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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________________TO _______________________
COMMISSION FILE NUMBER 1-12338
VESTA INSURANCE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 63-1097283
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3760 RIVER RUN DRIVE 35243
BIRMINGHAM, ALABAMA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(205) 970-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [_] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The number of shares outstanding of the registrant's common stock,
$.01 par value, as of March 31, 1997
18,587,165
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VESTA INSURANCE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
<C> <S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets at March 31, 1997 and
December 31, 1996................................................. 1
Consolidated Statements of Operations for the Three
Months Ended March 31, 1997 and 1996.............................. 2
Consolidated Statements of Cash Flow for the Three
Months Ended March 31, 1997 and 1996.............................. 3
Notes to Consolidated Financial Statements........................ 4
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 5
<CAPTION>
PART II OTHER INFORMATION
<C> <S> <C>
Item 1. Legal Proceedings................................................. 9
Item 2. Changes in Securities............................................. 9
Item 3. Defaults Upon Senior Securities................................... 9
Item 4. Submission of Matters to a Vote of Security Holders............... 9
Item 5. Other Information................................................. 9
Item 6. Exhibits and Reports on Form 8-K.................................. 10
</TABLE>
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
VESTA INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
----------- -----------
<S> <C> <C>
(UNAUDITED)
Assets:
Investments:
Fixed maturities available for sale--at fair value
(cost: 1997--$298,226;
1996--$306,026)................................... $ 298,529 308,898
Equity securities--at fair value: (cost: 1997--
$3,396; 1996--$4,365)............................. 7,615 8,326
Short-term investments.............................. 187,273 105,415
----------- ----------
Total investments.................................. 493,417 422,639
Cash................................................. 9,197 4,637
Accrued investment income............................ 6,274 5,392
Premiums in course of collection .................... 285,834 259,275
Reinsurance balances receivable...................... 141,505 115,768
Reinsurance recoverable on paid losses............... 92,110 69,698
Deferred policy acquisition costs.................... 77,526 75,532
Property and equipment............................... 4,029 3,920
Other assets......................................... 58,760 49,381
Goodwill............................................. 15,173 7,339
----------- ----------
Total assets....................................... $ 1,183,825 $1,013,581
=========== ==========
Liabilities:
Reserves for:
Losses and loss adjustment expenses................. 261,478 247,224
Unearned premiums................................... 248,516 228,325
----------- ----------
509,994 475,549
Accrued income taxes................................. 25,137 21,463
Reinsurance balances payable......................... 81,745 51,162
Other liabilities.................................... 24,257 26,425
Short term debt...................................... 15,000 22,000
Long term debt....................................... 98,291 98,279
----------- ----------
Total liabilities.................................. 754,424 694,878
Commitments and contingencies
Deferrable Capital Securities......................... 100,000 --
Stockholders' equity
Preferred stock, 5,000,000 shares authorized, none
issued.............................................. -- --
Common stock, $.01 par value, 32,000,000 shares
authorized,
issued: 1997--18,970,695 shares; 1996--18,919,939... 190 190
Additional paid-in capital........................... 161,326 161,037
Unrealized investment gains, net of applicable taxes. 2,939 4,442
Retained earnings.................................... 178,656 166,795
Receivable from issuance of restricted stock......... (3,313) (3,207)
Treasury stock....................................... (10,397) (10,554)
----------- ----------
Total stockholders' equity......................... 329,401 318,703
----------- ----------
Total liabilities and stockholders' equity......... $ 1,183,825 $1,013,581
=========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
1
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VESTA INSURANCE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
1997 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>
Revenues:
Net premiums written............................ $131,316 $ 152,509
Increase in unearned premiums................... (5,696) (7,373)
------------- -------------
Net premiums earned............................. 125,620 145,136
Net investment income........................... 6,147 4,946
Other........................................... 314 44
------------- -------------
Total revenues............................... 132,081 150,126
Expenses:
Losses incurred................................. 70,545 80,075
Loss adjustment expenses incurred............... 3,650 3,703
Policy acquisition expenses..................... 24,810 40,167
Operating expenses.............................. 7,599 5,650
Premium taxes and fees.......................... 2,246 2,370
Interest on debt................................ 2,359 2,470
Goodwill........................................ 305 125
------------- -------------
Total expenses............................... 111,514 134,560
Income before income taxes and deferrable capital
securities...................................... 20,567 15,566
Income taxes..................................... 7,086 5,057
Deferrable capital securities interest, net of
income tax...................................... 923 --
------------- -------------
Net income................................... $ 12,558 $ 10,509
============= =============
Per share amounts:
Net income................................... $ .68 $ .56
============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
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VESTA INSURANCE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
Operating Activities:
Net Income.............................................. $ 12,558 $ 10,509
Adjustments to reconcile net income to cash provided
from operations:
Change in:
Loss and LAE reserves................................. 14,254 49,583
Unearned premium reserve.............................. 20,191 19,509
Reinsurance balances payable.......................... 30,583 (3,156)
Accrued income taxes.................................. 6,594 4,834
Other liabilities..................................... (3,589) (3,144)
Premiums in course of collection...................... (26,559) (52,573)
Reinsurance balances receivable....................... (25,738) 4,055
Reinsurance recoverable on paid losses................ (22,411) (21,804)
Other assets.......................................... (20,206) 2,497
Payables from deferrable capital trust................. 1,421 --
Policy acquisition costs deferred...................... 18,001 (16,110)
Policy acquisition costs amortized..................... (19,995) 6,453
Investment gains....................................... (282) --
Amortization and depreciation.......................... 836 900
Loss on disposition of property, plant and equipment... (91) --
--------- ---------
Net cash provided from (used in) operations........... (14,433) 1,553
Investing Activities:
Investments sold or matured:
Fixed maturities available for sale-matured, called.... 7,287 10,028
Equity securities...................................... 2,291 --
Investments acquired:
Fixed maturities available for sale.................... -- (1,216)
Equity securities...................................... (1,039) (902)
Net decrease in short-term investments.................. (81,859) (10,727)
Additions to property, plant and equipment.............. (507) --
Dispositions of property, plant and equipment........... 165 --
--------- ---------
Net cash provided used in investing activities........ (73,662) (2,817)
Financing Activities:
Repayment of long and short term debt................... (6,988) --
Issuance of deferrable capital securities............... 100,000 --
Dividends paid.......................................... (697) (708)
Capital contributions................................... 340 986
--------- ---------
Net cash provided from financing activities........... 92,655 278
Increase (decrease) in cash.............................. 4,560 (986)
Cash at beginning year................................... 4,637 6,833
--------- ---------
Cash at end of year...................................... $ 9,197 $ 5,847
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
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VESTA INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
Basis of Presentation: The accompanying unaudited financial statements have
been prepared in conformity with generally accepted accounting principles and,
in the opinion of management, reflect all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of results for such
periods. The results of operations and cash flows for any interim period are
not necessarily indicative of results for the full year. These financial
statements should be read in conjunction with the financial statements and
related notes in the Company's 1996 Annual Report. Certain amounts in the
financial statements presented have been reclassified from amounts previously
reported in order to be comparable between years. These reclassifications have
no effect on previously reported stockholders' equity or net income during the
period involved.
Earnings Per Share: Net earnings per share is calculated by dividing net
income by weighted average number of common share and common equivalent shares
outstanding including the net effect of the restricted stock grants. The
weighted average number of common shares and common equivalent shares
outstanding for the three month period ended March 31, 1997 and 1996 was
18,581,703 and 18,911,223, respectively.
Subsequent Event: On April 23, 1997, the Company entered into a stock
purchase agreement to acquire all of the issued and outstanding stock of the
operating subsidiaries of Anthem Casualty Insurance Group, Inc., each of which
are property and casualty insurance companies headquartered in Ohio, for
$238.75 million. The transaction is expected to close no later than July 1,
1997. Anthem had $648 million of assets and approximately $217 million of
stockholders' equity at December 31, 1996.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Vesta Insurance Group, Inc. (the "Company" or "Vesta") is a holding company
for a group of property and casualty insurance companies (the "Vesta Group")
that offer treaty reinsurance and primary insurance on personal and commercial
risks. In both its reinsurance and primary insurance operations, the Company
focuses principally on property coverages, for which ultimate losses generally
can be more promptly determined than on casualty risks. The Company's revenues
from operations are derived primarily from net premiums earned on risks
written and reinsured by the Company, investment income and investment gains
or losses, while expenses consist primarily of payments for claims losses and
underwriting expenses, including agents' commissions and operating expenses.
Comparison of First Quarter 1997 to First Quarter 1996
Net income increased by $2.1 million, or 20.0%, to $12.6 million for the
quarter ended March 31, 1997, from $10.5 million for the quarter ended March
31, 1996. On a per share basis, net income for the first quarter of 1997 was
$.68 per share versus net income of $.56 per share for the first quarter of
1996.
Gross Premiums Written; Net Premiums Written; Net Premiums Earned. Gross
premiums written increased by $9.4 million, or 4.8%, to $203.8 million for the
quarter ended March 31, 1997, from $194.4 million for the quarter ended March
31, 1996, as gross premiums written on reinsurance risks increased by $6.1
million and gross premiums written on primary insurance risks increased by
$3.3 million. Net premiums written decreased by $21.2 million, or 13.9%, to
$131.3 million for the quarter ended March 31, 1997, from $152.5 million for
the quarter ended March 31, 1996.
Gross premiums written for reinsurance increased by $6.1 million, or 3.9%,
to $160.6 million for the quarter ended March 31, 1997, from $154.5 million
for the quarter ended March 31, 1996. This growth was attributable to an
increase in gross premiums written on pro rata business. The growth in pro-
rata reinsurance gross premiums written was due to growth in existing accounts
as well as the addition of new accounts in 1997 as compared to 1996. Net
premiums written for reinsurance decreased $14.5 million, or 13.8%, to $104.2
million for the quarter ended March 31, 1997, from $118.7 million for the
quarter ended March 31, 1996. The decrease in net premiums written was due to
a pro-rata reinsurance facility entered into by Vesta Fire Insurance
Corporation ("Vesta Fire") in the third quarter of 1996 to provide capital
flexibility to take advantage of growth opportunities.
Gross premiums written for primary insurance increased by $3.3 million, or
8.3%, to $43.2 million for the quarter ended March 31, 1997, from $39.9
million for the quarter ended March 31, 1996 due principally to a $3.4 million
increase in personal lines products. Gross premiums written for personal lines
products increased 12.8%, to $30.1 million for the quarter ended March 31,
1997, compared to $26.7 million for the quarter ended March 31, 1996. The
growth was primarily attributable to a $2.3 million increase in financial
services lines premiums. Gross premiums on commercial lines decreased .8%,
from $13.2 million for the quarter ended March 31, 1996 to $13.1 million for
the quarter ended March 31, 1997.
Net premiums written for primary insurance decreased by $6.7 million, or
19.9%, to $27.1 million for the quarter ended March 31, 1997, from $33.8
million for the quarter ended March 31, 1996. The decrease in net premiums
written was due to a pro-rata reinsurance facility entered into by Vesta Fire.
Net premiums earned decreased by $19.5 million, or 13.4%, to $125.6 million
for the quarter ended March 31, 1997, from $145.1 million for the quarter
ended March 31, 1996. The decrease in earned premiums is primarily
attributable to the pro-rata reinsurance facility entered into by Vesta Fire.
5
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Net Investment Income. Net investment income increased by $1.2 million, or
24.5%, to $6.1 million for the quarter ended March 31, 1997, from $4.9 million
for the quarter ended March 31, 1996. The weighted average yield on invested
assets (excluding realized and unrealized gains) was 5.62% for the quarter
ended March 31, 1997, compared with 5.56% for the quarter ended March 31,
1996. The increase in net investment income is primarily attributable to the
increase in average invested assets relating to the receipt of proceeds from
the sale by the Company of $100 million of its 8.525% Deferrable Capital
Securities due 2027.
Losses and Loss Adjustment Expenses Incurred. Losses and loss adjustment
expenses ("LAE") decreased by $9.6 million, or 11.5%, to $74.2 million for the
quarter ended March 31, 1997, from $83.8 million for the quarter ended March
31, 1996. The decrease in loss and LAE was due principally to the pro-rata
reinsurance facility entered into by Vesta Fire. The loss and LAE ratio for
the quarter ended March 31, 1997 was 59.1% as compared to 57.7% for the
quarter ended March 31, 1996.
Policy Acquisition and Other Underwriting Expenses. Policy acquisition and
other underwriting expenses decreased by $13.5 million, or 28.0%, to $34.7
million for the quarter ended March 31, 1997, from $48.2 million for the
quarter ended March 31, 1996. The decrease in policy acquisition and other
underwriting expenses is primarily the result of the pro-rata reinsurance
facility entered into by Vesta Fire. The underwriting expense ratio for the
quarter ended March 31, 1997, was 27.6%, as compared to 33.2% for the quarter
ended March 31, 1996.
Federal Income Taxes. Federal income taxes increased by $1.5 million, or
29.4%, to $6.6 million for the quarter ended March 31, 1997. The effective
rate on pre-tax income increased from 32.5% to 34.4% for the quarter ended
March 31, 1997. This increase was due primarily to a smaller portion of income
from tax free municipal bonds in 1997 versus 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company is a holding company whose principal asset is its investment in
the capital stock of the companies constituting the Vesta Group, a group of
wholly owned property and casualty insurance companies including Vesta Fire.
The several insurance company subsidiaries comprising Vesta Group are
individually supervised by state insurance regulators. Vesta Fire is the
principal operating subsidiary of the Company.
As a holding company with no other business operations, the Company relies
primarily upon dividend payments from Vesta Fire to meet its cash requirements
(including its debt service) and to pay dividends to its stockholders.
Transactions between Vesta Fire and the Company, including the payment of
dividends by Vesta Fire, are subject to certain limitations under the
insurance laws of Alabama. Specifically, Alabama law permits the payment of
dividends in any year which, together with other dividends or distributions
made within the preceding 12 months, do not exceed the greater of 10% of
statutory surplus as of the end of the preceding year or the net income for
the preceding year, with larger dividends payable only after receipt of prior
regulatory approval. Based upon restrictions presently in effect, the maximum
amount available for payment of dividends to the Company by its insurance
subsidiaries in 1997 without prior approval of regulatory authorities is
approximately $50.7 million.
The principal uses of funds at the holding company level are to pay
operating expenses, interest on outstanding indebtedness and dividends to
stockholders. During the last three years, the insurance subsidiaries of the
Company have produced operating results sufficient to fund the needs of the
Company. There can be no assurance as to the ability of the Company's
insurance subsidiaries to continue to pay dividends at current levels.
However, the Company is not aware of any demands or
6
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commitments of the insurance subsidiaries that would prevent the payment of
dividends to the Company sufficient to meet the anticipated needs (including
debt service) of the Company over the next twelve months.
On January 31, 1997, Vesta Capital Trust I, a Delaware business trust
controlled by the Company, sold $100 million of its 8.525% Deferrable Capital
Securities. These securities have a 30 year maturity and are not redeemable
except in certain limited circumstances. These securities were sold in a
private placement transaction to qualified institutional buyers under Rule
144A and were not registered under the Securities Act of 1933. A portion of
the proceeds from the sale of these securities were used to repay indebtedness
under the Company's existing lines of credit and the remainder will be used
for general corporate purposes.
During the first quarter of 1997, the Company paid approximately $0.7
million in dividends on its common stock, and it is expected that the Company
will pay approximately $2.8 million for all of 1997. The Company is also
required to make semi-annual interest payments of $4.4 million on its $100
million of 8.75% Senior Debentures due 2025 and $4.25 million on its $100
million of 8.525% Deferrable Capital Securities due 2027.
The principal sources of funds for the Company's insurance subsidiaries are
premiums, investment income and proceeds from the sale or maturity of invested
assets. Such funds are used principally for the payment of claims, operating
expenses, commissions and the purchase of investments. In order to provide
further liquidity, the Company increased its $100 million line of credit to
$200 million effective April 8, 1997. To date, the Company has borrowed $15
million under this line of credit for general corporate purposes. The Credit
Agreement relating to this line of credit contains certain covenants that
require, among other things, the Company to maintain a certain consolidated
net worth, maintain a certain amount of investment income available for the
payment of interest expense, cause each insurance subsidiary to maintain a
certain total adjusted capital and which limit the amount of indebtedness the
Company can have. The Company is in compliance with each of these covenants.
On a consolidated basis, net cash provided from (used in) operations for the
quarters ended March 31, 1997 and 1996, was $(14.4) million and $1.6 million,
respectively. Net cash provided from operations in 1996 was due principally to
the large increase in premiums written. Cash flow during the first quarter of
1997 was adversely affected by the settlement of various reinsurance unearned
premium portfolio transfers.
Total assets of the Company increased by 20.0% to $1.2 billion in 1997, from
$1.0 billion in 1996. Cash and invested assets were $502.6 million at March
31, 1997, increasing 17.6% from December 31, 1996.
As of March 31, 1997, the Company's investment portfolio consisted of cash
and short-term investments (39.1%), U.S. Government securities (7.3%),
mortgage-backed securities (1.4%), corporate bonds (19.8%), foreign government
securities (.4%), municipal bonds (30.5%) and equity securities (1.5%).
According to Moody's, 97.5% of the Company's portfolio is rated A or better.
The Company expects current cash flow to be sufficient to meet operating
needs, although invested assets have been categorized as available for sale in
the event short-term cash needs exceed available resources. The Company
adjusts its holdings of cash, short-term investments and invested assets
available for sale according to its seasonal cash flow needs.
On April 23, 1997, the Company entered into a stock purchase agreement to
acquire all of the issued and outstanding stock of the operating subsidiaries
of Anthem Casualty Group, Inc. (Anthem),
7
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each of which are property and casualty insurance companies headquartered in
Ohio, for $238.75 million. The transaction is expected to close no later than
July 1, 1997. Anthem had $648 million of assets and approximately $217 million
of stockholders' equity at December 31, 1996. The Company will fund the
payment of the purchase price for this acquisition with available cash on
hand, cash available from its insurance subsidiaries and with funds available
under its line of credit. Following the acquisition, the Company will continue
to have sufficient liquidity to fund operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Any statement contained in this report which is not a historical fact, or
which might otherwise be considered an opinion or projection concerning the
Company or its business, whether express or implied, is meant as and should be
considered a forward-looking statement as that term is defined in the Private
Securities Litigation Reform Act of 1996. Forward-looking statements are based
on assumptions and opinions concerning a variety of known and unknown risks,
including but not necessarily limited to changes in market conditions, natural
disasters and other catastrophic events, increased competition, changes in
availability and cost of reinsurance, changes in governmental regulations, and
general economic conditions, as well as other risks more completely described
in the Company's filings with the Securities and Exchange Commission,
including its most recent Annual Report on Form 10-K. If any of these
assumptions or opinions prove incorrect, any forward-looking statements made
on the basis of such assumptions or opinions may also prove materially
incorrect in one or more respects.
8
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PART II
ITEM 1. LEGAL PROCEEDINGS
The Company, through its subsidiaries, is routinely a party to pending or
threatened legal proceedings and arbitrations. These proceedings involve
alleged breaches of contract, torts, including bad faith and fraud claims and
miscellaneous other specified relief. Based upon information presently
available, and in light of legal and other defenses available to the Company
and its subsidiaries, management does not consider liability from any
threatened or pending litigation to be material.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
9
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EXHIBITS INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Company, dated
September 1, 1993 (filed as an exhibit to Amendment No. 1 to
the Registration Statement on Form S-1 (Registration No. 33-
68114) of Vesta Insurance Group, Inc., filed on October 18,
1993 and incorporated herein by reference (File No. 1-12338)).
3.2 By-Laws of the Company (Amended and Restated as of October 1,
1993) (filed as an exhibit to Amendment No. 1 to the Registra-
tion Statement on Form S-1 (Registration No. 33-68114) of
Vesta Insurance Group, Inc., filed on October 18, 1993 and in-
corporated herein by reference (File No. 1-12338)).
4.1 Indenture between the Company and Southtrust Bank of Alabama,
National Association, dated as of July 19, 1995 (filed as an
exhibit to the Company's Form 10-K for the year ended December
31, 1995, filed on March 28, 1996 and incorporated herein by
reference (File No. 1-12338)).
4.2 Supplemental Indebenture between the Company and Southtrust
Bank of Alabama, National Association, dated July 19, 1995
(filed as an exhibit to the Company's Form 10-K for the year
ended December 31, 1995, filed on March 28, 1996 and incorpo-
rated herein by reference (File No. 1-12338)).
4.3 Indenture dated as of January 31, 1997, between the Company
and First Union National Bank of North Carolina, as trustee.
4.4 Amended and Restated Declaration of Trust, dated as of January
31, 1997, of Vesta Capital Trust I.
4.5 Capital Securities Guarantee Agreement, dated as of January
31, 1997, between the Company and First Union National Bank of
North Carolina, as trustee.
10.1 Separation and Public Offering Agreement between Torchmark
Corporation and the Company dated September 13, 1993 (filed as
an exhibit to the Company's Form 10-K for the year ended De-
cember 31, 1993, filed on March 28, 1994 and incorporated
herein by reference (File No. 1-2338)).
10.2 Marketing and Administrative Services Agreement between Lib-
erty National Fire Insurance Company, Liberty National Insur-
ance Corporation and Liberty National Life Insurance Company
dated September 13, 1993 (filed as an exhibit to the Company's
Form 10-K for the year ended December 31, 1993, filed on March
28, 1994 and incorporated herein by reference (File No. 1-
2338)).
10.3 Investment Services Agreement between Waddell & Reed Asset
Management Company and the Company (filed as an exhibit to
Amendment No. 1 to the Registration Statement on Form S-1
(Registration No. 33-68114) of Vesta Insurance Group, Inc.,
filed on October 18, 1993 and incorporated herein by reference
(File No. 1-12338)) dated September 13, 1993.
10.5 Management Agreement between J. Gordon Gaines, Inc., Liberty
National Fire Insurance Company, Sheffield Insurance Corpora-
tion, Liberty National Insurance Corporation and Vesta Insur-
ance Corporation dated November 15, 1994 (filed as an exhibit
to the Company's Form 10-K for the year ended December 31,
1993, filed on March 28, 1994 and incorporated herein by ref-
erence (File No. 1-2338)).
10.6 Form of Restricted Stock Agreement (filed as an exhibit to the
Registration Statement on Form S-1 (Registration No. 33-68114)
of Vesta Insurance Group, Inc., filed on August 31, 1993 and
incorporated herein by reference (File No. 1-12338)).
10.7* The Company's Long Term Incentive Plan as amended effective as
of May 16, 1995 (filed as an exhibit to the Company's Form 10Q
for the quarter ended June 30, 1995, filed on August 14, 1995
and incorporated herein by reference (File No. 1-12338)).
</TABLE>
10
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<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S> <C>
10.8* Form of Non-Qualified Stock Option Agreement entered into by
and between the Company and certain of its executive officers
and directors (filed as an exhibit to the Company's Form 10-K
for the year ended December 31, 1995, filed on March 28, 1996
and incorporated herein by reference (File No. 1-12338)).
10.9* Cash Bonus Plan of the Company (filed as an exhibit to the
Company's Form 10-K for the year ended December 31, 1993,
filed on March 28, 1994 and incorporated herein by reference
(File No. 1-2338)).
10.10* J. Gordon Gaines, Inc. Post Retirement Benefits Plan (filed as
an exhibit to the Company's Form 10-K for the year ended De-
cember 31, 1994, filed on March 29, 1995 and incorporated
herein by reference (File No. 1-12338)).
10.11* J. Gordon Gaines, Inc. Retirement Savings Plan (filed as an
exhibit to the Company's Form 10-K for the year ended December
31, 1994, filed on March 29, 1995 and incorporated herein by
reference (File No. 1-12338)).
10.12* The Company's Non-Employee Director Stock Plan (filed as an
exhibit to the Company's
10-Q for the quarter ended June 30, 1995, filed on August 14,
1995 and incorporated herein by reference (File No. 1-12338)).
10.13 Office Lease between the Company and Torchmark Development
Corporation, dated as of April 20, 1992 (filed as an exhibit
to the Company's Form 10-K for the year ended December 31,
1993, filed on March 28, 1994 and incorporated herein by ref-
erence (File No. 1-12338)).
10.14 Agency Agreement between Liberty National Fire Insurance Com-
pany, Vesta Insurance Corporation, Sheffield Insurance Corpo-
ration, and Overby-Seawell Company (filed as an exhibit to
Amendment No. 1 to the Registration Statement on Form S-1
(Registration No. 33-68114) of Vesta Insurance Group, Inc.,
filed on October 18, 1993 and incorporated herein by reference
(File No. 1-12338)).
10.15 Commercial/Personal Property Risk Excess Reinsurance Con-
tracts, dated July 1, 1993,
constituting the Company's Direct Per Risk Treaty Program, be-
tween Vesta Fire Insurance Corporation, Sheffield Insurance
Corporation, Vesta Insurance Corporation, Vesta Lloyds Insur-
ance Company and various reinsurers (filed as an exhibit to
Amendment No. 1 to the Registration Statement on Form S-1
(Registration No. 33-68114) of Vesta Insurance Group, Inc.,
filed on October 18, 1993 and incorporated herein by reference
(File No. 1-12338)) Renewed July 1, 1996.
10.16 Catastrophe Reinsurance Contracts, dated July 1, 1995, consti-
tuting the Company's Direct Property Catastrophe Program, be-
tween Vesta Fire Insurance Corporation, Vesta Insurance Corpo-
ration, Sheffield Insurance Corporation, Vesta Lloyds Insur-
ance Company and various reinsurers (filed as an exhibit to
the Company's Form 10-K for the year ended December 31, 1994,
filed on March 29, 1995 and incorporated herein by reference
(File No. 1-12338)). Renewed July 1, 1996.
10.17 Specific Regional Castastrophe Excess Contracts, dated January
1, 1996, constituting the Company's Regional Property Catas-
trophe Program, between Vesta Fire Insurance Corporation and
various reinsurers (filed as an exhibit to the Company's Form
10-K for the year ended December 31, 1995, filed on March 28,
1996 and incorporated herein by reference (File No. 1-12338)).
Renewed January 1, 1997.
10.18 Casualty Excess of Loss Reinsurance Agreements, dated January
1, 1994, constituting the Company's Casualty Excess of Loss
Reinsurance Program, between Vesta Fire Insurance Corporation,
Vesta Insurance Corporation, Sheffield Insurance Corporation,
Vesta Lloyds Insurance Company and various reinsurers (filed
as an exhibit to the Company's Form 10-K for the year ended
December 31, 1993, filed on March 28, 1994 and incorporated
herein by reference (File No. 1-12338)). Renewed January 1,
1997.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S> <C>
10.19 Amendment to Catastrophe Reinsurance Contracts, dated July 1,
1995, constituting the Company's Direct Property Catastrophe
Program, between Vesta Fire Insurance Corporation, Vesta In-
surance Corporation, Sheffield Insurance Corporation, Vesta
Lloyds Insurance Company, Hawaiian Insurance & Guaranty Compa-
ny, Limited and various reinsurers. (Filed as an exhibit to
the Company's Form 10-Q for the quarter ended September 30,
1995, filed on November 14, 1995 and incorporated herein by
reference (File No. 1-12338)).
10.20 Amendment to Catastrophe Reinsurance Contracts, dated January
1, 1996, constituting the Company's Direct Property Catastro-
phe Program, between Vesta Fire Insurance Corporation, Vesta
Insurance Corporation, Sheffield Insurance Corporation, Vesta
Lloyds Insurance Company, Hawaiian Insurance & Guaranty Compa-
ny, Limited and various reinsurers (filed as an exhibit to the
Company's Form 10-K for the year ended December 31, 1995,
filed on March 28, 1996 and incorporated herein by reference
(File No. 1-12338)). Renewed January 1, 1997.
10.21 Amended and Restated Credit Agreement between Vesta Insurance
Group, Inc. and Southtrust Bank of Alabama, N.A., ABN Amro
Bank B.V., Bank of Tokyo-Mitsubishi Trust Company, The First
National Bank of Chicago, Wachovia Bank of Georgia, N.A. and
First Union National Bank of North Carolina (as agent), dated
April 8, 1997.
10.22 Quota Share Reinsurance Contract, effective July 1, 1996, cov-
ering all lines of business written by Vesta Fire Insurance
Corporation, Sheffield Insurance Corporation, Vesta Insurance
Corporation, Vesta Lloyds Insurance Company, The Hawaiian In-
surance and Guaranty Company, Ltd. and various reinsurers
(filed as an exhibit to the Company's Form 10-Q for the quar-
ter ended September 30, 1996, filed on November 14, 1996 and
incorporated herein by reference (File No. 1-12338)).
10.23 Stock Purchase Agreement between Anthem Casualty Insurance
Group, Inc., and Vesta Insurance Group, Inc., dated April 23,
1997.
</TABLE>
- --------
*These are the Company's compensatory plans.
B) REPORTS ON FORM 8-K.
None.
12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED
THEREUNTO DULY AUTHORIZED.
VESTA INSURANCE GROUP, INC.
Date: May 13, 1997 /s/ Mary Beth Heibein
_______________________________________
Mary Beth Heibein
Controller and Principal
Accounting Officer
13
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
VESTA INSURANCE GROUP, INC.
__________________
__________________
INDENTURE
Dated as of January 31, 1997
----------------------------
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
as Trustee
__________________
8.525% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE I.
DEFINITIONS
<S> <C>
SECTION 1.01. Definitions................................................. 1
Additional Sums........................................................ 1
Adjusted Treasury Rate................................................. 1
Affiliate.............................................................. 2
Authenticating Agent................................................... 2
Bankruptcy Law......................................................... 2
Board of Directors..................................................... 2
Board Resolution....................................................... 2
Business Day........................................................... 2
Capital Leases......................................................... 2
Capital Securities..................................................... 3
Commission............................................................. 3
Common Securities...................................................... 3
Common Securities Guarantee............................................ 3
Common Stock........................................................... 3
Company................................................................ 3
Company Request........................................................ 3
Comparable Treasury Issue.............................................. 4
Comparable Treasury Price.............................................. 4
Compounded Interest.................................................... 4
Contingent Obligation.................................................. 4
Custodian.............................................................. 5
Declaration............................................................ 5
Default................................................................ 5
Deferred Interest...................................................... 5
Definitive Securities.................................................. 5
Depositary............................................................. 5
Dissolution Event...................................................... 5
Event of Default....................................................... 5
Exchange Act........................................................... 5
Extended Interest Payment Period....................................... 5
GAAP................................................................... 5
Global Security........................................................ 6
Guarantees............................................................. 6
Indebtedness for Money Borrowed........................................ 6
Indenture.............................................................. 6
Interest Payment Date.................................................. 6
Investment Company Event............................................... 6
Issue Date............................................................. 6
Lien................................................................... 6
Maturity Date.......................................................... 6
Mortgage............................................................... 6
Non Book-Entry Capital Securities...................................... 7
</TABLE>
i
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Table of Contents (cont'd)
--------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Officers................................................................ 7
Officers' Certificate................................................... 7
Opinion of Counsel...................................................... 7
Other Debentures........................................................ 7
Other Guarantees........................................................ 7
outstanding............................................................. 7
Person.................................................................. 8
Predecessor Security.................................................... 8
Prepayment Price........................................................ 8
Principal office of the Trustee......................................... 8
Property Trustee........................................................ 8
Purchase Agreement...................................................... 8
"Qualified Debt Obligations"............................................ 8
Quotation Agent......................................................... 9
Reference Treasury Dealer............................................... 9
Reference Treasury Dealer Quotations.................................... 9
Responsible Officer..................................................... 9
Restricted Security..................................................... 9
Rule 144A............................................................... 9
Securities.............................................................. 9
Securities Act.......................................................... 9
Securityholder.......................................................... 9
Security Register....................................................... 10
Senior Indebtedness..................................................... 10
Special Event........................................................... 10
Special Event Prepayment Price.......................................... 10
Subsidiary.............................................................. 10
Tax Event............................................................... 11
Trustee................................................................. 11
Trust Indenture Act of 1939............................................. 11
Trust Securities........................................................ 12
U.S. Government Obligations............................................. 12
Vesta Capital Trust..................................................... 12
ARTICLE II.
SECURITIES
SECTION 2.01. Forms Generally.............................................. 12
SECTION 2.02. Execution and Authentication................................. 12
SECTION 2.03. Form and Payment............................................. 13
SECTION 2.04. Legends...................................................... 13
SECTION 2.05. Global Security.............................................. 14
SECTION 2.06. Interest..................................................... 15
SECTION 2.07. Transfer and Exchange........................................ 16
SECTION 2.08. Replacement Securities....................................... 17
SECTION 2.09. Treasury Securities.......................................... 17
</TABLE>
ii
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Table of Contents (cont'd)
--------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 2.10. Temporary Securities................................... 18
SECTION 2.11. Cancellation........................................... 18
SECTION 2.12. Defaulted Interest..................................... 19
SECTION 2.13. CUSIP Numbers.......................................... 20
ARTICLE III.
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and
Interest............................................... 20
SECTION 3.02. Offices for Notices and Payments, etc.................. 20
SECTION 3.03. Appointments to Fill Vacancies in
Trustee's Office....................................... 21
SECTION 3.04. Provision as to Paying Agent........................... 21
SECTION 3.05. Certificate to Trustee................................. 22
SECTION 3.06. Compliance with Consolidation
Provisions............................................. 23
SECTION 3.07. Limitation on Dividends................................ 23
SECTION 3.08. Covenants as to Vesta Capital Trust.................... 24
SECTION 3.09. Payment of Expenses.................................... 24
SECTION 3.10. Payment Upon Resignation or Removal.................... 25
ARTICLE IV.
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists................................. 25
SECTION 4.02. Preservation and Disclosure of Lists................... 26
SECTION 4.03. Reports of the Company................................. 28
SECTION 4.04. Reports by the Trustee................................. 29
ARTICLE V.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 5.01. Events of Default...................................... 30
SECTION 5.02. Payment of Securities on Default; Suit
Therefor............................................... 32
SECTION 5.03. Application of Moneys Collected by
Trustee................................................ 34
SECTION 5.04. Proceedings by Securityholders......................... 35
SECTION 5.05. Proceedings by Trustee................................. 36
SECTION 5.06. Remedies Cumulative and Continuing..................... 36
SECTION 5.07. Direction of Proceedings and Waiver of
Defaults by Majority of Securityholders................ 37
SECTION 5.08. Notice of Defaults..................................... 38
</TABLE>
iii
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Table of Contents (cont'd)
--------------------------
<TABLE>
<CAPTION>
Page
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<S> <C>
SECTION 5.09. Undertaking to Pay Costs............................... 38
ARTICLE VI.
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee................. 39
SECTION 6.02. Reliance on Documents, Opinions, etc................... 40
SECTION 6.03. No Responsibility for Recitals, etc.................... 42
SECTION 6.04. Trustee, Authenticating Agent, Paying
Agents, Transfer Agents or Registrar May
Own Securities......................................... 42
SECTION 6.05. Moneys to be Held in Trust............................. 42
SECTION 6.06. Compensation and Expenses of Trustee................... 42
SECTION 6.07. Officers' Certificate as Evidence...................... 43
SECTION 6.08. Conflicting Interest of Trustee........................ 44
SECTION 6.09. Eligibility of Trustee................................. 44
SECTION 6.10. Resignation or Removal of Trustee...................... 44
SECTION 6.11. Acceptance by Successor Trustee........................ 46
SECTION 6.12. Successor by Merger, etc............................... 47
SECTION 6.13. Limitation on Rights of Trustee as a
Creditor............................................... 47
SECTION 6.14. Authenticating Agents.................................. 48
ARTICLE VII.
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders.............................. 49
SECTION 7.02. Proof of Execution by Securityholders.................. 50
SECTION 7.03. Who Are Deemed Absolute Owners......................... 50
SECTION 7.04. Securities Owned by Company Deemed Not
Outstanding............................................ 51
SECTION 7.05. Revocation of Consents; Future Holders
Bound.................................................. 51
ARTICLE VIII.
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purpose of Meetings.................................... 52
SECTION 8.02. Call of Meetings by Trustee............................ 52
SECTION 8.03. Call of Meetings by Company or
Securityholders........................................ 52
SECTION 8.04. Qualifications for Voting.............................. 53
SECTION 8.05. Regulations............................................ 53
SECTION 8.06. Voting................................................. 54
</TABLE>
iv
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Table of Contents (cont'd)
--------------------------
<TABLE>
<CAPTION>
Page
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ARTICLE IX.
AMENDMENTS
<S> <C>
SECTION 9.01. Without Consent of Securityholders..................... 54
SECTION 9.02. With Consent of Securityholders........................ 56
SECTION 9.03. Compliance with Trust Indenture Act;
Effect of Supplemental Indentures...................... 57
SECTION 9.04. Notation on Securities................................. 58
SECTION 9.05. Evidence of Compliance of Supplemental
Indenture to be Furnished Trustee...................... 58
ARTICLE X.
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 10.01. Company May Consolidate, etc., on Certain Terms........ 58
SECTION 10.02. Successor Corporation to be Substituted
for Company............................................ 59
SECTION 10.03. Opinion of Counsel to be Given Trustee................. 60
ARTICLE XI.
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01. Discharge of Indenture................................. 60
SECTION 11.02. Deposited Moneys and U.S. Government
Obligations to be Held in Trust by Trustee............. 61
SECTION 11.03. Paying Agent to Repay Moneys Held...................... 61
SECTION 11.04. Return of Unclaimed Moneys............................. 61
SECTION 11.05. Defeasance Upon Deposit of Moneys or
U.S. Government Obligations............................ 62
SECTION 11.06. Reinstatement.......................................... 64
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01. Indenture and Securities Solely Corporate Obligations. 64
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
SECTION 13.01. Successors............................................. 64
SECTION 13.02. Official Acts by Successor Corporation................. 64
SECTION 13.03. Surrender of Company Powers............................ 65
</TABLE>
v
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Table of Contents (cont'd)
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<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 13.04. Address for Notices, etc................................ 65
SECTION 13.05. Governing Law........................................... 66
SECTION 13.06. Evidence of Compliance with Conditions
Precedent............................................... 66
SECTION 13.07. Business Days........................................... 66
SECTION 13.08. Trust Indenture Act to Control.......................... 66
SECTION 13.09. Table of Contents, Headings, etc........................ 67
SECTION 13.10. Execution in Counterparts............................... 67
SECTION 13.11. Separability............................................ 67
SECTION 13.12. Assignment.............................................. 67
SECTION 13.13. Acknowledgement of Rights............................... 67
ARTICLE XIV.
PREPAYMENT OF SECURITIES
SECTION 14.01. Special Event Prepayment................................ 68
SECTION 14.02. No Optional Prepayment by Company....................... 68
SECTION 14.03. No Sinking Fund......................................... 68
SECTION 14.04. Notice of Prepayment.................................... 69
SECTION 14.05. Payment of Securities Called for
Prepayment.............................................. 69
ARTICLE XV.
SUBORDINATION OF SECURITIES
SECTION 15.01. Agreement to Subordinate................................ 70
SECTION 15.02. Default on Senior Indebtedness.......................... 70
SECTION 15.03. Liquidation; Dissolution; Bankruptcy.................... 71
SECTION 15.04. Subrogation............................................. 73
SECTION 15.05. Trustee to Effectuate Subordination..................... 74
SECTION 15.06. Notice by the Company................................... 74
SECTION 15.07. Rights of the Trustee; Holders of Senior
Indebtedness............................................ 75
SECTION 15.08. Subordination May Not Be Impaired....................... 76
ARTICLE XVI.
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01. Extension of Interest Payment Period.................... 76
SECTION 16.02. Notice of Extension..................................... 77
</TABLE>
vi
<PAGE>
THIS INDENTURE, dated as of January 31, 1997, between Vesta Insurance
Group, Inc., a Delaware corporation (hereinafter sometimes called the
"Company"), and First Union National Bank of North Carolina, a national banking
association, as trustee (hereinafter sometimes called the "Trustee").
W I T N E S S E T H:
In consideration of the premises, and the purchase of the Securities
by the holders thereof, the Company covenants and agrees with the Trustee for
the equal and proportionate benefit of the respective holders from time to time
of the Securities, as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Definitions.
The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture shall have the respective meanings specified in this Section
1.01. All other terms used in this Indenture which are defined in the Trust
Indenture Act of 1939, or which are by reference therein defined in the
Securities Act, shall (except as herein otherwise expressly provided or unless
the context otherwise requires) have the meanings assigned to such terms in said
Trust Indenture Act and in said Securities Act as in force at the date of this
Indenture as originally executed. The following terms have the meanings given
to them in the Declaration: (i) Clearing Agency; (ii) Delaware Trustee; (iii)
Depository; (iv) Capital Security Certificate; (v) Property Trustee; (vi)
Administrative Trustees; (vii) Direct Action; (viii) Capital Securities; and
(ix) Capital Securities Guarantee. All accounting terms used herein and not
expressly defined shall have the meanings assigned to such terms in accordance
with generally accepted accounting principles and the term "generally accepted
accounting principles" means such accounting principles as are generally
accepted at the time of any computation. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other subdivision. Headings
are used for convenience of reference only and do not affect interpretation.
The singular includes the plural and vice versa.
"Additional Sums" shall have the meaning set forth in Section 2.06(c).
1
<PAGE>
"Adjusted Treasury Rate" shall mean, with respect to any prepayment
date, the rate per annum equal to the semi-annual equivalent yield to maturity
of the Comparable Treasury Issue, calculated using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such prepayment date, in each case calculated on
the third Business Day preceding such prepayment date, plus in each case (a)
1.25% if such prepayment date occurs on or prior to the first anniversary of the
Issue Date and (b) 0.50% in all other cases.
"Affiliate" shall mean, with respect to a specified Person, (a) any
Person directly or indirectly owning, controlling or holding the power to vote
10% or more of the outstanding voting securities or other ownership interests of
the specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, (d) a partnership in which the specified Person is a
general partner, (e) any officer or director of the specified Person, and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.
"Authenticating Agent" shall mean any agent or agents of the Trustee
which at the time shall be appointed and acting pursuant to Section 6.14.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.
"Board of Directors" shall mean either the Board of Directors of the
Company or any duly authorized committee of that board.
"Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" shall mean, with respect to any series of Securities,
any day other than a Saturday or a Sunday or a day on which banking institutions
in The City of New York are authorized or required by law or executive order to
close.
"Capital Leases" means, with respect to the Company and its
Subsidiaries, any lease of any property that should, in
2
<PAGE>
accordance with GAAP, be classified and accounted for as a capital lease on a
consolidated balance sheet of the Company and its Subsidiaries.
"Capital Securities" shall mean undivided beneficial interests in the
assets of Vesta Capital Trust which rank pari passu with the Common Securities
issued by Vesta Capital Trust; provided, however, that if an Event of Default
-------- -------
has occurred and is continuing, no payments in respect of Distributions on, or
payments upon liquidation, redemption or otherwise with respect to, the Common
Securities shall be made until the holders of the Capital Securities shall be
paid in full the Distributions and the liquidation, redemption and other
payments to which they are entitled.
"Commission" shall mean the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act of 1939,
then the body performing such duties at such time.
"Common Securities" shall mean undivided beneficial interests in the
assets of Vesta Capital Trust which rank pari passu with Capital Securities
issued by Vesta Capital Trust; provided, however, that if an Event of Default
-------- -------
has occurred and is continuing, no payments in respect of Distributions on, or
payments upon liquidation, redemption or otherwise with respect to, the Common
Securities shall be made until the holders of the Capital Securities shall be
paid in full the Distributions and the liquidation, redemption and other
payments to which they are entitled.
"Common Securities Guarantee" shall mean any guarantee that the
Company may enter into with any Person or Persons that operate directly or
indirectly for the benefit of holders of Common Securities of Vesta Capital
Trust.
"Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Company or any other class of stock resulting from changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
"Company" shall mean Vesta Insurance Group, Inc., a Delaware
corporation, and, subject to the provisions of Article X, shall include its
successors and assigns.
"Company Request" or "Company Order" shall mean a written request or
order signed in the name of the Company by the
3
<PAGE>
Chief Executive Officer, the President, a Vice President, the Controller, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Comparable Treasury Issue" shall mean the United States Treasury
security selected by the Quotation Agent as having a maturity comparable to the
remaining term to the Stated Maturity Date of the Securities that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Securities.
"Comparable Treasury Price" shall mean, with respect to any prepayment
date pursuant to Section 14.01, (i) the average of the bid and asked prices for
the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) on the third Business Day preceding such prepayment date, as
set forth in the daily statistical release (or any successor release) published
by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m.
Quotations for U.S. Government Securities" or (ii) if such release (or any
successor release) is not published or does not contain such prices on such
Business Day, (A) the average of five Reference Treasury Dealer Quotations for
such prepayment date, after excluding the highest and lowest such Reference
Treasury Dealer Quotations, or (B) if the Trustee obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such Quotations.
"Compounded Interest" shall have the meaning set forth in Section
16.01.
"Contingent Obligation" means, with respect to the Company and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take or pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose of assuring in any other manner the obligee of such debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Contingent
Obligation shall not include (i) obligations under insurance or reinsurance
policies, or (ii) endorsements for collection or deposit in the ordinary course
of business.
4
<PAGE>
"Custodian" shall mean any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Declaration" shall mean the Amended and Restated Declaration of Trust
of Vesta Capital Trust, dated as of January 31, 1997.
"Default" shall mean any event, act or condition that with notice or
lapse of time, or both, would constitute an Event of Default.
"Deferred Interest" shall have the meaning set forth in Section
16.01.
"Definitive Securities" shall mean those securities issued in fully
registered certificated form not otherwise in global form.
"Depositary" shall mean, with respect to Securities of any series, for
which the Company shall determine that such Securities will be issued as a
Global Security, The Depository Trust Company, New York, New York, another
clearing agency, or any successor registered as a clearing agency under the
Exchange Act or other applicable statute or regulation, which, in each case,
shall be designated by the Company pursuant to Section 2.05(d).
"Dissolution Event" shall mean the liquidation of the Trust pursuant
to the Declaration, and the distribution of the Securities held by the Property
Trustee to the holders of the Trust Securities issued by the Vesta Capital Trust
pro rata in accordance with the Declaration.
"Event of Default" shall mean any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 16.01.
"GAAP" means generally accepted accounting principles, as recognized
by the American Institute of Certificated Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Company and its Subsidiaries throughout the period indicated and
consistent with the prior financial practice of the Company and its
Subsidiaries.
5
<PAGE>
"Global Security" shall mean, with respect to the Securities, a
Security executed by the Company and delivered by the Trustee to the Depositary
or pursuant to the Depositary's instruction, all in accordance with the
Indenture, which shall be registered in the name of the Depositary or its
nominee.
"Guarantees" shall mean the Capital Securities Guarantee and the
Common Securities Guarantee.
"Indebtedness for Money Borrowed" shall mean any obligation of, or any
obligation guaranteed by, the Company for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments.
"Indenture" shall mean this instrument as originally executed or, if
amended as herein provided, as so amended.
"Interest Payment Date" shall have the meaning set forth in Section
2.06.
"Investment Company Event" shall mean that Vesta Capital Trust and the
Company shall have received an opinion, requested by the Company, of counsel
experienced in practice under the Investment Company Act of 1940, as amended
(the "1940 Act"), to the effect that, as a result of the occurrence of a change
in law or regulation or a change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an insubstantial risk
that Vesta Capital Trust is or will be considered an "investment company" which
is required to be registered under the 1940 Act, which Change in 1940 Act Law
becomes effective on or after the Issue Date.
"Issue Date" shall mean January 31, 1997.
"Lien" means, with respect to any asset, any Mortgage, lien, pledge,
charge, security interest or encumbrance of any kind with respect to such asset.
For the purposes of this Indenture, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Maturity Date" shall mean January 15, 2027.
"Mortgage" shall mean and include any mortgage, pledge, lien, security
interest, conditional sale or other title retention agreement or other similar
encumbrance.
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"Non Book-Entry Capital Securities" shall have the meaning set forth
in Section 2.05.
"Officers" shall mean any of the Chief Executive Officer, the
President, a Vice President, the Controller, the Secretary or an Assistant
Secretary, the Treasurer or an Assistant Treasurer of the Company.
"Officers' Certificate" shall mean a certificate signed by two
Officers and delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel, who may
be an employee of the Company, and who shall be acceptable to the Trustee.
"Other Debentures" shall mean all junior subordinated debentures
issued by the Company from time to time and sold to trusts to be established by
the Company (if any), in each case similar to Vesta Capital Trust.
"Other Guarantees" shall mean all guarantees to be issued by the
Company with respect to capital securities (if any) and issued to other trusts
to be established by the Company (if any), in each case similar to the Vesta
Capital Trust.
The term "outstanding" when used with reference to Securities, shall,
subject to the provisions of Section 7.04, mean, as of any particular time, all
Securities authenticated and delivered by the Trustee or an Authenticating Agent
under this Indenture, except
(a) Securities theretofore cancelled by the Trustee or an
Authenticating Agent or delivered to the Trustee for
cancellation;
(b) Securities, or portions thereof, for the payment or prepayment of
which moneys in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than the
Company) or shall have been set aside and segregated in trust by
the Company (if the Company shall act as its own paying agent);
provided that, if such Securities, or portions thereof, are to be
prepaid prior to maturity thereof, notice of such prepayment
shall have been given as in Article XIV provided or provision
satisfactory to the Trustee shall have been made for giving such
notice; and
(c) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and
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delivered pursuant to the terms of Section 2.08 unless proof
satisfactory to the Company and the Trustee is presented that any
such Securities are held by bona fide holders in due course.
"Person" shall mean a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Predecessor Security" of any particular Security shall mean every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 2.08 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Prepayment Price" shall mean the Special Event Prepayment Price.
"Principal office of the Trustee", or other similar term, shall mean
the principal office of the Trustee, at which at any particular time its
corporate trust business shall be administered.
"Property Trustee" shall have the same meaning as set forth in the
Declaration.
"Purchase Agreement" shall mean the Purchase Agreement, dated January
29, 1997, among the Company, Vesta Capital Trust and the initial purchasers
named therein.
"Qualified Debt Obligations" means, without duplication, (a) debt
securities of the Company, provided that the terms of any such debt security (i)
permit the deferral of principal and interest payments for a period of up to
five years (but not beyond the maturity date), as elected by the Company, (ii)
have a maturity for payment of principal of not less than ten (10) years after
the date of issuance, and (iii) include provisions making the debt security
expressly subordinate to all other debt of the Company, (b) preferred securities
issued by a Subsidiary, the sole purpose of which is to issue such preferred
securities and invest the proceeds thereof in debt securities of the type
described in clause (a) above, and which preferred securities are payable solely
out of the proceeds of payments on account of such debt securities; and (c) the
obligations recorded on the consolidated balance sheet of the Company and its
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Subsidiaries with respect to debt securities of the type described in clause (a)
above and preferred securities of the type described in clause (b) above.
"Quotation Agent" shall mean the Reference Treasury Dealer appointed
by the Company.
"Reference Treasury Dealer" shall mean (i) Donaldson, Lufkin &
Jenrette Securities Corporation, and its successors; provided, however, that if
the foregoing shall cease to be a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"), the Company shall substitute
therefor another Primary Treasury Dealer, and (ii) any other Primary Treasury
Dealer selected by the Trustee after consultation with the Company.
"Reference Treasury Dealer Quotations" shall mean, with respect to
each Reference Treasury Dealer and any prepayment date pursuant to Section
14.01, the average, as determined by the Trustee, of the bid and asked prices
for the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) at 5:00 p.m. New York City time on the third Business Day
preceding such prepayment date, quoted in writing to the Trustee by such
Reference Treasury Dealer.
"Responsible Officer", when used with respect to the Trustee, shall
mean any officer of the Trustee with responsibility for the administration of
this Indenture and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Security" shall mean Securities that bear or are required
to bear the legends set forth in Exhibit A hereto, other than those legends to
be set forth only on a Global Security.
"Rule 144A" shall mean Rule 144A under the Securities Act, as such
Rule may be amended from time to time, or under any similar rule or regulation
hereafter adopted by the Commission.
"Securities" means the Company's 8.525% Junior Subordinated Deferrable
Interest Debentures due January 15, 2027, as authenticated and issued under this
Indenture.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securityholder", "holder of Securities", or other similar terms,
shall mean any Person in whose name at the time a
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particular Security is registered on the register kept by the Company or the
Trustee for that purpose in accordance with the terms hereof.
"Security Register" shall mean (i) prior to a Dissolution Event, the
list of holders provided to the Trustee pursuant to Section 4.01, and (ii)
following a Dissolution Event, any security register maintained by a security
registrar for the securities appointed by the Company following the execution of
a supplemental indenture providing for transfer procedures as provided for in
Section 2.07(a).
"Senior Indebtedness" shall mean with respect to the Company and its
Subsidiaries: (a) all liabilities, obligations and indebtedness for borrowed
money, whether or not evidenced by bonds, debentures, notes or other similar
instruments, (b) all obligations to pay the deferred purchase price of property
or services (other than trade payables due and arising in the ordinary course of
business), (c) all Capital Lease Obligations, (d) all debt of any other Person
secured by a Lien on any asset of the Company or any of its Subsidiaries, (e)
all Contingent Obligations, and (f) all obligations, contingent or otherwise,
relating to the face amount of letters of credit, whether or not drawn, and
banker's acceptance, but excluding any obligation relating to an undrawn letter
of credit if the undrawn letter of credit is issued in connection with a
liability for which a reserve has been established by the Company or the
applicable Subsidiary in accordance with GAAP; provided, that Senior
Indebtedness shall not include the Securities, the Guarantees or other Qualified
Debt Obligations.
"Special Event" means either a Tax Event or an Investment Company
Event.
"Special Event Prepayment Price" shall mean, with respect to any
prepayment of the Securities pursuant to Section 14.01 hereof, an amount in cash
equal to the greater of (i) 100% of the principal amount of the Securities to be
prepaid and (ii) the sum, as determined by a Quotation Agent, of the present
values of the remaining scheduled payments of principal and interest on the
Securities discounted to the prepayment date on a semi-annual basis (assuming a
360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate,
plus, in each case, accrued and unpaid interest thereon, including Compounded
Interest and Additional Sums, if any, to the date of such prepayment.
"Subsidiary" shall mean with respect to any Person, (i) any
corporation at least a majority of whose outstanding voting stock of which is
owned, directly or indirectly, by such Person
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or by one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries, (ii) any general partnership, joint venture or similar entity, at
least a majority of whose outstanding partnership or similar interests shall at
the time be owned by such Person, or by one or more of its Subsidiaries, or by
such Person and one or more of its Subsidiaries and (iii) any limited
partnership of which such Person or any of its Subsidiaries is a general
partner. For the purposes of this definition, "voting stock" means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.
"Tax Event" shall mean the receipt by Vesta Capital Trust and the
Company of an opinion, requested by the Company, of counsel experienced in such
matters to the effect that, as a result of any amendment to, or change
(including any announced prospective change) in, the laws or any regulations
thereunder of the United States or any political subdivision or taxing authority
thereof or therein or as a result of any official administrative written
decision or pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is made on or after the Issue Date, there is more than
an insubstantial risk that (i) Vesta Capital Trust is, or will be within 90 days
of the date of such opinion, subject to United States Federal income tax with
respect to income received or accrued on the Securities, (ii) interest payable
by the Company on the Securities is not, or within 90 days of the date of such
opinion, will not be, deductible by the Company, in whole or in part, for United
States Federal income tax purposes, or (iii) Vesta Capital Trust is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
"Trustee" shall mean the Person identified as "Trustee" in the first
paragraph hereof, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder.
"Trust Indenture Act of 1939" shall mean the Trust Indenture Act of
1939 as in force at the date of execution of this Indenture except as provided
in Section 9.03; provided, however, that, in the event the Trust Indenture Act
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of 1939 is amended after such date, "Trust Indenture Act of 1939" shall mean, to
the extent required by any such amendment, the Trust Indenture Act of 1939 as so
amended.
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"Trust Securities" shall mean the Capital Securities and the Common
Securities, collectively.
"U.S. Government Obligations" shall mean securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such U.S. Government Obligation or a
specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.
"Vesta Capital Trust" shall mean Vesta Capital Trust I, a Delaware
business trust created for the purpose of issuing its undivided beneficial
interests in connection with the issuance of Securities under this Indenture.
ARTICLE II.
SECURITIES
SECTION 2.01. Forms Generally.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A, the terms of which are incorporated
in and made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the Company is subject or usage. Each Security shall be dated the date of
its authentication. The Securities shall be issued in denominations of $1,000
and integral multiples thereof.
SECTION 2.02. Execution and Authentication.
The Securities shall be signed on behalf of the Company by the Chief
Executive Officer, the President, a Vice President or the Controller and
attested by its Secretary or an Assistant
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Secretary. Any signature may be in the form of a manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds that office at
the time the Security is authenticated, the Security shall nevertheless be
valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Security has been authenticated under this Indenture. The
form of Trustee's certificate of authentication to be borne by the Securities
shall be substantially as set forth in Exhibit A hereto.
The Trustee shall, upon a Company Order, authenticate for original
issue up to, and the aggregate principal amount of Securities outstanding at any
time may not exceed, $103,093,000 aggregate principal amount of the Securities;
except as provided in Sections 2.07, 2.08, 2.10 and 14.05.
SECTION 2.03. Form and Payment.
Except as provided in Section 2.05, the Securities shall be issued in
fully registered certificated form without interest coupons. Principal of and
premium, if any, and interest on the Securities issued in certificated form will
be payable, the transfer of such Securities will be registrable and such
Securities will be exchangeable for Securities bearing identical terms and
provisions at the office or agency of the Trustee; provided, however, that
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payment of interest with respect to the Securities (other than Securities issued
in global form, the payment of interest on which shall be made in immediately
available funds) may be made at the option of the Company (i) by check mailed to
the holder at such address as shall appear in the Security Register or (ii) by
transfer to an account maintained by the Person entitled thereto, provided that
proper transfer instructions have been received in writing by the relevant
record date. Notwithstanding the foregoing, so long as the holder of any
Securities is the Property Trustee, the payment of the principal of and premium,
if any, and interest (including Compounded Interest and Additional Sums, if any)
on such Securities held by the Property Trustee will be made in immediately
available funds at such place and to such account as may be designated by the
Property Trustee.
SECTION 2.04. Legends.
Except as otherwise determined by the Company in accordance with
applicable law, each Security shall bear the applicable legends relating to
restrictions on transfer pursuant to the securities laws in substantially the
form set forth on Exhibit A hereto.
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SECTION 2.05. Global Security.
(a) In connection with a Dissolution Event,
(i) if any Capital Securities are held in book-entry form, the
related Definitive Securities shall be presented to the Trustee (if an
arrangement with the Depositary has been maintained) by the Property
Trustee in exchange for one or more Global Securities (as may be required
pursuant to Section 2.07) in an aggregate principal amount equal to the
aggregate principal amount of all outstanding Securities, to be registered
in the name of the Depositary, or a custodian therefor, or its nominee, and
delivered by the Trustee to the Depositary for crediting to the accounts of
its participants pursuant to the instructions of the Administrative
Trustees; the Company upon any such presentation shall execute one or more
Global Securities in such aggregate principal amount and deliver the same
to the Trustee for authentication and delivery in accordance with this
Indenture; and payments on the Securities issued as a Global Security will
be made to the Depositary; and
(ii) if any Capital Securities are held in certificated form, the
related Definitive Securities may be presented to the Trustee by the
Property Trustee and any Capital Security certificate which represents
Capital Securities other than Capital Securities in book-entry form ("Non
Book-Entry Capital Securities") will be deemed to represent beneficial
interests in Securities presented to the Trustee by the Property Trustee
having an aggregate principal amount equal to the aggregate liquidation
amount of the Non Book-Entry Capital Securities until such Capital Security
certificates are presented to the Security Registrar for transfer or
reissuance, at which time such Capital Security certificates will be
cancelled and a Security, registered in the name of the holder of the
Capital Security certificate, with an aggregate principal amount equal to
the aggregate liquidation amount of the Capital Security certificate
cancelled, will be executed by the Company and delivered to the Trustee for
authentication and delivery in accordance with this Indenture. Upon the
issuance of such Securities, Securities with an equivalent aggregate
principal amount that were presented by the Property Trustee to the Trustee
will be deemed to have been cancelled.
(b) The Global Securities shall represent the aggregate amount of
outstanding Securities from time to time endorsed thereon; provided, that the
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aggregate amount of
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outstanding Securities represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and prepayments. Any
endorsement of a Global Security to reflect the amount of any increase or
decrease in the amount of outstanding Securities represented thereby shall be
made by the Trustee, in accordance with instructions given by the Company as
required by this Section 2.05.
(c) The Global Securities may be transferred, in whole but not in
part, only to another nominee of the Depositary, or to a successor Depositary
selected or approved by the Company or to a nominee of such successor
Depositary.
(d) If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or the Depositary has ceased to be
a clearing agency registered under the Exchange Act, and a successor Depositary
is not appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such condition, as the case may be, the Company will
execute, and the Trustee, upon receipt of a Company Order, will authenticate and
make available for delivery the Definitive Securities, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Security in exchange for such Global Security. If there is
an Event of Default, the Depositary shall have the right to exchange the Global
Securities for Definitive Securities. In addition, the Company may at any time
determine that the Securities shall no longer be represented by a Global
Security. In the event of such an Event of Default or such a determination, the
Company shall execute, and subject to Section 2.07, the Trustee, upon receipt of
an Officers' Certificate evidencing such determination by the Company, will
authenticate and make available for delivery the Definitive Securities, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Security in exchange for such Global Security.
Upon the exchange of the Global Security for such Definitive Securities, in
authorized denominations, the Global Security shall be cancelled by the Trustee.
Such Definitive Securities issued in exchange for the Global Security shall be
registered in such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Definitive
Securities to the Depositary for delivery to the Persons in whose names such
Definitive Securities are so registered.
SECTION 2.06. Interest.
(a) Each Security will bear interest at the rate of 8.525% per annum
(the "Coupon Rate") from the most recent date to
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which interest has been paid or, if no interest has been paid, from January 31,
1997, until the principal thereof becomes due and payable, and on any overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the Coupon Rate,
compounded semi-annually, payable (subject to the provisions of Article XVI)
semi-annually in arrears on January 15 and July 15 of each year (each, an
"Interest Payment Date") commencing on July 15, 1997 to the Person in whose name
such Security or any predecessor Security is registered, at the close of
business on the regular record date for such interest installment, which shall
be the first day of the month in which the relevant Interest Payment Date falls.
(b) Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months and, for any period of less than a full
calendar month, the number of days elapsed in such month. In the event that any
Interest Payment Date falls on a day that is not a Business Day, then payment of
interest payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), with the same force and effect as if made on such date.
(c) During such time as the Property Trustee is the holder of any
Securities, the Company shall pay any additional amounts on the Securities as
may be necessary in order that the amount of Distributions then due and payable
by Vesta Capital Trust on the outstanding Trust Securities shall not be reduced
as a result of any additional taxes, duties and other governmental charges to
which Vesta Capital Trust has become subject as a result of a Tax Event
("Additional Sums").
SECTION 2.07. Transfer and Exchange.
(a) Transfer Restrictions. The Securities may not be transferred
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except in compliance with any legend contained in Exhibit A unless otherwise
determined by the Company in accordance with applicable law. Upon any
distribution of the Securities following a Dissolution Event, the Company and
the Trustee shall enter into a supplemental indenture pursuant to Section 9.01
to provide for the transfer restrictions and procedures with respect to the
Securities substantially similar to those contained in the Declaration to the
extent applicable in the circumstances existing at such time.
(b) General Provisions Relating to Transfers and Exchanges. To permit
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registrations of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Definitive Securities and Global Securities. All
Definitive
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Securities and Global Securities issued upon any registration of transfer or
exchange of Definitive Securities or Global Securities shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Definitive Securities or Global Securities
surrendered upon such registration of transfer or exchange.
No service charge shall be made to a holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith.
The Company shall not be required to (i) issue, register the transfer
of or exchange Securities during a period beginning at the opening of business
15 days before the day of mailing of a notice of prepayment or any notice of
selection of Securities for prepayment under Article XIV hereof and ending at
the close of business on the day of such mailing; or (ii) register the transfer
of or exchange any Security so selected for prepayment in whole or in part,
except the unprepaid portion of any Security being prepaid in part.
Prior to due presentment for the registration of a transfer of any
Security, the Trustee, any agent and the Company may deem and treat the Person
in whose name any Security is registered as the absolute owner of such Security
for the purpose of receiving payment of principal of and premium, if any, and
interest on such Securities, and neither the Trustee, any agent nor the Company
shall be affected by notice to the contrary.
SECTION 2.08. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Trustee's requirements
for replacements of Securities are met. An indemnity bond must be supplied by
the holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee and any authenticating agent from any loss that
any of them may suffer if a Security is replaced. The Company or the Trustee
may charge for its expenses in replacing a Security.
Every replacement Security is an obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Securities duly issued hereunder.
SECTION 2.09. Treasury Securities.
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In determining whether the holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or any Affiliate of the Company shall be considered as though not
outstanding, except that for purposes of determining whether the Trustee shall
be protected in relying on any such direction, waiver or consent, only
Securities that a Responsible Officer of the Trustee actually knows to be so
owned shall be so considered.
SECTION 2.10. Temporary Securities.
Pending the preparation of Definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities that are printed, typewritten,
lithographed, mimeographed or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company shall cause Definitive
Securities to be prepared without unreasonable delay. The Definitive Securities
shall be printed, typewritten, lithographed or engraved, or provided by any
combination thereof, or in any other manner permitted by the rules and
regulations of any applicable securities exchange, all as determined by the
officers executing such Definitive Securities. After the preparation of
Definitive Securities, the temporary Securities shall be exchangeable for
Definitive Securities upon surrender of the temporary Securities at the office
or agency maintained by the Company for such purpose pursuant to Section 3.02
hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities, the Company shall execute, and the Trustee
shall authenticate and make available for delivery, in exchange therefor the
same aggregate principal amount of Definitive Securities of authorized
denominations. Until so exchanged, the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as Definitive
Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall retain or destroy cancelled Securities in accordance with
its normal
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practices (subject to the record retention requirement of the Exchange Act)
unless the Company directs them to be returned to it. The Company may not issue
new Securities to replace Securities that have been redeemed or paid or that
have been delivered to the Trustee for cancellation. All cancelled Securities
not destroyed by the Trustee shall be delivered to the Company.
SECTION 2.12. Defaulted Interest.
Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the holder on the
relevant regular record date by virtue of having been such holder; and such
Defaulted Interest shall be paid by the Company, at its election, as provided in
clause (a) or clause (b) below:
(a) The Company may make payment of any Defaulted Interest on
Securities to the Persons in whose names such Securities (or their
respective Predecessor Securities) are registered at the close of business
on a special record date for the payment of such Defaulted Interest, which
shall be fixed in the following manner: the Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each such Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal to
the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a special record date for the payment of such Defaulted Interest
which shall not be more than 15 nor less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such special record date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed, first
class postage prepaid, to each Securityholder at his or her address as it
appears in the Security Register, not less than 10 days prior to such
special record date. Notice of the proposed payment of such Defaulted
Interest and the special record date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose
names such Securities (or their respective
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Predecessor Securities) are registered on such special record date and
shall be no longer payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest on any
Securities in any other lawful manner not inconsistent with the requirements of
any securities exchange on which such Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.
SECTION 2.13. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of prepayment as a convenience to Securityholders; provided that any such notice
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may state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
prepayment and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such prepayment shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the CUSIP numbers.
ARTICLE III.
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and Interest
The Company covenants and agrees for the benefit of the holders of the
Securities that it will duly and punctually pay or cause to be paid the
principal of and premium, if any, and interest on the Securities at the place,
at the respective times and in the manner provided herein.
SECTION 3.02. Offices for Notices and Payments, etc.
So long as any of the Securities remains outstanding, the Company will
maintain in the Borough of Manhattan, The City of New York, an office or agency
where the Securities may be presented for payment, an office or agency where
the Securities may be presented for registration of transfer and for exchange as
in this Indenture provided and an office or agency where notices and demands to
or upon the Company in respect of the Securities or of this Indenture may be
served. The Company will give to the
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Trustee written notice of the location of any such office or agency and of any
change of location thereof. Until otherwise designated from time to time by the
Company in a notice to the Trustee, any such office or agency for all of the
above purposes shall be the office or agency of the Trustee in the Borough of
Manhattan, The City of New York. In case the Company shall fail to maintain any
such office or agency in the Borough of Manhattan, The City of New York, or
shall fail to give such notice of the location or of any change in the location
thereof, presentations and demands may be made and notices may be served at the
principal corporate trust office of the Trustee.
In addition to any such office or agency, the Company may from time to
time designate one or more offices or agencies outside the Borough of Manhattan,
The City of New York, where the Securities may be presented for registration of
transfer and for exchange in the manner provided in this Indenture, and the
Company may from time to time rescind such designation, as the Company may deem
desirable or expedient; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
any such office or agency in the Borough of Manhattan, The City of New York, for
the purposes above mentioned. The Company will give to the Trustee prompt
written notice of any such designation or rescission thereof; provided, further,
that the Company shall at all times maintain a paying agent in each such office
or agency.
SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office.
The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.04. Provision as to Paying Agent.
(a) If the Company shall appoint a paying agent other than the
Trustee with respect to the Securities, it will cause such paying
agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the
provision of this Section 3.04,
(1) that it will hold all sums held by it as such agent for the
payment of the principal of and premium, if any, or interest
on the Securities (whether such sums have been paid to it by
the Company or by any other obligor
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on the Securities) in trust for the benefit of the holders
of the Securities; and
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Securities) to make
any payment of the principal of and premium or interest on
the Securities when the same shall be due and payable.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of and premium, if any, or
interest on the Securities, set aside, segregate and hold in
trust for the benefit of the holders of the Securities a sum
sufficient to pay such principal, premium or interest so becoming
due and will notify the Trustee of any failure to take such
action and of any failure by the Company (or by any other obligor
under the Securities) to make any payment of the principal of and
premium, if any, or interest on the Securities when the same
shall become due and payable.
(c) Anything in this Section 3.04 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a
satisfaction and discharge with respect to the Securities
hereunder, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust for any such Securities by the
Trustee or any paying agent hereunder, as required by this
Section 3.04, such sums to be held by the Trustee upon the trusts
herein contained.
(d) Anything in this Section 3.04 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section
3.04 is subject to Sections 11.03 and 11.04.
SECTION 3.05. Certificate to Trustee.
The Company will deliver to the Trustee on or before 120 days after
the end of each fiscal year in each year, commencing with the first fiscal year
ending after the date hereof, so long as Securities are outstanding hereunder,
an Officers' Certificate, one of the signers of which shall be the principal
executive, principal financial or principal accounting officer of the Company,
stating that in the course of the performance by the signers of their duties as
officers of the
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Company they would normally have knowledge of any default by the Company in the
performance of any covenants contained herein, stating whether or not they have
knowledge of any such default and, if so, specifying each such default of which
the signers have knowledge and the nature thereof.
SECTION 3.06. Compliance with Consolidation Provisions.
The Company will not, while any of the Securities remain outstanding,
consolidate with, or merge into, or merge into itself, or sell or convey all or
substantially all of its property to, any other Person unless the provisions of
Article X hereof are complied with.
SECTION 3.07. Limitation on Dividends.
The Company will not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Company's capital stock (which includes common and preferred stock)
or (ii) make any payment of principal, interest or premium, if any, on or repay
or repurchase or redeem any debt securities of the Company (including any Other
Debentures) that rank pari passu with or junior in right of payment to the
Securities or (iii) make any guarantee payments with respect to any guarantee by
the Company of the debt securities of any Subsidiary of the Company (including
Other Guarantees) if such guarantee ranks pari passu or junior in right of
payment to the Securities (other than (a) dividends or distributions in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
Common Stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholder's rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Capital Securities Guarantee,
(d) as a result of a reclassification of the Company's capital stock or the
exchange or the conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock, (e) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, and (f) purchases or issuances of Common Stock in
connection with any of the Company's stock option, stock purchase, stock loan or
other benefit plans for its directors, officers or employees or any of the
Company's dividend reinvestment plans, in each case as now existing or hereafter
established or amended) if at such time (i) there shall have occurred any event
of which the Company has actual knowledge that (a) with the giving of notice or
the lapse of time, or both,
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would constitute an Event of Default and (b) in respect of which the Company
shall not have taken reasonable steps to cure, (ii) if such Securities are held
by the Property Trustee, the Company shall be in default with respect to its
payment of any obligations under the Capital Securities Guarantee or (iii) the
Company shall have given notice of its election of the exercise of its right to
extend the interest payment period pursuant to Section 16.01 and any such
extension shall be continuing.
SECTION 3.08. Covenants as to Vesta Capital Trust
In the event Securities are issued to Vesta Capital Trust or a trustee
of such trust in connection with the issuance of Trust Securities by Vesta
Capital Trust, for so long as such Trust Securities remain outstanding, the
Company will (i) directly or indirectly maintain 100% ownership of the Common
Securities of Vesta Capital Trust; provided, however, that any successor of the
-------- -------
Company, permitted pursuant to Article X, may succeed to the Company's ownership
of such Common Securities, (ii) use its reasonable efforts to cause Vesta
Capital Trust (a) to remain a business trust, except in connection with a
distribution of Securities to the holders of the Trust Securities in a
liquidation of Vesta Capital Trust, the redemption of all of the Trust
Securities of Vesta Capital Trust or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of Vesta Capital Trust, and
(b) to continue to be treated as a grantor trust and not as an association
taxable as a corporation or a partnership for United States federal income tax
purposes and (iii) to use its reasonable efforts to cause each holder of Trust
Securities to be treated as owning an undivided beneficial interest in the
Securities.
SECTION 3.09. Payment of Expenses.
In connection with the offering, sale and issuance of the Securities
to Vesta Capital Trust and in connection with the sale of the Trust Securities
by Vesta Capital Trust, the Company, in its capacity as borrower with respect to
the Securities, shall:
(a) pay all costs and expenses relating to the offering, sale and
issuance of the Securities, including commissions to the initial purchasers
payable pursuant to the Purchase Agreement and compensation of the Trustee in
accordance with the provisions of Section 6.06;
(b) pay all costs and expenses of Vesta Capital Trust (including, but
not limited to, costs and expenses relating to the organization of Vesta Capital
Trust, the offering, sale and issuance of the Trust Securities (including
commissions to the
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initial purchasers payable pursuant to the Purchase Agreement in connection
therewith), the fees and expenses of the Property Trustee and the Delaware
Trustee, the costs and expenses relating to the operation of the Trust,
including without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s), transfer
agent(s), duplicating, travel and telephone and other telecommunications
expenses and costs and expenses incurred in connection with the acquisition,
financing and disposition of the assets of Vesta Capital Trust;
(c) be primarily and fully liable for any indemnification obligations
arising with respect to the Declaration;
(d) pay any and all taxes (other than United States withholding taxes
attributable to Vesta Capital Trust or its assets) and all liabilities, costs
and expenses with respect to such taxes of Vesta Capital Trust; and
(e) pay all other fees, expenses, debts and obligations (other than
the Trust Securities) related to Vesta Capital Trust.
SECTION 3.10. Payment Upon Resignation or Removal.
Upon termination of this Indenture or the removal or resignation of
the Trustee, unless otherwise stated, the Company shall pay to the Trustee all
amounts accrued and owing to the date of such termination, removal or
resignation. Upon termination of the Declaration or the removal or resignation
of the Delaware Trustee or the Property Trustee, as the case may be, pursuant to
Section 5.7 of the Declaration, the Company shall pay to the Delaware Trustee or
the Property Trustee, as the case may be, all amounts accrued and owing to the
date of such termination, removal or resignation.
ARTICLE IV.
SECURITYHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists.
The Company covenants and agrees that it will furnish or cause to be
furnished to the Trustee:
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(a) on a semi-annual basis on each regular record date for the
Securities, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Securityholders as of
such record date; and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15
days prior to the time such list is furnished;
except that, no such lists need be furnished so long as the Trustee is in
possession thereof by reason of its acting as Security registrar.
SECTION 4.02. Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the
holders of the Securities (1) contained in the most recent list
furnished to it as provided in Section 4.01 or (2) received by it
in the capacity of Securities registrar (if so acting) hereunder.
The Trustee may destroy any list furnished to it as provided in
Section 4.01 upon receipt of a new list so furnished.
(b) In case three or more holders of Securities (hereinafter referred
to as "applicants") apply in writing to the Trustee and furnish
to the Trustee reasonable proof that each such applicant has
owned a Security for a period of at least six months preceding
the date of such application, and such application states that
the applicants desire to communicate with other holders of
Securities or with holders of all Securities with respect to
their rights under this Indenture and is accompanied by a copy of
the form of proxy or other communication which such applicants
propose to transmit, then the Trustee shall within 5 Business
Days after the receipt of such application, at its election,
either:
(1) afford such applicants access to the information preserved at the
time by the Trustee in accordance with the provisions of
subsection (a) of this Section 4.02; or
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(2) inform such applicants as to the approximate number of holders of
all Securities, whose names and addresses appear in the
information preserved at the time by the Trustee in accordance
with the provisions of subsection (a) of this Section 4.02, and
as to the approximate cost of mailing to such Securityholders the
form of proxy or other communication, if any, specified in such
application.
If the Trustee shall elect not to afford such applicants
access to such information, the Trustee shall, upon the written
request of such applicants, mail to each Securityholder whose
name and address appear in the information preserved at the time
by the Trustee in accordance with the provisions of subsection
(a) of this Section 4.02 a copy of the form of proxy or other
communication which is specified in such request with reasonable
promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the
reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and file
with the Commission, together with a copy of the material to be
mailed, a written statement to the effect that, in the opinion of
the Trustee, such mailing would be contrary to the best interests
of the holders of all Securities or would be in violation of
applicable law. Such written statement shall specify the basis
of such opinion. If the Commission, after opportunity for a
hearing upon the objections specified in the written statement so
filed, shall enter an order refusing to sustain any of such
objections or if, after the entry of an order sustaining one or
more of such objections, the Commission shall find, after notice
and opportunity for hearing, that all the objections so sustained
have been met and shall enter an order so declaring, the Trustee
shall mail copies of such material to all such Securityholders
with reasonable promptness after the entry of such order and the
renewal of such tender; otherwise the Trustee shall be relieved
of any obligation or duty to such applicants respecting their
application.
(c) Each and every holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the
Company nor the
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Trustee nor any paying agent shall be held accountable by reason
of the disclosure of any such information as to the names and
addresses of the holders of Securities in accordance with the
provisions of subsection (b) of this Section 4.02, regardless of
the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
SECTION 4.03. Reports of the Company
(a) The Company covenants and agrees to file with the Trustee,
within 15 days after the date on which the Company is required to
file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the
Company may be required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Exchange Act; or, if the
Company is not required to file information, documents or reports
pursuant to either of such sections, then to file with the
Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such
of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the
Exchange Act in respect of a security listed and registered on a
national securities exchange as may be prescribed from time to
time in such rules and regulations.
(b) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations
prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by
the Company with the conditions and covenants provided for in
this Indenture as may be required from time to time by such rules
and regulations.
(c) The Company covenants and agrees to transmit by mail to all
holders of Securities, as the names and addresses of such holders
appear upon the Security Register, within 30 days after the
filing thereof with the Trustee, such summaries of any
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information, documents and reports required to be filed by the
Company pursuant to subsections (a) and (b) of this Section 4.03
as may be required by rules and regulations prescribed from time
to time by the Commission.
(d) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's
receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information
contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to
rely exclusively on Officers' Certificates).
(e) So long as is required for an offer or sale of the Securities to
qualify for an exemption under Rule 144A under the Securities
Act, the Company shall, upon request, provide the information
required by clause (d)(4) thereunder to each holder of Restricted
Securities and to each beneficial owner and prospective purchaser
of Securities identified by any holder of Restricted Securities,
unless such information is furnished to the Commission pursuant
to Section 13 or 15(d) of the Exchange Act.
SECTION 4.04. Reports by the Trustee
(a) The Trustee shall transmit to Securityholders such reports
concerning the Trustee and its actions under this Indenture as
may be required pursuant to the Trust Indenture Act of 1939 at
the times and in the manner provided pursuant thereto. If
required by Section 313(a) of the Trust Indenture Act of 1939,
the Trustee shall, within sixty days after each May 15 following
the date of this Indenture, commencing May 15, 1997, deliver to
Securityholders a brief report, dated as of such May 15, which
complies with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the Trustee with
each stock exchange, if any, upon which the Securities are
listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when the Securities are listed
on any stock exchange.
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ARTICLE V.
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
ON EVENT OF DEFAULT
SECTION 5.01. Events of Default.
One or more of the following events of default shall constitute an
Event of Default hereunder (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of any interest upon any Security or any
Other Debentures when it becomes due and payable, and continuance
of such default for a period of 30 days; provided, however, that
--------
a valid extension of an interest payment period by the Company in
accordance with the terms hereof or, in the case of any Other
Debentures, the indenture related thereto, shall not constitute a
default in the payment of interest for this purpose; or
(b) default in the payment of all or any part of the principal of (or
premium, if any, on) any Security or any Other Debentures as and
when the same shall become due and payable either at maturity,
upon prepayment, by declaration of acceleration of maturity or
otherwise; or
(c) default in any material respect in the performance, or breach, of
any covenant or warranty of the Company in this Indenture (other
than a covenant or warranty a default in whose performance or
whose breach is elsewhere in this Section specifically dealt
with), and continuance of such default or breach for a period of
90 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the
Trustee by the holders of at least 25% in aggregate principal
amount of the outstanding Securities a written notice specifying
such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(d) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of
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the Company in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of the
Company or for any substantial part of its property, or ordering
the winding-up or liquidation of its affairs and such decree or
order shall remain unstayed and in effect for a period of 90
consecutive days; or
(e) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar
official) of the Company or of any substantial part of its
property, or shall make any general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they
become due.
If an Event of Default with respect to Securities at the time
outstanding occurs and is continuing, then in every such case the Trustee or the
holders of not less than 25% in aggregate principal amount of the Securities
then outstanding may declare the principal amount of all Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the holders of the outstanding Securities), and upon any
such declaration the same shall become immediately due and payable.
The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Securities shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, (i)
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
(A) all matured installments of interest upon all the Securities and the
principal of and premium, if any, on any and all Securities which shall have
become due otherwise than by acceleration (with interest upon such principal and
premium, if any, and, to the extent that payment of such interest is enforceable
under applicable law, on overdue installments of interest, at the same rate as
the rate of interest specified in the Securities to the date of such payment or
deposit) and (B) such amount as shall be sufficient to pay to the Trustee and
each
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predecessor Trustee all amounts payable pursuant to Section 6.06, and (ii) any
and all Events of Default under the Indenture shall have been cured, waived or
otherwise remedied as provided herein, then, in every such case, the holders of
a majority in aggregate principal amount of the Securities then outstanding, by
written notice to the Company and to the Trustee, may rescind and annul such
declaration and its consequences, but no such waiver or rescission and annulment
shall extend to or shall affect any subsequent default or shall impair any right
consequent thereon.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the holders of the Securities shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the holders of the
Securities shall continue as though no such proceeding had been taken.
SECTION 5.02. Payment of Securities on Default; Suit Therefor.
The Company covenants that (a) in case default shall be made in the
payment of any installment of interest upon any of the Securities as and when
the same shall become due and payable, and such default shall have continued for
a period of 30 days, or (b) in case default shall be made in the payment of the
principal of or premium, if any, on any of the Securities as and when the same
shall have become due and payable, whether at maturity of the Securities or upon
prepayment or by declaration of acceleration of maturity or otherwise, then,
upon demand of the Trustee, the Company will pay to the Trustee, for the benefit
of the holders of the Securities, the whole amount that then shall have become
due and payable on all such Securities for principal and premium, if any, or
interest, or both, as the case may be, with interest upon the overdue principal
and premium, if any, and (to the extent that payment of such interest is
enforceable under applicable law and, if the Securities are held by Vesta
Capital Trust or a trustee of such trust, without duplication of any other
amounts paid by Vesta Capital Trust or a trustee in respect thereof) upon the
overdue installments of interest at the rate borne by the Securities; and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including a reasonable compensation to the Trustee,
its agents, attorneys and counsel, and any expenses or liabilities incurred by
the Trustee hereunder other than through its negligence or bad faith.
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In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the
Securities and collect in the manner provided by law out of the property of the
Company or any other obligor on the Securities wherever situated the moneys
adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Securities under
Title 11, United States Code, or any other applicable law, or in case a receiver
or trustee shall have been appointed for the property of the Company or such
other obligor, or in the case of any other similar judicial proceedings relative
to the Company or other obligor upon the Securities, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 5.02,
shall be entitled and empowered, by intervention in such proceedings or
otherwise, to file and prove a claim or claims for the whole amount of principal
and interest owing and unpaid in respect of the Securities and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for all amounts payable pursuant to Section 6.06 to the
Trustee and each predecessor Trustee) and of the Securityholders allowed in such
judicial proceedings relative to the Company or any other obligor on the
Securities, or to the creditors or property of the Company or such other
obligor, unless prohibited by applicable law and regulations, to vote on behalf
of the holders of the Securities in any election of a trustee or a standby
trustee in arrangement, reorganization, liquidation or other bankruptcy or
insolvency proceedings or Person performing similar functions in comparable
proceedings, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized by each of the Securityholders to make
such payments to the Trustee, and, in the event that the Trustee shall consent
to the making of such payments directly to the Securityholders, to pay to the
Trustee such amounts as shall be sufficient to pay to the Trustee and
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each predecessor Trustee all amounts payable pursuant to Section 6.06.
Nothing herein contained shall be construed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any holder thereof or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or
under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities, or the production thereof in any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable benefit of the holders of the
Securities.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Securities, and it shall not be necessary to make any holders of the
Securities parties to any such proceedings.
SECTION 5.03. Application of Moneys Collected by Trustee.
Any moneys collected by the Trustee shall be applied in the order
following, at the date or dates fixed by the Trustee for the distribution of
such moneys, upon presentation of the Securities in respect of which moneys have
been collected, and stamping thereon the payment, if only partially paid, and
upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under Section
6.06, including the costs and expenses of collection applicable to the
Securities and reasonable compensation to the Trustee, its agents, attorneys and
counsel, and of all other expenses and liabilities incurred, and all advances
made, by the Trustee except as a result of its negligence or bad faith;
Second: To the payment of all Senior Indebtedness of the Company if
and to the extent required by Article XV;
Third: To the payment of the amounts then due and unpaid upon
Securities for principal of (and premium, if any) and
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interest on the Securities, in respect of which or for the benefit of which
money has been collected, ratably, without preference of priority of any kind,
according to the amounts due on such Securities for principal (and premium, if
any) and interest, respectively; and
Fourth: To the Company.
SECTION 5.04. Proceedings by Securityholders.
Except as contemplated by this Section 5.04, no holder of any Security
shall have any right by virtue of or by availing of any provision of this
Indenture to institute any suit, action or proceeding in equity or at law upon
or under or with respect to this Indenture or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless such holder previously
shall have given to the Trustee written notice of an Event of Default and of the
continuance thereof with respect to the Securities specifying such Event of
Default, as hereinbefore provided, and unless also the holders of not less than
25% in aggregate principal amount of the Securities then outstanding shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity shall have
failed to institute any such action, suit or proceeding, it being understood and
intended, and being expressly covenanted by the taker and holder of every
Security with every other taker and holder and the Trustee, that no one or more
holders of Securities shall have any right in any manner whatsoever by virtue of
or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of any other holder of Securities, or to obtain or seek to
obtain priority over or preference to any other such holder, or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all holders of Securities.
Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Security to receive payment of the principal of
(premium, if any) and interest on such Security, on or after the same shall have
become due and payable, or to institute suit for the enforcement of any such
payment, shall not be impaired or affected without the consent of such holder
and by accepting a Security hereunder it is expressly understood, intended and
covenanted by the taker and holder of every Security with every other such taker
and holder and the Trustee, that no one or more holders of Securities shall have
any
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right in any manner whatsoever by virtue or by availing of any provision of this
Indenture to affect, disturb or prejudice the rights of the holders of any other
Securities, or to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all
holders of Securities. For the protection and enforcement of the provisions of
this Section, each and every Securityholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity.
The Company and the Trustee acknowledge that pursuant to the
Declaration, the holders of Capital Securities are entitled, in the
circumstances and subject to the limitations set forth therein, to commence a
Direct Action with respect to any Event of Default under this Indenture and the
Securities.
SECTION 5.05. Proceedings by Trustee.
In case an Event of Default occurs with respect to Securities and is
continuing, the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 5.06. Remedies Cumulative and Continuing.
All powers and remedies given by this Article V to the Trustee or to
the Securityholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any other powers and remedies available to the Trustee or
the holders of the Securities, by judicial proceedings or otherwise, to enforce
the performance or observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to the Securities, and no delay
or omission of the Trustee or of any holder of any of the Securities to exercise
any right or power accruing upon any Event of Default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.04, every power and remedy given by this Article V or by
law to the Trustee or to the Securityholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.
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SECTION 5.07. Direction of Proceedings and Waiver of Defaults by
Majority of Securityholders.
The holders of a majority in aggregate principal amount of the
Securities at the time outstanding shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
--------
however, that (subject to the provisions of Section 6.01) the Trustee shall have
- -------
the right to decline to follow any such direction if the Trustee shall determine
that the action so directed would be unjustly prejudicial to the holders not
taking part in such direction or if the Trustee being advised by counsel
determines that the action or proceeding so directed may not lawfully be taken
or if the Trustee in good faith by its board of directors or trustees, executive
committee, or a trust committee of directors or trustees and/or Responsible
Officers shall determine that the action or proceedings so directed would
involve the Trustee in personal liability. Prior to any declaration
accelerating the maturity of the Securities, the holders of a majority in
aggregate principal amount of the Securities at the time outstanding may on
behalf of the holders of all of the Securities waive any past default or Event
of Default and its consequences except a default (a) in the payment of principal
of or premium, if any, or interest on any of the Securities or (b) in respect of
covenants or provisions hereof which cannot be modified or amended without the
consent of the holder of each Security affected; provided, however, that if the
-------- -------
Securities are held by the Property Trustee, such waiver or modification to such
waiver shall not be effective until the holders of a majority in aggregate
liquidation amount of Trust Securities shall have consented to such waiver or
modification to such waiver; provided further, that if the consent of the holder
-------- -------
of each outstanding Security is required, such waiver shall not be effective
until each holder of the Trust Securities shall have consented to such waiver.
Upon any such waiver, the default covered thereby shall be deemed to be cured
for all purposes of this Indenture and the Company, the Trustee and the holders
of the Securities shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon. Whenever any default or
Event of Default hereunder shall have been waived as permitted by this Section
5.07, said default or Event of Default shall for all purposes of the Securities
and this Indenture be deemed to have been cured and to be not continuing.
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SECTION 5.08. Notice of Defaults.
The Trustee shall, within 90 days after the occurrence of a default
with respect to the Securities known to the Trustee, mail to all
Securityholders, as the names and addresses of such holders appear upon the
Security register, notice of all defaults known to the Trustee, unless such
defaults shall have been cured before the giving of such notice (the term
"defaults" for the purpose of this Section 5.08 being hereby defined to be the
events specified in clauses (a), (b), (c), (d) and (e) of Section 5.01, not
including periods of grace, if any, provided for therein, and irrespective of
the giving of written notice specified in clause (c) of Section 5.01); and
provided that, except in the case of default in the payment of the principal of
or premium, if any, or interest on any of the Securities, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Securityholders; and provided further, that in
the case of any default of the character specified in Section 5.01(c) no such
notice to Securityholders shall be given until at least 60 days after the
occurrence thereof but shall be given within 90 days after such occurrence.
SECTION 5.09. Undertaking to Pay Costs.
All parties to this Indenture agree, and each holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section 5.09 shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in aggregate principal
amount of the Securities outstanding, or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest on any Security against the Company on or after the
same shall have become due and payable.
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ARTICLE VI.
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee.
With respect to the holders of the Securities issued hereunder, the
Trustee, prior to the occurrence of an Event of Default and after the curing or
waiving of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture. In case an Event of Default has occurred (which has not been cured
or waived) the Trustee shall exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have
occurred
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this
Indenture, and the Trustee shall not be liable except for
the performance of such duties and obligations as are
specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture; but, in the case of any such certificates or
opinions that by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture;
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(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith, in accordance with
the direction of the Securityholders pursuant to Section 5.07,
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this
Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or liability is not reasonably assured to it under the
terms of this Indenture and that adequate indemnity against such risk is not
reasonably assured to it.
SECTION 6.02. Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, bond, note, debenture or other paper or document believed
by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein may be sufficiently evidenced by an Officers' Certificate
(unless other evidence in respect thereof be herein specifically
prescribed); and any Board Resolution may be evidenced to the
Trustee by a copy thereof certified by the Secretary or an
Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or
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suffered omitted by it hereunder in good faith and in accordance
with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request,
order or direction of any of the Securityholders, pursuant to the
provisions of this Indenture, unless such Securityholders shall
have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred
therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this
Indenture; nothing contained herein shall, however, relieve the
Trustee of the obligation, upon the occurrence of an Event of
Default (that has not been cured or waived), to exercise such of
the rights and powers vested in it by this Indenture, and to use
the same degree of care and skill in their exercise, as a prudent
man would exercise or use under the circumstances in the conduct
of his own affairs;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, coupon or other paper or
document, unless requested in writing to do so by the holders of
a majority in aggregate principal amount of the outstanding
Securities; provided, however, that if the payment within a
reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require reasonable
indemnity against such expense or liability as a condition to so
proceeding; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through
agents (including any Authenticating Agent) or attorneys, and the
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Trustee shall not be responsible for any misconduct or negligence
on the part of any such agent or attorney appointed by it with
due care.
SECTION 6.03. No Responsibility for Recitals, etc.
The recitals contained herein and in the Securities (except in the
certificate of authentication of the Trustee or the Authenticating Agent) shall
be taken as the statements of the Company and the Trustee and the Authenticating
Agent assume no responsibility for the correctness of the same. The Trustee and
the Authenticating Agent make no representations as to the validity or
sufficiency of this Indenture or of the Securities. The Trustee and the
Authenticating Agent shall not be accountable for the use or application by the
Company of any Securities or the proceeds of any Securities authenticated and
delivered by the Trustee or the Authenticating Agent in conformity with the
provisions of this Indenture.
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer
Agents or Registrar May Own Securities.
The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Security registrar, in its individual or any other
capacity, may become the owner or pledgee of Securities with the same rights it
would have if it were not Trustee, Authenticating Agent, paying agent, transfer
agent or Security registrar.
SECTION 6.05. Moneys to be Held in Trust.
Subject to the provisions of Section 11.04, all moneys received by the
Trustee or any paying agent shall, until used or applied as herein provided, be
held in trust for the purpose for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
and any paying agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
SECTION 6.06. Compensation and Expenses of Trustee.
The Company, as borrower, covenants and agrees to pay to the Trustee
from time to time, and the Trustee shall be entitled to, such compensation as
shall be agreed to in writing between the Company and the Trustee (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust), and the Company will pay or reimburse the Trustee
upon its request for all reasonable
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expenses, disbursements and advances incurred or made by the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith. The Company also
covenants to indemnify each of the Trustee or any predecessor Trustee (and its
officers, agents, directors and employees) for, and to hold each of them
harmless against, any and all loss, damage, claim, liability or expense
including taxes (other than taxes based on the income of the Trustee) incurred
without negligence or bad faith on the part of the Trustee and arising out of or
in connection with the acceptance or administration of this trust, including the
costs and expenses of defending itself against any claim of liability in the
premises. The obligations of the Company under this Section 6.06 shall
constitute additional indebtedness hereunder. Such additional indebtedness
shall be secured by a lien prior to that of the Securities upon all property and
funds held or collected by the Trustee as such, except funds held in trust for
the benefit of the holders of particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.01(d) or Section 5.01(e), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall survive the resignation or
removal of the Trustee and the defeasance or other termination of this
Indenture.
SECTION 6.07. Officers' Certificate as Evidence.
Except as otherwise provided in Sections 6.01 and 6.02, whenever in
the administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof is herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee, and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken or omitted by
it under the provisions of this Indenture upon the faith thereof.
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SECTION 6.08. Conflicting Interest of Trustee.
If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the
Company shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.
SECTION 6.09. Eligibility of Trustee.
The Trustee hereunder shall at all times be a corporation or a
national banking association organized and doing business under the laws of the
United States of America or any state or territory thereof or of the District of
Columbia or a corporation or other Person permitted to act as trustee by the
Commission authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000)
and subject to supervision or examination by federal, state, territorial, or
District of Columbia authority. If such corporation or a national banking
association publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section 6.09 the combined capital and surplus of such
corporation or national banking association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.10.
SECTION 6.10. Resignation or Removal of Trustee.
(a) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice of such resignation
to the Company and by mailing notice thereof to the holders of
the Securities at their addresses as they shall appear on the
Security register. Upon receiving such notice of resignation,
the Company shall promptly appoint a successor trustee or
trustees by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one
copy to the successor
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trustee. If no successor trustee shall have been so appointed
and have accepted appointment within 60 days after the mailing of
such notice of resignation to the affected Securityholders, the
resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any
Securityholder who has been a bona fide holder of a Security for
at least six months may, subject to the provisions of Section
5.09, on behalf of himself and all others similarly situated,
petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
Section 6.08 after written request therefor by the Company
or by any Securityholder who has been a bona fide holder of
a Security or Securities for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 6.09 and shall fail to resign
after written request therefor by the Company or by any such
Securityholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of
its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, the Company may remove the Trustee and
appoint a successor trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or, subject to the
provisions of Section 5.09, any Securityholder who has been a
bona fide holder of a Security for at least six months may, on
behalf of himself and all others similarly situated,
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petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The holders of a majority in aggregate principal amount of the
Securities at the time outstanding may at any time remove the
Trustee and nominate a successor trustee, which shall be deemed
appointed as successor trustee unless within 10 days after such
nomination the Company objects thereto or if no successor trustee
shall have been so appointed and shall have accepted appointment
within 30 days after such removal, in which case the Trustee so
removed or any Securityholder, upon the terms and conditions and
otherwise as in subsection (a) of this Section 6.10 provided, may
petition any court of competent jurisdiction for an appointment
of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this
Section 6.10 shall become effective upon acceptance of
appointment by the successor trustee as provided in Section 6.11.
SECTION 6.11. Acceptance by Successor Trustee.
Any successor trustee appointed as provided in Section 6.10 shall
execute, acknowledge and deliver to the Company and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring trustee shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as trustee herein; but,
nevertheless, on the written request of the Company or of the successor trustee,
the trustee ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of Section 6.06, execute and deliver an instrument
transferring to such successor trustee all the rights and powers of the trustee
so ceasing to act and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such retiring trustee thereunder. Upon
request of any such successor trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act
shall,
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nevertheless, retain a lien upon all property or funds held or collected by such
trustee to secure any amounts then due it pursuant to the provisions of Section
6.06.
No successor trustee shall accept appointment as provided in this
Section 6.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.
Upon acceptance of appointment by a successor trustee as provided in
this Section 6.11, the Company shall mail notice of the succession of such
trustee hereunder to the holders of Securities at their addresses as they shall
appear on the Security register. If the Company fails to mail such notice
within 10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
SECTION 6.12. Successor by Merger, etc.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any Securities shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor trustee; and in all such cases such certificates shall have the full
force which the Securities or this Indenture elsewhere provides that the
certificate of the Trustee shall have; provided, however, that the right to
adopt the certificate of authentication of any predecessor Trustee or
authenticate Securities in the name of any predecessor Trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
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SECTION 6.13. Limitation on Rights of Trustee as a Creditor.
The Trustee shall comply with Section 311(a) of the Trust Indenture
Act of 1939, excluding any creditor relationship described in Section 311(b) of
the Trust Indenture Act of 1939. A Trustee who has resigned or been removed
shall be subject to Section 311(a) of the Trust Indenture Act of 1939 to the
extent included therein.
SECTION 6.14. Authenticating Agents.
There may be one or more Authenticating Agents appointed by the
Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Securities issued
upon exchange or registration of transfer thereof as fully to all intents and
purposes as though any such Authenticating Agent had been expressly authorized
to authenticate and deliver Securities; provided, that the Trustee shall have no
liability to the Company for any acts or omissions of the Authenticating Agent
with respect to the authentication and delivery of Securities. Any such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States or of any state or territory
thereof or of the District of Columbia authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of at least
$5,000,000 and being subject to supervision or examination by federal, state,
territorial or District of Columbia authority. If such corporation publishes
reports of condition at least annually pursuant to law or the requirements of
such authority, then for the purposes of this Section 6.14 the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner and
with the effect herein specified in this Section.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of such Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section 6.14 without the execution or filing of any paper or any further act on
the part of the parties hereto or such Authenticating Agent.
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Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any Authenticating Agent shall cease to be eligible under this Section 6.14, the
Trustee may, and upon the request of the Company shall, promptly appoint a
successor Authenticating Agent eligible under this Section 6.14, shall give
written notice of such appointment to the Company and shall mail notice of such
appointment to all Securityholders as the names and addresses of such holders
appear on the Security Register. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers, duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as Authenticating Agent herein.
The Company, as borrower, agrees to pay to any Authenticating Agent
from time to time reasonable compensation for its services. Any Authenticating
Agent shall have no responsibility or liability for any action taken by it as
such in accordance with the directions of the Trustee.
ARTICLE VII.
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders.
Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Securities may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the holders of such specified percentage have
joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Securityholders in person or by
agent or proxy appointed in writing, or (b) by the record of such holders of
Securities voting in favor thereof at any meeting of such Securityholders duly
called and held in accordance with the provisions of Article VIII, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of such Securityholders.
If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of Securityholders entitled to give
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such request, demand, authorization, direction, notice, consent, waiver or other
action, but the Company shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action may be given before or after the record date, but only
the Securityholders of record at the close of business on the record date shall
be deemed to be Securityholders for the purposes of determining whether
Securityholders of the requisite proportion of Outstanding Securities have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other action, and for that purpose the
Outstanding Securities shall be computed as of the record date; provided,
however, that no such authorization, agreement or consent by such
Securityholders on the record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than six
months after the record date.
SECTION 7.02. Proof of Execution by Securityholders.
Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of
the execution of any instrument by a Securityholder or his agent or proxy shall
be sufficient if made in accordance with such reasonable rules and regulations
as may be prescribed by the Trustee or in such manner as shall be satisfactory
to the Trustee. The ownership of Securities shall be proved by the Security
Register or by a certificate of the Security registrar. The Trustee may require
such additional proof of any matter referred to in this Section as it shall deem
necessary.
The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.06.
SECTION 7.03. Who Are Deemed Absolute Owners.
Prior to due presentment for registration of transfer of any Security,
the Company, the Trustee, any Authenticating Agent, any paying agent, any
transfer agent and any Security registrar may deem the Person in whose name such
Security shall be registered upon the Security Register to be, and may treat him
as, the absolute owner of such Security (whether or not such Security shall be
overdue) for the purpose of receiving payment of or on account of the principal
of and premium, if any, and interest on such Security and for all other
purposes; and neither the Company nor the Trustee nor any Authenticating Agent
nor any paying agent nor any transfer agent nor any Security registrar shall be
affected by any notice to the contrary. All such payments so made to any holder
for the time being or upon his order shall be valid, and, to the extent of the
sum or sums so
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paid, effectual to satisfy and discharge the liability for moneys payable upon
any such Security.
SECTION 7.04. Securities Owned by Company Deemed Not Outstanding.
In determining whether the holders of the requisite aggregate
principal amount of Securities have concurred in any direction, consent or
waiver under this Indenture, Securities which are owned by the Company or any
other obligor on the Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company, except for the Securities owned by or on behalf of Vesta Capital Trust,
or any other obligor on the Securities shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, consent or waiver, only Securities which a Responsible Officer
of the Trustee actually knows are so owned shall be so disregarded. Securities
so owned which have been pledged in good faith may be regarded as outstanding
for the purposes of this Section 7.04 if the pledgee shall establish to the
satisfaction of the Trustee the pledgee's right to vote such Securities and that
the pledgee is not the Company or any such other obligor or Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any such other obligor. In the case of a dispute as
to such right, any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee.
SECTION 7.05. Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Security specified in this
Indenture in connection with such action, any holder of a Security (or any
Security issued in whole or in part in exchange or substitution therefor) the
serial number of which is shown by the evidence to be included in the Securities
the holders of which have consented to such action may, by filing written notice
with the Trustee at its principal office and upon proof of holding as provided
in Section 7.02, revoke such action so far as concerns such Security (or so far
as concerns the principal amount represented by any exchanged or substituted
Security). Except as aforesaid, any such action taken by the holder of any
Security shall be conclusive and binding upon such holder and upon all future
holders and owners of such Security, and of any Security issued in exchange or
substitution therefor, irrespective of whether or not any notation in regard
thereto is made upon such Security or any Security issued in exchange or
substitution therefor.
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ARTICLE VIII.
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purpose of Meetings
A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this Article VIII for any of the following
purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of
any Default hereunder and its consequences, or to take any other
action authorized to be taken by Securityholders pursuant to any
of the provisions of Article V;
(b) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.02;
or
(d) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of
such Securities under any other provision of this Indenture or
under applicable law.
SECTION 8.02. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 8.01, to be held at such time and at such place
in the Borough of Manhattan, The City of New York, as the Trustee shall
determine. Notice of every meeting of the Securityholders, setting forth the
time and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be mailed to holders of Securities at their
addresses as they shall appear on the Securities Register. Such notice shall be
mailed not less than 20 nor more than 180 days prior to the date fixed for the
meeting.
SECTION 8.03. Call of Meetings by Company or Securityholders.
In case at any time the Company pursuant to a resolution of the Board
of Directors, or the holders of at least 10% in aggregate principal amount of
the Securities then
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outstanding, shall have requested the Trustee to call a meeting of
Securityholders, by written request setting forth in reasonable detail the
action proposed to be taken at the meeting, and the Trustee shall not have
mailed the notice of such meeting within 20 days after receipt of such request,
then the Company or such Securityholders may determine the time and the place in
the Borough of Manhattan, The City of New York, for such meeting and may call
such meeting to take any action authorized in Section 8.01, by mailing notice
thereof as provided in Section 8.02.
SECTION 8.04. Qualifications for Voting.
To be entitled to vote at any meeting of Securityholders a Person
shall be (a) a holder of one or more Securities or (b) a Person appointed by an
instrument in writing as proxy by a holder of one or more Securities. The only
Persons who shall be entitled to be present or to speak at any meeting of
Securityholders shall be the Persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
SECTION 8.05. Regulations.
Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 8.04, at any meeting each holder
of Securities or proxy therefor shall be entitled to one vote for each $1,000
principal amount of Securities held or represented by him; provided, however,
that no vote shall be cast or counted at any meeting in respect of any Security
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of
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Securities held by him or instruments in writing as aforesaid duly designating
him as the person to vote on behalf of other Securityholders. Any meeting of
Securityholders duly called pursuant to the provisions of Section 8.02 or 8.03
may be adjourned from time to time by a majority of those present, whether or
not constituting a quorum, and the meeting may be held as so adjourned without
further notice.
SECTION 8.06. Voting.
The vote upon any resolution submitted to any meeting of holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of such holders or of their representatives by proxy and the serial
number or numbers of the Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 8.02. The record shall show the serial numbers of the
Securities voting in favor of or against any resolution. The record shall be
signed and verified by the affidavits of the permanent chairman and secretary of
the meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
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ARTICLE IX.
AMENDMENTS
SECTION 9.01. Without Consent of Securityholders.
The Company, when authorized by a Board Resolution, and the Trustee
may from time to time and at any time amend this Indenture, without the consent
of the Securityholders, for one or more of the following purposes:
(a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the
Company pursuant to Article X hereof;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the
Securityholders as the Board of Directors and the Trustee shall
consider to be for the protection of the Securityholders, and to
make the occurrence, or the occurrence and continuance, of a
default in any of such additional covenants, restrictions or
conditions a Default or an Event of Default permitting the
enforcement of all or any of the remedies provided in this
Indenture as herein set forth; provided, however, that in respect
of any such additional covenant, restriction or condition such
amendment may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed
in the case of other Defaults) or may provide for an immediate
enforcement upon such default or may limit the remedies available
to the Trustee upon such default;
(c) to provide for the issuance under this Indenture of Securities in
coupon form (including Securities registrable as to principal
only) and to provide for exchangeability of such Securities with
the Securities issued hereunder in fully registered form and to
make all appropriate changes for such purpose;
(d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be
defective or inconsistent with any other provision contained
herein or in any supplemental indenture, or to make such other
provisions in regard to matters or
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questions arising under this Indenture; provided that any such
action shall not materially adversely affect the interests of the
holders of the Securities;
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the Securities;
(f) to make provision for transfer procedures, certification, book-
entry provisions, the form of restricted securities legends, if
any, to be placed on Securities, and all other matters required
pursuant to Section 2.07 or otherwise necessary, desirable or
appropriate in connection with the issuance of Securities to
holders of Capital Securities in the event of a distribution of
Securities by Vesta Capital Trust following a Dissolution Event;
(g) to qualify or maintain qualification of this Indenture under the
Trust Indenture Act of 1939; or
(h) to make any change that does not adversely affect the rights of
any Securityholder in any material respect.
The Trustee is hereby authorized to join with the Company in the
execution of any supplemental indenture to effect such amendment, to make any
further appropriate agreements and stipulations which may be therein contained
and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any amendment to this Indenture authorized by the provisions of this
Section 9.01 may be executed by the Company and the Trustee without the consent
of the holders of any of the Securities at the time outstanding, notwithstanding
any of the provisions of Section 9.02.
SECTION 9.02. With Consent of Securityholders.
With the consent (evidenced as provided in Section 7.01) of the
holders of a majority in aggregate principal amount of the Securities at the
time outstanding, the Company, when authorized by a Board Resolution, and the
Trustee may from time
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to time and at any time amend this Indenture for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the holders of the
Securities; provided, however, that no such amendment shall without the consent
--------
of the holders of each Security then outstanding and affected hereby (i) extend
the Maturity Date of any Security, or reduce the rate or extend the time of
payment of interest thereon (except as contemplated by Article XVI), or reduce
the principal amount thereof (including in the case of a discounted Security the
amount payable thereon in the event of acceleration or the amount provable in
bankruptcy), or reduce any amount payable on redemption thereof, or make the
principal thereof or any interest or premium thereon payable in any coin or
currency other than that provided in the Securities, or impair or affect the
right of any Securityholder to institute suit for payment thereof, or (ii)
reduce the aforesaid percentage of Securities the holders of which are required
to consent to any such amendment to this Indenture, provided, however, that if
-------- -------
the Securities are held by Vesta Capital Trust, such amendment shall not be
effective until the holders of a majority in liquidation amount of Trust
Securities shall have consented to such amendment; provided, further, that if
-------- -------
the consent of the holder of each outstanding Security is required, such
amendment shall not be effective until each holder of the Trust Securities shall
have consented to such amendment.
Upon the request of the Company accompanied by a copy of a resolution
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any supplemental indenture affecting such
amendment, and upon the filing with the Trustee of evidence of the consent of
Securityholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders as their names and addresses appear upon the
Security Register. Any failure of the Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
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It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act; Effect of
Supplemental Indentures.
Any supplemental indenture executed pursuant to the provisions of this
Article IX shall comply with the Trust Indenture Act. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article IX, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Securities shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
SECTION 9.04. Notation on Securities.
Securities authenticated and delivered after the execution of any
supplemental indenture affecting such series pursuant to the provisions of this
Article IX may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company or the Trustee
shall so determine, new Securities so modified as to conform, in the opinion of
the Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared and executed by the
Company, authenticated by the Trustee or the Authenticating Agent and delivered
in exchange for the Securities then outstanding.
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be
Furnished Trustee.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant to this Article is
authorized or permitted by, and conforms to, the terms of this Article and that
it is proper for the Trustee under the provisions of this Article to join in the
execution thereof.
ARTICLE X.
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
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SECTION 10.01. Company May Consolidate, etc., on Certain Terms.
Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of the Company with or into any other Person
(whether or not affiliated with the Company, as the case may be), or successive
consolidations or mergers in which the Company, as the case may be, or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance, transfer or lease of the property of the Company, as the case may
be, or its successor or successors as an entirety, or substantially as an
entirety, to any other Person (whether or not affiliated with the Company, as
the case may be, or its successor or successors) authorized to acquire and
operate the same; provided, that (a) the Company is the surviving Person or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, conveyance, transfer or lease of property is
made is a Person organized and existing under the laws of the United States or
any State thereof or the District of Columbia, and (b) upon any such
consolidation, merger, sale, conveyance, transfer or lease, the due and punctual
payment of the principal of (and premium, if any) and interest on the Securities
according to their tenor and the due and punctual performance and observance of
all the covenants and conditions of this Indenture to be kept or performed by
the Company shall be expressly assumed, by supplemental indenture (which shall
conform to the provisions of the Trust Indenture Act of 1939, as then in effect)
satisfactory in form to the Trustee, and executed and delivered to the Trustee
by the Person formed by such consolidation, or into which the Company, as the
case may be, shall have been merged, or by the Person which shall have acquired
such property, and (c) after giving effect to such consolidation, merger, sale,
conveyance, transfer or lease, no Default or Event of Default shall have
occurred and be continuing.
SECTION 10.02. Successor Corporation to be Substituted for Company.
In case of any such consolidation, merger, conveyance or transfer and
upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the due and punctual payment of the principal of and premium, if any, and
interest on all of the Securities and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed or observed by the Company, such successor Person shall succeed to and
be substituted for the Company, with the same effect as if it had been named
herein as the party of the first part, and the Company thereupon shall be
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relieved of any further liability or obligation hereunder or upon the
Securities. Such successor Person thereupon may cause to be signed, and may
issue either in its own name or in the name of Vesta Insurance Group, Inc., any
or all of the Securities issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee or the Authenticating
Agent; and, upon the order of such successor Person instead of the Company and
subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee or the Authenticating Agent shall authenticate and
deliver any Securities which previously shall have been signed and delivered by
the officers of the Company to the Trustee or the Authenticating Agent for
authentication, and any Securities which such successor Person thereafter shall
cause to be signed and delivered to the Trustee or the Authenticating Agent for
that purpose. All the Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Securities had been issued at the date of the execution hereof.
SECTION 10.03. Opinion of Counsel to be Given Trustee.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive an Opinion of Counsel as conclusive evidence that any consolidation,
merger, sale, conveyance, transfer or lease, and any assumption, permitted or
required by the terms of this Article X complies with the provisions of this
Article X.
ARTICLE XI.
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 11.01. Discharge of Indenture.
When (a) the Company shall deliver to the Trustee for cancellation all
Securities theretofore authenticated (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.08) and not theretofore cancelled, or (b) all the
Securities not theretofore cancelled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for prepayment within one
year under arrangements satisfactory to the Trustee for the giving of notice of
prepayment, and the Company shall deposit or cause to be deposited with the
Trustee, in trust, funds sufficient to pay on the Maturity Date or upon
prepayment all of the Securities (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced or paid as
provided in
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Section 2.08) not theretofore cancelled or delivered to the Trustee for
cancellation, including principal (and premium, if any) and interest due or to
become due to the Maturity Date or prepayment date, as the case may be, but
excluding, however, the amount of any moneys for the payment of principal (or
premium, if any) or interest on the Securities (1) theretofore repaid to the
Company in accordance with the provisions of Section 11.04, or (2) paid to any
State or to the District of Columbia pursuant to its unclaimed property or
similar laws, and if in either case the Company shall also pay or cause to be
paid all other sums payable hereunder by the Company, then this Indenture shall
cease to be of further effect except for the provisions of Sections 2.02, 2.07,
2.08, 3.01, 3.02, 3.04, 6.06, 6.10 and 11.04 hereof shall survive until such
Securities shall mature and be paid. Thereafter, Sections 6.06, 6.10 and 11.04
shall survive, and the Trustee, on demand of the Company accompanied by any
Officers' Certificate and an Opinion of Counsel to the effect that all
conditions to the satisfaction and discharge of this Indenture have been
satisfied and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture, the
Company, however, hereby agreeing to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee in
connection with this Indenture or the Securities.
SECTION 11.02. Deposited Moneys and U.S. Government Obligations to be
Held in Trust by Trustee.
Subject to the provisions of Section 11.04, all moneys and U.S.
Government Obligations deposited with the Trustee pursuant to Sections 11.01 or
11.05 shall be held in trust and applied by it to the payment, either directly
or through any paying agent (including the Company if acting as its own paying
agent), to the holders of the particular Securities for the payment of which
such moneys or U.S. Government Obligations have been deposited with the
Trustee, of all sums due and to become due thereon for principal, premium, if
any, and interest.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 11.05 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the holders of outstanding Securities.
SECTION 11.03. Paying Agent to Repay Moneys Held.
Upon the satisfaction and discharge of this Indenture all moneys then
held by any paying agent of the Securities (other
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than the Trustee) shall, upon written demand of the Company, be repaid to it or
paid to the Trustee, and thereupon such paying agent shall be released from all
further liability with respect to such moneys.
SECTION 11.04. Return of Unclaimed Moneys.
Any moneys deposited with or paid to the Trustee or any paying agent
for payment of the principal of or premium, if any, or interest on Securities
and not applied but remaining unclaimed by the holders of Securities for two
years after the date upon which the principal of or premium, if any, or interest
on such Securities, as the case may be, shall have become due and payable, shall
be repaid to the Company by the Trustee or such paying agent on written demand;
and the holder of any of the Securities shall thereafter look only to the
Company for any payment which such holder may be entitled to collect and all
liability of the Trustee or such paying agent with respect to such moneys shall
thereupon cease.
SECTION 11.05. Defeasance Upon Deposit of Moneys or U.S. Government
Obligations
The Company shall be deemed to have been Discharged (as defined below)
from its respective obligations with respect to the Securities on the 91st day
after the applicable conditions set forth below have been satisfied with respect
to the Securities at any time after the applicable conditions set forth below
have been satisfied:
(1) The Company shall have deposited or caused to be deposited
irrevocably with the Trustee or the Defeasance Agent (as defined
below) as trust funds in trust, specifically pledged as security
for, and dedicated solely to, the benefit of the holders of the
Securities (i) money in an amount, or (ii) U.S. Government
Obligations which through the payment of interest and principal
in respect thereof in accordance with their terms will provide,
not later than one day before the due date of any payment, money
in an amount, or (iii) a combination of (i) and (ii), sufficient,
in the opinion (with respect to (ii) and (iii)) of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee and the
Defeasance Agent, if any, to pay and discharge each installment
of principal of and interest and premium, if any, on the
outstanding Securities on
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the dates such installments of principal, premium or interest are
due;
(2) if the Securities are then listed on any national securities
exchange, the Company shall have delivered to the Trustee and the
Defeasance Agent, if any, an Opinion of Counsel to the effect
that the exercise of the option under this Section 11.05 would
not cause such Securities to be delisted from such exchange;
(3) no Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of
such deposit;
(4) the Company shall have delivered to the Trustee and the
Defeasance Agent, if any, an Opinion of Counsel to the effect
that holders of the Securities will not recognize income, gain or
loss for United States federal income tax purposes as a result of
the exercise of the option under this Section 11.05 and will be
subject to United States federal income tax on the same amount
and in the same manner and at the same times as would have been
the case if such option had not been exercised, and such opinion
shall be accompanied by a private letter ruling to that effect
received from the United States Internal Revenue Service or a
revenue ruling pertaining to a comparable form of transaction to
that effect published by the United States Internal Revenue
Service; and
(5) the Company shall have delivered to the Trustee and the
Defeasance Agent, if any, an Officers' Certificate and an Opinion
of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities and to have satisfied all the obligations under this Indenture
relating to the Securities (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), except (A) the rights
of holders of Securities to receive, from the trust fund described in clause (1)
above, payment of the principal of and the interest and premium, if any, on the
Securities when such payments are due; (B) the Company's obligations with
respect to the Securities under Sections 2.07, 2.08, 5.02 and 11.04; and (C)
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the rights, powers, trusts, duties and immunities of the Trustee hereunder.
"Defeasance Agent" means another financial institution which is
eligible to act as Trustee hereunder and which assumes all of the obligations of
the Trustee necessary to enable the Trustee to act hereunder. In the event such
a Defeasance Agent is appointed pursuant to this Section, the following
conditions shall apply:
(1) The Trustee shall have approval rights over the document
appointing such Defeasance Agent and the document setting forth
such Defeasance Agent's rights and responsibilities; and
(2) The Defeasance Agent shall provide verification to the Trustee
acknowledging receipt of sufficient money and/or U.S. Government
Obligations to meet the applicable conditions set forth in this
Section 11.05.
SECTION 11.06. Reinstatement.
If the Trustee or any Defeasance Agent is unable to apply any money in
accordance with Section 11.05 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had occurred pursuant to Section 11.05 until such time as the
Trustee or any Defeasance Agent is permitted to apply all such money in
accordance with Section 11.05.
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01. Indenture and Securities Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or
interest on any Security, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture, or in any Security, or because of the creation of
any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor Person to the Company, either directly or through
the Company any
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constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of the Securities.
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
SECTION 13.01. Successors.
All the covenants, stipulations, promises and agreements in this
Indenture contained by the Company shall bind its successors and assigns whether
so expressed or not.
SECTION 13.02. Official Acts by Successor Corporation.
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee or officer of any corporation that shall at the time be
the lawful sole successor of the Company.
SECTION 13.03. Surrender of Company Powers.
The Company by instrument in writing executed by authority of 2/3
(two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company, and thereupon such power so
surrendered shall terminate both as to the Company, as the case may be, and as
to any successor Person.
SECTION 13.04. Address for Notices, etc.
Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Securities on the Company may be given or served by being deposited postage
prepaid by registered or certified mail in a post office letter box addressed
(until another address is filed by the Company with the Trustee for the purpose)
to the Company, 3760 River Run Drive, Birmingham, Alabama 35243 Attention:
General Counsel. Any notice, direction, request or demand by any Securityholder
to or upon the Trustee shall be deemed to have been sufficiently given or made,
for all purposes, if given or made in writing at the office of the Trustee, 230
South Tryon Street, 9th Floor, Charlotte, North Carolina 28288-1179, Attention:
Bond Administration (unless another address is provided by the Trustee to the
Company for the
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purpose). All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, and mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 13.05. Governing Law.
This Indenture and each Security shall be deemed to be a contract made
under the laws of the State of New York, and for all purposes shall be governed
by and construed in accordance with the laws of said State, without regard to
conflicts of laws principles thereof.
SECTION 13.06. Evidence of Compliance with Conditions Precedent.
Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion of
the signers all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
SECTION 13.07. Business Days.
In any case where the date of payment of principal of or premium, if
any, or interest on the Securities will not be a Business Day, the payment of
such principal of or premium, if any, or interest on the Securities need not be
made on such date but may be made on the next succeeding Business Day (and
without
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any interest or other payment in respect of any such delay), with the same force
and effect as if made on the date of payment and no interest shall accrue for
the period from and after such date.
SECTION 13.08. Trust Indenture Act to Control.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture which
is required to be included in this Indenture by any of Sections 310 to 317,
inclusive, of the Trust Indenture Act of 1939, such required provision shall
control.
SECTION 13.09. Table of Contents, Headings, etc.
The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.
SECTION 13.10. Execution in Counterparts
This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
SECTION 13.11. Separability.
In case any one or more of the provisions contained in this Indenture
or in the Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Securities,
but this Indenture and the Securities shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
SECTION 13.12. Assignment.
The Company will have the right at all times to assign any of its
respective rights or obligations under this Indenture to a direct or indirect
wholly owned Subsidiary of the Company, provided that, in the event of any such
assignment, the Company, as the case may be, will remain liable for all such
obligations. Subject to the foregoing, the Indenture is binding upon and inures
to the benefit of the parties thereto and their respective successors and
assigns. This Indenture may not otherwise be assigned by the parties hereto.
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SECTION 13.13. Acknowledgement of Rights.
The Company acknowledges that, with respect to any Securities held by
Vesta Capital Trust or a trustee of such trust, if the Property Trustee of such
Trust fails to enforce its rights under this Indenture as the holder of the
Securities held as the assets of Vesta Capital Trust any holder of Capital
Securities may institute legal proceedings directly against the Company to
enforce such Property Trustee's rights under this Indenture without first
instituting any legal proceedings against such Property Trustee or any other
Person. Notwithstanding the foregoing, if an Event of Default has occurred and
is continuing and such event is attributable to the failure of the Company to
pay principal of or premium, if any, or interest on the Securities when due, the
Company acknowledges that a holder of Capital Securities may directly institute
a proceeding for enforcement of payment to such holder of the principal of or
premium, if any, or interest on the Securities having a principal amount equal
to the aggregate liquidation amount of the Capital Securities of such holder on
or after the respective due date specified in the Securities.
ARTICLE XIV.
PREPAYMENT OF SECURITIES
SECTION 14.01. Special Event Prepayment.
If a Special Event has occurred and is continuing, then the Company
shall have the right upon (i) not less than 45 days written notice to the
Trustee and (ii) not less than 30 days nor more than 60 days written notice to
the Securityholders, to prepay the Securities, in whole (but not in part), at
any time within 90 days following the occurrence of such Special Event, at the
Special Event Prepayment Price. Following a Special Event, the Company shall
take such action as is necessary to promptly determine the Special Event
Prepayment Price, including without limitation the appointment by the Company of
a Quotation Agent. The Special Event Prepayment Price shall be paid prior to
12:00 noon, New York City time, on the date of such prepayment or such earlier
time as the Company determines, provided that the Company shall deposit with the
Trustee an amount sufficient to pay the Special Event Prepayment Price by 10:00
a.m., New York City time, on the date such Special Event Prepayment Price is to
be paid.
SECTION 14.02. No Optional Prepayment by Company.
Other than as set forth in Section 14.01, the Securities shall not be
subject to optional prepayment by the Company.
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SECTION 14.03. No Sinking Fund.
The Securities are not entitled to the benefit of any sinking fund.
SECTION 14.04. Notice of Prepayment.
In case the Company shall desire to exercise the right to prepay all
of the Securities in accordance with their terms, it shall fix a date for
prepayment and shall mail a notice of such prepayment at least 30 and not more
than 60 days prior to the date fixed for prepayment to the holders of Securities
so to be prepaid as a whole or in part at their last addresses as the same
appear on the Security Register. Such mailing shall be by first class mail.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice. In any case, failure to give such notice by mail or any defect in the
notice to the holder of any Security designated for prepayment as a whole or in
part shall not affect the validity of the proceedings for the prepayment of any
other Security.
Each such notice of prepayment shall specify the CUSIP number of the
Securities to be prepaid, the date fixed for prepayment, the prepayment price at
which the Securities are to be prepaid (or the method by which such prepayment
price is to be calculated), the place or places of payment that payment will be
made upon presentation and surrender of the Securities, that interest accrued to
the date fixed for prepayment will be paid as specified in said notice, and that
on and after said date interest thereon or on the portions thereof to be prepaid
will cease to accrue. If less than all the Securities are to be prepaid the
notice of prepayment shall specify the numbers of the Securities to be prepaid.
Prior to 10:00 a.m., New York City time, on the prepayment date
specified in the notice of prepayment given as provided in this Section, the
Company will deposit with the Trustee or with one or more paying agents an
amount of money sufficient to prepay on the prepayment date all the Securities
so called for prepayment at the appropriate Prepayment Price, together with
accrued interest to the date fixed for prepayment.
The Company will give the Trustee notice not less than 45 days prior
to the prepayment date as to the aggregate principal amount of Securities to be
prepaid.
SECTION 14.05. Payment of Securities Called for Prepayment.
If notice of prepayment has been given as provided in Section 14.04,
the Securities with respect to which such notice
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has been given shall become due and payable on the date and at the place or
places stated in such notice at the applicable Prepayment Price, together with
interest accrued to the date fixed for prepayment (subject to the rights of
holders of Securities on the close of business on a regular record date in
respect of an Interest Payment Date occurring on or prior to the prepayment
date), and on and after said date (unless the Company shall default in the
payment of such Securities at the Prepayment Price, together with interest
accrued to said date) interest on the Securities so called for prepayment shall
cease to accrue. On presentation and surrender of such Securities at a place of
payment specified in said notice, the said Securities shall be paid and prepaid
by the Company at the applicable Prepayment Price, together with interest
accrued thereon to the date fixed for prepayment (subject to the rights of
holders of Securities on the close of business on a regular record date in
respect of an Interest Payment Date occurring on or prior to the prepayment
date).
ARTICLE XV.
SUBORDINATION OF SECURITIES
SECTION 15.01. Agreement to Subordinate.
The Company covenants and agrees, and each holder of Securities issued
hereunder likewise covenants and agrees, that the Securities shall be issued
subject to the provisions of this Article XV; and each holder of a Security,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.
The payment by the Company of the principal of and premium, if any,
and interest on all Securities issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
the prior payment in full of all amounts with respect to Senior Indebtedness,
whether outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article XV shall prevent the occurrence of any
Default or Event of Default hereunder.
SECTION 15.02. Default on Senior Indebtedness.
In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness, or in the event that the maturity of any Senior
Indebtedness has been accelerated because of a default, then, in either case, no
payment shall be made by the Company with respect to the principal (including
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prepayments) of or premium, if any, or interest on the Securities.
In the event of the acceleration of the maturity of the Securities,
then no payment shall be made by the Company with respect to the principal
(including prepayments) of or premium, if any, or interest on the Securities
until the holders of all Senior Indebtedness outstanding at the time of such
acceleration shall receive payment in full of all amounts due in respect of such
Senior Indebtedness (including any amounts due upon acceleration).
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 15.02, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent of
the amounts due in respect of such Senior Indebtedness and only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing, within 90 days of
such payment, of the amounts then due and owing on such Senior Indebtedness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of such Senior Indebtedness.
SECTION 15.03. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due upon all Senior Indebtedness
of the Company shall first be paid in full, or payment thereof provided for in
money in accordance with its terms, before any payment is made by the Company on
account of the principal (and premium, if any) or interest on the Securities;
and upon any such dissolution or winding-up or liquidation or reorganization,
any payment by the Company, or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to which the
Securityholders or the Trustee would be entitled to receive from the Company,
except for the provisions of this Article XV, shall be paid by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, or by the Securityholders or by the Trustee
under this Indenture if received by them or it, directly to the holders of
Senior Indebtedness of the Company (pro rata to such holders
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on the basis of the respective amounts of Senior Indebtedness held by such
holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay such
Senior Indebtedness in full, in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to the Securityholders
or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the holders of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Indebtedness may have been issued,
and their respective interests may appear, as calculated by the Company, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all amounts due in respect of such Senior Indebtedness
in full in money in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the benefit of the holders of such
Senior Indebtedness.
For purposes of this Article XV, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article XV with respect
to the Securities to the payment of Senior Indebtedness that may at the time be
outstanding, provided that (i) such Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Indebtedness are not, without the
consent of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale,
conveyance, transfer or lease of its property as an entirety, or substantially
as an entirety, to another Person upon the terms and conditions provided for in
Article X of this Indenture shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 15.03 if such
other Person shall, as a part of such consolidation, merger,
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sale, conveyance, transfer or lease, comply with the conditions stated in
Article X of this Indenture. Nothing in Section 15.02 or in this Section 15.03
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 6.06 of this Indenture.
SECTION 15.04. Subrogation.
Subject to the payment in full of all amounts due in respect of Senior
Indebtedness, the rights of the Securityholders shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company, as the case may
be, applicable to such Senior Indebtedness until the principal of (and premium,
if any) and interest on the Securities shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions to the holders of
such Senior Indebtedness of any cash, property or securities to which the
Securityholders or the Trustee would be entitled except for the provisions of
this Article XV, and no payment over pursuant to the provisions of this Article
XV to or for the benefit of the holders of such Senior Indebtedness by
Securityholders or the Trustee, shall, as between the Company, its creditors
other than holders of Senior Indebtedness of the Company, and the holders of the
Securities, be deemed to be a payment by the Company to or on account of such
Senior Indebtedness. It is understood that the provisions of this Article XV
are and are intended solely for the purposes of defining the relative rights of
the holders of the Securities, on the one hand, and the holders of such Senior
Indebtedness, on the other hand.
Nothing contained in this Article XV or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness of the Company, and the
holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Securities the principal of (and
premium, if any) and interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the holders of the Securities and creditors
of the Company, as the case may be, other than the holders of Senior
Indebtedness of the Company, as the case may be, nor shall anything herein or
therein prevent the Trustee or the holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article XV of the holders
of such Senior Indebtedness in respect of cash, property or securities of the
Company, as the case may be, received upon the exercise of any such remedy.
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Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee, subject to the provisions of Article VI of this
Indenture, and the Securityholders shall be entitled to conclusively rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Trustee or to the Securityholders, for the purposes of ascertaining the Persons
entitled to participate in such distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, as the case may be, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article XV.
SECTION 15.05. Trustee to Effectuate Subordination.
Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Trustee on such Securityholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article XV and appoints the Trustee such Securityholder's
attorney-in-fact for any and all such purposes.
SECTION 15.06. Notice by the Company.
The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company that would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article XV. Notwithstanding the provisions
of this Article XV or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts that would prohibit
the making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article XV, unless and until a
Responsible Officer of the Trustee shall have received written notice thereof
from the Company or a holder or holders of Senior Indebtedness or from any
trustee therefor; and before the receipt of any such written notice, the
Trustee, subject to the provisions of Article VI of this Indenture, shall be
entitled in all respects to assume that no such facts exist; provided, however,
that if the Trustee shall not have received the notice provided for in this
Section 15.06 at least two Business Days prior to the date upon which by the
terms hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (or premium, if any) or interest on
any Security), then, anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such money and to
apply the same to the purposes for which they were received, and
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shall not be affected by any notice to the contrary that may be received by it
within two Business Days prior to such date.
The Trustee, subject to the provisions of Article VI of this
Indenture, shall be entitled to conclusively rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness of the Company, as the case may be (or a trustee on behalf of such
holder), to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article XV, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XV, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Upon any payment or distribution of assets of the Company referred to
in this Article XV, the Trustee and the Securityholders shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the
Securityholders, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XV.
SECTION 15.07. Rights of the Trustee; Holders of Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XV in respect of any Senior Indebtedness at any
time held by it, to the same extent as any other holder of Senior Indebtedness,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
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With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XV, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and,
subject to the provisions of Article VI of this Indenture, the Trustee shall not
be liable to any holder of such Senior Indebtedness if it shall pay over or
deliver to Securityholders, the Company or any other Person money or assets to
which any holder of such Senior Indebtedness shall be entitled by virtue of this
Article XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06.
SECTION 15.08. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior Indebtedness of
the Company to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by the Company with the terms, provisions and covenants of
this Indenture, regardless of any knowledge thereof that any such holder may
have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness of the Company may, at any time and from time
to time, without the consent of or notice to the Trustee or the Securityholders,
without incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XV or the obligations
hereunder of the holders of the Securities to the holders of such Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
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ARTICLE XVI.
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 16.01. Extension of Interest Payment Period.
(a) So long as no Event of Default has occurred and is continuing, the
Company shall have the right, at any time and from time to time during the term
of the Securities, to defer payments of interest by extending the interest
payment period of such Securities for a period not exceeding 10 consecutive
semi-annual periods, including the first such semi-annual period during such
extension period (the "Extended Interest Payment Period"), during which Extended
Interest Payment Period no interest shall be due and payable; provided that no
-------- ----
Extended Interest Payment Period may extend beyond the Maturity Date. To the
extent permitted by applicable law, interest, the payment of which has been
deferred because of the extension of the interest payment period pursuant to
this Section 16.01, will bear interest thereon at the Coupon Rate compounded
semi-annually for each semi-annual period of the Extended Interest Payment
Period ("Compounded Interest"). At the end of the Extended Interest Payment
Period, the Company shall pay all interest accrued and unpaid on the Securities,
including any Additional Sums and Compounded Interest (together, "Deferred
Interest") that shall be payable to the holders of the Securities in whose names
the Securities are registered in the Security Register on the first record date
after the end of the Extended Interest Payment Period.
(b) Before the termination of any Extended Interest Payment Period, the
Company may further defer payments of interest by further extending such period,
provided that such period, together with all such previous and further
- --------
extensions within such Extended Interest Payment Period, shall not exceed 10
consecutive semi-annual periods, including the first such semi-annual period
during such Extended Interest Payment Period, or extend beyond the Maturity Date
of the Securities. Upon the termination of any Extended Interest Payment Period
and the payment of all Deferred Interest then due, the Company may elect to
commence a new Extended Interest Payment Period, subject to the foregoing
requirements. No interest shall be due and payable during an Extended Interest
Payment Period, except at the end thereof, but the Company may prepay at any
time all or any portion of the interest accrued during an Extended Interest
Payment Period.
SECTION 16.02. Notice of Extension.
(a) If the Property Trustee is the only registered holder of the
Securities at the time the Company selects an Extended Interest Payment Period,
the Company shall give written notice to the Administrative Trustees, the
Property Trustee and
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the Trustee of its selection of such Extended Interest Payment Period at least
five Business Days before the earlier of (i) the next succeeding date on which
distributions on the Trust Securities issued by Vesta Capital Trust would have
been payable except for such election, or (ii) the date the Administrative
Trustees are required to give notice of the record date, or the date such
Distributions are payable, to any national securities exchange or to holders of
the Capital Securities issued by Vesta Capital Trust, but in any event at least
five Business Days before such record date.
(b) If the Property Trustee is not the only holder of the Securities
at the time the Company selects an Extended Interest Payment Period, the Company
shall give the holders of the Securities and the Trustee written notice of its
selection of such Extended Interest Payment Period at least 10 Business Days
before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the
date the Company is required to give notice of the record or payment date of
such interest payment to any national securities exchange.
(c) The semi-annual period in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 16.02 shall be counted as one of the 10
semi-annual periods permitted in the maximum Extended Interest Payment Period
permitted under Section 16.01. There is no limitation on the number of times
that the Company may elect to begin an Extended Interest Payment Period.
First Union National Bank of North Carolina hereby accepts the trusts
in this Indenture declared and provided, upon the terms and conditions
hereinabove set forth.
78
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed by their respective officers thereunto duly authorized, as of
the day and year first above written.
VESTA INSURANCE GROUP, INC.
By /s/ Robert Y. Huffman
--------------------------------------
Robert Y. Huffman
Its President and Chief
Executive Officer
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
as Trustee
By /s/ Thomas J. Brett
--------------------------------------
Name: THOMAS J. BRETT
Title: CORPORATE TRUST OFFICER
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EXHIBIT A
---------
(FORM OF FACE OF SECURITY)
[IF THE SECURITY IS A GLOBAL SECURITY, INSERT: - THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY
A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DTC (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
"AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO
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NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT,
SUBJECT TO THE RIGHT OF THE COMPANY PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
(i) PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY,
AND (ii) PURSUANT TO CLAUSE (E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE REVERSE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEREE TO THE COMPANY. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE.
No. CUSIP No.___________
81
<PAGE>
VESTA INSURANCE GROUP, INC.
8.525% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE JANUARY 15, 2027
Vesta Insurance Group, Inc., a Delaware corporation (the "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to __________, or
registered assigns, the principal sum of $__________ Dollars on January 15, 2027
(the "Maturity Date"), unless previously prepaid, and to pay interest on the
outstanding principal amount hereof from January 31, 1997, or from the most
recent interest payment date (each such date, an "Interest Payment Date") to
which interest has been paid or duly provided for, semi-annually (subject to
deferral as set forth herein) in arrears on January 15 and July 15 of each year,
commencing July 15, 1997, at the rate of 8.525% per annum until the principal
hereof shall have become due and payable, and on any overdue principal and
premium, if any, and (without duplication and to the extent that payment of such
interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum compounded semi-annually. The amount of
interest payable on any Interest Payment Date shall be computed on the basis of
a 360-day year of twelve 30-day months and, for any period less than a full
calendar month, the number of days elapsed in such month. In the event that any
date on which the principal of (or premium, if any) or interest on this Security
is payable is not a Business Day, then payment payable on such date will be made
on the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), with the same force and effect as
if made on such date.
The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment, which shall be the
first day of the month in which the relevant Interest Payment Date falls. Any
such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the holders on such regular record date and may
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the holders of Securities not less than 10 days prior
to such special record date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture.
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The principal of (and premium, if any) and interest on this Security
shall be payable at the office or agency of the Trustee in Charlotte, North
Carolina maintained for that purpose in any coin or currency of the United
States of America that at the time of payment is legal tender for payment of
public and private debts; provided, however, that, payment of interest may be
made at the option of the Company by (i) check mailed to the holder at such
address as shall appear in the Security Register or (ii) by transfer to an
account maintained by the Person entitled thereto, provided that proper written
transfer instructions have been received by the relevant record date; provided
that if this Security is in global form, the interest hereon shall be made in
immediately available funds. Notwithstanding the foregoing, so long as the
Holder of this Security is the Property Trustee, the payment of the principal of
(and premium, if any) and interest on this Security will be made at such place
and to such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of Senior Indebtedness, and this Security is issued subject to
the provisions of the Indenture with respect thereto. Each holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her attorney-in-
fact for any and all such purposes. Each holder hereof, by his or her
acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Security shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
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The provisions of this Security are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though
fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated_____________
VESTA INSURANCE GROUP, INC.
By:_______________________
Name:
Title:
Attest:
By:____________________
Name:
Title:
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
as Trustee
By:____________________
Authorized Officer
84
<PAGE>
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Company (herein
sometimes referred to as the "Securities"), specified in the Indenture, all
issued or to be issued under and pursuant to an Indenture, dated as of January
31, 1997 (the "Indenture"), duly executed and delivered between the Company and
First Union National Bank of North Carolina, as Trustee (the "Trustee"), to
which Indenture reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Securities.
Upon the occurrence and continuation of a Special Event, the Company
shall have the right to prepay this Security in whole (but not in part) at the
Special Event Prepayment Price. "Special Event Prepayment Price" shall mean an
amount in cash equal to the greater of (i) 100% of the principal amount of the
Securities to be prepaid and (ii) the sum, as determined by a Quotation Agent,
of the present values of the remaining scheduled payments of principal and
interest on the Securities discounted to the prepayment date on a semi-annual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate, plus, in each case, any accrued and unpaid interest
thereon, including Compounded Interest and Additional Sums, if any, to the date
of such prepayment.
The Special Event Prepayment Price shall be paid prior to 12:00 noon,
New York City time, on the date of such prepayment, provided, that the Company
shall deposit with the Trustee an amount sufficient to pay the Special Event
Prepayment Price by 10:00 a.m., New York City time, on the date the Special
Event Prepayment Price is to be paid. Any prepayment pursuant to this paragraph
will be made upon not less than 30 days nor more than 60 days notice.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Securities may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the Securities at the time outstanding, as defined in the Indenture,
to execute supplemental indentures for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of modifying in any manner the rights of the holders of the Securities;
provided, however, that no such supplemental indenture shall, without the
consent of each holder
85
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of Securities then outstanding and affected thereby, (i) extend the Maturity
Date of any Securities, or reduce the principal amount thereof, or reduce any
amount payable on prepayment thereof, or reduce the rate or extend the time of
payment of interest thereon (subject to Article XVI of the Indenture), or make
the principal of, or interest or premium on, the Securities payable in any coin
or currency other than U.S. dollars, or impair or affect the right of any holder
of Securities to institute suit for the payment thereof, or (ii) reduce the
aforesaid percentage of Securities, the holders of which are required to consent
to any such supplemental indenture. The Indenture also contains provisions
permitting the holders of a majority in aggregate principal amount of the
Securities at the time outstanding affected thereby, on behalf of all of the
holders of the Securities, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a default in the payment of the
principal of or premium, if any, or interest on any of the Securities or a
default in respect of any covenant or provision under which the Indenture cannot
be modified or amended without the consent of each holder of Securities then
outstanding. Any such consent or waiver by the holder of this Security (unless
revoked as provided in the Indenture) shall be conclusive and binding upon such
holder and upon all future holders and owners of this Security and of any
Security issued in exchange heretofore or in place hereof (whether by
registration of transfer or otherwise), irrespective of whether or not any
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Security at the time and place and at the rate and in the money
herein prescribed.
The Company shall have the right, at any time and from time to time
during the term of the Securities, to defer payments of interest by extending
the interest payment period of such Securities for a period not exceeding 10
consecutive semi-annual periods, including the first such semi-annual period
during such extension period, and not to extend beyond the Maturity Date of the
Securities (an "Extended Interest Payment Period"), at the end of which period
the Company shall pay all interest then accrued and unpaid together with
interest thereon at the rate specified for the Securities (to the extent that
payment of such interest is enforceable under applicable law). Before the
termination of any such Extended Interest Payment Period, the Company may
further defer payments of interest by further extending such Extended Interest
Payment Period, provided that such Extended Interest Payment Period, together
with all such
86
<PAGE>
previous and further extensions within such Extended Interest Payment Period,
shall not exceed 10 consecutive semi-annual periods, including the first semi-
annual period during such Extended Interest Payment Period, or extend beyond the
Maturity Date of the Securities. Upon the termination of any such Extended
Interest Payment Period and the payment of all accrued and unpaid interest and
any additional amounts then due, the Company may commence a new Extended
Interest Payment Period, subject to the foregoing requirements.
The Company has agreed that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) or (ii) make any payment of principal,
interest or-premium, if any, on or repay or repurchase or redeem any debt
securities of the Company that rank pari passu with or junior in right of
payment to the Securities or make any guarantee payments with respect to any
guarantee by the Company of the debt securities or any Subsidiary of the Company
if such guarantee ranks pari passu or junior in right of payment to the
Securities (other than (a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Common Stock of the
Company, (b) any declaration of a dividend in connection with the implementation
of a stockholder's rights plan, or the issuance of stock under any such plan in
the future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Capital Securities Guarantee, (d) as a result of a
reclassification of the Company's capital stock or the exchange or the
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (e) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the exchange or
conversion of such capital stock or the security being exchanged or converted,
and (f) purchases or issuances of Common Stock in connection with any of the
Company's stock option, stock purchase, stock loan or other benefit plans for
its directors, officers or employees or any of the Company's dividend
reinvestment plans, in each case as now existing or hereinafter established or
amended) if at such time (i) there shall have occurred any event of which the
Company has actual knowledge that (a) is, or with the giving of notice or the
lapse of time, or both, would be, an Event of Default and (b) in respect of
which the Company shall not have taken reasonable steps to cure, (ii) if such
Securities are held by Vesta Capital Trust, the Company shall be in default with
respect to its payment of any obligations under the Capital Securities Guarantee
or (iii) the Company shall have given notice of its election of the exercise of
its right to extend the interest payment period and any such extension shall be
continuing.
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The Company will have the right at any time to liquidate Vesta Capital
Trust and cause the Securities to be distributed to the holders of the Trust
Securities in liquidation of Vesta Capital Trust.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to the transfer restrictions limitations as may be
contained herein and therein from time to time, the transfer of this Security is
registrable by the holder hereof on the Security Register of the Company, upon
surrender of this Security for registration of transfer at the office or agency
of the Trustee in the City of Charlotte and State of North Carolina accompanied
by a written instrument or instruments of transfer in form satisfactory to the
Company or the Trustee duly executed by the holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of authorized
denominations and for the same aggregate principal amount and series will be
issued to the designated transferee or transferees. No service charge will be
made for any such registration of transfer, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
relation thereto.
Prior to due presentment for registration of transfer of this
Security, the Company, the Trustee, any paying agent and the registrar may deem
and treat the registered holder hereof as the absolute owner hereof (whether or
not this Security shall be overdue and notwithstanding any notice of ownership
or writing hereon made by anyone other than the Security Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any paying agent nor any registrar shall be
affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest on this Security, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor Person, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
All terms used in this Security that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
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THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PROVISIONS THEREOF.
89
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================================================================================
AMENDED AND RESTATED DECLARATION
OF TRUST
OF
VESTA CAPITAL TRUST I
January 31, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
INTERPRETATION AND DEFINITIONS
<S> <C>
SECTION 1.1 Definitions............................................. 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application........................ 9
SECTION 2.2 Lists of Holders of Securities.......................... 10
SECTION 2.3 Reports by the Property Trustee......................... 10
SECTION 2.4 Periodic Reports to Property Trustee.................... 10
SECTION 2.5 Evidence of Compliance with Conditions
Precedent............................................... 11
SECTION 2.6 Events of Default; Waiver............................... 11
SECTION 2.7 Event of Default; Notice................................ 13
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.................................................... 14
SECTION 3.2 Office.................................................. 14
SECTION 3.3 Purpose................................................. 14
SECTION 3.4 Authority............................................... 14
SECTION 3.5 Title to Property of the Trust.......................... 15
SECTION 3.6 Powers and Duties of the Administrative
Trustees................................................ 15
SECTION 3.7 Prohibition of Actions by the Trust and
the Trustees............................................ 18
SECTION 3.8 Powers and Duties of the Property
Trustee................................................. 19
SECTION 3.9 Certain Duties and Responsibilities of
the Property Trustee.................................... 21
SECTION 3.10 Certain Rights of Property Trustee...................... 23
SECTION 3.11 Delaware Trustee........................................ 26
SECTION 3.12 Execution of Documents.................................. 26
SECTION 3.13 Not Responsible for Recitals or Issuance
of Securities........................................... 27
SECTION 3.14 Duration of Trust....................................... 27
SECTION 3.15 Mergers................................................. 27
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities................. 29
SECTION 4.2 Responsibilities of the Sponsor......................... 29
SECTION 4.3 Right to Proceed........................................ 30
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE V
TRUSTEES
<S> <C>
SECTION 5.1 Number of Trustees: Appointment of
Co-Trustee............................................. 30
SECTION 5.2 Delaware Trustee....................................... 31
SECTION 5.3 Property Trustee; Eligibility.......................... 31
SECTION 5.4 Certain Qualifications of Administrative
Trustees and Delaware Trustee Generally................ 32
SECTION 5.5 Administrative Trustees................................ 32
SECTION 5.6 Delaware Trustee....................................... 33
SECTION 5.7 Appointment, Removal and Resignation of
Trustees............................................... 33
SECTION 5.8 Vacancies Among Trustees............................... 35
SECTION 5.9 Effect of Vacancies.................................... 35
SECTION 5.10 Meetings............................................... 36
SECTION 5.11 Delegation of Power.................................... 36
Section 5.12 Merger, Conversion, Consolidation or
Succession to Business................................. 37
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.......................................... 37
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities................ 37
SECTION 7.2 Execution and Authentication........................... 38
SECTION 7.3 Form and Dating........................................ 39
SECTION 7.4 Registrar and Paying Agent............................. 41
SECTION 7.5 Paying Agent to Hold Money in Trust.................... 42
SECTION 7.6 Replacement Securities................................. 42
SECTION 7.7 Outstanding Capital Securities......................... 42
SECTION 7.8 Capital Securities in Treasury......................... 43
SECTION 7.9 Temporary Securities................................... 43
SECTION 7.10 Cancellation........................................... 44
SECTION 7.11 CUSIP Numbers.......................................... 44
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust................................... 45
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities................................. 46
SECTION 9.2 Transfer Procedures and Restrictions................... 46
SECTION 9.3 Deemed Security Holders................................ 55
SECTION 9.4 Book Entry Interests................................... 55
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
SECTION 9.5 Notices to Clearing Agency............................. 56
SECTION 9.6 Appointment of Successor Clearing
Agency................................................. 56
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.............................................. 56
SECTION 10.2 Exculpation............................................ 57
SECTION 10.3 Fiduciary Duty......................................... 57
SECTION 10.4 Indemnification........................................ 58
SECTION 10.5 Outside Businesses..................................... 62
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year............................................ 63
SECTION 11.2 Certain Accounting Matters............................. 63
SECTION 11.3 Banking................................................ 64
SECTION 11.4 Withholding............................................ 64
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments............................................. 64
SECTION 12.2 Meetings of the Holders of Securities; Action by
Written Consent........................................ 66
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee..... 68
SECTION 13.2 Representations and Warranties of Delaware Trustee..... 69
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices................................................ 70
SECTION 14.2 Governing Law.......................................... 71
SECTION 14.3 Intention of the Parties............................... 71
SECTION 14.4 Headings............................................... 71
SECTION 14.5 Successors and Assigns................................. 71
SECTION 14.6 Partial Enforceability................................. 72
SECTION 14.7 Counterparts........................................... 72
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ANNEX I Terms of 8.525% Capital Securities
8.525% Common Securities...............................I-1
EXHIBIT A-1 Form of Capital Security Certificate...................A1-1
EXHIBIT A-2 Form of Common Security Certificate....................A2-1
</TABLE>
(iv)
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
VESTA CAPITAL TRUST I
January 31, 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of January 31, 1997, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the Holders (as defined herein), from time to
time, of undivided beneficial interests in the Trust to be issued pursuant to
this Declaration;
WHEREAS, the Delaware Trustee and the Sponsor established Vesta
Capital Trust I (the "Trust"), a trust created under the Delaware Business Trust
Act pursuant to a Declaration of Trust dated as of January 27, 1997 (the
"Original Declaration"), and a Certificate of Trust filed with the Secretary of
State of the State of Delaware on January 27, 1997, for the sole purpose of
issuing and selling certain securities representing undivided beneficial
interests in the assets of the Trust and investing the proceeds thereof in
certain Debentures of the Debenture Issuer (each as hereinafter defined);
WHEREAS, prior to the date hereof, no Trust Securities have been
issued;
WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original Declaration;
and
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act (as defined
herein) and that this Declaration constitute the governing instrument of such
business trust, the Trustees declare that all assets contributed to the Trust
will be held in trust for the benefit of the Holders (as defined herein), from
time to time, of the securities representing undivided beneficial interests in
the assets of the Trust issued hereunder, subject to the provisions of this
Declaration.
1
<PAGE>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
-----------
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not defined in the
preamble above or elsewhere herein have the respective meanings assigned to
them in this Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration (including Appendix I hereto and Exhibit A hereto) as
modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Declaration unless otherwise defined in this Declaration
or unless the context otherwise requires;
(f) a term defined in the Indenture (as defined herein) has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Administrative Trustee" has the meaning set forth in Section 5.1.
----------------------
"Affiliate" has the same meaning as given to that term in Rule 405
---------
under the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent or Registrar.
-----
"Authorized Officer" of a Person means any other Person that is
------------------
authorized to legally bind such former Person.
"Book Entry Interest" means a beneficial interest in a Global
-------------------
Certificate registered in the name of a Clearing Agency or its nominee,
ownership and transfers of which shall be maintained
2
<PAGE>
and made through book entries by a Clearing Agency as described in Section 9.4.
"Business Day" means any day other than a Saturday or a Sunday or a
------------
day on which banking institutions in The City of New York are authorized or
required by law or executive order to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
------------------
Code, 12 Del. Code (S)3801 et seq., as it may be amended from time to time or
any successor legislation.
"Capital Securities" has the meaning specified in Section 7.1(a).
------------------
"Capital Securities Guarantee" means the guarantee agreement dated as
----------------------------
of January 31, 1997 of the Guarantor in respect of the Capital Securities.
"Capital Security Beneficial Owner" means, with respect to a Book
---------------------------------
Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Clearing Agency" means an organization registered as a "Clearing
---------------
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Capital Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Capital Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Time" means the "Closing Time" under the Purchase Agreement.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, or any successor legislation.
"Commission" means the United States Securities and Exchange
----------
Commission as from time to time constituted, or if any time after the execution
of this Declaration such Commission is not existing and performing the duties
now assigned to it under applicable Federal securities laws, then the body
performing such duties at such time.
3
<PAGE>
"Common Securities" has the meaning specified in Section 7.1(a).
-----------------
"Common Securities Guarantee" means the guarantee agreement dated as
---------------------------
of January 31, 1997 of the Guarantor in respect of the Common Securities.
"Company Indemnified Person" means (a) any Administrative Trustee; (b)
--------------------------
any Affiliate of any Administrative Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Administrative Trustee; or (d) any officer, employee or agent of the Trust or
its Affiliates.
"Corporate Trust Office" means the office of the Property Trustee at
----------------------
which the corporate trust business of the Property Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Agreement is located at 230 South Tryon Street, 9th Floor,
Charlotte, North Carolina 28288-1179.
"Covered Person" means: (a) any officer, director, shareholder,
--------------
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holders of Securities.
"Debenture Issuer" means Vesta Insurance Group, Inc., a Delaware
----------------
corporation, or any successor entity resulting from any consolidation,
amalgamation, merger or other business combination, in its capacity as issuer of
the Debentures under the Indenture.
"Debenture Trustee" means First Union National Bank of North Carolina,
-----------------
a national banking association, as trustee under the Indenture until a successor
is appointed thereunder, and thereafter means such successor trustee.
"Debentures" means the 8.525% Junior Subordinated Deferrable Interest
----------
Debentures due January 15, 2027 of the Debenture Issuer issued pursuant to the
Indenture.
"Default" means an event, act or condition that with notice or lapse
-------
of time, or both, would constitute an Event of Default.
"Definitive Capital Securities" shall have the meaning set forth in
-----------------------------
Section 7.3(c).
"Delaware Trustee" has the meaning set forth in Section 5.2.
----------------
4
<PAGE>
"Direct Action" shall have the meaning set forth in Section 3.8(e).
-------------
"Distribution" means a distribution payable to Holders of Securities
------------
in accordance with Section 6.1.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
---
"Event of Default" in respect of the Securities means an Event of
----------------
Default (as defined in the Indenture) that has occurred and is continuing in
respect of the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set forth in Section
----------------------------
10.4(b).
"Global Capital Securities" has the meaning set forth in Section
-------------------------
7.3(a).
"Guarantor" means Vesta Insurance Group, Inc., a Delaware corporation,
---------
or any successor entity resulting from any consolidation, amalgamation, merger
or other business combination in its capacity as guarantor under each of the
Securities Guarantees, as the case may be.
"Holder" means a Person in whose name a Security is registered, such
------
Person being a beneficial owner within the meaning of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary
------------------
Indemnified Person.
"Indenture" means the Indenture dated as of January 31, 1997, among
---------
the Debenture Issuer and the Debenture Trustee, as amended from time to time.
"Initial Optional Redemption Date" has the meaning set forth in
--------------------------------
Section 4(b) of Annex I hereto.
"Investment Company" means an investment company as defined in the
------------------
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
----------------------
amended from time to time, or any successor legislation.
"Legal Action" has the meaning set forth in Section 3.6(g).
------------
5
<PAGE>
"Liquidation Amount" with respect to any Security means the amount
------------------
designated as such with respect thereto in Annex I hereto.
"Majority in Liquidation Amount" means, with respect to the Trust
------------------------------
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the aggregate Liquidation
Amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all outstanding Securities of
the relevant class.
"Ministerial Action" has the meaning set forth in Annex I hereto.
------------------
"Offering Memorandum" has the meaning set forth in Section 3.6(b).
-------------------
"Officers' Certificate" means, with respect to any Person, a
---------------------
certificate signed by two of the following: the Chief Executive Officer, the
President, a Vice President, the Controller or the Secretary or an Assistant
Secretary, the Treasurer or an Assistant Treasurer of such Person. Any
Officers' Certificate delivered with respect to compliance with a condition or
covenant provided for in this Declaration shall include:
(a) a statement that each officer signing the Certificate has read the
covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" shall mean a written opinion of counsel, who may
------------------
be an employee of the Sponsor, and who shall be acceptable to the Property
Trustee.
6
<PAGE>
"Paying Agent" has the meaning specified in Section 7.4.
------------
"Person" means a legal person, including any individual, corporation,
------
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Property Trustee" has the meaning set forth in Section 5.3(a).
----------------
"Property Trustee Account" has the meaning set forth in Section
------------------------
3.8(c).
"Purchase Agreement" means the Purchase Agreement for the initial
------------------
offering and sale of Capital Securities in the form of Exhibit C.
"QIBs" shall mean qualified institutional buyers as defined in Rule
----
144A.
"Quorum" means a majority of the Administrative Trustees or, if there
------
are only two Administrative Trustees, both of them.
"Registrar" has the meaning set forth in Section 7.4.
---------
"Regulation S" means Regulation S under the Securities Act, as such
------------
regulation may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
"Regulation S Global Capital Security" has the meaning set forth in
------------------------------------
Section 7.3(a).
"Related Party" means, with respect to the Sponsor, any direct or
-------------
indirect wholly owned subsidiary of the Sponsor or any other Person that owns,
directly or indirectly, 100% of the outstanding voting securities of the
Sponsor.
"Responsible Officer" means, with respect to the Property Trustee, any
-------------------
officer within the Corporate Trust Office of the Property Trustee with
responsibility for the administration of this Declaration and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Restricted Definitive Capital Securities" has the meaning set forth
----------------------------------------
in Section 7.3(c).
7
<PAGE>
"Restricted Capital Security" means a Capital Security required by
---------------------------
Section 9.2 to contain a Restricted Securities Legend.
"Restricted Securities Legend" has the meaning set forth in Section
----------------------------
9.2.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or any
---------
successor rule or regulation.
"Rule 144" means Rule 144 under the Securities Act, as such rule may
--------
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Rule 144A" means Rule 144A under the Securities Act, as such rule may
---------
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
"Rule 144A Global Capital Security" has the meaning set forth in
---------------------------------
Section 7.3(a).
"Securities" or "Trust Securities" means the Common Securities and the
---------- ----------------
Capital Securities.
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time, or any successor legislation.
"Securities Guarantees" means the Common Securities Guarantee and the
---------------------
Capital Securities Guarantee.
"Special Event" has the meaning set forth in Section 4(c) of Annex I
-------------
hereto.
"Special Event Redemption Price" has the meaning set forth in Section
------------------------------
4(c) of Annex I hereto.
"Sponsor" means Vesta Insurance Group, Inc., a Delaware corporation,
-------
or any successor entity resulting from any merger, consolidation, amalgamation
or other business combination, in its capacity as sponsor of the Trust.
"Successor Entity" has the meaning specified in Section 3.15(b).
-----------------
"Successor Delaware Trustee" has the meaning specified in Section
--------------------------
5.7(b)(ii).
"Successor Property Trustee" has the meaning specified in Section
--------------------------
5.7(b)(i).
"Successor Securities" has the meaning specified in Section 3.15(b).
--------------------
8
<PAGE>
"Super Majority" has the meaning set forth in Section 2.6(a)(ii).
--------------
"10% in Liquidation Amount" means, with respect to the Trust
-------------------------
Securities, except as provided in the terms of the Capital Securities or by the
Trust Indenture Act, Holder(s) of outstanding Trust Securities voting together
as a single class or, as the context may require, Holders of outstanding Capital
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of 10% or more of the aggregate Liquidation
Amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all outstanding Securities of
the relevant class.
"Treasury Regulations" means the income tax regulations, including
--------------------
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
------- --------
Declaration as a trustee (including the Property Trustee, the Delaware Trustee
and the Administrative Trustees), so long as such Person shall continue as a
trustee of the Trust in accordance with the terms hereof, and all other Persons
who may from time to time be duly appointed, qualified and serving as Trustees
in accordance with the provisions hereof, and references herein to a Trustee or
the Trustees shall refer to such Person or Persons solely in their capacity as
trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended from time to time, or any successor legislation.
"Unrestricted Global Capital Security" has the meaning set forth in
------------------------------------
Section 9.2(b).
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
--------------------------------
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that would be required to be part of this Declaration if this
Declaration were a qualified indenture under the Trust Indenture Act and shall,
to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.
9
<PAGE>
(c) If and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by (S)(S) 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
------------------------------
(a) Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall provide the Property Trustee, unless the Property Trustee is
Registrar for the Securities, (i) within 5 days after each record date for
payment of Distributions, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Holders of the Securities
("List of Holders") as of such record date, provided that neither the Sponsor
nor the Administrative Trustees on behalf of the Trust shall be obligated to
provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Property Trustee by the
Sponsor and the Administrative Trustees on behalf of the Trust, and (ii) at any
other time, within 30 days of receipt by the Trust of a written request for a
List of Holders as of a date no more than 14 days before such List of Holders is
given to the Property Trustee. The Property Trustee shall preserve, in as
current a form as is reasonably practicable, all information contained in Lists
of Holders given to it or which it receives in the capacity as Paying Agent (if
acting in such capacity), provided that the Property Trustee may destroy any
List of Holders previously given to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under
(S)(S) 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
-------------------------------
Within 60 days after May 15 of each year, commencing May 15, 1997, the
Property Trustee shall provide to the Holders of the Capital Securities such
reports as are required by (S) 313 of the Trust Indenture Act, if any, in the
form and in the manner provided by (S) 313 of the Trust Indenture Act. The
Property Trustee shall also comply with the requirements of (S) 313(d) of the
Trust Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
------------------------------------
10
<PAGE>
Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such documents, reports and
information as are required by (S) 314 (if any) and the compliance certificate
required by (S) 314 of the Trust Indenture Act in the form, in the manner and at
the times required by (S) 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent.
------------------------------------------------
Each of the Sponsor and an Administrative Trustee on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent provided for in this Declaration that relate to any of the
matters set forth in (S) 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given by an officer pursuant to (S) 314(c)(1) of the
Trust Indenture Act may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver.
-------------------------
(a) The Holders of a Majority in Liquidation Amount of Capital
Securities may, by vote, on behalf of the Holders of all of the Capital
Securities, waive any past Event of Default in respect of the Capital Securities
and its consequences, provided that, if the underlying Event of Default under
-------- ----
the Indenture:
(i) is not waivable under the Indenture, the Event of Default
under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority in
aggregate principal amount of the holders of the Debentures (a "Super
Majority") to be waived under the Indenture, the Event of Default under the
Declaration may only be waived by the vote of the Holders of at least the
proportion in aggregate Liquidation Amount of the Capital Securities that
the relevant Super Majority represents of the aggregate principal amount of
the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of (S)
316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
Default shall cease to exist, and any Event of Default with respect to the
Capital Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other Default or an Event of Default with respect to the Capital
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Capital Securities of an Event of Default with respect to the
11
<PAGE>
Capital Securities shall also be deemed to constitute a waiver by the Holders of
the Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
-------- ----
Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders
of the Common Securities are deemed to have waived such Event of Default
under the Declaration as provided below in this Section 2.6(b), the Event
of Default under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of a Super Majority to be
waived, except where the Holders of the Common Securities are deemed to
have waived such Event of Default under the Declaration as provided below
in this Section 2.6(b), the Event of Default under the Declaration may only
be waived by the vote of the Holders of at least the proportion in
aggregate Liquidation Amount of the Common Securities that the relevant
Super Majority represents of the aggregate principal amount of the
Debentures outstanding;
provided further, that each Holder of Common Securities will be deemed to have
- -------- -------
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences if all Events of Default with respect to
the Capital Securities have been cured, waived or otherwise eliminated, and
until such Events of Default have been so cured, waived or otherwise eliminated,
the Property Trustee will be deemed to be acting solely on behalf of the Holders
of the Capital Securities and only the Holders of the Capital Securities will
have the right to direct the Property Trustee in accordance with the terms of
the Securities. The foregoing provisions of this Section 2.6(b) shall be in
lieu of (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such
(S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby
expressly excluded from this Declaration and the Securities, as permitted by the
Trust Indenture Act. Subject to the foregoing provisions of this Section
2.6(b), upon such waiver, any such Default shall cease to exist and any Event of
Default with respect to the Common Securities arising therefrom shall be deemed
to have been cured for every purpose of this Declaration, but no such waiver
shall extend to any subsequent or other Default or Event of Default
12
<PAGE>
with respect to the Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the
Property Trustee, at the direction of the Holders of the Capital Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu
of (S) 316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
SECTION 2.7 Event of Default; Notice.
------------------------
(a) The Property Trustee shall, within 90 days after a Responsible
Officer of the Property Trustee obtains knowledge of the occurrence of an Event
of Default, transmit by mail, first class postage prepaid, to the Holders of the
Securities, notices of all Defaults with respect to the Securities actually
known to a Responsible Officer of the Property Trustee, unless such Defaults
have been cured before the giving of such notice; provided that, except for a
Default in the payment of principal of (or premium, if any) or interest on any
of the Debentures, the Property Trustee shall be protected in withholding such
notice if and so long as a Responsible Officer of the Property Trustee in good
faith determines that the withholding of such notice is in the interests of the
Holders of the Securities.
(b) The Property Trustee shall not be deemed to have knowledge of any
Default or Event of Default except:
(i) Default or Event of Default under Sections 5.01(a) and
5.01(b) of the Indenture; or
(ii) any Default or Event of Default as to which the Property
Trustee shall have received written notice or of which a Responsible
Officer of the Property Trustee charged with the administration of the
Declaration shall have actual knowledge.
(c) Within five Business Days after the occurrence of any Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit notice of such Event of Default to the Holders of the Capital
Securities, the Administrative Trustees and the Sponsor, unless such Event of
Default shall have been cured or waived. The Sponsor and the Administrative
Trustees shall file annually with the Property Trustee a certification as to
whether or not they are in compliance with all the conditions and covenants
applicable to them under this Declaration.
13
<PAGE>
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
----
The Trust is named "Vesta Capital Trust I" as such name may be
modified from time to time by the Administrative Trustees following written
notice to the Property Trustee, the Delaware Trustee and the Holders of
Securities. The Trust's activities may be conducted under the name of the Trust
or any other name deemed advisable by the Administrative Trustees.
SECTION 3.2 Office.
------
The address of the principal office of the Trust is c/o Vesta
Insurance Group, Inc., 3760 River Run Drive, Birmingham, Alabama 35243. On ten
Business Days written notice to the Property Trustee, the Delaware Trustee and
the Holders of Securities, the Administrative Trustees may designate another
principal office.
SECTION 3.3 Purpose.
-------
The exclusive purposes and functions of the Trust are (a) to issue and
sell Securities, (b) to use the gross proceeds from the sale of the Securities
to acquire the Debentures, and (c) except as otherwise limited herein, to engage
in only those other activities necessary, advisable or incidental thereto. The
Trust shall not borrow money, issue debt or reinvest proceeds derived from
investments, mortgage or pledge any of its assets, or otherwise undertake (or
permit to be undertaken) any activity that would cause the Trust not to be
classified for United States federal income tax purposes as a grantor trust.
SECTION 3.4 Authority.
---------
Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Administrative Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Administrative Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action taken by
the Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no Person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.
14
<PAGE>
SECTION 3.5 Title to Property of the Trust.
------------------------------
Except as provided in Section 3.8 with respect to the Debentures and
the Property Trustee Account or as otherwise provided in this Declaration, legal
title to all assets of the Trust shall be vested in the Trust. The Holders
shall not have legal title to any part of the assets of the Trust, but shall
have an undivided beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Administrative Trustees.
------------------------------------------------
The Administrative Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Capital Securities and the Common
Securities in accordance with this Declaration; provided, however, that except,
in the case of (i) and (ii), as contemplated in Section 7.1(a), (i) the Trust
may issue no more than one series of Capital Securities and no more than one
series of Common Securities, (ii) there shall be no interests in the Trust other
than the Securities, and (iii) the issuance of Securities shall be limited to a
simultaneous issuance of both Capital Securities and Common Securities at any
Closing Time;
(b) in connection with the issue and sale of the Capital Securities,
at the direction of the Sponsor, to:
(i) execute, if necessary, an offering memorandum (the "Offering
Memorandum") in preliminary and final form, including any amendments or
supplements thereto, prepared by the Sponsor, in relation to the offering
and sale of Capital Securities to qualified institutional buyers in
reliance on Rule 144A under the Securities Act, to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) and outside the United States to non-U.S. persons in
offshore transactions in reliance on Regulation S under the Securities Act;
(ii) execute and file any documents prepared by the Sponsor, or
take any acts as determined by the Sponsor to be necessary in order to
qualify or register all or part of the Capital Securities in any State in
which the Sponsor has determined to qualify or register such Capital
Securities for sale;
(iii) at the direction of the Sponsor, execute and file an
application, prepared by the Sponsor, to the New York Stock Exchange or any
other national stock exchange or the Nasdaq Stock Market's National Market
for listing or quotation of the Capital Securities;
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(iv) execute and deliver letters, documents, or instruments with
DTC and other Clearing Agencies relating to the Capital Securities;
(v) if required, execute and file with the Commission a
registration statement on Form 8-A, including any amendments thereto,
prepared by the Sponsor, relating to the registration of the Capital
Securities under Section 12(b) of the Exchange Act; and
(vi) execute and enter into the Purchase Agreement providing for
the sale of the Capital Securities.
(c) to acquire the Debentures with the proceeds of the sale of the
Capital Securities and the Common Securities; provided, however, that the
Administrative Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the Holders of the
Capital Securities and the Holders of Common Securities;
(d) to give the Sponsor and the Property Trustee prompt written
notice of the occurrence of a Special Event;
(e) to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including and with
respect to, for the purposes of (S) 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Capital Securities and Holders of Common Securities as
to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of
the Administrative Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort
to legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has
the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(j) to give the certificate required by (S)314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Administrative Trustee;
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(k) to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, Registrar for the
Securities or to appoint a Paying Agent for the Securities as provided in
Section 7.4 except for such time as such power to appoint a Paying Agent is
vested in the Property Trustee;
(m) to give prompt written notice to the Property Trustee and to
Holders of the Securities of any notice received from the Debenture Issuer of
its election to defer payments of interest on the Debentures by extending the
interest payment period under the Indenture;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(o) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Capital
Securities or to enable the Trust to effect the purposes for which the Trust was
created;
(p) to take any action, not inconsistent with this Declaration or with
applicable law, that the Administrative Trustees determine in their discretion
to be necessary or desirable in carrying out the activities of the Trust as set
out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes; and
(q) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Administrative Trustees, on behalf of
the Trust.
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The Administrative Trustees must exercise the powers set forth in this
Section 3.6 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Administrative Trustees shall not take
any action that is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3.
Subject to this Section 3.6, the Administrative Trustees shall have
none of the powers or the authority of the Property Trustee set forth in Section
3.8.
Any expenses incurred by the Administrative Trustees pursuant to this
Section 3.6 shall be reimbursed by the Sponsor.
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.
----------------------------------------------------
The Trust shall not, and the Trustees (including the Property Trustee)
shall not cause the Trust to, engage in any activity other than as required or
authorized by this Declaration. The Trust shall not:
(a) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of Securities
pursuant to the terms of this Declaration and of the Securities;
(b) acquire any assets other than as expressly provided herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(e) possess any power or otherwise act in such a way as to vary
the Trust assets or the terms of the Securities in any way whatsoever;
(f) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities; or
(g) other than as provided in this Declaration or Annex I, (A)
direct the time, method and place of conducting any proceeding with respect
to any remedy available to the Debenture Trustee, or exercising any trust
or power conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is waivable under the
Indenture, (C) exercise any right to rescind or annul any declaration that
the principal of all the
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Debentures shall be due and payable, or (D) consent to any amendment,
modification or termination of the Indenture or the Debentures where such
consent shall be required unless the Trust shall have received an opinion
of a nationally recognized independent tax counsel experienced in such
matters to the effect that such amendment, modification or termination will
not cause more than an insubstantial risk that, for United States federal
income tax purposes, the Trust will not be classified as a grantor trust.
SECTION 3.8 Powers and Duties of the Property Trustee.
-----------------------------------------
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the
Holders of the Securities. The right, title and interest of the Property
Trustee to the Debentures shall vest automatically in each Person who may
hereafter be appointed as Property Trustee in accordance with Section 5.7. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents with regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Administrative Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "Property Trustee Account") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders of the
Securities and, upon the receipt of payments of funds made in respect of
the Debentures held by the Property Trustee, deposit such funds into the
Property Trustee Account and make, or cause any Paying Agent to make,
payments to the Holders of the Capital Securities and Holders of the Common
Securities from the Property Trustee Account in accordance with Section
6.1. Funds in the Property Trustee Account shall be held uninvested until
disbursed in accordance with this Declaration. The Property Trustee
Account shall be an account that is maintained with a banking institution
the rating on whose long-term unsecured indebtedness is at least equal to
the rating assigned to the Capital Securities by a "nationally recognized
statistical rating organization", as that term is defined for purposes of
Rule 436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as shall be necessary
or appropriate to effect the redemption
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of the Capital Securities and the Common Securities to the extent the
Debentures are redeemed or mature; and
(iii) upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the Securities,
engage in such ministerial activities as shall be necessary or appropriate
to effect the distribution of the Debentures to Holders of Securities upon
the occurrence of certain events.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of this Declaration and the Securities.
(e) Subject to Section 3.9(a), the Property Trustee shall take any
Legal Action which arises out of or in connection with an Event of Default of
which a Responsible Officer of the Property Trustee has actual knowledge or the
Property Trustee's duties and obligations under this Declaration or the Trust
Indenture Act and if the Property Trustee shall have failed to take such Legal
Action, the Holders of the Capital Securities may take such Legal Action, to the
same extent as if such Holders of Capital Securities held an aggregate principal
amount of Debentures equal to the aggregate Liquidation Amount of such Capital
Securities, without first proceeding against the Property Trustee or the Trust;
provided, however, that if an Event of Default has occurred and is continuing
- -------- -------
and such event is attributable to the failure of the Debenture Issuer to pay the
principal of or premium, if any, or interest on the Debentures on the date such
principal, premium, if any, or interest is otherwise payable (or in the case of
redemption, on the redemption date), then a Holder of Capital Securities may
directly institute a proceeding for enforcement of payment to such Holder of the
principal of or premium, if any, or interest on the Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Capital
Securities of such Holder (a "Direct Action") on or after the respective due
date specified in the Debentures. In connection with such Direct Action, the
rights of the Holders of the Common Securities will be subrogated to the rights
of such Holder of Capital Securities to the extent of any payment made by the
Debenture Issuer to such Holder of Capital Securities in such Direct Action.
Except as provided in the preceding sentences, the Holders of Capital Securities
will not be able to exercise directly any other remedy available to the holders
of the Debentures.
(f) The Property Trustee shall continue to serve as a Trustee until
either:
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(i) the Trust has been completely liquidated and the proceeds of
the liquidation distributed to the Holders of Securities pursuant to the
terms of the Securities; or
(ii) a Successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 5.7(b).
(g) The Property Trustee shall have the legal power to exercise all
of the rights, powers and privileges of a holder of Debentures under the
Indenture and, if an Event of Default actually known to a Responsible Officer of
the Property Trustee occurs and is continuing, the Property Trustee shall, for
the benefit of Holders of the Securities, enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant to this Declaration and
the terms of the Securities. The Property Trustee must exercise the powers set
forth in this Section 3.8 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Property Trustee shall
not take any action that is inconsistent with the purposes and functions of the
Trust set out in Section 3.3.
(h) The Property Trustee shall be authorized to undertake any actions
set forth in (S)317(a) of the Trust Indenture Act.
(i) For such time as the Property Trustee is the Paying Agent, the
Property Trustee may authorize one or more Persons to act as additional Paying
Agents and to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to all securities and any such Paying Agent
shall comply with (S)317(b) of the Trust Indenture Act. Any such additional
Paying Agent may be removed by the Property Trustee at any time the Property
Trustee remains as Paying Agent and a successor Paying Agent or additional
Paying Agents may be (but are not required to be) appointed at any time by the
Property Trustee.
(j) Subject to this Section 3.8, the Property Trustee shall have none
of the duties, liabilities, powers or the authority of the Administrative
Trustees set forth in Section 3.6.
The Property Trustee must exercise the powers set forth in this
Section 3.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Property Trustee shall not take any
action that is inconsistent with the purposes and functions of the Trust set out
in Section 3.3.
SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.
-----------------------------------------------------------
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(a) The Property Trustee, before the occurrence of any Event of
Default and after the curing or waiving of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Declaration and in the Securities and no implied covenants shall
be read into this Declaration against the Property Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section 2.6)
of which a Responsible Officer of the Property Trustee has actual knowledge, the
Property Trustee shall exercise such of the rights and powers vested in it by
this Declaration, and use the same degree of care and skill in their exercise,
as a prudent person would exercise or use under the circumstances in the conduct
of his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Declaration and in
the Securities and the Property Trustee shall not be liable except for
the performance of such duties and obligations as are specifically set
forth in this Declaration and in the Securities, and no implied
covenants or obligations shall be read into this Declaration against
the Property Trustee; and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Property
Trustee and conforming to the requirements of this Declaration;
provided, however, that in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Property Trustee, the Property Trustee shall be under
a duty to examine the same to determine whether or not they conform to
the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was negligent
in ascertaining the pertinent facts;
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(iii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in Liquidation
Amount of the Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee,
or exercising any trust or power conferred upon the Property Trustee under
this Declaration;
(iv) no provision of this Declaration shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Declaration or indemnity
reasonably satisfactory to the Property Trustee against such risk or
liability is not reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Debentures and the Property
Trustee Account shall be to deal with such property in a similar manner as
the Property Trustee deals with similar property for its own account,
subject to the protections and limitations on liability afforded to the
Property Trustee under this Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no duty or liability for or with
respect to the value, genuineness, existence or sufficiency of the
Debentures or the payment of any taxes or assessments levied thereon or in
connection therewith;
(vii) the Property Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree in writing with
the Sponsor. Money held by the Property Trustee need not be segregated from
other funds held by it except in relation to the Property Trustee Account
maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except
to the extent otherwise required by law; and
(viii) the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Sponsor with their
respective duties under this Declaration, nor shall the Property Trustee be
liable for any default or misconduct of the Administrative Trustees or the
Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
----------------------------------
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(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Sponsor or the Administrative
Trustees contemplated by this Declaration may be sufficiently evidenced by
an Officers' Certificate;
(iii) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder, the
Property Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and conclusively rely
upon an Officers' Certificate which, upon receipt of such request, shall be
promptly delivered by the Sponsor or the Administrative Trustees;
(iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or securities
laws) or any rerecording, refiling or reregistration thereof;
(v) the Property Trustee may consult with counsel or other
experts of its selection and the advice or opinion of such counsel and
experts with respect to legal matters or advice within the scope of such
experts' area of expertise shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion, such
counsel may be counsel to the Sponsor or any of its Affiliates, and may
include any of its employees. The Property Trustee shall have the right at
any time to seek instructions concerning the administration of this
Declaration from any court of competent jurisdiction;
(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at
the request or direction of any Holder, unless such Holder shall have
provided to the Property Trustee security and indemnity, reasonably
satisfactory to the Property Trustee, against the costs, expenses
(including reasonable attorneys' fees and expenses and the expenses of the
Property Trustee's agents, nominees
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or custodians) and liabilities that might be incurred by it in complying
with such request or direction, including such reasonable advances as may
be requested by the Property Trustee; provided, that, nothing contained in
this Section 3.10(a)(vi) shall be taken to relieve the Property Trustee,
upon the occurrence of an Event of Default, of its obligation to exercise
the rights and powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents, custodians, nominees or attorneys and the Property Trustee
shall not be responsible for any misconduct or negligence on the part of
any agent or attorney appointed with due care by it hereunder;
(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Property Trustee or its agents alone shall be sufficient
and effective to perform any such action and no third party shall be
required to inquire as to the authority of the Property Trustee to so act
or as to its compliance with any of the terms and provisions of this
Declaration, both of which shall be conclusively evidenced by the Property
Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (i) may request instructions from the
Holders of the Securities which instructions may only be given by the
Holders of the same proportion in Liquidation Amount of the Securities as
would be entitled to direct the Property Trustee under the terms of the
Securities in respect of such remedy, right or action, (ii) may refrain
from enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in conclusively
relying on or acting in or accordance with such instructions;
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(xi) except as otherwise expressly provided by this Declaration,
the Property Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Declaration; and
(xii) the Property Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith, without
negligence, and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11 Delaware Trustee.
----------------
Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Administrative Trustees or the Property Trustee described in this
Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be
a Trustee for the sole and limited purpose of fulfilling the requirements of
(S)3807 of the Business Trust Act and taking such actions as are required to be
taken by the Delaware Trustee under the Business Trust Act. In the event the
Delaware Trustee shall at any time be required to take any action or perform any
duty hereunder, the Delaware Trustee shall be entitled to the benefits of
Section 3.9(b)(ii) through (vii) and Section 3.10. No implied covenants or
obligations shall be read into this Declaration against the Delaware Trustee.
SECTION 3.12 Execution of Documents.
----------------------
Unless otherwise determined by the Administrative Trustees, and except
as otherwise required by the Business Trust Act, any Administrative Trustee is
authorized to execute on behalf of the Trust any documents that the
Administrative Trustees have the power and authority to execute pursuant to
Section 3.6; provided that, the registration statement referred to in Section
3.6(b)(i), including any amendments thereto, shall be signed by all of the
Administrative Trustees.
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SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14 Duration of Trust.
-----------------
The Trust, unless terminated pursuant to the provisions of Article
VIII hereof, shall have existence up to January 31, 2038.
SECTION 3.15 Mergers.
-------
(a) The Trust may not merge or convert with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, except as described in
Section 3.15(b) and (c).
(b) The Trust may, at the request of the Sponsor, with the consent of
the Administrative Trustees or, if there are more than two, a majority of the
Administrative Trustees and without the consent of the Holders of the
Securities, the Delaware Trustee or the Property Trustee, merge or convert with
or into, consolidate, amalgamate, or be replaced by, or convey, transfer or
lease its properties and assets as an entirety or substantially as an entirety
to, a trust organized as such under the laws of any State; provided that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust
under the Securities; or
(B) substitutes for the Securities other securities having
substantially the same terms as the Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the
Securities rank with respect to Distributions and payments upon
liquidation, redemption and otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor
Entity that possesses the same powers and duties as the Property Trustee as
the holder of the Debentures;
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(iii) the Successor Securities are listed or quoted, or any Successor
Securities will be listed or quoted upon notification of issuance, on any
national securities exchange or with another organization on which the
Capital Securities are then listed or quoted, if any;
(iv) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization;
(v) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the Holders of the Securities
(including any Successor Securities) in any material respect (other than
with respect to any dilution of such Holders' interests in the new entity);
(vi) such Successor Entity has a purpose identical to that of the
Trust;
(vii) prior to such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor has received an
opinion of an independent counsel to the Trust experienced in such matters
to the effect that:
(A) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect
the rights, preferences and privileges of the Holders of the
Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the Holders'
interest in the new entity);
(B) following such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the
Trust nor the Successor Entity will be required to register as an
Investment Company under the Investment Company Act; and
(C) following such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer, or lease, the Trust
(or the Successor Entity) will continue to be classified as a grantor
trust for United States federal income tax purposes; and
(viii) the Sponsor or any permitted successor or assignee owns all of
the common securities of such Successor Entity and guarantees the
obligations of such Successor
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Entity under the Successor Securities at least to the extent provided by
the Capital Securities Guarantee and the Common Securities Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of all Holders of the Securities in liquidation amount of the
Securities, consolidate, amalgamate, merge or convert with or into, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to, any other Person or permit any
other Person to consolidate, amalgamate, merge or convert with or into, or
replace it if such consolidation, amalgamation, merger, conversion, replacement,
conveyance, transfer or lease would cause the Trust or the Successor Entity not
to be classified as a grantor trust for United States federal income tax
purposes.
(d) The Administrative Trustees shall furnish to the Delaware Trustee
at least five Business Days prior notice of the consummation of any merger,
consolidation, amalgamation, or replacement; provided, however, that failure to
provide such notice shall not effect the validity of any such transaction.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
---------------------------------------
At the Closing Time, the Sponsor will purchase all of the Common
Securities then issued by the Trust, in an amount at least equal to 3% of the
capital of the Trust, at the same time as the Capital Securities are issued and
sold.
SECTION 4.2 Responsibilities of the Sponsor.
-------------------------------
In connection with the issue and sale of the Capital Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:
(a) to prepare the Offering Memorandum, including any amendments or
supplements thereto;
(b) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Capital Securities and to do any
and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States;
(c) if deemed necessary or advisable by the Sponsor, to prepare for
filing by the Trust an application to the New York
29
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Stock Exchange or any other national stock exchange or the Nasdaq National
Market for listing or quotation of the Capital Securities;
(d) if required, to prepare for filing by the Trust with the
Commission a registration statement on Form 8-A relating to the registration of
the Capital Securities under Section 12(b) of the Exchange Act, including any
amendments thereto; and
(e) to negotiate the terms of the Purchase Agreement providing for
the sale of the Capital Securities.
SECTION 4.3 Right to Proceed.
----------------
The Sponsor acknowledges the rights of the Holders of Capital
Securities, in the event that a failure of the Trust to pay Distributions on the
Capital Securities is attributable to the failure of the Company to pay interest
or principal on the Debentures, to institute Direct Actions against the
Debenture Issuer for enforcement of its payment obligations on the Debentures.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees: Appointment of Co-Trustee.
---------------------------------------------
The number of Trustees initially shall be six (6), and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in Liquidation
Amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities; provided, however, that, the number of Trustees shall in
-------- -------
no event be less than two (2); provided further, that (1) one Trustee shall be
-------- -------
the Delaware Trustee; (2) there shall be at least one Trustee who is an employee
or officer of, or is affiliated with the Sponsor (an "Administrative Trustee");
and (3) one Trustee shall be the Property Trustee for so long as this
Declaration is required to qualify as an indenture under the Trust Indenture
Act, and such Trustee may also serve as Delaware Trustee if it meets the
applicable requirements. Notwithstanding the above, unless an Event of Default
shall have occurred and be continuing, at any time or times, for the purpose of
meeting the legal requirements of the Trust Indenture Act or of any jurisdiction
in which any part of the Trust's property may at the time be located, the
Holders of a Majority in Liquidation Amount of the Common Securities acting as a
class at a meeting of the
30
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Holders of the Common Securities, and the Administrative Trustees shall have
power to appoint one or more Persons either to act as a co-trustee, jointly with
the Property Trustee, of all or any part of the Trust's property, or to act as
separate trustee of any such property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such person or persons
in such capacity any property, title, right or power deemed necessary or
desirable, subject to the provisions of this Declaration. In case an Event of
Default has occurred and is continuing, the Property Trustee alone shall have
power to make any such appointment of a co-trustee.
SECTION 5.2 Delaware Trustee.
----------------
If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law,
provided that, if the Property Trustee has its principal place of business in
- -------- ----
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application to the Property Trustee in its capacity as Property
Trustee.
SECTION 5.3 Property Trustee; Eligibility.
-----------------------------
(a) There shall at all times be one Trustee (the "Property Trustee")
which shall act as Property Trustee and which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation or national banking association organized
and doing business under the laws of the United States of America or any
State or Territory thereof or of the District of Columbia, or a corporation
or Person permitted by the Commission to act as an institutional trustee
under the Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
50 million U.S. dollars ($50,000,000), and subject to supervision or
examination by federal, state, territorial or District of Columbia
authority. If such corporation or national banking association publishes
reports of condition at least annually, pursuant to law or to the
requirements of
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the supervising or examining authority referred to above, then for the
purposes of this Section 5.3(a)(ii), the combined capital and surplus of
such corporation or national banking association shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 5.3(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 5.7(c).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of (S)310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in (S)310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of (S) 310(b) of the Trust Indenture Act.
(d) The Capital Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in (S)310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be:
First Union National Bank of North Carolina
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Bond Administration
SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware
--------------------------------------------------------------
Trustee Generally.
-----------------
Each Administrative Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.
SECTION 5.5 Administrative Trustees.
-----------------------
(a) The initial Administrative Trustees shall be:
Robert Y. Huffman
c/o Vesta Insurance Group, Inc.
3760 River Run Drive
Birmingham, Alabama 35243
Barry A. Patrick
c/o Vesta Insurance Group, Inc.
3760 River Run Drive
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Birmingham, Alabama 35243
Donald W. Thornton
c/o Vesta Insurance Group, Inc.
3760 River Run Drive
Birmingham, Alabama 35243
Brian R. Meredith
c/o Vesta Insurance Group, Inc.
3760 River Run Drive
Birmingham, Alabama 35243
(b) Except as expressly set forth in this Declaration and except if a
meeting of the Administrative Trustees is called with respect to any matter over
which the Administrative Trustees have power to act, any power of the
Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
(c) Unless otherwise determined by the Administrative Trustees, and
except as otherwise required by the Business Trust Act or applicable law, any
Administrative Trustee is authorized to execute on behalf of the Trust any
documents which the Administrative Trustees have the power and authority to
cause the Trust to execute pursuant to Section 3.6, provided, that, the
registration statement referred to in Section 3.6, including any amendments
thereto, shall be signed by all of the Administrative Trustees; and
(d) An Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purposes of signing any documents which the Administrative
Trustees have power and authority to cause the Trust to execute pursuant to
Section 3.6.
SECTION 5.6 Delaware Trustee.
----------------
The initial Delaware Trustee shall be:
First Union Bank of Delaware
One Rodney Square, 1st Floor
920 King Street
Wilmington, Delaware 19801
Attention: Corporate Trustee
Administration
SECTION 5.7 Appointment, Removal and Resignation of Trustees.
------------------------------------------------
(a) Subject to Section 5.7(b), any Trustee may be appointed or
removed without cause at any time:
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(i) until the issuance of any Securities, by written
instrument executed by the Sponsor;
(ii) in the case of Administrative Trustees, after the issuance
of any Securities, by vote of the Holders of a Majority in Liquidation
Amount of the Common Securities voting as a class at a meeting of the
Holders of the Common Securities;
(iii) in the case of the Property Trustee and the Delaware
Trustee, unless an Event of Default shall have occurred and be continuing
after the issuance of any Securities, by vote of the Holders of a Majority
in Liquidation Amount of the Common Securities voting as a class at a
meeting of the Holders of the Common Securities; and
(iv) in the case of the Property Trustee and the Delaware
Trustee, if an Event of Default shall have occurred and be continuing after
the issuance of the Securities, by vote of Holders of a Majority in
Liquidation Amount of the Capital Securities voting as a class at a meeting
of Holders of the Capital Securities.
(b) (i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.7(a) until a successor Trustee possessing
the qualifications to act as Property Trustee under Section 5.3 (a "Successor
Property Trustee") has been appointed and has accepted such appointment by
written instrument executed by such Successor Property Trustee and delivered to
the removed Property Trustee, the Administrative Trustees and the Sponsor; and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with this Section 5.7(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Sections 5.2
and 5.4 (a "Successor Delaware Trustee") has been appointed and has
accepted such appointment by written instrument executed by such Successor
Delaware Trustee and delivered to the removed Delaware Trustee, the
Administrative Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
that:
34
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(i) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
(A) until a Successor Property Trustee has been appointed
and has accepted such appointment by instrument executed by such
Successor Property Trustee and delivered to the Administrative
Trustees, the Sponsor and the resigning Property Trustee; or
(B) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the Holders of the
Securities; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee has
been appointed and has accepted such appointment by instrument executed by
such Successor Delaware Trustee and delivered to the Administrative
Trustees, the Sponsor and the resigning Delaware Trustee.
(d) The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Delaware Trustee or Successor Property Trustee,
as the case may be, if the Property Trustee or the Delaware Trustee delivers an
instrument of resignation in accordance with this Section 5.7.
(e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.7 within 60 days after delivery of an instrument of resignation or removal,
the Property Trustee or Delaware Trustee resigning or being removed, as
applicable, may petition any court of competent jurisdiction for appointment of
a Successor Property Trustee or Successor Delaware Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper and
prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
SECTION 5.8 Vacancies Among Trustees.
------------------------
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Administrative Trustees or, if
there are more than two, a majority of the Administrative Trustees, shall be
conclusive evidence of the existence of such vacancy. The
35
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vacancy shall be filled with a Trustee appointed in accordance with Section 5.7.
SECTION 5.9 Effect of Vacancies.
-------------------
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 5.7, the
Administrative Trustees in office, regardless of their number, shall have all
the powers granted to the Administrative Trustees and shall discharge all the
duties imposed upon the Administrative Trustees by this Declaration.
SECTION 5.10 Meetings.
--------
If there is more than one Administrative Trustee, meetings of the
Administrative Trustees shall be held from time to time upon the call of any
Administrative Trustee. Regular meetings of the Administrative Trustees may be
held at a time and place fixed by resolution of the Administrative Trustees.
Notice of any in-person meetings of the Administrative Trustees shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 24 hours before such meeting. Notice
of any telephonic meetings of the Administrative Trustees or any committee
thereof shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of an Administrative Trustee at a meeting shall constitute a waiver
of notice of such meeting except where an Administrative Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Administrative
Trustees may be taken at a meeting by vote of a majority of the Administrative
Trustees present (whether in person or by telephone) and eligible to vote with
respect to such matter, provided that a Quorum is present, or without a meeting
by the written consent of the Administrative Trustees. In the event there is
only one Administrative Trustee, any and all action of such Administrative
Trustee shall be evidenced by a written consent of such Administrative Trustee.
SECTION 5.11 Delegation of Power.
-------------------
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other
36
<PAGE>
natural person over the age of 21 his or her power for the purpose of executing
any documents contemplated in Section 3.6, including any registration statement
or amendment thereto filed with the Commission, or making any other governmental
filing; and
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Administrative Trustees or otherwise as the
Administrative Trustees may deem expedient, to the extent such delegation is not
prohibited by applicable law or contrary to the provisions of the Trust, as set
forth herein.
Section 5.12 Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any Person into which the Property Trustee or the Delaware Trustee or
any Administrative Trustee that is not a natural person, as the case may be, may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Trustee
shall be a party, or any Person succeeding to all or substantially all the
corporate trust business of such Trustee, shall be the successor of such Trustee
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided such Person shall be otherwise
qualified and eligible under this Article.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
-------------
Each Holder shall receive Distributions in accordance with the
applicable terms of such Holder's Securities. If and to the extent that the
Debenture Issuer makes a payment of interest (including Compounded Interest (as
defined in the Indenture) and Additional Sums (as defined in the Indenture)),
premium and/or principal or any other payments on the Debentures held by the
Property Trustee (the amount of any such payment being a "Payment Amount"), the
Property Trustee shall and is directed, to the extent funds are available for
that purpose, to make a distribution (a "Distribution") of the Payment Amount to
Holders in accordance with the respective terms of the Securities held by them.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
---------------------------------------
37
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(a) The Administrative Trustees shall on behalf of the Trust issue
one class of capital securities representing undivided beneficial interests in
the assets of the Trust having such terms as are set forth in Annex I (the
"Capital Securities") and one class of common securities representing undivided
beneficial interests in the assets of the Trust having such terms as are set
forth in Annex I (the "Common Securities"). The Trust shall issue no securities
or other interests in the assets of the Trust other than the Capital Securities
and the Common Securities.
(b) The Capital Securities rank pari passu and payment thereon shall
be made Pro Rata (as defined in Annex I hereto) with the Common Securities
except that, where an Event of Default has occurred and is continuing, the
rights of Holders of the Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights to payment of the Holders of the Capital Securities.
(c) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(d) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable.
(e) Every Person, by virtue of having become a Holder or a Capital
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration.
SECTION 7.2 Execution and Authentication.
----------------------------
The Securities shall be signed on behalf of the Trust by an
Administrative Trustee. Such signature may be by manual or facsimile signature.
Typographical and other minor errors or defects in any reproduction of any such
signature shall not affect the validity of any Security. In case any
Administrative Trustee who shall have signed any of the Securities shall cease
to be such Administrative Trustee before the Securities so signed shall be
delivered by the Trust, such Securities nevertheless may be delivered as though
the Person who signed such Securities had not ceased to be such Administrative
Trustee; and any Securities may be signed on behalf of the Trust by such Persons
who, at the actual date of execution of such Security, shall be the
Administrative Trustees of the Trust, although at the date of the execution and
delivery of the
38
<PAGE>
Declaration any such Person was not such an Administrative Trustee.
A Common Security shall be valid upon execution by an Administrative
Trustee without any act of the Property Trustee. A Capital Security shall not
be valid until authenticated by the manual signature of an authorized officer of
the Property Trustee. The signature shall be conclusive evidence that the
Capital Security has been authenticated under this Declaration.
Upon a written order of the Trust signed by one Administrative
Trustee, the Property Trustee shall authenticate the Capital Securities for
original issue. The aggregate number of Capital Securities outstanding at any
time shall not exceed the number set forth in the Terms in Annex I hereto except
as provided in Section 7.6.
The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Capital Securities. An authenticating agent may
authenticate Capital Securities whenever the Property Trustee may do so. Each
reference in this Declaration to authentication by the Property Trustee includes
authentication by such agent. An authenticating agent has the same rights as
the Property Trustee to deal with the Sponsor or an Affiliate.
SECTION 7.3 Form and Dating.
---------------
The Capital Securities and the Property Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 and the Common
Securities shall be substantially in the form of Exhibit A-2, each of which is
hereby incorporated in and expressly made a part of this Declaration.
Certificates representing the Securities may be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrative Trustees, as evidenced by their execution thereof. The
Securities may have letters, CUSIP or other numbers, notations or other marks of
identification or designation and such legends or endorsements required by law,
stock exchange rule, agreements to which the Trust is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Administration Trustees, as evidenced by their execution thereof). The
Trust at the direction of the Sponsor shall furnish any such legend not
contained in Exhibit A-1 to the Property Trustee in writing. Each Capital
Security shall be dated the date of its authentication. The terms and
provisions of the Securities set forth in Annex I and the forms of Securities
set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and
to the extent applicable, the Property Trustee and the Sponsor, by their
execution and delivery of this Declaration,
39
<PAGE>
expressly agree to such terms and provisions and to be bound thereby.
(a) Global Securities. The Capital Securities offered and sold to
-----------------
QIBs in reliance on Rule 144A or offered and sold outside the United States to
non-U.S. persons in offshore transactions in reliance on Regulation S, as
provided in the Purchase Agreement, shall be issued in the form of one or more,
permanent global Securities in definitive, fully registered form without
Distribution coupons with the appropriate global legends and the Restricted
Securities Legend set forth in Exhibit A-1 hereto (respectively, a "Rule 144A
Global Capital Security" or "Regulation S Global Capital Security"), which shall
be deposited on behalf of the purchasers of the Capital Securities represented
thereby with the Property Trustee or the Registrar, as custodian for the
Clearing Agency, and registered in the name of the Clearing Agency or a nominee
of the Clearing Agency, duly executed by the Trust and authenticated by the
Property Trustee as hereinafter provided. The number of Capital Securities
represented by the Rule 144A Global Capital Security and the Regulation S Global
Capital Security may from time to time be increased or decreased by adjustments
made on the records of the Property Trustee and the Clearing Agency or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 7.3(b) shall apply only to
---------------------
the Rule 144A Global Capital Securities, the Regulation S Global Capital
Securities and such other Capital Securities in global form as may be authorized
by the Trust to be deposited with or on behalf of the Clearing Agency.
The Administrative Trustees shall execute and the Property Trustee
shall, in accordance with this Section 7.3, authenticate and make available for
delivery initially one or more Rule 144A Global Capital Securities and one or
more Regulation S Global Capital Securities that (i) shall be registered in the
name of Cede & Co. or other nominee of such Clearing Agency and (ii) shall be
delivered by the Trustee to such Clearing Agency or pursuant to such Clearing
Agency's written instructions or held by the Property Trustee or the Registrar
as custodian for the Clearing Agency.
Members of, or participants in, the Clearing Agency ("Participants")
shall have no rights under this Declaration with respect to any Rule 144A Global
Capital Security or any Regulation S Global Capital Security held on their
behalf by the Clearing Agency or by the Property Trustee or the Registrar as the
custodian of the Clearing Agency or under such Rule 144A Global Capital Security
or such Regulation S Global Capital Security, and the Clearing Agency may be
treated by the Trust, the Property Trustee and any agent of the Trust or the
Property Trustee as the absolute owner of such Rule 144A Global Capital
40
<PAGE>
Security or such Regulation S Global Capital Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Trust, the Property Trustee or any agent of the Trust or the Property Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Clearing Agency or impair, as between the Clearing Agency and
its Participants, the operation of customary practices of such Clearing Agency
governing the exercise of the rights of a holder of a beneficial interest in any
Rule 144A Global Capital Security or any Regulation S Global Capital Security.
(c) Definitive Capital Securities. Except as provided in Section 7.9,
-----------------------------
owners of beneficial interests in a Rule 144A Global Capital Security or a
Regulation S Global Capital Security will not be entitled to receive physical
delivery of certificated Capital Securities ("Definitive Capital Securities").
Purchasers of Securities who are "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and did not purchase
Capital Securities in reliance on Regulation S will receive Capital Securities
in the form of individual certificates in definitive, fully registered form
without distribution coupons and with the Restricted Securities Legend set forth
in Exhibit A-1 hereto ("Restricted Definitive Capital Securities"); provided,
--------
however, that upon registration of transfer of such Restricted Definitive
- -------
Capital Securities to a QIB, such Restricted Definitive Capital Securities will,
unless the Rule 144A Global Capital Security has previously been exchanged, be
exchanged for an interest in a Rule 144A Global Capital Security pursuant to the
provisions of Section 9.2. Restricted Definitive Capital Securities will bear
the Restricted Securities Legend set forth on Exhibit A-1 unless removed in
accordance with this Section 7.3 or Section 9.2.
SECTION 7.4 Registrar and Paying Agent.
--------------------------
The Trust shall maintain in the Borough of Manhattan, The City of New
York, (i) an office or agency where Capital Securities may be presented for
registration of transfer ("Registrar") and (ii) an office or agency where
Capital Securities may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Capital Securities and of their transfer. The
Trust may appoint the Registrar and the Paying Agent and may appoint one or more
co-registrars, one or more additional paying agents in such other locations as
it shall determine. The term "Registrar" includes any additional registrar and
the term "Paying Agent" includes any additional paying agent. The Trust may
change any Paying Agent, Registrar or co-registrar without prior notice to any
Holder. The Paying Agent shall be permitted to resign as Paying Agent upon 30
days' written notice to the Property Trustee and the Sponsor. The Trust shall
notify the Property Trustee of the name and address of any Agent not a party to
this Declaration. If the Trust fails
41
<PAGE>
to appoint or maintain another entity as Registrar or Paying Agent, the Property
Trustee shall act as such. The Trust or any of its Affiliates may act as Paying
Agent or Registrar. The Property Trustee shall act as Paying Agent and Registrar
for the Common Securities.
The Trust initially appoints the Property Trustee as Registrar and
Paying Agent for the Capital Securities.
SECTION 7.5 Paying Agent to Hold Money in Trust.
-----------------------------------
The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of Liquidation Amounts or Distributions on the Securities, and
will notify the Property Trustee if there are insufficient funds for such
purpose. While any such insufficiency continues, the Property Trustee may
require a Paying Agent to pay all money held by it to the Property Trustee. The
Trust at any time may require a Paying Agent to pay all money held by it to the
Property Trustee and to account for any money disbursed by it. Upon payment
over to the Property Trustee the Paying Agent (if other than the Trust or an
Affiliate of the Trust) shall have no further liability for the money. If the
Trust or the Sponsor or an Affiliate of the Trust or the Sponsor acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent.
SECTION 7.6 Replacement Securities.
----------------------
If the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken or if such Security is mutilated and is
surrendered to the Trust or in the case of the Capital Securities to the
Property Trustee, the Administrative Trustees shall execute and the Property
Trustee shall authenticate a replacement Security if the Property Trustee's and
the Administrative Trustees' requirements, as the case may be, are met. An
indemnity bond must be provided by the Holder which, in the judgment of the
Property Trustee, is sufficient to protect the Trustees, the Sponsor or any
authenticating agent from any loss which any of them may suffer if a Security is
replaced. The Trust may charge such Holder for its expenses in replacing a
Security.
Every replacement Security is an additional beneficial interest in the
Trust.
SECTION 7.7 Outstanding Capital Securities.
------------------------------
The Capital Securities outstanding at any time are all the Capital
Securities authenticated by the Property Trustee
42
<PAGE>
except for those cancelled by it, those delivered to it for cancellation, and
those described in this Section as not outstanding.
If a Capital Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Capital
Security is held by a bona fide purchaser.
If Capital Securities are considered paid in accordance with the terms
of this Declaration, they cease to be outstanding and Distributions on them
shall cease to accumulate.
Except as otherwise provided herein, a Capital Security does not cease
to be outstanding because one of the Trustees, the Sponsor or an Affiliate of
the Sponsor holds the Security.
SECTION 7.8 Capital Securities in Treasury.
------------------------------
In determining whether the Holders of the required amount of
Securities have concurred in any direction, waiver or consent, Capital
Securities owned by the Trust, the Sponsor or an Affiliate of the Sponsor, as
the case may be, shall be disregarded and deemed not to be outstanding, except
that for the purposes of determining whether the Property Trustee shall be fully
protected in relying on any such direction, waiver or consent, only Capital
Securities which a Responsible Officer of the Property Trustee actually knows
are so owned shall be so disregarded.
SECTION 7.9 Temporary Securities.
--------------------
(a) Until Definitive Securities are ready for delivery, the Trust may
prepare and, in the case of the Capital Securities, the Property Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of Definitive Securities but may have variations that the Trust
considers appropriate for temporary Securities. Without unreasonable delay, the
Trust shall prepare and, in the case of the Capital Securities, the Property
Trustee shall authenticate Definitive Securities in exchange for temporary
Securities.
(b) A Global Capital Security deposited with the Clearing Agency or
with the Property Trustee as custodian for the Clearing Agency pursuant to
Section 7.3 shall be transferred to the beneficial owners thereof in the form of
certificated Capital Securities only if such transfer complies with Section 9.2
and (i) the Clearing Agency notifies the Company that it is unwilling or unable
to continue as Clearing Agency for such Global Capital Security or if at any
time such Clearing Agency ceases to be a "clearing agency" registered under the
Exchange Act and a
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clearing agency is not appointed by the Sponsor within 90 days of such notice,
(ii) a Default or an Event of Default has occurred and is continuing or (iii)
the Trust at its sole discretion elects to cause the issuance of certificated
Capital Securities.
(c) Any Global Capital Security that is transferable to the
beneficial owners thereof in the form of certificated Capital Securities
pursuant to this Section 7.9 shall be surrendered by the Clearing Agency to the
Property Trustee located in the Borough of Manhattan, The City of New York, to
be so transferred, in whole or from time to time in part, without charge, and
the Property Trustee shall authenticate and make available for delivery, upon
such transfer of each portion of such Global Capital Security, an equal
aggregate Liquidation Amount of Securities of authorized denominations in the
form of certificated Capital Securities. Any portion of a Global Capital
Security transferred pursuant to this Section shall be registered in such names
as the Clearing Agency shall direct. Any Capital Security in the form of
certificated Capital Securities delivered in exchange for an interest in the
Restricted Global Capital Security shall, except as otherwise provided by
Sections 7.3 and 9.1, bear the Restricted Securities Legend set forth in Exhibit
A-1 hereto.
(d) Subject to the provisions of Section 7.9(c), the Holder of a
Global Capital Security may grant proxies and otherwise authorize any Person,
including Participants and Persons that may hold interests through Participants,
to take any action which such Holder is entitled to take under this Declaration
or the Securities.
(e) In the event of the occurrence of any of the events specified in
Section 7.9(b), the Trust will promptly make available to the Property Trustee a
reasonable supply of certificated Capital Securities in fully registered form
without Distribution coupons.
SECTION 7.10 Cancellation.
------------
The Trust at any time may deliver Capital Securities to the Property
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Property Trustee any Capital Securities surrendered to them for registration of
transfer, redemption, exchange or payment. The Property Trustee shall promptly
cancel all Capital Securities surrendered for registration of transfer,
redemption, exchange, payment, replacement or cancellation and shall dispose of
canceled Capital Securities in accordance with its customary procedures unless
any Administrative Trustee otherwise directs the Property Trustee in writing.
The Trust may not issue new Capital Securities to replace Capital Securities
that it has paid or that have been
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delivered to the Property Trustee for cancellation or that any Holder has
exchanged.
SECTION 7.11 CUSIP Numbers.
-------------
The Trust in issuing the Capital Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Property Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders of Capital
Securities; provided that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Capital
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Capital
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Sponsor will promptly notify the Property Trustee
of any change in the CUSIP numbers.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
--------------------
(a) The Trust shall automatically be terminated and dissolved and its
affairs wound up upon the earliest to occur of the following events:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution or
liquidation or its equivalent with respect to the Sponsor, or the
revocation of the Sponsor's charter and the expiration of 90 days after the
date of revocation without a reinstatement thereof;
(iii) following the distribution of a Like Amount of the
Debentures to the Holders of the Securities, provided that, the Property
Trustee has received written notice from the Sponsor directing the Property
Trustee to terminate the Trust (which direction is optional and within the
discretion of the Sponsor);
(iv) upon the entry of a decree of judicial dissolution of the
Trust by a court of competent jurisdiction;
(v) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been
paid to the Holders in accordance with the terms of the Securities; or
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(vi) the expiration of the term of the Trust provided in
Section 3.14.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 8.1(a) and the completion of the winding up of the Trust
and after satisfaction of all liabilities of the Trust (whether by payment or by
making reasonable provision for payment thereof), the Administrative Trustees
shall file a certificate of cancellation with the Secretary of State of the
State of Delaware.
(c) The provisions of Section 3.9 and Article X shall survive the
termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities.
----------------------
(a) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. Any transfer or purported transfer of any Security
not made in accordance with this Declaration shall be null and void.
(b) Subject to this Article IX, Capital Securities may only be
transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration. Any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void.
(c) Subject to Section 3.15, the Sponsor and any Related Party may
only transfer the Common Securities to the Sponsor or a Related Party after the
delivery to the Property Trustee of an Officers' Certificate certifying that the
transferee is either the Sponsor or a Related Party.
(d) The Property Trustee shall provide for the registration of
Securities and of the transfer of Securities, which will be effected without
charge but only upon payment (with such indemnity as the Property Trustee may
require) in respect of any tax or other governmental charges that may be imposed
in relation to it. Upon surrender for registration of transfer of any
Securities, the Administrative Trustees shall execute and the Property Trustee
shall cause one or more new Securities to be issued in the name of the
designated transferee or transferees. Every Security surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Property Trustee duly executed by the
Holder or such Holder's attorney duly authorized in writing. Each Security
surrendered for registration of transfer shall be delivered to the Property
Trustee and canceled in accordance with
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Section 7.10. A transferee of a Security shall be entitled to the rights and
subject to the obligations of a Holder hereunder upon the receipt by such
transferee of a Security. By acceptance of a Security, each transferee shall be
deemed to have agreed to be bound by this Declaration.
SECTION 9.2 Transfer Procedures and Restrictions.
------------------------------------
(a) General. Except as otherwise provided in Section 9.2(b), if
-------
Capital Securities are issued upon the registration of transfer, exchange or
replacement of Capital Securities bearing the Restricted Securities Legend set
forth in Exhibit A-1 hereto, or if a request is made to remove such Restricted
Securities Legend on Capital Securities, the Capital Securities so issued shall
bear the Restricted Securities Legend, or the Restricted Securities Legend shall
not be removed, as the case may be, unless there is delivered to the Sponsor and
the Property Trustee such satisfactory evidence, which shall include an Opinion
of Counsel, as may be reasonably required by the Sponsor and the Property
Trustee, that neither the legend nor the restrictions on transfer set forth
therein are required to ensure that transfers thereof are made pursuant to an
exception from the registration requirements of the Securities Act or, with
respect to Restricted Securities, that such Securities are not "restricted"
within the meaning of Rule 144. Upon provision of such satisfactory evidence,
the Property Trustee, at the written direction of the Sponsor, shall
authenticate and deliver Capital Securities that do not bear the legend.
(b) Transfer and Exchange of Definitive Capital Securities. When
------------------------------------------------------
Definitive Capital Securities are presented to the Registrar or co-Registrar:
(x) to register the transfer of such Definitive Capital Securities,
or
(y) to exchange such Definitive Capital Securities which became
mutilated, destroyed, defaced, stolen or lost, for an equal number of
Definitive Capital Securities,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Capital Securities surrendered for
registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Trust and the
Registrar or co-Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
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(ii) in the case of Definitive Capital Securities that are
Restricted Definitive Capital Securities:
(A) if such Restricted Capital Securities are being
delivered to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such Holder to
that effect; or
(B) if such Restricted Capital Securities are being
transferred: (i) a certification from the transferor in a form
substantially similar to that attached hereto as the "Form of
Assignment" in Exhibit A-1, and (ii) if the Trust or the Registrar so
requests, evidence reasonably satisfactory to them as to the
compliance with the restrictions set forth in the Restricted
Securities Legend.
(c) Restrictions on Transfer of a Definitive Capital Security for a
---------------------------------------------------------------
Beneficial Interest in a Global Capital Security. A Definitive Capital Security
- ------------------------------------------------
may not be exchanged for a beneficial interest in a Global Capital Security
except upon satisfaction of the requirements set forth below. Upon receipt by
the Property Trustee of a Definitive Capital Security, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Property Trustee, together with:
(i) if such Definitive Capital Security is a Restricted
Capital Security, certification from the transferor in a form substantially
similar to that attached hereto as the "Form of Assignment" in Exhibit A-1;
provided, however, that such Definitive Capital Security may only be
exchanged for an interest in a Regulation S Global Security where such
Definitive Capital Security is being transferred pursuant to Regulation S
or Rule 144 (if available); and
(ii) whether or not such Definitive Capital Security is a
Restricted Capital Security, written instructions directing the Property
Trustee to make, or to direct the Clearing Agency to make, an adjustment on
its books and records with respect to the appropriate Global Capital
Security to reflect an increase in the number of the Capital Securities
represented by such Global Capital Security,
then the Property Trustee shall cancel such Definitive Capital Security and
cause, or direct the Clearing Agency to cause, the aggregate number of Capital
Securities represented by the appropriate Global Capital Security to be
increased accordingly. If no Global Capital Securities are then outstanding, the
Trust shall issue and the Property Trustee shall authenticate, upon
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written order of any Administrative Trustee, an appropriate number of Capital
Securities in global form.
(d) Transfer and Exchange of Global Capital Securities. Subject to
--------------------------------------------------
Section 9.2(e), the transfer and exchange of Global Capital Securities or
beneficial interests therein shall be effected through the Clearing Agency, in
accordance with this Declaration (including applicable restrictions on transfer
set forth herein, if any) and the procedures of the Clearing Agency therefor.
(e) Transfer of a Beneficial Interest in a Global Capital Security
--------------------------------------------------------------
for a Definitive Capital Security.
- ---------------------------------
(i) Any Person having a beneficial interest in a Global
Capital Security may upon request, but only upon 20 days prior notice to
the Property Trustee, and if accompanied by the information specified
below, exchange such beneficial interest for a Definitive Capital Security
representing the same number of Capital Securities. Upon receipt by the
Property Trustee from the Clearing Agency or its nominee on behalf of any
Person having a beneficial interest in a Global Capital Security of written
instructions or such other form of instructions as is customary for the
Clearing Agency or the Person designated by the Clearing Agency as having
such a beneficial interest in a Restricted Capital Security and a
certification from the transferor (in a form substantially similar to that
attached hereto as the "Form of Assignment" in Exhibit A-1), which may be
submitted by facsimile, then the Property Trustee will cause the aggregate
number of Capital Securities represented by Global Capital Securities to be
reduced on its books and records and, following such reduction, the Trust
will execute and the Property Trustee will authenticate and make available
for delivery to the transferee a Definitive Capital Security;
(ii) Definitive Capital Securities issued in exchange for a
beneficial interest in a Global Capital Security pursuant to this Section
9.2(e) shall be registered in such names and in such authorized
denominations as the Clearing Agency, pursuant to instructions from its
Participants or indirect participants or otherwise, shall instruct the
Property Trustee in writing. The Property Trustee shall deliver such
Capital Securities to the Persons in whose names such Capital Securities
are so registered in accordance with such instructions of the Clearing
Agency.
(f) Restrictions on Transfer and Exchange of Global Capital
-------------------------------------------------------
Securities. Notwithstanding any other provisions of this Declaration (other
- ----------
than the provisions set forth in subsection (g) of this Section 9.2), a Global
Capital Security may not be
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<PAGE>
transferred as a whole except by the Clearing Agency to a nominee of the
Clearing Agency or another nominee of the Clearing Agency or by the Clearing
Agency or any such nominee to a successor Clearing Agency or a nominee of such
successor Clearing Agency.
Prior to the expiration of the restricted period, as contemplated by
Regulation S, beneficial interests in the Regulation S Global Capital Security
may be exchanged for beneficial interests in the Rule 144A Global Capital
Security only if such exchange occurs in connection with a transfer of the
Capital Securities pursuant to Rule 144A and the transferor first delivers to
the Property Trustee a written certificate (in a form substantially similar to
that attached hereto as the "Form of Assignment" in Exhibit A-1) to the effect
that the Capital Securities are being transferred to a person who the transferor
reasonably believes is a QIB, purchasing for its own account or the account of a
QIB in a transaction meeting the requirements of Rule 144A and in accordance
with all applicable securities laws of the states of the United States and other
jurisdictions.
Beneficial interests in the Rule 144A Global Capital Security may be
transferred to a person who takes delivery in the form of an interest in the
Regulation S Global Capital Security, whether before or after the expiration of
such restricted period, as contemplated by Regulation S, only if the transferor
first delivers to the Property Trustee a written certificate (in a form
substantially similar to that attached hereto as the "Form of Assignments" in
Exhibit A-1) to the effect that such transfer is being made in accordance with
Rule 903 or 904 of Regulation S or Rule 144 (if available) and that, if such
transfer occurs prior to the expiration of such restricted period, the interest
transferred will be held immediately thereafter through Euroclear or CEDEL.
(g) Authentication of Definitive Capital Securities. If at any time
-----------------------------------------------
Global Capital Securities are outstanding:
(i) there occurs a Default or an Event of Default which is
continuing,
(ii) the Trust, in its sole discretion, notifies the Property
Trustee in writing that it elects to cause the issuance of Definitive
Capital Securities under this Declaration, or
(iii) the Trust is required to exchange such Global Capital
Securities for Definitive Capital Securities as described in Section
7.9(b),
then the Trust will execute, and the Property Trustee, upon receipt of a written
order of the Trust signed by one Administrative Trustee requesting the
authentication and delivery
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of Definitive Capital Securities to the Persons designated by the Trust, will
authenticate and make available for delivery Definitive Capital Securities,
equal in number to the number of Capital Securities represented by the Global
Capital Securities, in exchange for such Global Capital Securities.
(h) Legend.
------
(i) Except as permitted by the following paragraph (ii), each
Capital Security certificate evidencing the Global Capital Securities and
the Definitive Capital Securities (and all Capital Securities issued in
exchange therefor or substitution thereof) shall bear a legend (the
"Restricted Securities Legend") in substantially the following form:
THE CAPITAL SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR
ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS
CAPITAL SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS
CAPITAL SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF
AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE
OF THE COMPANY WAS THE OWNER OF THIS CAPITAL SECURITY
(OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) SO LONG AS THIS CAPITAL SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
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OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE
RIGHT OF THE TRUST AND THE COMPANY PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E)
OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO
CLAUSE (E), TO REQUIRE THAT THE TRANSFEROR DELIVER TO
THE TRUST A LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN
THE FORM OF ANNEX A TO THE OFFERING MEMORANDUM DATED
JANUARY __, 1997. SUCH HOLDER FURTHER AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS CAPITAL
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE
HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT (A)
IS NOT ITSELF, AND IS NOT ACQUIRING CAPITAL SECURITIES
WITH "PLAN ASSETS" OF, AN EMPLOYEE BENEFIT OR OTHER
PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") (EACH, A "PLAN"), OR AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN ASSET
ENTITY"), OR (B) IS ACQUIRING AND HOLDING THE CAPITAL
SECURITIES IN A TRANSACTION THAT IS NOT OTHERWISE
PROHIBITED BY EITHER ERISA OR THE CODE.
and in the case of the Regulation S Global Capital Security the following
additional legend:
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT AND MAY NOT BE
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OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER
THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE.
(ii) Upon any sale or transfer of a Restricted Capital Security
(including any Restricted Capital Security represented by a Global Capital
Security) pursuant to an effective registration statement under the
Securities Act or pursuant to Rule 144 under the Securities Act after such
registration statement ceases to be effective:
(A) in the case of any Restricted Capital Security that is a
Definitive Capital Security, the Registrar shall permit the Holder
thereof to exchange such Restricted Capital Security for a Definitive
Capital Security that does not bear the Restricted Securities Legend
and rescind any restriction on the transfer of such Restricted Capital
Security; and
(B) in the case of any Restricted Capital Security that is
represented by a Global Capital Security, the Registrar shall permit
the Holder of such Global Capital Security to exchange such Global
Capital Security for another Global Capital Security that does not
bear the Restricted Securities Legend.
(i) Cancellation or Adjustment of Global Capital Security. At such
-----------------------------------------------------
time as all beneficial interests in a Global Capital Security have either been
exchanged for Definitive Capital Securities to the extent permitted by this
Declaration or redeemed, repurchased or canceled in accordance with the terms of
this Declaration, such Global Capital Security shall be canceled by the Property
Trustee. At any time prior to such cancellation, if any beneficial interest in
a Global Capital Security is exchanged for Definitive Capital Securities,
Capital Securities represented by such Global Capital Security shall be reduced
and an adjustment shall be made on the books and records of the Property Trustee
(if it is then the custodian for such Global Capital Security) with respect to
such Global Capital Security, by the Property Trustee or the Securities
custodian, to reflect such reduction.
(j) Obligations with Respect to Transfers and Ex-changes of Capital
---------------------------------------------------------------
Securities.
- ----------
(i) To permit registrations of transfers and exchanges, the Trust
shall execute and the Property Trustee shall authenticate Definitive
Capital Securities and Global
53
<PAGE>
Capital Securities at the Registrar's or co-Registrar's request in
accordance with the terms of this Declaration.
(ii) Registrations of transfers or exchanges will be effected
without charge, but only upon payment (with such indemnity as the Trust,
the Property Trustee or the Sponsor may require) in respect of any tax or
other governmental charge that may be imposed in relation to it.
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange (a) Capital Securities during a period
beginning at the opening of business 15 days before the day of mailing of a
notice of redemption or any notice of selection of Capital Securities for
redemption and ending at the close of business on the day of such mailing;
or (b) any Capital Security so selected for redemption in whole or in part,
except the unredeemed portion of any Capital Security being redeemed in
part.
(iv) Prior to the due presentation for registrations of
transfer of any Capital Security, the Trust, the Property Trustee, the
Paying Agent, the Registrar or any co-registrar may deem and treat the
Person in whose name a Capital Security is registered as the absolute owner
of such Capital Security for the purpose of receiving Distributions on such
Capital Security and for all other purposes whatsoever, and none of the
Trust, the Property Trustee, the Paying Agent, the Registrar or any co-
registrar shall be affected by notice to the contrary.
(v) All Capital Securities issued upon any registration of
transfer or exchange pursuant to the terms of this Declaration shall
evidence the same security and shall be entitled to the same benefits under
this Declaration as the Capital Securities surrendered upon such
registration of transfer or exchange.
(k) No Obligation of the Property Trustee.
-------------------------------------
(i) The Property Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Capital Security, a
Participant in the Clearing Agency or other Person with respect to the
accuracy of the records of the Clearing Agency or its nominee or of any
Participant thereof, with respect to any ownership interest in the Capital
Securities or with respect to the delivery to any Participant, beneficial
owner or other Person (other than the Clearing Agency) of any notice
(including any notice of redemption) or the payment of any amount, under or
with respect to such Capital Securities. All notices and communications to
be given to the Holders and all payments to be made to Holders under the
Capital Securities shall be
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given or made only to or upon the order of the registered Holders (which
shall be the Clearing Agency or its nominee in the case of a Global Capital
Security). The rights of beneficial owners in any Global Capital Security
shall be exercised only through the Clearing Agency subject to the
applicable rules and procedures of the Clearing Agency. The Property
Trustee may conclusively rely and shall be fully protected in relying upon
information furnished by the Clearing Agency or any agent thereof with
respect to its Participants and any beneficial owners.
(ii) The Property Trustee and Registrar shall have no
obligation or duty to monitor, determine or inquire as to compliance with
any restrictions on transfer imposed under this Declaration or under
applicable law with respect to any transfer of any interest in any Capital
Security (including any transfers between or among Clearing Agency
Participants or beneficial owners in any Global Capital Security) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by, the terms of this Declaration, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
(l) Minimum Transfers. Capital Securities shall be subject to the
-----------------
transfer restrictions described in the Offering Memorandum and may only be
transferred in minimum blocks of $100,000 aggregate Liquidation Amount until
such Capital Securities are registered pursuant to an effective registration
statement filed under the Securities Act or "unrestricted" pursuant to Rule 144
under the Securities Act.
SECTION 9.3 Deemed Security Holders.
-----------------------
The Trustees may treat the Person in whose name any Security shall be
registered on the books and records of the Trust as the sole owner of such
Security for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Security on the part of any Person, whether
or not the Trustees shall have actual or other notice thereof.
SECTION 9.4 Book Entry Interests.
--------------------
Global Capital Securities shall initially be registered on the books
and records of the Trust in the name of Cede & Co., the nominee of the Clearing
Agency, and no Capital Security Beneficial Owner will receive a definitive
Capital Security certificate (a "Capital Security Certificate") representing
such Capital Security Beneficial Owner's interests in such Global
55
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Capital Securities, except as provided in Section 9.2. Unless and until
definitive, fully registered Capital Securities certificates have been issued to
the Capital Security Beneficial Owners pursuant to Section 9.2:
(a) the provisions of this Section 9.4 shall be in full force and
effect;
(b) the Trust and the Property Trustee and the Administrative Trustees
shall be entitled to deal with the Clearing Agency for all purposes of this
Declaration (including the payment of Distributions on the Global Capital
Securities and receiving approvals, votes or consents hereunder) as the Holder
of the Capital Securities and the sole holder of the Global Certificates and
shall have no obligation to the Capital Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4 conflict
with any other provisions of this Declaration, the provisions of this Section
9.4 shall control; and
(d) the rights of the Capital Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Capital Security Beneficial
Owners and the Clearing Agency and/or the Clearing Agency Participants and
receive and transmit payments of Distributions on the Global Certificates to
such Clearing Agency Participants. DTC will make book entry transfers among the
Clearing Agency Participants.
SECTION 9.5 Notices to Clearing Agency.
--------------------------
Whenever a notice or other communication to the Capital Security
Holders is required under this Declaration, the Trustees shall give all such
notices and communications specified herein to be given to the Holders of Global
Capital Security to the Clearing Agency, and shall have no notice obligations to
the Capital Security Beneficial Owners.
SECTION 9.6 Appointment of Successor Clearing Agency.
----------------------------------------
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Capital Securities, the Administrative
Trustees may, in their sole discretion, appoint a successor Clearing Agency with
respect to such Capital Securities.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
---------
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(a) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities, the Sponsor shall not be:
(i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust; and
(ii) be required to pay to the Trust or to any Holder of
Securities any deficit upon dissolution of the Trust or otherwise.
(b) The Sponsor shall be liable for all of the fees, expenses, debts
and obligations of the Trust (other than with respect to the Securities) to the
extent not satisfied out of the Trust's assets.
(c) Pursuant to (S) 3803(a) of the Business Trust Act, the Holders of
the Capital Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
-----------
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.
SECTION 10.3 Fiduciary Duty.
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(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions
of this Declaration, to the extent that they restrict the duties and liabilities
of an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Property Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
any Covered Persons; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person shall
act in a manner that is, or provides terms that are, fair and reasonable to
the Trust or any Holder of Securities,
each Covered Person or Indemnified Person shall resolve such conflict of
interest, take such action or provide such terms, considering in each case the
relative interest of each party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and burdens relating to
such interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so made, taken
or provided by the Indemnified Person shall not constitute a breach of this
Declaration or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no duty
or obligation to give any consideration to any interest of or factors
affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or
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different standard imposed by this Declaration or by applicable law.
SECTION 10.4 Indemnification.
---------------
(a) (i) The Sponsor shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees and expenses), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Company
Indemnified Person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Trust, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(ii) The Sponsor shall indemnify, to the full extent permitted by
law, any Company Indemnified Person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit
by or in the right of the Trust to procure a judgment in its favor by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees and expenses) actually and reasonably
incurred by him in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust and except that no
such indemnification shall be made in respect of any claim, issue or matter
as to which such Company Indemnified Person shall have been adjudged to be
liable to the Trust unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such Person is
fairly and reasonably entitled to indemnity for such expenses which such
Court of Chancery or such other court shall deem proper.
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(iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of
liability) in defense of any action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 10.4(a), or in defense of any
claim, issue or matter therein, he shall be indemnified, to the full extent
permitted by law, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Sponsor
only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set
forth in paragraphs (i) and (ii). Such determination shall be made (1) by
the Administrative Trustees by a majority vote of a quorum consisting of
such Administrative Trustees who were not parties to such action, suit or
proceeding, (2) if such a quorum is not obtainable, or, even if obtainable,
if a quorum of disinterested Administrative Trustees so directs, by
independent legal counsel in a written opinion, or (3) by the Common
Security Holder of the Trust.
(v) Expenses (including attorneys' fees and expenses) incurred
by a Company Indemnified Person in defending a civil, criminal,
administrative or investigative action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the
Sponsor in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Company
Indemnified Person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Sponsor as
authorized in this Section 10.4(a). Notwithstanding the foregoing, no
advance shall be made by the Sponsor if a determination is reasonably and
promptly made (i) by the Administrative Trustees by a majority vote of a
quorum of disinterested Administrative Trustees, (ii) if such a quorum is
not obtainable, or, even if obtainable, if a quorum of disinterested
Administrative Trustees so directs, by independent legal counsel in a
written opinion or (iii) the Common Security Holder of the Trust, that,
based upon the facts known to the Administrative Trustees, counsel or the
Common Security Holder at the time such determination is made, such Company
Indemnified Person acted in bad faith or in a manner that such Person did
not believe to be in or not opposed to the best interests of the Trust, or,
with respect to any criminal proceeding, that such Company Indemnified
Person
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believed or had reasonable cause to believe his conduct was unlawful. In
no event shall any advance be made in instances where the Administrative
Trustees, independent legal counsel or Common Security Holder reasonably
determine that such Person deliberately breached his duty to the Trust or
its Common or Capital Security Holders.
(vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section 10.4(a)
shall not be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors of the Sponsor
or Capital Security Holders of the Trust or otherwise, both as to action in
his official capacity and as to action in another capacity while holding
such office. All rights to indemnification under this Section 10.4(a) shall
be deemed to be provided by a contract between the Sponsor and each Company
Indemnified Person who serves in such capacity at any time while this
Section 10.4(a) is in effect. Any repeal or modification of this Section
10.4(a) shall not affect any rights or obligations then existing.
(vii) The Sponsor or the Trust may purchase and maintain
insurance on behalf of any Person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Sponsor would have the power to indemnify him against such liability under
the provisions of this Section 10.4(a).
(viii) For purposes of this Section 10.4(a), references to "the
Trust" shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in
a consolidation or merger, so that any Person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was
serving at the request of such constituent entity as a director, trustee,
officer, employee or agent of another entity, shall stand in the same
position under the provisions of this Section 10.4(a) with respect to the
resulting or surviving entity as he would have with respect to such
constituent entity if its separate existence had continued.
(ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise
provided when authorized or ratified, continue as to a Person who has
ceased to be a Company Indemnified Person and shall inure to the benefit of
the heirs, executors and administrators of such a Person.
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(b) The Sponsor agrees to indemnify the (i) Property Trustee, (ii) the
Delaware Trustee, (iii) any Affiliate of the Property Trustee or the Delaware
Trustee, and (iv) any officers, directors, shareholders, members, partners,
employees, representatives, custodians, nominees or agents of the Property
Trustee or the Delaware Trustee (each of the Persons in (i) through (iv) being
referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary
Indemnified Person harmless against, any and all loss, liability, damage, claim
or expense including taxes (other than taxes based on the income of such
Fiduciary Indemnified Person) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. The obligation to indemnify as set forth in
this Section 10.4(b) shall survive the resignation or removal of the Property
Trustee or the Delaware Trustee and the satisfaction and discharge of this
Declaration.
(c) The Sponsor agrees to pay the Property Trustee and the Delaware
Trustee, from time to time, such compensation for all services rendered by the
Property Trustee and the Delaware Trustee hereunder as may be mutually agreed
upon in writing by the Sponsor and the Property Trustee or the Delaware Trustee,
as the case may be, and, except as otherwise expressly provided herein, to
reimburse the Property Trustee and the Delaware Trustee upon its or their
request for all reasonable expenses, disbursements and advances incurred or made
by the Property Trustee or the Delaware Trustee, as the case may be, in
accordance with the provisions of this Declaration, except any such expense,
disbursement or advance as may be attributable to its or their negligence or bad
faith.
SECTION 10.5 Outside Businesses.
------------------
Any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders of Securities shall
have no rights by virtue of this Declaration in and to such independent ventures
or the income or profits derived therefrom, and the pursuit of any such venture,
even if competitive with the business of the Trust, shall not be deemed wrongful
or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the
Property Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
the Sponsor, the Delaware Trustee and the
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Property Trustee shall have the right to take for its own account (individually
or as a partner or fiduciary) or to recommend to others any such particular
investment or other opportunity. Any Covered Person, the Delaware Trustee and
the Property Trustee may engage or be interested in any financial or other
transaction with the Sponsor or any Affiliate of the Sponsor, or may act as
depositary for, trustee or agent for, or act on any committee or body of holders
of, securities or other obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
-----------
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code.
SECTION 11.2 Certain Accounting Matters.
--------------------------
(a) At all times during the existence of the Trust, the Administrative
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail, each transaction
of the Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of accounting for
United States federal income tax purposes. The books of account and the records
of the Trust shall be examined by and reported upon as of the end of each Fiscal
Year of the Trust by a firm of independent certified public accountants selected
by the Administrative Trustees.
(b) The Administrative Trustees shall cause to be prepared and
delivered to each of the Holders of Securities, within 90 days after the end of
each Fiscal Year of the Trust, annual financial statements of the Trust,
including a balance sheet of the Trust as of the end of such Fiscal Year, and
the related statements of income or loss.
(c) The Administrative Trustees shall cause to be duly prepared and
delivered to each of the Holders of Securities, any annual United States federal
income tax information statement, required by the Code, containing such
information with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the Code
to deliver any such statement at a later date, the Administrative Trustees shall
endeavor to deliver all such information statements within 30 days after the end
of each Fiscal Year of the Trust.
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(d) The Administrative Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Administrative Trustees on behalf of the Trust with any state or
local taxing authority.
SECTION 11.3 Banking.
-------
The Trust shall maintain one or more bank accounts in the name and for
the sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Debentures held by the Property Trustee shall be made directly to
the Property Trustee Account and no other funds of the Trust shall be deposited
in the Property Trustee Account. The sole signatories for such accounts shall
be designated by the Administrative Trustees; provided, however, that the
Property Trustee shall designate the signatories for the Property Trustee
Account.
SECTION 11.4 Withholding.
-----------
The Trust and the Administrative Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably be
requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Administrative Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to Distributions or allocations to any Holder, the amount withheld shall
be deemed to be a Distribution in the amount of the withholding to the Holder.
In the event of any claimed over withholding, Holders shall be limited to an
action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
----------
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration
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may only be amended by a written instrument approved and executed by:
(i) the Administrative Trustees (or if there are more than two
Administrative Trustees a majority of the Administrative Trustees);
(ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, the Property Trustee;
and
(iii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, the Delaware Trustee.
(b) No amendment shall be made, and any such purported amendment shall
be void and ineffective:
(i) unless, in the case of any proposed amendment, the
Property Trustee shall have first received an Officers' Certificate from
each of the Trust and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the terms of the
Securities);
(ii) unless, in the case of any proposed amendment which
affects the rights, powers, duties, obligations or immunities of the
Property Trustee, the Property Trustee shall have first received:
(A) an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the
Securities); and
(B) an opinion of counsel (who may be counsel to the
Sponsor or the Trust) that (x) such amendment is permitted by,
and conforms to, the terms of this Declaration (including the
terms of the Securities) and (y) all conditions precedent to the
execution and delivery of such amendment have been satisfied,
provided, however, that the Property Trustee shall not be required to sign
-------- -------
any such amendment, and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue to be classified for
purposes of United States federal income taxation as a grantor
trust;
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(B) reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(c) At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges or
preferences of any Holder of Securities may be effected only with such
additional requirements as may be set forth in the terms of such Securities;
(d) Section 10.1(c) and this Section 12.1 shall not be amended without
the consent of all of the Holders of the Securities;
(e) Article IV shall not be amended without the consent of the Holders
of a Majority in Liquidation Amount of the Common Securities;
(f) The rights of the Holders of the Common Securities under Article V
to increase or decrease the number of, and appoint and remove Trustees shall not
be amended without the consent of the Holders of a Majority in Liquidation
Amount of the Common Securities; and
(g) Notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity, correct or supplement any provision in
this Declaration that may be inconsistent with any other provision of this
Declaration or to make any other provisions with respect to matters or
questions arising under this Declaration which shall not be inconsistent
with the other provisions of the Declaration; and
(ii) to modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust
will be classified for United States federal income tax purposes as a
grantor trust at all times that any Securities are outstanding or to ensure
that the Trust will not be required to register as an Investment Company
under the Investment Company Act;
provided, however, that in the case of clause (i), such action shall not
- -------- -------
adversely affect in any material respect the interests of the Holders of the
Securities, and any amendments of this Declaration shall become effective when
notice thereof is given to the Holders of the Securities.
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SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent.
----------------------------------------------------------------
(a) Meetings of the Holders of any class of Securities may be called
at any time by the Administrative Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Capital
Securities are listed or admitted for trading. The Administrative Trustees
shall call a meeting of the Holders of such class if directed to do so by the
Holders of at least 10% in Liquidation Amount of such class of Securities. Such
direction shall be given by delivering to the Administrative Trustees one or
more notices in a writing stating that the signing Holders of Securities wish to
call a meeting and indicating the general or specific purpose for which the
meeting is to be called. Any Holders of Securities calling a meeting shall
specify in writing the Security Certificates held by the Holders of Securities
exercising the right to call a meeting and only those Securities specified shall
be counted for purposes of determining whether the required percentage set forth
in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least seven days
and not more than 60 days before the date of such meeting. Whenever a vote,
consent or approval of the Holders of Securities is permitted or required
under this Declaration or the rules of any stock exchange on which the
Capital Securities are listed or admitted for trading, such vote, consent
or approval may be given at a meeting of the Holders of Securities. Any
action that may be taken at a meeting of the Holders of Securities may be
taken without a meeting if a consent in writing setting forth the action so
taken is signed by the Holders of Securities owning not less than the
minimum amount of Securities in Liquidation Amount that would be necessary
to authorize or take such action at a meeting at which all Holders of
Securities having a right to vote thereon were present and voting. Prompt
notice of the taking of action without a meeting shall be given to the
Holders of Securities entitled to vote who have not consented in writing.
The Administrative Trustees may specify that any written ballot submitted
to the Security Holder for the purpose of taking any action without a
meeting shall be returned to the Trust within the time specified by the
Administrative Trustees;
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(ii) each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Securities is entitled
to participate, including waiving notice of any meeting, or voting or
participating at a meeting. No proxy shall be valid after the expiration
of 11 months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Holder of Securities
executing it. Except as otherwise provided herein, all matters relating to
the giving, voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware corporation and
the Holders of the Securities were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities shall be
conducted by the Administrative Trustees or by such other Person that the
Administrative Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the terms
of the Securities, the Trust Indenture Act or the listing rules of any
stock exchange on which the Capital Securities are then listed or trading,
otherwise provides, the Administrative Trustees, in their sole discretion,
shall establish all other provisions relating to meetings of Holders of
Securities, including notice of the time, place or purpose of any meeting
at which any matter is to be voted on by any Holders of Securities, waiver
of any such notice, action by consent without a meeting, the establishment
of a record date, quorum requirements, voting in person or by proxy or any
other matter with respect to the exercise of any such right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property Trustee.
--------------------------------------------------
The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:
(a) The Property Trustee is a national banking association with trust
powers and authority to execute and
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deliver, and to carry out and perform its obligations under the terms of, this
Declaration;
(b) The execution, delivery and performance by the Property Trustee of
this Declaration has been duly authorized by the Property Trustee. This
Declaration has been duly executed and delivered by the Property Trustee and
constitutes a legal, valid and binding obligation of the Property Trustee,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, reorganization, moratorium, insolvency, and other similar laws
affecting creditors' rights generally and to general principles of equity and
the discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law);
(c) The execution, delivery and performance of this Declaration by the
Property Trustee does not conflict with or constitute a breach of the charter or
by-laws of the Property Trustee; and
(d) No consent, approval or authorization of, or registration with or
notice to, any North Carolina State or federal banking authority is required for
the execution, delivery or performance by the Property Trustee of this
Declaration.
SECTION 13.2 Representations and Warranties of Delaware Trustee.
--------------------------------------------------
The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) The Delaware Trustee is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, or is a
national banking association, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, this
Declaration;
(b) The execution, delivery and performance by the Delaware Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Delaware Trustee and does not conflict with or constitute a
breach of the charter or by-laws of the Delaware Trustee. This Declaration has
been duly executed and delivered by the Delaware Trustee and constitutes a
legal, valid and binding obligation of the Delaware Trustee, enforceable against
it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights
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generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law);
(c) No consent, approval or authorization of, or registration with or
notice to, any federal or Delaware banking authority is required for the
execution, delivery or performance by the Delaware Trustee of this Declaration;
and
(d) The Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices.
-------
All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Administrative Trustees at
the Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Holders of the Securities):
Vesta Capital Trust I
c/o Vesta Insurance Group, Inc.
3760 River Run Drive
Birmingham, Alabama 35243
Attention: Donald W. Thornton
Telecopy: (205) 970-7150
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders of the Securities):
First Union Bank of Delaware
One Rodney Square, 1st Floor
920 King Street
Wilmington, Delaware 19801
Attention: Corporate Trust Administration
Telecopy: (302) 888-7544
(c) if given to the Property Trustee, at the Property Trustee's
mailing address set forth below (or such other address as the Property Trustee
may give notice of to the Holders of the Securities):
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First Union National Bank
of North Carolina
230 South Tryon Street
Charlotte, North Carolina 28288-1179
Attention: Bond Administration
Telecopy: (704) 383-7316
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Trust):
Vesta Insurance Group, Inc.
3760 River Run Drive
Birmingham, Alabama 35243
Attention: Donald W. Thornton
Telecopy: (205) 970-7150
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 14.2 Governing Law.
-------------
This Declaration and the rights of the parties hereunder shall be
governed by and interpreted in accordance with the laws of the State of Delaware
and all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.
SECTION 14.3 Intention of the Parties.
------------------------
It is the intention of the parties hereto that the Trust be classified
for United States federal income tax purposes as a grantor trust. The
provisions of this Declaration shall be interpreted to further this intention of
the parties.
SECTION 14.4 Headings.
--------
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 14.5 Successors and Assigns.
----------------------
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Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether or not so expressed.
SECTION 14.6 Partial Enforceability.
----------------------
If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application of such provision to Persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 14.7 Counterparts.
------------
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
/s/ Robert Y. Huffman
----------------------------------------------
Robert Y. Huffman, solely in his capacity as
Administrative Trustee
/s/ Barry A. Patrick
----------------------------------------------
Barry A. Patrick, solely in his capacity as
Administrative Trustee
/s/ Donald W. Thornton
----------------------------------------------
Donald W. Thornton, solely in his capacity as
Administrative Trustee
/s/ Brian R. Meredith
----------------------------------------------
Brian R. Meredith, solely in his capacity as
Administrative Trustee
FIRST UNION BANK OF DELAWARE,
solely in its capacity as Delaware Trustee
By: _________________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
solely in its capacity as Property Trustee
By: _________________________________________
Name:
Title:
VESTA INSURANCE GROUP, INC.
as Sponsor
/s/ Robert Y. Huffman
By: _________________________________________
Robert Y. Huffman
Its President and Chief
Executive Officer
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<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
__________________________________________________
Robert Y. Huffman, solely in his capacity as
Administrative Trustee
__________________________________________________
Barry A. Patrick, solely in his capacity as
Administrative Trustee
__________________________________________________
Donald W. Thornton, solely in his capacity as
Administrative Trustee
__________________________________________________
Brian R. Meredith, solely in his capacity as
Administrative Trustee
FIRST UNION BANK OF DELAWARE,
solely in its capacity as Delaware Trustee
By: Stephen J. Kaba
----------------------------------------------
Name: STEPHEN J. KABA
Title: VICE PRESIDENT
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
solely in its capacity as Property Trustee
By: Thomas J. Brett
----------------------------------------------
Name: THOMAS J. BRETT
Title: CORPORATE TRUST OFFICER
VESTA INSURANCE GROUP, INC.
as Sponsor
By:_______________________________________________
Name:
Title:
<PAGE>
ANNEX I
TERMS OF
8.525% CAPITAL SECURITIES
8.525% COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated Declaration of
Trust, dated as of January 31, 1997 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities and the Common
Securities (collectively, the "Securities") are set out below (each capitalized
term used but not defined herein has the meaning set forth in the Declaration
or, if not defined in such Declaration, as defined in the Offering Memorandum
referred to below in Section 2(c) of this Annex I):
1. Designation and Number.
----------------------
(a) Capital Securities. 100,000 Capital Securities of the Trust
------------------
with an aggregate liquidation amount with respect to the assets of the Trust of
One Hundred Million dollars ($100,000,000) and each with a liquidation amount
with respect to the assets of the Trust of $1,000 per security, are hereby
designated for the purposes of identification only as "8.525% Capital
Securities" (the "Capital Securities"). The certificates evidencing the Capital
Securities shall be substantially in the form of Exhibit A-1 to the Declaration,
with such changes and additions thereto or deletions therefrom as may be
required by ordinary usage, custom or practice or to conform to the rules of any
stock exchange or quotation system on which the Capital Securities are listed or
quoted.
(b) Common Securities. 3,093 Common Securities of the Trust with
-----------------
an aggregate liquidation amount with respect to the assets of the Trust of Three
Million Ninety-Three Thousand dollars ($3,093,000) and a liquidation amount with
respect to the assets of the Trust of $1,000 per security, are hereby designated
for the purposes of identification only as "8.525% Common Securities" (the
"Common Securities"). The certificates evidencing the Common Securities shall be
substantially in the form of Exhibit A-2 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice.
2. Distributions.
-------------
(a) Distributions payable on each Security will be fixed at a
rate per annum of 8.525% (the "Coupon Rate") of the liquidation amount of $1,000
per Security (the "Liquidation Amount"), such rate being the rate of interest
payable on the Debentures to be held by the Property Trustee. Distributions in
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<PAGE>
arrears for more than one semi-annual period will bear additional distributions
thereon compounded semi-annually at the Coupon Rate (to the extent permitted by
applicable law). The term "Distributions", as used herein, includes
distributions of any such interest payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds on hand legally available therefor.
(b) Distributions on the Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid, from January 31, 1997, and will be payable
semi-annually in arrears on January 15 and July 15 of each year, commencing on
July 15, 1997, except as otherwise described below. The amount of Distributions
payable for any period will be computed on the basis of a 360-day year
consisting of twelve 30-day months and for any period less than a full calendar
month on the basis of the actual number of days elapsed in such month. If any
date on which Distributions are payable on the Securities is not a Business Day,
then payment of the Distribution payable on such date shall be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), with the same force and effect as if made on such
date (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). As long as no Event of Default has occurred
and is continuing under the Indenture, the Debenture Issuer has the right under
the Indenture to defer payments of interest by extending the interest payment
period at any time and from time to time on the Debentures for a period not
exceeding 10 consecutive semi-annual periods, including the first such semi-
annual period during such period (each an "Extension Period"), provided that no
Extension Period shall extend beyond the Maturity Date of the Debentures. Upon
any such election, distributions will be deferred during such Extension Period.
Notwithstanding such deferral, Distributions to which Holders of Securities are
entitled shall continue to accumulate with additional Distributions thereon (to
the extent permitted by applicable law but not at a rate greater than the rate
at which interest is then accruing on the Debentures) at the Coupon Rate
compounded semi-annually from the relevant Distribution Date, during any such
Extension Period. Prior to the expiration of any such Extension Period, the
Debenture Issuer may further defer payments of interest by further extending
such Extension Period; provided that such Extension Period, together with all
such previous and further extensions within such Extension Period, may not
exceed 10 consecutive semi-annual periods, including the first semi-annual
period during such Extension Period, or extend beyond the Maturity Date of the
Debentures. Upon the expiration of any Extension Period and the payment of all
amounts then due, the Debenture Issuer may commence a new Extension Period,
subject to the above requirements.
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<PAGE>
(c) Distributions on the Securities will be payable to the
Holders thereof as they appear on the books and records of the Trust at the
close of business on the first day of the month in which the relevant
Distribution Date falls, which Distribution Dates correspond to the interest
payment dates on the Debentures. Subject to any applicable laws and regulations
and the provisions of the Declaration, each such payment in respect of the
Capital Securities will be made as follows: (i) if the Capital Securities are
held in global form by a Clearing Agency (or its nominee), in accordance with
the procedures of the Clearing Agency; and (ii) if the Capital Securities are
held in definitive form by check mailed to the address of the Holder thereof as
reflected in the records of the Registrar unless otherwise agreed by the Trust.
The relevant record dates for the Common Securities shall be the same as the
record dates for the Capital Securities. Distributions payable on any Securities
that are not punctually paid on any Distribution Date, as a result of the
Debenture Issuer having failed to make a payment under the Debentures, will
cease to be payable to the Holder on the relevant record date, and such
defaulted Distribution will instead be payable to the Person in whose name such
Securities are registered on the special record date or other specified date
determined in accordance with the Indenture.
(d) In the event that there is any money or other property held
by or for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) pursuant to Section 8 among the Holders
of the Securities.
3. Liquidation Distribution Upon Dissolution.
-----------------------------------------
In the event of any termination of the Trust or the Sponsor otherwise
gives notice of its election to liquidate the Trust pursuant to Section
8.1(a)(iii) of the Declaration, the Trust shall be liquidated by the
Administrative Trustees as expeditiously as the Administrative Trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, to the Holders of the
Securities a Like Amount (as defined below) of the Debentures, unless such
distribution is determined by the Property Trustee not to be practicable, in
which event such Holders will be entitled to receive out of the assets of the
Trust legally available for distribution to Holders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the aggregate of the Liquidation Amount of $1,000 per Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution").
"Like Amount" means (i) with respect to a redemption of the
Securities, Securities having a Liquidation Amount equal to
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<PAGE>
the principal amount of Debentures to be paid in accordance with their terms and
(ii) with respect to a distribution of Debentures upon the liquidation of the
Trust, Debentures having a principal amount equal to the Liquidation Amount of
the Securities of the Holder to whom such Debentures are distributed.
If, upon any such liquidation, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets on hand legally
available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by the Trust on the Securities shall be paid on a Pro
Rata basis as set forth in Section 8.
4. Redemption and Distribution.
---------------------------
(a) Upon the repayment of the Debentures on the Maturity Date
thereof or prepayment thereof prior thereto in accordance with the terms
thereof, the proceeds from such repayment or prepayment shall be simultaneously
applied by the Property Trustee (subject to the Property Trustee having received
notice no later than 45 days prior to such repayment or prepayment) to redeem a
Like Amount of the Securities at a redemption price equal to (i) in the case of
the repayment of the Debentures on the Maturity Date, the Maturity Redemption
Price (as defined below) and (ii) in the case of the optional prepayment of the
Debentures upon the occurrence and continuation of a Special Event, the Special
Event Redemption Price (as defined below). The Maturity Redemption Price and the
Special Event Redemption Price are referred to collectively as the "Redemption
Price." Holders will be given not less than 30 nor more than 60 days notice of
such redemption.
(b) (i) The "Maturity Redemption Price", with respect to a
redemption of Securities, shall mean an amount equal to the principal of and
accrued interest on the Debentures as of the Maturity Date thereof.
(c) If at any time a Tax Event or an Investment Company Event
(each as defined below, and each a "Special Event") occurs, the Debenture Issuer
shall have the right (subject to the conditions set forth in the Indenture),
upon not less than 30 nor more than 60 days notice, to prepay the Debentures in
whole, but not in part, within the 90 days following the occurrence of such
Special Event (the "90 Day Period"), and, simultaneous with such redemption, to
cause a Like Amount of the Securities to be redeemed by the Trust at the Special
Event Redemption Price on a Pro Rata basis.
"Tax Event" shall mean the receipt by the Sponsor and the Trust of an
Opinion of Counsel, requested by the Sponsor, (a "Tax Event Opinion")
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any
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<PAGE>
announced prospective change) in, the laws or any regulations thereunder of the
United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative written decision or
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or which pronouncement or
decision is made on or after January 31, 1997, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
of such opinion, subject to United States federal income tax with respect to
income received or accrued on the Debentures, (ii) interest payable by the
Debenture Issuer on the Debentures is not, or within 90 days of the date of such
opinion, will not be, deductible by the Debenture Issuer, in whole or in part,
for United States federal income tax purposes, or (iii) the Trust is, or will be
within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.
"Investment Company Event" means the Sponsor and the Trust shall have
received an opinion, requested by the Sponsor of counsel experienced in practice
under the Investment Company Act, to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in Investment Company Act Law"), there
is more than an insubstantial risk that the Trust is or will be considered an
"investment company" which is required to be registered under the Investment
Company Act, which Change in Investment Company Act Law becomes effective on or
after January 31, 1997.
"Special Event Redemption Price" shall mean an amount in cash equal to
the greater of (i) 100% of the Liquidation Amount of the Securities and (ii) the
sum, as determined by a Quotation Agent (as defined in the Indenture), of the
present values of the remaining scheduled payments of principal and discounted
to the redemption date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined in
the Indenture), plus, in each case, accumulated and unpaid Distributions
thereon, if any, to the date of such redemption.
(d) On and from the date fixed by the Administrative Trustees for
any distribution of Debentures and liquidation of the Trust: (i) the Securities
will no longer be deemed to be outstanding, (ii) the Clearing Agency or its
nominee (or any successor Clearing Agency or its nominee), as the Holder of the
Capital Securities, will receive a registered global certificate or certificates
representing the Debentures to be delivered upon such distribution and (iii) any
certificates representing Securities not held by the Clearing Agency or its
nominee (or any
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<PAGE>
successor Clearing Agency or its nominee) will be deemed to represent beneficial
interests in a Like Amount of Debentures until such certificates are presented
to the Administrative Trustees or their agent for cancellation, whereupon the
Debenture Issuer will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Debentures.
(e) The procedure with respect to redemptions or distributions of
Debentures shall be as follows:
(i) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Securities (a "Redemption/Distribution
Notice") will be given by the Trust by mail to each Holder of Securities to
be redeemed or exchanged not fewer than 30 nor more than 60 days before the
date fixed for redemption or exchange thereof which, in the case of a
redemption, will be the date fixed for repayment or prepayment of the
Debentures. For purposes of the calculation of the date of redemption or
exchange and the dates on which notices are given pursuant to this Section
4(e)(i), a Redemption/Distribution Notice shall be deemed to be given on the
day such notice is first mailed by first-class mail, postage prepaid, to
Holders of Securities. Each Redemption/Distribution Notice shall be
addressed to the Holders of Securities at the address of each such Holder
appearing in the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or
exchange proceedings with respect to any other Holder.
(ii) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, (which notice will be irrevocable), then (A)
with respect to Capital Securities registered in the name of or held of
record by a Clearing Agency or its nominee, by 12:00 noon, New York City
time, on the redemption date, provided that the Debenture Issuer has paid
the Property Trustee a sufficient amount of cash in connection with the
related maturity or prepayment of the Debentures by 10:00 a.m., New York
City time, on the Maturity Date or the date of prepayment, as the case may
be, the Property Trustee will deposit irrevocably with the Clearing Agency
or its nominee (or successor Clearing Agency or its nominee) funds
sufficient to pay the applicable Redemption Price with respect to such
Capital Securities and will give the Clearing Agency irrevocable
instructions and authority to pay the Redemption Price to the relevant
Clearing Agency Participants, and (B) with respect to Capital Securities
issued in certificated form and Common Securities, provided that the
Debenture Issuer has paid the Property Trustee a sufficient amount of cash
in connection with the related maturity or prepayment of the Debentures,
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<PAGE>
the Property Trustee will pay the relevant Redemption Price to the Holders
of such Securities by check mailed to the address of the relevant Holder
appearing on the books and records of the Trust on the redemption date. If
a Redemption/Distribution Notice shall have been given and funds deposited
as required, if applicable, then immediately prior to the close of business
on the date of such deposit, or on the redemption date, as applicable,
Distributions will cease to accumulate on the Securities so called for
redemption and all rights of Holders of such Securities so called for
redemption will cease, except the right of the Holders of such Securities to
receive the Redemption Price, but without interest on such Redemption Price,
and such Securities shall cease to be outstanding.
(iii) Payment of accumulated and unpaid Distributions on the
Redemption Date of the Securities will be subject to the rights of Holders
of Securities on the close of business on a regular record date in respect
of a Distribution Date occurring on or prior to such Redemption Date.
(iv) Neither the Administrative Trustees nor the Trust shall be
required to register or cause to be registered the transfer of (i) any
Securities beginning on the opening of business 15 days before the day of
mailing of a notice of redemption or any notice of selection of Securities
for redemption or (ii) any Securities selected for redemption. If any date
fixed for redemption of Securities is not a Business Day, then payment of
the Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), with the same force and effect as if
made on such date fixed for redemption. If payment of the Redemption Price
in respect of any Securities is improperly withheld or refused and not paid
either by the Property Trustee or the Paying Agent or by the Sponsor as
guarantor pursuant to the relevant Securities Guarantee, Distributions on
such Securities will continue to accumulate from the original redemption
date to the actual date of payment, in which case the actual payment date
will be considered the date fixed for redemption for purposes of calculating
the Redemption Price.
(v) Redemption/Distribution Notices shall be sent by the
Property Trustee on behalf of the Trust to (A) in respect of the Capital
Securities, the Clearing Agency or its nominee (or any successor Clearing
Agency or its nominee) if the Global Certificates have been issued or, if
Definitive Capital Security Certificates have been issued, to the Holder
thereof, and (B) in respect of the Common Securities to the Holder thereof.
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<PAGE>
(vi) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws and banking laws),
provided the acquiror is not the Holder of the Common Securities or the
obligor under the Indenture, the Sponsor or any of its Affiliates may at any
time and from time to time purchase outstanding Capital Securities by
tender, in the open market or by private agreement.
5. Voting Rights - Capital Securities.
----------------------------------
(a) Except as provided under Sections 5(b) and 7 and as otherwise
required by law and the Declaration, the Holders of the Capital Securities will
have no voting rights.
(b) So long as any Debentures are held by the Property Trustee,
the Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in Liquidation Amount
of all outstanding Capital Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Capital Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Capital Securities except by subsequent vote of such Holders. The
Property Trustee shall notify each Holder of Capital Securities of any notice of
default with respect to the Debentures. In addition to obtaining the foregoing
approvals of such Holders of the Capital Securities, prior to taking any of the
foregoing actions, the Trustees shall obtain an opinion of counsel experienced
in such matters to the effect that the Trust will not be classified as an
association taxable as a corporation for United States federal income tax
purposes on account of such action.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on any due
date (including any Interest Payment Date or prepayment date or Maturity Date),
then a Holder of Capital Securities may directly institute a proceeding for
enforcement of payment to such Holder of the principal of or premium, if any, or
interest on a Like Amount of
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<PAGE>
Debentures (a "Direct Action") on or after the respective due date specified in
the Debentures. In connection with such Direct Action, the rights of the Common
Securities Holder will be subrogated to the rights of such Holder of Capital
Securities to the extent of any payment made by the Debenture Issuer to such
Holder of Capital Securities in such Direct Action. Except as provided in the
second preceding sentence, the Holders of Capital Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Capital Securities may be
given at a separate meeting of Holders of Capital Securities convened for such
purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which Holders of Capital Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Capital Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consent.
No vote or consent of the Holders of the Capital Securities will be
required for the Trust to redeem and cancel Capital Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
Notwithstanding that Holders of Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not be entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
6. Voting Rights - Common Securities.
---------------------------------
(a) Except as provided under Sections 6(b), 6(c), and 7 as otherwise
required by law and the Declaration, the Holders of the Common Securities will
have no voting rights.
(b) Unless a Debenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the Holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a Majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the Holders of the Capital Securities have the
right to vote to appoint, remove
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<PAGE>
or replace the Administrative Trustees, which voting rights are vested
exclusively in the Sponsor as the holder of the Common Securities. No
resignation or removal of a Trustee and no appointment of a successor trustee
shall be effective until the acceptance of appointment by the successor trustee
in accordance with the provisions of the Declaration.
(c) So long as any Debentures are held by the Property Trustee,
the Trustees shall not (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee, or executing any
trust or power conferred on such Debenture Trustee with respect to the
Debentures, (ii) waive any past default that is waivable under Section 5.07 of
the Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Debentures or (iv) consent
to any amendment, modification or termination of the Indenture or the
Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in Liquidation Amount
of all outstanding Common Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Debentures
affected thereby, no such consent shall be given by the Property Trustee without
the prior approval of each Holder of the Common Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of the Common Securities except by subsequent vote of such Holders. The Property
Trustee shall notify each Holder of Common Securities of any notice of default
with respect to the Debentures. In addition to obtaining the foregoing approvals
of such Holders of the Common Securities, prior to taking any of the foregoing
actions, the Trustees shall obtain an Opinion of Counsel experienced in such
matters to the effect that the Trust will not be classified as an association
taxable as a corporation for United States federal income tax purposes on
account of such action.
If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (including any Interest Payment Date or prepayment date or Maturity Date)
(or in the case of redemption, on the redemption date), then a Holder of Common
Securities may institute a Direct Action for enforcement of payment to such
Holder of the principal of or premium, if any, or interest on a Like Amount of
Debentures on or after the respective due date specified in the Debentures. In
connection with Direct Action, the rights of the Holders of Capital Securities
will be subrogated to the rights of such Holder of Common Securities to the
extent of any payment made by the Debenture Issuer to such Holder of Common
Securities in such Direct Action. Except as provided in the second preceding
sentence, the Holders of Common Securities will not be able to
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exercise directly any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities in the Trust or pursuant to
written consent. The Administrative Trustees will cause a notice of any meeting
at which Holders of Common Securities are entitled to vote, or of any matter
upon which action by written consent of such Holders is to be taken, to be
mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.
7. Amendments to Declaration and Indenture.
---------------------------------------
In addition to the requirements set out in Section 12.1 of the
Declaration, the Declaration may be amended from time to time by the Sponsor and
the Trustees, without the consent of the Holders of the Securities (i) to cure
any ambiguity, correct or supplement any provisions in the Declaration that may
be inconsistent with any other provisions, or to make any other provisions with
respect to matters or questions arising under the Declaration which shall not be
inconsistent with the other provisions of the Declaration, or (ii) to modify,
eliminate or add to any provisions of the Declaration to such extent as shall be
necessary to ensure that the Trust will be classified for United States federal
income tax purposes as a grantor trust at all times that any Securities are
outstanding or to ensure that the Trust will not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
-------- -------
in the case of clause (i), such action shall not adversely affect in any
material respect the interests of any Holder of Securities. Any amendments of
the Declaration pursuant to the foregoing shall become effective when notice
thereof is given to the holders of the Securities. The Declaration also may be
amended by the Trustees and the Sponsor with (i) the consent of Holders
representing a Majority in Liquidation Amount of all outstanding Securities, and
(ii) receipt by the Trustees of an Opinion of Counsel to the effect that such
amendment or the exercise of any power granted to the Trustees in accordance
with such amendment will not affect the Trust's status as a grantor
I-11
<PAGE>
trust for United States federal income tax purposes or the Trust's exemption
from status as an investment company under the Investment Company Act, provided
--------
that, without the consent of each Holder of Trust Securities, the Declaration
- ----
may not be amended to (i) change the amount or timing of any Distribution on the
Trust Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Securities as of a specified date or
(ii) restrict the right of a holder of Trust Securities to institute suit for
the enforcement of any such payment on or after such date.
8. Pro Rata.
--------
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
of Securities according to the aggregate Liquidation Amount of the Securities
held by the relevant Holder in relation to the aggregate Liquidation Amount of
all Securities outstanding unless, in relation to a payment, an Event of Default
under the Declaration has occurred and is continuing, in which case any funds
available to make such payment shall be paid first to each Holder of the Capital
Securities pro rata according to the aggregate Liquidation Amount of Capital
Securities held by the relevant Holder relative to the aggregate Liquidation
Amount of all Capital Securities outstanding, and only after satisfaction of all
amounts owed to the Holders of the Capital Securities, to each Holder of Common
Securities pro rata according to the aggregate liquidation amount of Common
Securities held by the relevant Holder relative to the aggregate Liquidation
Amount of all Common Securities outstanding.
9. Ranking.
-------
The Capital Securities rank pari passu with the Common Securities and
payment thereon shall be made Pro Rata with the Common Securities, except that,
if an Event of Default under the Declaration occurs and is continuing, no
payments in respect of Distributions on, or payments upon liquidation,
redemption or otherwise with respect to, the Common Securities shall be made
until the Holders of the Capital Securities shall be paid in full the
Distributions, Redemption Price, Liquidation Distribution and other payments to
which they are entitled at such time.
10. Acceptance of Securities Guarantee and Indenture.
------------------------------------------------
Each Holder of Capital Securities and Common Securities, by the
acceptance thereof, agrees to the provisions of the Capital Securities Guarantee
and the Common Securities Guarantee, respectively, including the subordination
provisions therein and to the provisions of the Indenture.
I-12
<PAGE>
11. No Preemptive Rights.
--------------------
The Holders of the Securities shall have no preemptive rights or
similar rights to subscribe for any additional securities.
12. Miscellaneous.
-------------
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the Capital
Securities Guarantee or the Common Securities Guarantee (as may be appropriate)
and the Indenture (including any supplemental indenture) to a Holder without
charge on written request to the Sponsor at its principal place of business.
I-13
<PAGE>
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS GLOBAL SECURITY IS A GLOBAL CAPITAL SECURITY, INSERT: THIS
CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY
THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE
CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING
AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.]
[IF THIS GLOBAL SECURITY IS A RULE 144A GLOBAL SECURITY, INSERT:
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE TRUST OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
THE CAPITAL SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS
CAPITAL SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF
THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH VESTA INSURANCE
GROUP, INC. ("THE COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS CAPITAL SECURITY IS
A1-1
<PAGE>
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")
TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT,
SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (ii) PURSUANT TO CLAUSE (E), TO REQUIRE THAT THE TRANSFEROR DELIVER
TO THE TRUST A LETTER FROM THE TRANSFEREE SUBSTANTIALLY IN THE FORM OF ANNEX A
TO THE OFFERING MEMORANDUM DATED JANUARY 29, 1997. SUCH HOLDER FURTHER AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CAPITAL SECURITY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT IT (A) IS NOT ITSELF, AND IS NOT ACQUIRING
CAPITAL SECURITIES WITH "PLAN ASSETS" OF, AN EMPLOYEE BENEFIT OR OTHER PLAN
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE") (EACH, A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS
INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN
ASSET ENTITY"), OR (B) IS ACQUIRING AND HOLDING THE CAPITAL SECURITIES IN A
TRANSACTION THAT IS NOT OTHERWISE PROHIBITED BY EITHER ERISA OR THE CODE.
[IF THIS GLOBAL SECURITY IS A REGULATION S GLOBAL SECURITY, INSERT:
THIS CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS
AVAILABLE.]
A1-2
<PAGE>
Certificate Number Number of Capital Securities
CUSIP NO.
Certificate Evidencing Capital Securities
of
VESTA CAPITAL TRUST I
8.525% Capital Securities
(Liquidation Amount $1,000 per Capital Security)
VESTA CAPITAL TRUST I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that
______________________ (the "Holder") is the registered owner of
___________________ capital securities of the Trust representing undivided
beneficial interests in the assets of the Trust designated the 8.525% Capital
Securities (Liquidation Amount $1,000 per Capital Security) (the "Capital
Securities"). The Capital Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer. The designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Capital Securities represented hereby are issued and shall in all respects
be subject to the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of January 31, 1997, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms of the Capital
Securities as set forth in Annex I to the Declaration. Capitalized terms used
but not defined herein shall have the meaning given them in the Declaration.
The Sponsor will provide a copy of the Declaration, the Capital Securities
Guarantee and the Indenture to a Holder without charge upon written request to
the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.
By its acceptance hereof, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of indirect beneficial ownership in the
Debentures.
A1-3
<PAGE>
IN WITNESS WHEREOF, an Administrative Trustee on behalf of the Trust
has duly executed this certificate.
Date:_________________
VESTA CAPITAL TRUST I
By: ______________________
Name:
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the within-
mentioned Declaration.
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
as Property Trustee
By: _________________________
Authorized Officer
A1-4
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be fixed at a rate
per annum of 8.525% (the "Coupon Rate") of the Liquidation Amount of $1,000 per
Capital Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
semi-annual period will bear interest thereon compounded semi-annually at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions", as used herein, includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to the
extent that payments are made in respect of the Debentures held by the Property
Trustee and to the extent the Property Trustee has funds on hand legally
available therefor.
Distributions on the Capital Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if any Distributions have been paid, from January 31, 1997 and will be payable
semi-annually in arrears, on January 15 and July 15 of each year, commencing on
July 15, 1997, except as otherwise described below and in the Declaration.
Distributions will be computed on the basis of a 360-day year consisting of
twelve 30-day months and, for any period less than a full calendar month, the
number of days elapsed in such month. As long as no Event of Default has
occurred and is continuing under the Indenture, the Debenture Issuer has the
right under the Indenture to defer payments of interest by extending the
interest payment period at any time and from time to time on the Debentures for
a period not exceeding 10 consecutive calendar semi-annual periods, including
the first such semi-annual period during such extension period (each an
"Extension Period"), provided that no Extension Period shall extend beyond the
Maturity Date of the Debentures. As a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, semi-annual
Distributions will continue to accumulate with interest thereon (to the extent
permitted by applicable law, but not at a rate exceeding the rate of interest
then accruing on the Debentures) at the Coupon Rate compounded semi-annually
during any such Extension Period. Prior to the termination of any such
Extension Period, the Debenture Issuer may further defer payments of interest by
further extending such Extension Period; provided that such Extension Period,
together with all such previous and further extensions within such Extension
Period, may not exceed 10 consecutive semi-annual periods, including the first
semi-annual period during such Extension Period, or extend beyond the Maturity
Date of the Debentures. Payments of Distributions that have accumulated but not
been paid during any Extension Period will be payable to Holders as they appear
on the books and records of the Trust on the records of the Trust on the record
date for the first scheduled Distribution payment date following the
A1-5
<PAGE>
expiration of such first record date after the end of the Extension Period.
Upon the expiration of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.
Subject to certain conditions set forth in the Declaration and the
Indenture, the Property Trustee shall, at the direction of the Sponsor, at any
time liquidate the Trust and cause the Debentures to be distributed to the
holders of the Securities in liquidation of the Trust or, simultaneous with any
redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
A1-6
<PAGE>
_________________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________ agent to
transfer this Capital Security Certificate on the books of the Trust. The agent
may substitute another to act for him or her.
Date: _______________________
Signature: ______________________________
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
Signature Guarantee*:____________________________
__________________________
* Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities and Exchange Act of 1934, as amended.
A1-7
<PAGE>
[Include the following if the Capital Security bears a Restricted Capital
Securities Legend --
In connection with any transfer of any of the Capital Securities evidenced by
this certificate, the undersigned confirms that such Capital Securities are
being:
CHECK ONE BOX BELOW
(1) [_] exchanged for the undersigned's own account
without transfer; or
(2) [_] transferred pursuant to and in compliance with
Rule 144A under the Securities Act of 1933, as
amended; or
(3) [_] transferred pursuant to and in compliance with
Regulation S under the Securities Act of 1933, as
amended; or
(4) [_] to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act of 1933, as amended, that is acquiring the
Capital Securities for its own account, or for the account of
such an institutional "accredited investor," for investment
purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities
Act of 1933, as amended; or
(5) [_] transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933, as
amended; or
(6) [_] transferred pursuant to an effective registration statement.
Unless one of the boxes is checked, the Registrar will refuse to register any of
the Capital Securities evidenced by this certificate in the name of any person
other than the registered Holder thereof; provided, however, that if box (3),
-------- -------
(4) or (5) is checked, the Registrar may require, prior to registering any such
transfer of the Capital Securities such legal opinions, certifications and other
information as the Trust has reasonably requested to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act of 1933, as amended, such as
the exemption provided by Rule 144 under such
A1-8
<PAGE>
Act; provided, further, that (i) if box 2 is checked, the transferee must also
-------- -------
certify that it is a qualified institutional buyer as defined in Rule 144A or
(ii) if box (4) is checked, the transferee must also provide to the Registrar a
Transferee Letter of Representation in the form attached to the Offering
Memorandum of the Trust dated January 29, 1997.
Date: __________________________________________________
Signature
(Sign exactly as you name appears on the other
side of this Capital Security Certificate)
A1-9
<PAGE>
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW.
THIS COMMON SECURITY MAY NOT BE TRANSFERRED EXCEPT TO VESTA INSURANCE
GROUP, INC. OR A RELATED PARTY (AS DEFINED IN THE DECLARATION).
A2-1
<PAGE>
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
Vesta Corporate Trust I
8.525% Common Securities
(Liquidation Amount $1,000 per Common Security)
VESTA CAPITAL TRUST I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), hereby certifies that Vesta
Insurance Group, Inc. (the "Holder") is the registered owner of
__________________ common securities of the Trust representing undivided
beneficial interests in the assets of the Trust designated the 8.525% Common
Securities (liquidation amount $1,000 per Common Security) (the "Common
Securities"). The Common Securities are transferable on the books and records
of the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer. The designation,
rights, privileges, restrictions, preferences and other terms and provisions of
the Common Securities represented hereby are issued and shall in all respects be
subject to the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of January 31, 1997, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms of the Common
Securities as set forth in Annex I to the Declaration. Capitalized terms used
but not defined herein shall have the meaning given them in the Declaration.
The Sponsor will provide a copy of the Declaration, the Common Securities
Guarantee and the Indenture (including any supplemental indenture) to a Holder
without charge upon written request to the Sponsor at its principal place of
business.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Securities Guarantee to the extent provided therein.
By its acceptance hereof, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Common Securities as evidence of indirect beneficial ownership in the
Debentures.
A2-2
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate this
________ day of January, 1997.
VESTA CAPITAL TRUST I
By: ___________________________
Name:
Administrative Trustee
A2-3
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate
per annum of 8.525% (the "Coupon Rate") of the liquidation amount of $1,000 per
Common Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
semi-annual period will bear interest thereon compounded semiannually at the
Coupon Rate (to the extent permitted by applicable law). he term
"Distributions", as used herein, includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to the
extent that payments are made in respect of the Debentures held by the Property
Trustee and to the extent the Property Trustee has funds available therefor.
Distributions on the Common Securities will be cumulative, will accrue
from the most recent date to which Distributions have been paid or, if no
Distributions have been paid, from January 31, 1997 and will be payable semi-
annually in arrears, on January 15 and July 15 of each year, commencing on July
15, 1997, except as otherwise described below and in the Declaration.
Distributions will be computed on the basis of a 360-day year consisting of
twelve 30 day months and, for any period less than a full calendar month, the
number of days elapsed in such month. As long as no Event of Default has
occurred and is continuing under the Indenture, the Debenture Issuer has the
right under the Indenture to defer payments of interest by extending the
interest payment period at any time and from time to time on the Debentures for
a period not exceeding 10 consecutive calendar semi-annual periods, including
the first such semi-annual period during such extension period (each an
"Extension Period"), provided that no Extension Period shall extend beyond the
Maturity Date of the Debentures. As a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, Distributions will
continue to accumulate with interest thereon (to the extent permitted by
applicable law, but not at a rate exceeding the rate of interest then accruing
on the Debentures) at the Coupon Rate compounded semi-annually during any such
Extension Period. Prior to the termination of any such Extension Period, the
Debenture Issuer may further defer payments of interest by further extending
such Extension Period; provided that such Extension Period, together with all
such previous and further extensions within such Extension Period, may not
exceed 10 consecutive semi-annual periods, including the first semi-annual
period during such Extension Period, or extend beyond the Maturity Date of the
Debentures. Payments of Distributions that have accumulated will be payable to
Holders as they appear on the books and records of the Trust on the record date
for the first Distribution Date following the expiration of such Extension
Period. Upon the expiration of any Extension Period and the payment of all
amounts
A2-4
<PAGE>
then due, the Debenture Issuer may commence a new Extension Period, subject to
the above requirements.
Subject to certain conditions set forth in the Declaration and the
Indenture, the Property Trustee shall, at the direction of the Sponsor, at any
time liquidate the Trust and cause the Debentures to be distributed to the
holders to the Securities in liquidation of the Trust or, simultaneous with any
redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Common Securities shall be redeemable as provided in the
Declaration.
A2-5
<PAGE>
______________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints _______________________________________________________
________________________________________________________________________________
________________________________ agent to transfer this Common
Security Certificate on the books of the Trust. The agent may substitute
another to act for him or her.
Date: ____________________________
Signature: __________________________
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
Signature Guarantee*: _______________________________________
_____________________
* Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities and Exchange Act of 1934. as amended.
A2-6
<PAGE>
[Include the following if the Common Security bears a Restricted Common
Securities Legend -
In connection with any transfer of any of the Common Securities evidenced by
this certificate, the undersigned confirms that such Common Securities are
being:
CHECK ONE BOX BELOW
(1) [_] exchanged for the undersigned's own account
without transfer; or
(2) [_] transferred pursuant to and in compliance with
Rule 144A under the Securities Act of 1933, as
amended; or
(3) [_] transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933, as amended; or
(4) [_] to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act of 1933, as amended that is acquiring the
Preferred Security for its own account, or for the account of
such an institutional "accredited investor," for investment
purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities
Act of 1933, as amended; or
(5) [_] transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(6) [_] transferred pursuant to an effective registration statement
Unless one of the boxes is checked, the Registrar will refuse to register any of
the Common Securities evidenced by this certificate in the name of any person
other than the registered Holder thereof; provided, however, that if box (3),
-------- -------
(4) or (5) is checked, the Registrar may require, prior to registering any such
transfer of the Preferred Securities such legal opinions, certifications and
other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, as
amended, such as the exemption provided by Rule 144 under such
A2-7
<PAGE>
Act; provided, further, that (i) if box 2 is checked, the transferee must also
--------
certify that it is a qualified institutional buyer as defined in Rule 144A or
(ii) if box 4 is checked, the transferee must also provide a Transferee
Representation Letter in the form attached to the Offering Memorandum of the
Trust, dated January 29, 1997.
Date: ____________________________________________
Signature
(Sign exactly as your name appears on the other
side of this Common Security Certificate)
A2-8
<PAGE>
========================================
CAPITAL SECURITIES GUARANTEE AGREEMENT
Vesta Insurance Group, Inc.
Dated as of January 31, 1997
========================================
<PAGE>
TABLE OF CONTENTS
------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION.............................................. 2
SECTION 1.1 Definitions and Interpretation.......................... 2
------------------------------
ARTICLE II
TRUST INDENTURE ACT......................................................... 6
SECTION 2.1 Trust Indenture Act; Application........................ 6
--------------------------------
SECTION 2.2 Lists of Holders of Securities.......................... 6
------------------------------
SECTION 2.3 Reports by the Capital Securities
---------------------------------
Guarantee Trustee....................................... 7
-----------------
SECTION 2.4 Periodic Reports to Capital Securities
--------------------------------------
Guarantee Trustee....................................... 7
-----------------
SECTION 2.5 Evidence of Compliance with Conditions
--------------------------------------
Precedent............................................... 7
---------
SECTION 2.6 Events of Default; Waiver............................... 8
-------------------------
SECTION 2.7 Event of Default; Notice................................ 8
------------------------
SECTION 2.8 Conflicting Interests................................... 8
---------------------
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE........................................ 9
SECTION 3.1 Powers and Duties of the Capital
--------------------------------
Securities Guarantee Trustee............................ 9
----------------------------
SECTION 3.2 Certain Rights of Capital Securities
------------------------------------
Guarantee Trustee....................................... 11
-----------------
SECTION 3.3. Not Responsible for Recitals or Issuance
----------------------------------------
of Capital Securities Guarantee........................ 13
--------------------------------
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE........................................ 14
SECTION 4.1 Capital Securities Guarantee Trustee;
-------------------------------------
Eligibility............................................. 14
-----------
SECTION 4.2 Appointment, Removal and Resignation of
---------------------------------------
Capital Securities Guarantee Trustee.................... 15
------------------------------------
ARTICLE V
GUARANTEE................................................................... 16
SECTION 5.1 Guarantee............................................... 16
---------
SECTION 5.2 Waiver of Notice and Demand............................. 16
---------------------------
SECTION 5.3 Obligations Not Affected................................ 16
------------------------
SECTION 5.4 Rights of Holders....................................... 17
-----------------
SECTION 5.5 Guarantee of Payment.................................... 18
--------------------
SECTION 5.6 Subrogation............................................. 18
-----------
SECTION 5.7 Independent Obligations................................. 18
-----------------------
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI
LIMITATION OF TRANSACTIONS;.................................................. 18
SECTION 6.1 Limitation of Transactions............................... 19
--------------------------
SECTION 6.2 Ranking.................................................. 20
-------
ARTICLE VII
TERMINATION.................................................................. 20
SECTION 7.1 Termination.............................................. 20
-----------
ARTICLE VIII
INDEMNIFICATION.............................................................. 20
SECTION 8.1 Exculpation.............................................. 20
-----------
SECTION 8.2 Indemnification.......................................... 21
---------------
ARTICLE IX
MISCELLANEOUS................................................................ 21
SECTION 9.1 Successors and Assigns................................... 21
----------------------
SECTION 9.2 Amendments............................................... 21
----------
SECTION 9.3 Notices.................................................. 22
-------
SECTION 9.4 Benefit.................................................. 23
-------
SECTION 9.5 Governing Law............................................ 23
-------------
</TABLE>
3
<PAGE>
CAPITAL SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Capital Securities Guarantee"), dated
as of January 31, 1997, is executed and delivered by Vesta Insurance Group,
Inc., a Delaware corporation (the "Guarantor"), and First Union National Bank of
North Carolina, a national banking association, as trustee (the "Capital
Securities Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Capital Securities (as defined herein) of Vesta
Capital Trust I, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of January 31, 1997, among the trustees of the Issuer,
the Guarantor, as sponsor, and the holders from time to time of undivided
beneficial interests in the assets of the Issuer, the Issuer (i) is issuing on
the date hereof 100,000 capital securities, having an aggregate liquidation
amount of $100,000,000, such capital securities being designated the 8.525%
Capital Securities (collectively the "Capital Securities").
WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Capital Securities Guarantee, to pay to the Holders
of the Capital Securities the Guarantee Payments (as defined below). The
Guarantor agrees to make certain other payments on the terms and conditions set
forth herein.
WHEREAS, the Guarantor is executing and delivering a guarantee
agreement (the "Common Securities Guarantee"), with substantially identical
terms to this Capital Securities Guarantee, for the benefit of the holders of
the Common Securities (as defined herein), except that if an Event of Default
(as defined in the Declaration) has occurred and is continuing, the rights of
holders of the Common Securities to receive Guarantee Payments under the Common
Securities Guarantee are subordinated, to the extent and in the manner set forth
in the Common Securities Guarantee, to the rights of holders of Capital
Securities to receive Guarantee Payments under this Capital Securities
Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Capital Securities, which purchase the Guarantor hereby acknowledges shall
benefit the Guarantor, the Guarantor executes and delivers this Capital
Securities Guarantee for the benefit of the Holders.
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
------------------------------
In this Capital Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Capital Securities Guarantee but
not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
(b) terms defined in the Declaration as at the date of execution of
this Capital Securities Guarantee have the same meaning when used
in this Capital Securities Guarantee unless otherwise defined in
this Capital Securities Guarantee;
(c) a term defined anywhere in this Capital Securities Guarantee has
the same meaning throughout;
(d) all references to "the Capital Securities Guarantee" or "this
Capital Securities Guarantee" are to this Capital Securities
Guarantee as modified, supplemented or amended from time to time;
(e) all references in this Capital Securities Guarantee to Articles
and Sections are to Articles and Sections of this Capital
Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning
when used in this Capital Securities Guarantee, unless otherwise
defined in this Capital Securities Guarantee or unless the
context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405
---------
under the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a Saturday or a Sunday, or a
------------
day on which banking institutions in The City of New York are authorized or
required by law or executive order to close.
2
<PAGE>
"Capital Securities Guarantee Trustee" means First Union National Bank
------------------------------------
of North Carolina, a national banking association, until a Successor Capital
Securities Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Capital Securities Guarantee and
thereafter means each such Successor Capital Securities Guarantee Trustee.
"Common Securities" means the securities representing common undivided
-----------------
beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the Capital Securities
----------------------
Guarantee Trustee at which the corporate trust business of the Capital
Securities Guarantee Trustee shall, at any particular time, be principally
administered, which office at the date of execution of this Agreement is located
at 230 South Tryon Street, Charlotte, North Carolina 28288-1179, Attention:
Bond Administration.
"Covered Person" means any Holder or beneficial owner of Capital
--------------
Securities.
"Debentures" means the series of subordinated debt securities of the
----------
Guarantor designated the 8.525% Junior Subordinated Deferrable Interest
Debentures due January 15, 2027 held by the Property Trustee (as defined in the
Declaration) of the Issuer.
"Event of Default" means a default by the Guarantor on any of its
----------------
payment or other obligations under this Capital Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
------------------
without duplication, with respect to the Capital Securities, to the extent not
paid or made by the Issuer: (i) any accumulated and unpaid Distributions (as
defined in the Declaration) that are required to be paid on such Capital
Securities to the extent the Issuer has funds on hand legally available therefor
at such time, (ii) the redemption price, including all accumulated and unpaid
Distributions to the date of redemption (the "Redemption Price") to the extent
the Issuer has funds on hand legally available therefor at such time, with
respect to any Capital Securities called for redemption by the Issuer, and (iii)
upon a voluntary or involuntary termination and liquidation of the Issuer (other
than in connection with the distribution of Debentures to the Holders in
exchange for Capital Securities as provided in the Declaration), the lesser of
(a) the aggregate of the liquidation amount and all accumulated and unpaid
Distributions on the Capital Securities to the date of
3
<PAGE>
payment, to the extent the Issuer has funds on hand legally available therefor,
and (b) the amount of assets of the Issuer remaining available for distribution
to Holders in liquidation of the Issuer. If an Event of Default has occurred
and is continuing, no Guarantee Payments under the Common Securities Guarantee
with respect to the Common Securities or any guarantee payment under any Other
Common Securities Guarantees shall be made until the Holders of Capital
Securities shall be paid in full the Guarantee Payments to which they are
entitled under this Capital Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and records
------
of the Issuer, of any Capital Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Capital
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Capital Securities Guarantee Trustee,
------------------
any Affiliate of the Capital Securities Guarantee Trustee, or any officers,
directors, shareholders, members, partners, employees, representatives,
nominees, custodians or agents of the Capital Securities Guarantee Trustee.
"Indenture" means the Indenture dated as of January 31, 1997, among
---------
the Guarantor (the "Debenture Issuer") and First Union National Bank, as
trustee, pursuant to which the Debentures are to be issued to the Property
Trustee of the Issuer.
"Majority in liquidation amount of the Capital Securities" means,
---------------------------------------------------------
except as provided by the Trust Indenture Act, a vote by Holder(s) of Capital
Securities, voting separately as a class, of more than 50% of the aggregate
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting percentages are determined) of all Capital
Securities.
"Officers' Certificate" means, with respect to any person, a
---------------------
certificate signed by two of the following: the Chairman, a Vice Chairman, the
Chief Executive Officer, the President, a Vice President, the Controller, the
Secretary, an Assistant Secretary, the Treasurer or Assistant Treasurer of the
Guarantor. Any Officers' Certificate delivered with respect to compliance with
a condition or covenant provided for in this Capital Securities Guarantee shall
include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
4
<PAGE>
(b) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(c) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Other Common Securities Guarantees" shall have the same meaning as
----------------------------------
"Other Guarantees" as the Common Securities Guarantee.
"Other Debentures" means all junior subordinated debentures issued by
----------------
the Guarantor from time to time and sold to trusts to be established by the
Guarantor (if any), in each case similar to the Issuer.
"Other Guarantees" means all guarantees hereafter issued by the
----------------
Guarantor with respect to capital securities (if any) similar to the Capital
Securities issued by other trusts to be established by the Guarantor (if any),
in each case similar to the Issuer.
"Person" means a legal person, including any individual, corporation,
------
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Capital Securities
-------------------
Guarantee Trustee, any officer of the Capital Securities Guarantee Trustee, with
responsibility for the administration of this Capital Securities Guarantee and
also mean, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Successor Capital Securities Guarantee Trustee" means a successor
----------------------------------------------
Capital Securities Guarantee Trustee possessing the qualifications to act as
Capital Securities Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended.
5
<PAGE>
"Trust Securities" means the Common Securities and the Capital
----------------
Securities.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
--------------------------------
(a) This Capital Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Capital Securities
Guarantee and shall, to the extent applicable, be governed by such provisions;
and
(b) if and to the extent that any provision of this Capital Securities
Guarantee limits, qualifies or conflicts with the duties imposed by Section 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
SECTION 2.2 Lists of Holders of Securities
------------------------------
(a) The Guarantor shall provide the Capital Securities Guarantee
Trustee (unless the Capital Securities Guarantee Trustee is otherwise the
registrar of the Capital Securities) with a list, in such form as the Capital
Securities Guarantee Trustee may reasonably require, of the names and addresses
of the Holders of the Capital Securities ("List of Holders") as of such date,
(i) within one Business Day after December 15 and June 15 of each year, and (ii)
at any other time within 30 days of receipt by the Guarantor of a written
request for a List of Holders as of a date no more than 14 days before such List
of Holders is given to the Capital Securities Guarantee Trustee provided, that
the Guarantor shall not be obligated to provide such List of Holders at any time
the List of Holders does not differ from the most recent List of Holders given
to the Capital Securities Guarantee Trustee by the Guarantor. The Capital
Securities Guarantee Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.
(b) The Capital Securities Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee
---------------------------------------------------
Within 60 days after May 15 of each year, commencing May 15, 1997, the
Capital Securities Guarantee Trustee shall provide to the Holders of the
Capital Securities such reports as are required by Section 313 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the
6
<PAGE>
Trust Indenture Act. The Capital Securities Guarantee Trustee shall also comply
with the requirements of section 313(d) of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee
--------------------------------------------------------
The Guarantor shall provide to the Capital Securities Guarantee
Trustee such documents, reports and information as required by Section 314 (if
any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act. Delivery of such reports, information and
documents to the Capital Securities Guarantee Trustee is for informational
purposes only and the Capital Securities Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Guarantor's
compliance with any of its covenants hereunder (as to which the Capital
Securities Guarantee Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent
------------------------------------------------
The Guarantor shall provide to the Capital Securities Guarantee
Trustee such evidence of compliance with any conditions precedent, if any,
provided for in this Capital Securities Guarantee that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate
or opinion required to be given by an officer pursuant to Section 314(c)(1) may
be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver
-------------------------
The Holders of a Majority in liquidation amount of Capital Securities
may, by vote, on behalf of the Holders of all of the Capital Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such
Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this Capital
Securities Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 2.7 Event of Default; Notice
------------------------
(a) The Capital Securities Guarantee Trustee shall, within 90 days
after the occurrence of a default with respect to this Capital Securities
Guarantee known to a Responsible Officer of the Capital Securities Guarantee
Trustee, mail by first class
7
<PAGE>
postage prepaid, to all Holders of the Capital Securities, notices of all
defaults actually known to a Responsible Officer of the Capital Securities
Guarantee Trustee, unless such defaults have been cured before the giving of
such notice, provided, that, except in the case of default in the payment of any
Guarantee Payment, the Capital Securities Guarantee Trustee shall be protected
in withholding such notice if and so long as the board of directors, the
executive committee, or a trust committee of directors and/or Responsible
Officers of the Capital Securities Guarantee Trustee in good faith determines
that the withholding of such notice is in the interests of the holders of the
Capital Securities.
(b) The Capital Securities Guarantee Trustee shall not be deemed to
have knowledge of any Event of Default unless the Capital Securities Guarantee
Trustee shall have received written notice, or a Responsible Officer of the
Capital Securities Guarantee Trustee charged with the administration of the
Declaration shall have obtained actual knowledge, of such Event of Default.
SECTION 2.8 Conflicting Interests
---------------------
The Declaration shall be deemed to be specifically described in this
Capital Securities Guarantee for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee
-------------------------------------------------------------
(a) This Capital Securities Guarantee shall be held by the Capital
Securities Guarantee Trustee for the benefit of the Holders of the Capital
Securities, and the Capital Securities Guarantee Trustee shall not transfer this
Capital Securities Guarantee to any Person except a Holder of Capital Securities
exercising his or her rights pursuant to Section 5.4(b) or to a Successor
Capital Securities Guarantee Trustee on acceptance by such Successor Capital
Securities Guarantee Trustee of its appointment to act as Successor Capital
Securities Guarantee Trustee. The right, title and interest of the Capital
Securities Guarantee Trustee shall automatically vest in any Successor Capital
Securities Guarantee Trustee, and such vesting and succession of title shall be
effective whether or not conveyancing documents have been executed and delivered
pursuant
8
<PAGE>
to the appointment of such Successor Capital Securities Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Capital Securities Guarantee Trustee has occurred and is continuing, the
Capital Securities Guarantee Trustee shall enforce this Capital Securities
Guarantee for the benefit of the Holders of the Capital Securities.
(c) The Capital Securities Guarantee Trustee, before the occurrence of
any Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Capital Securities Guarantee, and no implied covenants shall be
read into this Capital Securities Guarantee against the Capital Securities
Guarantee Trustee. In case an Event of Default has occurred (that has not been
cured or waived pursuant to Section 2.6) and is actually known to a Responsible
Officer of the Capital Securities Guarantee Trustee, the Capital Securities
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Capital Securities Guarantee, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Capital Securities Guarantee shall be
construed to relieve the Capital Securities Guarantee Trustee from liability for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Capital Securities
Guarantee Trustee shall be determined solely by the express provisions
of this Capital Securities Guarantee, and the Capital Securities
Guarantee Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Capital Securities Guarantee, and no implied covenants or obligations
shall be read into this Capital Securities Guarantee against the
Capital Securities Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Capital
Securities Guarantee Trustee, the Capital Securities Guarantee Trustee
may conclusively rely, as to the truth of the statements and the
correctness of
9
<PAGE>
the opinions expressed therein, upon any certificates or opinions
furnished to the Capital Securities Guarantee Trustee and conforming
to the requirements of this Capital Securities Guarantee; but in the
case of any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Capital Securities
Guarantee Trustee, the Capital Securities Guarantee Trustee shall be
under a duty to examine the same to determine whether or not they
conform to the requirements of this Capital Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of the
Capital Securities Guarantee Trustee, unless it shall be proved that the
Capital Securities Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Capital Securities Guarantee Trustee shall not be liable
with respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of a Majority in
liquidation amount of the Capital Securities relating to the time, method
and place of conducting any proceeding for any remedy available to the
Capital Securities Guarantee Trustee, or exercising any trust or power
conferred upon the Capital Securities Guarantee Trustee under this Capital
Securities Guarantee; and
(iv) no provision of this Capital Securities Guarantee shall require
the Capital Securities Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers, if the
Capital Securities Guarantee Trustee shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Capital Securities Guarantee or
indemnity, reasonably satisfactory to the Capital Securities Guarantee
Trustee, against such risk or liability is not reasonably assured to it.
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee
------------------------------------------------------
(a) Subject to the provisions of Section 3.1:
(i) The Capital Securities Guarantee Trustee may conclusively rely,
and shall be fully protected in acting or
10
<PAGE>
refraining from acting, upon any resolution, certificate, statement
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Capital Securities Guarantee may be sufficiently evidenced by an Officers'
Certificate.
(iii) Whenever, in the administration of this Capital Securities
Guarantee, the Capital Securities Guarantee Trustee shall deem it desirable
that a matter be proved or established before taking, suffering or omitting
any action hereunder, the Capital Securities Guarantee Trustee (unless
other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly
delivered by the Guarantor.
(iv) The Capital Securities Guarantee Trustee shall have no duty to
see to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Capital Securities Guarantee Trustee may consult with counsel
of its selection, and the advice or opinion of such counsel with respect to
legal matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its Affiliates and may include any of
its employees. The Capital Securities Guarantee Trustee shall have the
right at any time to seek instructions concerning the administration of
this Capital Securities Guarantee from any court of competent
jurisdiction.
(vi) The Capital Securities Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Capital Securities Guarantee at the request or direction of any Holder,
unless such Holder shall have provided to the Capital Securities Guarantee
Trustee such security and indemnity, reasonably satisfactory to the Capital
Securities Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the Capital Securities
Guarantee Trustee's agents, nominees or custodians) and liabilities that
might
11
<PAGE>
be incurred by it in complying with such request or direction, including
such reasonable advances as may be requested by the Capital Securities
Guarantee Trustee; provided that, nothing contained in this Section
3.2(a)(vi) shall be taken to relieve the Capital Securities Guarantee
Trustee, upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Capital Securities
Guarantee.
(vii) The Capital Securities Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Capital Securities
Guarantee Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
(viii) The Capital Securities Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either directly
or by or through agents, nominees, custodians or attorneys, and the Capital
Securities Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
(ix) Any action taken by the Capital Securities Guarantee Trustee or
its agents hereunder shall bind the Holders of the Capital Securities, and
the signature of the Capital Securities Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such action. No
third party shall be required to inquire as to the authority of the Capital
Securities Guarantee Trustee to so act or as to its compliance with any of
the terms and provisions of this Capital Securities Guarantee, both of
which shall be conclusively evidenced by the Capital Securities Guarantee
Trustee's or its agent's taking such action.
(x) Whenever in the administration of this Capital Securities
Guarantee the Capital Securities Guarantee Trustee shall deem it desirable
to receive instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Capital Securities Guarantee Trustee
(i) may request instructions from the Holders of a Majority in liquidation
amount of the Capital Securities, (ii) may refrain from enforcing such
remedy or right or taking such other action until such instructions are
received, and (iii)
12
<PAGE>
shall be protected in conclusively relying on or acting in accordance with
such instructions.
(xi) The Capital Securities Guarantee Trustee shall not be liable for
any action taken, suffered, or omitted to be taken by it in good faith,
without negligence, and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Capital Securities Guarantee.
(b) No provision of this Capital Securities Guarantee shall be deemed
to impose any duty or obligation on the Capital Securities Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Capital Securities Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power
or authority available to the Capital Securities Guarantee Trustee shall be
construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Capital Securities
---------------------------------------------------------------
Guarantee
---------
The recitals contained in this Capital Securities Guarantee shall be
taken as the statements of the Guarantor, and the Capital Securities Guarantee
Trustee does not assume any responsibility for their correctness. The Capital
Securities Guarantee Trustee makes no representation as to the validity or
sufficiency of this Capital Securities Guarantee.
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility
-------------------------------------------------
(a) There shall at all times be a Capital Securities Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Securities and Exchange Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least 50 million
U.S. dollars
13
<PAGE>
($50,000,000), and subject to supervision or examination by Federal, state,
territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to above,
then, for the purposes of this Section 4.1(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
(b) If at any time the Capital Securities Guarantee Trustee shall
cease to be eligible to so act under Section 4.1(a), the Capital Securities
Guarantee Trustee shall immediately resign in the manner and with the effect set
out in Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Capital Securities Guarantee Trustee and Guarantor shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2 Appointment, Removal and Resignation of Capital Securities
----------------------------------------------------------
Guarantee Trustee
-----------------
(a) Subject to Section 4.2(b), the Capital Securities Guarantee
Trustee may be appointed or removed without cause at any time by the Guarantor
except during an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Capital Securities Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Capital Securities Guarantee Trustee and
delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office until a
Successor Capital Securities Guarantee Trustee shall have been appointed or
until its removal or resignation. The Capital Securities Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Capital Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Capital Securities Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Capital Securities Guarantee Trustee and delivered to the Guarantor and the
resigning Capital Securities Guarantee Trustee.
14
<PAGE>
(d) If no Successor Capital Securities Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery of an instrument of removal or resignation, the Capital
Securities Guarantee Trustee resigning or being removed may petition any court
of competent jurisdiction for appointment of a Successor Capital Securities
Guarantee Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Capital Securities Guarantee
Trustee.
(e) No Capital Securities Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Capital securities Guarantee Trustee.
(f) Upon termination of this Capital Securities Guarantee or removal
or resignation of the Capital Securities Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Capital Securities Guarantee Trustee
all amounts due to the Capital Securities Guarantee Trustee accrued to the date
of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
---------
The Guarantor irrevocably and unconditionally agrees to pay in full on
a subordinated basis to the extent set forth in this Capital Securities
Guarantee to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
---------------------------
The Guarantor hereby waives notice of acceptance of this Capital
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
15
<PAGE>
SECTION 5.3 Obligations Not Affected
------------------------
The obligations, covenants, agreements and duties of the Guarantor
under this Capital Securities Guarantee shall in no way be affected or impaired
by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Capital Securities to be performed
or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Capital Securities or the extension of
time for the performance of any other obligation under, arising out of, or in
connection with, the Capital Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Capital Securities, or any
action on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor with respect to the
Guarantee Payments shall be absolute and unconditional under any and all
circumstances.
16
<PAGE>
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 Rights of Holders
-----------------
(a) The Holders of a Majority in liquidation amount of the Capital
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Capital Securities Guarantee Trustee
in respect of this Capital Securities Guarantee or exercising any trust or power
conferred upon the Capital Securities Guarantee Trustee under this Capital
Securities Guarantee .
(b) If the Capital Securities Guarantee Trustee fails to enforce such
Capital Securities Guarantee, any Holder of Capital Securities may institute a
legal proceeding directly against the Guarantor to enforce the Capital
Securities Guarantee Trustee's rights under this Capital Securities Guarantee,
without first instituting a legal proceeding against the Issuer, the Capital
Securities Guarantee Trustee or any other person or entity. The Guarantor
waives any right or remedy to require that any action be brought first against
the Issuer or any other person or entity before proceeding directly against the
Guarantor.
SECTION 5.5 Guarantee of Payment
--------------------
This Capital Securities Guarantee creates a guarantee of payment and
not of collection.
SECTION 5.6 Subrogation
-----------
The Guarantor shall be subrogated to all (if any) rights of the
Holders of Capital Securities against the Issuer in respect of any amounts paid
to such Holders by the Guarantor under this Capital Securities Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Capital
Securities Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Capital Securities Guarantee. If any amount shall be paid
to the Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such amount in trust for the Holders and to pay over such amount to the
Holders.
17
<PAGE>
SECTION 5.7 Independent Obligations
-----------------------
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Capital
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Capital
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
--------------------------
So long as any Capital Securities remain outstanding, the Guarantor
shall not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Guarantor's capital stock (which includes common and preferred stock) or (ii)
make any payment of principal, interest or premium, if any, on, or repay or
repurchase or redeem any debt securities of the Guarantor (including any Other
Debentures) that rank pari passu with or junior in right of payment to the
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Guarantor of the debt securities of any subsidiary of the Guarantor
(including Other Guarantees) if such guarantee ranks pari passu or junior in
right of payment to the Debentures (other than (a) dividends or distributions in
shares of, or options, warrants, rights to subscribe for or purchase shares of,
common stock of the Guarantor, (b) any declaration of a dividend in connection
with the implementation of a stockholder's rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Capital Securities Guarantee,
(d) as a result of a reclassification of the Guarantor's capital stock or the
exchange or the conversion of one class or series of the Guarantor's capital
stock for another class or series of the Guarantor's capital stock, (e) the
purchase of fractional interests in shares of the Guarantor's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, and (f) purchases or issuances of common
stock in connection with any of the Guarantor's stock option, stock purchase,
stock loan or other benefit plans for its directors, officers or employees or
any of the Guarantor's dividend reinvestment plans, in each case as now existing
or hereafter established or amended), if at such time (i) there shall have
occurred any event of which the Guarantor has actual knowledge that (a) is, or
with the giving of notice or the lapse of time, or both, would be an Event of
Default and (b)
18
<PAGE>
in respect of which the Guarantor shall not have taken reasonable steps to cure,
(ii) if such Debentures are held by the Property Trustee, the Guarantor shall be
in default with respect to its payment of any obligations under this Capital
Securities Guarantee or (iii) the Guarantor shall have given notice of its
election of the exercise of its right to extend the interest payment period
pursuant to Section 16.01 of the Indenture and any such extension shall be
continuing.
SECTION 6.2 Ranking
-------
This Capital Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to Senior Indebtedness (as defined in the Indenture), to the same extent
and in the same manner that the Debentures are subordinated to Senior
Indebtedness pursuant to the Indenture (except as indicated below), it being
understood that the terms of Article XV of the Indenture shall apply to the
obligations of the Guarantor under this Capital Securities Guarantee as if (x)
such Article XV were set forth herein in full and (y) such obligations were
substituted for the term "Securities" appearing in such Article XV, except that
with respect to Section 15.03 of the Indenture only, the term "Senior
Indebtedness" shall mean all liabilities of the Guarantor, whether or not for
money borrowed (other than obligations in respect of Other Guarantees), (ii)
pari passu with any Other Guarantee (as defined herein) and any Other Common
Securities Guarantee and (iii) senior to any obligations in respect of any class
of the Guarantor's capital stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
-----------
This Capital Securities Guarantee shall terminate and be of no further
force and effect (i) upon full payment of the Redemption Price (as defined in
the Declaration) of all Capital Securities, or (ii) upon liquidation of the
Issuer, the full payment of the amounts payable in accordance with the
Declaration or the distribution of the Debentures to the Holders of all of the
Capital Securities. Notwithstanding the foregoing, this Capital Securities
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder of Capital Securities must restore payment of any
sums paid under the Capital Securities or under this Capital Securities
Guarantee.
19
<PAGE>
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
-----------
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Capital
Securities Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Capital Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Capital Securities might properly be paid.
SECTION 8.2 Indemnification
---------------
The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss, liability,
damage, claim or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 8.2 shall survive the termination of this
Capital Securities Guarantee.
20
<PAGE>
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
----------------------
All guarantees and agreements contained in this Capital Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Capital Securities then outstanding.
SECTION 9.2 Amendments
----------
Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Capital Securities Guarantee may only be amended with the prior
approval of the Holders of a Majority in liquidation amount of the Securities
(including the stated amount that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the date upon which the
voting percentages are determined). The provisions of Section 12.2 of the
Declaration with respect to meetings of Holders of the Securities apply to the
giving of such approval.
SECTION 9.3 Notices
-------
All notices provided for in this Capital Securities Guarantee shall be
in writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:
(a) If given to the Issuer, in care of the Administrative Trustee at
the Issuer's mailing address set forth below (or such other address as the
Issuer may give notice of to the Holders of the Common Securities):
Vesta Capital Trust I
c/o Vesta Insurance Group, Inc.
3760 River Run Drive
Birmingham, Alabama 35243
Attention: General Counsel
Telecopy: (205) 970-7007
(b) If given to the Capital Securities Guarantee Trustee, at the
Capital Securities Guarantee Trustee's mailing address set forth below (or such
other address as the Capital Securities Guarantee Trustee may give notice of to
the Holders of the Capital Securities):
21
<PAGE>
First Union National Bank of North Carolina
230 South Tryon Street
Charlotte, North Carolina 28288-1179
Attention: Bond Administration
Telecopy: (704) 383-7316
(c) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Capital Securities):
Vesta Insurance Group, Inc.
3760 River Run Drive
Birmingham, Alabama 35234
Attention: General Counsel
Telecopy: (205) 970-7007
(d) If given to any Holder of Capital Securities, at the address set
forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 9.4 Benefit
-------
This Capital Securities Guarantee is solely for the benefit of the
Holders of the Capital Securities and, subject to Section 3.1(a), is not
separately transferable from the Capital Securities.
SECTION 9.5 Governing Law
-------------
THIS CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
22
<PAGE>
THIS CAPITAL SECURITIES GUARANTEE is executed as of the day
and year first above written.
VESTA INSURANCE GROUP,INC., as
Guarantor
By: /s/ Donald W. Thornton
--------------------------------------
Name: DONALD W. THORNTON
Title: SENIOR VICE PRESIDENT
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as
Capital Securities Guarantee
Trustee
By: /s/ Thomas J. Brett
--------------------------------------
Name: THOMAS J. BRETT
Title: CORPORATE TRUST OFFICER
<PAGE>
================================================================================
CREDIT AGREEMENT
among
VESTA INSURANCE GROUP, INC.,
THE LENDERS NAMED HEREIN,
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION,
as Documentation Agent,
and
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
as Administrative Agent
$200,000,000 Revolving Credit Facilities
Arranged by
FIRST UNION CAPITAL MARKETS CORP.
Dated as of September 24, 1996,
As amended and restated as of April 8, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS............................ 1
ARTICLE I
DEFINITIONS
1.1. Defined Terms............................................... 1
1.2. Accounting Terms............................................ 15
1.3. Other Terms; Construction................................... 15
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1. Commitments; Loans.......................................... 15
2.2. Borrowings.................................................. 16
2.3. Notes....................................................... 18
2.4. Termination and Reduction of Commitments.................... 18
2.5. Mandatory and Voluntary Payments and Prepayments............ 18
2.6. Interest.................................................... 19
2.7. Fees........................................................ 20
2.8. Interest Periods............................................ 21
2.9. Conversions and Continuations............................... 21
2.10. Method of Payments; Computations............................ 22
2.11. Recovery of Payments........................................ 24
2.12. Use of Proceeds............................................. 24
2.13. Pro Rata Treatment; Sharing of Payments..................... 24
2.14. Increased Costs; Change in Circumstances; Illegality; etc... 25
2.15. Taxes....................................................... 26
2.16. Compensation................................................ 28
ARTICLE III
CONDITIONS OF BORROWING
3.1. Conditions of Loans under Original Credit Agreement......... 29
3.2. Conditions to Effectiveness of this Agreement............... 29
3.3. Conditions to All Loans..................................... 31
</TABLE>
-i-
<PAGE>
<TABLE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
<S> <C>
4.1. Corporate Organization and Power........................... 32
4.2. Authorization; Enforceability.............................. 32
4.3. No Violation............................................... 32
4.4. Governmental Authorization; Permits........................ 32
4.5. Litigation................................................. 33
4.6. Taxes...................................................... 33
4.7. Subsidiaries............................................... 33
4.8. Full Disclosure............................................ 33
4.9. Margin Regulations......................................... 33
4.10. No Material Adverse Change................................. 34
4.11. Financial Matters.......................................... 34
4.12. Ownership of Properties.................................... 35
4.13. ERISA...................................................... 35
4.14. Environmental Matters...................................... 35
4.15. Compliance With Laws....................................... 36
4.16. Regulated Industries....................................... 36
4.17. Insurance.................................................. 36
ARTICLE V
AFFIRMATIVE COVENANTS
5.1. GAAP Financial Statements.................................. 36
5.2. Statutory Financial Statements............................. 37
5.3. Other Business and Financial Information................... 38
5.4. Corporate Existence; Franchises; Maintenance of Properties. 40
5.5. Compliance with Laws....................................... 40
5.6. Payment of Obligations..................................... 40
5.7. Insurance.................................................. 41
5.8. Maintenance of Books and Records; Inspection............... 41
5.9. Dividends.................................................. 41
5.10. Further Assurances......................................... 41
ARTICLE VI
FINANCIAL COVENANTS
6.1. Capitalization Ratio...................................... 42
6.2. Consolidated Net Worth.................................... 42
6.3. Fixed Charge Coverage Ratio............................... 42
6.4. Risk-Based Capital........................................ 42
</TABLE>
-ii-
<PAGE>
ARTICLE VII
NEGATIVE COVENANTS
<TABLE>
<C> <S> <C>
7.1. Merger; Consolidation....................................... 43
7.2. Indebtedness................................................ 43
7.3. Liens....................................................... 43
7.4. Disposition of Assets....................................... 45
7.5. Transactions with Affiliates................................ 46
7.6. Lines of Business........................................... 46
7.7. Fiscal Year................................................. 46
7.8. Accounting Changes.......................................... 46
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default........................................... 46
8.2. Remedies: Termination of Commitments, Acceleration, etc..... 48
ARTICLE IX
THE ADMINISTRATIVE AGENT
9.1. Appointment................................................ 49
9.2. Nature of Duties........................................... 49
9.3. Exculpatory Provisions..................................... 50
9.4. Reliance by Administrative Agent........................... 50
9.5. Non-Reliance on Administrative Agent and Other Lenders..... 51
9.6. Notice of Default.......................................... 51
9.7. Indemnification............................................ 51
9.8. The Administrative Agent in its Individual Capacity........ 52
9.9. Successor Administrative Agent............................. 52
9.10. Documentation Agent........................................ 53
ARTICLE X
MISCELLANEOUS
10.1. Fees and Expenses......................................... 53
10.2. Indemnification........................................... 53
10.3. Governing Law; Consent to Jurisdiction.................... 54
10.4. Arbitration; Preservation and Limitation of Remedies...... 54
10.5. Notices................................................... 55
10.6. Amendments, Waivers, etc.................................. 56
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
10.7. Assignments, Participations............................... 56
10.8. No Waiver................................................. 58
10.9. Successors and Assigns.................................... 59
10.10. Survival.................................................. 59
10.11. Severability.............................................. 59
10.12. Construction.............................................. 59
10.13. Confidentiality........................................... 59
10.14. Counterparts.............................................. 60
10.15. Entire Agreement.......................................... 60
10.16. Effect of Amendment and Restatement....................... 60
</TABLE>
EXHIBITS
Exhibit A-1 Form of Facility A Note
Exhibit A-2 Form of Facility B Note
Exhibit B-1 Form of Notice of Borrowing
Exhibit B-2 Form of Notice of Conversion/Continuation
Exhibit C Form of Assignment and Acceptance
Exhibit D-1 Form of Compliance Certificate (GAAP Financial Statements)
Exhibit D-2 Form of Compliance Certificate (Statutory Financial Statements)
Exhibit E Form of Opinion of Donald W. Thornton
SCHEDULES
Schedule 4.4 Licenses
Schedule 4.7 Subsidiaries
Schedule 7.3 Liens
<PAGE>
Schedule 4.7
Subsidiaries
<TABLE>
<CAPTION>
Percentage owned
(directly or
indirectly)
Subsidiary Direct Owner by Borrower
---------- ------------ -------------
<S> <C> <C>
The Hawaiian Insurance & Guaranty
Company, Limited Vesta Fire Insurance Corporation 100%
J. Gordon Gaines, Inc. Vesta Insurance Group, Inc. 100%
J. Gordon Gaines of
Texas, Inc. Vesta Fire Insurance Corporation 100%
Liberty National Reinsurance
Company, Ltd. Vesta Insurance Group, Inc. 100%
Sheffield Insurance Corporation Vesta Fire Insurance Corporation 100%
Vesta Capital Trust I Vesta Insurance Group, Inc. 100%
Vesta Financial Corporation Vesta Fire Insurance Corporation 100%
Vesta Fire Insurance Company Vesta Insurance Group, Inc. 100%
Vesta Insurance Corporation Vesta Fire Insurance Corporation 100%
Vesta Lloyds Insurance Company Vesta Fire Insurance Corporation 100%
Vesta Management Corporation of Texas Vesta Insurance Group, Inc. 100%
Vesta County Mutual Vesta Management Corporation
Insurance Company of Texas (control pursuant to 100%
management contract)
</TABLE>
<PAGE>
Schedule 7.3
Liens
1. $6.6 million lien on corporate aircraft with Michigan National Bank.
<PAGE>
"Assignment and Acceptance" shall mean an Assignment and Acceptance
entered into between a Lender and an Assignee and accepted by the Administrative
Agent and the Borrower, in substantially the form of EXHIBIT C.
"Authorized Officer" shall mean any officer of the Borrower authorized
by resolution of the board of directors of the Borrower to take the action
specified herein with respect to such officer and whose signature and incumbency
shall have been certified to the Administrative Agent by the secretary or an
assistant secretary of the Borrower.
"Bankruptcy Code" shall mean 11 U.S.C. (S)(S) 101 et seq., as amended
-- ---
from time to time, and any successor statute.
"Base Rate" shall mean the higher of (i) the per annum interest rate
publicly announced from time to time by First Union in Charlotte, North
Carolina, to be its prime or base rate (which may not necessarily be its best
lending rate), as adjusted to conform to changes as of the opening of business
on the date of any such change in such prime or base rate, or (ii) 0.5% per
annum plus the Federal Funds Rate, as adjusted to conform to changes as of the
opening of business on the date of any such change in the Federal Funds Rate.
"Base Rate Loan" shall mean, at any time, any Loan that bears interest
at such time at the Base Rate.
"Borrower Margin Stock" shall mean shares of capital stock of the
Borrower that are held by the Borrower or any of its Subsidiaries and that
constitute Margin Stock.
"Borrowing" shall mean the incurrence by the Borrower (including as a
result of conversions and continuations of outstanding Loans pursuant to SECTION
2.9) on a single date of a group of Loans of a single Class and Type and, in the
case of LIBOR Loans, as to which a single Interest Period is in effect.
"Borrowing Date" shall mean, with respect to any Borrowing, the date
upon which such Borrowing is made.
"Business Day" shall mean (i) any day other than a Saturday or Sunday,
a legal holiday or a day on which commercial banks in Charlotte, North Carolina
are required by law to be closed and (ii) in respect of any determination
relevant to a LIBOR Loan, any such day that is also a day on which tradings are
conducted in the London interbank Eurodollar market.
"Capitalization Ratio" shall mean, as of the last day of any fiscal
quarter, the ratio of (i) Consolidated Indebtedness as of such date to (ii) the
sum of Consolidated Indebtedness and Consolidated Net Worth, each as of such
date; provided, however, that, solely for purposes of this definition and not
-------- -------
for any other purpose of this Agreement, Consolidated Indebtedness shall not
include (a) the Junior Subordinated Debentures, (b) the beneficial interests of
the Trust in the Junior Subordinated Debentures, or (c) the Borrower's guarantee
to the holders of the Trust Securities of all of the Trust's obligations under
the Trust Securities.
-3-
<PAGE>
"Class" shall have the meaning given to such term in SECTION 2.2(A).
"Commitments" shall mean the Facility A Commitments and the Facility B
Commitments.
"Compliance Certificate" shall mean a fully completed and duly
executed certificate in the form of EXHIBIT D-1 or EXHIBIT D-2, as applicable.
"Consolidated Indebtedness" shall mean, as of the last day of any
fiscal quarter, the aggregate (without duplication) of all Indebtedness of the
Borrower and its Subsidiaries as of such date, determined on a consolidated
basis in accordance with Generally Accepted Accounting Principles.
"Consolidated Interest Expense" shall mean, for any period, the sum
(without duplication) of total interest expense of the Borrower and its
Subsidiaries for such period in respect of Indebtedness of the Borrower and its
Subsidiaries (including, without limitation, all such interest expense accrued
or capitalized during such period, whether or not actually paid during such
period, and including all net amounts paid or accrued by the Borrower and its
Subsidiaries during such period under or in respect of Hedge Agreements and all
commitment fees and other ongoing fees in respect of Indebtedness (including the
facility fees provided for under SECTIONS 2.7(A) and 2.7(B), but excluding the
administrative fees payable under the Fee Letter) paid or accrued by the
Borrower and its Subsidiaries during such period), determined on a consolidated
basis in accordance with Generally Accepted Accounting Principles, and
including, without limitation, all such interest expense in respect of the
Junior Subordinated Debentures.
"Consolidated Net Income" shall mean, for any period, net income (or
loss) for the Borrower and its Subsidiaries for such period, determined on a
consolidated basis in accordance with Generally Accepted Accounting Principles.
"Consolidated Net Worth" shall mean, at any time, the net worth of the
Borrower and its Subsidiaries at such time, determined on a consolidated basis
in accordance with Generally Accepted Accounting Principles; provided, however,
-------- -------
that, notwithstanding the foregoing, determinations of Consolidated Net Worth
shall (i) exclude any preferred stock or other class of equity securities that,
by its stated terms (or by the terms of any class of equity securities issuable
upon conversion thereof or in exchange therefor), or upon the occurrence of any
event, matures or is mandatorily redeemable, or is redeemable at the option of
the holders thereof, in whole or in part, at any time prior to one (1) year
after the Facility A Maturity Date, (ii) include the aggregate outstanding
amount (up to $100,000,000) of the beneficial interests of the Trust in the
Junior Subordinated Debentures, and (iii) be made without regard to the
requirements of Statement of Financial Accounting Standards No. 115 issued by
the Financial Accounting Standards Board.
"Contingent Obligation" shall mean, with respect to any Person, any
direct or indirect liability of such Person with respect to any Indebtedness,
liability or other obligation (the "primary obligation") of another Person (the
"primary obligor"), whether or not contingent, (a) to purchase, repurchase or
otherwise acquire such primary obligation or any property
-4-
<PAGE>
constituting direct or indirect security therefor, (b) to advance or provide
funds (i) for the payment or discharge of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet item, level of income
or financial condition of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor in respect thereof
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of any such primary obligation against loss or failure or
inability to perform in respect thereof; provided, however, that, with respect
-------- -------
to the Borrower and its Subsidiaries, the term Contingent Obligation shall not
include (y) endorsements for collection or deposit in the ordinary course of
business or (z) obligations entered into by an Insurance Subsidiary in the
ordinary course of its business under insurance policies or contracts issued by
it or to which it is a party, including reinsurance agreements (and security
posted by any such Insurance Subsidiary in the ordinary course of its business
to secure obligations thereunder).
"Covenant Compliance Worksheet" shall mean a fully completed worksheet
in the form of Attachment A to EXHIBIT D-1 or EXHIBIT D-2, as applicable.
"Credit Documents" shall mean this Agreement, the Notes, the Fee
Letter, any Hedge Agreement to which the Borrower and any Lender are parties,
and all other agreements, instruments, documents and certificates now or
hereafter executed and delivered to the Administrative Agent or any Lender by or
on behalf of the Borrower or any of its Subsidiaries with respect to this
Agreement and the transactions contemplated hereby, in each case as amended,
modified, supplemented or restated from time to time.
"Default" shall mean any event or condition that, with the passage of
time or giving of notice, or both, would constitute an Event of Default.
"Dollars" or "$" shall mean dollars of the United States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade or
business, whether or not incorporated) that would be deemed to be under "common
control" with, or a member of the same "controlled group" as, the Borrower or
any of its Subsidiaries, within the meaning of Sections 414(b), (c), (m) or (o)
of the Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean any of the following with respect to a Plan
or Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a
Plan or a Multiemployer Plan, (ii) a complete or partial withdrawal by the
Borrower or any ERISA Affiliate from a Multiemployer Plan that results in
liability under Section 4201 or 4204 of ERISA, or the receipt by the Borrower or
any ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that
it intends to terminate or has terminated under Section 4041A of ERISA, (iii)
the distribution by the Borrower or any ERISA Affiliate under Section 4041 or
4041A of ERISA of a notice of intent to terminate any Plan or the
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taking of any action to terminate any Plan, (iv) the commencement of proceedings
by the PBGC under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by the Borrower
or any ERISA Affiliate of a notice from any Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan, (v) the
institution of a proceeding by any fiduciary of any Multiemployer Plan against
the Borrower or any ERISA Affiliate to enforce Section 515 of ERISA, which is
not dismissed within thirty (30) days, (vi) the imposition upon the Borrower or
any ERISA Affiliate of any liability under Title IV of ERISA, other than for
PBGC premiums due but not delinquent under Section 4007 of ERISA, or the
imposition or threatened imposition of any Lien upon any assets of the Borrower
or any ERISA Affiliate as a result of any alleged failure to comply with the
Internal Revenue Code or ERISA in respect of any Plan, (vii) the engaging in or
otherwise becoming liable for a nonexempt Prohibited Transaction by the Borrower
or any ERISA Affiliate, (viii) a violation of the applicable requirements of
Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a)
of the Internal Revenue Code by any fiduciary of any Plan for which the Borrower
or any of its ERISA Affiliates may be directly or indirectly liable or (ix) the
adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the
Internal Revenue Code or Section 307 of ERISA, would result in the loss of tax-
exempt status of the trust of which such Plan is a part if the Borrower or an
ERISA Affiliate fails to timely provide security to such Plan in accordance with
the provisions of such sections.
"Eligible Assignee" shall mean (i) a commercial bank organized under
the laws of the United States or any state thereof and having total assets in
excess of $1,000,000,000, (ii) a commercial bank organized under the laws of any
other country that is a member of the Organization for Economic Cooperation and
Development or any successor thereto (the "OECD") or a political subdivision of
any such country and having total assets in excess of $1,000,000,000, provided
--------
that such bank or other financial institution is acting through a branch or
agency located in the United States, in the country under the laws of which it
is organized or in another country that is also a member of the OECD, (iii) the
central bank of any country that is a member of the OECD, (iv) a finance company
or other financial institution or fund (other than an insurance company or an
insurance holding company) that is engaged in making, purchasing or otherwise
investing in loans in the ordinary course of its business and having total
assets in excess of $1,000,000,000, (v) any Affiliate of an existing Lender or
(vi) any other Person approved by the Required Lenders, which approval shall not
be unreasonably withheld.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than internal
reports prepared by any Person in the ordinary course of its business and not in
response to any third party action or request of any kind) or proceedings
relating in any way to any Environmental Law or any permit issued, or any
approval given, under any such Environmental Law (collectively, "Claims"),
including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to human health or
the environment.
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<PAGE>
"Environmental Laws" shall mean any and all federal, state and local
laws, statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations, rules of common law and orders of courts or Governmental
Authorities, relating to the protection of human health or occupational safety
or the environment, now or hereafter in effect and in each case as amended from
time to time, including, without limitation, requirements pertaining to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or
remediation of Hazardous Substances.
"Event of Default" shall have the meaning given to such term in
SECTION 8.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Existing Loans" shall have the meaning given to such term in SECTION
2.1(C).
"Facilities" shall mean the revolving credit facilities established
pursuant to SECTIONS 2.1(A) and 2.1(B).
"Facility A Commitment" shall mean, with respect to any Lender at any
time, the amount set forth opposite such Lender's name on its signature page
hereto under the caption "Facility A Commitment" or, if such Lender has entered
into one or more Assignment and Acceptances, the amount set forth for such
Lender at such time in the Register maintained by the Administrative Agent
pursuant to SECTION 10.7(B) as such Lender's "Facility A Commitment," as such
amount may be reduced at or prior to such time pursuant to the terms hereof.
"Facility B Commitment" shall mean, with respect to any Lender at any
time, the amount set forth opposite such Lender's name on its signature page
hereto under the caption "Facility B Commitment" or, if such Lender has entered
into one or more Assignment and Acceptances, the amount set forth for such
Lender at such time in the Register maintained by the Administrative Agent
pursuant to SECTION 10.7(B) as such Lender's "Facility B Commitment," as such
amount may be reduced at or prior to such time pursuant to the terms hereof.
"Facility A Lender" shall mean any Lender (i) holding all or a portion
of any outstanding Facility A Loans and (ii) having a Facility A Commitment
(unless the Facility A Commitments have been terminated pursuant to this
Agreement).
"Facility B Lender" shall mean any Lender (i) holding all or a portion
of any outstanding Facility B Loans and (ii) having a Facility B Commitment
(unless the Facility A Commitments have been terminated pursuant to this
Agreement).
"Facility A Loans" shall have the meaning given to such term in
SECTION 2.1(A).
"Facility B Loans" shall have the meaning given to such term in
SECTION 2.1(B).
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<PAGE>
"Facility A Maturity Date" shall mean July 31, 2001.
"Facility B Maturity Date" shall mean the date 364 days after the date
of this Agreement.
"Facility A Notes" shall mean the promissory notes of the Borrower in
substantially the form of EXHIBIT A-1, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Facility B Notes" shall mean the promissory notes of the Borrower in
substantially the form of EXHIBIT A-2, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Facility A Termination Date" shall mean the Facility A Maturity Date
or such earlier date of termination of the Facility A Commitments pursuant to
SECTION 2.4 or SECTION 8.2.
"Facility B Termination Date" shall mean the Facility B Maturity Date
or such earlier date of termination of the Facility B Commitments pursuant to
SECTION 2.4 or SECTION 8.2.
"Federal Funds Rate" shall mean, for any period, a fluctuating per
annum interest rate (rounded upwards, if necessary, to the nearest 1/100 of one
percentage point) equal for each day during such period to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by the Administrative Agent.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
"Fee Letter" shall mean the letter from First Union to the Borrower,
dated March 18, 1997, relating to the administrative fees payable to the
Administrative Agent in respect of the transactions contemplated by this
Agreement, as amended, modified or supplemented from time to time.
"Fixed Charge Coverage Ratio" shall mean, as of the last day of any
fiscal quarter, the ratio of:
(i) the aggregate for the period of four consecutive fiscal
quarters ending on such date (the "Measurement Period") of (x) Consolidated
Net Income, (y) Consolidated Interest Expense, to the extent taken into
account in the calculation of Consolidated Net Income for such period, and
(z) federal, state, local and other income taxes, to the extent taken into
account in the calculation of Consolidated Net Income for such period, all
determined on a consolidated basis for the Borrower and its Subsidiaries in
accordance with Generally Accepted Accounting Principles; to
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(ii) the sum for the Measurement Period of (x) Consolidated
Interest Expense and (y) the aggregate of all amounts paid by the Borrower
as dividends or distributions in respect of its equity securities (other
than as contemplated by clause (z) below), and (z) the aggregate of all
amounts paid by the Borrower to purchase, redeem, retire or otherwise
acquire its equity securities (other than pursuant to employee benefit
plans approved by the board of directors of the Borrower in the ordinary
course of business), but only to the extent that such amounts paid during
the Measurement Period exceed the lesser of (1) twenty-five percent (25%)
of Consolidated Net Income for the Measurement Period and (2) five percent
(5%) of Consolidated Net Worth as of the last day of the Measurement
Period.
"Generally Accepted Accounting Principles" shall mean generally accepted
accounting principles, as set forth in the statements, opinions and
pronouncements of the Accounting Principles Board, the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board (or,
to the extent not so set forth in such statements, opinions and pronouncements,
as generally followed by entities similar in size to the Borrower and engaged in
generally similar lines of business), consistently applied and maintained and in
conformity with those used in the preparation of the most recent financial
statements of the Borrower referred to in SECTION 4.11(A).
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof and any central bank thereof, any municipal,
local, city or county government, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Substances" shall mean any substances or materials (i) that are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (ii) that are
defined by any Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous, (iii) the presence of
which require investigation or response under any Environmental Law, (iv) that
constitute a nuisance, trespass or health or safety hazard to Persons or
neighboring properties, (v) that consist of underground or aboveground storage
tanks, whether empty, filled or partially filled with any substance or (vi) that
contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or wastes, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedge Agreement" shall mean any interest or foreign currency rate swap,
cap, collar, option, hedge, forward rate or other similar agreement or
arrangement designed to protect against fluctuations in interest rates or
currency exchange rates.
"Historical Statutory Statements" shall have the meaning given to such term
in SECTION 4.11(B).
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness of such Person for borrowed money or in
respect of loans or advances, (ii) all
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obligations of such Person evidenced by notes, bonds, debentures or similar
instruments, (iii) all reimbursement obligations of such Person with respect to
surety bonds, letters of credit and bankers' acceptances (in each case, whether
or not drawn or matured and in the stated amount thereof), (iv) all obligations
of such Person to pay the deferred purchase price of property or services, (v)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person, (vi) all
obligations of such Person as lessee under leases that are or should be, in
accordance with Generally Accepted Accounting Principles, recorded as capital
leases, to the extent such obligations are required to be so recorded, (vii) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any capital stock or other equity securities
that, by their stated terms (or by the terms of any equity securities issuable
upon conversion thereof or in exchange therefor), or upon the occurrence of any
event, mature or are mandatorily redeemable, or are redeemable at the option of
the holder thereof, in whole or in part, at any time prior to the Facility A
Maturity Date, (viii) the net termination obligations of such Person under any
Hedge Agreements, calculated as of any date as if such agreement or arrangement
were terminated as of such date, (ix) all Contingent Obligations of such Person
and (x) all indebtedness referred to in clauses (i) through (ix) above secured
by any Lien on any property or asset owned or held by such Person regardless of
whether the indebtedness secured thereby shall have been assumed by such Person
or is nonrecourse to the credit of such Person, and with respect to the Borrower
and its Subsidiaries shall include, without limitation (but without
duplication), the Junior Subordinated Debentures, the beneficial interests of
the Trust in the Junior Subordinated Debentures, and the Borrower's guarantee to
the holders of the Trust Securities of all of the Trust's obligations under the
Trust Securities.
"Insurance Regulatory Authority" shall mean, with respect to any Insurance
Subsidiary, the insurance department or similar Governmental Authority charged
with regulating insurance companies or insurance holding companies, in its state
of domicile and, to the extent that it has regulatory authority over such
Insurance Subsidiary, in each other jurisdiction in which such Insurance
Subsidiary conducts business or is licensed to conduct business.
"Insurance Subsidiary" shall mean any Subsidiary of the Borrower the
ability of which to pay dividends is regulated by an Insurance Regulatory
Authority or that is otherwise required to be regulated thereby in accordance
with the applicable Requirements of Law of its state of domicile.
"Interest Period" shall have the meaning given to such term in SECTION 2.8.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Junior Subordinated Debentures" shall mean the Borrower's 8.525% Junior
Subordinated Deferrable Interest Debentures due January 15, 2027, issued
pursuant to the Indenture, dated as of January 31, 1997, between the Borrower
and First Union National Bank of North Carolina, as Debenture Trustee, as
amended, modified or supplemented from time to time.
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<PAGE>
"LIBOR Loan" shall mean, at any time, any Loan that bears interest at such
time at the Adjusted LIBOR Rate.
"LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising part of
the same Borrowing for any Interest Period, an interest rate per annum obtained
by dividing (i) (y) the rate of interest appearing on Telerate Page 3750 (or any
successor page) or (z) if no such rate is available, or at the option of the
Administrative Agent in any event, the rate of interest determined by the
Administrative Agent to be the rate or the arithmetic mean of rates (rounded
upward, if necessary, to the nearest 1/16 of one percentage point) at which
Dollar deposits in immediately available funds are offered by First Union to
first-tier banks in the London interbank Eurodollar market, in each case under
(y) and (z) above at approximately 11:00 a.m., London time, two (2) Business
Days prior to the first day of such Interest Period for a period substantially
equal to such Interest Period and in an amount substantially equal to the amount
of First Union's LIBOR Loan comprising part of such Borrowing, by (ii) the
amount equal to 1.00 minus the Reserve Requirement (expressed as a decimal) for
such Interest Period.
"Lender" shall mean each financial institution signatory hereto and each
other financial institution that becomes a "Lender" hereunder pursuant to
SECTION 10.7, and their respective successors and assigns.
"Lending Office" shall mean, with respect to any Lender, the office of such
Lender designated as its "Lending Office" on its signature page hereto or in an
Assignment and Acceptance, or such other office as may be otherwise designated
in writing from time to time by such Lender to the Borrower and the
Administrative Agent. A Lender may designate separate Lending Offices as
provided in the foregoing sentence for the purposes of making or maintaining
different Types of Loans, and, with respect to LIBOR Loans, such office may be a
domestic or foreign branch or Affiliate of such Lender.
"Licenses" shall have the meaning given to such term in SECTION 4.4(C).
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, security
interest, lien (statutory or otherwise), preference, priority, charge or other
encumbrance of any nature, whether voluntary or involuntary, including, without
limitation, the interest of any vendor or lessor under any conditional sale
agreement, title retention agreement, capital lease or any other lease or
arrangement having substantially the same effect as any of the foregoing.
"Loans" shall mean any or all of the Facility A Loans and the Facility B
Loans.
"Margin Percentage" shall mean, at any time, the applicable percentage (a)
to be added to the LIBOR Rate pursuant to SECTION 2.6 for purposes of
determining the Adjusted LIBOR Rate for either Class of Loan and (b) to be used
in calculating the facility fees payable pursuant to SECTIONS 2.7(A) and 2.7(B),
in each case as determined under the following matrix with reference to the
ratings given to the Borrower's senior unsecured long-term publicly traded
Indebtedness without third party credit enhancement:
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<TABLE>
<CAPTION>
Applicable Margin Applicable Margin Applicable Margin Applicable Margin
Percentage for Percentage for Percentage for Percentage for
LIBOR Loans LIBOR Loans Facility Fee Facility Fee
Rating Status (Facility A) (Facility B) (Facility A) Facility B)
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Level I Status 0.165% 0.185% 0.085% 0.065%
Level II Status 0.250% 0.270% 0.100% 0.080%
Level III Status 0.300% 0.320% 0.150% 0.130%
</TABLE>
For purposes of determining any Margin Percentage at any date:
(i) "Level I Status" exists at such date if, as of such date,
the Borrower has senior unsecured long-term publicly traded Indebtedness
without third party credit enhancement that is rated (y) not lower than A3
by Moody's or (z) not lower than A- by Standard & Poor's;
(ii) "Level II Status" exists at such date if, as of such date,
the Borrower has senior unsecured long-term publicly traded Indebtedness
without third party credit enhancement that is rated (y) not lower than
Baa1 by Moody's or (z) not lower than BBB+ by Standard & Poor's; and
(iii) "Level III Status" exists at such date if, as of such date,
neither Level I Status nor Level II Status exists (whether because the
applicable ratings are not provided at such time by Moody's and Standard &
Poor's or are lower in each instance than the respective minimum ratings
required for Level II Status);
provided, however, that if at any time the difference between the Moody's and
- -------- -------
Standard & Poor's ratings at such time is more than one (1) "Rating Grade," then
for purposes of determining the Margin Percentages at such time, the higher of
such two ratings shall be reduced to the rating that is the median between the
higher rating and the lower rating (or its equivalent); or, if the median is not
mathematically determinable, then the higher of such two ratings shall be
reduced to the rating that would have been the median if the higher of such two
ratings were actually one Rating Grade higher. For purposes of the foregoing
sentence, the term "Rating Grade" shall mean and refer to the different debt
ratings (for example, A1, A2, A3 for Moody's and A+, A and A- for Standard &
Poor's) within any particular debt rating category (in the foregoing example,
the rating category of "A" for both Moody's and Standard & Poor's). Any
adjustment required in the Margin Percentages as a result of a change in ratings
as provided hereinabove shall be effective as of the tenth (10th) Business Day
after the effective date of such change.
"Margin Stock" shall have the meaning given to such term in Regulation U.
"Material Adverse Change" shall mean a material adverse change in the
condition (financial or otherwise), operations, business, properties or
financial prospects of the Borrower or the Borrower and its Subsidiaries, taken
as a whole.
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"Material Adverse Effect" shall mean a material adverse effect upon (i) the
condition (financial or otherwise), operations, business, properties or
financial prospects of the Borrower or the Borrower and its Subsidiaries, taken
as a whole, (ii) the ability of the Borrower to perform its obligations under
this Agreement or any of the other Credit Documents or (iii) the legality,
validity or enforceability of this Agreement or any of the other Credit
Documents or the rights and remedies of the Administrative Agent and the Lenders
hereunder and thereunder.
"Moody's" shall mean Moody's Investors Service, Inc., its successors and
assigns.
"Multiemployer Plan" shall mean any "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate
makes, is making or is obligated to make contributions or has made or been
obligated to make contributions.
"NAIC" shall mean the National Association of Insurance Commissioners and
any successor thereto.
"Notes" shall mean the Facility A Notes and the Facility B Notes.
"Notice of Borrowing" shall have the meaning given to such term in SECTION
2.2(B).
"Notice of Conversion/Continuation" shall have the meaning given to such
term in SECTION 2.9(B).
"Obligations" shall mean all principal of and interest (including, to the
greatest extent permitted by law, post-petition interest) on the Loans and all
fees, expenses, indemnities and other obligations owing, due or payable at any
time by the Borrower to the Administrative Agent, any Lender or any other Person
entitled thereto, under this Agreement or any of the other Credit Documents.
"Original Closing Date" shall mean the date upon which the initial
extensions of credit were made pursuant to the Original Credit Agreement.
"Original Credit Agreement" shall have the meaning given to such term in
the recitals hereof.
"Original Credit Agreement Date" shall mean September 24, 1996.
"Original Lenders" shall mean the banks and other financial institutions
that are "Lenders" (within the meaning of the Original Credit Agreement) under
the Original Credit Agreement as of the Amendment Effective Date.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"Participant" shall have the meaning given to such term in SECTION 10.7(D).
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"Permitted Liens" shall have the meaning given to such term in SECTION 7.3.
"Person" shall mean any corporation, association, joint venture,
partnership, limited liability company, organization, business, individual,
trust, government or agency or political subdivision thereof or any other legal
entity.
"Plan" shall mean any "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA that is subject to the provisions of Title IV of ERISA
(other than a Multiemployer Plan) and to which the Borrower or any ERISA
Affiliate may have any liability.
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or by
reason of a Department of Labor prohibited transaction individual or class
exemption or (ii) Section 4975(c) of the Internal Revenue Code that is not
exempt by reason of Section 4975(c)(2) or 4975(d) of the Internal Revenue Code.
"Quarterly Statement" shall mean, with respect to any Insurance Subsidiary
for any fiscal quarter, the quarterly financial statements of such Insurance
Subsidiary as required to be filed with the Insurance Regulatory Authority of
its jurisdiction of domicile, together with all exhibits, schedules,
certificates and actuarial opinions required to be filed or delivered therewith.
"Register" shall have the meaning given to such term in SECTION 10.7(B).
"Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and X,
respectively, of the Federal Reserve Board, and any successor regulations.
"Reportable Event" shall mean (i) any "reportable event" within the meaning
of Section 4043(c) of ERISA for which the 30-day notice under Section 4043(a) of
ERISA has not been waived by the PBGC (including any failure to meet the minimum
funding standard of, or timely make any required installment under, Section 412
of the Internal Revenue Code or Section 302 of ERISA, regardless of the issuance
of any waivers in accordance with Section 412(d) of the Internal Revenue Code),
(ii) any such "reportable event" subject to advance notice to the PBGC under
Section 4043(b)(3) of ERISA, (iii) any application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Internal
Revenue Code, and (iv) a cessation of operations described in Section 4062(e) of
ERISA.
"Required Lenders" shall mean, at any time, the Lenders holding outstanding
Loans and Commitments (or, after the termination of the Commitments, outstanding
Loans) representing more than sixty-six and two-thirds percent (66-2/3%) of the
aggregate at such time of all outstanding Loans and Commitments (or, after the
termination of the Commitments, the aggregate at such time of all outstanding
Loans).
"Requirement of Law" shall mean, with respect to any Person, the charter,
articles or certificate of organization or incorporation and bylaws or other
organizational or governing documents of such Person, and any statute, law,
treaty, rule, regulation, order, decree, writ, injunction or determination of
any arbitrator or court or other Governmental Authority, in each
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case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject or otherwise pertaining to
any or all of the transactions contemplated by this Agreement and the other
Credit Documents.
"Reserve Requirement" shall mean, with respect to any Interest Period, the
reserve percentage (expressed as a decimal) in effect from time to time during
such Interest Period, as provided by the Federal Reserve Board, applied for
determining the maximum reserve requirements (including, without limitation,
basic, supplemental, marginal and emergency reserves) applicable to First Union
under Regulation D with respect to "Eurocurrency liabilities" within the meaning
of Regulation D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding.
"Significant Subsidiary" shall mean, at the relevant time of determination,
any Subsidiary of the Borrower having (after the elimination of intercompany
accounts) (i) assets constituting at least 10% of the total assets of the
Borrower and its Subsidiaries on a consolidated basis, (ii) revenues
constituting at least 10% of the total revenues of the Borrower and its
Subsidiaries on a consolidated basis, or (iii) net earnings constituting at
least 10% of the total net earnings of the Borrower and its Subsidiaries on a
consolidated basis, in each case as determined as of the date of the financial
statements of the Borrower and its Subsidiaries most recently delivered under
SECTION 5.1 prior to such time (or, with regard to determinations at any time
prior to the initial delivery of financial statements under SECTION 5.1, as of
the date of the most recent financial statements referred to in SECTION
4.11(A)).
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, its successors and assigns.
"Statutory Accounting Principles" shall mean, with respect to any Insurance
Subsidiary, the statutory accounting practices prescribed or permitted by the
relevant Insurance Regulatory Authority of its state of domicile, consistently
applied and maintained and in conformity with those used in the preparation of
the most recent Historical Financial Statements.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of
directors, in the case of a corporation, or of the ownership or beneficial
interests, in the case of a Person not a corporation, is at the time, directly
or indirectly, owned or controlled by such Person and one or more of its other
Subsidiaries or a combination thereof (irrespective of whether, at the time,
securities of any other class or classes of any such corporation or other Person
shall or might have voting power by reason of the happening of any contingency).
When used without reference to a parent entity, the term "Subsidiary" shall be
deemed to refer to a Subsidiary of the Borrower.
"Torchmark" shall mean Torchmark Corporation, a Delaware corporation, and
its successors and assigns.
"Trust" shall mean Vesta Capital Trust I, a Delaware statutory business
trust.
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"Trust Securities" shall mean the 8.525% Capital Securities issued by the
Trust and representing preferred beneficial interests in the Trust.
"Type" shall have the meaning given to such term in SECTION 2.2(A).
"Unfunded Pension Liability" shall mean, with respect to any Plan or
Multiemployer Plan, the excess of its benefit liabilities under Section
4001(a)(16) of ERISA over the current value of its assets, determined in
accordance with the applicable assumptions used for funding under Section 412 of
the Code for the applicable plan year.
"VFIC" shall mean Vesta Fire Insurance Corporation, an Alabama corporation.
"Wholly Owned" shall mean, with respect to any Subsidiary of any Person,
that 100% of the outstanding capital stock or other ownership interests of such
Subsidiary is owned, directly or indirectly, by such Person.
.1. Accounting Terms. Except as specifically provided otherwise in this
----------------
Agreement, all accounting terms used herein that are not specifically defined
shall have the meanings customarily given them, and all financial computations
hereunder shall be made, in accordance with Generally Accepted Accounting
Principles (or, to the extent that such terms apply solely to any Insurance
Subsidiary or if otherwise expressly required, Statutory Accounting Principles).
Notwithstanding the foregoing, in the event that any changes in Generally
Accepted Accounting Principles or Statutory Accounting Principles after the date
hereof are required to be applied to the transactions described herein and would
affect the computation of the financial covenants contained in SECTIONS 6.1
through 6.4, as applicable, such changes shall be followed only from and after
the date this Agreement shall have been amended to take into account any such
changes. References to amounts on particular exhibits, schedules, lines, pages
and columns of any Annual Statement or Quarterly Statement are based on the
format promulgated by the NAIC for the 1995 Annual Statements and Quarterly
Statements. In the event such format is changed in future years so that
different information is contained in such items or they no longer exist, or if
the Annual Statement or Quarterly Statement is replaced by the NAIC or by any
Insurance Regulatory Authority after the date hereof such that different forms
of financial statements are required to be furnished by the Insurance
Subsidiaries in lieu thereof, such references shall be to information consistent
with that reported in the referenced item in the 1995 Annual Statements or
Quarterly Statements, as the case may be.
.2. Other Terms; Construction. Unless otherwise specified or unless the
-------------------------
context otherwise requires, all references herein to sections, annexes,
schedules and exhibits are references to sections, annexes, schedules and
exhibits in and to this Agreement, and all terms defined in this Agreement shall
have the defined meanings when used in any other Credit Document or any
certificate or other document made or delivered pursuant hereto.
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ARTICLE I
AMOUNT AND TERMS OF THE LOANS
I.1. Commitments; Loans. (a) Each Facility A Lender severally agrees,
------------------
subject to and on the terms and conditions of this Agreement, to make loans
(each, a "Facility A Loan," and collectively, the "Facility A Loans") to the
Borrower, from time to time on any Business Day during the period from and
including the Amendment Effective Date to but not including the Facility A
Termination Date, in an aggregate principal amount at any time outstanding not
exceeding its Facility A Commitment at such time, provided that no Borrowing of
--------
Facility A Loans shall be made if, immediately after giving effect thereto, the
aggregate principal amount of Facility A Loans outstanding at such time would
exceed the aggregate Facility A Commitments at such time. Subject to and on the
terms and conditions of this Agreement, the Borrower may borrow, repay and
reborrow Facility A Loans.
(b) Each Facility B Lender severally agrees, subject to and on the terms
and conditions of this Agreement, to make loans (each, a "Facility B Loan," and
collectively, the "Facility B Loans") to the Borrower, from time to time on any
Business Day during the period from and including the Amendment Effective Date
to but not including the Facility B Termination Date, in an aggregate principal
amount at any time outstanding not exceeding its Facility B Commitment at such
time, provided that no Borrowing of Facility B Loans shall be made if,
--------
immediately after giving effect thereto, the aggregate principal amount of
Facility B Loans outstanding at such time would exceed the aggregate Facility B
Commitments at such time. Subject to and on the terms and conditions of this
Agreement, the Borrower may borrow, repay and reborrow Facility B Loans.
(c) On the Amendment Effective Date, the aggregate outstanding principal
amount of any and all Loans (as defined in the Original Credit Agreement) made
pursuant to the Original Credit Agreement and outstanding on the Amendment
Effective Date (collectively, the "Existing Loans") shall automatically be
converted to an equivalent principal amount of Facility A Loans hereunder, made
by the Facility A Lenders ratably in accordance with their respective Facility A
Commitments, and for all purposes of this Agreement shall be deemed to be
Facility A Loans hereunder and entitled to the benefits of this Agreement and
the other Credit Documents.
I.2. Borrowings. (a) The Facility A Loans and the Facility B Loans (each,
----------
a "Class" of Loan) shall, at the option of the Borrower and subject to the terms
and conditions of this Agreement, be either Base Rate Loans or LIBOR Loans
(each, a "Type" of Loan), provided that (i) all Loans comprising the same
--------
Borrowing shall, unless otherwise specifically provided herein, be of the same
Type, and (ii) notwithstanding any other provision of this Agreement, all
Facility B Loans made prior to the third (3rd) Business Day after the Amendment
Effective Date shall be made initially as Base Rate Loans.
(b) In order to make a Borrowing (other than Borrowings involving
continuations or conversions of outstanding Loans, which shall be made pursuant
to SECTION 2.9), the Borrower will give the Administrative Agent written notice
not later than 11:00 a.m., Charlotte time, three (3) Business Days prior to each
Borrowing to be comprised of LIBOR Loans and one (1)
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Business Day prior to each Borrowing to be comprised of Base Rate Loans;
provided, however, that a request for a Borrowing of Facility B Loans to be made
- -------- -------
on the Amendment Effective Date as Base Rate Loans may, at the discretion of the
Administrative Agent, be given later than the time specified therefor as set
forth hereinabove. Each such notice (each, a "Notice of Borrowing") shall be
irrevocable, shall be given in the form of EXHIBIT B-1 and shall specify (a) the
aggregate principal amount, Class and initial Type of the Loans to be made
pursuant to such Borrowing, (b) in the case of a Borrowing of LIBOR Loans, the
initial Interest Period to be applicable thereto, and (c) the requested
Borrowing Date, which shall be a Business Day. Notwithstanding anything to the
contrary contained herein:
(i) the aggregate principal amount of each Borrowing comprised
of Base Rate Loans shall not be less than $1,000,000 or, if greater, an
integral multiple of $500,000 in excess thereof (or, if less, in the amount
of the Aggregate Unutilized Facility A Commitments or Aggregate Unutilized
Facility B Commitments, as applicable), and the aggregate principal amount
of each Borrowing comprised of LIBOR Loans shall not be less than
$3,000,000 or, if greater, an integral multiple of $1,000,000 in excess
thereof;
(ii) if the Borrower shall have failed to designate the Class of
Loans comprising a Borrowing, the Borrower shall be deemed to have
requested a Borrowing comprised of Facility A Loans;
(iii) if the Borrower shall have failed to designate the Type of
Loans comprising a Borrowing, the Borrower shall be deemed to have
requested a Borrowing comprised of Base Rate Loans; and
(iv) if the Borrower shall have failed to select the duration of
the Interest Period to be applicable to any Borrowing of LIBOR Loans, then
the Borrower shall be deemed to have selected an Interest Period with a
duration of one month.
(c) Upon its receipt of a Notice of Borrowing, the Administrative Agent
will promptly notify each Lender having a Commitment under the relevant Facility
of the proposed Borrowing. Not later than 1:00 p.m., Charlotte time, on the
requested Borrowing Date, each applicable Lender will make available to the
Administrative Agent at its office referred to in SECTION 10.5 (or at such other
location as the Administrative Agent may designate) an amount, in Dollars and in
immediately available funds, equal to the amount of the Loan to be made by such
Lender. To the extent the applicable Lenders have made such amounts available
to the Administrative Agent as provided hereinabove, the Administrative Agent
will make the aggregate of such amounts available to the Borrower in accordance
with subsection (d) below and in like funds as received by the Administrative
Agent.
(d) The Borrower hereby authorizes the Administrative Agent to disburse
the proceeds of each Borrowing in accordance with the terms of any written
instructions from any of the Authorized Officers, provided that the
--------
Administrative Agent shall not be obligated under any circumstances to forward
amounts to any account not listed in an Account Designation Letter. The
Borrower may at any time deliver to the Administrative Agent an Account
Designation Letter listing any additional accounts or deleting any accounts
listed in a previous Account Designation Letter.
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(e) Unless the Administrative Agent has received, prior to 1:00 p.m.,
Charlotte time, on the relevant Borrowing Date, written notice from a Lender
that such Lender will not make available to the Administrative Agent such
Lender's ratable portion, if any, of the relevant Borrowing, the Administrative
Agent may assume that such Lender has made such portion available to the
Administrative Agent in immediately available funds on such Borrowing Date in
accordance with subsection (c) above, and the Administrative Agent may, in
reliance upon such assumption, but shall not be obligated to, make a
corresponding amount available to the Borrower on such Borrowing Date. If and
to the extent that such Lender shall not have made such portion available to the
Administrative Agent, and the Administrative Agent shall have made such
corresponding amount available to the Borrower, such Lender, on the one hand,
and the Borrower, on the other, severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount, together with interest
thereon for each day from the date such amount is made available to the Borrower
until the date such amount is repaid to the Administrative Agent, (i) in the
case of such Lender, at the Federal Funds Rate, and (ii) in the case of the
Borrower, at the rate of interest applicable at such time to the Class and Type
of Loans comprising such Borrowing, as determined under the provisions of
SECTION 2.6. If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount shall constitute such Lender's Loan as part of
such Borrowing for purposes of this Agreement. The failure of any Lender to
make any Loan required to be made by it as part of any Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its Loan
as part of such Borrowing, but no Lender shall be responsible for the failure of
any other Lender to make the Loan to be made by such other Lender as part of any
Borrowing.
(f) Each Lender may, at its option, make and maintain any Loan at, to or
for the account of any of its Lending Offices, provided that any exercise of
--------
such option shall not affect the obligation of the Borrower to repay such Loan
to or for the account of such Lender in accordance with the terms of this
Agreement.
I.3. Notes. (a) The Loans made by each Lender shall be evidenced (i) in
-----
the case of Facility A Loans, by a Facility A Note appropriately completed in
substantially the form of EXHIBIT A-1, and (ii) in the case of Facility B Loans,
by a Facility B Note appropriately completed in substantially the form of
EXHIBIT A-2.
(b) Each Facility A Note issued to a Facility A Lender shall (i) be
executed by the Borrower, (ii) be payable to the order of such Lender, (iii) be
dated as of the Amendment Effective Date, (iv) be in a stated principal amount
equal to such Lender's Facility A Commitment, (v) bear interest in accordance
with the provisions of SECTION 2.6, as the same may be applicable to the
Facility A Loans made by such Lender from time to time, and (vi) be entitled to
all of the benefits of this Agreement and the other Credit Documents and subject
to the provisions hereof and thereof.
(c) Each Facility B Note issued to a Facility B Lender shall (i) be
executed by the Borrower, (ii) be payable to the order of such Lender, (iii) be
dated as of the Amendment Effective Date, (iv) be in a stated principal amount
equal to such Lender's Facility B Commitment, (v) bear interest in accordance
with the provisions of SECTION 2.6, as the same may be applicable to the
Facility B Loans made by such Lender from time to time, and (vi) be
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entitled to all of the benefits of this Agreement and the other Credit Documents
and subject to the provisions hereof and thereof.
(d) Each Lender will record on its internal records the amount of each
Loan made by it and each payment received by it in respect thereof and will, in
the event of any transfer of any of its Notes, either endorse on the reverse
side thereof or on a schedule attached thereto (or any continuation thereof) the
outstanding principal amount of the Loans evidenced thereby as of the date of
transfer or provide such information on a schedule to the Assignment and
Acceptance relating to such transfer; provided, however, that the failure of any
-------- -------
Lender to make any such recordation or provide any such information, or any
error therein, shall not affect the Borrower's obligations under this Agreement
or the Notes.
I.4. Termination and Reduction of Commitments. (a) The Facility A
----------------------------------------
Commitments shall be automatically and permanently terminated on the Facility A
Maturity Date unless sooner terminated pursuant to subsection (b) below or
SECTION 8.2. The Facility B Commitments shall be automatically and permanently
terminated on the Facility B Maturity Date unless sooner terminated pursuant to
subsection (b) below or SECTION 8.2.
(b) At any time and from time to time after the date hereof, upon not less
than five (5) Business Days' prior written notice to the Administrative Agent,
the Borrower may terminate in whole or reduce in part the Aggregate Unutilized
Facility A Commitments or the Aggregate Unutilized Facility B Commitments,
provided that any such partial reduction shall be in an aggregate amount of not
- --------
less than $10,000,000 or, if greater, an integral multiple thereof. The amount
of any termination or reduction made under this subsection (b) may not
thereafter be reinstated. Each reduction of the Commitments pursuant to this
subsection (b) shall be applied ratably among the Facility A Lenders or the
Facility B Lenders, as the case may be, according to their respective
Commitments under the applicable Facility.
I.5. Mandatory and Voluntary Payments and Prepayments. (a) Except to the
------------------------------------------------
extent due or made sooner pursuant to the provisions of this Agreement, (i) the
Borrower will repay the aggregate outstanding principal amount of the Facility A
Loans in full on the Facility A Maturity Date and (ii) the Borrower will repay
the aggregate outstanding principal amount of the Facility B Loans in full on
the Facility B Maturity Date.
(b) In the event that, at any time, the aggregate principal amount of
Facility A Loans or Facility B Loans outstanding at such time shall exceed the
aggregate Facility A Commitments or Facility B Commitments, respectively, at
such time (after giving effect to any concurrent termination or reduction
thereof), the Borrower will immediately prepay the outstanding principal amount
of the applicable Class of Loans in the amount of such excess. Each prepayment
of the Loans under either Facility made pursuant to this subsection (b) shall be
applied ratably among the Lenders having Commitments under such Facility, in
proportion to the principal amount of such Loans held by each.
(c) At any time and from time to time, the Borrower shall have the right
to prepay the Loans, in whole or in part, without premium or penalty (except as
provided in clause (iii) below), upon written notice to the Administrative Agent
given not later than 11:00 a.m., Charlotte time, three (3) Business Days prior
to each intended prepayment of LIBOR Loans and
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one (1) Business Day prior to each intended prepayment of Base Rate Loans,
provided that (i) each partial prepayment shall be in an aggregate principal
- --------
amount of not less than $1,000,000 or, if greater, an integral multiple of
$500,000 in excess thereof, (ii) no partial prepayment of LIBOR Loans made
pursuant to any single Borrowing shall reduce the aggregate outstanding
principal amount of the remaining LIBOR Loans under such Borrowing to less than
$3,000,000 or to any greater amount not an integral multiple of $1,000,000 in
excess thereof, and (iii) unless made together with all amounts required under
SECTION 2.16 to be paid as a consequence of such prepayment, a prepayment of a
LIBOR Loan may be made only on the last day of the Interest Period applicable
thereto. Each such notice shall specify the proposed date of such prepayment and
the aggregate principal amount, Classes and the Types of the Loans to be prepaid
(and, in the case of LIBOR Loans, the Interest Period of the Borrowing pursuant
to which made) and shall be irrevocable and shall bind the Borrower to make such
prepayment on the terms specified therein. Amounts prepaid pursuant to this
subsection (c) may be reborrowed, subject to the terms and conditions of this
Agreement. Each prepayment of the Loans under either Facility made pursuant to
this subsection (c) shall be applied ratably among the Lenders having
Commitments under such Facility, in proportion to the principal amount of such
Loans held by each.
(d) Each payment or prepayment of a LIBOR Loan made pursuant to the
provisions of this SECTION 2.5 on a day other than the last day of the Interest
Period applicable thereto shall be made together with all amounts required under
SECTION 2.16 to be paid as a consequence thereof.
I.6. Interest. (a) The Borrower will pay interest in respect of the
--------
unpaid principal amount of each Loan, from the date of Borrowing thereof until
such principal amount shall be paid in full, (i) at the Base Rate, as in effect
from time to time during such periods as such Loan is a Base Rate Loan, and (ii)
at the Adjusted LIBOR Rate applicable to the Class of such Loan, as in effect
from time to time during such periods as such Loan is a LIBOR Loan.
(b) Any principal amounts of the Loans not paid when due and, to the
greatest extent permitted by law, all interest accrued on the Loans and all
other fees and amounts hereunder not paid when due (whether at maturity,
pursuant to acceleration or otherwise), shall bear interest at a rate per annum
equal to the interest rate applicable from time to time thereafter to such Loans
(whether the Base Rate or the Adjusted LIBOR Rate) plus 2% (or, in the case of
fees and other amounts, at the Base Rate plus 2%), and, in each case, such
default interest shall be payable on demand. To the greatest extent permitted
by law, interest shall continue to accrue after the filing by or against the
Borrower of any petition seeking any relief in bankruptcy or under any law
pertaining to insolvency or debtor relief.
(c) Accrued (and theretofore unpaid) interest shall be payable as follows:
(i) in respect of each Base Rate Loan (including any Base Rate
Loan or portion thereof paid or prepaid pursuant to the provisions of
SECTION 2.5, except as provided hereinbelow), in arrears on the last
Business Day of each calendar quarter; provided, that in the event the
--------
Loans are repaid or prepaid in full and the Commitments have been
terminated, then accrued interest in respect of all Base Rate Loans shall
be payable together with such repayment or prepayment on the date
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thereof;
(ii) in respect of each LIBOR Loan (including any LIBOR Loan or
portion thereof paid or prepaid pursuant to the provisions of SECTION 2.5,
except as provided hereinbelow), in arrears on the last Business Day of the
Interest Period applicable thereto (subject to the provisions of clause
(iv) in SECTION 2.8); provided, that in the event all LIBOR Loans made
--------
pursuant to a single Borrowing are repaid or prepaid in full, then accrued
interest in respect of such LIBOR Loans shall be payable together with such
repayment or prepayment on the date thereof; and
(iii) in respect of any Loan, at maturity (whether pursuant to
acceleration or otherwise) and, after maturity, on demand.
(d) Nothing contained in this Agreement or in any other Credit Document
shall be deemed to establish or require the payment of interest to any Lender at
a rate in excess of the maximum rate permitted by applicable law. If the amount
of interest payable for the account of any Lender on any interest payment date
would exceed the maximum amount permitted by applicable law to be charged by
such Lender, the amount of interest payable for its account on such interest
payment date shall be automatically reduced to such maximum permissible amount.
In the event of any such reduction affecting any Lender, if from time to time
thereafter the amount of interest payable for the account of such Lender on any
interest payment date would be less than the maximum amount permitted by
applicable law to be charged by such Lender, then the amount of interest payable
for its account on such subsequent interest payment date shall be automatically
increased to such maximum permissible amount, provided that at no time shall the
--------
aggregate amount by which interest paid for the account of any Lender has been
increased pursuant to this sentence exceed the aggregate amount by which
interest paid for its account has theretofore been reduced pursuant to the
previous sentence.
(e) The Administrative Agent shall promptly notify the Borrower and the
Lenders upon determining the interest rate for each Borrowing of LIBOR Loans
after its receipt of the relevant Notice of Borrowing or Notice of
Conversion/Continuation; provided, however, that the failure of the
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Administrative Agent to provide the Borrower or the Lenders with any such notice
shall neither affect any obligations of the Borrower or the Lenders hereunder
nor result in any liability on the part of the Administrative Agent to the
Borrower or any Lender. Each such determination (including each determination
of the Reserve Requirement) shall, absent manifest error, be conclusive and
binding on all parties hereto.
I.7. Fees. The Borrower agrees to pay:
----
(a) To the Administrative Agent, for the account of each Facility A
Lender, a facility fee for the period from the Original Credit Agreement Date to
the Facility A Termination Date, at a per annum rate equal to the applicable
Margin Percentage on the average daily Facility A Commitment of such Lender
(whether or not used), payable in arrears (i) on the last Business Day of each
calendar quarter, and (ii) on the Facility A Termination Date;
(b) To the Administrative Agent, for the account of each Facility B
Lender, a facility
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fee for the period from the date of this Agreement to the Facility B Termination
Date, at a per annum rate equal to the applicable Margin Percentage on the
average daily Facility B Commitment of such Lender (whether or not used),
payable in arrears (i) on the last Business Day of each calendar quarter, and
(ii) on the Facility B Termination Date; and
(c) To the Administrative Agent, for its own account, the annual
administrative fee described in the Fee Letter, on the terms, in the amount and
at the times set forth therein.
I.8. Interest Periods. Concurrently with the giving of a Notice of
----------------
Borrowing or Notice of Conversion/Continuation in respect of any Borrowing
comprised of LIBOR Loans, the Borrower shall have the right to elect, pursuant
to such notice, the interest period (each, an "Interest Period") to be
applicable to such LIBOR Loans, which Interest Period shall, at the option of
the Borrower, be a one, two or three-month period; provided, however, that:
-------- -------
(i) all LIBOR Loans comprising a single Borrowing shall at all
times have the same Interest Period;
(ii) the initial Interest Period for any LIBOR Loan shall
commence on the date of the Borrowing of such LIBOR Loan (including the
date of any continuation of, or conversion into, such LIBOR Loan), and each
successive Interest Period applicable to such LIBOR Loan shall commence on
the day on which the next preceding Interest Period applicable thereto
expires;
(iii) LIBOR Loans may not be outstanding under more than five (5)
separate Interest Periods at any one time (for which purpose Interest
Periods shall be deemed to be separate even if they are coterminous);
(iv) if any Interest Period otherwise would expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day unless such next succeeding Business Day falls in
another calendar month, in which case such Interest Period shall expire on
the next preceding Business Day;
(v) the Borrower may not select any Interest Period (y) with
respect to Facility A Loans that are to be maintained as LIBOR Loans, that
expires after the Facility A Maturity Date, or (z) with respect to Facility
B Loans that are to be maintained as LIBOR Loans, that begins prior to the
Amendment Effective Date or that expires after the Facility B Maturity
Date;
(vi) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month during which such
Interest Period would otherwise expire, such Interest Period shall expire
on the last Business Day of such calendar month; and
(vii) if, upon the expiration of any Interest Period applicable to
a Borrowing of LIBOR Loans, the Borrower shall have failed to elect a new
Interest Period to be applicable to such LIBOR Loans, then the Borrower
shall be deemed to have elected to convert such LIBOR Loans into Base Rate
Loans as of the expiration of the then current
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Interest Period applicable thereto.
I.9. Conversions and Continuations. (a) The Borrower shall have the
-----------------------------
right, on any Business Day occurring (a) with respect to Facility A Loans, on or
after the Amendment Effective Date, and (b) with respect to Facility B Loans, on
or after the third (3rd) Business Day after the Amendment Effective Date, to
elect (i) to convert all or a portion of the outstanding principal amount of any
Base Rate Loans of either Class into LIBOR Loans of the same Class, or to
convert any LIBOR Loans of either Class the Interest Periods for which end on
the same day into Base Rate Loans of the same Class, or (ii) to continue all or
a portion of the outstanding principal amount of any LIBOR Loans of either Class
the Interest Periods for which end on the same day for an additional Interest
Period, provided that (x) any such conversion of LIBOR Loans into Base Rate
--------
Loans shall involve an aggregate principal amount of not less than $1,000,000
or, if greater, an integral multiple of $500,000 in excess thereof; any such
conversion of Base Rate Loans into, or continuation of, LIBOR Loans shall
involve an aggregate principal amount of not less than $3,000,000 or, if
greater, an integral multiple of $1,000,000 in excess thereof; and no partial
conversion of LIBOR Loans made pursuant to a single Borrowing shall reduce the
outstanding principal amount of such LIBOR Loans to less than $3,000,000 or to
any greater amount not an integral multiple of $1,000,000 in excess thereof, (y)
except as otherwise provided in SECTION 2.14(D), LIBOR Loans may be converted
into Base Rate Loans only on the last day of the Interest Period applicable
thereto (and, in any event, if a LIBOR Loan is converted into a Base Rate Loan
on any day other than the last day of the Interest Period applicable thereto,
the Borrower will pay, upon such conversion, all amounts required under SECTION
2.16 to be paid as a consequence thereof) and (z) no conversion of Base Rate
Loans into LIBOR Loans or continuation of LIBOR Loans shall be permitted during
the continuance of a Default or Event of Default.
(b) The Borrower shall make each such election by giving the
Administrative Agent written notice not later than 11:00 a.m., Charlotte time,
three (3) Business Days prior to the intended effective date of any conversion
of Base Rate Loans into, or continuation of, LIBOR Loans and one (1) Business
Day prior to the intended effective date of any conversion of LIBOR Loans into
Base Rate Loans. Each such notice (each, a "Notice of Conversion/Continuation")
shall be irrevocable, shall be given in the form of EXHIBIT B-2 and shall
specify (x) the date of such conversion or continuation (which shall be a
Business Day), (y) in the case of a conversion into, or a continuation of, LIBOR
Loans, the Interest Period to be applicable thereto, and (z) the aggregate
amount, Class and Type of the Loans being converted or continued. Upon the
receipt of a Notice of Conversion/Continuation, the Administrative Agent will
promptly notify each Lender having a Commitment under the relevant Facility (or
outstanding Loans under such Facility, in the event the relevant Commitments
have been terminated) of the proposed conversion or continuation. In the event
that the Borrower shall fail to deliver a Notice of Conversion/Continuation as
provided herein with respect to any outstanding LIBOR Loans, such LIBOR Loans
shall automatically be converted to Base Rate Loans upon the expiration of the
then current Interest Period applicable thereto (unless repaid pursuant to the
terms hereof).
I.10. Method of Payments; Computations. (a) All payments by the Borrower
--------------------------------
hereunder shall be made without setoff, counterclaim or other defense, in
Dollars and in immediately available funds to the Administrative Agent, for the
account of the Lenders
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entitled to such payment (except as otherwise expressly provided herein as to
payments required to be made directly to the Lenders) at its office referred to
in SECTION 10.5, prior to 12:00 noon, Charlotte time, on the date payment is
due. Any payment made as required hereinabove, but after 12:00 noon, Charlotte
time, shall be deemed to have been made on the next succeeding Business Day. If
any payment falls due on a day that is not a Business Day, then such due date
shall be extended to the next succeeding Business Day (except that in the case
of LIBOR Loans to which the proviso of clause (iv) in SECTION 2.8 is applicable,
such due date shall be the next preceding Business Day), and such extension of
time shall then be included in the computation of payment of interest, fees or
other applicable amounts.
(b) The Administrative Agent will distribute to the Lenders like amounts
relating to payments made to the Administrative Agent for the account of the
Lenders as follows: (i) if the payment is received by 12:00 noon, Charlotte
time, in immediately available funds, the Administrative Agent will make
available to each relevant Lender on the same date, by wire transfer of
immediately available funds, such Lender's ratable share of such payment (based
on the percentage that the amount of the relevant payment owing to such Lender
bears to the total amount of such payment owing to all of the relevant Lenders),
and (ii) if such payment is received after 12:00 noon, Charlotte time, or in
other than immediately available funds, the Administrative Agent will make
available to each such Lender its ratable share of such payment by wire transfer
of immediately available funds on the next succeeding Business Day (or in the
case of uncollected funds, as soon as practicable after collected). If the
Administrative Agent shall not have made a required distribution to the
appropriate Lenders as required hereinabove after receiving a payment for the
account of such Lenders, the Administrative Agent will pay to each such Lender,
on demand, its ratable share of such payment with interest thereon at the
Federal Funds Rate for each day from the date such amount was required to be
disbursed by the Administrative Agent until the date repaid to such Lender.
(c) Unless the Administrative Agent shall have received written notice
from the Borrower prior to the date on which any payment is due to any Lender
hereunder that such payment will not be made in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date, and the Administrative Agent may, in reliance on such
assumption, but shall not be obligated to, cause to be distributed to such
Lender on such due date an amount equal to the amount then due to such Lender.
If and to the extent the Borrower shall not have so made such payment in full to
the Administrative Agent, and without limiting the obligation of the Borrower to
make such payment in accordance with the terms hereof, such Lender shall repay
to the Administrative Agent forthwith on demand such amount so distributed to
such Lender, together with interest thereon for each day from the date such
amount is so distributed to such Lender until the date repaid to the
Administrative Agent, at the Federal Funds Rate.
(d) Each Lender for whose account any payment is to be made hereunder may,
but shall not be obligated to, debit the amount of any such payment not made as
and when required hereunder to any ordinary deposit account of the Borrower with
such Lender (with prompt notice to the Administrative Agent and the Borrower);
provided, however, that the failure to give such notice shall not affect the
- -------- -------
validity of such debit by such Lender.
(e) With respect to each payment hereunder, except as specifically
provided
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otherwise herein or in any of the other Credit Documents, the Borrower
may designate by written notice to the Administrative Agent prior to or
concurrently with such payment the specific Loans or other Obligations that are
to be paid, repaid or prepaid, provided that (i) unless made together with all
--------
amounts required under SECTION 2.16 to be paid as a consequence thereof, a
prepayment of a LIBOR Loan may be made only on the last day of the Interest
Period applicable thereto, and (ii) each payment on account of any Obligations
to or for the account of any one or more Lenders shall be apportioned ratably
among such Lenders in proportion to the amounts of such Obligations owed to them
respectively. In the absence of any such designation by the Borrower, or if an
Event of Default has occurred and is continuing, the Administrative Agent shall
make such designation in its sole discretion or as the Required Lenders may
direct, subject to the foregoing and to the other provisions of this Agreement.
(f) All computations of interest and fees hereunder (including
computations of the Reserve Requirement) shall be made on the basis of a year
consisting of 360 days and the actual number of days (including the first day,
but excluding the last day) elapsed.
I.11. Recovery of Payments. (a) The Borrower agrees that to the extent
--------------------
the Borrower makes a payment or payments to or for the account of the
Administrative Agent or any Lender, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy, insolvency or similar state or federal law, common law or
equitable cause, then, to the extent of such payment or repayment, the
Obligation intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been received.
(b) If any amounts distributed by the Administrative Agent to any Lender
are subsequently returned or repaid by the Administrative Agent to the Borrower
or its representative or successor in interest, whether by court order or by
settlement approved by the Lender in question, such Lender will, promptly upon
receipt of notice thereof from the Administrative Agent, pay the Administrative
Agent such amount. If any such amounts are recovered by the Administrative
Agent from the Borrower or its representative or successor in interest, the
Administrative Agent will redistribute such amounts to the Lenders on the same
basis as such amounts were originally distributed.
I.12. Use of Proceeds._. The proceeds of the Loans (as defined in the
---------------
Original Credit Agreement) made pursuant to the Original Credit Agreement were
used to repay the Terminating Senior Indebtedness (as defined in the Original
Credit Agreement) in full, to pay or reimburse reasonable transaction fees and
expenses in connection with the consummation of the transactions contemplated by
the Original Credit Agreement, and for working capital and general corporate
purposes. The proceeds of the Loans made on or after the Amendment Effective
Date will be used to pay or reimburse reasonable transaction fees and expenses
(if necessary) in connection with the consummation of the transactions
contemplated hereby and for working capital and general corporate purposes
(including to bridge receivables from insurers and to provide bridge financing
for acquisitions).
I.13. Pro Rata Treatment; Sharing of Payments. (a) All fundings,
---------------------------------------
continuations and conversions of Loans of either Class shall be made by the
Lenders pro rata on the basis of their
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respective Commitments to provide Loans of such Class (in the case of the
initial funding of Loans of such Class pursuant to SECTION 2.2) or on the basis
of their respective outstanding Loans of such Class (in the case of
continuations and conversions of outstanding Loans of such Class pursuant to
SECTION 2.9 and in the event the Commitments to provide Loans of such Class have
expired or have been terminated), as applicable from time to time. All payments
on account of principal of or interest on any Loans, fees or any other
Obligations owing to or for the account of any one or more Lenders shall be
apportioned ratably among such Lenders in proportion to the amounts of such
principal, interest, fees or other Obligations owed to them respectively.
(b) Each Lender agrees that if it shall receive any amount hereunder
(whether by voluntary payment, realization upon security, exercise of the right
of setoff or banker's lien, counterclaim or cross action, or otherwise, other
than pursuant to SECTION 10.7) applicable to the payment of any of the
Obligations that exceeds its ratable share (according to the proportion of (i)
the amount of such Obligations due and payable to such Lender at such time to
(ii) the aggregate amount of such Obligations due and payable to all Lenders at
such time) of payments on account of such Obligations then or therewith obtained
by all the Lenders to which such payments are required to have been made, such
Lender shall forthwith purchase from the other Lenders such participations in
such Obligations as shall be necessary to cause such purchasing Lender to share
the excess payment or other recovery ratably with each of them; provided,
--------
however, that if all or any portion of such excess payment is thereafter
- -------
recovered from such purchasing Lender, such purchase from each such other Lender
shall be rescinded and each such other Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery, together with an
amount equal to such other Lender's ratable share (according to the proportion
of (i) the amount of such other Lender's required repayment to (ii) the total
amount so recovered from the purchasing Lender) of any interest or other amount
paid or payable by the purchasing Lender in respect of the total amount so
recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to the provisions of this subsection may, to the
fullest extent permitted by law, exercise any and all rights of payment
(including, without limitation, setoff, banker's lien or counterclaim) with
respect to such participation as fully as if such participant were a direct
creditor of the Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or similar law, any Lender receives a secured
claim in lieu of a setoff to which this subsection applies, such Lender shall,
to the extent practicable, exercise its rights in respect of such secured claim
in a manner consistent with the rights of the Lenders entitled under this
subsection to share in the benefits of any recovery on such secured claim.
I.14. Increased Costs; Change in Circumstances; Illegality; etc. (a) If,
---------------------------------------------------------
at any time after the date hereof and from time to time, the introduction of or
any change in any applicable law, rule or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender with any
guideline or request from any such Governmental Authority (whether or not having
the force of law), shall (i) subject such Lender to any tax or other charge, or
change the basis of taxation of payments to such Lender, in respect of any of
its LIBOR Loans or any other amounts payable hereunder or its obligation to
make, fund or maintain any LIBOR Loans (other than any change in the rate or
basis of tax on the overall net income of such Lender or its applicable Lending
Office), (ii) impose, modify or deem applicable any reserve, special deposit
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or similar requirement (other than as a result of any change in the Reserve
Requirement) against assets of, deposits with or for the account of, or credit
extended by, such Lender or its applicable Lending Office, or (iii) impose on
such Lender or its applicable Lending Office any other condition affecting its
LIBOR Loans, and the result of any of the foregoing shall be to increase the
cost to such Lender of making or maintaining any LIBOR Loans or to reduce the
amount of any sum received or receivable by such Lender hereunder, the Borrower
will, promptly upon demand therefor by such Lender, pay to such Lender such
additional amounts as shall compensate such Lender for such increase in costs or
reduction in return.
(b) If, at any time after the date hereof and from time to time, any
Lender shall have reasonably determined that the introduction of or any change
in any applicable law, rule or regulation regarding capital adequacy or in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof, or compliance by such Lender
with any guideline or request from any such Governmental Authority (whether or
not having the force of law), has or would have the effect, as a consequence of
such Lender's Commitments or Loans hereunder, of reducing the rate of return on
the capital of such Lender or any Person controlling such Lender to a level
below that which such Lender or controlling Person could have achieved but for
such introduction, change or compliance (taking into account such Lender's or
controlling Person's policies with respect to capital adequacy), the Borrower
will, promptly upon demand therefor by such Lender therefor, pay to such Lender
such additional amounts as will compensate such Lender or controlling Person for
such reduction in return.
(c) If, on or prior to the first day of any Interest Period, (y) the
Administrative Agent shall have determined that adequate and reasonable means do
not exist for ascertaining the applicable LIBOR Rate for such Interest Period or
(z) the Administrative Agent shall have received written notice from the
Required Lenders of their determination that the rate of interest referred to in
the definition of "LIBOR Rate" upon the basis of which the Adjusted LIBOR Rate
for LIBOR Loans for such Interest Period is to be determined will not adequately
and fairly reflect the cost to such Lenders of making or maintaining LIBOR Loans
during such Interest Period, the Administrative Agent will forthwith so notify
the Borrower and the Lenders. Upon such notice, (i) all then outstanding LIBOR
Loans shall automatically, on the expiration date of the respective Interest
Periods applicable thereto (unless then repaid in full), be converted into Base
Rate Loans, (ii) the obligation of the Lenders to make, to convert Base Rate
Loans into, or to continue, LIBOR Loans shall be suspended (including pursuant
to the Borrowing to which such Interest Period applies), and (iii) any Notice of
Borrowing or Notice of Conversion/Continuation given at any time thereafter with
respect to LIBOR Loans shall be deemed to be a request for Base Rate Loans, in
each case until the Administrative Agent or the Required Lenders, as the case
may be, shall have determined that the circumstances giving rise to such
suspension no longer exist (and the Required Lenders, if making such
determination, shall have so notified the Administrative Agent), and the
Administrative Agent shall have so notified the Borrower and the Lenders.
(d) Notwithstanding any other provision in this Agreement, if, at any time
after the date hereof and from time to time, any Lender shall have determined in
good faith that the introduction of or any change in any applicable law, rule or
regulation or in the interpretation or
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<PAGE>
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance with any guideline or
request from any such Governmental Authority (whether or not having the force of
law), has or would have the effect of making it unlawful for such Lender to make
or to continue to make or maintain LIBOR Loans, such Lender will forthwith so
notify the Administrative Agent and the Borrower. Upon such notice, (i) each of
such Lender's then outstanding LIBOR Loans shall automatically, on the
expiration date of the respective Interest Period applicable thereto (or, to the
extent any such LIBOR Loan may not lawfully be maintained as a LIBOR Loan until
such expiration date, upon such notice), be converted into a Base Rate Loan,
(ii) the obligation of such Lender to make, to convert Base Rate Loans into, or
to continue, LIBOR Loans shall be suspended (including pursuant to any Borrowing
for which the Administrative Agent has received a Notice of Borrowing but for
which the Borrowing Date has not arrived), and (iii) any Notice of Borrowing or
Notice of Conversion/Continuation given at any time thereafter with respect to
LIBOR Loans shall, as to such Lender, be deemed to be a request for a Base Rate
Loan, in each case until such Lender shall have determined that the
circumstances giving rise to such suspension no longer exist and shall have so
notified the Administrative Agent, and the Administrative Agent shall have so
notified the Borrower.
(e) Determinations by the Administrative Agent or any Lender for purposes
of this SECTION 2.14 of any increased costs, reduction in return, market
contingencies, illegality or any other matter shall, absent manifest error, be
conclusive, provided that such determinations are made in good faith. No
--------
failure by the Administrative Agent or any Lender at any time to demand payment
of any amounts payable under this SECTION 2.14 shall constitute a waiver of its
right to demand payment of any additional amounts arising at any subsequent
time. Nothing in this SECTION 2.14 shall require or be construed to require the
Borrower to pay any interest, fees, costs or other amounts in excess of that
permitted by applicable law.
I.15. Taxes. (a) Any and all payments by the Borrower hereunder or under
-----
any Note shall be made, in accordance with the terms hereof and thereof, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, other than net income and franchise taxes imposed on the
Administrative Agent or any Lender by the United States or by the jurisdiction
under the laws of which the Administrative Agent or such Lender, as the case may
be, is organized or in which its principal office or (in the case of a Lender)
its applicable Lending Office is located, or any political subdivision or taxing
authority thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to the Administrative Agent or
any Lender, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this SECTION 2.15), the Administrative Agent or
such Lender, as the case may be, receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower will make such
deductions, (iii) the Borrower will pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law and (iv)
the Borrower will deliver to the Administrative Agent or such Lender, as the
case may be, evidence of such payment.
(b) The Borrower will indemnify the Administrative Agent and each Lender
for
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the full amount of Taxes (including, without limitation, any Taxes imposed
by any jurisdiction on amounts payable under this SECTION 2.15) paid by the
Administrative Agent or such Lender, as the case may be, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the Administrative
Agent or such Lender, as the case may be, makes written demand therefor.
(c) Each of the Administrative Agent and the Lenders agrees that if it
subsequently recovers, or receives a permanent net tax benefit with respect to,
any amount of Taxes (i) previously paid by it and as to which it has been
indemnified by or on behalf of the Borrower or (ii) previously deducted by the
Borrower (including, without limitation, any Taxes deducted from any additional
sums payable under clause (i) of subsection (a) above), the Administrative Agent
or such Lender, as the case may be, shall reimburse the Borrower to the extent
of the amount of any such recovery or permanent net tax benefit (but only to the
extent of indemnity payments made, or additional amounts paid, by or on behalf
of the Borrower under this SECTION 2.15 with respect to the Taxes giving rise to
such recovery or tax benefit); provided, however, that the Borrower, upon the
-------- -------
request of the Administrative Agent or such Lender, agrees to repay to the
Administrative Agent or such Lender, as the case may be, the amount paid over to
the Borrower (together with any penalties, interest or other charges), in the
event the Administrative Agent or such Lender is required to repay such amount
to the relevant taxing authority or other Governmental Authority. The
determination by the Administrative Agent or any Lender of the amount of any
such recovery or permanent net tax benefit shall, in the absence of manifest
error, be conclusive and binding.
(d) If any Lender is a "foreign corporation, partnership or trust" within
the meaning of the Internal Revenue Code, and such Lender claims exemption from
United States withholding tax under Section 1441 or 1442 of the Internal Revenue
Code, such Lender will deliver to each of the Administrative Agent and the
Borrower, on or prior to the date of any payment by the Borrower to such Lender
under this Agreement or the Notes, a properly completed Internal Revenue Service
Form 4224 or 1001, as applicable (or successor forms), certifying that such
Lender is entitled to an exemption from or a reduction of withholding or
deduction for or on account of United States federal income taxes in connection
with payments under this Agreement or any of the Notes, together with a properly
completed Internal Revenue Service Form W-8 or W-9, as applicable (or successor
forms). Each such Lender further agrees to deliver to each of the
Administrative Agent and the Borrower an additional copy of each such relevant
form on or before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, in each case certifying that such Lender is
entitled to an exemption from or a reduction of withholding or deduction for or
on account of United States federal income taxes in connection with payments
under this Agreement or any of the Notes, unless an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required, which event renders
all such forms inapplicable or the exemption to which such forms relate
unavailable and such Lender notifies the Administrative Agent and the Borrower
that it is not entitled to receive payments without deduction or withholding of
United States federal income taxes. Each such Lender will promptly notify the
Administrative Agent and the Borrower of any changes in circumstances
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<PAGE>
that would modify or render invalid any claimed exemption or reduction.
(e) If any Lender is entitled to a reduction in (and not a complete
exemption from) the applicable withholding tax, the Borrower and the
Administrative Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If any of the forms or other documentation required under
subsection (d) above are not delivered to the Administrative Agent as therein
required, then the Borrower and the Administrative Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
I.16. Compensation. The Borrower will compensate each Lender upon demand
------------
for all losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Lender to fund or maintain LIBOR
Loans) that such Lender may incur or sustain (i) if for any reason (other than a
default by such Lender) a borrowing or continuation of, or conversion into, a
LIBOR Loan does not occur on a date specified therefor in a Notice of Borrowing
or Notice of Conversion/Continuation, (ii) if any repayment, prepayment or
conversion of any LIBOR Loan occurs on a date other than the last day of an
Interest Period applicable thereto (including as a consequence of acceleration
of the maturity of the Loans pursuant to SECTION 8.2), (iii) if any prepayment
of any LIBOR Loan is not made on any date specified in a notice of prepayment
given by the Borrower or (iv) as a consequence of any other failure by the
Borrower to make any payments with respect to any LIBOR Loan when due hereunder.
Calculation of all amounts payable to a Lender under this SECTION 2.16 shall be
made as though such Lender had actually funded its relevant LIBOR Loan through
the purchase of a Eurodollar deposit bearing interest at the LIBOR Rate in an
amount equal to the amount of such LIBOR Loan, having a maturity comparable to
the relevant Interest Period; provided, however, that each Lender may fund its
-------- -------
LIBOR Loans in any manner it sees fit and the foregoing assumption shall be
utilized only for the calculation of amounts payable under this SECTION 2.16.
Determinations by any Lender for purposes of this SECTION 2.16 of any such
losses, expenses or liabilities shall, absent manifest error, be conclusive,
provided that such determinations are made in good faith.
- --------
ARTICLE II
CONDITIONS OF BORROWING
II.1. Conditions of Loans under Original Credit Agreement. The obligation
---------------------------------------------------
of each Lender to make Loans in connection with the initial Borrowing under the
Original Credit Agreement was subject to the satisfaction of the conditions
precedent set forth in Sections 3.1 and 3.2 of the Original Credit Agreement,
which conditions have heretofore been satisfied (other than the term Original
Credit Agreement, which shall have the meaning given to it in this Agreement,
capitalized terms used in this SECTION 3.1 without definition shall, solely for
purposes of this SECTION 3.1, have the meanings given to them in the Original
Credit Agreement).
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<PAGE>
II.2. Conditions to Effectiveness of this Agreement. The effectiveness of
---------------------------------------------
this Agreement and the amendment and restatement of the Original Credit
Agreement effected hereby is subject to the satisfaction of the condition set
forth in the last sentence of SECTION 10.14 and the following conditions
precedent:
(a) The Administrative Agent shall have received the following, each dated
the Amendment Effective Date (unless otherwise specified) and, except for the
Notes, in sufficient copies for each Lender:
(i) a Facility A Note for each Facility A Lender that is a party
hereto as of the Amendment Effective Date, in the amount of such Lender's
Facility A Commitment and duly completed and executed by the Borrower;
(ii) a Facility B Note for each Facility B Lender that is a party
hereto as of the Amendment Effective Date, in the amount of such Lender's
Facility B Commitment and duly completed and executed by the Borrower;
(iii) a certificate, signed by the chief executive officer, vice
president - finance or treasurer of the Borrower, in form and substance
satisfactory to the Administrative Agent, certifying that (A) all
representations and warranties of the Borrower contained in this Agreement
and the other Credit Documents are true and correct as of the Amendment
Effective Date, both immediately before and after giving effect to the
consummation of the transactions contemplated by this Agreement, the making
of any Loans hereunder on the Amendment Effective Date and the application
of the proceeds thereof, (B) no Default or Event of Default has occurred
and is continuing, both immediately before and after giving effect to the
consummation of the transactions contemplated by this Agreement, the making
of any Loans hereunder on the Amendment Effective Date and the application
of the proceeds thereof, (C) there are no insurance regulatory proceedings
pending or, to such individual's knowledge, threatened against any of the
Insurance Subsidiaries in any jurisdiction that, if adversely determined,
would be reasonably likely to have a Material Adverse Effect, and (D) both
immediately before and after giving effect to the consummation of the
transactions contemplated by this Agreement, no Material Adverse Change has
occurred since December 31, 1995, and there exists no event, condition or
state of facts that could reasonably be expected to result in a Material
Adverse Change;
(iv) a certificate of the secretary or an assistant secretary of
the Borrower, in form and substance satisfactory to the Administrative
Agent, certifying (A) that the certificate of incorporation of the Borrower
has not been amended since the Original Closing Date (or, if such
certificate has been amended since the Original Closing Date, a statement
to the effect that attached thereto is a true and complete copy of such
certificate, certified as of a recent date by the Secretary of State of
Delaware, and that the same has not been amended since the date of such
certification, and attaching such copy), (B) that the bylaws of the
Borrower have not been amended since the Original Closing Date (or, if such
bylaws have been amended since the Original Closing Date, a statement to
the effect that attached thereto is a true and complete copy of such
bylaws, as then in effect and as in effect at all times from the date on
which the resolutions
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referred to in clause (C) below were adopted to and including the date of
such certificate, and attaching such copy), and (C) that attached thereto
is a true and complete copy of resolutions adopted by the board of
directors of the Borrower authorizing the execution, delivery and
performance of this Agreement and the other Credit Documents to which it is
a party, and attaching such copy; and
(v) a favorable opinion of Donald W. Thornton, general counsel
to the Borrower, addressed to the Administrative Agent and the Lenders, in
substantially the form of EXHIBIT E and addressing such other matters as
the Administrative Agent or any Lender may reasonably request.
(b) The Administrative Agent shall have received (i) a certificate as of a
recent date of the good standing of the Borrower under the laws of the State of
Delaware, from the Secretary of State of Delaware, (ii) a certificate as of a
recent date of the qualification of the Borrower to conduct business as a
foreign corporation, from the Secretary of State of Alabama, and (iii) a
certificate as of a recent date of the good standing of the Borrower, from the
Department of Revenue of the State of Alabama.
(c) All legal matters, documentation and corporate or other proceedings
incident to the transactions contemplated hereby shall be reasonably acceptable
to the Administrative Agent; all approvals, permits and consents of any
Governmental Authorities (including, without limitation, all relevant Insurance
Regulatory Authorities) or other Persons required in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been obtained (without the
imposition of conditions that are not reasonably acceptable to the
Administrative Agent), and all related filings, if any, shall have been made,
and all such approvals, permits, consents and filings shall be in full force and
effect and the Administrative Agent shall have received such copies thereof as
it shall have requested; all applicable waiting periods shall have expired
without any adverse action being taken by any Governmental Authority having
jurisdiction; and no action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before, and no
order, injunction or decree shall have been entered by, any court or other
Governmental Authority, in each case to enjoin, restrain or prohibit, to obtain
substantial damages in respect of, or that is otherwise related to or arises out
of, this Agreement or the consummation of the transactions contemplated hereby,
or that, in the opinion of the Administrative Agent, would otherwise be
reasonably likely to have a Material Adverse Effect.
(d) Since December 31, 1995, both immediately before and after giving
effect to the consummation of the transactions contemplated by this Agreement,
there shall not have occurred any Material Adverse Change or any event,
condition or state of facts that could reasonably be expected to result in a
Material Adverse Change.
(e) The Borrower shall have paid all fees and expenses of the
Administrative Agent and the Lenders required hereunder or under any other
Credit Document to be paid on or prior to the Amendment Effective Date
(including fees and expenses of counsel) in connection with this Agreement and
the transactions contemplated hereby.
(f) Each of the representations and warranties contained in ARTICLE IV and
in the
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other Credit Documents shall be true and correct on and as of the Amendment
Effective Date with the same effect as if made on and as of such date (except to
the extent any such representation or warranty is expressly stated to have been
made as of a specific date, in which case such representation or warranty shall
be true and correct as of such date).
(g) No Default or Event of Default shall have occurred and be continuing.
(h) There shall not have occurred and be continuing any event or condition
in the United States financial and capital markets that could reasonably be
expected to have a material adverse effect on the primary syndication of the
revolving credit facility provided for hereunder.
(i) The Administrative Agent and each Lender shall have received such
other documents, certificates, opinions and instruments as it shall have
reasonably requested.
II.3. Conditions to All Loans. The obligation of each Lender to make any
-----------------------
Loans hereunder is subject to the satisfaction of the following conditions
precedent on the relevant Borrowing Date:
(a) The Administrative Agent shall have received a Notice of Borrowing in
accordance with SECTION 2.2(B);
(b) Each of the representations and warranties contained in ARTICLE IV and
in the other Credit Documents shall be true and correct on and as of the
relevant Borrowing Date with the same effect as if made on and as of such date,
both immediately before and after giving effect to the Loans to be made on such
date (except to the extent any such representation or warranty is expressly
stated to have been made as of a specific date, in which case such
representation or warranty shall be true and correct as of such date); and
(c) No Default or Event of Default shall have occurred and be continuing
on such date, both immediately before and after giving effect to the Loans to be
made on such date.
Each giving of a Notice of Borrowing, and the consummation of each
Borrowing, shall be deemed to constitute a representation by the Borrower that
the statements contained in subsections (b) and (c) above are true, both as of
the date of such notice or request and as of the relevant Borrowing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to induce the Lenders to extend the credit contemplated hereby,
the Borrower represents and warrants to the Administrative Agent and the Lenders
as follows:
III.1. Corporate Organization and Power. Each of the Borrower and its
--------------------------------
Subsidiaries
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<PAGE>
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) has the full corporate
power and authority to execute, deliver and perform the Credit Documents to
which it is or will be a party, to own and hold its property and to engage in
its business as presently conducted, and (iii) is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where the
nature of its business or the ownership of its properties requires it to be so
qualified.
III.2. Authorization; Enforceability. The Borrower has taken all
-----------------------------
necessary corporate action to execute, deliver and perform each of the Credit
Documents to which it is or will be a party, and has, or on the Amendment
Effective Date (or any later date of execution and delivery) will have, validly
executed and delivered each of the Credit Documents to which it is or will be a
party. This Agreement constitutes, and each of the other Credit Documents upon
execution and delivery by the Borrower will constitute, the legal, valid and
binding obligation of the Borrower, enforceable against it in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by general equitable principles.
III.3. No Violation. The execution, delivery and performance by the
------------
Borrower of this Agreement and each of the other Credit Documents, and
compliance by it with the terms hereof and thereof, do not and will not (i)
violate any provision of its certificate of incorporation or bylaws or
contravene any other Requirement of Law applicable to it, (ii) conflict with,
result in a breach of or constitute (with notice, lapse of time or both) a
default under any material indenture, agreement or other instrument to which it
is a party, by which it or any of its properties is bound or to which it is
subject, or (iii) result in or require the creation or imposition of any Lien
upon any of its properties or assets. No Subsidiary is subject to any
restriction or encumbrance on its ability to make dividend payments or other
distributions in respect of its capital stock, to make loans or advances to the
Borrower or any other Subsidiary, or to transfer any of its assets or properties
to the Borrower or any other Subsidiary, in each case other than such
restrictions or encumbrances existing under or by reason of the Credit Documents
or applicable Requirements of Law.
III.4. Governmental Authorization; Permits. (a) No consent, approval,
-----------------------------------
authorization or other action by, notice to, or registration or filing with, any
Governmental Authority or other Person is or will be required as a condition to
or otherwise in connection with the due execution, delivery and performance by
the Borrower of this Agreement or any of the other Credit Documents or the
legality, validity or enforceability hereof or thereof.
(b) Each of the Borrower and its Subsidiaries has, and is in good standing
with respect to, all governmental approvals, licenses, permits and
authorizations necessary to conduct its business as presently conducted and to
own or lease and operate its properties, except for those the failure to obtain
which would not be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect.
(c) SCHEDULE 4.4 lists with respect to each Insurance Subsidiary, as of
the Amendment Effective Date, all of the jurisdictions in which such Insurance
Subsidiary holds licenses (including, without limitation, licenses or
certificates of authority from relevant Insurance Regulatory Authorities),
permits or authorizations to transact insurance and
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<PAGE>
reinsurance business (collectively, the "Licenses"), indicates the line or lines
of insurance in which each such Insurance Subsidiary is permitted to be engaged
with respect to each License therein listed, and attaches copies of all Licenses
in the States of Alabama, Hawaii and Texas. To the knowledge of the Borrower,
except as set forth on SCHEDULE 4.4, (i) no such License is the subject of a
proceeding for suspension, revocation or limitation or any similar proceedings,
(ii) there is no sustainable basis for such a suspension, revocation or
limitation, and (iii) no such suspension, revocation or limitation is threatened
by any relevant Insurance Regulatory Authority, that, in each instance under
(i), (ii) and (iii) above, would be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect. No Insurance Subsidiary transacts
any insurance business, directly or indirectly, in any jurisdiction other than
those listed on SCHEDULE 4.4, where such business requires any license, permit
or other authorization of an Insurance Regulatory Authority of such
jurisdiction.
III.5. Litigation. There are no actions, investigations, suits or
----------
proceedings pending or, to the knowledge of the Borrower, threatened, at law, in
equity or in arbitration, before any court, other Governmental Authority or
other Person, (i) against or affecting the Borrower, any of its Subsidiaries or
any of their respective properties that would, if adversely determined, be
reasonably likely to have a Material Adverse Effect, or (ii) with respect to
this Agreement or any of the other Credit Documents.
III.6. Taxes. Each of the Borrower and its Subsidiaries has timely filed
-----
all federal, state and local tax returns and reports required to be filed by it
and has paid all taxes, assessments, fees and other charges levied upon it or
upon its properties that are shown thereon as due and payable, other than those
that are being contested in good faith and by proper proceedings and for which
adequate reserves have been established in accordance with Generally Accepted
Accounting Principles. Such returns accurately reflect in all material respects
all liability for taxes of the Borrower and its Subsidiaries for the periods
covered thereby. There is no ongoing audit or examination or, to the knowledge
of the Borrower, other investigation by any Governmental Authority of the tax
liability of the Borrower or any of its Subsidiaries, and there is no unresolved
claim by any Governmental Authority concerning the tax liability of the Borrower
or any of its Subsidiaries for any period for which tax returns have been or
were required to have been filed, other than claims for which adequate reserves
have been established in accordance with Generally Accepted Accounting
Principles. Neither the Borrower nor any of its Subsidiaries has waived or
extended or has been requested to waive or extend the statute of limitations
relating to the payment of any taxes.
III.7. Subsidiaries. SCHEDULE 4.7 sets forth a list, as of the Amendment
------------
Effective Date, of all of the Subsidiaries of the Borrower and, as to each such
Subsidiary, the percentage ownership (direct and indirect) of the Borrower in
each class of its capital stock and each direct owner thereof. All of the
issued and outstanding shares of capital stock of VFIC are directly owned and
held by the Borrower.
III.8. Full Disclosure. All factual information heretofore or
---------------
contemporaneously furnished to the Administrative Agent or any Lender in writing
by or on behalf of the Borrower or any of its Subsidiaries for purposes of or in
connection with this Agreement and the transactions contemplated hereby is, and
all other such factual information hereafter furnished to the Administrative
Agent or any Lender in writing by or on behalf of the
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<PAGE>
Borrower or any of its Subsidiaries will be, true and accurate in all material
respects on the date as of which such information is dated or certified (or, if
such information has been amended or supplemented, on the date as of which any
such amendment or supplement is dated or certified) and not made incomplete by
omitting to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which such information was
provided, not misleading.
III.9. Margin Regulations. Neither the Borrower nor any of its
------------------
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
Margin Stock. No proceeds of the Loans will be used, directly or indirectly, to
purchase or carry any Margin Stock (except for purchases by the Borrower of
outstanding shares of its capital stock made in compliance with the applicable
provisions of Regulations G, T, U and X), to extend credit for such purpose or
for any other purpose that would violate or be inconsistent with Regulations G,
T, U or X or any provision of the Exchange Act.
III.10. No Material Adverse Change. There has been no Material Adverse
--------------------------
Change since December 31, 1995, and there exists no event, condition or state of
facts that could reasonably be expected to result in a Material Adverse Change.
III.11. Financial Matters. (a) The Borrower has heretofore furnished to
-----------------
the Administrative Agent copies of (i) the audited consolidated balance sheets
of the Borrower and its Subsidiaries as of December 31, 1995, 1994, and 1993,
and the related statements of income, stockholders' equity and cash flows for
the fiscal years then ended, together with the opinion of KPMG Peat Marwick
thereon, and (ii) the unaudited consolidated balance sheet of the Borrower and
its Subsidiaries as of September 30, 1996, and the related statements of income,
stockholders' equity and cash flows for the nine-month period then ended. Such
financial statements have been prepared in accordance with Generally Accepted
Accounting Principles (subject, with respect to the unaudited financial
statements, to the absence of notes required by Generally Accepted Accounting
Principles and to normal year-end audit adjustments) and present fairly the
financial condition of the Borrower and its Subsidiaries on a consolidated basis
as of the respective dates thereof and the consolidated results of operations of
the Borrower and its Subsidiaries for the respective periods then ended. Except
as fully reflected in the most recent financial statements referred to above and
the notes thereto, there are no material liabilities or obligations with respect
to the Borrower or any of its Subsidiaries of any nature whatsoever (whether
absolute, contingent or otherwise and whether or not due).
(b) The Borrower has heretofore furnished to the Administrative Agent
copies of the Annual Statements of each of the Insurance Subsidiaries as of
December 31, 1996, 1995, 1994 and 1993, and for the fiscal years then ended,
each as filed with the relevant Insurance Regulatory Authority (collectively,
the "Historical Statutory Statements"). The Historical Statutory Statements
(including, without limitation, the provisions made therein for investments and
the valuation thereof, reserves, policy and contract claims and statutory
liabilities) have been prepared in accordance with Statutory Accounting
Principles (except as may be reflected in the notes thereto and subject, with
respect to the Quarterly Statements, to the absence of notes required by
Statutory Accounting Principles and to normal year-end adjustments), were in
compliance with applicable Requirements of Law when filed and present
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<PAGE>
fairly the financial condition of the respective Insurance Subsidiaries covered
thereby as of the respective dates thereof and the results of operations,
changes in capital and surplus and cash flow of the respective Insurance
Subsidiaries covered thereby for the respective periods then ended. Except for
liabilities and obligations disclosed or provided for in the Historical
Statutory Statements (including, without limitation, reserves, policy and
contract claims and statutory liabilities), no Insurance Subsidiary had, as of
the date of its respective Historical Statutory Statements, any material
liabilities or obligations of any nature whatsoever (whether absolute,
contingent or otherwise and whether or not due) that, in accordance with
Statutory Accounting Principles, would have been required to have been disclosed
or provided for in such Historical Statutory Statements. All books of account of
each Insurance Subsidiary fully and fairly disclose all of its material
transactions, properties, assets, investments, liabilities and obligations, are
in its possession and are true, correct and complete in all material respects.
(c) Each of the Borrower and its Subsidiaries, after giving effect to the
consummation of the transactions contemplated hereby, (i) will have capital
sufficient to carry on its businesses as conducted and as proposed to be
conducted, (ii) will have assets with a fair saleable value, determined on a
going concern basis, (y) not less than the amount required to pay the probable
liability on its existing debts as they become absolute and matured and (z)
greater than the total amount of its liabilities (including identified
contingent liabilities, valued at the amount that can reasonably be expected to
become absolute and matured), and (iii) will not intend to, and will not believe
that it will, incur debts or liabilities beyond its ability to pay such debts
and liabilities as they mature.
III.12. Ownership of Properties. Each of the Borrower and its
-----------------------
Subsidiaries (i) has good and marketable title to all real property owned by it,
(ii) holds interests as lessee under valid leases in full force and effect with
respect to all material leased real and personal property used in connection
with its business, and (iii) has good title to all of its other properties and
assets reflected in the most recent financial statements referred to in SECTION
4.11(A) (except as sold or otherwise disposed of since the date thereof in the
ordinary course of business), in each case under (i), (ii) and (iii) above free
and clear of all Liens other than Permitted Liens.
III.13. ERISA. Each Plan is and has been administered in compliance in
-----
all material respects with all applicable Requirements of Law, including,
without limitation, the applicable provisions of ERISA and the Internal Revenue
Code. No ERISA Event has occurred and is continuing or, to the knowledge of the
Borrower, is reasonably expected to occur with respect to any Plan, in either
case that would be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect. No Plan has any Unfunded Pension Liability, and
neither the Borrower nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA, in either instance where
the same would be reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect. Neither the Borrower nor any ERISA Affiliate is
required to contribute to or has, or has at any time had, any liability to a
Multiemployer Plan.
III.14. Environmental Matters. (a) No Hazardous Substances are or have
---------------------
been generated, used, located, released, treated, disposed of or stored by the
Borrower or any of its Subsidiaries or, to the knowledge of the Borrower, by any
other Person or otherwise, in, on or under any portion of any real property,
leased or owned, of the Borrower or any of its
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<PAGE>
Subsidiaries, except in material compliance with all applicable Environmental
Laws, and no portion of any such real property or, to the knowledge of the
Borrower, any other real property at any time leased, owned or operated by the
Borrower or any of its Subsidiaries, has been contaminated by any Hazardous
Substance; and no portion of any real property, leased or owned, of the Borrower
or any of its Subsidiaries has been or, to the knowledge of the Borrower, is
presently the subject of an environmental audit, assessment or remedial action.
(b) To the knowledge of the Borrower, (i) no portion of any real property,
leased or owned, of the Borrower or any of its Subsidiaries has been used as or
for a mine, a landfill, a dump or other disposal facility, a gasoline service
station, or (other than for petroleum substances stored in the ordinary course
of business) a petroleum products storage facility, (ii) no portion of such real
property or any other real property at any time leased, owned or operated by the
Borrower or any of its Subsidiaries has, pursuant to any Environmental Law, been
placed on the "National Priorities List" or "CERCLIS List" (or any similar
federal, state or local list) of sites subject to possible environmental
problems, and (iii) there are not and have never been any underground storage
tanks situated on any real property, leased or owned, of the Borrower or any of
its Subsidiaries.
(c) All activities and operations of the Borrower and its Subsidiaries are
in compliance with the requirements of all applicable Environmental Laws, except
to the extent the failure so to comply, individually or in the aggregate, would
not be reasonably likely to have a Material Adverse Effect. Neither the
Borrower nor any of its Subsidiaries is involved in any suit, action or
proceeding, or has received any notice, complaint or other request for
information from any Governmental Authority or other Person, with respect to any
actual or alleged Environmental Claims that, if adversely determined, would be
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect; and, to the knowledge of the Borrower, there are no threatened actions,
suits, proceedings or investigations with respect to any such Environmental
Claims, nor any basis therefor.
III.15. Compliance With Laws. Each of the Borrower and its Subsidiaries
--------------------
has timely filed all material reports, documents and other materials required to
be filed by it under all applicable Requirements of Law with any Governmental
Authority, has retained all material records and documents required to be
retained by it under all applicable Requirements of Law, and is otherwise in
compliance with all applicable Requirements of Law in respect of the conduct of
its business and the ownership and operation of its properties, except for such
Requirements of Law the failure to comply with which, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect.
III.16. Regulated Industries. Neither the Borrower nor any of its
--------------------
Subsidiaries is (i) an "investment company," a company "controlled" by an
"investment company," or an "investment advisor," within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a "holding company," a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
III.17. Insurance. The assets, properties and business of the Borrower
---------
and its Subsidiaries are insured against such hazards and liabilities, under
such coverages and in such
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<PAGE>
amounts, as are customarily maintained by prudent companies similarly situated
and under policies issued by insurers of recognized responsibility. No notice of
any pending or threatened cancellation or material premium increase has been
received by the Borrower or any of its Subsidiaries with respect to any such
policies, and the Borrower and each of its Subsidiaries are in substantial
compliance with all conditions contained therein.
ARTICLE IV
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments and the payment in full of all principal and interest with respect
to the Loans together with all other amounts then due and owing hereunder:
IV.1. GAAP Financial Statements. The Borrower will deliver to each
-------------------------
Lender:
(a) As soon as available and in any event within sixty (60) days after the
end of each of the first three fiscal quarters of each fiscal year, beginning
with the fiscal quarter ended March 31, 1997, unaudited consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as of the end
of such fiscal quarter and unaudited consolidated and consolidating statements
of income, stockholders' equity and cash flows for the Borrower and its
Subsidiaries for the fiscal quarter then ended and for that portion of the
fiscal year then ended, in each case setting forth comparative consolidated
figures as of the end of and for the corresponding period in the preceding
fiscal year, all prepared in accordance with Generally Accepted Accounting
Principles (subject to the absence of notes required by Generally Accepted
Accounting Principles and subject to normal year-end audit adjustments) applied
on a basis consistent with that of the preceding quarter or containing
disclosure of the effect on the financial condition or results of operations of
any change in the application of accounting principles and practices during such
quarter; and
(b) As soon as available and in any event within 120 days after the end of
each fiscal year, beginning with the fiscal year ended December 31, 1996, (i) an
audited consolidated balance sheet of the Borrower and its Subsidiaries as of
the end of such fiscal year and audited consolidated statements of income,
stockholders' equity and cash flows for the Borrower and its Subsidiaries for
the fiscal year then ended, including the applicable notes, in each case setting
forth comparative figures as of the end of and for the preceding fiscal year,
certified by the independent certified public accounting firm regularly retained
by the Borrower or another independent certified public accounting firm of
recognized national standing reasonably acceptable to the Required Lenders,
together with (y) a report thereon by such accountants that is not qualified as
to going concern or scope of audit and to the effect that such financial
statements present fairly the consolidated financial condition and results of
operations of the Borrower and its Subsidiaries as of the dates and for the
periods indicated in accordance with generally accepted accounting principles
applied on a basis consistent with that of the preceding year or containing
disclosure of the effect on the financial position or results of operations of
any change in the application of accounting principles and practices during such
year, and (z) a report by such accountants to the effect that, based on and in
connection with
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their examination of the financial statements of the Borrower and its
Subsidiaries, they obtained no knowledge of the occurrence or existence of any
Default or Event of Default relating to accounting or financial reporting
matters, or a statement specifying the nature and period of existence of any
such Default or Event of Default disclosed by their audit; provided, however,
-------- -------
that such accountants shall not be liable by reason of the failure to obtain
knowledge of any Default or Event of Default that would not be disclosed or
revealed in the course of their audit examination, and (ii) an unaudited
consolidating balance sheet of the Borrower and its Subsidiaries as of the end
of such fiscal year and unaudited consolidating statements of income,
stockholders' equity and cash flows for the Borrower and its Subsidiaries for
the fiscal year then ended, all in reasonable detail.
IV.2. Statutory Financial Statements. The Borrower will deliver to each
------------------------------
Lender:
(a) As soon as available and in any event within fifty (50) days after the
end of each of the first three fiscal quarters of each fiscal year, beginning
with the fiscal quarter ending March 31, 1997, a Quarterly Statement of each
Insurance Subsidiary as of the end of such fiscal quarter and for that portion
of the fiscal year then ended, in the form filed with the relevant Insurance
Regulatory Authority, prepared in accordance with Statutory Accounting
Principles applied on a basis consistent with that of the preceding quarter or
containing disclosure of the effect on the financial condition or results of
operations of any change in the application of accounting principles and
practices during such quarter; and
(b) As soon as available and in any event within sixty-five (65) days
after the end of each fiscal year, beginning with the fiscal year ending
December 31, 1997, an Annual Statement of each Insurance Subsidiary as of the
end of such fiscal year and for the fiscal year then ended, in the form filed
with the relevant Insurance Regulatory Authority, prepared in accordance with
Statutory Accounting Principles applied on a basis consistent with that of the
preceding year or containing disclosure of the effect on the financial condition
or results of operations of any change in the application of accounting
principles and practices during such year;
(c) As soon as available and in any event within 135 days after the end of
each fiscal year, beginning with the fiscal year ended December 31, 1996, an
unaudited consolidated balance sheet of the Borrower and its Insurance
Subsidiaries as of the end of such fiscal year and unaudited consolidated
statements of income, stockholders' equity and cash flows for the Borrower and
its Insurance Subsidiaries for the fiscal year then ended, in each case setting
forth comparative consolidated figures as of the end of and for the preceding
fiscal year, all prepared in accordance with Statutory Accounting Principles
applied on a basis consistent with that of the preceding year or containing
disclosure of the effect on the financial condition or results of operations of
any change in the application of accounting principles and practices during such
year; and
(d) As soon as available and in any event within 155 days after the end of
each fiscal year, beginning with the fiscal year ended December 31, 1996 (but
only if and to the extent required by the applicable Insurance Regulatory
Authority with regard to any Insurance Subsidiary), a certification by the
independent certified public accounting firm referred to in SECTION 5.1(B) as to
the Annual Statement of each such Insurance Subsidiary as of the end of such
fiscal year and for the fiscal year then ended, together with a report thereon
by such
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accountants that is not qualified as to going concern or scope of audit
and to the effect that such financial statements present fairly the consolidated
financial condition and results of operations of such Insurance Subsidiary as of
the date and for the period indicated in accordance with statutory accounting
principles applied on a basis consistent with that of the preceding year or
containing disclosure of the effect on the financial position or results of
operations of any change in the application of accounting principles and
practices during such year.
IV.3. Other Business and Financial Information. The Borrower will deliver
----------------------------------------
to each Lender:
(a) Concurrently with each delivery of the financial statements described
in SECTIONS 5.1 and 5.2, a Compliance Certificate in the form of EXHIBIT D-1 (in
the case of the financial statements described in SECTION 5.1) or EXHIBIT D-2
(in the case of the financial statements described in SECTION 5.2) with respect
to the period covered by the financial statements then being delivered, executed
by the chief financial officer, vice president - finance or treasurer of the
Borrower, together, in the case of the financial statements described in SECTION
5.1, with a Covenant Compliance Worksheet reflecting the computation of the
financial covenants set forth in SECTIONS 6.1, 6.2 and 6.3 as of the last day of
the period covered by such financial statements, and in the case of the
financial statements described in SECTION 5.2, with a Covenant Compliance
Worksheet reflecting the computation of the financial covenants set forth in
SECTION 6.4 as of the last day of the period covered by such financial
statements;
(b) Promptly upon filing with the relevant Insurance Regulatory Authority
and in any event within ninety (90) days after the end of each fiscal year,
beginning with the fiscal year ended December 31, 1997, a copy of each Insurance
Subsidiary's "Statement of Actuarial Opinion" (or equivalent information should
the relevant Insurance Regulatory Authority not require such a statement) as to
the adequacy of such Insurance Subsidiary's loss reserves for such fiscal year,
together with a copy of its management discussion and analysis in connection
therewith, each in the format prescribed by the applicable insurance laws of
such Insurance Subsidiary's jurisdiction of domicile;
(c) Promptly upon the sending, filing or receipt thereof, copies of (i)
all financial statements, reports, notices and proxy statements that the
Borrower or any of its Subsidiaries shall send or make available generally to
its shareholders, (ii) all reports (other than earnings press releases) on Form
10-Q, Form 10-K or Form 8-K (or their successor forms) or registration
statements and prospectuses (other than on Form S-8 or its successor form) that
the Borrower or any of its Subsidiaries shall render to or file with the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. or any national securities exchange, (iii) all reports on Form A
or Form B (or their successor forms) that any Insurance Subsidiary shall file
with any Insurance Regulatory Authority, (iv) all significant reports on
examination or similar significant reports, financial examination reports or
market conduct examination reports by the NAIC or any Insurance Regulatory
Authority or other Governmental Authority with respect to any Insurance
Subsidiary's insurance business, and (v) all significant filings made under
applicable state insurance holding company acts by the Borrower or any of its
Subsidiaries, including, without limitation, filings seeking approval of
transactions with Affiliates;
(d) Promptly upon (and in any event within five (5) Business Days after)
obtaining
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knowledge thereof, written notice of any of the following:
(i) the occurrence of any Default or Event of Default, together
with a written statement of the chief executive officer, chief financial
officer or vice president - finance of the Borrower specifying the nature
of such Default or Event of Default, the period of existence thereof and
the action that the Borrower has taken and proposes to take with respect
thereto;
(ii) the institution or threatened institution of any action,
suit, investigation or proceeding against or affecting the Borrower or any
of its Subsidiaries, including any such investigation or proceeding by any
Insurance Regulatory Authority or other Governmental Authority (other than
routine periodic inquiries, investigations or reviews), that would, if
adversely determined, be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect, and any material development
in any litigation or other proceeding previously reported pursuant to
SECTION 4.5 or this SECTION 5.3(D)(II);
(iii) the receipt by the Borrower or any of its Subsidiaries from
any Insurance Regulatory Authority or other Governmental Authority of (i)
any notice asserting any failure by the Borrower or any of its Subsidiaries
to be in compliance with applicable Requirements of Law or that threatens
the taking of any action against the Borrower or such Subsidiary or sets
forth circumstances that, if taken or adversely determined, would be
reasonably likely to have a Material Adverse Effect, or (ii) any notice of
any actual or threatened suspension, limitation or revocation of, failure
to renew, or imposition of any restraining order, escrow or impoundment of
funds in connection with, any license, permit, accreditation or
authorization of the Borrower or any of its Subsidiaries, where such action
would be reasonably likely to have a Material Adverse Effect;
(iv) the occurrence of any ERISA Event, together with (i) a
written statement of the chief executive officer, chief financial officer
or vice president - finance of the Borrower specifying the details of such
ERISA Event and the action that the Borrower has taken and proposes to take
with respect thereto, (ii) a copy of any notice with respect to such ERISA
Event that may be required to be filed with the PBGC and (iii) a copy of
any notice delivered by the PBGC to the Borrower or such ERISA Affiliate
with respect to such ERISA Event;
(v) the occurrence of any decrease in (y) the rating given by
either Standard & Poor's or Moody's with respect to the Borrower's senior
publicly traded Indebtedness or (z) the rating given to any Insurance
Subsidiary by A.M. Best & Company; and
(vi) any other matter or event that has, or would be reasonably
likely to have, a Material Adverse Effect, together with a written
statement of the chief executive officer, chief financial officer or vice
president -finance of the Borrower setting forth the nature and period of
existence thereof and the action that the Borrower has taken and proposes
to take with respect thereto;
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(e) Within five (5) Business Days after request therefor by any Lender, if
theretofore prepared and delivered to the Borrower, or within ninety (90) days
after request therefor by the Required Lenders from time to time (but not more
than once per year), if not theretofore prepared and delivered to the Borrower,
in either case at the Borrower's expense, an actuarial review and valuation
statement of, and opinion as to the adequacy of, each Insurance Subsidiary's
loss and loss adjustment expense reserve positions as of the end of such year
with respect to the insurance business then in force, and covering such other
subjects as are customary in actuarial reviews, prepared by KPMG Peat Marwick or
another independent actuarial firm reasonably acceptable to the Required
Lenders, together with a favorable review letter thereon by the Borrower's
regularly retained independent certified public accountants, all in form and
substance satisfactory to the Required Lenders; and
(f) As promptly as reasonably possible, such other information about the
business, condition (financial or otherwise), operations or properties of the
Borrower or any of its Subsidiaries as the Administrative Agent or any Lender
may from time to time reasonably request.
IV.4. Corporate Existence; Franchises; Maintenance of Properties. The
----------------------------------------------------------
Borrower will, and will cause each of its Subsidiaries to, (i) maintain and
preserve in full force and effect its corporate existence, except as expressly
permitted otherwise by SECTION 7.1, (ii) obtain, maintain and preserve in full
force and effect all other rights, franchises, licenses, permits,
certifications, approvals and authorizations required by Governmental
Authorities and necessary to the ownership, occupation or use of its properties
or the conduct of its business, except to the extent the failure to do so would
not be reasonably likely to have a Material Adverse Effect, and (iii) keep all
material properties in good working order and condition (normal wear and tear
excepted) and from time to time make all necessary repairs to and renewals and
replacements of such properties, except to the extent that any of such
properties are obsolete or are being replaced.
IV.5. Compliance with Laws. The Borrower will, and will cause each of its
--------------------
Subsidiaries to, comply in all respects with all Requirements of Law applicable
in respect of the conduct of its business and the ownership and operation of its
properties, except to the extent the failure so to comply would not be
reasonably likely to have a Material Adverse Effect.
IV.6. Payment of Obligations. The Borrower will, and will cause each of
----------------------
its Subsidiaries to, (i) pay all liabilities and obligations as and when due
(subject to any applicable subordination provisions), except to the extent
failure to do so would not be reasonably likely to have a Material Adverse
Effect, and (ii) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties, prior to the date on which penalties would attach thereto, and all
lawful claims that, if unpaid, might become a Lien upon any of the properties of
the Borrower or any of its Subsidiaries; provided, however, that neither the
-------- -------
Borrower nor any of its Subsidiaries shall be required to pay any such tax,
assessment, charge, levy or claim that is being contested in good faith and by
proper proceedings and as to which the Borrower or such Subsidiary is
maintaining adequate reserves with respect thereto in accordance with Generally
Accepted Accounting Principles.
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IV.7. Insurance. The Borrower will, and will cause each of its
---------
Subsidiaries to, maintain with financially sound and reputable insurance
companies insurance with respect to its assets, properties and business, against
such hazards and liabilities, of such types and in such amounts, as is
customarily maintained by companies in the same or similar businesses similarly
situated; provided that the Borrower and its Subsidiaries may self-insure
--------
against risks consistent with customary industry practices for companies in the
same or similar businesses, of similar size and with similar risk parameters.
IV.8. Maintenance of Books and Records; Inspection. The Borrower will,
--------------------------------------------
and will cause each of its Subsidiaries to, (i) maintain adequate books,
accounts and records, in which full, true and correct entries shall be made of
all financial transactions in relation to its business and properties, and
prepare all financial statements required under this Agreement, in each case in
accordance with Generally Accepted Accounting Principles or Statutory Accounting
Principles, as applicable, and in compliance with the requirements of any
Governmental Authority having jurisdiction over it, and (ii) permit employees or
agents of the Administrative Agent or any Lender to inspect its properties and
examine or audit its books, records, working papers and accounts and make copies
and memoranda of them, and to discuss its affairs, finances and accounts with
its officers and employees and, upon notice to the Borrower, the independent
public accountants of the Borrower and its Subsidiaries (and by this provision
the Borrower authorizes such accountants to discuss the finances and affairs of
the Borrower and its Subsidiaries), all at such times and from time to time,
upon reasonable notice and during business hours, as may be reasonably
requested.
IV.9. Dividends. The Borrower will take all action necessary to cause its
---------
Subsidiaries to make such dividends, distributions or other payments to the
Borrower as shall be necessary for the Borrower to make payments of the
principal of and interest on the Loans in accordance with the terms of this
Agreement. In the event the approval of any Governmental Authority or other
Person is required in order for any such Subsidiary to make any such dividends,
distributions or other payments to the Borrower, or for the Borrower to make any
such principal or interest payments, the Borrower will forthwith exercise its
best efforts and take all actions permitted by law and necessary to obtain such
approval.
IV.10. Further Assurances. The Borrower will, and will cause each of its
------------------
Subsidiaries to, make, execute, endorse, acknowledge and deliver any amendments,
modifications or supplements hereto and restatements hereof and any other
agreements, instruments or documents, and take any and all such other actions,
as may from time to time be reasonably requested by the Administrative Agent or
the Required Lenders to effect, confirm or further assure or protect and
preserve the interests, rights and remedies of the Administrative Agent and the
Lenders under this Agreement and the other Credit Documents.
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<PAGE>
ARTICLE V
FINANCIAL COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments and the payment in full of all principal and interest with respect
to the Loans together with all other amounts then due and owing hereunder:
V.1. Capitalization Ratio. The Borrower will not permit the Capitalization
--------------------
Ratio to be greater than 0.425 to 1.0 as of the last day of any fiscal quarter,
beginning with the fiscal quarter ended December 31, 1996.
V.2. Consolidated Net Worth. The Borrower will not permit Consolidated Net
----------------------
Worth:
(i) As of the last day of the fiscal quarter ended December 31,
1996, to be less than the aggregate of (i) $250,000,000, plus (ii) 50% of
----
the aggregate of Consolidated Net Income for such fiscal quarter (provided
--------
that Consolidated Net Income for such fiscal quarter shall be taken into
account for purposes of this calculation only if positive), minus (iii) the
-----
aggregate of all amounts paid by the Borrower as dividends or distributions
in respect of its equity securities at any time during such fiscal quarter;
and
(ii) As of the last day of any fiscal quarter ending thereafter,
to be less than the aggregate of (i) $350,000,000, plus (ii) 50% of the
----
aggregate of Consolidated Net Income for each fiscal quarter ending after
September 30, 1996 up to and including the fiscal quarter then ending
(provided that Consolidated Net Income for any such fiscal quarter shall be
--------
taken into account for purposes of this calculation only if positive),
minus (iii) the aggregate of all amounts paid by the Borrower as dividends
-----
or distributions in respect of its equity securities at any time after
September 30, 1996 up to and including the last day of the fiscal quarter
then ending.
V.3. Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed
---------------------------
Charge Coverage Ratio to be less than 3.0 to 1.0 as of the last day of any
fiscal quarter, beginning with the fiscal quarter ended December 31, 1996;
provided, however, that the provisions of this SECTION 6.3 shall not be
- -------- -------
satisfied as of the last day of any fiscal quarter unless, in addition to the
foregoing requirement with respect to the Fixed Charge Coverage Ratio, (i) the
aggregate (without duplication) of the maximum amount that is or would be
permitted by the Insurance Regulatory Authority of the jurisdiction of domicile
of each Insurance Subsidiary under applicable Requirements of Law (without the
necessity of any consent, approval or other action of such Insurance Regulatory
Authority involving the granting of permission or the exercise of discretion by
such Insurance Regulatory Authority), to be paid as dividends to the Borrower by
the Insurance Subsidiaries in respect of the period of four consecutive fiscal
quarters ending on such date as if such period were a fiscal year (whether or
not any such dividends are actually paid), exceeds (ii) the aggregate (without
duplication) of all scheduled principal and interest in respect of Indebtedness
of the Borrower and its Subsidiaries paid or accrued by the Borrower and its
Subsidiaries during such period.
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V.4. Risk-Based Capital. The Borrower will not permit "total adjusted
------------------
capital" (within the meaning of the Risk-Based Capital for Insurers Model Act as
promulgated by the NAIC as of the Original Credit Agreement Date (the "Model
Act")) of VFIC at any time from and after the Amendment Effective Date to be
less than 150% of the applicable "Company Action Level RBC" (within the meaning
of the Model Act) for VFIC at such time.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments and the payment in full of all principal and interest with respect
to the Loans together with all other amounts then due and owing hereunder:
VI.1. Merger; Consolidation. The Borrower will not, and will not permit
---------------------
or cause any of its Significant Subsidiaries to, liquidate, wind up or dissolve,
or enter into any consolidation, merger or other combination, or agree to do any
of the foregoing; provided, however, that the Borrower or any Significant
-------- -------
Subsidiary may merge into or consolidate with any other Person so long as (y)
the surviving corporation is the Borrower or a Wholly Owned Subsidiary (and in
any event, if the Borrower is a party to such merger or consolidation, the
surviving corporation shall be the Borrower) and (z) immediately after giving
effect thereto, no Default or Event of Default would exist.
VI.2. Indebtedness. The Borrower will not create, incur, assume or suffer
------------
to exist, and will not permit or cause any of its Subsidiaries to create, incur,
or knowingly assume or suffer to exist, any Indebtedness that ranks senior in
any respect to the Indebtedness under this Agreement (or any portion thereof) as
to payment or performance or as to dividends or distributions upon bankruptcy,
insolvency, liquidation or winding-up.
VI.3. Liens. The Borrower will not, and will not permit or cause any of
-----
its Subsidiaries to, directly or indirectly, make, create, incur, assume or
suffer to exist, or enter into or suffer to exist any agreement or restriction
that prohibits or conditions the creation, incurrence or assumption of, any Lien
upon or with respect to any part of its property or assets, whether now owned or
hereafter acquired, or agree to do any of the foregoing, other than the
following (collectively, "Permitted Liens"):
(i) Liens in existence on the Amendment Effective Date and set
forth on SCHEDULE 7.3;
(ii) Liens imposed by law, such as Liens of carriers,
warehousemen, mechanics, materialmen and landlords, and other similar Liens
incurred in the ordinary course of business for sums not constituting
borrowed money that are not overdue for a period of more than thirty (30)
days or that are being contested in good faith by appropriate proceedings
and for which adequate reserves have been established in accordance with
Generally Accepted Accounting Principles;
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<PAGE>
(iii) Liens (other than any Lien imposed by ERISA, the creation or
incurrence of which would result in an Event of Default under SECTION
8.1(I)) incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure the performance of letters
of credit, bids, tenders, statutory obligations, surety and appeal bonds,
leases, government contracts and other similar obligations (other than
obligations for borrowed money) entered into in the ordinary course of
business;
(iv) Liens for taxes, assessments or other governmental charges
or statutory obligations that are not delinquent or remain payable without
any penalty or that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in
accordance with Generally Accepted Accounting Principles;
(v) Liens in connection with pledges and deposits made pursuant
to statutory and regulatory requirements of Insurance Regulatory
Authorities by an Insurance Subsidiary in the ordinary course of its
business, for the purpose of securing regulatory capital or satisfying
other financial responsibility requirements;
(vi) Liens upon cash and United States government and agency
securities of the Borrower and its Subsidiaries, securing obligations
incurred in connection with reverse repurchase transactions and other
similar investment management transactions of such types and in such
amounts as are customary for companies similar to the Borrower in size and
lines of business and that are entered into by the Borrower and its
Subsidiaries in the ordinary course of business;
(vii) Purchase money Liens upon real or personal property used by
the Borrower or any of its Subsidiaries in the ordinary course of its
business, securing Indebtedness incurred solely to pay all or a portion of
the purchase price thereof (including in connection with capital leases,
and including mortgages or deeds of trust upon real property and
improvements thereon), provided that the aggregate principal amount at any
--------
time outstanding of all Indebtedness secured by such Liens does not exceed
an amount equal to 5% of the value of the total assets of the Borrower and
its Subsidiaries at such time, determined on a consolidated basis in
accordance with Generally Accepted Accounting Principles as of the date of
the financial statements of the Borrower and its Subsidiaries most recently
delivered under SECTION 5.1 prior to such time (or, with regard to
determinations at any time prior to the initial delivery of financial
statements under SECTION 5.1, as of the date of the most recent financial
statements referred to in SECTION 4.11(A)), and provided further that any
-------- -------
such Lien (i) shall attach to such property concurrently with or within ten
(10) days after the acquisition thereof by the Borrower or such Subsidiary,
(ii) shall not exceed the lesser of (y) the fair market value of such
property or (z) the cost thereof to the Borrower or such Subsidiary and
(iii) shall not encumber any other property of the Borrower or any of its
Subsidiaries;
(viii) Liens on Borrower Margin Stock, to the extent the fair
market value
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thereof exceeds 25% of the fair market value of the assets of the Borrower
and its Subsidiaries (including Borrower Margin Stock);
(ix) Any attachment or judgment Lien not constituting an Event of
Default under SECTION 8.1(H) that is being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with Generally Accepted Accounting Principles;
(x) With respect to any real property occupied by the Borrower
or any of its Subsidiaries, all easements, rights of way, licenses and
similar encumbrances on title that do not materially impair the use of such
property for its intended purposes; and
(xi) Liens in favor of the trustee or agent under any agreement or
indenture relating to Indebtedness of the Borrower and its Subsidiaries
permitted under this Agreement, covering sums required to be deposited with
such trustee or agent thereunder.
VI.4. Disposition of Assets. The Borrower will not, and will not permit
---------------------
or cause any of its Subsidiaries to, sell, assign, lease, convey, transfer or
otherwise dispose of (whether in one or a series of transactions) all or any
portion of its assets, business or properties, or enter into any arrangement
with any Person providing for the lease by the Borrower or any Subsidiary as
lessee of any asset that has been sold or transferred by the Borrower or such
Subsidiary to such Person, or agree to do any of the foregoing, except for:
(i) sales of Investments by the Insurance Subsidiaries in the
ordinary course of business;
(ii) the sale or exchange of used or obsolete equipment to the
extent (y) the proceeds of such sale are applied towards, or such equipment
is exchanged for, similar replacement equipment or (z) such equipment is no
longer necessary for the operations of the Borrower or its applicable
Subsidiary in the ordinary course of business;
(iii) the sale, lease or other disposition of assets by a
Subsidiary of the Borrower to the Borrower or to another Wholly Owned
Subsidiary, to the extent permitted by applicable Requirements of Law and
each relevant Insurance Regulatory Authority, provided that (x) immediately
--------
after giving effect thereto, no Default or Event of Default would exist,
(y) in no event shall the Borrower contribute, sell or otherwise transfer,
or permit VFIC to issue or sell, any of the capital stock of VFIC to any
other Subsidiary, and (z) such sale or disposition would not adversely
affect the ability of any Insurance Subsidiary party thereto to pay
dividends or otherwise make distributions to its parent;
(iv) the sale or other disposition of any Borrower Margin Stock
to the extent the fair market value thereof exceeds 25% of the fair market
value of the assets of the Borrower and its Subsidiaries (including
Borrower Margin Stock), provided that fair value is received in exchange
--------
therefor; and
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<PAGE>
(v) the sale or disposition of assets outside the ordinary course
of business, provided that (w) the net proceeds from any such sale or
--------
disposition do not exceed an amount equal to the least of the following:
(1) 10% of the total assets of the Borrower and its Subsidiaries on a
consolidated basis, (2) 10% of the total revenues of the Borrower and its
Subsidiaries on a consolidated basis, and (3) 10% of the total net earnings
of the Borrower and its Subsidiaries on a consolidated basis, in each case
as determined as of the date of the financial statements of the Borrower
and its Subsidiaries most recently delivered under SECTION 5.1 prior to
such time (or, with regard to determinations at any time prior to the
initial delivery of financial statements under SECTION 5.1, as of the date
of the most recent financial statements referred to in SECTION 4.11(A)),
(x) immediately after giving effect thereto, the Borrower would be in
compliance with the provisions of SECTION 6.2, such compliance determined
on a pro forma basis in accordance with Generally Accepted Accounting
--- -----
Principles as if such sale or disposition had been consummated on the last
day of the then most recently ended fiscal quarter, (y) immediately after
giving effect thereto, no Default or Event of Default would exist, and (z)
in no event shall the Borrower or any of its Subsidiaries sell or otherwise
dispose of any of the capital stock or other ownership interests of VFIC or
any other Significant Subsidiary.
VI.5. Transactions with Affiliates. The Borrower will not, and will not
----------------------------
permit or cause any of its Subsidiaries to, enter into any transaction with any
officer, director, stockholder or other Affiliate of the Borrower or any
Subsidiary, except in the ordinary course of its business and upon fair and
reasonable terms that are no less favorable to it than would obtain in a
comparable arm's length transaction with a Person other than an Affiliate of the
Borrower or such Subsidiary; provided, however, that nothing contained in this
-------- -------
Section shall prohibit:
(i) transactions between and among the Borrower and its Wholly
Owned Subsidiaries;
(ii) transactions under incentive compensation plans, stock
option plans and other employee benefit plans, and loans and advances from
the Borrower or any of its Subsidiaries to its officers, in each case that
have been approved by the board of directors of the Borrower or any of its
Subsidiaries; and
(iii) the payment by the Borrower of reasonable and customary fees
to members of its board of directors.
VI.6. Lines of Business. The Borrower will not, and will not permit or
-----------------
cause any of its Subsidiaries to, engage to any substantial degree in any
business other than the lines of property and casualty insurance business and
other businesses engaged in by the Borrower and its Subsidiaries on the date
hereof or a business reasonably related thereto.
VI.7. Fiscal Year. The Borrower will not, and will not permit or cause
-----------
any of its Subsidiaries to, change the ending date of its fiscal year to a date
other than December 31 unless (i) the Borrower shall have given the Lenders
written notice of its intention to change such ending date at least sixty (60)
days prior to the effective date thereof and (ii) prior to such effective date
this Agreement shall have been amended to make any changes in the financial
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covenants and other terms and conditions to the extent necessary, in the
reasonable determination of the Required Lenders, to reflect the new fiscal year
ending date.
VI.8. Accounting Changes. The Borrower will not, and will not permit or
------------------
cause any of its Subsidiaries to, make or permit any material change in its
accounting policies or reporting practices, except as may be required or
permitted by Generally Accepted Accounting Principles or Statutory Accounting
Principles, as applicable.
ARTICLE VII
EVENTS OF DEFAULT
VII.1. Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an "Event of Default":
(a) The Borrower shall fail to pay any principal of or interest on any
Loan, any fee or any other Obligation when due;
(b) The Borrower shall fail to observe, perform or comply with any
condition, covenant or agreement contained in any of SECTIONS 2.12, 5.3(D)(I) or
5.4(I), ARTICLE VI, or SECTIONS 7.1 through 7.4, inclusive;
(c) The Borrower or any of its Subsidiaries shall fail to observe, perform
or comply with any condition, covenant or agreement contained in this Agreement
or any of the other Credit Documents other than those enumerated in subsections
(a) and (b) above, and such failure shall continue unremedied for any grace
period specifically applicable thereto or, if no such grace period is
applicable, for a period of thirty (30) days after the Borrower acquires
knowledge thereof;
(d) Any representation or warranty made or deemed made by or on behalf of
the Borrower or any of its Subsidiaries in this Agreement, any of the other
Credit Documents or in any certificate, instrument, report or other document
furnished in connection herewith or therewith or in connection with the
transactions contemplated hereby or thereby shall prove to have been false or
misleading in any material respect as of the time made, deemed made or
furnished;
(e) The Borrower or any of its Subsidiaries shall (i) fail to pay when due
(whether by scheduled maturity, acceleration or otherwise and after giving
effect to any applicable grace period) any principal of or interest on any
Indebtedness (other than the Indebtedness incurred pursuant to this Agreement)
having an aggregate principal amount of at least $1,000,000; or (ii) fail to
observe, perform or comply with any condition, covenant or agreement contained
in any agreement or instrument evidencing or relating to any such Indebtedness,
or any other event shall occur or condition exist in respect thereof, and the
effect of such failure, event or condition is to cause, or permit the holder or
holders of such Indebtedness (or a trustee or agent on its or their behalf) to
cause (with the giving of notice, lapse of time, or both), such Indebtedness to
become due, or to be prepaid, redeemed, purchased or defeased, prior to its
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stated maturity;
(f) The Borrower or any of its Significant Subsidiaries shall (i) file a
voluntary petition or commence a voluntary case seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts or any other
relief under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to controvert in a timely and appropriate manner, any
petition or case of the type described in subsection (g) below, (iii) apply for
or consent to the appointment of or taking possession by a custodian, trustee,
receiver or similar official for or of itself or all or a substantial part of
its properties or assets, (iv) fail generally, or admit in writing its
inability, to pay its debts generally as they become due, (v) make a general
assignment for the benefit of creditors or (vi) take any corporate action to
authorize or approve any of the foregoing;
(g) Any involuntary petition or case shall be filed or commenced against
the Borrower or any of its Significant Subsidiaries seeking liquidation,
winding-up, reorganization, dissolution, arrangement, readjustment of debts, the
appointment of a custodian, trustee, receiver or similar official for it or all
or a substantial part of its properties or any other relief under the Bankruptcy
Code or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, and such petition or case shall continue undismissed and
unstayed for a period of sixty (60) days; or an order, judgment or decree
approving or ordering any of the foregoing shall be entered in any such
proceeding;
(h) Any one or more money judgments, writs or warrants of attachment,
executions or similar processes involving an aggregate amount (exclusive of
amounts fully bonded or covered by insurance as to which the surety or insurer,
as the case may be, has acknowledged its liability in writing) in excess of
$5,000,000 shall be entered or filed against the Borrower or any of its
Subsidiaries or any of their respective properties, and (i) the same is not
dismissed, stayed or discharged within sixty (60) days or is not otherwise being
appropriately contested in good faith and in a manner reasonably satisfactory to
the Required Lenders, or (ii) the same is not dismissed, stayed or discharged
within five (5) days prior to any proposed sale of assets of the Borrower or any
Subsidiary pursuant thereto, or (iii) any action shall be legally taken by a
judgment creditor to levy upon assets of the Borrower or any Subsidiary to
enforce the same;
(i) Any ERISA Event shall occur or exist with respect to any Plan or
Multiemployer Plan and, as a result thereof, together with all other ERISA
Events then existing, there shall exist a reasonable likelihood of liability to
any one or more Plans or Multiemployer Plans or to the PBGC (or to any
combination thereof) in excess of $1,000,000 with respect to the Borrower or any
ERISA Affiliate;
(j) Any Insurance Regulatory Authority or other Governmental Authority
having jurisdiction shall issue any order of conservation, supervision,
rehabilitation or liquidation or any other order of similar effect in respect of
any Insurance Subsidiary, and such action, individually or in the aggregate,
would be reasonably likely to have a Material Adverse Effect;
(k) Any one or more licenses, permits, accreditations or authorizations of
the Borrower or any of its Subsidiaries shall be suspended, limited or
terminated or shall not be
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renewed, or any other action shall be taken, by any Governmental Authority in
response to any alleged failure by the Borrower or any of its Subsidiaries to be
in compliance with applicable Requirements of Law, and such action, individually
or in the aggregate, would be reasonably likely to have a Material Adverse
Effect; or
(l) Any of the following shall occur: (i) any Person or group of Persons
acting in concert as a partnership or other group (other than Torchmark) shall,
as a result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become, after the date hereof, the
"beneficial owner" (within the meaning of such term under Rule 13d-3 under the
Exchange Act) of securities of the Borrower representing 30% or more of the
combined voting power of the then outstanding securities of the Borrower
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors; (ii) the Board of Directors of
the Borrower shall cease to consist of a majority of the individuals who
constituted the Board of Directors of the Borrower as of the date hereof or who
shall have become a member thereof subsequent to the date hereof after having
been nominated, or otherwise approved in writing, by at least a majority of
individuals who constituted the Board of Directors of the Borrower as of the
date hereof (or their replacements approved as herein required); or (iii) the
Borrower shall cease to own directly 100% of the issued and outstanding capital
stock of VFIC or its successor by merger or consolidation as permitted hereunder
(including, without limitation, as a result of the contribution, sale or
transfer by the Borrower, or the issuance or sale by VFIC, of any capital stock
of VFIC to any one or more other Subsidiaries of the Borrower).
VII.2. Remedies: Termination of Commitments, Acceleration, etc. Upon and
-------------------------------------------------------
at any time after the occurrence and during the continuance of any Event of
Default, the Administrative Agent shall at the direction, or may with the
consent, of the Required Lenders, take any or all of the following actions at
the same or different times:
(a) Declare the Facility A Commitments and/or the Facility B Commitments to
be terminated, whereupon the same shall terminate (provided that, upon the
--------
occurrence of an Event of Default pursuant to SECTION 8.1(F) or SECTION 8.1(G),
all of the Commitments shall automatically be terminated);
(b) Declare all or any part of the outstanding principal amount of the
Loans to be immediately due and payable, whereupon the principal amount so
declared to be immediately due and payable, together with all interest accrued
thereon and all other amounts payable under this Agreement, the Notes and the
other Credit Documents, shall become immediately due and payable without
presentment, demand, protest, notice of intent to accelerate or other notice or
legal process of any kind, all of which are hereby knowingly and expressly
waived by the Borrower (provided that, upon the occurrence of an Event of
--------
Default pursuant to SECTION 8.1(F) or SECTION 8.1(G), all of the outstanding
principal amount of the Loans and all other amounts described in this subsection
(b) shall automatically become immediately due and payable without presentment,
demand, protest, notice of intent to accelerate or other notice or legal process
of any kind, all of which are hereby knowingly and expressly waived by the
Borrower); and
(c) Exercise all rights and remedies available to it under this Agreement,
the other
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Credit Documents and applicable law.
VII.3. Remedies: Set-Off. In addition to all other rights and remedies
-----------------
available under the Credit Documents or applicable law or otherwise, upon and at
any time after the occurrence and during the continuance of any Event of
Default, each Lender may, and each is hereby authorized by the Borrower, at any
such time and from time to time, to the fullest extent permitted by applicable
law, without presentment, demand, protest or other notice of any kind, all of
which are hereby knowingly and expressly waived by the Borrower, to set off and
to apply any and all deposits (general or special, time or demand, provisional
or final) and any other property at any time held (including at any branches or
agencies, wherever located), and any other indebtedness at any time owing, by
such Lender to or for the credit or the account of the Borrower against any or
all of the Obligations to such Lender now or hereafter existing, whether or not
such Obligations may be contingent or unmatured, the Borrower hereby granting to
each Lender a continuing security interest in and Lien upon all such deposits
and other property as security for such Obligations. Each Lender agrees to
notify the Borrower promptly after any such set-off and application; provided,
--------
however, that the failure to give such notice shall not affect the validity of
- -------
such set-off and application.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
VIII.1. Appointment. Each Lender hereby irrevocably appoints and
-----------
authorizes First Union to act as Administrative Agent hereunder and under the
other Credit Documents and to take such actions as agent on its behalf hereunder
and under the other Credit Documents, and to exercise such powers and to perform
such duties, as are specifically delegated to the Administrative Agent by the
terms hereof or thereof, together with such other powers and duties as are
reasonably incidental thereto.
VIII.2. Nature of Duties. The Administrative Agent shall have no duties
----------------
or responsibilities other than those expressly set forth in this Agreement and
the other Credit Documents. The Administrative Agent shall not have, by reason
of this Agreement or any other Credit Document, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any other Credit
Document, express or implied, is intended to or shall be so construed as to
impose upon the Administrative Agent any obligations or liabilities in respect
of this Agreement or any other Credit Document except as expressly set forth
herein or therein. The Administrative Agent may execute any of its duties under
this Agreement or any other Credit Document by or through agents or attorneys-
in-fact and shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact that it selects with reasonable care. The
Administrative Agent shall be entitled to consult with legal counsel,
independent public accountants and other experts selected by it with respect to
all matters pertaining to this Agreement and the other Credit Documents and its
duties hereunder and thereunder and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts. The Lenders hereby acknowledge that the
Administrative Agent shall not be under any duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Credit Document
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unless it shall be requested in writing to do so by the Required Lenders (or,
where a higher percentage of the Lenders is expressly required hereunder, such
Lenders).
VIII.3. Exculpatory Provisions. Neither the Administrative Agent nor any
----------------------
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action taken or omitted to be taken by it or such
Person under or in connection with the Credit Documents, except for its or such
Person's own gross negligence or willful misconduct, (ii) responsible in any
manner to any Lender for any recitals, statements, information, representations
or warranties herein or in any other Credit Document or in any document,
instrument, certificate, report or other writing delivered in connection
herewith or therewith, for the execution, effectiveness, genuineness, validity,
enforceability or sufficiency of this Agreement or any other Credit Document, or
for the financial condition of the Borrower, its Subsidiaries or any other
Person, or (iii) required to ascertain or make any inquiry concerning the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Credit Document or the existence or possible existence of
any Default or Event of Default, or to inspect the properties, books or records
of the Borrower or any of its Subsidiaries.
VIII.4. Reliance by Administrative Agent. The Administrative Agent shall
--------------------------------
be entitled to rely, and shall be fully protected in relying, upon any notice,
statement, consent or other communication (including, without limitation, any
thereof by telephone, telecopy, telex, telegram or cable) believed by it in good
faith to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons. The Administrative Agent may deem and treat each
Lender as the owner of its interest hereunder for all purposes hereof unless and
until a written notice of the assignment, negotiation or transfer thereof shall
have been given to the Administrative Agent in accordance with the provisions of
this Agreement. The Administrative Agent shall be entitled to refrain from
taking or omitting to take any action in connection with this Agreement or any
other Credit Document (i) if such action or omission would, in the reasonable
opinion of the Administrative Agent, violate any applicable law or any provision
of this Agreement or any other Credit Document or (ii) unless and until it shall
have received such advice or concurrence of the Required Lenders (or, where a
higher percentage of the Lenders is expressly required hereunder, such Lenders)
as it deems appropriate or it shall first have been indemnified to its
satisfaction by the Lenders against any and all liability and expense (other
than liability and expense arising from its own gross negligence or willful
misconduct) that may be incurred by it by reason of taking, continuing to take
or omitting to take any such action. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against the Administrative Agent as a
result of the Administrative Agent's acting or refraining from acting hereunder
or under any other Credit Document in accordance with the instructions of the
Required Lenders (or, where a higher percentage of the Lenders is expressly
required hereunder, such Lenders), and such instructions and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders
(including all subsequent Lenders).
VIII.5. Non-Reliance on Administrative Agent and Other Lenders. Each
------------------------------------------------------
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representation or warranty to it and that no act by the Administrative
Agent or any such Person hereafter taken, including any review of the affairs of
the Borrower and its Subsidiaries, shall be deemed to constitute any
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representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that (i) it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
properties, financial and other condition and creditworthiness of the Borrower
and its Subsidiaries and made its own decision to enter into this Agreement and
extend credit to the Borrower hereunder, and (ii) it will, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action hereunder and under the other Credit Documents and to make
such investigation as it deems necessary to inform itself as to the business,
prospects, operations, properties, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries. Except as expressly
provided in this Agreement and the other Credit Documents, the Administrative
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information concerning the
business, prospects, operations, properties, financial or other condition or
creditworthiness of the Borrower, its Subsidiaries or any other Person that may
at any time come into the possession of the Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
VIII.6. Notice of Default. The Administrative Agent shall not be deemed
-----------------
to have knowledge or notice of the occurrence of any Default or Event of Default
unless the Administrative Agent shall have received written notice from the
Borrower or a Lender referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default." In the
event that the Administrative Agent receives such a notice, the Administrative
Agent will give notice thereof to the Lenders as soon as reasonably practicable;
provided, however, that if any such notice has also been furnished to the
- -------- -------
Lenders, the Administrative Agent shall have no obligation to notify the Lenders
with respect thereto. The Administrative Agent shall (subject to SECTIONS 9.4
and 10.6) take such action with respect to such Default or Event of Default as
shall reasonably be directed by the Required Lenders; provided that, unless and
--------
until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
VIII.7. Indemnification. To the extent the Administrative Agent is not
---------------
reimbursed by or on behalf of the Borrower, and without limiting the obligation
of the Borrower to do so, the Lenders agree (i) to indemnify the Administrative
Agent and its officers, directors, employees, agents, attorneys-in-fact and
Affiliates, ratably in proportion to their respective percentages as used in
determining the Required Lenders as of the date of determination, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including, without limitation,
attorneys' fees and expenses) or disbursements of any kind or nature whatsoever
that may at any time (including at any time following the repayment in full of
the Loans and the termination of the Commitments) be imposed on, incurred by or
asserted against the Administrative Agent in any way relating to or arising out
of this Agreement or any other Credit Document or any documents contemplated by
or referred to herein or the transactions contemplated hereby or thereby or any
action taken or
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<PAGE>
omitted by the Administrative Agent under or in connection with any of the
foregoing, and (ii) to reimburse the Administrative Agent upon demand, ratably
in proportion to their respective percentages as used in determining the
Required Lenders as of the date of determination, for any expenses incurred by
the Administrative Agent in connection with the preparation, negotiation,
execution, delivery, administration, amendment, modification, waiver or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
or any of the other Credit Documents (including, without limitation, reasonable
attorneys' fees and expenses and compensation of agents and employees paid for
services rendered on behalf of the Lenders); provided, however, that no Lender
-------- -------
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
to the extent resulting from the gross negligence or willful misconduct of the
party to be indemnified.
VIII.8. The Administrative Agent in its Individual Capacity. With respect
---------------------------------------------------
to its Commitments, the Loans made by it and the Note or Notes issued to it, the
Administrative Agent in its individual capacity and not as Administrative Agent
shall have the same rights and powers under the Credit Documents as any other
Lender and may exercise the same as though it were not performing the agency
duties specified herein; and the terms "Lenders," "Required Lenders," "holders
of Notes" and any similar terms shall, unless the context clearly otherwise
indicates, include the Administrative Agent in its individual capacity. The
Administrative Agent and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of banking, trust, financial advisory or other
business with the Borrower, any of its Subsidiaries or any of their respective
Affiliates as if the Administrative Agent were not performing the agency duties
specified herein, and may accept fees and other consideration from any of them
for services in connection with this Agreement and otherwise without having to
account for the same to the Lenders.
VIII.9. Successor Administrative Agent. The Administrative Agent may
------------------------------
resign at any time by giving thirty (30) days' prior written notice to the
Borrower and the Lenders. Upon any such notice of resignation, the Required
Lenders will, with the prior written consent of the Borrower (which consent
shall not be unreasonably withheld), appoint from among the Lenders a successor
to the Administrative Agent (provided that the Borrower's consent shall not be
--------
required in the event a Default or Event of Default shall have occurred and be
continuing). If no successor to the Administrative Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within such thirty-day period, then the retiring Administrative Agent may, on
behalf of the Lenders and after consulting with the Lenders and the Borrower,
appoint a successor Administrative Agent from among the Lenders. Upon the
acceptance of any appointment as Administrative Agent by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder and under the
other Credit Documents. After any retiring Administrative Agent's resignation
as Administrative Agent, the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent. If no successor to the Administrative Agent has accepted
appointment as Administrative Agent by the thirtieth (30th) day following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless
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<PAGE>
thereupon become effective, and the Lenders shall thereafter perform all of the
duties of the Administrative Agent hereunder and under the other Credit
Documents until such time, if any, as the Required Lenders appoint a successor
Administrative Agent as provided for hereinabove.
VIII.10. Documentation Agent. Notwithstanding any other provision of this
-------------------
Agreement or any of the other Credit Documents, the Documentation Agent is named
as such for recognition purposes only, and in its capacity as such shall have no
powers, rights, duties, responsibilities or liabilities with respect to this
Agreement and the other Credit Documents and the transactions contemplated
hereby and thereby.
ARTICLE IX
MISCELLANEOUS
IX.1. Fees and Expenses. The Borrower agrees (i) whether or not the
-----------------
transactions contemplated by this Agreement shall be consummated, to pay upon
demand all reasonable out-of-pocket costs and expenses of the Administrative
Agent (including, without limitation, the reasonable fees and expenses of
counsel to the Administrative Agent) in connection with the preparation,
negotiation, execution, delivery and syndication of this Agreement and the other
Credit Documents, and any amendment, modification or waiver hereof or thereof or
consent with respect hereto or thereto, (ii) to pay upon demand all reasonable
out-of-pocket costs and expenses of the Administrative Agent and each Lender
(including, without limitation, the reasonable fees and expenses of counsel to
the Administrative Agent or any Lender) in connection with (y) any refinancing
or restructuring of the credit arrangement provided under this Agreement,
whether in the nature of a "work-out," in any insolvency or bankruptcy
proceeding or otherwise and whether or not consummated, and (z) the enforcement,
attempted enforcement or preservation of any rights or remedies under this
Agreement or any of the other Credit Documents, whether in any action, suit or
proceeding (including any bankruptcy or insolvency proceeding) or otherwise, and
(iii) to pay and hold harmless the Administrative Agent and each Lender from and
against all liability for any intangibles, documentary, stamp or other similar
taxes, fees and excises, if any, including any interest and penalties, and any
finder's or brokerage fees, commissions and expenses (other than any fees,
commissions or expenses of finders or brokers engaged by the Administrative
Agent or any Lender), that may be payable in connection with the transactions
contemplated by this Agreement and the other Credit Documents.
IX.2. Indemnification. The Borrower agrees, whether or not the
---------------
transactions contemplated by this Agreement shall be consummated, to indemnify
and hold harmless the Administrative Agent and each Lender and each of their
respective directors, officers, employees, agents and Affiliates (each, an
"Indemnified Person") from and against any and all claims, losses, damages,
obligations, liabilities, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) of any kind or nature
whatsoever, whether direct, indirect or consequential (collectively,
"Indemnified Costs"), that may at any time be imposed on, incurred by or
asserted against any such Indemnified Person as a result of, arising from or in
any way relating to the preparation, execution, performance or
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enforcement of this Agreement or any of the other Credit Documents, any of the
transactions contemplated herein or therein or any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of any
Loans, or any action, suit or proceeding (including any inquiry or
investigation) by any Person, whether threatened or initiated, related to any of
the foregoing, and in any case whether or not such Indemnified Person is a party
to any such action, proceeding or suit or a subject of any such inquiry or
investigation; provided, however, that no Indemnified Person shall have the
-------- -------
right to be indemnified hereunder for any Indemnified Costs to the extent
resulting from the gross negligence or willful misconduct of such Indemnified
Person. All of the foregoing Indemnified Costs of any Indemnified Person shall
be paid or reimbursed by the Borrower, as and when incurred and upon demand.
IX.3. Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE OTHER
--------------------------------------
CREDIT DOCUMENTS HAVE BEEN EXECUTED, DELIVERED AND ACCEPTED IN, AND SHALL BE
DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA (WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF). THE
BORROWER HEREBY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE COURT
WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN
THE WESTERN DISTRICT OF THE STATE OF NORTH CAROLINA FOR ANY PROCEEDING
INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS, OR ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, OR
ANY PROCEEDING TO WHICH THE ADMINISTRATIVE AGENT OR ANY LENDER OR THE BORROWER
IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION
WITH, ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER OR THE BORROWER.
THE BORROWER IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF
APPEAL) BY ANY JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES
ANY OBJECTION THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE
OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. NOTHING IN THIS
--------------------
SECTION SHALL AFFECT THE RIGHT OF ANY PARTY TO BRING ANY ACTION OR PROCEEDING
AGAINST ANY OTHER PARTY IN THE COURTS OF ANY OTHER JURISDICTION.
The parties hereto agree that this Agreement and the other Credit Documents
have been and will be made and entered into within the State of North Carolina
and that the Loans and the other transactions contemplated hereby and thereby
have been and will be made and consummated in the State of North Carolina.
Furthermore, the parties hereto believe that, inasmuch as this Agreement and the
transactions contemplated hereby have been and will be entered into and
consummated outside the State of Alabama, such transactions constitute
transactions in interstate commerce, so that neither the Administrative Agent
nor any Lender is or will be required, solely by entering into this Agreement
and consummating the transactions contemplated hereby and holding any Note, to
qualify to do business as a foreign corporation within the State of Alabama.
Notwithstanding the foregoing, however, the Borrower hereby irrevocably waives
all rights that it may have to raise, in any action brought by the
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Administrative Agent or any Lender to enforce its rights hereunder, under the
Notes or under any of the other Credit Documents, any defense that is based upon
the failure of the Administrative Agent or any Lender to qualify to do business
as a foreign corporation in the State of Alabama, including, but not limited to,
any defenses based upon (S) 232 of the Alabama Constitution of 1901, (S) 10-2B-
15.02 of the Code of Alabama (1975) or (S) 40-14-4 of the Code of Alabama
(1975), or any successor provisions thereof. The foregoing waiver is made
knowingly and voluntarily and is a material inducement for the Administrative
Agent and the Lenders to enter into this Agreement and to consummate the
transactions contemplated hereby.
IX.4. Arbitration; Preservation and Limitation of Remedies. (a) Upon
----------------------------------------------------
demand of any party hereto, whether made before or after institution of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or relating to this Agreement or any other Credit Document ("Disputes")
between or among the Borrower, the Administrative Agent and the Lenders, or any
of them, shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, claims brought as class actions, claims
arising from documents executed in the future, or claims arising out of or
connected with the transactions contemplated by this Agreement and the other
Credit Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA"), as in effect from time to time,
and Title 9 of the U.S. Code, as amended. All arbitration hearings shall be
conducted in the city in which the principal office of the Administrative Agent
is located. The expedited procedures set forth in Rule 51 et seq. of the
-- ---
Arbitration Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted. Notwithstanding the foregoing, this arbitration
provision does not apply to Disputes under or related to Hedge Agreements.
(b) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, either alone, in conjunction with or
during a Dispute. Any party hereto shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights of self-help, including peaceful
occupation of real property and collection of rents, set-off, and peaceful
possession of personal property; (ii) obtaining provisional or ancillary
remedies, including injunctive relief, sequestration, garnishment, attachment,
appointment of a receiver and filing an involuntary bankruptcy proceeding; and
(iii) when applicable, a judgment by confession of judgment. Preservation of
these remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a Dispute. The parties hereto
agree that no party shall have a remedy of punitive or exemplary damages against
any other party in any Dispute, and each party hereby waives any right or claim
to punitive or exemplary damages that it has now or that may arise in the future
in connection with any Dispute, whether such Dispute is resolved by arbitration
or judicially.
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IX.5. Notices. All notices and other communications provided for hereunder
-------
shall be in writing (including telegraphic, telex, facsimile transmission or
cable communication) and mailed, telegraphed, telexed, telecopied, cabled or
delivered to the party to be notified at the following addresses:
(a) if to the Borrower, to Vesta Insurance Group, Inc., 3760 River
Run Drive, Birmingham, Alabama 35243, Attention: Stephen P. Leonard,
Telecopy No. (205) 970-7007, with a copy to Vesta Insurance Group, Inc.,
3760 River Run Drive, Birmingham, Alabama 35243, Attention: Donald W.
Thornton, Telecopy No. (205) 970-7007;
(b) if to the Administrative Agent, to First Union National Bank of
North Carolina, One First Union Center, TW-10, 301 South College Street,
Charlotte, North Carolina 28288-0608, Attention: Syndication Agency
Services, Telecopy No. (704) 383-0288; and
(c) if to any Lender, to it at the address for notices set forth on
its signature page hereto (or if to any Lender not a party hereto as of the
date hereof, at the address for notices set forth in its Assignment and
Acceptance);
or in each case, to such other address as any party may designate for itself by
like notice to all other parties hereto. All such notices and communications
shall be deemed to have been given (i) if mailed as provided above by any method
other than overnight delivery service, on the third Business Day after deposit
in the mails, (ii) if mailed by overnight delivery service, telegraphed,
telexed, telecopied or cabled, when delivered for overnight delivery, delivered
to the telegraph company, confirmed by telex answerback, transmitted by
telecopier or delivered to the cable company, respectively, or (iii) if
delivered by hand, upon delivery; provided that notices and communications to
--------
the Administrative Agent shall not be effective until received by the
Administrative Agent.
IX.6. Amendments, Waivers, etc. No amendment, modification, waiver or
------------------------
discharge or termination of, or consent to any departure by the Borrower from,
any provision of this Agreement or any other Credit Document, shall be effective
unless in a writing signed by the Required Lenders (or by the Administrative
Agent at the direction or with the consent of the Required Lenders), and then
the same shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such amendment,
-------- -------
modification, waiver, discharge, termination or consent shall:
(a) unless agreed to by each Lender holding or owed Obligations directly
affected thereby, (i) reduce or forgive the principal amount of, or rate of
interest on, any Loan, or reduce or forgive any fees or other Obligations (other
than fees payable to the Administrative Agent for its own account), or (ii)
extend any date (including the Facility A Maturity Date or the Facility B
Maturity Date) fixed for the payment of any principal of or interest on any Loan
(other than additional interest payable under SECTION 2.6(B) during the
continuance of an Event of Default), any fees (other than fees payable to the
Administrative Agent for its own account) or any other Obligations;
(b) unless agreed to by all of the Lenders, (i) increase or extend any
Commitment
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of any Lender (it being understood that a waiver of any Event of Default, if
agreed to by the requisite Lenders hereunder, shall not constitute such an
increase or extension), (ii) change the percentage of the aggregate Commitments
or of the aggregate unpaid principal amount of the Loans, or the number or
percentage of Lenders, that shall be required for the Lenders or any of them to
take or approve, or direct the Administrative Agent to take or approve, any
action hereunder (including as set forth in the definition of "Required
Lenders"), or (iii) change any provision of SECTION 2.13 or this SECTION 10.6;
and
(c) unless agreed to by the Administrative Agent in addition to the
Lenders required as provided hereinabove to take such action, affect the rights
or obligations of the Administrative Agent hereunder or under any of the other
Credit Documents;
and provided further that (i) if any amendment, modification, waiver or consent
-------- -------
would adversely affect the holders of Loans of a particular Class (the "affected
Class") relative to holders of Loans of the other Class, then such amendment,
modification, waiver or consent shall require the consent of Lenders holding
more than sixty-six and two-thirds percent (66-2/3%) of the aggregate
outstanding principal amount of all Loans of the affected Class, and (ii) the
Fee Letter and any Hedge Agreement to which any Lender is a party may be amended
or modified, and any rights thereunder waived, in a writing signed by the
parties thereto.
IX.7. Assignments, Participations. (a) Each Lender may assign to one or
---------------------------
more other Eligible Assignees (each, an "Assignee") all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of either of its Commitments, the outstanding Loans made by it and
the Note or Notes held by it); provided, however, that (i) any such assignment
-------- -------
(other than an assignment to a Lender or an Affiliate of a Lender) shall not be
made without the prior written consent of the Administrative Agent and the
Borrower (to be evidenced by their counterexecution of the relevant Assignment
and Acceptance), which consent shall not be unreasonably withheld, (ii) except
in the case of an assignment to a Lender or an Affiliate of a Lender, no such
assignment with regard to either Facility shall be in an aggregate principal
amount (determined as of the date of the Assignment and Acceptance with respect
to each such assignment) less than the lesser of (y) the entire Commitment of
such Lender under such Facility immediately prior to such assignment or (z)
$5,000,000, and (iii) the parties to each such assignment will execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with any Note or Notes subject
to such assignment, and will pay a nonrefundable processing fee of $3,000 to the
Administrative Agent for its own account. Upon such execution, delivery,
acceptance and recording of the Assignment and Acceptance, from and after the
effective date specified therein, which effective date shall be at least five
Business Days after the execution thereof (unless the Administrative Agent shall
otherwise agree), (A) the Assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of the assigning Lender hereunder with respect thereto and (B) the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights (other than rights under the provisions of this Agreement and the other
Credit Documents relating to indemnification or payment of fees, costs and
expenses, to the extent such rights relate to the time prior to the effective
date of such Assignment and Acceptance) and be released from its obligations
under
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<PAGE>
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of such assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto). The terms and
provisions of each Assignment and Acceptance shall, upon the effectiveness
thereof, be incorporated into and made a part of this Agreement, and the
covenants, agreements and obligations of each Lender set forth therein shall be
deemed made to and for the benefit of the Administrative Agent and the other
parties hereto as if set forth at length herein.
(b) The Administrative Agent will maintain at its address for notices
referred to herein a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitments of, and principal amount of the Loans owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower and
each Lender at any reasonable time and from time to time upon reasonable prior
notice.
(c) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an Assignee and counterexecuted by the
Borrower (if required), together with any Note or Notes subject to such
assignment and the processing fee referred to in subsection (a) above, the
Administrative Agent will (i) accept such Assignment and Acceptance, (ii) on the
effective date thereof, record the information contained therein in the Register
and (iii) give notice thereof to the Borrower and the Lenders. Within five (5)
Business Days after its receipt of such notice, the Borrower, at its own
expense, will execute and deliver to the Administrative Agent in exchange for
the surrendered Note or Notes a new Note or Notes to the order of such Assignee
(and, to the extent the assigning Lender has retained any portion of its Loans
and/or Commitments hereunder, to the order of the assigning Lender), prepared in
accordance with the applicable provisions of SECTION 2.3 as necessary to
reflect, after giving effect to the assignment, the Commitments of the Assignee
and (to the extent of any retained interests) the assigning Lender, dated the
date of the replaced Note or Notes and otherwise in substantially the form of
EXHIBITS A-1 and A-2, as applicable. The Administrative Agent will return
cancelled Notes to the Borrower.
(d) Each Lender may, without the consent of the Borrower, the
Administrative Agent or any other Lender, sell to one or more other Persons
(each, a "Participant") participations in any portion comprising less than all
of its rights and obligations under this Agreement (including, without
limitation, a portion of either of its Commitments, the outstanding Loans made
by it and the Note or Notes held by it); provided, however, that (i) such
-------- -------
Lender's obligations under this Agreement shall remain unchanged and such Lender
shall remain solely responsible for the performance of such obligations, (ii)
any such participation shall be in an amount of not less than $3,000,000, but no
Lender shall sell any participation that, when taken together with all other
participations, if any, sold by such Lender, covers all of such Lender's rights
and obligations under this Agreement, (iii) the Borrower, the Administrative
Agent and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement, and no Lender shall permit any Participant to have any voting rights
or any right
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<PAGE>
to control the vote of such Lender with respect to any amendment, modification,
waiver, consent or other action hereunder or under any other Credit Document
(except as to actions that would (x) reduce or forgive the principal amount of,
or rate of interest on, any Loan, or reduce or forgive any fees or other
Obligations, (y) extend any date (including the Facility A Maturity Date or the
Facility B Maturity Date) fixed for the payment of any principal of or interest
on any Loan, any fees or any other Obligations, or (z) increase any Commitment
of any Lender), and (iv) no Participant shall have any rights under this
Agreement or any of the other Credit Documents, each Participant's rights
against the granting Lender in respect of any participation to be those set
forth in the participation agreement, and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not granted such
participation. Notwithstanding the foregoing, each Participant shall have the
rights of a Lender for purposes of SECTIONS 2.14(A), 2.14(B), 2.15, 2.16 and
8.3, and shall be entitled to the benefits thereto, to the extent that the
Lender granting such participation would be entitled to such benefits if the
participation had not been made, provided that no Participant shall be entitled
--------
to receive any greater amount pursuant to any of such Sections than the Lender
granting such participation would have been entitled to receive in respect of
the amount of the participation made by such Lender to such Participant had such
participation not been made.
(e) Nothing in this Agreement shall be construed to prohibit any Lender
from pledging or assigning all or any portion of its rights and interest
hereunder or under any Note to any Federal Reserve Bank as security for
borrowings therefrom; provided, however, that no such pledge or assignment shall
-------- -------
release a Lender from any of its obligations hereunder.
(f) Assignments and participations pursuant to this SECTION 10.7 need not
be pro rata as among the Facilities.
(g) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section, disclose to the
Assignee or Participant or proposed Assignee or Participant any information
relating to the Borrower and its Subsidiaries furnished to it by or on behalf of
any other party hereto, provided that such Assignee or Participant or proposed
--------
Assignee or Participant agrees in writing to keep such information confidential
to the same extent required of the Lenders under SECTION 10.13.
IX.8. No Waiver. The rights and remedies of the Administrative Agent and
---------
the Lenders expressly set forth in this Agreement and the other Credit Documents
are cumulative and in addition to, and not exclusive of, all other rights and
remedies available at law, in equity or otherwise. No failure or delay on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege or be
construed to be a waiver of any Default or Event of Default. No course of
dealing between any of the Borrower and the Administrative Agent or the Lenders
or their agents or employees shall be effective to amend, modify or discharge
any provision of this Agreement or any other Credit Document or to constitute a
waiver of any Default or Event of Default. No notice to or demand upon the
Borrower in any case shall entitle the Borrower to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the right
of the Administrative Agent or any Lender to exercise any right or remedy or
take any other or further action in any
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<PAGE>
circumstances without notice or demand.
IX.9. Successors and Assigns. This Agreement shall be binding upon, inure
----------------------
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, and all references herein to any party shall be deemed to
include its successors and assigns; provided, however, that (i) the Borrower
-------- -------
shall not sell, assign or transfer any of its rights, interests, duties or
obligations under this Agreement or any other Credit Document without the prior
written consent of all of the Lenders and (ii) any Assignees shall have such
rights and obligations with respect to this Agreement and the other Credit
Documents as are provided for under and pursuant to the provisions of SECTION
10.7.
IX.10. Survival. All representations, warranties and agreements made by or
--------
on behalf of the Borrower or any of its Subsidiaries in this Agreement and in
the other Credit Documents shall survive the execution and delivery hereof or
thereof and the making and repayment of the Loans. In addition, notwithstanding
anything herein or under applicable law to the contrary, the provisions of this
Agreement and the other Credit Documents relating to indemnification or payment
of fees, costs and expenses, including, without limitation, the provisions of
SECTIONS 2.14(A), 2.14(B), 2.15, 2.16, 9.7, 10.1 and 10.2, shall survive the
payment in full of the Loans, the termination of the Commitments and any
termination of this Agreement or any of the other Credit Documents.
IX.11. Severability. To the extent any provision of this Agreement is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
IX.12. Construction. The headings of the various articles, sections and
------------
subsections of this Agreement have been inserted for convenience only and shall
not in any way affect the meaning or construction of any of the provisions
hereof. Except as otherwise expressly provided herein and in the other Credit
Documents, in the event of any inconsistency or conflict between any provision
of this Agreement and any provision of any of the other Credit Documents, the
provision of this Agreement shall control.
IX.13. Confidentiality. Each Lender agrees to keep confidential, pursuant
---------------
to its customary procedures for handling confidential information of a similar
nature and in accordance with safe and sound banking practices, all nonpublic
information provided to it by or on behalf of the Borrower or any of its
Subsidiaries in connection with this Agreement or any other Credit Document;
provided, however, that any Lender may disclose such information (i) to its
- -------- -------
directors, employees and agents and to its auditors, counsel and other
professional advisors, (ii) at the demand or request of any bank regulatory
authority, court or other Governmental Authority having or asserting
jurisdiction over such Lender, as may be required pursuant to subpoena or other
legal process, or otherwise in order to comply with any applicable Requirement
of Law, (iii) in connection with any proceeding to enforce its rights hereunder
or under any other Credit Document or any other litigation or proceeding related
hereto or to which it is a party, (iv) to the Administrative Agent or any other
Lender, (v) to the extent the same has become publicly available other than as a
result of a breach of this
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<PAGE>
Agreement and (vi) pursuant to and in accordance with the provisions of SECTION
10.7(G).
IX.14. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. This Agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto and receipt by the Administrative Agent and the Borrower of
written or telephonic notification of such execution and authorization of
delivery thereof.
IX.15. Entire Agreement. THIS AGREEMENT AND THE OTHER DOCUMENTS AND
----------------
INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH (A) EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND THERETO RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF, (B) SUPERSEDE ANY AND ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF, INCLUDING, WITHOUT LIMITATION, THE COMMITMENT
LETTER FROM FIRST UNION TO THE BORROWER DATED MARCH 18, 1997, BUT SPECIFICALLY
EXCLUDING THE FEE LETTER, AND (C) MAY NOT BE AMENDED, SUPPLEMENTED, CONTRADICTED
OR OTHERWISE MODIFIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
IX.16. Effect of Amendment and Restatement. This Agreement amends and
-----------------------------------
restates the Original Credit Agreement in its entirety; provided, however, that
-------- -------
the provisions of the Original Credit Agreement and the other Credit Documents
relating to indemnification or payment of fees, costs and expenses for the
benefit of the Administrative Agent and the Lenders (in each case, as defined in
the Original Credit Agreement), including, without limitation, the provisions of
SECTIONS 2.14(A), 2.14(B), 2.15, 2.16, 9.7, 10.1 and 10.2 of the Original Credit
Agreement, shall survive the effectiveness of this Agreement and the amendment
and restatement of the Original Credit Agreement effected hereby. Upon the
effectiveness of this Agreement, (i) all Existing Loans (if any) shall be deemed
to be Facility A Loans hereunder, shall be evidenced by the Facility A Notes and
shall be entitled to all of the benefits of this Agreement and the other Credit
Documents, and (ii) all other Credit Documents, instruments, certificates,
financial statements and other documents executed or delivered by or on behalf
of the Borrower or any of its Subsidiaries pursuant to the Original Credit
Agreement at any time prior to the effectiveness of this Agreement shall be
deemed to have been executed or delivered pursuant to this Agreement.
-66-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
VESTA INSURANCE GROUP, INC.
By: /s/ Brian R. Meredith
---------------------------------------
Title: Vice President - Finance
(signatures continued)
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<PAGE>
ADMINISTRATIVE AGENT:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Administrative
Agent and as a Lender
Facility A Commitment: By: /s/ Gail M. Golightly
---------------------------------------
$20,000,000
Title: Senior Vice President
Facility B Commitment:
$20,000,000
Instructions for wire transfers to the
Administrative Agent:
First Union National Bank of North
Carolina
ABA Routing No. 053000219
Charlotte, North Carolina
General Ledger No. 465906, RC No. 5007
Attention: Syndication Agency Services
Re: Vesta Insurance Group, Inc.
Address for notices (as a Lender):
First Union National Bank of
North Carolina
Financial Institutions Group
One First Union Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Robert C. Mayer, Jr.
Telephone: (704) 374-6628
Telecopy: (704) 383-7611
Lending Office:
First Union National Bank of
North Carolina
Financial Institutions Group
One First Union Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Robert C. Mayer, Jr.
Telephone: (704) 374-6628
Telecopy: (704) 383-7611
(signatures continued)
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<PAGE>
DOCUMENTATION AGENT:
SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION
Facility A Commitment: By: /s/ W. Spencer Ragland
-------------------------------------
$20,000,000
Title: Commercial Loan Officer
Facility B Commitment:
$20,000,000
Address for notices:
420 North 20th Street
Birmingham, Alabama 35203
Attention: Curtis Perry
Telephone: (205) 254-5799
Telecopy: (205) 254-5022
Lending Office:
420 North 20th Street
Birmingham, Alabama 35203
Attention: Curtis Perry
Telephone: (205) 254-5799
Telecopy: (205) 254-5022
(signatures continued)
-69-
<PAGE>
OTHER LENDERS:
ABN AMRO BANK N.V., NEW YORK BRANCH
Facility A Commitment: By: /s/ Victor J. Fennon
---------------------------------------
$15,000,000
Title: Vice President
Facility B Commitment:
$15,000,000
By: /s/ Bruce D. Ballentine
---------------------------------------
Title: Vice President
Address for notices:
500 Park Avenue
New York, New York 10022
Attention: James Mitchell
Telephone: (212) 446-4116
Telecopy: (212) 446-4335
Lending Office:
500 Park Avenue
New York, New York 10022
Attention: James Mitchell
Telephone: (212) 446-4116
Telecopy: (212) 446-4335
(signatures continued)
-70-
<PAGE>
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
Facility A Commitment: By: /s/ John E. Beckwith
-------------------------------------
$15,000,000
Title: Vice President
Facility B Commitment:
$15,000,000
Address for notices:
1251 Avenue of the Americas
12th Floor, National Banking Department
New York, New York 10016-3138
Attention: John Beckwith
Telephone: (212) 782-4354
Telecopy: (212) 782-4935
Lending Office:
1251 Avenue of the Americas
12th Floor, National Banking Department
New York, New York 10016-3138
Attention: John Beckwith
Telephone: (212) 782-4354
Telecopy: (212) 782-4935
(signatures continued)
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<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
Facility A Commitment: By: /s/ Frederick J. Crawford
------------------------------------
$15,000,000
Title: Vice President
Facility B Commitment:
$15,000,000
Address for notices:
Insurance Companies Division
One First National Plaza, Mail Suite 0085
Chicago, Illinois 60670-0085
Attention: Frederick Crawford
Telephone: (312) 732-5664
Telecopy: (312) 732-4033
Lending Office:
Insurance Companies Division
One First National Plaza, Mail Suite 0085
Chicago, Illinois 60670-0085
Attention: Frederick Crawford
Telephone: (312) 732-5664
Telecopy: (312) 732-4033
(signatures continued)
-72-
<PAGE>
WACHOVIA BANK OF GEORGIA, N.A.
Facility A Commitment: By: /s/ William B. Nixon
------------------------------------
$15,000,000
Title: Vice President
Facility B Commitment:
$15,000,000
Address for notices:
191 Peachtree Street, 29th Floor
Atlanta, Georgia 30303
Attention: William B. Nixon
Telephone: (404) 332-4884
Telecopy: (404) 332-5016
Lending Office:
191 Peachtree Street, 29th Floor
Atlanta, Georgia 30303
Attention: William B. Nixon
Telephone: (404) 332-4884
Telecopy: (404) 332-5016
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<PAGE>
Exhibit B-1 to Amended and Restated
Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Vesta Insurance Group, Inc.
April 8, 1997 / $200,000,000
___________________________________
FORM OF
NOTICE OF BORROWING
[Date]
First Union National Bank of
North Carolina, as
Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, Vesta Insurance Group, Inc. (the "Borrower"), refers
to the Amended and Restated Credit Agreement, dated as of April 8, 1997, among
the Borrower, certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), SouthTrust Bank of Alabama, National
Association, as Documentation Agent, and you, as Administrative Agent for the
Lenders (as amended, modified or supplemented from time to time, the "Credit
Agreement," the terms defined therein being used herein as therein defined),
and, pursuant to SECTION 2.2(B) of the Credit Agreement, hereby gives you, as
Administrative Agent, irrevocable notice that the Borrower requests a Borrowing
under the Credit Agreement, and to that end sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") as required by SECTION
2.2(B) of the Credit Agreement:
(i) The aggregate principal amount of the Proposed Borrowing is
$_______________./1/
(ii) The Loans comprising the Proposed Borrowing shall be
[Facility A Loans] [Facility B Loans] and shall be initially made as
[Base Rate Loans] [LIBOR Loans]./2/
_______________________
/1/Shall be an amount not less than $1,000,000 or, if greater, an integral
multiple of $500,000 in excess thereof (in the case of Base Rate Loans), or
$3,000,000 or, if greater, an integral multiple of $1,000,000 in excess thereof
(in the case of LIBOR Loans).
/2/Select the applicable Class and Type of Loans.
<PAGE>
(iii) The Proposed Borrowing is requested to be made on
______________ (the "Borrowing Date")./3/
[(iv) The initial Interest Period for the LIBOR Loans comprising
the Proposed Borrowing shall be [one/two/three months].]/4/
[(v) The Borrower's senior unsecured long-term publicly traded
Indebtedness without third party credit enhancement is presently rated
_______ by Moody's and _______ by Standard & Poor's, and as a result
of such ratings the Margin Percentage initially applicable to the
LIBOR Loans comprising the Proposed Borrowing shall be _____%.]/5/
The Borrower hereby certifies that the following statements are true
on and as of the date hereof and will be true on and as of the Borrowing Date:
(A) Each of the representations and warranties contained in
ARTICLE IV of the Credit Agreement and in the other Credit Documents is and
will be true and correct on and as of each such date, with the same effect
as if made on and as of each such date, both immediately before and after
giving effect to the Proposed Borrowing and to the application of the
proceeds therefrom (except to the extent any such representation or
warranty is expressly stated to have been made as of a specific date, in
which case such representation or warranty shall be true and correct as of
such date);
(B) No Default or Event of Default has occurred and is
continuing or would result from the Proposed Borrowing or from the
application of the proceeds therefrom; and
(C) After giving effect to the Proposed Borrowing, the
aggregate principal amount of Facility A Loans outstanding will not exceed
the aggregate Facility A Commitments and the aggregate principal amount of
Facility B Loans outstanding will not exceed the aggregate Facility B
Commitments.
Very truly yours,
VESTA INSURANCE GROUP, INC.
By: ______________________________________
Title: ___________________________________
________________________
/3/Shall be a Business Day at least one Business Day after the date hereof
(in the case of Base Rate Loans) or at least three Business Days after the date
hereof (in the case of LIBOR Loans).
/4/Include this clause in the case of a Proposed Borrowing comprised of
LIBOR Loans, and select the applicable Interest Period.
/5/Include this clause in the case of a Proposed Borrowing comprised of
LIBOR Loans, and insert the applicable ratings and the applicable Margin
Percentage as set forth in the table contained in the definition of "Margin
Percentage" in the Credit Agreement.
-2-
<PAGE>
Exhibit B-2 to Amended and Restated
Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Vesta Insurance Group, Inc.
April 8, 1997 / $200,000,000
___________________________________
FORM OF
NOTICE OF CONVERSION/CONTINUATION
[Date]
First Union National Bank of
North Carolina, as
Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, Vesta Insurance Group, Inc. (the "Borrower"), refers
to the Amended and Restated Credit Agreement, dated as of April 8, 1997, among
the Borrower, certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), SouthTrust Bank of Alabama, National
Association, as Documentation Agent, and you, as Administrative Agent for the
Lenders (as amended, modified or supplemented from time to time, the "Credit
Agreement," the terms defined therein being used herein as therein defined),
and, pursuant to SECTION 2.9(B) of the Credit Agreement, hereby gives you, as
Administrative Agent, irrevocable notice that the Borrower requests a
[conversion] [continuation]/"/ of Loans under the Credit Agreement, and to that
end sets forth below the information relating to such [conversion]
[continuation] (the "Proposed [Conversion] [Continuation]") as required by
SECTION 2.9(B) of the Credit Agreement:
____________________
/6/Insert "conversion" or "continuation" throughout the notice, as
applicable.
<PAGE>
(i) The Proposed [Conversion] [Continuation] is requested to be
made on _______________./7/
_____________________
/7/Shall be a Business Day at least one Business Day after the date hereof
(in the case of any conversion of LIBOR Loans into Base Rate Loans) or at least
three Business Days after the date hereof (in the case of any conversion of Base
Rate Loans into, or continuation of, LIBOR Loans), and additionally, in the case
of any conversion of LIBOR Loans into Base Rate Loans, or continuation of LIBOR
Loans, shall be the last day of the Interest Period applicable to such LIBOR
Loans.
-2-
<PAGE>
(ii) The Proposed [Conversion] [Continuation] involves
$____________/8/ in aggregate principal amount of [Facility A Loans]
[Facility B Loans]/9/ made pursuant to a Borrowing on
________________,/10/ which Loans are presently maintained as [Base
Rate] [LIBOR] Loans and are proposed hereby to be [converted into Base
Rate Loans] [converted into LIBOR Loans] [continued as LIBOR
Loans]./11/
[(iii) The initial Interest Period for the Loans being [converted
into] [continued as] LIBOR Loans pursuant to the Proposed [Conversion]
[Continuation] shall be [one/two/three months].]/12/
[(iv) The Borrower's senior unsecured long-term publicly traded
Indebtedness without third party credit enhancement is presently rated
_______ by Moody's and _______ by Standard & Poor's, and as a result
of such ratings the Margin Percentage initially applicable to the
Loans being [converted into] [continued as] LIBOR Loans pursuant to
the Proposed [Conversion] [Continuation] shall be _____%.]/13/
The Borrower hereby certifies that the following statement is true both on
and as of the date hereof and will be true on and as of the effective date of
the Proposed [Conversion] [Continuation]: no Default or Event of Default has
occurred and is continuing or would result from the Proposed [Conversion]
[Continuation].
Very truly yours,
VESTA INSURANCE GROUP, INC.
By: ______________________________
____________________
/8/Shall be an amount not less than $1,000,000 or, if greater, an integral
multiple of $500,000 in excess thereof (in the case of any conversion of LIBOR
Loans into Base Rate Loans) or $3,000,000 or, if greater, an integral multiple
of $1,000,000 in excess thereof (in the case of any conversion of Base Rate
Loans into, or continuation of, LIBOR Loans).
/9/Select the applicable Class of Loans.
/10/Insert the applicable Borrowing Date for the Loans being converted or
continued.
/11Complete with the applicable bracketed language.
/12/Include this clause in the case of a Proposed Conversion or
Continuation involving a conversion of Base Rate Loans into, or continuation of,
LIBOR Loans, and select the applicable Interest Period.
/13/Include this clause in the case of a Proposed Conversion or
Continuation involving a conversion of Base Rate Loans into, or continuation of,
LIBOR Loans, and insert the applicable ratings and the applicable Margin
Percentage as set forth in the table contained in the definition of "Margin
Percentage" in the Credit Agreement.
-3-
<PAGE>
Title: _____________________________
-4-
<PAGE>
Exhibit C to Amended and Restated
Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Vesta Insurance Group, Inc.
April 8, 1997 / $200,000,000
______________________________
FORM OF
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE (this "Assignment and Acceptance") is made
this _____ day of ____________, ____, by and between _________________________
(the "Assignor") and __________________________ (the "Assignee"). Reference is
made to the Amended and Restated Credit Agreement, dated as of April 8, 1997 (as
amended, modified or supplemented from time to time, the "Credit Agreement"),
among Vesta Insurance Group, Inc. (the "Borrower"), certain banks and other
financial institutions from time to time parties thereto (the "Lenders"),
SouthTrust Bank of Alabama, National Association, as Documentation Agent, and
First Union National Bank of North Carolina, as Administrative Agent for the
Lenders (the "Administrative Agent"). Unless otherwise defined herein,
capitalized terms used herein without definition shall have the meanings given
to them in the Credit Agreement.
The Assignor and the Assignee hereby agree as follows:
1. Assignment and Assumption. Subject to the terms and conditions hereof,
-------------------------
the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby
purchases and assumes from the Assignor, without recourse to the Assignor and,
except as expressly provided herein, without representation or warranty by the
Assignor, the interest or interests as of the Effective Date (as hereinafter
defined) in and to all of the Assignor's rights and obligations under the Credit
Agreement and the other Credit Documents (in its capacity as a Lender
thereunder) with respect to each Class of Loans represented by the percentage
interest or interests specified with regard to such Class in Item 4(a) of Annex
--------- -----
I (each such assigned interest, an "Assigned Share"), including, without
- -
limitation, (i) in the case of Facility A Loans, the relevant Assigned Share of
all rights and obligations of the Assignor with respect to its Facility A
Commitment and its outstanding Facility A Loans, and (ii) in the case of
Facility B Loans, the relevant Assigned Share of all rights and obligations of
the Assignor with respect to its Facility B Commitment and its outstanding
Facility B Loans.
2. The Assignor. The Assignor (i) represents and warrants that it is the
------------
legal and beneficial owner of each interest being assigned by it hereunder, that
each such interest is free and clear of any adverse claim, that as of the date
hereof the amount of its Commitments and outstanding Loans of each Class with
regard to which an interest is being assigned hereunder is as set forth in Item
----
4 of Annex I, and that after giving effect to the assignment provided for herein
- - -------
the respective Commitments of the Assignor and the Assignee to provide Loans of
such Class will be as set forth in Item 4(a) of Annex I, (ii) except as set
--------- -------
forth in clause (i) above, makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, any other Credit Document or
any other instrument or document furnished pursuant thereto or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement, any other Credit Document or any other instrument or document
furnished
<PAGE>
pursuant thereto, and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any of
its Subsidiaries or the performance or observance by the Borrower or any of its
Subsidiaries of any of their respective obligations under the Credit Agreement,
any other Credit Document or any other instrument or document furnished pursuant
thereto.
3. The Assignee. The Assignee (i) represents and warrants that it is
------------
legally authorized to enter into this Assignment and Acceptance, (ii) confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements most recently required to have been delivered under SECTION
5.1 of the Credit Agreement and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance, (iii) agrees that it will, independently and
without reliance upon the Administrative Agent, the Assignor or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement, (iv) confirms that it is an Eligible
Assignee, (v) appoints and authorizes the Administrative Agent to take such
actions as agent on its behalf under the Credit Agreement and the other Credit
Documents, and to exercise such powers and to perform such duties, as are
specifically delegated to the Administrative Agent by the terms thereof,
together with such other powers and duties as are reasonably incidental thereto,
and (vi) agrees that it will perform in accordance with their respective terms
all of the obligations that by the terms of the Credit Agreement are required to
be performed by it as a Lender. [To the extent legally entitled to do so, the
Assignee will deliver to the Administrative Agent, as and when required to be
delivered under the Credit Agreement, duly completed and executed originals of
the applicable tax withholding forms described in SECTION 2.15(D) of the Credit
Agreement]./3/
4. Effective Date. Following the execution of this Assignment and
--------------
Acceptance by the Assignor and the Assignee, an executed original hereof,
together with all attachments hereto, shall be delivered to each of the
Administrative Agent and the Borrower (and also to the Administrative Agent, the
processing fee referred to in SECTION 10.7(A) of the Credit Agreement). The
effective date of this Assignment and Acceptance (the "Effective Date") shall be
the earlier of (i) the date of acceptance hereof by the Administrative Agent and
the Borrower or (ii) the date, if any, designated as the Effective Date in Item
----
5 of Annex I (which date shall be not less than five (5) Business Days after the
- - -------
date of execution hereof by the Assignor and the Assignee). As of the Effective
Date, (y) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, shall have the rights and
obligations of a Lender thereunder and under the other Credit Documents, and (z)
the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights (other than rights under the provisions of the Credit
Agreement and the other Credit Documents relating to indemnification or payment
of fees, costs and expenses, to the extent such rights relate to the time prior
to the Effective Date) and be released from its obligations under the Credit
Agreement and the other Credit Documents.
5. Payments; Settlement. On or prior to the Effective Date, in
--------------------
consideration of the
__________________
/3/Insert if the Assignee is organized under the laws of a jurisdiction outside
the United States.
-2-
<PAGE>
sale and assignment provided for herein and as a condition to the effectiveness
of this Assignment and Acceptance, the Assignee will pay to the Assignor an
amount (to be confirmed between the Assignor and the Assignee) that represents
the Assigned Share of the principal amount of the Loans of each relevant Class
made by the Assignor and outstanding on the Effective Date (together, if and to
the extent the Assignor and the Assignee so elect, with the Assigned Share of
any related accrued but unpaid interest, fees and other amounts). From and after
the Effective Date, the Administrative Agent will make all payments required to
be made by it under the Credit Agreement in respect of each interest assigned
hereunder (including, without limitation, all payments of principal, interest
and fees in respect of the Assigned Share of the Assignor's Commitments and
Loans assigned hereunder) directly to the Assignee. The Assignor and the
Assignee shall be responsible for making between themselves all appropriate
adjustments in payments due under the Credit Agreement in respect of the period
prior to the Effective Date. All payments required to be made hereunder or in
connection herewith shall be made in Dollars by wire transfer of immediately
available funds to the appropriate party at its address for payments designated
in Annex I.
-------
6. Governing Law. This Assignment and Acceptance shall be governed by,
-------------
and construed in accordance with, the internal laws of the State of North
Carolina (without regard to the conflicts of laws principles thereof).
7. Entire Agreement. This Assignment and Acceptance, together with the
----------------
Credit Agreement and the other Credit Documents, embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings of the parties, verbal or written, relating to the subject matter
hereof.
8. Successors and Assigns. This Assignment and Acceptance shall be
----------------------
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
9. Counterparts. This Assignment and Acceptance may be executed in any
------------
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Assignment and Acceptance
to be executed by their duly authorized officers as of the date first above
written.
ASSIGNOR:
________________________________
By: ____________________________
Title: _________________________
ASSIGNEE:
________________________________
By: ____________________________
Title: _________________________
Accepted this _______ day of
______________, 19___:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as
Administrative Agent
By: ________________________________
Title: _____________________________
Consented and agreed to:
VESTA INSURANCE GROUP, INC.
By: ________________________________
Title: _____________________________
-4-
<PAGE>
ANNEX I
-------
1. Borrower: Vesta Insurance Group, Inc.
2. Name and Date of Credit Agreement:
Amended and Restated Credit Agreement, dated as of April 8, 1997, among
Vesta Insurance Group, Inc., certain Lenders from time to time parties
thereto, SouthTrust Bank of Alabama, National Association, as Documentation
Agent, and First Union National Bank of North Carolina, as Administrative
Agent.
3. Date of Assignment and Acceptance: ________________, 19___.
4. Amounts:
Amount of
Aggregate for Assigned Assigned
Assignor Share /4/ Share
---------- --------- -------
(a) Facility A Commitment $___________ _____% $__________
(b) Facility A Loans/5/ $___________ _____% $__________
(c) Facility B Commitment $___________ _____% $__________
(b) Facility A Loans/6/ $___________ _____% $__________
5. Effective Date: ________________________/7/
6. Addresses for Payments:
Assignor: _________________________________
_________________________________
_________________________________
Attention: ______________________
Telephone: ______________________
Telecopy: _______________________
____________________
/4/Percentage taken to up to ten decimal places, if necessary.
/5/Insert outstanding amounts as of the date of the Assignment and
Acceptance.
/6/Insert outstanding amounts as of the date of the Assignment and
Acceptance.
/7/Shall be a date not less than five Business Days after the date of the
Assignment and Acceptance.
<PAGE>
Reference: ______________________
Assignee: _________________________________
_________________________________
_________________________________
Attention: ______________________
Telephone: ______________________
Telecopy: _______________________
Reference: ______________________
7. Addresses for Notices:
Assignor: _________________________________
_________________________________
_________________________________
Attention: ______________________
Telephone: ______________________
Telecopy: _______________________
Assignee: _________________________________
_________________________________
_________________________________
Attention: ______________________
Telephone: ______________________
Telecopy: _______________________
8. Lending Office of Assignee:
_________________________________
_________________________________
_________________________________
Attention: ______________________
Telephone: ______________________
Telecopy: _______________________
<PAGE>
Exhibit D-1 to Amended and Restated
Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Vesta Insurance Group, Inc.
April 8, 1997 / $200,000,000
_________________________________
FORM OF
COMPLIANCE CERTIFICATE
(GAAP Financial Statements)
THIS CERTIFICATE is given pursuant to SECTION 5.3(A) of the Amended and
Restated Credit Agreement, dated as of April 8, 1997 (as amended, modified or
supplemented from time to time, the "Credit Agreement," the terms defined
therein being used herein as therein defined), among Vesta Insurance Group, Inc.
(the "Borrower"), certain banks and other financial institutions from time to
time parties thereto (the "Lenders"), SouthTrust Bank of Alabama, National
Association, as Documentation Agent, and First Union National Bank of North
Carolina, as Administrative Agent for the Lenders.
The undersigned hereby certifies that:
1. He is the duly elected [Chief Financial Officer] [Vice President-
Finance] [Treasurer] of the Borrower./1/
2. Enclosed with this Certificate are copies of the financial statements
of the Borrower and its Subsidiaries as of _____________, and for the [________-
month period] [year] then ended, required to be delivered under SECTION
[5.1(A)][5.1(B)] of the Credit Agreement. Such financial statements have been
prepared in accordance with Generally Accepted Accounting Principles [(subject
to the absence of notes required by Generally Accepted Accounting Principles and
subject to normal year-end audit adjustments)]/2/ and fairly present the
financial condition of the Borrower and its Subsidiaries on a consolidated basis
as of the date indicated and the results of operation of the Borrower and its
Subsidiaries on a consolidated basis for the period covered thereby.
3. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under the supervision of the undersigned, a review in
reasonable detail of the transactions and condition of the Borrower and its
Subsidiaries during the accounting period covered by such financial statements.
4. The examination described in paragraph 3 above did not disclose, and
the undersigned has no knowledge of the existence of, any Default or Event of
Default during or at the end of the accounting period covered by such financial
statements or as of the date of this Certificate. [, except as set forth below.
________________
/1/ Insert applicable bracketed language throughout the Certificate.
/2/ Insert in the case of quarterly financial statements.
<PAGE>
Describe here or in a separate attachment any exceptions to paragraph 4
above by listing, in reasonable detail, the nature of the Default or Event of
Default, the period during which it existed and the action that the Borrower has
taken or proposes to take with respect thereto.]
5. Attached to this Certificate as Attachment A is a covenant compliance
worksheet reflecting the computation of the financial covenants set forth in
SECTIONS 6.1, 6.2 and 6.3 of the Credit Agreement as of the last day of the
period covered by the financial statements enclosed herewith.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the _______ day of _____________, ____.
VESTA INSURANCE GROUP, INC.
By: [signature of officer]
--------------------------------
Name: ______________________________
Title: _____________________________
<PAGE>
ATTACHMENT A
COVENANT COMPLIANCE WORKSHEET
(GAAP Financial Statements)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CAPITALIZATION RATIO
(SECTION 6.1 OF THE CREDIT AGREEMENT): NOT GREATER THAN 0.425 TO 1.0
- --------------------------------------------------------------------------------
<S> <C>
(1) Consolidated Indebtedness as of
the measurement date $==========
(2) Capitalization:
(a) Consolidated Indebtedness as of
the measurement date (from Line 1) $_________
(b) Consolidated Net Worth as of
the measurement date $_________
(c) Capitalization: Add Lines 2(a)
and 2(b) $==========
(3) Ratio of Consolidated Indebtedness
to Total Capitalization:
Divide Line 1 by Line 2(c)
: 1.0
==========
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CONSOLIDATED NET WORTH
(SECTION 6.2 OF THE CREDIT AGREEMENT): NOT LESS THAN THE FOLLOWING:
- -------------------------------------------------------------------------------
<S> <C>
(1) Base for calculating Consolidated
Net Worth $350,000,000/3/
===========
(2) Consolidated Net Income for each
fiscal quarter (if positive) ending
after September 30, 1996 $_________
Multiplied by: 50%
Equals: Net income adjustment $==========
(3) Aggregate of all amounts paid by
the Borrower as dividends or distributions
in respect of its equity securities at any
time after September 30, 1996 up to and including
the last day of the fiscal quarter then ending ($==========)
(4) Required Consolidated Net Worth:
Add Lines 1 and 2 and subtract Line 3
$==========
(5) Actual Consolidated Net Worth as
of measurement date $==========
- --------------------------------------------------------------------------------
</TABLE>
_______________
/3/ $250,000,000 for the fiscal quarter ended December 31, 1996.
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
FIXED CHARGE COVERAGE RATIO
(SECTION 6.3 OF THE CREDIT AGREEMENT): NOT LESS THAN 3.0 TO 1.0
- -------------------------------------------------------------------------------
<S> <C>
(1) Consolidated earnings before
interest and taxes for the
four-quarter period ending on
the date of determination (the
"Measurement Period"):
(a) Consolidated Net Income of the
Borrower and its Subsidiaries
for the Measurement Period $_______
(b) Consolidated Interest Expense for
the Measurement Period (to the extent
taken into account in the determination
of Consolidated Net Income) $_______
(c) Federal, state, local and other
income taxes paid or accrued by
the Borrower and its Subsidiaries
during the Measurement Period
(to the extent taken into account in the
determination of Consolidated Net Income) $_______
(d) Consolidated earnings before
interest and taxes:
Add Lines 1(a), 1(b) and 1(c) $=======
(2) Fixed Charges:
(a) Consolidated Interest Expense for
the Measurement Period $_______
(b) Aggregate amount of all dividends
and distributions made by the Borrower
in respect of its equity securities
during the Measurement Period $_______
(c) Aggregate amount of all amounts
paid by the Borrower to purchase,
redeem, retire or acquire
its equity securities during the
Measurement Period
(other than pursuant to employee
benefit plans) $_______
Minus lesser of:/4/
-----
25% of Consolidated Net Income ($_______)
5% of Consolidated Net Worth ($_______)
Equals: Repurchase adjustment $________
(d) Fixed Charges:
Add Lines 2(a), 2(b) and 2(c) $========
(3) Fixed Charge Coverage Ratio:
Divide Line 1(d) by Line 2(d) :1.0
========
(4) Amounts available for dividends
from Insurance Subsidiaries
in respect of the Measurement Period $_______
(5) Aggregate (without duplication) of
all scheduled principal and interest
in respect of Indebtedness paid or
accrued by the Borrower and its
Subsidiaries during the Measurement Period $_______
- --------------------------------------------------------------------------------
</TABLE>
_________
/4/ Insert the lesser of these two items, determined as of and for the
- ---
Measurement Period.
<PAGE>
Exhibit D-2 to Amended and Restated
Credit Agreement
First Union National Bank
of North Carolina, as
Administrative Agent
Vesta Insurance Group, Inc.
April 8, 1997 / $200,000,000
_________________________________
FORM OF
COMPLIANCE CERTIFICATE
(Statutory Financial Statements)
THIS CERTIFICATE is given pursuant to SECTION 5.3(A) of the Amended and
Restated Credit Agreement, dated as of April 8, 1997 (as amended, modified or
supplemented from time to time, the "Credit Agreement," the terms defined
therein being used herein as therein defined), among Vesta Insurance Group, Inc.
(the "Borrower"), certain banks and other financial institutions from time to
time parties thereto (the "Lenders"), SouthTrust Bank of Alabama, National
Association, as Documentation Agent, and First Union National Bank of North
Carolina, as Administrative Agent for the Lenders.
The undersigned hereby certifies that:
1. He is the duly elected [Chief Financial Officer] [Vice President-
Finance] [Treasurer] of the Borrower./5/
2. Enclosed with this Certificate are copies of the financial statements
of the Borrower and its Subsidiaries as of _____________, and for the [________-
month period] [year] then ended, required to be delivered under SECTION
[5.2(A)][5.2(B)] of the Credit Agreement. Such financial statements have been
prepared in accordance with Statutory Accounting Principles and fairly present
the financial condition of the Borrower and its Subsidiaries on a consolidated
basis as of the date indicated and the results of operation of the Borrower and
its Subsidiaries on a consolidated basis for the period covered thereby.
3. Attached to this Certificate as Attachment A is a covenant compliance
worksheet reflecting the computation of the financial covenant set forth in
SECTION 6.4 of the Credit Agreement as of the last day of the period covered by
the financial statements enclosed herewith.
______________
/5/ Insert applicable bracketed language throughout the Certificate.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the _______ day of _____________, ____.
VESTA INSURANCE GROUP, INC.
By: [signature of officer]
--------------------------------
Name: ______________________________
Title: _____________________________
<PAGE>
ATTACHMENT A
COVENANT COMPLIANCE WORKSHEET
(Statutory Financial Statements)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RISK-BASED CAPITAL NOT LESS THAN 150% OF APPLICABLE
(SECTION 6.4 OF THE CREDIT AGREEMENT): COMPANY ACTION LEVEL RBC
- -------------------------------------------------------------------------------
<S> <C>
(1) Total adjusted capital of VFIC as
of the measurement date $_________
(2) Company Action Level RBC as of the
measurement date $_________
(3) Required total adjusted capital as
of the measurement date:
Multiply Line 1(b) by 150% $_________
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 4.7
Subsidiaries
<TABLE>
<CAPTION>
Percentage owned
(directly or
indirectly)
Subsidiary Direct Owner by Borrower
---------- ------------ ------------
<S> <C> <C>
The Hawaiian Insurance & Guaranty
Company, Limited Vesta Fire Insurance Corporation 100%
J. Gordon Gaines, Inc. Vesta Insurance Group, Inc. 100%
J. Gordon Gaines of
Texas, Inc. Vesta Fire Insurance Corporation 100%
Liberty National Reinsurance
Company, Ltd. Vesta Insurance Group, Inc. 100%
Sheffield Insurance Corporation Vesta Fire Insurance Corporation 100%
Vesta Capital Trust I Vesta Insurance Group, Inc. 100%
Vesta Financial Corporation Vesta Fire Insurance Corporation 100%
Vesta Fire Insurance Company Vesta Insurance Group, Inc. 100%
Vesta Insurance Corporation Vesta Fire Insurance Corporation 100%
Vesta Lloyds Insurance Company Vesta Fire Insurance Corporation 100%
Vesta Management Corporation of Texas Vesta Insurance Group, Inc. 100%
Vesta County Mutual Vesta Management Corporation
Insurance Company of Texas (control pursuant to 100%
management contract)
</TABLE>
<PAGE>
Schedule 7.3
Liens
1. $6.6 million lien on corporate aircraft with Michigan National Bank.
<PAGE>
_______________________________________________________
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
ANTHEM INSURANCE COMPANIES, INC.,
ANTHEM CASUALTY INSURANCE GROUP, INC.
AND
VESTA INSURANCE GROUP, INC.
DATED AS OF APRIL 23, 1997
_______________________________________________________
SALE OF ALL OF THE OUTSTANDING SHARES OF COMMON STOCK
OF
ANTHEM CASUALTY INSURANCE GROUP, INC.
AND
THE SHELBY INSURANCE COMPANY
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE 1. DEFINITION OF CERTAIN TERMS................................................................................. 2
Section 1.01 Terms............................................................................................... 2
Section 1.02 Additional Terms.................................................................................... 5
ARTICLE 2. SALE AND PURCHASE OF THE SHARES............................................................................. 6
Section 2.01. Sale and Purchase of the Shares..................................................................... 6
Section 2.02. Purchase Price...................................................................................... 6
Section 2.03. Closing............................................................................................. 6
Section 2.04. Deliveries by Anthem and Seller..................................................................... 6
(1) The Shares........................................................................................ 6
(2) Officer's Certificate............................................................................. 6
(3) Resolutions of Anthem and Seller.................................................................. 6
(4) Opinion of Counsel................................................................................ 7
(5) Required Approvals; Consents; Elimination of Debt................................................. 7
(6) Resignations...................................................................................... 7
Section 2.05. Deliveries by Purchaser............................................................................. 7
(1) Officer's Certificate............................................................................. 7
(2) Opinion of Counsel................................................................................ 8
(3) Certified Resolutions............................................................................. 8
(4) Purchase Price.................................................................................... 8
Section 2.06. Post-Closing Matters................................................................................ 8
(1) Closing Balance Sheet............................................................................. 8
(2) Dispute Resolution................................................................................ 8
(3) Purchase Price Adjustment......................................................................... 9
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ANTHEM
AND SELLER................................................................................................. 9
Section 3.01. Organization, Standing and Corporate Authority of
Anthem............................................................................................. 9
Section 3.02. Anthem's and Seller's Transaction Authority; Corporate Proceedings; Enforceability..................10
Section 3.03. Organization, Standing, Permits, Certificates of
Authority, etc., of Seller and the Subsidiaries....................................................10
Section 3.04. Title to the Shares.................................................................................12
Section 3.05. The Subsidiaries....................................................................................14
Section 3.06. Consents and Approvals; No Violations...............................................................14
Section 3.07. Financial Statements and Insurer Convention Statements..............................................14
Section 3.08. No Default..........................................................................................16
Section 3.09. Environmental Matters...............................................................................15
Section 3.10. Legal Proceedings...................................................................................16
Section 3.11. Property and Title; Liens...........................................................................18
Section 3.12. Brokers.............................................................................................17
Section 3.13. Compliance With Laws................................................................................17
Section 3.14. Insurance Business..................................................................................19
Section 3.15. Regulatory Filings..................................................................................19
Section 3.16. Contracts...........................................................................................19
Section 3.17. No Material Adverse Change..........................................................................21
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 3.18. Conduct of Business.........................................................................................21
Section 3.19. Security Deposits...........................................................................................20
Section 3.20. Real Estate.................................................................................................20
Section 3.21. Intangible Property and Computer Software...................................................................23
Section 3.22. Liabilities.................................................................................................23
Section 3.23. Employee Benefit Plans......................................................................................22
Section 3.24. Employee Relations..........................................................................................26
Section 3.25. Reinsurance and Coinsurance.................................................................................26
Section 3.26. Insurance...................................................................................................25
Section 3.27. Officers, Directors, and Key Employees......................................................................27
Section 3.28. Accounting Practices........................................................................................27
Section 3.29. Powers of Attorneys; Guarantees.............................................................................26
Section 3.30. Loss Reserves...............................................................................................26
Section 3.31. No Material Misrepresentations..............................................................................28
Section 3.32. Personal Property Leases....................................................................................29
Section 3.33. Bank Accounts; Custodial Accounts...........................................................................27
Section 3.34. Improper Payments...........................................................................................29
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER30
Section 4.01. Organization, Standing and Corporate Authority of
Purchaser..................................................................................................30
Section 4.02. Purchaser's Transaction Authority; Corporate
Proceedings; Enforceability................................................................................30
Section 4.03. No Violation................................................................................................30
Section 4.04. No Default..................................................................................................31
Section 4.05. Legal Proceedings...........................................................................................31
Section 4.06. Investment Purpose..........................................................................................31
Section 4.07. Brokers.....................................................................................................32
Section 4.08. Seller Financial Statements and Insurer Convention Statements...............................................32
Section 4.09. Disclosure..................................................................................................32
Section 4.10. Financing...................................................................................................32
Section 4.11. Articles, By-Laws, etc......................................................................................32
ARTICLE 5. COVENANTS OF SELLER..................................................................................................33
Section 5.01. Conduct of Business.........................................................................................33
Section 5.02. Litigation..................................................................................................36
Section 5.03. Additional Financial Information............................................................................36
Section 5.04. Disposition of Affiliate Relationships......................................................................36
Section 5.05. Notifications by Seller.....................................................................................36
Section 5.06. Required Approvals and Consents.............................................................................37
Section 5.07. Hart-Scott-Rodino Filings...................................................................................37
Section 5.08. Non-Solicitation............................................................................................37
Section 5.09. Acquisition Proposals.......................................................................................38
Section 5.10. Instruments.................................................................................................38
Section 5.11. Transfer of Certain Assets by Seller........................................................................38
Section 5.12. Use of Names................................................................................................38
Section 5.13. [Deleted]...................................................................................................39
Section 5.14. Pre-Closing Maintenance of Insurance and Reinsurance........................................................39
Section 5.15. Continuation of Certain Insurance...........................................................................39
Section 5.15. Certain Investments.........................................................................................39
Section 5.17. Preservation of Permits and Services........................................................................39
Section 5.18. Confidential Nature of Information Obtained by Anthem and the Seller........................................40
ARTICLE 6. COVENANTS OF PURCHASER..............................................................................................40
Section 6.01. Required Approvals..........................................................................................40
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 6.02. Hart-Scott-Rodino Filings...................................................................................40
Section 6.03. Use of Name and Logo........................................................................................40
Section 6.04. Indemnification.............................................................................................41
Section 6.05. Continued Access by Seller..................................................................................41
Section 6.06. Conduct of Business.........................................................................................42
Section 6.07. Notifications by Purchaser..................................................................................42
Section 6.08. Non-Solicitation............................................................................................42
Section 6.09. Instruments.................................................................................................42
ARTICLE 7. JOINT COVENANTS OF SELLER AND PURCHASER.............................................................................43
Section 7.01. Corporate Examinations and Investigations...................................................................43
Section 7.02. Expenses....................................................................................................44
Section 7.03. Further Assurances..........................................................................................44
Section 7.04. Public Announcements........................................................................................44
Section 7.05. Certain Benefit Programs....................................................................................44
Section 7.06 Managed Care Workers' Compensation Business.................................................................45
Section 7.07. Certain Insurance...........................................................................................45
Section 7.08. Further Assurances..........................................................................................46
ARTICLE 8. CONDITIONS PRECEDENT TO CLOSING......................................................................................46
Section 8.01. Conditions to Obligations of All Parties....................................................................46
(1) No Injunction, etc.......................................................................................46
(2) HSR Act Satisfied........................................................................................46
(3) Required Approvals.......................................................................................46
(4) Managed Care Workers' Compensation Business..............................................................47
Section 8.02. Additional Conditions to Obligations of Purchaser...........................................................47
(1) Performance..............................................................................................47
(2) Seller's Warranties True.................................................................................47
(3) Deliveries Tendered by Anthem and Seller.................................................................47
(4) Transfer Taxes...........................................................................................47
Section 8.03. Additional Conditions to the Obligations of Anthem or Seller................................................47
(1) Performance..............................................................................................47
(2) Purchaser's Warranties True..............................................................................48
(3) Deliveries Tendered by Purchaser.........................................................................48
ARTICLE 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................................................................48
Section 9.01. Survival....................................................................................................48
ARTICLE 10. INDEMNIFICATION....................................................................................................48
Section 10.01. Indemnification by Anthem..................................................................................48
Section 10.02. Indemnification by Purchaser...............................................................................48
Section 10.03. Third Party Claims.........................................................................................49
Section 10.04. Limitations................................................................................................50
Section 10.05. Closing Loss Reserve Reconciliation........................................................................50
ARTICLE 11. TAX MATTERS........................................................................................................52
Section 11.01. Representations and Warranties.............................................................................52
Section 11.02. Anthem Indemnity...........................................................................................55
Section 11.03. Purchaser Indemnity........................................................................................55
Section 11.04. Effect of Carryovers and Carrybacks........................................................................55
Section 11.05. Payment for Tax Benefits Realized in Connection with Indemnity by Anthem or Seller.........................56
Section 11.06. Allocation Between Partial Periods.........................................................................56
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 11.07. Filing of Returns..........................................................................................56
Section 11.08. Post-Closing Audits and Other Proceedings..................................................................57
Section 11.09. Cooperation................................................................................................57
Section 11.10. Termination of Existing Tax Sharing Agreements.............................................................57
Section 11.11. Section 338(h)(10) Election................................................................................58
ARTICLE 12. TERMINATION OF AGREEMENT...........................................................................................60
Section 12.01. Termination................................................................................................60
Section 12.02. Procedure for Termination..................................................................................60
Section 12.03. Effect of Termination......................................................................................60
ARTICLE 13. MISCELLANEOUS......................................................................................................61
Section 13.01. Notices....................................................................................................61
Section 13.02. Pronouns...................................................................................................62
Section 13.03. Assignment.................................................................................................62
Section 13.04. No Third Party Beneficiaries...............................................................................62
Section 13.05. Counterparts...............................................................................................62
Section 13.06. Entire Agreement; Amendment................................................................................63
Section 13.07. Captions...................................................................................................63
Section 13.08. Severability...............................................................................................63
Section 13.09. Schedules..................................................................................................63
Section 13.10. Governing Law; Venue.......................................................................................63
</TABLE>
iv
<PAGE>
SCHEDULE INDEX
--------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SCHEDULE
NO. SUBJECT
- ---------- -------
- --------------------------------------------------------------------------------
<S> <C>
2.04(4) OPINION OF COUNSEL TO SELLER
- --------------------------------------------------------------------------------
2.05(2) OPINION OF COUNSEL TO PURCHASER
- --------------------------------------------------------------------------------
3 SELLER'S DISCLOSURE LETTER
- --------------------------------------------------------------------------------
3.03 THE COMPANY AND THE SUBSIDIARIES
- --------------------------------------------------------------------------------
3.06(1) SELLER'S REQUIRED APPROVALS
- --------------------------------------------------------------------------------
3.10 CERTAIN LITIGATION
- --------------------------------------------------------------------------------
3.11 CERTAIN ASSETS AND LIABILITIES OF SELLER
- --------------------------------------------------------------------------------
3.14(3) AGENTS; BROKERS; COMPENSATION; SIDE AGREEMENTS
- --------------------------------------------------------------------------------
3.16 CONTRACTS (EXCLUDING REAL ESTATE)
- --------------------------------------------------------------------------------
3.19 DEPOSITS OF SECURITIES
- --------------------------------------------------------------------------------
3.20 REAL ESTATE, LEASES AND CONTRACTS; PERMITTED
EXCEPTIONS
- --------------------------------------------------------------------------------
3.23 EMPLOYEE BENEFIT PLANS
- --------------------------------------------------------------------------------
3.23(7) CERTAIN QUALIFIED ORDERS
- --------------------------------------------------------------------------------
3.24 EMPLOYEE RELATIONS EXCEPTIONS
- --------------------------------------------------------------------------------
3.25 REINSURANCE AND COINSURANCE AGREEMENTS
- --------------------------------------------------------------------------------
3.26 INSURANCE POLICIES HELD
- --------------------------------------------------------------------------------
3.27 OFFICERS, DIRECTORS AND KEY EMPLOYEES;
COMPENSATION
- --------------------------------------------------------------------------------
3.28 ACCOUNTING CHANGES
- --------------------------------------------------------------------------------
3.29 POWERS OF ATTORNEY; GUARANTEES
- --------------------------------------------------------------------------------
3.32 LEASES OF PERSONAL PROPERTY
- --------------------------------------------------------------------------------
3.33 BANK ACCOUNTS; CUSTODIAL ACCOUNTS
- --------------------------------------------------------------------------------
</TABLE>
v
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
5.11 CERTAIN ASSETS AND LIABILITIES TO BE
TRANSFERRED
- --------------------------------------------------------------------------------
11.01(2) RETURNS
- --------------------------------------------------------------------------------
11.01(4) TAX AUDITS
- --------------------------------------------------------------------------------
11.01(6) STATUTES OF LIMITATIONS
- --------------------------------------------------------------------------------
11.01(7) POWERS OF ATTORNEY RELATING TO TAX
- --------------------------------------------------------------------------------
11.01(8) TAX SHARING AGREEMENTS
- --------------------------------------------------------------------------------
11.01(9) TRANSACTION NOT TAXABLE
- --------------------------------------------------------------------------------
11.01(11) NO PARTNERSHIP
- --------------------------------------------------------------------------------
11.01(16) ELECTIONS
- --------------------------------------------------------------------------------
</TABLE>
vi
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
This is an agreement ("AGREEMENT") made to be effective as of April
23, 1997 by and among Anthem Insurance Companies, Inc., an Indiana mutual
insurance company ("ANTHEM"), Anthem Casualty Insurance Group, Inc., a Delaware
corporation (the "SELLER"), and Vesta Insurance Group, Inc., a Delaware
corporation ("PURCHASER").
Recitals:
--------
(A) ANTHEM owns all of the outstanding common stock, without par
value, of SELLER.
(B) SELLER owns all of the issued and outstanding shares (i) of
Anthem Casualty Insurance Company, an Indiana corporation ("ACIC"), and (ii) of
The Shelby Insurance Company, an Ohio corporation ("SHELBY") (all of the issued
and outstanding shares of ACIC and of SHELBY, collectively, the "SHARES").
(C) ACIC owns all of the issued and outstanding shares of Mound
Agency Inc., an Illinois corporation ("MOUND AGENCY"). MOUND AGENCY owns all of
the issued and outstanding Class B Shares of Mound Agency of Ohio, Inc., an Ohio
corporation ("MOUND OHIO").
(D) SHELBY owns all of the issued and outstanding shares of
Affirmative Insurance Company ("AFFIRMATIVE"), of Insura Property and Casualty
Insurance Company ("INSURA"), and of Shelby Financial Corporation ("SHELBY
FINANCIAL"), each an Ohio corporation (ACIC, SHELBY, AFFIRMATIVE, and INSURA,
collectively, the "INSURERS"; and the INSURERS, MOUND AGENCY , MOUND OHIO, and
SHELBY FINANCIAL, collectively, the "SUBSIDIARIES").
(E) SELLER desires to sell, and PURCHASER desires to purchase, the
SHARES.
NOW, THEREFORE, in consideration of their promises and of their mutual
agreements, covenants, representations and warranties set forth in this
AGREEMENT, and for other good and valuable consideration received to their full
satisfaction, the parties hereto make the following agreement, intending to be
bound legally thereby:
<PAGE>
ARTICLE 1
Definition of Certain Terms
---------------------------
Section 1.01. When used in this AGREEMENT, the following terms shall
------------
have the meanings specified in this Section 1.01; and the plural of any such
term means more than one thereof:
"AFFILIATE" means a PERSON controlling, controlled by or under common
control with another PERSON specified herein.
"ADVERSE LOSS RESERVE DEVELOPMENT" means the dollar amount by which
the ADJUSTED CLOSING LOSS RESERVES exceed the CLOSING LOSS RESERVES.
"BUSINESS DAY" means a day other than a Saturday or a Sunday on which
banks in Indianapolis, Indiana are not authorized or required by law or
executive order to close.
"CLAIM" means a claim, loss, damage, liability and legal or other
expense (including, without limitation, reasonable attorneys' fees, witnesses'
fees, investigation fees, court reporters' fees and other out-of-pocket
expenses), arising as a result of, among other things, any action, suit, demand,
assessment, judgment, cost, fine, injunction or penalty, to the extent not
compensated or compensable by insurance proceeds of Seller.
"CLAIM NOTICE" means a notice specifying, in reasonable detail, (i)
the nature of a CLAIM, (ii) each applicable provision of this AGREEMENT or other
instrument under which such CLAIM arises, and (iii) if then known, the amount of
such CLAIM or the method of computation thereof.
"CLOSING" means the closing of the sale and purchase of the SHARES
contemplated by this AGREEMENT.
"CONVENTION STATEMENT" means an annual convention statement or
equivalent of each of the INSURERS filed with the insurance department or other
insurance regulatory authority of the state of its incorporation.
"ENVIRONMENTAL LAW" means, without limitation, any of the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S)(S)9601 et seq., the Emergency Planning and Community Right-to-Know Act of
-- ---
1986, 42 U.S.C. (S)(S) 42 U.S.C. (S)(S) 11001 et seq., the Resource Conservation
-- ---
and Recovery Act, 42 U.S.C. (S)(S) 6901 et seq., the Toxic Substances Control
-- ---
Act, 15 U.S.C. (S)(S) 2601 et seq., the Federal Insecticide, Fungicide, and
-- ---
Rodenticide Act, 7 U.S.C. (S)(S) 136 et seq., the Clean Air Act, 42 U.S.C.
-- ---
(S)(S) 7401 et seq., the Clean Water Act (Federal Water Pollution Control Act),
-- ---
33 U.S.C. (S)(S) 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. (S)(S)
-- ---
300f et seq., the Occupational Safety and Health Act, 29 U.S.C. (S)(S) 641 et
-- --- --
seq., the Hazardous
- ---
-2-
<PAGE>
Materials Transportation Act, 49 U.S.C. (S)(S) 1801 et seq., the Endangered
-- ---
Species Act, 16 U.S.C. (S)(S) 1531 et seq. and the Oil Pollution Act of 1990, 33
-- ---
U.S.C. (S)(S) 2701 et seq., as any of the above statutes have been amended as of
-- ---
the CLOSING DATE, all rules and regulations promulgated pursuant to any of the
above statutes, and all applicable judicial and administrative decisions,
orders, and decrees interpreting such statutes.
"HAZARDOUS SUBSTANCES" means any pollutants, contaminants, toxic or
hazardous substances, materials, wastes, constituents, compounds, chemicals,
natural or man-made elements or forces (including, without limitation, petroleum
or any by-products or fractions thereof, any form of natural gas, lead, asbestos
and asbestos-containing materials ("ACM"), building construction materials and
debris, polychlorinated biphenyls ("PCBs") and PCB-containing equipment, radon
and other radioactive elements, infectious carcinogenic, multagenic, or
etiologic agents, pesticides, defoliants, explosives, flammables, corrosives and
urea formaldehyde foam insulation) that are regulated by any Environmental Laws.
"INDEMNITEE" means a party hereto claiming indemnification from
another party hereto pursuant to the terms hereof.
"INDEMNITOR" means a party hereto from whom indemnification is claimed
by an INDEMNITEE.
"KNOWLEDGE" means (i) in the case of SELLER, the actual knowledge of
any of the department directors, officers, directors, or managers of any of
ANTHEM, SELLER and the SUBSIDIARIES or any other employees of any of them who
have managerial or supervisory responsibilities and (ii) in the case of
PURCHASER, the actual knowledge of any of officers, directors, managers,
supervisors, or other employees of PURCHASER who have managerial or supervisory
responsibilities.
"LIEN" means a lien, pledge, mortgage, security interest,
hypothecation, charge, option, call, commitment, voting trust, right of refusal,
easement, covenant, restriction, transfer restriction under any shareholder or
similar agreement, or other encumbrance or title exception, other than a
PERMITTED EXCEPTION.
"LOSS RESERVES" means all reserves for all losses and loss adjustment
expenses, including, without limitation, case reserves, reserves for loss
adjustment expenses, both allocated and unallocated, reserves for incurred but
not reported losses and loss adjustment expenses, and otherwise determined in
accordance with those generally accepted actuarial standards and principles
applied in determining the LOSS RESERVES reflected in the SELLER FINANCIAL
STATEMENTS.
-3-
<PAGE>
"MATERIAL ADVERSE EFFECT" means an effect that (i) is materially
adverse to the business (including any PERMIT), financial condition or results
of operations of a specified person or specified group of persons, (ii) is
materially adverse to the transactions contemplated hereby, and/or (iii)
materially impairs the ability of a party hereto to consummate the transactions
to be undertaken by it as contemplated thereby.
"PERMIT" means a license, permit, order, approval, registration,
authorization, qualification and/or filing with, from or under a federal, state,
local or foreign law and/or governmental or regulatory authority, or an industry
or other non-governmental self-regulatory organization created by statute.
"PERMITTED EXCEPTION" means those exceptions identified in Schedule
3.20.
"PERSON" means an individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, governmental or regulatory authority or other
entity.
"QUARTERLY CONVENTION STATEMENT" means the quarterly convention
statement or equivalent of each of the INSURERS filed with the insurance
department or other insurance regulatory authority of the state of its
incorporation.
"REQUIRED APPROVAL" means an approval, consent, authorization or
clearance of or filing with a governmental or regulatory authority or official
required in order to permit, authorize or entitle a specified party hereto to
execute and deliver this AGREEMENT, to perform its obligations hereunder, or to
consummate the transactions to be undertaken by it as contemplated hereby.
"RETURN" means each return, declaration report, statement, and other
document required to be filed in respect of any TAX.
"STATUTORY ACCOUNTING PRINCIPLES" means the statutory accounting
practices prescribed for or permitted to each of the INSURERS by the insurance
department or other insurance regulatory authority of the state of its
incorporation.
"TAX" means a tax, however denominated (together with any interest,
penalties or additions that may become payable in respect thereof) imposed on
any of ANTHEM, SELLER, and the SUBSIDIARIES by any federal, state, local or
foreign government, or any agency or political subdivision of any such
government, and includes, without limiting the generality of the foregoing, all
income taxes (including, but not limited to, United States federal income taxes
and state income and franchise taxes),
-4-
<PAGE>
payroll, employee, and other withholding taxes, unemployment contributions and
taxes, social security, Medicare, Medicaid, sales and use taxes, premium taxes,
excise taxes, franchise taxes, net worth taxes, occupation taxes, real and
personal property taxes, stamp taxes, transfer taxes, workers' compensation
premiums and taxes, and other obligations of the same or similar nature.
Section 1.02. When used in this AGREEMENT, the following terms shall
------------
have the meanings specified in that part hereof identified in the following
table:
<TABLE>
<CAPTION>
TERM DEFINED IN
---- ----------
<S> <C>
ACQUISITION PROPOSAL................................Section 5.09
ADJUSTED CLOSING LOSS RESERVES......................Section 10.05(1)
AFFIRMATIVE.........................................Recital (B)
AGREEMENT...........................................Preamble
ACIC................................................Recital (B)
ANTHEM..............................................Preamble
ANTHEM MARKS........................................Section 6.03(2)
AUDIT DATE..........................................Section 2.06(1)
AUDITORS............................................Section 2.06(1)
CLOSING BALANCE SHEET...............................Section 2.06(1)
CLOSING DATE........................................Section 2.03
CLOSING LOSS RESERVES...............................Section 3.30
CODE................................................Section 3.23
CONFIDENTIALITY AGREEMENT...........................Section 7.01(2)
ERISA...............................................Section 3.23
FEDERAL TAX SHARING AGREEMENT.......................Section 11.01(8)
HSR ACT.............................................Section 5.07
INDEPENDENT ARBITER.................................Section 2.06(2)
INDIANA TAX SHARING AGREEMENT.......................Section 11.01(8)
INSURA..............................................Recital (B)
INSURER CONVENTION STATEMENTS.......................Section 3.07(2)
INSURER QUALIFIED JURISDICTIONS.....................Section 3.03(2)
INSURERS............................................Recital (B)
MOUND AGENCY........................................Recital (B)
MOUND OHIO..........................................Recital (C)
NET WORTH...........................................Section 2.06(3)
NOTES...............................................Section 5.01(2)(viii)
OTHER QUALIFIED JURISDICTIONS.......................Section 3.03(3)
OWNED REAL PROPERTY.................................Section 3.20
PLANS...............................................Section 3.23
POST-CLOSING PARTIAL PERIOD.........................Section 11.03
PRE-CLOSING PARTIAL PERIOD..........................Section 11.02
PURCHASE PRICE......................................Section 2.02
PURCHASER...........................................Preamble
PURCHASER'S REPRESENTATIVES.........................Section 7.01(2)
SELLER..............................................Preamble
SELLER FINANCIAL STATEMENTS.........................Section 3.07(1)
SELLER QUALIFIED JURISDICTIONS......................Section 3.03(1)
SHARES..............................................Recital (B)
SHELBY..............................................Recital (B)
SHELBY FINANCIAL....................................Recital (B)
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C>
SUBSIDIARIES........................................Recital (B)
</TABLE>
ARTICLE 2
Sale and Purchase of the SHARES
-------------------------------
Section 2.01. Sale and Purchase of the SHARES. Upon the terms and
----------------------------------------------
subject to the conditions set forth herein, SELLER shall sell, transfer, assign
and deliver to PURCHASER, and PURCHASER shall purchase from SELLER, all of the
right, title, and interest of SELLER in and to all of the SHARES.
Section 2.02. PURCHASE PRICE. As the purchase price for the SHARES,
-----------------------------
PURCHASER shall pay to SELLER the sum of $238,750,000 (the "PURCHASE PRICE") as
provided elsewhere herein.
Section 2.03. CLOSING. Subject to the satisfaction or waiver of the
----------------------
terms and conditions hereof, the CLOSING shall be held at the offices of SELLER
at 120 Monument Circle, Indianapolis, Indiana on such date (the "CLOSING DATE")
and commencing at such time as SELLER and PURCHASER shall mutually designate.
Section 2.04. Deliveries by ANTHEM and SELLER. At the CLOSING,
----------------------------------------------
ANTHEM and SELLER shall cause all of the following to be delivered to PURCHASER,
all of which shall be in form and content reasonably satisfactory to PURCHASER
and PURCHASER'S counsel:
(1) The SHARES. One or more instruments of assignment, duly
----------
executed on behalf of SELLER, transferring, assigning and selling to PURCHASER,
free and clear of all claims, liens, security interests, pledges,
hypothecations, restrictions or other encumbrances, all of the SHARES, together
with each stock certificate evidencing the same.
(2) Officer's Certificate. The certificate of the President or a
---------------------
Vice-President of each of ANTHEM and SELLER, dated no earlier than the CLOSING
DATE and stating that, to the best of his knowledge and belief, (i) SELLER has
fully performed and satisfied all covenants and conditions required hereunder to
be performed and satisfied by it at or prior to the CLOSING, and (ii) each of
the warranties and representations set forth in Article 3 are true and accurate
as if made as of the date of such certificate.
(3) Resolutions of ANTHEM and SELLER.
--------------------------------
(A) Copies of one or more resolutions duly adopted by the
Board of Directors of ANTHEM, duly approving and adopting this AGREEMENT and
authorizing the performance by ANTHEM of its obligations hereunder, accompanied
by the
-6-
<PAGE>
certificate of the President or a Vice-President of ANTHEM, dated no earlier
than the CLOSING DATE and stating that each such resolution has been duly
adopted by the Board of Directors of ANTHEM and is in full force and effect,
without amendment, as of the date of such certificate.
(B) Copies of one or more resolutions duly adopted by the
Board of Directors of SELLER, duly approving and adopting this AGREEMENT and
authorizing the performance by SELLER of its obligations hereunder, accompanied
by the certificate of the President or a Vice-President of SELLER, dated no
earlier than the CLOSING DATE and stating that each such resolution has been
duly adopted by the Board of Directors of SELLER and is in full force and
effect, without amendment, as of the date of such certificate.
(4) Opinion of Counsel. An opinion of one or more counsel to
------------------
each of ANTHEM and SELLER, substantially in the form of Schedule 2.04(4); each
of ANTHEM and SELLER may provide the opinion of more than one counsel, each of
which may cover less than all, if together such opinions cover all, of the
opinions set forth in Schedule 2.04(4).
(5) REQUIRED APPROVALS; Consents; Elimination of Debt. A
-------------------------------------------------
certificate duly executed by the President or a Vice-President of ANTHEM, dated
no earlier than the CLOSING DATE and certifying that, to the best of his
knowledge and belief:
(i) each REQUIRED APPROVAL identified in Schedule 3.06(1)
has been obtained and/or made; and
(ii) each consent, waiver and approval required under each
contract specified in Section 3.06(2)(ii) is identified in such certificate and
has been obtained.
(6) Resignations. The written resignation (effective upon
------------
consummation of the Closing) of each director of any of the SUBSIDIARIES
requested by PURCHASER in a writing delivered to SELLER at least ten BUSINESS
DAYS prior to the CLOSING DATE.
Section 2.05. Deliveries by PURCHASER. At the CLOSING, PURCHASER
---------------------------------------
shall cause all of the following to be delivered to SELLER:
(1) Officer's Certificate. A certificate duly executed by the
---------------------
President or a Vice-President of PURCHASER, dated no earlier than the CLOSING
DATE and certifying that, to the best of his knowledge and belief, (i) PURCHASER
has fully performed and satisfied all covenants and conditions required
hereunder to be performed and satisfied by it at or prior to the CLOSING, (ii)
each of the warranties and representations PURCHASER set forth in Article 4 are
true and accurate as if made as of the date of such certificate, and (iii) each
REQUIRED
-7-
<PAGE>
APPROVAL required to be obtained or made by PURCHASER has been obtained or made.
(2) Opinion of Counsel. An opinion of counsel to PURCHASER,
------------------
substantially in the form of Schedule 2.05(2).
(3) Certified Resolutions. Copies of one or more resolutions
---------------------
duly approved by the Board of Directors of PURCHASER, duly approving and
adopting this AGREEMENT and authorizing the performance by PURCHASER of its
obligations hereunder, accompanied by the certificate of the President or a
Vice-President of PURCHASER, dated no earlier than the CLOSING DATE and
certifying that each such resolution has been duly adopted and is in full force
and effect, without amendment, as of the date of such certificate.
(4) PURCHASE PRICE. By wire transfer of immediately available
--------------
funds, to an account which shall be designated by SELLER prior to the CLOSING
DATE, an amount equal to the PURCHASE PRICE.
Section 2.06. Post-Closing Matters.
-----------------------------------
(1) CLOSING BALANCE SHEET. As promptly as is practicable after
---------------------
consummation of the CLOSING, an audit of the affairs of each of the SUBSIDIARIES
as of the last day of the month immediately preceding the consummation of the
CLOSING (the "AUDIT DATE") shall be conducted in accordance with generally
accepted auditing standards by Ernst & Young LLP (the "AUDITORS"). Upon
completion of such audit, the AUDITORS shall deliver to PURCHASER and to ANTHEM
a consolidated balance sheet of the SUBSIDIARIES as of the AUDIT DATE (the
"CLOSING BALANCE SHEET") and the related consolidated statement of income and
stockholder's equity for the period ended on the AUDIT DATE, together with their
report on such financial statements. The said financial statements shall be
prepared in accordance with generally accepted accounting principles applied
consistently with those used in preparing the SELLER FINANCIAL STATEMENTS.
(2) Dispute Resolution. If the AUDITORS, ANTHEM and/or PURCHASER
------------------
disagree as to any amount set forth in or omitted from the CLOSING BALANCE
SHEET, and if (i) such disagreement cannot be resolved among the AUDITORS,
ANTHEM and PURCHASER within ten (10) BUSINESS DAYS after delivery of the CLOSING
BALANCE SHEET to ANTHEM and PURCHASER, (ii) such disagreement would affect by
more than $25,000 the adjustment to the PURCHASE PRICE under Section 2.06(3), or
(iii) the report of the AUDITORS is qualified, the matter giving rise to such
difference and/or qualification shall be referred to a national "Big Six"
accounting firm, or a successor thereto, mutually designated by PURCHASER and
ANTHEM (the "INDEPENDENT ARBITER") for resolution, the CLOSING BALANCE SHEET
and/or such report thereon shall be adjusted as necessary to reflect such
-8-
<PAGE>
resolution by the INDEPENDENT ARBITER, and the CLOSING BALANCE SHEET and said
report thereon, as so resolved by the INDEPENDENT ARBITER, shall be final,
conclusive and binding on the parties hereto for purposes of Section 2.06(3).
If there is no such disagreement regarding the CLOSING BALANCE SHEET and/or the
report thereon of the AUDITORS is not qualified, the CLOSING BALANCE SHEET shall
be final, conclusive and binding on the parties hereto for purposes of Section
2.06(3). The fees of the AUDITORS for conducting the said audit, together with
the fees of the INDEPENDENT ARBITER for resolving any difference and/or
qualification in respect of the CLOSING BALANCE SHEET, shall be borne equally by
PURCHASER and ANTHEM.
(3) PURCHASE PRICE Adjustment. As an adjustment to the PURCHASE
-------------------------
PRICE, ANTHEM shall pay to PURCHASER the amount by which the NET WORTH shown on
the SELLER FINANCIAL STATEMENTS exceeds the NET WORTH shown on the CLOSING
BALANCE SHEET, or PURCHASER shall pay to SELLER (or, if SELLER has been
dissolved or merged or consolidated with ANTHEM, to ANTHEM) the amount by which
the NET WORTH shown on the CLOSING BALANCE SHEET exceeds the NET WORTH shown on
the SELLER FINANCIAL STATEMENTS, as the case may be, within ten (10) BUSINESS
DAYS after the later of the dates when the AUDITORS or the INDEPENDENT ARBITER,
if any, shall have given the CLOSING BALANCE SHEET to each of PURCHASER and
ANTHEM. For purposes of this Section 2.06, the term "NET WORTH" means the
amount by which the total assets shown on the SELLER FINANCIAL STATEMENTS or on
the CLOSING BALANCE SHEET (adjusted in the case of each of the SELLER FINANCIAL
STATEMENTS and of the CLOSING BALANCE SHEET, however, to reflect the fixed
maturity securities shown therein at amortized cost) as the case may be, exceeds
the total liabilities (excluding any liability for payment of the NOTES) shown
therein.
ARTICLE 3
Representations and Warranties of ANTHEM and SELLER
---------------------------------------------------
Each of ANTHEM and SELLER represents and warrants to PURCHASER that, except
as expressly disclosed in reasonable detail in SELLER'S Disclosure Letter
included as Schedule 3 or elsewhere herein, as of the date hereof:
Section 3.01. Organization, Standing and Corporate Authority of
----------------------------------------------------------------
ANTHEM. ANTHEM is a mutual insurance company duly organized, validly existing
- ------
and in good standing under the laws of the State of Indiana; is duly qualified,
licensed or otherwise in good standing as a foreign corporation in each
jurisdiction where the ownership of its property or the conduct of its business
makes necessary such qualification, licensing or good standing.
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<PAGE>
Section 3.02. ANTHEM'S and SELLER'S Transaction Authority; Corporate
--------------------------------------------------------------------
Proceedings; Enforceability.
- ---------------------------
(1) Each of ANTHEM and SELLER has all requisite corporate power
and authority to execute and deliver this AGREEMENT; to perform its obligations
hereunder; and to consummate the transactions to be undertaken by it as
contemplated hereby.
(2) The execution and delivery of this AGREEMENT by each of
ANTHEM and SELLER, the performance by it of its obligations hereunder, and the
consummation by it of the transactions to be undertaken by it as contemplated
hereby, have been duly and validly authorized by all necessary action of the
Board of Directors of each of ANTHEM and SELLER; and no other corporate act or
proceeding on the part of ANTHEM or SELLER is necessary to authorize its
execution and delivery of this AGREEMENT, its performance of its obligations
hereunder, or its consummation of the transactions to be undertaken by it as
contemplated hereby.
(3) This AGREEMENT has been duly and validly executed and
delivered on behalf of each of ANTHEM and SELLER; constitutes its valid and
binding agreement; and is enforceable against it in accordance with its terms.
Section 3.03. Organization, Standing, PERMITS, Certificates of
--------------------------------------------------------------
Authority, etc., of SELLER and the SUBSIDIARIES.
- -----------------------------------------------
(1) SELLER is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware; is duly qualified,
licensed or otherwise in good standing as a foreign corporation in each
jurisdiction where the ownership of its property or the conduct of its business
makes necessary such qualification, licensing or good standing; and has all
requisite corporate power and authority to own, lease and use its properties,
and to carry on its business, as and in the places where such properties and
business are now owned, leased, used and conducted. Without limiting the
generality of the foregoing, SELLER has all PERMITS and is duly qualified,
licensed, or otherwise authorized to conduct the business being conducted by it,
and is in good standing, in each of the licensing jurisdictions identified as to
it in Schedule 3.03 (the "SELLER QUALIFIED JURISDICTIONS"), which named
jurisdictions are the only jurisdictions in which such qualification or
authorization is required by law in order to carry on its business as now being
conducted, except for any jurisdiction in which the absence of such
qualification has no MATERIAL ADVERSE EFFECT. No other jurisdiction has claimed,
in writing or otherwise to SELLER'S KNOWLEDGE, that SELLER is required to
qualify or otherwise be licensed therein. SELLER does not own or lease real
property in any jurisdiction other than the SELLER QUALIFIED JURISDICTIONS.
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<PAGE>
(2) Each of the INSURERS is a stock property - casualty
insurance corporation duly organized, validly existing and in good standing
under the laws of that state identified in Schedule 3.03 as the state of its
incorporation; has the requisite corporate power and authority, and is legally
entitled, licensed, authorized and admitted, to own, lease and use its
properties, to transact insurance business as currently being transacted, and to
carry on its other business as and in the places where such properties and
business are now owned, leased, used and conducted; and is duly qualified,
licensed, admitted or otherwise authorized to transact insurance business as
currently being transacted, and any other business, as a foreign corporation in
each jurisdiction where the ownership of its properties or the conduct of its
business makes such authorization necessary. Without limiting the generality of
the foregoing, each of the INSURERS has all PERMITS and is duly qualified,
licensed, admitted or otherwise authorized to transact the insurance business
conducted by it by the appropriate insurance regulatory authority of, and is
otherwise in good standing, in each of the licensing jurisdictions identified as
to it in Schedule 3.03 (the "INSURER QUALIFIED JURISDICTIONS"), which named
jurisdictions are the only jurisdictions in which such qualification or
authorization is required by law in order to carry on their businesses as now
being conducted, except for any jurisdiction in which the absence of such
qualification has no MATERIAL ADVERSE EFFECT. No other jurisdiction has claimed,
in writing or otherwise to SELLER'S KNOWLEDGE, that any of the INSURERS are
required to qualify or otherwise be licensed therein. The INSURERS do not own or
lease real property in any jurisdiction other than the INSURER QUALIFIED
JURISDICTIONS. Each of the INSURERS is authorized to write insurance in the
INSURER QUALIFIED JURISDICTIONS in the respective lines of insurance specified
on Schedule 3.03 as such insurance is defined in the insurance laws of the
respective jurisdictions. None of the INSURERS' certificates of authority or
similar PERMITS to transact insurance in INSURER QUALIFIED JURISDICTIONS have
been limited, revoked or suspended, nor are such certificates of authority or
similar PERMITS the subject of a proceeding for limitation, suspension or
revocation; no insurer has received any written or oral communication from any
of the INSURER QUALIFIED JURISDICTIONS threatening to limit, suspend or revoke
any of their certificates of authority; and no INSURER is operating under a
voluntary agreement with the insurance regulatory authorities of any INSURER
QUALIFIED JURISDICTION which restricts its authority to transact insurance
pursuant to such certificates of authority.
(3) Each of MOUND AGENCY, MOUND OHIO and SHELBY FINANCIAL is a
corporation duly organized, validly existing and in good standing under the laws
of the state of incorporation identified as to it in Schedule 3.03; is duly
qualified, licensed or otherwise in good standing as a foreign
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<PAGE>
corporation in each jurisdiction where the ownership of its property or the
conduct of its business makes necessary such qualification, licensing or good
standing; and has all requisite corporate power and authority to own, lease and
use its properties, and to carry on its business, as and in the places where
such properties and business are now owned, leased, used and conducted. Without
limiting the generality of the foregoing, each of MOUND AGENCY, MOUND OHIO, and
SHELBY FINANCIAL has all PERMITS and is duly qualified, licensed, admitted or
otherwise authorized to conduct the business conducted by it, and is in good
standing, in each of the licensing jurisdictions identified as to it in Schedule
3.03 (the "OTHER QUALIFIED JURISDICTIONS"), which named jurisdictions are the
only jurisdictions in which such qualification or authorization is required by
law in order to carry on their business as now being conducted, except for any
jurisdiction in which the absence of such qualification has no MATERIAL ADVERSE
EFFECT. No other jurisdiction has claimed, in writing or otherwise to SELLER'S
KNOWLEDGE, that MOUND AGENCY, MOUND OHIO, or SHELBY FINANCIAL is required to
qualify or otherwise be licensed therein. None of MOUND AGENCY, MOUND OHIO and
SHELBY FINANCIAL owns or leases real property in any jurisdiction other than the
OTHER QUALIFIED JURISDICTIONS.
Section 3.04. Title to the SHARES.
----------------------------------
(1) The total number of shares of stock that ACIC has authority
to issue consists of 500,000 shares of common stock, without par value, of which
64,000 shares are (i) issued and outstanding, (ii) held by SELLER, and (iii)
included in the SHARES.
(2) The total number of shares that SHELBY is authorized to
issue consists of 8,000,000 common shares, par value $1 per share, 3,058,667
Class A preferred shares, par value $1 per share, and 1,280,000 Class B
preferred shares, par value $1 per share, of which 8,000,000 common shares are
(i) issued and outstanding, (ii) held by SELLER, and (iii) included in the
SHARES. There are no shares of capital stock of SHELBY that are currently issued
and outstanding, other than 8,000,000 of its authorized common shares, all of
which are held by SELLER.
(3) SELLER owns all of the SHARES, free and clear of any LIEN.
Other than this AGREEMENT, there is no outstanding agreement of SELLER to sell,
transfer or encumber any interest in the SHARES. There are no outstanding
options, warrants, subscriptions, calls, agreements, convertible securities,
unsatisfied preemptive rights, or other agreements, commitments, rights or
claims of any sort pursuant to which either of ACIC and SHELBY is or may become
obligated to issue, sell, purchase or redeem any of its authorized shares.
Except for ownership or interest by reason of securities held in the
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<PAGE>
investment portfolio of any of the SUBSIDIARIES, none of the SUBSIDIARIES has
any direct or indirect ownership interest, by way of stock ownership or
otherwise, in any corporation, association, joint venture or other business
enterprise or other entity. The SHARES are duly authorized, validly issued,
fully paid and nonassessable, and were not issued in violation of the preemptive
rights of any PERSON or of any agreement, law or regulation by which the issuer
thereof was bound at the time of issuance.
Section 3.05. The SUBSIDIARIES.
-------------------------------
(1) Schedule 3.03 correctly identifies the name of each of the
SUBSIDIARIES, the state of its incorporation, its authorized shares, the number
of such shares duly issued and outstanding, and the holder of all such shares.
SELLER owns all of the issued and outstanding shares of ACIC and of SHELBY
which, collectively, constitute the SHARES; ACIC owns all of the issued and
outstanding shares of MOUND AGENCY; MOUND AGENCY owns all of the issued and
outstanding Class B shares of MOUND OHIO; Joseph T. Wechter owns all of the
issued and outstanding Class A shares of MOUND OHIO; and SHELBY owns all of the
issued and outstanding shares of AFFIRMATIVE, INSURA and SHELBY FINANCIAL, in
each case free and clear of any LIEN. There are no outstanding options,
warrants, subscriptions, calls, agreements, convertible securities, unsatisfied
preemptive rights, or other agreements, commitments, rights or claims of any
sort whatsoever pursuant to which any of the SUBSIDIARIES is or may become
obligated to issue, sell, purchase or redeem any of its authorized shares.
Except for ownership or interest by reason of securities held in its investment
portfolio, none of the SUBSIDIARIES has any direct or indirect ownership
interest, by way of stock ownership or otherwise, in any corporation,
association, joint venture or other business enterprise or other entity. The
outstanding shares of each of the SUBSIDIARIES are duly authorized, validly
issued, fully paid and nonassessable, and were not issued in violation of the
preemptive rights of any PERSON or of any agreement, law or regulation by which
the issuer thereof was bound at the time of issuance.
(2) SELLER has furnished to PURCHASER copies of the certificate
or articles of incorporation, by-laws and regulations (or comparable documents)
of each of the SUBSIDIARIES, all of which documents are true and complete.
(3) The minute books of each of the SUBSIDIARIES accurately
reflect all actions taken at all meetings, and all consents and actions taken
in writing in lieu of meetings, of and by its shareholders and directors since
the date when it became an AFFILIATE of ANTHEM. All actions taken by the
SUBSIDIARIES requiring the approval of the Board of
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<PAGE>
Directors or the shareholders, as the case may be, have been so approved.
Section 3.06. Consents and Approvals; No Violations.
----------------------------------------------------
(1) Schedule 3.06(1) identifies each REQUIRED APPROVAL required
to be obtained by any of ANTHEM, SELLER, and the SUBSIDIARIES.
(2) Neither the execution and delivery of this AGREEMENT by
either of ANTHEM and SELLER, nor its consummation of the transactions to be
undertaken by it as contemplated hereby, will (i) violate any provision of the
articles or certificate of incorporation, by-laws or regulations (or any
comparable document) of any of ANTHEM, SELLER, and the SUBSIDIARIES; (ii)
constitute (upon notice, lapse of time or otherwise) a breach or a default (by
way of substitution, novation or otherwise, or give rise to any right of
termination, cancellation or acceleration) under any material contract to which
any of ANTHEM, SELLER, and the SUBSIDIARIES is a party or by or to which it, or
any of its assets or properties, may be bound or subject (including any contract
identified in Schedule 3.16 or Schedule 3.20), assuming that all consents,
waivers and/or approvals required under each such contract have been obtained
and which shall be set forth on the certificate delivered pursuant to Section
2.04(5)(ii); (iii) violate any order, judgment, injunction, award or decree of
any court, arbitrator or governmental or regulatory authority against, or any
agreement with or condition imposed by any governmental or regulatory authority,
binding upon any of ANTHEM, SELLER, and the SUBSIDIARIES or upon the property,
assets or business of any of them; (iv) result in the imposition of any LIEN
upon any of ANTHEM, SELLER, and the SUBSIDIARIES, or upon the property or assets
of any of them; (v) result in the breach of any of the terms or conditions of,
constitute a default under, or otherwise cause any impairment of any of its
PERMITS; or (vi) violate any statute, law, rule or regulation of any federal,
state, local or other governmental authority applicable to any of ANTHEM,
SELLER, and the SUBSIDIARIES or the property, assets or business of any of them,
excluding from the foregoing clauses (i) through and including (vi) such
breaches, defaults, results and violations that, in the aggregate, do not have a
MATERIAL ADVERSE EFFECT on the SUBSIDIARIES.
Section 3.07. Financial Statements and INSURER CONVENTION STATEMENTS.
---------------------------------------------------------------------
(1) SELLER has furnished to PURCHASER copies of the audited
consolidated balance sheets of SELLER and the SUBSIDIARIES as at December 31,
1996, and the related consolidated statements of income, stockholder's equity
and cash flow for the year then ended and the notes thereto (the "SELLER
FINANCIAL STATEMENTS"). The SELLER FINANCIAL STATEMENTS present
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<PAGE>
fairly the financial condition of SELLER and the SUBSIDIARIES at the date
indicated, and the results of operations of SELLER and the SUBSIDIARIES for the
period then ended, on a consolidated basis and in accordance with generally
accepted accounting principles applied on a consistent basis with prior periods.
(2) SELLER has furnished to PURCHASER copies of the CONVENTION
STATEMENTS of each of the INSURERS for the year ended December 31, 1996 (the
"INSURER CONVENTION STATEMENTS"). The INSURER CONVENTION STATEMENTS, together
with the schedules included therein, present fairly the statutory financial
condition of each of the INSURERS at the date indicated, together with the
statutory results of operations of each of the INSURERS and other data contained
in the INSURER CONVENTION STATEMENTS for the period then ended, and were
prepared in conformity with STATUTORY ACCOUNTING PRINCIPLES applied on a
consistent basis with prior periods, except as (i) expressly set forth therein
or (ii) otherwise required by a rule or regulation of an insurance regulatory
authority.
Section 3.08. No Default. None of ANTHEM, SELLER, and the
-------------------------
SUBSIDIARIES is in default under or in violation of, and no event has occurred
that, upon notice or lapse of time or both, would constitute a default under or
violation of (i) any of its PERMITS; (ii) its articles or certificate of
incorporation, by-laws, or regulations (or any comparable document); or (iii)
any contract to which it is a party or by or to which it, or any of its assets
or properties, may be bound or subject, excluding from the foregoing clauses
(i), (ii) and (iii) such defaults, violations and events that, in the aggregate,
do not have a MATERIAL ADVERSE EFFECT on the SUBSIDIARIES.
Section 3.09. Environmental Matters.
------------------------------------
(1) Each of the SUBSIDIARIES has obtained and is in material
compliance with the terms and conditions of all material PERMITS, licenses and
other authorizations required under any ENVIRONMENTAL LAW;
(2) Each of the SUBSIDIARIES is in compliance with all
ENVIRONMENTAL LAWS, and there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans that may
interfere with or prevent continued compliance with all ENVIRONMENTAL LAWS;
(3) No asbestos, equipment containing polychlorinated biphenyls,
leaking underground or above-ground storage tanks or other HAZARDOUS SUBSTANCE
is contained in or located, in violation of any ENVIRONMENTAL LAW, (i) at any
property or improvement thereon which is or has been owned by any of the
SUBSIDIARIES, or (ii) to SELLER'S KNOWLEDGE, at any
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<PAGE>
property or improvement thereon that is or has been leased or controlled by any
of the SUBSIDIARIES; and
(4) There have been no (i) past emissions or releases of any
HAZARDOUS SUBSTANCE from (a) any property or improvement which is or has been
owned by any of the SUBSIDIARIES, or (b) to SELLER'S KNOWLEDGE, any property or
improvement thereon that is or has been leased or controlled by any of the
SUBSIDIARIES, or (ii) other events, conditions, circumstances, activities,
practices, incidents, actions or plans related to any such property or
improvement, that could result in any common law or legal liability or otherwise
form the basis of any valid claim, action, suit, proceeding, hearing or
investigation involving any of the SUBSIDIARIES under any ENVIRONMENTAL LAW; and
(5) None of the SUBSIDIARIES has received notice from any
governmental agency of any allegation which is inconsistent with the foregoing
representations.
Section 3.10. Legal Proceedings.
--------------------------------
(1) Other than outstanding orders, judgments, injunctions,
awards or decrees of any court, governmental or regulatory agency or arbitrator
relating to insurance claims made in connection with policies of insurance
underwritten or assumed by any of the INSURERS in the ordinary course of
business, there are no outstanding orders, judgments, injunctions, awards or
decrees of any court, governmental or regulatory agency or arbitrator against,
by or affecting any of ANTHEM, SELLER, and the SUBSIDIARIES, or any of the
directors, officers or employees thereof in their capacities as such, that could
(i) prevent the performance of this AGREEMENT or the consummation of any of the
transactions contemplated hereby, (ii) prevent materially the use by the
PURCHASER of any assets of any of the SUBSIDIARIES, in each case in accordance
with past practices, (iii) affect the validity or enforceability of this
AGREEMENT or compliance with the terms hereof by SELLER, (iv) affect materially
the PERMITS, business, financial condition or results of operations of the
SUBSIDIARIES, taken as a whole, or (v) have a MATERIAL ADVERSE EFFECT.
(2) To SELLER'S KNOWLEDGE, other than actions, suits or claims
or legal, administrative or arbitration proceedings or investigations relating
to insurance claims made in connection with policies of insurance underwritten
or assumed by any of the INSURERS (i) in the ordinary course of business, (ii)
that do not allege or seek damages in excess of policy limits or exemplary or
punitive damages, and (iii) are not brought or purported to be brought on behalf
of a class of PERSONS, and except as set forth in Schedule 3.10, there are no
actions, suits or claims or legal, administrative or arbitration proceedings or
investigations overtly threatened (in a writing
-16-
<PAGE>
received by any of ANTHEM, SELLER, and the SUBSIDIARIES) or pending in any court
or before any governmental agency or arbitrator against, by or affecting any of
ANTHEM, SELLER, and the SUBSIDIARIES, or any of the directors, officers or
employees thereof in their capacities as such, or its properties or assets.
Section 3.11. Property and Title; LIENS.
----------------------------------------
(1) Each of the SUBSIDIARIES owns and has good and marketable
title to all of its property and assets including, but not limited to, its
property and assets reflected in the balance sheet as at December 31, 1996
included in either the SELLER FINANCIAL STATEMENTS or the INSURER CONVENTION
STATEMENTS, as applicable (other than property and assets disposed of in the
ordinary course of business since December 31, 1996), free and clear of all
LIENS, except (i) as disclosed in the SELLER FINANCIAL STATEMENTS, the INSURER
CONVENTION STATEMENTS, or the notes thereto, and (ii) PERMITTED EXCEPTIONS.
(2) Except for the NOTES and the SHARES and except as set forth
on Schedule 3.11, SELLER has no assets or liabilities. Schedule 3.11 identifies
all assets and liabilities of SELLER as of March 31, 1997, and there has been no
material change in the assets or liabilities of SELLER since that date.
Section 3.12. Brokers. None of ANTHEM, SELLER, the SUBSIDIARIES, and
----------------------
any party acting on behalf of any of them has paid or become obligated to pay
any fee or commission to any broker, finder, intermediary, financial advisor or
other PERSON for or on account of this AGREEMENT or the transactions
contemplated hereby, other than the fees of Credit Suisse First Boston
Corporation, for which ANTHEM is solely responsible.
Section 3.13. Compliance With Laws. To SELLER'S KNOWLEDGE, (i) none
-----------------------------------
of the SUBSIDIARIES is in violation of any applicable order, judgment,
injunction, award, decree or other requirement of any federal, state, local or
foreign law, statute, ordinance, rule, regulation, order, writ, injunction,
decree, or PERMIT, applicable to it or its property, assets or business, and
none of the SUBSIDIARIES has received notice (written or oral) from any
governmental agency that any such violation is being alleged, (ii) each of the
SUBSIDIARIES has complied in all material respects with all laws, statutes,
ordinances, rules, regulations and requirements applicable to the conduct of its
business and to its property and assets (including, without limitation,
applicable state licensing requirements for the insurance agents and brokers of
the INSURERS), and none of the SUBSIDIARIES has received notice (written or
oral) from any governmental agency that any such violation is being alleged, and
(iii) none of the SUBSIDIARIES has committed any act, or omitted to perform any
act, that would
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<PAGE>
provide reasonable grounds for termination or non-renewal of any of its PERMITS,
and no insurance regulatory authority or other governmental agency has asserted
otherwise in a writing delivered to any of them, excluding from the foregoing
clauses (i) and (ii) such violations and failures to comply that, in the
aggregate, do not have a MATERIAL ADVERSE EFFECT on the SUBSIDIARIES.
Section 3.14. Insurance Business.
---------------------------------
(1) Except with respect to terms specifically negotiated with
policyholders, to SELLER'S KNOWLEDGE, (i) all policies of insurance issued by
the INSURERS as now in force are, to the extent required under applicable law,
on forms that have been approved by applicable insurance regulatory authorities
or that have been filed and not objected to by such authorities within the
period provided for objection, and (ii) any premium rates required to be filed
with or approved by insurance regulatory authorities have been so filed and/or
approved or are otherwise in compliance with existing law, and premium rates
established by each of the INSURERS conform thereto.
(2) To SELLER'S KNOWLEDGE, (i) each of the contracts between the
INSURERS and their respective agents, managers or brokers is valid, binding, and
in full force and effect in accordance with its terms, assuming no breach or
default by any such agent, manager or broker thereunder and except for any such
contract that, if not valid, binding or in effect, would not have a MATERIAL
ADVERSE EFFECT; (ii) none of the INSURERS is in breach or default in any
material respect under any such contract; and (iii) no such contract contains
any provision providing that a party thereto other than any of the INSURERS may
terminate the same by reason of the transactions contemplated by this AGREEMENT
or any other provision that would be altered or otherwise become applicable
solely by reason of such transactions.
(3) Schedule 3.14 hereto contains a complete and accurate list
of agents, brokers, and other persons or entities who or that, collectively,
produced at least ninety percent (90%) of the premiums written by the INSURERS
during the period of twelve (12) months ended March 31, 1997. The INSURERS enjoy
good relations with their insurance agents as a whole. None of SELLER and the
SUBSIDIARIES has received any notification (written or oral) by such agents
threatening litigation or termination of their agency agreements with the
INSURERS or otherwise establishing a basis reasonably to believe that such
agents are likely to cease to do business with the INSURERS in the same manner
as such business has been conducted historically, whether as a result of the
transactions contemplated by this AGREEMENT or otherwise. Set forth on Schedule
3.14 is a true and correct summary description of each
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<PAGE>
INSURER'S compensation arrangements with its agents identified therein.
(4) Except as set forth in Schedule 3.14, there are no side
agreements or other agreements (whether oral or written) between any of the
SUBSIDIARIES and its agents or former agents, including, without limitation,
agreements with respect to the payment of compensation by any of the
SUBSIDIARIES to its agents or former agents in existence on the date hereof and
on the CLOSING DATE.
(5) None of the SUBSIDIARIES is in default with respect to any
contract or other agreement with any PERSON set forth in Schedule 3.14, and no
such contract or other agreement contains any provision providing that the other
party thereto may terminate the same by reason of the transactions contemplated
by this AGREEMENT or any other provision which would be altered or otherwise
become applicable by reason of such transactions.
Section 3.15. Regulatory Filings. Each of ANTHEM, SELLER, and the
---------------------------------
SUBSIDIARIES has filed all material reports, statements, documents,
registrations, filings or submissions required to be filed by it with any
governmental or regulatory authority, except (i) those with respect to which the
imposition, levy or collection of all fines, penalties, assessments, TAXES,
forfeitures, money judgments or sanctions of any type are barred by applicable
statutes of limitation, and (ii) as otherwise agreed to in writing by the
governmental or regulatory authority involved; all such registrations, filings
and submissions were in material compliance with applicable law when filed; and
no material deficiencies have been asserted by any such governmental or
regulatory authority with respect to such registrations, filings or submissions
that have not been remedied or otherwise satisfied.
Section 3.16. Contracts. Schedule 3.16 identifies all material
------------------------
written contracts (other than leases of real estate and other contracts
identified in Schedule 3.20, tax sharing agreements identified in Schedule
11.01(8), insurance policies issued by the INSURERS in the ordinary course of
business, reinsurance and coinsurance treaties and agreements identified on
Schedule 3.25, and those contracts identified in any other Schedule to this
AGREEMENT), to which any of the SUBSIDIARIES is a party or by or to which it or
its assets or properties are bound or subject. There have been delivered or made
available to PURCHASER true and complete copies of all of the contracts
identified in Schedule 3.16 or any other Schedule to this AGREEMENT. Each such
contract and other agreement is valid, in full force and effect, and binding
upon each of the SUBSIDIARIES party thereto in accordance with its terms, none
of which (and, to SELLER'S KNOWLEDGE, no other party thereto) is in default in
any material respect under any of such contracts to which it is a party. For
purposes of this AGREEMENT, a contract is material
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<PAGE>
only if (i) the liability thereunder of any of the SUBSIDIARIES or any third
party thereto for any calendar year, or in the aggregate, is at least $100,000
or, (ii) if no such monetary liability is involved, the obligations thereunder
of any third party thereto provide a benefit to any of the SUBSIDIARIES that is
material to its financial condition or operations.
Section 3.17. No Material Adverse Change. Except for conditions
-----------------------------------------
affecting generally the industry in which they conduct business, since December
31, 1996, there has been no change in the properties, business or operations of
the SUBSIDIARIES, taken as a whole, other than such changes (i) that, in the
aggregate, do not have a MATERIAL ADVERSE EFFECT as to the SUBSIDIARIES, taken
as a whole, and (ii) as are expressly required or permitted by this AGREEMENT.
Section 3.18. Conduct of Business. Except as contemplated by this
----------------------------------
AGREEMENT, since December 31, 1996, each of SELLER and the SUBSIDIARIES has
conducted its operations in the ordinary and usual course of its business,
consistent with past practice. Without limiting the generality of any of the
provisions of the foregoing, except as contemplated by this AGREEMENT since
December 31, 1996, none of SELLER and the SUBSIDIARIES has taken any of the
actions described in Section 5.01 of this AGREEMENT.
Section 3.19. Security Deposits. Schedule 3.19 (i) identifies all
--------------------------------
securities deposited by each of the INSURERS with state insurance departments
and other regulatory authorities and (ii) has been completed in accordance with
the instructions applicable to the Schedule of Deposits appearing in the
CONVENTION STATEMENTS for the period ended December 31, 1996.
Section 3.20. Real Estate. Schedule 3.20 sets forth a list and
--------------------------
summary description of (i) all real property owned by any of the SUBSIDIARIES
and all buildings located thereon, other than real property acquired through
salvage or subrogation (the "OWNED REAL PROPERTY"); (ii) all material leases,
subleases or other agreements under which any of the SUBSIDIARIES is the lessor
or lessee of any real property; (iii) all material options held by any of the
SUBSIDIARIES, and all material contractual obligations thereof, to purchase or
acquire any interest in real property; and (iv) all material contractual
obligations of any of the SUBSIDIARIES to sell or dispose of any interest in
real property. Except for PERMITTED EXCEPTIONS and except as otherwise set
forth in Schedule 3.20:
(1) One of the SUBSIDIARIES owns fee simple title to the OWNED
REAL PROPERTY;
(2) One of the SUBSIDIARIES has good, valid and marketable title
to the OWNED REAL PROPERTY, free and clear
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<PAGE>
of all title defects or objections, liens, claims, encumbrances, charges,
security interests or other encumbrances of any nature whatsoever, including,
without limitation, leases, chattel mortgages, pledges, conditional sales
contracts, collateral security arrangements, and other title or interest
retention arrangements, and the OWNED REAL PROPERTY is not subject to any right
of way, easement (other than easements of record), building use restriction,
exception, variance, reservation or limitation or any nature whatsoever;
(3) There are no options, rights of first refusal or contracts
of sale affecting the fee title in the OWNED REAL PROPERTY;
(4) There is no pending or, to SELLER'S KNOWLEDGE, threatened
condemnation of all or any portion of the OWNED REAL PROPERTY;
(5) All improvements now situated on the OWNED REAL PROPERTY are
completely within the boundaries of the same, and none of the SUBSIDIARIES has
received, and to SELLER'S KNOWLEDGE there is no, claim from or by any PERSON
alleging or claiming that any portion of the OWNED REAL PROPERTY or the
improvements, fixtures, equipment or personal property on the OWNED REAL
PROPERTY encroaches upon any real property, easement, or right of way held by
any PERSON;
(6) SELLER has made available to PURCHASER true and correct
copies of surveys and appraisals in the possession of any of ANTHEM, SELLER, and
the SUBSIDIARIES, if any, relating to or affecting the OWNED REAL PROPERTY;
(7) The use for which the OWNED REAL PROPERTY is now being used
does not violate any applicable zoning, and the continued use thereof as
currently being used will not violate any subdivision, deed or other
restriction; and
(8) All leases set forth on Schedule 3.20 are valid, binding and
enforceable in accordance with their terms, except to the extent that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to creditors' rights and remedies generally, and
are in full force and effect; there are no existing defaults by any of the
SUBSIDIARIES thereunder; and no event of default has occurred which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a material default thereunder by any of the
SUBSIDIARIES or, to SELLER'S KNOWLEDGE, by any other party thereto.
Section 3.21. Intangible Property and Computer Soft ware. Each of
---------------------------------------------------------
the SUBSIDIARIES has at all times through the date hereof owned, had registered,
or had valid rights to use
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<PAGE>
such trade marks, trade names, copyrights and computer software as have been
necessary for the conduct of its business. To SELLER'S KNOWLEDGE, none of the
SUBSIDIARIES has received written notice, and none of them has reason to
believe, that it has not, during such period, owned, had registered, or had
valid rights to use any such trade marks, trade names, copyrights, computer
software, or any application pending therefor as were necessary for the conduct
of its business.
Section 3.22. Liabilities. To SELLER'S KNOWLEDGE, none of the
--------------------------
SUBSIDIARIES has any liability or obligation of any nature (whether accrued,
absolute, contingent or other and whether due or to be become due), other than
those (i) that are fully and adequately reflected or reserved against in the
SELLER FINANCIAL STATEMENTS or the INSURER CONVENTION STATEMENTS for the year
ended December 31, 1996, (ii) incurred in the ordinary course of business since
December 31, 1996, and (iii) that, in the aggregate, do not have a MATERIAL
ADVERSE EFFECT or the SUBSIDIARIES.
Section 3.23. Employee Benefit Plans. Schedule 3.23 identifies all
-------------------------------------
employee benefit plans (the "PLANS") sponsored by SELLER under which it is
required to contribute with respect to employees or former employees of Seller
or the Subsidiaries, or their dependents. The Subsidiaries have no obligations
or liabilities under the Plans or under any other employee benefit plans with
respect to any employees or former employees of Seller or the Subsidiaries, or
their dependents. The PLANS identified in Schedule 3.23 include (i) each
"employee benefit plan" (described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and (ii) each formal or
informal plan, arrangement or contract involving direct or indirect
compensation, maintained or formerly maintained by any of SELLER and the
SUBSIDIARIES, or with respect to which any employees or former employees of any
of them are participants and to which any of them have any liability or under
which any of them have any present or future obligations or liability on behalf
of its employees or former employees or their dependents or beneficiaries,
including, but not limited to, each retirement, pension, profit-sharing, thrift,
savings, target benefit, employee stock ownership, cash or deferred, multiple
employer, multiemployer or other similar plan or program, each other deferred or
incentive compensation, bonus, stock option, employee stock purchase, "phantom
stock" or stock appreciation right plan, each other program providing payment or
reimbursement for or of medical, dental or vision care, psychiatric counseling,
or vacation, sick, disability or severance pay (including "basic severance pay")
and each other "fringe benefit" plan or welfare plan arrangement. Schedule 3.23
identifies each of the PLANS that is intended to be qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "CODE"). Schedule
3.23 also identifies each former employee of any of the SUBSIDIARIES who, as of
the date hereof, is receiving or entitled to receive retiree medical
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<PAGE>
benefits, retiree life insurance benefits, or group accident insurance benefits
from any of them. Except as set forth in Schedule 3.23:
(1) SELLER has delivered or made available to PURCHASER copies
of the following documents, as they may have been amended to the date hereof,
embodying or relating to the PLANS: (i) all written documents for each of the
PLANS identified in Schedule 3.23, including all amendments thereto, and any
related trust agreements, group annuity contracts, insurance policies or other
funding agreements or arrangements; (ii) the most recent determination letter,
if any, received from the Internal Revenue Service with respect to the
qualification of any of the PLANS intended to be qualified under Section 401(a)
of the CODE; (iii) actuarial valuations for each of the PLANS, if applicable,
for the most recent plan year for which such valuations are available; (iv) the
current summary plan description, if any, for each of the PLANS; and (v) the
most recently filed annual return/report on Form 5500, 5500-C or 5500-R, if any,
for each of the PLANS.
(2) the written terms of each of the PLANS and any related trust
agreement, group annuity contract, insurance policy or other funding arrangement
are in substantial compliance and are being operated in compliance in all
material respects with the requirements of all applicable statutes, orders, or
governmental rules and regulations, including without limitation, ERISA and the
CODE; each of the PLANS is in substantial compliance, and is being operated in
compliance in all material respects, with the requirements prescribed by ERISA
and the CODE;
(3) all contributions to each of the PLANS intended to be
qualified under Section 401(a) of the CODE are and have been in the year to
which they relate fully deductible pursuant to Section 404 of the CODE and are
not subject to excise tax under Section 4972 of the CODE;
(4) none of ANTHEM, SELLER, the SUBSIDIARIES, any other
"disqualified person" or "party in interest," as defined in Section 4975 of the
CODE and Section 3(14) of ERISA, respectively, and any party required to be
indemnified by SELLER has engaged in a "prohibited transaction," as such term is
defined in Section 4975 of the CODE and Section 406 or 407 of ERISA, with
respect to any of the PLANS subject to ERISA that could subject any of the
SUBSIDIARIES to a tax or penalty on prohibited transactions imposed by either
Section 502 of ERISA or Section 4975 of the CODE;
(5) there has been no act or omission by any of ANTHEM, SELLER,
the SUBSIDIARIES, any administrator, any fiduciary of any of the PLANS (or any
agent of any of the foregoing), and any party required to be indemnified by
SELLER,
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<PAGE>
that could subject any of the SUBSIDIARIES to any material liability for
a breach of fiduciary duty under ERISA or any other law applicable to any of the
PLANS;
(6) the execution and delivery of this AGREEMENT by SELLER and
the consummation of the transactions contemplated hereby will not (a) involve
any prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the CODE; or (b) accelerate the payment of any benefits under any of the
PLANS;
(7) other than qualified domestic relations orders as defined in
Section 414(p) of the CODE and qualified medical child support orders as defined
in Section 609(a)(2)(A) of ERISA, each of which, if any, is listed on Schedule
3.23(7), and except for claims for benefits in the ordinary course, there are no
actions, suits, arbitrations, disputes, legal, administrative or other
proceedings or governmental investigations pending against any of the PLANS, the
assets of any of the PLANS or any PERSON who is a fiduciary with respect to any
of the PLANS;
(8) (a) no PLAN subject to Title IV of ERISA maintained by any
of the SUBSIDIARIES has been terminated; and (b) no proceeding has been
initiated by the Pension Benefit Guaranty Corporation to terminate any of the
PLANS;
(9) none of the PLANS that is an "employee benefit pension
plan," as defined in Section 3(2) of ERISA, has incurred an "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
CODE, nor has any of the SUBSIDIARIES at any time requested a minimum funding
waiver within the meaning of Section 412(d) of the CODE;
(10) no "reportable event" (within the meaning of Section
4043(c)(1)-(13) of ERISA) requiring the filing of a notice has occurred with
respect to any of the PLANS subject to Title IV of ERISA; and
(11) none of the SUBSIDIARIES has at any time maintained,
contributed to or had an obligation to contribute to any plan under which more
than one employer makes contributions (within the meaning of Section 4064(a) of
ERISA) or any "multiemployer plan" (within the meaning of Section 3(37) of
ERISA).
Section 3.24. Employee Relations. To SELLER'S KNOWLEDGE, Schedule
---------------------------------
3.24 describes the status of all union organizing efforts known to any of the
SUBSIDIARIES conducted within the last three (3) years or now being conducted.
To SELLER'S KNOWLEDGE, none of the SUBSIDIARIES has at any time during the last
five (5) years had, nor is there now threatened as to it, a strike, picket, work
stoppage, work slowdown, or
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other similar labor unrest involving a group or groups of its employees.
Section 3.25. Reinsurance and Coinsurance.
------------------------------------------
(1) Schedule 3.25 sets forth a list of all reinsurance and
coinsurance treaties or agreements to which any of the SUBSIDIARIES is a party
or is a named reinsured and which either (i) covers loss or potential loss
arising out of any event occurring (whether or not reported) during the period
of three (3) years ending on the date hereof or (ii) covers one or more losses
reported prior to the date hereof. Except as indicated on Schedule 3.25, all
such treaties or agreements as set forth in such Schedule are, to SELLER'S
KNOWLEDGE, in full force and effect. None of the SUBSIDIARIES or, to SELLER'S
KNOWLEDGE, any other party to any agreement listed in Schedule 3.25, is in
default thereunder in any material respect, and no such agreement contains any
provision providing that the other party thereto may terminate such agreement by
reason of the transactions contemplated by this AGREEMENT.
(2) The INSURERS are not aware of any claims or losses which
have arisen or may arise under policies written by the Insurers and for which
reinsurance has been purchased that are not covered under such reinsurance
contracts.
Section 3.26. Insurance. To SELLER'S KNOWLEDGE, Schedule 3.26 sets
------------------------
forth a list and brief description (specifying the insurer and the policy number
or covering note number with respect to binders, describing each pending claim
thereunder of more than $50,000 (or, in the case of policies of workers'
compensation, more than $100,000), setting forth the aggregate amounts paid out
under each such policy since January 1, 1992 through the date hereof, and the
aggregate limit, if any, of the insurer's liability thereunder) of all policies
or binders of fire, liability, product liability, workers' compensation,
vehicular, and other insurance held by or on behalf of any of the SUBSIDIARIES
other than (i) coinsurance and reinsurance treaties and agreements listed on
Schedule 3.25, (ii) policies in respect of which any of the SUBSIDIARIES is an
insured mortgagee or lessor, and (iii) policies issued by any of ANTHEM and the
SUBSIDIARIES. Such policies and binders are, to the SELLER'S KNOWLEDGE, valid
and enforceable in accordance with their terms, are in full force and effect,
and insure against risks and liabilities to the extent and in the manner deemed
appropriate and sufficient by any of ANTHEM and the SUBSIDIARIES insured
thereunder.
Section 3.27. Officers, Directors, and Key Employees. Schedule 3.27
-----------------------------------------------------
sets forth: (i) the name and total compensation of each officer, director and
each other employee of each of the SUBSIDIARIES, and the name and total
compensation of each employee of SELLER, whose total compensation exceeds
$75,000 per year; (ii) all bonuses received by such persons
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<PAGE>
since December 31, 1994, and any accrual for such bonuses; and (iii) all
commitments or agreements by any of the SUBSIDIARIES to increase the
compensation of any of these persons. Except as set forth on Schedule 3.27, none
of the SUBSIDIARIES has any contractual arrangement (written or oral) with any
current or former officer, director or employee of any of the SUBSIDIARIES or
any AFFILIATE thereof.
Section 3.28. Accounting Practices. To SELLER'S KNOWLEDGE, except as
-----------------------------------
set forth on Schedule 3.28 and except for changes disclosed in the SELLER
FINANCIAL STATEMENTS or the INSURER CONVENTION STATEMENTS, since December 31,
1993, none of the SUBSIDIARIES has made any change in its accounting methods,
practices or policies, including, without limitation, any change with respect to
establishment of reserves for unearned premiums, losses (including incurred but
not reported losses), and loss adjustment expenses, or made any change in
depreciation or amortization policies or rates adopted by it, except as required
by law, generally accepted accounting principles, or STATUTORY ACCOUNTING
PRINCIPLES.
Section 3.29. Powers of Attorneys; Guarantees. None of the
----------------------------------------------
SUBSIDIARIES has any obligation to act under any outstanding power of attorney
or any obligation or liability, either actual, accrued, accruing or contingent,
as guarantor, surety, co-signer, endorser, co-maker, or indemnitor in respect to
the obligation of any PERSON, corporation, partnership, joint venture,
association, organization, or other entity (other than for purposes of
collection in the ordinary course of its business and other than with respect to
reinsurance assumed in the ordinary course of its business).
Section 3.30. LOSS RESERVES. The LOSS RESERVES reflected in the
----------------------------
INSURER CONVENTION STATEMENTS, in any subsequent QUARTERLY CONVENTION STATEMENTS
provided to the PURCHASER after the date hereof and prior to the CLOSING DATE,
and the LOSS RESERVES reflected in the CLOSING BALANCE SHEET were or will be
determined in accordance with generally accepted actuarial standards and
principles applied on a basis consistent with those applied in determining the
LOSS RESERVES reflected in the SELLER FINANCIAL STATEMENTS, it being understood
and agreed that the LOSS RESERVES reflected in the INSURER CONVENTION STATEMENTS
and any QUARTERLY CONVENTION STATEMENTS are or will be net of reinsurance
recoverables, and the LOSS RESERVES reflected in the SELLER FINANCIAL STATEMENTS
are or will be gross. The LOSS RESERVES set forth in the CLOSING BALANCE SHEET,
net of reinsurance recoverables (other than intercompany reinsurance) (the
"CLOSING LOSS RESERVES") make or will make good and sufficient provision for the
settlement of the total amount of all liabilities and obligations incurred by
the INSURERS through the CLOSING DATE under all insurance and reinsurance
contracts pursuant to which the INSURERS have any liability or obligation. The
determination of whether, and the
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<PAGE>
extent to which, the CLOSING LOSS RESERVES make good and sufficient provision
for the settlement of all such liabilities and obligation shall be made in
accordance with Section 10.05 of this AGREEMENT.
Section 3.31. No Material Misrepresentations. No warranty or
---------------------------------------------
representation of any of ANTHEM, SELLER, or the SUBSIDIARIES contained in this
AGREEMENT, or documents furnished to the PURCHASER pursuant to this AGREEMENT,
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statement contained in such warranty, representation,
or document, in light of the circumstances under which it was made, not
misleading.
Section 3.32. Personal Property Leases. Schedule 3.32 contains an
---------------------------------------
accurate and complete list of each lease and sublease pursuant to which any of
the SUBSIDIARIES lease personal property for an annual rental exceeding $20,000.
Except as set forth in Schedule 3.32, each such lease is valid, binding and
enforceable in accordance with its terms, except to the extent that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to creditors' rights and remedies generally, and
are in full force and effect; there are no existing defaults by any of the
SUBSIDIARIES thereunder; and no event of default has occurred which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a default thereunder by any of the SUBSIDIARIES
or, to SELLER'S KNOWLEDGE, any other party thereto.
Section 3.33. Bank Accounts; Custodial Accounts. Schedule 3.33
------------------------------------------------
contains a true and complete list of each and every bank account, safe deposit
box, brokerage account, trust account, depository account or other custodial
account of each of the SUBSIDIARIES. Other than the assets (i) deposited in the
accounts listed in Schedule 3.33 and/or (ii) identified in Schedule 3.19, none
of the SUBSIDIARIES has any other liquid assets or investments held or
maintained with any other PERSON or entity at any location.
Section 3.34. Improper Payments. To SELLER'S KNOWLEDGE, since
--------------------------------
December 31, 1996:
(1) no funds or assets of any of the SUBSIDIARIES have been used
for any illegal purpose;
(2) no unrecorded fund or asset of any of the SUBSIDIARIES has
been established for any purpose;
(3) no accumulation or use of corporate funds of any of the
SUBSIDIARIES has been made without being properly accounted for on the books and
records of one of the SUBSIDIARIES;
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<PAGE>
(4) all payments by or on behalf of any of the SUBSIDIARIES have been
duly and properly recorded and accounted for on its books and records; and
(5) no false or artificial entry has been made on the books and
records of any of the SUBSIDIARIES for any reason whatsoever.
ARTICLE 4
Representations and Warranties of PURCHASER
-------------------------------------------
PURCHASER represents and warrants to each of ANTHEM and SELLER that, as of
the date hereof:
Section 4.01. Organization, Standing and Corporate Authority of
----------------------------------------------------------------
PURCHASER. PURCHASER is a corporation duly organized, validly existing and in
- ---------
good standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to purchase, own and hold the SHARES.
Section 4.02. PURCHASER'S Transaction Authority; Corporate
----------------------------------------------------------
Proceedings; Enforceability.
- ---------------------------
(1) PURCHASER has all requisite corporate power and authority to
execute and deliver this AGREEMENT; to perform its obligations hereunder; and to
consummate the transactions to be undertaken by it as contemplated hereby.
(2) The execution and delivery of this AGREEMENT by PURCHASER,
the performance by it of its obligations hereunder, and the consummation by it
of the transactions to be undertaken by it as contemplated hereby, have been
duly and validly authorized by all necessary corporate acts and proceedings on
the part of PURCHASER, its shareholders and directors.
(3) This AGREEMENT has been duly and validly executed and
delivered on behalf of PURCHASER; constitutes the valid and binding agreement of
PURCHASER; and is enforceable against PURCHASER in accordance with its terms.
Section 4.03. No Violation. Neither the execution and delivery of
---------------------------
this AGREEMENT by PURCHASER, nor its consummation of the transactions to be
undertaken by it as contemplated hereby, will (i) violate any provision of its
articles or certificate of incorporation, by-laws or regulations (or any
comparable document); (ii) constitute (upon notice, lapse of time or otherwise)
a breach or a default (by way of substitution, notation or otherwise, or give
rise to any right of termination, cancellation or acceleration) under any
contract to which it is a party or by or to which it or any of its assets or
properties may be bound or subject; (iii) violate any order, judgment,
injunction, award or decree of any court, arbitrator
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<PAGE>
or governmental or regulatory authority against, or any agreement with, or
condition imposed by, any governmental or regulatory authority, binding upon it;
or (iv) violate any statute, law, rule or regulation of any federal, state,
local or other governmental authority applicable to it or its property, assets
or business, excluding from the foregoing clauses (i) through and including (iv)
such breaches, defaults, results and violations that, in the aggregate, do not
have a MATERIAL ADVERSE EFFECT.
Section 4.04. No Default. PURCHASER is not in default under or in
-------------------------
violation of, and no event has occurred that, upon notice or lapse of time or
both, would constitute a default under or violation of (i) its articles or
certificate of incorporation, by-laws, or regulations (or any comparable
document); (ii) any contract to which it is a party or by or to which it, or any
of its assets or properties, may be bound or subject; or (iii) any order,
judgment, injunction, award or decree of any court, arbitrator or governmental
or regulatory authority against, or any agreement with or condition imposed by
any governmental or regulatory authority, binding upon PURCHASER, its property,
assets or business, excluding from the foregoing clauses (i), (ii) and (iii)
such defaults, violations and events that, in the aggregate, do not have a
MATERIAL ADVERSE EFFECT on PURCHASER.
Section 4.05. Legal Proceedings.
--------------------------------
(1) There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, governmental or regulatory authority against, by
or affecting PURCHASER, or any of its directors, officers or employees in their
capacities as such, that could (i) prevent the performance of this AGREEMENT or
the consummation of any of the transactions contemplated hereby, or (ii) affect
the validity or enforceability of this AGREEMENT or compliance with the terms
hereof by PURCHASER, excluding from the foregoing clauses (i) and (ii) such
orders, judgments, injunctions, awards and decrees that, in the aggregate, do
not have a MATERIAL ADVERSE EFFECT on PURCHASER.
(2) To PURCHASER'S KNOWLEDGE, there are no actions, suits or
claims or legal, administrative or arbitration proceedings or investigations
overtly threatened (in a writing received by PURCHASER) or pending in any court
or before any governmental agency or arbitrator against, by or affecting
PURCHASER or any of its directors, officers or employees in their capacities as
such, or its properties or assets, excluding any such action, suit, claim,
proceeding or investigation that, if determined adversely to PURCHASER or any
such director, officer or employee, would not have a MATERIAL ADVERSE EFFECT on
PURCHASER.
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<PAGE>
Section 4.06. Investment Purpose. PURCHASER shall acquire the SHARES
---------------------------------
for its own account, for the purpose of investment only, and not with a view to
the resale or distribution of all or any part of the SHARES; provided, however,
that the foregoing representation shall in no way limit PURCHASER'S right to
dispose of all or any portion of the SHARES in one or more transactions
registered under or exempt from the registration requirements of the Securities
Act of 1933, as amended, at any time and in PURCHASER'S sole discretion.
Section 4.07. Brokers. Neither PURCHASER nor any party acting on its
----------------------
behalf has paid or become obligated to pay any fee or commission to any broker,
finder, intermediary, financial advisor or other PERSON for or on account of
this AGREEMENT or the transactions contemplated hereby, other than the fees of
Donaldson, Lufkin & Jenrette Securities Corporation and/or of KPMG Peat Marwick
LLP, for which PURCHASER is solely responsible.
Section 4.08. SELLER FINANCIAL STATEMENTS and INSURER CONVENTION
-----------------------------------------------------------------
STATEMENTS. PURCHASER has received from SELLER copies of the SELLER FINANCIAL
- ----------
STATEMENTS and the INSURER CONVENTION STATEMENTS.
Section 4.09. Disclosure. PURCHASER is a sophisticated investor and
-------------------------
has had full opportunity to make such investigation of each of SELLER and the
SUBSIDIARIES as PURCHASER has deemed necessary or desirable in order to make an
informed decision regarding the transactions contemplated hereby. The only
representations and warranties that ANTHEM and/or SELLER, or any party acting as
agent or otherwise on behalf of ANTHEM and/or SELLER, has made with respect to
any of the SUBSIDIARIES, their properties, assets, business or otherwise in
connection with the transactions contemplated hereby, are those contained in
this AGREEMENT, including the Schedules hereto.
Section 4.10. Financing. PURCHASER will have available to it the
------------------------
funds required immediately to pay the PURCHASE PRICE at the CLOSING and to
consummate the transactions to be undertaken by it as contemplated hereby.
Section 4.11. Articles, By-Laws, etc.. PURCHASER has received from
--------------------------------------
SELLER copies of the certificate or articles of incorporation, by-laws and
regulations (or comparable documents) of each of the SUBSIDIARIES.
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<PAGE>
ARTICLE 5
Covenants of SELLER
-------------------
Section 5.01. Conduct of Business. Except as otherwise permitted or
----------------------------------
required by this AGREEMENT, during the period from the date hereof to the later
of the CLOSING DATE or the later date specified herein:
(1) ANTHEM and SELLER will use reasonable efforts to cause each
of the SUBSIDIARIES to conduct its operations according to the ordinary and
usual course of business and consistent with past practice; and
(2) without limiting the generality of any of the provisions of
the foregoing paragraph (1), ANTHEM and SELLER shall not cause, permit or suffer
any of the SUBSIDIARIES to:
(i) create, authorize, issue, sell or deliver any of its capital
stock (whether authorized and unissued or held in treasury),
bonds or other of its securities or any instrument convertible
into any of them, or grant or otherwise issue any options,
warrants or other rights with respect thereto, or split up,
combine or reclassify any of its outstanding stock or enter into
any contract or commitment to do any of the foregoing;
(ii) other than in the ordinary course of business consistent with
past practice, incur, assume, guarantee or otherwise become
liable with respect to any indebtedness for money borrowed, or
make any payment with respect to any obligation for money
borrowed before such payment is due except as may be necessary,
due to possible transmittal delays, to assure that payment will
be timely made;
(iii) amend its articles or certificate of incorporation, by-laws or
regulations (or other comparable document) or take any action
with respect to any such amendment;
(iv) make any capital expenditures, capital additions or capital
improvements other than those necessary to conduct business in
the ordinary course;
(v) enter into any collective bargaining agreement;
(vi) merge or consolidate with any other corporation or entity or
acquire or agree to
-31-
<PAGE>
acquire any stock or substantially all of the assets of any other
PERSON, firm, association, corporation or other entity;
(vii) [DELETED];
(viii) declare or pay any dividends, or declare or make any other
distributions of any kind to its shareholders, or make any direct
or indirect redemption, retirement, purchase or other acquisition
of any shares of its capital stock, except (i) dividends or
distributions made to enable SELLER to meet payments due in
respect of those certain 6 3/4 percent Senior Guaranteed Notes
due 2003 issued by SELLER (THE "NOTES") and (ii) dividends or
other distributions that, in the reasonable determination of any
of the SUBSIDIARIES, would not reduce the NET WORTH to be shown
on the CLOSING BALANCE SHEET below that shown on the SELLER
FINANCIAL STATEMENTS;
(ix) except as required by law, generally accepted accounting
principles, or STATUTORY ACCOUNTING PRINCIPLES, or as otherwise
disclosed to PURCHASER, make any change in its accounting methods
or practices including, without limitation, any change with
respect to establishment of reserves for unearned premiums,
losses (including losses incurred but not reported) and loss
adjustment expenses, or make any change in depreciation or
amortization policies or rates adopted by it;
(x) enter into any lease (as lessor or lessee) under which any of the
SUBSIDIARIES would be obligated to make or would receive payments
in any one year of one hundred thousand dollars ($100,000) or
more; sell, abandon, or make any other disposition of any of its
assets or properties having a fair market value of one hundred
thousand dollars ($100,000) or more, excluding investment assets;
grant or suffer any material lien on any of its assets other than
liens excepted in Section 3.11; amend any contract required to be
listed on Schedule 3.16; or enter into any other material
contract (as defined in Section 3.16);
(xi) terminate or fail to renew, any contract relating to the assets,
liabilities,
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<PAGE>
business, operations, financial condition, or results of
operations of the SUBSIDIARIES, except where such termination or
failure to renew would not have a MATERIAL ADVERSE EFFECT on the
SUBSIDIARIES;
(xii) sell, assign, or transfer any of the assets (including any
portion of the investment portfolio) of any of the SUBSIDIARIES
which individually or in the aggregate would have a MATERIAL
ADVERSE EFFECT on the SUBSIDIARIES;
(xiii) make any loan or advance to ANTHEM, SELLER or any directors,
officers or employees, consultants, agents or other
representatives of any of ANTHEM, SELLER, and the SUBSIDIARIES,
or make any other loan or advance otherwise than in the ordinary
course of business;
(xiv) enter into any employment agreements with, increase the rate of
compensation of, or pay or agree to pay any bonus to any of its
directors, officers or employees (provided however, that any of
the SUBSIDIARIES may grant reasonable annual merit increases to
some or all of its employees in the ordinary course of its
business);
(xv) implement any new employee benefit plan or arrangement or modify
or amend any arrangement now in effect; or
(xvi) make any material change in the nature of its business or
operations;
provided, however, that nothing contained in this Section 5.01 shall be
construed to prevent (i) SELLER from transferring all or substantially all of
its assets (other than the SHARES) and liabilities (other than the NOTES) to one
or more of the SUBSIDIARIES or (ii) one or more of the SUBSIDIARIES from
purchasing title insurance insuring title to one or more parcels of the OWNED
REAL PROPERTY.
Section 5.02. Litigation. SELLER shall notify PURCHASER promptly of
-------------------------
any actions or proceedings that, to SELLER'S KNOWLEDGE, have been threatened, or
commenced against any of the SUBSIDIARIES, any officer, director or employee (in
his or her capacity as such) or any properties or assets of any of them, that,
if pending or threatened on the date hereof, would be required to be disclosed
on Schedule 3.10 hereto.
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Section 5.03. Additional Financial Information. As soon as
-----------------------------------------------
reasonably practicable after they become available, SELLER shall furnish to
PURCHASER the QUARTERLY CONVENTION STATEMENTS of each of the INSURERS for all
interim quarterly periods ended after December 31, 1996 and at least sixty (60)
days prior to the CLOSING DATE. Said QUARTERLY CONVENTION STATEMENTS will
present the financial position and results of operations of each of the INSURERS
at such dates and for such periods (subject to year-end adjustments consisting
only of normal recurring accruals) in accordance with STATUTORY ACCOUNTING
PRINCIPLES applied on a consistent basis or as expressly set forth in such
QUARTERLY CONVENTION STATEMENTS or as required in a rule or regulation of an
insurance regulatory authority), and the schedules thereto, when considered in
relation to the statutory financial statements included therein, will present
fairly in all material respects the information contained therein.
Section 5.04. Disposition of AFFILIATE Relationships. All service
------------------------------------------------------
agreements and management agreements between each of the SUBSIDIARIES on the one
hand and ANTHEM and/or SELLER on the other hand shall be terminated effective
upon consummation of the CLOSING and all inter-AFFILIATE balances (except
balances among any of the SUBSIDIARIES) shall be terminated by payment on or
before consummation of the CLOSING.
Section 5.05. Notifications by SELLER. SELLER shall promptly notify
--------------------------------------
PURCHASER in writing of any (i) material violation or breach of, or default
under, this AGREEMENT by ANTHEM and/or SELLER, (ii) material inaccuracy or
misrepresentation made by ANTHEM and/or SELLER in this AGREEMENT, and/or (iii)
any condition to be satisfied by SELLER hereunder that cannot reasonably be
expected to be satisfied of which SELLER acquires KNOWLEDGE prior to the CLOSING
DATE. No notification made by SELLER pursuant to this Section 5.05 shall be
deemed to cure any breach of a representation or warranty made in this
AGREEMENT, nor shall any such notification be deemed to constitute or give rise
to a waiver (full or partial) of any condition precedent to PURCHASER'S
obligations under this AGREEMENT or otherwise affect any right of PURCHASER to
pursue breach of warranty or misrepresentation claims against ANTHEM and/or
SELLER.
Section 5.06. REQUIRED APPROVALS; Consents.
-------------------------------------------
(1) ANTHEM and/or SELLER shall (i) take all reasonable steps
necessary or appropriate to obtain, as promptly as possible, all REQUIRED
APPROVALS required of it, (ii) cooperate reasonably, and shall cause each of the
SUBSIDIARIES to cooperate reasonably, with PURCHASER in obtaining all REQUIRED
APPROVALS required of PURCHASER, and (iii) provide such information and
communications to
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governmental and regulatory authorities as they or PURCHASER reasonably request
in connection with obtaining any REQUIRED APPROVAL.
(2) Each of ANTHEM, SELLER, and the SUBSIDIARIES shall use reasonable
efforts to obtain each consent, waiver, and/or approval required under each
material contract to which it is a party in order that neither the execution and
delivery of this AGREEMENT by ANTHEM and SELLER, nor their consummation of the
transactions to be undertaken by them as contemplated thereby, constitutes a
breach or default, or gives rise to any right of termination, cancellation or
acceleration, of any such material contract.
Section 5.07. Hart-Scott-Rodino Filings. Each of ANTHEM and SELLER
----------------------------------------
shall (i) promptly make the filings required of it under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules of the Federal
Trade Commission thereunder (collectively, the "HSR ACT"), (ii) comply at the
earliest practicable date with any request for additional information received
by it from the Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR ACT, (iii) use all reasonable efforts
to assist PURCHASER in making filings required of PURCHASER under the HSR ACT,
and (iv) request early termination of the applicable waiting period under the
HSR ACT.
Section 5.08. Non-Solicitation. Without PURCHASER'S consent, ANTHEM
-------------------------------
and SELLER agree not to solicit any PERSON who is a senior management employee
of any of the SUBSIDIARIES on the date hereof to leave such employment during
the period of four (4) years commencing on the CLOSING DATE; provided, however,
that the foregoing restriction shall not apply to any such employee who is also
an employee of SELLER on the date hereof and to whom comparable employment is
not offered or continued by any of the SUBSIDIARIES during such four-year
period.
Section 5.09. ACQUISITION PROPOSALS. Except as contemplated by this
------------------------------------
AGREEMENT, none of ANTHEM, SELLER, and the SUBSIDIARIES, nor any officer,
director, affiliate, employee, representative or agent of any of them, shall
directly or indirectly solicit, initiate or participate in any way in
discussions or negotiations with, or provide any information or assistance to,
or enter into any agreement with, any PERSON or group of PERSONS concerning an
acquisition of a substantial equity interest in, or in a merger, consolidation,
liquidation, dissolution, disposition of assets (other than in the ordinary
course of business) of any of the SUBSIDIARIES or of all or any part of the
SHARES or of all or any part of the shares of SELLER now or hereafter
authorized, issued or outstanding (each, an "ACQUISITION PROPOSAL"), or assist
or participate in, facilitate or encourage any effort or attempt by any other
PERSON to do or
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seek to do any of the foregoing. SELLER shall promptly communicate to PURCHASER
the terms of any ACQUISITION PROPOSAL that it or any such other PERSON may
receive.
Section 5.10. Instruments. Any monies, checks, drafts, money orders,
--------------------------
postal notes and other instruments received after consummation of the CLOSING by
ANTHEM or SELLER in payment of any amounts due to any of the SUBSIDIARIES shall
forthwith after such receipt be transferred and delivered to PURCHASER, as agent
for the SUBSIDIARIES, by ANTHEM or SELLER, and each such instrument made payable
to ANTHEM or SELLER when so delivered shall bear all endorsements required to
effectuate the transfer thereof to any of the SUBSIDIARIES, as appropriate.
Section 5.11. Transfer of Certain Assets by Seller. On or prior to
----------------------------------------------------
the Closing, in consideration of the payment by the Subsidiaries to the Seller
of an amount equal to the sum of Seller's pension reserves and Seller's FAS 106
liability less the amount of Seller's deferred tax assets associated with such
liabilities, all as of the date of such transfer, Seller shall sell, transfer
and convey unto the Subsidiaries and cause the Subsidiaries to acquire from
Seller all of Seller's right, title and interest in and to the assets set forth
on Schedule 5.11 hereto, free and clear of all claims, liens, security
interests, pledges, hypothecations, restrictions or other encumbrances, and the
Subsidiaries shall assume all of the unsatisfied liabilities of Seller set forth
in Schedule 5.11 hereto.
Section 5.12. Use of Names. ANTHEM specifically agrees that it will
---------------------------
not, either directly or indirectly, use or permit any of its AFFILIATES to use
the names "Shelby," "Affirmative," "Insura" or any name which is confusingly
similar thereto in connection with its business or the insurance business
generally after the consummation of the CLOSING.
Section 5.13. [Deleted].
------------------------
Section 5.14. Pre-Closing Maintenance of Insurance and Reinsurance.
-------------------------------------------------------------------
From the date hereof through the CLOSING DATE, ANTHEM shall cause each of SELLER
and the SUBSIDIARIES to maintain in force (including necessary renewals thereof)
the insurance policies listed on Schedule 3.26 and the reinsurance treaties or
agreements listed on Schedule 3.25, except to the extent that they may be
replaced with materially equivalent policies or agreements appropriate to insure
or reinsure the assets, properties and business of each of the SUBSIDIARIES to
the same extent as currently insured or reinsured, as the case may be; provided,
however, that ANTHEM shall cause each of SELLER and the SUBSIDIARIES to provide
a copy or other confirmation of any such replacement policies or agreements to
the PURCHASER on or prior to the CLOSING DATE.
Section 5.15. Continuation of Certain Insurance. ANTHEM covenants
------------------------------------------------
and agrees to cause each of SELLER and the
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SUBSIDIARIES to complete and execute such applications as may be reasonably
necessary for PURCHASER to arrange for the continuation or replacement of
insurance at PURCHASER's expense for periods after the CLOSING DATE.
Section 5.16. Certain Investments. Any cash flow of the SUBSIDIARIES
----------------------------------
which in the reasonably judgment of the senior management of any of the
SUBSIDIARIES is available for investment prior to the CLOSING DATE, whether from
sales of securities or otherwise, shall, to the extent reinvested, be used to
purchase United States Treasury obligations which mature in thirty (30) days or
less or in commercial paper with a rating of AA or better. Without the consent
of PURCHASER, none of the SUBSIDIARIES will sell any investment security
maturing in more than six (6) months after the proposed date of sale of the
security.
Section 5.17. Preservation of Permits and Services. ANTHEM shall
---------------------------------------------------
cause each of the SUBSIDIARIES to use reasonable efforts (i) to preserve all of
its PERMITS and the services of its present officers, employees, consultants and
agents, except where the loss of its PERMIT or the services of its said
personnel will not have a MATERIAL ADVERSE EFFECT, and (ii) to maintain its
present suppliers and customers and preserve its goodwill.
Section 5.18. Confidential Nature of Information Obtained by the
-----------------------------------------------------------------
ANTHEM and SELLER. ANTHEM and SELLER shall keep confidential and shall not use
- -----------------
in any manner any information or documents obtained from PURCHASER concerning
its assets, liabilities, properties, business and operations, unless (i) readily
ascertainable from public or published information, or trade sources, (ii)
already known or subsequently developed by ANTHEM or SELLER independently of the
transactions contemplated by this AGREEMENT, or (iii) received from a third
party not under any obligation to PURCHASER of which ANTHEM or SELLER has
KNOWLEDGE to keep information confidential.
ARTICLE 6
Covenants of PURCHASER
----------------------
Section 6.01. REQUIRED APPROVALS. PURCHASER shall take all steps
---------------------------------
necessary or appropriate to obtain, as promptly as possible, all REQUIRED
APPROVALS required of it and shall (i) cooperate reasonably with each of ANTHEM,
SELLER, and the SUBSIDIARIES in obtaining all REQUIRED APPROVALS required of any
of them and (ii) provide such information and communications to governmental and
regulatory authorities as they or SELLER reasonably request in connection with
obtaining any REQUIRED APPROVALS required of any party hereto.
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Section 6.02. Hart-Scott-Rodino Filings. PURCHASER shall (i)
----------------------------------------
promptly make the filings required of it under the HSR ACT, (ii) comply at the
earliest practicable date with any request for additional information received
by it from the Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR ACT, (iii) use all reasonable efforts
to assist each of ANTHEM and SELLER in making filings required of it under the
HSR ACT, (iv) pay the filing fees required to be paid in connection with such
filings under the HSR ACT, and (v) request early termination of the applicable
waiting period under the HSR ACT.
Section 6.03. Use of Name and Logo.
-----------------------------------
(1) As soon as is practicable, but in no event later than ninety
(90) days, after consummation of the CLOSING, PURCHASER shall cause ACIC to take
all necessary corporate action and make all necessary regulatory applications to
change its corporate name to a name that does not include the name "Anthem," or
any word or expression similar thereto or derivative thereof, or begin with the
letter "A," and shall diligently pursue the approval of such applications. After
approval of each such name change, PURCHASER shall promptly deliver to ANTHEM a
copy of the amendment to the articles or certificate of incorporation of ACIC,
certified by the Secretary of State of Ohio, reflecting such corporate name
change.
(2) PURCHASER will use its best efforts to cause each of the
SUBSIDIARIES to cease using, as soon as is practicable following consummation of
the CLOSING, any ANTHEM MARK in any written or other communication; and, in any
event, PURCHASER will cause each of the SUBSIDIARIES to cease using, on or
before the later of (i) the 270th day next following the consummation of the
CLOSING, or (ii) the date on which all necessary regulatory approvals
contemplated by paragraph (1) of this Section 6.03 have been obtained, any
ANTHEM MARK and any written or other communication that contains any ANTHEM
MARK.
Section 6.04. Indemnification. PURCHASER agrees that all rights to
------------------------------
indemnification now existing in favor of any employee, agent, director or
officer of any of the SUBSIDIARIES, as provided in the articles or certificate
of incorporation, by-laws or regulations (or comparable document) of any of
them, shall survive the CLOSING.
Section 6.05. Continued Access by SELLER. At any time on or after
-----------------------------------------
the CLOSING DATE and for a period of five (5) years thereafter or, in connection
with the preparation, amendment or audit of one or more RETURNS of any of
ANTHEM, SELLER, and the SUBSIDIARIES, until each relevant tax year is closed by
applicable statutes of limitation, PURCHASER shall allow and enable each of
ANTHEM and SELLER, during regular business hours upon reasonable notice to
PURCHASER, through
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employees and representatives of ANTHEM or its AFFILIATE, to examine and make
copies of documents in the possession or under the control of any of PURCHASER
and the SUBSIDIARIES pertaining to business conducted by any of the SUBSIDIARIES
prior to the consummation of the CLOSING, in order to facilitate the
preparation, amendment or audit of (i) RETURNS of any of ANTHEM, SELLER, and the
SUBSIDIARIES; (ii) interim consolidated financial statements therefor covering
each fiscal quarter of each of ANTHEM and SELLER through the consummation of the
CLOSING; (iii) CONVENTION STATEMENTs of each of the INSURERS; and (iv) QUARTERLY
CONVENTION STATEMENTS of each of the INSURERS covering each fiscal quarter of
each through the consummation of the CLOSING. Any information obtained pursuant
to this Section 6.05 by SELLER shall be kept confidential except as may
otherwise be necessary in connection with the actions described herein and/or as
reflected or disclosed in said consolidated financial statements and/or said
QUARTERLY CONVENTION STATEMENTS. All reasonable out-of-pocket costs and expenses
incurred by PURCHASER in complying with this Section 6.05 shall be borne by
ANTHEM, but such costs and expenses shall be limited to those reasonable amounts
paid to outside parties that would not otherwise be paid but for the request of
ANTHEM or SELLER.
Section 6.06. Conduct of Business. From the date hereof through the
----------------------------------
consummation of the CLOSING, PURCHASER shall use reasonable efforts to conduct
its affairs in such a manner that it will be able (i) to perform its obligations
hereunder, (ii) to consummate the transactions to be undertaken by it as
contemplated hereby, and (iii) to satisfy all conditions precedent to such
performance and consummation to be satisfied by it hereunder.
Section 6.07. Notifications by PURCHASER. PURCHASER shall promptly
-----------------------------------------
notify ANTHEM and SELLER in writing of any (i) material violation or breach of,
or default under, this AGREEMENT by PURCHASER, (ii) material inaccuracy or
misrepresentation made by PURCHASER in this AGREEMENT, and/or (iii) any
condition to be satisfied by PURCHASER hereunder that cannot reasonably be
expected to be satisfied of which PURCHASER acquires KNOWLEDGE prior to the
CLOSING DATE. No notification made by PURCHASER pursuant to this Section 6.07
shall be deemed to cure any breach of a representation or warranty made in this
AGREEMENT, nor shall any such notification be deemed to constitute or give rise
to a waiver (full or partial) of any condition precedent to any obligation of
ANTHEM or SELLER under this AGREEMENT or otherwise affect any right of ANTHEM or
SELLER to pursue breach of warranty or misrepresentation claims against
PURCHASER.
Section 6.08. Non-Solicitation. In the event of termination of this
-------------------------------
AGREEMENT in accordance with its terms or upon a breach or violation of, or
default under, this AGREEMENT by PURCHASER, for a period of four (4) years from
the date
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<PAGE>
hereof, PURCHASER agrees not to solicit, contract with or attempt to contract,
directly or indirectly, with any PERSON who is an officer or employee of any of
ANTHEM, SELLER, and the SUBSIDIARIES at the date hereof.
Section 6.09. Instruments. If any monies, checks, drafts, money
--------------------------
orders, postal notes and other instruments are received after the CLOSING by any
of PURCHASER and the SUBSIDIARIES in payment of any amounts due to ANTHEM or
SELLER, PURCHASER shall, forthwith after such receipt, cause the same (i) to be
transferred and delivered to ANTHEM, and (ii) when so delivered, to bear all
endorsements required to effectuate the transfer thereof to ANTHEM.
ARTICLE 7
Joint Covenants of SELLER and PURCHASER
---------------------------------------
Section 7.01. Corporate Examinations and Investigations.
---------------------------------------------------------
(1) PURCHASER shall be entitled, through its employees and
representatives, to make such investigation of the assets, liabilities,
properties, business and operations of each of the SUBSIDIARIES, and such
examination of its books, records and financial condition, as PURCHASER elects.
Any such investigation and examination shall be conducted at reasonable times
and under reasonable circumstances so as not to interfere with the smooth
operation of any of ANTHEM, SELLER, and the SUBSIDIARIES, each of which ANTHEM
shall cause to cooperate fully therein. In order that PURCHASER might have full
opportunity to make such business, accounting and legal review, examination or
investigation as it may wish of the business and affairs of each of the
SUBSIDIARIES, ANTHEM shall cause each of the SUBSIDIARIES to furnish the
representatives of PURCHASER with access to all such information and documents
concerning its affairs as such representatives may reasonably request and shall
cause its officers, employees, consultants, agents, accountants and attorneys to
cooperate fully with such representatives in connection with such review and
examination. PURCHASER shall promptly notify SELLER of any event, condition or
circumstance discovered during its investigation of any of the SUBSIDIARIES that
could constitute a breach or default under this AGREEMENT by ANTHEM or SELLER.
No notification made by PURCHASER pursuant to this Section 7.01 shall be deemed
to cure any breach of a representation or warranty made in this AGREEMENT, nor
shall any such notification be deemed to constitute to give rise to a waiver
(full or partial) of any condition precedent to PURCHASER's obligations under
this AGREEMENT or otherwise affect any right of PURCHASER to pursue breach of
warranty or misrepresentation claims against ANTHEM or SELLER.
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<PAGE>
(2) PURCHASER shall, and shall cause each of its directors,
officers, employees, agents and representatives (collectively, "PURCHASER'S
REPRESENTATIVES") to, use all information relating to any of ANTHEM, SELLER, and
the SUBSIDIARIES acquired by any of them pursuant to the provisions of this
AGREEMENT or in the course of negotiations with ANTHEM or SELLER or examination
of any of the SELLER and the SUBSIDIARIES only in connection with the
transactions contemplated hereby and shall cause all information obtained by any
of them pursuant to this AGREEMENT and such negotiations and examinations, to
the extent not publicly available, to be kept confidential. In the event of
termination of this AGREEMENT, PURCHASER will cause to be delivered to SELLER
the original and all copies of all documents, work papers and other material
obtained by any of PURCHASER and PURCHASER'S REPRESENTATIVES from any of ANTHEM,
SELLER, and the SUBSIDIARIES, without retaining (or permitting or suffering
retention by any of PURCHASER'S REPRESENTATIVES of) copies thereof, whether so
obtained before or after the date hereof, and PURCHASER shall not, and shall not
permit or suffer PURCHASER'S REPRESENTATIVES to, use or disclose, directly or
indirectly, any information relating to any of ANTHEM, SELLER, and the
SUBSIDIARIES acquired by any of them pursuant to the provisions of this
AGREEMENT or in the course of negotiations with ANTHEM or SELLER or examination
of any of the SUBSIDIARIES, and will cause all such information to be kept
confidential. All information relating to any of ANTHEM, SELLER, and the
SUBSIDIARIES acquired by PURCHASER and/or PURCHASER'S REPRESENTATIVES pursuant
to the provisions of this AGREEMENT or in the course of negotiations with or
examination of any of ANTHEM, SELLER, and the SUBSIDIARIES shall be deemed to be
confidential information under and shall be subject the terms and provisions of
that certain letter agreement made as of January 15, 1997 between PURCHASER and
Credit Suisse First Boston on behalf of ANTHEM (the "CONFIDENTIALITY
AGREEMENT").
Section 7.02. Expenses. Except as otherwise expressly provided
-----------------------
herein, each party to this AGREEMENT shall bear its own expenses incurred in
connection with the preparation, execution and performance of this AGREEMENT and
the transactions contemplated hereby, including, without limitation, all fees
and expenses of agents, representatives, legal counsel, actuaries and
accountants, whether or not the transactions contemplated by this AGREEMENT
shall be consummated.
Section 7.03. Further Assurances. Each of the parties to this
---------------------------------
AGREEMENT shall execute such documents and other papers and take such further
actions as may reasonably be required or desirable to carry out the provisions
hereof and to consummate the transactions contemplated hereby.
Section 7.04. Public Announcements. Except as may be required by
-----------------------------------
law, no party to this AGREEMENT shall make,
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<PAGE>
encourage or permit disclosure of any kind or form in respect of this AGREEMENT
or the transactions contemplated hereby unless ANTHEM and PURCHASER mutually
agree in advance on the form, timing and contents of any such disclosure,
whether to the financial community, a governmental agency, the public generally
or otherwise.
Section 7.05. Certain Benefit Programs. ANTHEM and PURCHASER agree
---------------------------------------
that, effective upon consummation of the CLOSING:
(1) Except to the extent required pursuant to the applicable
provisions of the PLANS, the CODE and ERISA, participation in the PLANS by the
employees and former employees (and eligible dependents of such employees and
former employees) of each of the SUBSIDIARIES shall terminate.
(2) PURCHASER shall cause each employee of each of the
SUBSIDIARIES (excluding any former employees) to be provided with employee
benefits under benefit plans which are similar to the benefits provided to
employees of the PURCHASER generally, such benefits to be determined in
accordance with all applicable laws in effect in the respective jurisdictions
and subject to the terms and conditions of the various plans as may be in effect
from time to time.
(3) ANTHEM shall assume all liabilities under any deferred
compensation program, bonus program and retiree health program which have
accrued as of the CLOSING DATE with respect to each employee or former employee
of each of the SUBSIDIARIES.
Section 7.06 Managed Care Workers' Compensation Business. Each of
---------------------------------------------------------
PURCHASER and SELLER shall negotiate with the other in good faith, and shall
otherwise use all reasonable efforts to enter into, one or more agreements in
form and substance reasonably acceptable to each of them and pursuant to which
(i) PURCHASER shall permit ANTHEM and/or its AFFILIATE to continue to write
managed care workers' compensation business through one or more of the
SUBSIDIARIES for a period of two (2) years next following the consummation of
the CLOSING, (ii) ANTHEM shall maintain full responsibility for all aspects of
such business, both financial and operational, including the payment of all
CLAIMS, losses and loss adjustment expenses, with the result that PURCHASER
shall have no responsibility, liability or obligation for such business, (iii)
ANTHEM shall indemnify PURCHASER and hold it harmless from and against any and
all costs and expenses relating in any way to such business, and (iv) ANTHEM
shall have the irrevocable right, power and authority to cause one or more of
the SUBSIDIARIES to sell, by reinsurance or otherwise, all or any part of such
business and to cause the proceeds to such sale to be paid to and retained by
ANTHEM and/or its AFFILIATE, all at ANTHEM'S expense.
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Section 7.07. Certain Insurance . Following consummation of the
--------------------------------
CLOSING, ANTHEM may elect to purchase insurance to insure its indemnification
risk arising under Section 10.01(i) and, in such event, PURCHASER shall, and
shall cause each of the SUBSIDIARIES to, (i) afford to ANTHEM reasonable access,
during regular business hours and upon reasonable notice, to its books and
records and the cooperation of its employees, and (ii) allow ANTHEM to examine
and make copies of documents in its possession or under its control, all as
reasonably necessary in order to facilitate the purchase of such insurance by
ANTHEM.
Section 7.08. Further Assurances. Following the consummation of the
---------------------------------
CLOSING, each of the parties hereto shall execute such documents and other
papers, and shall take such further actions, as may be reasonably requested by
the other of them to assure and/or confirm that (i) all of the assets identified
in Schedule 5.11 have been transferred to and acquired by one or more of the
SUBSIDIARIES and (ii) all of the liabilities identified in Schedule 5.11 have
been assumed by one or more of the SUBSIDIARIES.
ARTICLE 8
Conditions Precedent to CLOSING
-------------------------------
Section 8.01. Conditions to Obligations of All Parties. The
-------------------------------------------------------
respective obligations of the parties to this AGREEMENT to consummate the
transactions contemplated hereby are subject to the satisfaction, at or prior to
the CLOSING, of each of the following conditions precedent:
(1) No Injunction, etc.. No party to this AGREEMENT shall be
-------------------
subject to any order, decree or injunction of a court of competent jurisdiction
that prevents or delays consummation of any of the transactions contemplated by
this AGREEMENT. No request for voluntary postponement of the CLOSING shall have
been received by any party to this AGREEMENT from any federal, state or local
governmental agency or department, nor shall any action, suit or proceeding
seeking to enjoin or restrain the CLOSING have been instituted or threatened by
any federal, state or local governmental agency or department. No court or
governmental or regulatory authority shall have taken any action prohibiting or
making illegal on the CLOSING DATE the transactions contemplated by this
AGREEMENT.
(2) HSR ACT Satisfied. The applicable provisions of the HSR ACT
-----------------
shall have been fully satisfied and any and all applicable waiting periods
thereunder shall have expired or otherwise terminated.
(3) REQUIRED APPROVALS. All REQUIRED APPROVALS shall have been
------------------
obtained and be in full force and effect, without conditions or limitations that
unreasonably
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restrict the ability of the parties hereto to perform this AGREEMENT, and
PURCHASER and SELLER shall have been furnished with appropriate evidence,
reasonably satisfactory to them and their respective counsel, of the granting of
such consents and approvals.
(4) Managed Care Workers' Compensation Business. PURCHASER and
--------------------------------------------
SELLER shall have effected each of the agreements contemplated by Section 7.06.
Section 8.02. Additional Conditions to Obligations of PURCHASER. The
----------------------------------------------------------------
obligations of PURCHASER to consummate the transactions contemplated by this
AGREEMENT are subject to the satisfaction, at or prior to the CLOSING, of each
of the following conditions precedent, any one or more of which may be waived by
PURCHASER:
(1) Performance. Each of ANTHEM and SELLER shall, in all
-----------
material respects, have complied with, performed and satisfied the covenants and
conditions required by this AGREEMENT to be complied with, performed and
satisfied by it at or prior to the CLOSING.
(2) ANTHEM'S AND SELLER'S Warranties True. The representations
-------------------------------------
and warranties of ANTHEM and SELLER set forth in this AGREEMENT shall be true
and correct on and as of the CLOSING DATE, except for such inaccuracies or
deficiencies that would not have a MATERIAL ADVERSE EFFECT.
(3) Deliveries Tendered by ANTHEM and SELLER. ANTHEM and SELLER
----------------------------------------
shall have tendered the deliveries required of it pursuant to Section 2.04 and
elsewhere herein.
(4) Transfer Taxes. SELLER shall have paid, or caused to be
--------------
paid, all stock transfer and other taxes required to be paid in connection with
the sale and delivery to the PURCHASER of the SHARES, and shall have caused all
appropriate stock transfer tax stamps to be affixed to the certificate or
certificates representing the SHARES so sold and delivered.
Section 8.03. Additional Conditions to the Obligations of ANTHEM or
---------------------------------------------------------------------
SELLER. The obligation of ANTHEM or SELLER to consummate the transactions
- ------
contemplated by this AGREEMENT is subject to the satisfaction, at or prior to
the CLOSING, of each of the following conditions precedent, any one or more of
which may be waived by ANTHEM:
(1) Performance. PURCHASER shall, in all material respects,
-----------
have complied with, performed and satisfied the covenants and conditions
required by this AGREEMENT to be complied with, performed and satisfied by it at
or prior to the CLOSING.
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(2) PURCHASER'S Warranties True. The representations and
---------------------------
warranties of PURCHASER set forth in this AGREEMENT shall be true and correct on
and as of the CLOSING DATE, except for such inaccuracies or deficiencies that
would not have a MATERIAL ADVERSE EFFECT.
(3) Deliveries Tendered by PURCHASER. PURCHASER shall have
--------------------------------
tendered the deliveries required of it pursuant to Section 2.05 and elsewhere
herein.
ARTICLE 9
Survival of Representations and Warranties
------------------------------------------
Section 9.01. Survival. The representations and warranties made by
-----------------------
the respective parties to this AGREEMENT shall survive the CLOSING and shall
expire on the second anniversary of the CLOSING DATE, except for (i) those of
ANTHEM and SELLER contained in Sections 3.04, 3.11 and 3.12, which shall not
expire, (ii) those of PURCHASER set forth in Sections 4.06 and 4.07, which shall
not expire, and those of ANTHEM and SELLER set forth in Section 11.01, which
shall expire upon the expiration of applicable statutes of limitation (giving
effect to any waiver or extension thereof).
ARTICLE 10
Indemnification
---------------
Section 10.01. Indemnification by ANTHEM. After consummation of the
-----------------------------------------
CLOSING, subject to the provisions of Section 10.04, ANTHEM shall indemnify
PURCHASER, and hold it harmless, from and against (i) any ADVERSE LOSS RESERVE
DEVELOPMENT in excess of $10,000,000 and (ii) every CLAIM incurred by or
asserted against any of PURCHASER and the SUBSIDIARIES that arises out of, or
results from a condition that would constitute, any breach of or default under
any warranty, agreement, covenant or other obligation of ANTHEM or SELLER under
this AGREEMENT. Notwithstanding the provisions of Section 10.04, ANTHEM shall
indemnify PURCHASER and hold it harmless against any and all CLAIMS made against
PURCHASER arising out of the NOTES, which indemnification shall not be subject
to any limitation.
Section 10.02. Indemnification by PURCHASER. After consummation of
--------------------------------------------
the CLOSING, subject to the provisions of Section 10.04, PURCHASER shall
indemnify each of ANTHEM and SELLER, and hold it harmless, from and against
every CLAIM incurred by or asserted against ANTHEM or SELLER that arises out of,
or results from a condition that would constitute, any breach of or default
under any warranty, agreement, covenant or other obligation of PURCHASER
contained in this AGREEMENT.
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Section 10.03. Third Party CLAIMS. If any CLAIM for which INDEMNITEE
----------------------------------
would be entitled to indemnification under this AGREEMENT arises out of a claim
or liability asserted against or sought to be collected from INDEMNITEE by a
third party, INDEMNITEE shall promptly give to INDEMNITOR a CLAIM NOTICE in
respect of such CLAIM. INDEMNITOR shall have thirty (30) BUSINESS DAYS
following the giving of a CLAIM NOTICE to it to notify INDEMNITEE whether or not
INDEMNITOR elects to defend INDEMNITEE in respect of such CLAIM; and:
(1) if INDEMNITOR so elects to defend INDEMNITEE in respect of
such CLAIM, INDEMNITOR shall either settle or, by appropriate proceedings,
defend such claim; and INDEMNITEE shall cooperate as reasonably requested by
INDEMNITOR in connection with such settlement or defense, to the extent not
involving expense to INDEMNITEE. INDEMNITOR shall (i) have the right to control
the defense or settlement of the CLAIM involved, (ii) pay all costs and expenses
of such proceedings incurred by it, and (iii) pay the amount of any resulting
settlement, judgment or award if it shall be determined that such CLAIM is
subject to indemnification by INDEMNITOR under this AGREEMENT; provided,
however, that INDEMNITOR shall effect no settlement of such CLAIM if such
settlement would affect the liability of INDEMNITEE unless INDEMNITEE shall
consent thereto in writing, which consent shall not be unreasonably delayed or
withheld. If INDEMNITEE desires to participate in, without controlling, any such
defense or settlement by INDEMNITOR, it may do so at INDEMNITEE's sole cost and
expense.
(2) if INDEMNITOR shall not so elect to defend INDEMNITEE in
respect of such CLAIM, INDEMNITEE shall either settle or, by appropriate
proceedings, defend such CLAIM, and INDEMNITOR shall cooperate as reasonably
requested by INDEMNITEE in connection with such settlement or defense.
INDEMNITEE shall (i) have the right to control the defense or settlement of the
CLAIM involved and (ii) be indemnified by INDEMNITOR for its reasonable costs
and expenses of such defense, and for the amount of any resulting settlement,
judgment or award, if it shall be determined that such CLAIM is subject to
indemnification by INDEMNITOR under this AGREEMENT; provided, however, that
INDEMNITEE shall effect no settlement of such CLAIM if such settlement would
affect the liability of INDEMNITOR unless INDEMNITOR shall consent to such
settlement in writing, which consent shall not be unreasonably delayed or
withheld. If INDEMNITOR desires to participate in, without controlling, any such
defense or settlement by INDEMNITEE, it may do so at its sole cost and expense.
Section 10.04. Limitations. Anything contained in this Article 10 or
---------------------------
elsewhere to the contrary notwithstanding, PURCHASER shall not be entitled to
indemnification under Section 10.01 or otherwise in respect of this AGREEMENT:
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<PAGE>
(1) for any CLAIM in respect of which PURCHASER shall not have
given a CLAIM NOTICE to ANTHEM on or before the 548th day next following the
CLOSING DATE, other than a CLAIM arising out of a breach or inaccuracy of any
representation and warranty set forth in any of Sections 3.04, 3.11, 3.12, and
11.01;
(2) in respect of any breach of representation, warranty or
covenant of ANTHEM or SELLER hereunder (other than the breach of
representations, warranties or covenants set forth in Sections 3.12 and 11.01 of
this AGREEMENT, for which ANTHEM shall be completely liable) or any other act or
omission of ANTHEM or SELLER not resulting in CLAIMS exceeding $2,000,000 in the
aggregate. PURCHASER shall be entitled to indemnification hereunder for the full
amount of all CLAIMS in excess of $2,000,000, subject to the limitation set
forth in Section 10.04(3) herein.
(3) that exceeds the total, aggregate amount of $30,000,000.
Section 10.05. Closing Loss Reserve Reconciliation. Any
----------------------------------------------------
deficiencies in the CLOSING LOSS RESERVES shall be calculated and paid as
follows:
(1) As soon as reasonably practicable after it becomes
available, PURCHASER shall deliver to SELLER a statement setting forth the
CLOSING LOSS RESERVES recalculated as of the end of the calendar quarter ending
immediately prior to the second anniversary of the CLOSING DATE (the "ADJUSTED
CLOSING LOSS RESERVES"). The ADJUSTED CLOSING LOSS RESERVES shall equal the sum
of (i) all payments made subsequent to the consummation of the CLOSING for
losses and loss adjustment expenses, net of all recoveries paid or payable to
any of the INSURERS in respect thereof, with respect to all liabilities and
obligations of the INSURERS as of the CLOSING DATE under any and all insurance
and reinsurance contracts of any of the INSURERS and (ii) the amount of LOSS
RESERVES, net of reinsurance recoverables (other than intercompany reinsurance),
as determined as of the end of the most recently completed calendar quarter,
necessary to make good and sufficient provision for the settlement of all
liabilities and obligations of the INSURERS as of the CLOSING DATE under any and
all insurance and reinsurance contracts of any of the INSURERS. PURCHASER shall
engage the actuarial firm at the time engaged by or on behalf of AFFILIATES of
PURCHASER that are property and casualty insurers, to certify their reserves, to
perform an actuarial review and certification of the ADJUSTED CLOSING LOSS
RESERVES, which review shall be conducted in accordance with generally accepted
actuarial standards and principles applied on a basis consistent with those
applied in establishing the CLOSING LOSS RESERVES. Such certification shall be
delivered to SELLER along with PURCHASER'S statement of
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<PAGE>
the ADJUSTED CLOSING LOSS RESERVES. The parties acknowledge and agree that it is
their intent that, in determining any ADVERSE LOSS RESERVE DEVELOPMENT, the LOSS
RESERVES reflected in each of the ADJUSTED CLOSING LOSS RESERVES and the CLOSING
LOSS RESERVES shall be determined in accordance with the same actuarial
standards and principles and otherwise on the same basis and shall be net of
reinsurance recoverables (other than intercompany reinsurance), notwithstanding
the fact that the LOSS RESERVES reflected in any financial statement referred to
herein may be presented therein on a different basis.
(2) After consummation of the CLOSING, PURCHASER shall cause
each of the INSURERS to adjust, settle and pay all of its obligations and
liabilities as of the CLOSING DATE under any and all of its insurance and
reinsurance contracts pursuant to appropriate standards and principles that are
(i) generally accepted in the property and casualty insurance industry and (ii)
applied by each of the INSURERS consistently during all periods following the
consummation of the CLOSING.
(3) If SELLER disputes PURCHASER'S determination of the ADJUSTED
CLOSING LOSS RESERVES, and if PURCHASER and SELLER are unable to resolve such
dispute within forty-five (45) days after such redetermination, they shall
jointly engage the INDEPENDENT ARBITER to determine such disputed item or items.
The INDEPENDENT ARBITER shall be asked to render its determination as to the
amount or treatment of the disputed item or items within ninety (90) days after
being retained. SELLER and PURCHASER shall each pay one-half of the cost of
hiring the INDEPENDENT ARBITER. The determination of the INDEPENDENT ARBITER
shall be final and binding on both parties.
(4) Within sixty (60) days following PURCHASER'S delivery to
SELLER of its statement setting forth the ADJUSTED CLOSING LOSS RESERVES, or
within thirty (30) days following the INDEPENDENT ARBITER'S determination
rendered under subsection (2) above, whichever is later, SELLER shall pay
PURCHASER the amount, if any, by which the ADVERSE LOSS RESERVE DEVELOPMENT
exceeds $10,000,000, subject to the limitations set forth in Section 10.04(3).
(5) The indemnities set forth in this Section 10.05 shall be the
sole remedy of PURCHASER with respect to LOSS RESERVES under this AGREEMENT.
ARTICLE 11
Tax Matters
-----------
Section 11.01. Representations and Warranties. Each of ANTHEM and
----------------------------------------------
SELLER represents and warrants to PURCHASER that, except as disclosed in
reasonable detail in SELLER'S Disclosure
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Letter included as Schedule 3 or elsewhere herein, or except as previously
disclosed to PURCHASER in writing, as of the date hereof:
(1) ANTHEM is the "common parent" of an "affiliated group" of
corporations (as those terms are used in Section 1504(a) of the CODE and the
Treasury Regulations promulgated under Section 1502 of the CODE) that includes
SELLER and the SUBSIDIARIES. ANTHEM, SELLER, and the SUBSIDIARIES are eligible
to file consolidated federal income tax returns for all taxable periods ending
on or before the date hereof for which the applicable statute of limitations for
the assessment of a federal income tax against any of the SUBSIDIARIES has not
lapsed.
(2) Each of ANTHEM, SELLER, and the SUBSIDIARIES has timely
filed with the appropriate taxing authorities all RETURNS (including, without
limitation, information returns and other material information) required to be
filed through the date hereof); the information set forth in said RETURNS is
complete and accurate in all material respects; and except as specified in
Schedule 11.01(2), none of ANTHEM, SELLER, and the SUBSIDIARIES has requested
any extension of time within which to file any RETURNS.
(3) All TAXES in respect of periods beginning before the date
hereof have been paid, or an adequate reserve has been established therefor, and
none of the SUBSIDIARIES has any liability for TAXES in excess of the amounts so
paid and reserves so established.
(4) Except as set forth in Schedule 11.01(4), no material
deficiencies for TAXES have been claimed, proposed or assessed by any taxing or
other governmental authority. Except as set forth in Schedule 11.01(4), there
are no pending or, to SELLER'S KNOWLEDGE, threatened audits, investigations or
claims for or relating to any material liability in respect of TAXES, and there
are no matters under discussion with any governmental authorities with respect
to TAXES that in the reasonable judgment of any of ANTHEM, SELLER, and the
SUBSIDIARIES is likely to result in a material additional amount of TAXES.
Audits of federal, state and local RETURNS by the relevant taxing authorities
have been completed for each period identified in Schedule 11.01(4) and, except
as set forth in such Schedule, none of ANTHEM, SELLER, the SUBSIDIARIES has been
notified that any taxing authority intends to audit a RETURN for any other
period. Except as set forth in Schedule 11.01(4), no extension of a statute of
limitations relating to TAXES is in effect with respect to any of ANTHEM,
SELLER, and the SUBSIDIARIES.
(5) Each of the SUBSIDIARIES has withheld from its employees,
customers, and other payees (and timely paid to
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the appropriate governmental authority) all amounts required by the tax
withholding provisions of applicable federal, state, local, and foreign laws
(including, without limitation, income, Social Security, and employment tax
withholding for all types of compensation and withholding or payments to non-
United States PERSONS) in respect of TAXES for all taxable periods through the
date hereof.
(6) Schedule 11.01(6) sets forth, for each taxable period
beginning before the date hereof for which the applicable statute of limitations
for the assessment of an income or franchise tax against any of the SUBSIDIARIES
has not lapsed, (i) all jurisdictions in which any of the SUBSIDIARIES has filed
an income or franchise tax return and (ii) all consolidated, combined, unitary
and group income or franchise tax returns in which any of the SUBSIDIARIES has
been included. To SELLER'S KNOWLEDGE, no other jurisdiction has claimed in
writing that any of the and the SUBSIDIARIES is required to file an income or
franchise tax return in such jurisdiction.
(7) Except as provided on Schedule 11.01(7), no power of
attorney has been granted to any PERSON with respect to any of the SUBSIDIARIES
relating to any TAX for any taxable period.
(8) Except for the tax sharing agreements identified in Schedule
11.01(8), there is no contract, agreement, or intercompany account system under
which any of the SUBSIDIARIES has, or may at any time in the future have, an
obligation to assume, share, or contribute to the payment of any portion of a
TAX (or any amount calculated with reference to any portion of a TAX) determined
on a consolidated, combined, unitary or group basis with respect to any group of
corporations of which any of the SUBSIDIARIES is or was a member. One of said
tax sharing agreements is dated February 24, 1992 and applies to the
SUBSIDIARIES only in respect of the consolidated federal income tax (the
"FEDERAL TAX SHARING AGREEMENT"), and one of said tax sharing agreements applies
to the SUBSIDIARIES only in respect of the consolidated Indiana income tax (the
"INDIANA TAX SHARING AGREEMENT").
(9) Except as set forth in Schedule 11.01(9), neither the
acquisition of the SUBSIDIARIES by PURCHASER nor any other transaction
contemplated by this AGREEMENT will cause any payment to be made by or on behalf
of any of the SUBSIDIARIES to be non-deductible, in whole or in part, for
federal income tax purposes by reason of Section 280(G) of the CODE.
(10) Neither ANTHEM nor SELLER is a "foreign person" as defined
in Section 1445(f)(3) of the CODE, and no TAX is required to be withheld
pursuant to Section 1445 of the CODE as a result of any transactions
contemplated by this AGREEMENT.
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(11) To SELLER'S KNOWLEDGE, except as set forth in Schedule
11.01(11), for federal income tax purposes, none of the SUBSIDIARIES is subject
to any joint venture, partnership or other arrangement or contract which is
treated as a partnership.
(12) No asset of any of the SUBSIDIARIES is property which is
required to be treated as being owned by any other PERSON pursuant to the so-
called "safe harbor lease" provisions of Section 168(f)(8) of the Internal
Revenue CODE of 1954, as amended, and in effect before the enactment of the Tax
Reform Act of 1986, nor is any such asset "tax exempt use property" within the
meaning of Section 168(h) of the CODE.
(13) None of the SUBSIDIARIES has filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the CODE (or any
corresponding provision of state, local or foreign income tax law) or agreed to
have Section 341(f)(2) of the CODE (or any corresponding provision of state,
local or foreign income tax law) apply to any disposition of any asset owned by
it.
(14) None of the SUBSIDIARIES has made or will make a deemed
dividend election under Treasury Regulations (S)1.1502-32(f)(2) or a consent
dividend election under Section 565 of the CODE.
(15) None of the SUBSIDIARIES has agreed to make, or is required
to make, any adjustment under Section 481(a) of the CODE by reason of a change
in accounting method or otherwise.
(16) All material elections with respect to TAXES affecting any
of the SUBSIDIARIES as of the date hereof are set forth in Schedule 11.01(16).
Section 11.02. ANTHEM Indemnity. After consummation of the CLOSING,
--------------------------------
subject to the provisions of Article Ten and without affecting the generality
thereof, ANTHEM shall indemnify each of PURCHASER and the SUBSIDIARIES, and hold
it harmless, from and against all TAXES (i) with respect to all taxable periods
ending on or prior to the CLOSING DATE, (ii) with respect to any taxable period
beginning before the CLOSING DATE and ending after the CLOSING DATE, but only
with respect to the portion of such period up to and including the CLOSING DATE
("PRE-CLOSING PARTIAL PERIOD"), or (iii) payable as a result of a material
breach of any representation or warranty set forth in Section 11.01.
Notwithstanding the foregoing and/or anything to the contrary elsewhere herein,
ANTHEM shall not be required to indemnify any of PURCHASER and the SUBSIDIARIES
for any TAX (x) to the extent of the reserves set forth on the CLOSING BALANCE
SHEET, or (y) payable as a result of any events occurring on the CLOSING DATE,
but after the consummation of the CLOSING, that are outside the ordinary course
of business. ANTHEM shall be
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entitled to any net refunds of TAXES (including interest thereon) with respect
to the periods described in clauses (i) and (ii) above, except to the extent
such refund arises as a result of a carryback of a loss or other tax benefit
from a period beginning after the CLOSING DATE.
Section 11.03. PURCHASER Indemnity. After consummation of the
-----------------------------------
CLOSING, subject to the provisions of Article Ten and without affecting the
generality thereof, PURCHASER shall indemnify each of ANTHEM and SELLER, and
hold it harmless, from and against all TAXES (i) with respect to all taxable
periods beginning after the CLOSING DATE, (ii) with respect to any taxable
period beginning before the CLOSING DATE and ending after the CLOSING DATE, but
only with respect to the portion of such period beginning the day after the
CLOSING DATE ("POST-CLOSING PARTIAL PERIOD"), or (iii) payable as a result of
any events occurring on the CLOSING DATE, but after consummation of the CLOSING,
which are outside the ordinary course of business. PURCHASER shall be entitled
to all refunds of TAXES with respect to the periods described in clauses (i) and
(ii) above.
Section 11.04. Effect of Carryovers and Carrybacks. For purposes of
---------------------------------------------------
this Article 11, TAX or TAXES shall include the amount of TAXES that would have
been paid but for the application of any credit or net operating or capital loss
deduction attributable to periods beginning after the CLOSING DATE, or to any
POST-CLOSING PARTIAL PERIOD, but shall not include amounts that would have been
paid but for the application of any credit or net operating or capital loss
deduction attributable to periods beginning on or prior to the CLOSING DATE or
to any PRE-CLOSING PARTIAL PERIOD.
Section 11.05. Payment for Tax Benefits Realized in Connection with
--------------------------------------------------------------------
Indemnity by ANTHEM or SELLER. If either ANTHEM or SELLER is required to make
- -----------------------------
an additional payment (either directly to a governmental authority as a TAX or
to PURCHASER as an indemnity payment under Section 11.02) and, in connection
with such payment, any of PURCHASER and the SUBSIDIARIES obtains a deduction or
credit, PURCHASER shall pay to ANTHEM an amount equal to the actual tax savings
produced by such deduction or credit. The amount of any such tax savings for
any period shall be the amount of the reduction in TAXES reflected on any
consolidated federal income tax return or any foreign, state or local RETURN
(net of any resulting increases in TAXES reflected on any other such RETURN) for
such period as compared to the TAXES that would have been reflected on such
RETURN in the absence of such deduction or credit. Any deduction or credit not
resulting in an actual tax savings for the taxable period for which it relates
or for any earlier period shall be carried forward to succeeding taxable years
until used to the extent permitted by law. All payments pursuant to this
Section 11.05 shall be made within 30 days after the filing of the applicable
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RETURN for the period in which such deduction or credit results in a reduction
in the TAXES paid by the entity receiving such deduction or credit. If PURCHASER
makes a payment pursuant to this Section 11.05 and it is later determined that
PURCHASER did not receive the actual tax savings (or portion thereof) relating
to such payment (including non-receipt of such tax benefit as a result of the
absorption of other losses or tax benefits incurred by any of PURCHASER and the
SUBSIDIARIES), ANTHEM shall promptly refund such payment (or such allocable
portion thereof) with interest (at the prevailing prime rate) to PURCHASER.
Section 11.06. Allocation Between Partial Periods. Any TAXES for a
--------------------------------------------------
period including a PRE-CLOSING PARTIAL PERIOD and a POST-CLOSING PARTIAL PERIOD
shall be apportioned between such PRE-CLOSING PARTIAL PERIOD and such POST-
CLOSING PARTIAL PERIOD based, in the case of real and personal property taxes,
on a per diem basis and, in the case of other TAXES, on the actual activities,
taxable income or taxable loss of each of the SUBSIDIARIES during such PRE-
CLOSING PARTIAL PERIOD and such POST-CLOSING PARTIAL PERIOD.
Section 11.07. Filing of RETURNS. ANTHEM shall include the
---------------------------------
SUBSIDIARIES in the consolidated federal income tax return and in any
consolidated, combined, or unitary state, local or foreign RETURN filed by
ANTHEM and/or SELLER for the period ending on or prior to the CLOSING DATE.
ANTHEM, with the assistance and cooperation of employees of the SUBSIDIARIES,
shall prepare books and working papers (including a closing of the books) which
will clearly demonstrate the income and activities of each of the SUBSIDIARIES
for the period ending on the CLOSING DATE and any PRE-CLOSING PARTIAL PERIOD.
PURCHASER shall include each of the SUBSIDIARIES in the consolidated federal
income tax return and in any consolidated, combined, or unitary state, local or
foreign tax return filed by PURCHASER for periods beginning after the CLOSING
DATE. An election under Treasury Regulations (S)1.1502-76(b)(5) (relating to
the 30-day election rules) shall not be made by any of the SUBSIDIARIES.
Section 11.08. Post-Closing Audits and Other Proceedings. ANTHEM and
---------------------------------------------------------
PURCHASER agree to give prompt notice to the other of each proposed adjustment
to any TAX for periods ending on or prior to the CLOSING DATE or any other PRE-
CLOSING PARTIAL PERIOD. ANTHEM and PURCHASER shall cooperate with each other in
the conduct of any audit or other proceedings involving any of the SUBSIDIARIES
for such periods and each may participate therein at its own expense, provided
that ANTHEM shall have the right to control the conduct of any such audit or
proceeding for which ANTHEM agrees that any resulting TAX is covered by the
indemnity provided in Section 11.02 of this AGREEMENT. Notwithstanding the
foregoing, ANTHEM may not settle or otherwise resolve any such claim, suit or
proceeding without the consent of PURCHASER, which consent shall not be
unreasonably withheld or delayed.
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Section 11.09. Cooperation. Without limiting the generality of
---------------------------
Section 6.05, ANTHEM and PURCHASER shall furnish or cause to be furnished to the
other, as promptly as practicable following request therefor, such information
and assistance (including access to books, records and employees) relating to
the SUBSIDIARIES as is reasonably necessary for the preparation of any RETURN,
claim for refund or audit, and the prosecution or defense of any claim, suit or
proceeding relating to any proposed TAX adjustment. Furthermore, ANTHEM will
cooperate with PURCHASER in persuading the District Director of the Internal
Revenue Service to exercise his authority to limit the liability of the
SUBSIDIARIES under Treasury Regulations (S)1.1502-6 for TAXES of the affiliated
group of which ANTHEM is the common parent.
Section 11.10. Termination of Existing Tax Sharing AGREEMENTS. The
--------------------------------------------------------------
FEDERAL TAX SHARING AGREEMENT and the INDIANA TAX SHARING AGREEMENT and any
similar arrangements with respect to or involving the SUBSIDIARIES shall be
terminated prior to the consummation of the CLOSING, and following such
termination, none of the SUBSIDIARIES shall be bound thereby or have any
liability thereunder for amounts due in respect of periods prior to such
termination.
Section 11.11. Section 338(h)(10) Election .
--------------------------------------------
(1) ANTHEM, SELLER and PURCHASER shall, at PURCHASER'S request,
join in making the elections provided for in Section 338(g) and Section
338(h)(10) of the CODE and the Treasury regulations promulgated under Section
338 of the CODE (the "Section 338 Regulations") (collectively, the "338
Elections") with respect to the purchase of the SHARES. The parties shall make
such other similar elections as may be necessary to achieve substantially the
same results to the parties for state and local income or franchise tax purposes
as the 338 Elections achieve for federal income tax purposes. For purposes of
this AGREEMENT, the term "338 Elections" shall include any such state or local
tax elections.
(2) PURCHASER must exercise its request to make the 338
Elections within thirty (30) days after the later of (i) the date of delivery of
the CLOSING BALANCE SHEET by the AUDITORS to PURCHASER and (ii) the date of
delivery by SELLER and/or ANTHEM to PURCHASER of the statement to be made by
PURCHASER pursuant to Section 11.11(6). If the request is not made by PURCHASER
within this time frame, ANTHEM and SELLER shall not be obligated to make the 338
Elections.
(3) Within ninety (90) days after the CLOSING DATE, PURCHASER
shall provide to SELLER a schedule of the fair market values of all the material
assets of SELLER and the SUBSIDIARIES as of the CLOSING DATE. PURCHASER shall
bear the cost of any appraisal of such assets. The parties will
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negotiate in good faith and use their reasonable efforts to agree on the fair
market value of all material assets of SELLER and the SUBSIDIARIES. To the
extent that the parties agree on such values, then each party shall apply such
values in all applicable filings related to the 338 Elections and in all
relevant tax returns. Whether or not the parties agree to any such values,
SELLER and PURCHASER shall each notify the other in writing as soon as
reasonably practicable of any audit adjustment or proposed audit adjustment by
any taxing authority that affects the "adjusted grossed up bases" and "modified
deemed sales price" of such assets (as those terms are defined in the Section
338 Regulations).
(4) If the 338 Elections are made, ANTHEM, SELLER and PURCHASER
will comply fully with all filing and other requirements necessary to effectuate
the 338 Elections on a timely basis and agree to cooperate in good faith with
each other in the preparation and timely filing of any tax returns required to
be filed in connection with the making of the 338 Elections, including the
exchange of information and the joint preparation and filing of Form 8023 and
related schedules.
(5) All items of income, deduction, gain or loss recognized as a
result of, and in accordance with, the 338 Elections shall be included in the
consolidated federal income tax return that includes SELLER for its taxable
period that includes the CLOSING DATE. Any income, deduction, gain or loss
recognized as a result of, and in accordance with, the making of the 338
ELECTIONS under any state or local statute or regulation similar to Section
338(h)(10) of the Code shall be included in the consolidated, combined, or
unitary state or local income or franchise tax return that includes SELLER. All
taxes resulting from the 338 Elections, whether determined on a consolidated,
combined, unitary, or separate company basis, shall be paid by ANTHEM or SELLER.
(6) Notwithstanding anything in this AGREEMENT to the contrary,
PURCHASER shall be solely responsible for and pay to SELLER and/or ANTHEM (or
reimburse to SELLER and/or ANTHEM if SELLER and/or ANTHEM is legally obligated
to pay) any taxes or increased taxes resulting from or arising out of, directly
or indirectly, any election or deemed election pursuant to Section 338 of the
CODE made with respect to the purchase by PURCHASER of the SHARES and/or any
payment made by Purchaser pursuant to this Section 11.11(6). Within thirty (30)
days after receipt from PURCHASER of the schedule of fair market values
contemplated by Section 11.11(3), ANTHEM or SELLER shall deliver to PURCHASER a
statement of the payment to be made by PURCHASER pursuant to this Section
11.11(6) in the event that the 338 Elections are made, together with appropriate
workpapers, or a statement that no such payment is required. If PURCHASER and
ANTHEM disagree as to the amount set forth in such statement, and if such
disagreement cannot be resolved between
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<PAGE>
ANTHEM and PURCHASER within ten (10) BUSINESS DAYS after delivery of such
statement to PURCHASER, the matter shall be referred to the INDEPENDENT ARBITER
for resolution, the statement that is the subject of such dispute shall be
adjusted as necessary to reflect such resolution by the INDEPENDENT ARBITER, and
the statement, as so adjusted by the INDEPENDENT ARBITER, shall be final,
conclusive and binding on the parties hereto. Fees of the INDEPENDENT ARBITER
for resolving any such dispute shall be borne equally by PURCHASER and ANTHEM.
(7) If the 338 Elections are not made, each of PURCHASER and
SELLER shall negotiate with the other in good faith, and shall otherwise use all
reasonable efforts to enter into, one or more agreements in form and substance
reasonably satisfactory to each of them and pursuant to which the PURCHASE PRICE
shall be allocated between the shares of SHELBY included in the SHARES and the
shares of ACIC included in the SHARES.
ARTICLE 12
Termination of AGREEMENT
------------------------
Section 12.01. Termination. This AGREEMENT may be terminated as
---------------------------
follows:
(1) by the mutual, written consent of PURCHASER and ANTHEM;
(2) by PURCHASER at any time after July 1, 1997 if, on the date
of such termination, (i) a condition precedent to the obligation of PURCHASER to
close hereunder has not been satisfied, through no fault of PURCHASER, or (ii)
the CLOSING has not been consummated for any reason other than a breach or
default hereunder by PURCHASER;
(3) by ANTHEM at any time after July 1, 1997 if, on the date of
such termination, (i) a condition precedent to the obligation of either ANTHEM
or SELLER to close hereunder has not been satisfied, through no fault of ANTHEM
or SELLER, or (ii) the CLOSING has not been consummated for any reason other
than a breach or default hereunder by either ANTHEM or SELLER; and
(4) By ANTHEM at any time after July 1, 1997 if any action, suit
or proceeding instituted by any governmental or regulatory authority and seeking
to modify, or to restrain or enjoin the consummation of, any of the transactions
contemplated hereby shall be pending; provided, that during the pendency of any
such action, suit or proceeding, the date specified in Section 12.01(2) after
which PURCHASER may terminate this AGREEMENT shall be extended to SEPTEMBER 1,
1997.
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<PAGE>
Section 12.02. Procedure for Termination. The termination of this
-----------------------------------------
AGREEMENT by any party hereto shall be effective only if previously authorized
by its board of directors and will be effective only after written notice
thereof (stating in reasonable detail the grounds therefor and signed by the
chairman of board or president of the terminating party) has been given to the
other party hereto.
Section 12.03. Effect of Termination. If this AGREEMENT is
-------------------------------------
terminated as provided elsewhere herein, it shall thereafter be void and of no
further force and effect, the transactions contemplated hereby shall be
abandoned, and no party hereto shall have any liability in respect of such
termination or otherwise hereunder, except that (i) Sections 6.08, 7.01(2) and
7.02 and the CONFIDENTIALITY AGREEMENT shall remain in full force and effect and
(ii) if such termination is based upon a breach or default under any covenant or
agreement hereunder, unless the breaching or defaulting party is also entitled
to terminate this AGREEMENT, the breaching or defaulting party shall be liable
to the other party for its actual damages.
ARTICLE 13
Miscellaneous
-------------
Section 13.01. Notices. Any notice or other communication required
-----------------------
or permitted hereunder must be in writing and shall be deemed to have been duly
given when (i) delivered to the party to whom it is given personally, (ii)
deposited in the U.S. mail if sent by certified or registered mail (return
receipt requested), postage prepaid and addressed to the party to whom it is
given as provided immediately below, or (iii) sent by facsimile transmission if
transmitted to each telephone number specified immediately below for so giving
such notice or communication to the party to whom it is given:
(1) If to ANTHEM or SELLER, to:
Anthem Insurance Companies, Inc.
120 Monument Circle
Attn.: Patrick M. Sheridan,
Chief Financial Officer
Indianapolis, Indiana 46204
Facsimile Telephone No.: (317) 488-6616
with a copy to:
Vorys, Sater, Seymour and Pease
52 East Gay Street
Columbus, Ohio 43215
Attn.: James R. Beatley, Jr., Esq.
Facsimile Telephone No.: (614) 464-6350
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<PAGE>
(2) If to PURCHASER, to:
Vesta Insurance Group, Inc.
3760 River Run Drive
Attn.: Donald W. Thornton, Esq.
Birmingham, Alabama 35243
Facsimile Telephone No.: (205) 970-7150
with a copy to:
Balch & Bingham LLP
1901 Sixth Avenue North, Suite 2600
Attn.: Gregory S. Curran, Esq.
Birmingham, Alabama 35203
Facsimile Telephone No.: (205) 226-8799
Any party hereto may from time to time by notice given in accordance with this
Section 13.01 to the other party hereto substitute a different address,
telephone number or PERSON for receipt of notices and communications hereunder
by the party giving such notice.
Section 13.02. Pronouns. The number and gender of each pronoun used
------------------------
herein shall be construed to be such number and gender as the context,
circumstances or its antecedent may require. The words "hereof," "herein,"
"hereto," "hereunder" and words of similar import shall be construed to refer to
this AGREEMENT as a whole, and not to any particular Article, Section or
provision, unless expressly stated otherwise.
Section 13.03. Assignment. This AGREEMENT shall be binding upon, and
--------------------------
shall inure to the benefit of and be enforceable by, the respective successors
and permitted assigns (including successive, as well as immediate, successors
and permitted assigns) of the parties hereto, but neither this AGREEMENT nor any
right hereunder may be assigned by any party without the written consent of the
other party hereto.
Section 13.04. No Third Party Beneficiaries. Nothing contained in
--------------------------------------------
this AGREEMENT is intended or shall be construed to afford to any PERSON, other
than a party hereto, any legal or equitable right, remedy or claim under or in
respect of this AGREEMENT or any provision hereof.
Section 13.05. Counterparts. This AGREEMENT may be executed in one
----------------------------
or more counterparts, each of which shall be deemed to be a duplicate original,
but all of which, taken together, shall be deemed to constitute a single
instrument; and each such counterpart may consist of multiple copies hereof,
each signed by less than all, if together signed by all, of the parties hereto.
Section 13.06. Entire Agreement; Amendment. This AGREEMENT and the
-------------------------------------------
CONFIDENTIALITY AGREEMENT constitute the
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<PAGE>
entire understanding of the parties hereto and supersede all prior and
contemporaneous agreements between the parties hereto in respect of the subject
matter hereof and thereof. This AGREEMENT may be amended only by a written
instrument duly executed on behalf of all parties hereto.
Section 13.07. Captions. The Article and Section headings and any
------------------------
other captions appearing in this AGREEMENT are included only for convenience of
reference and do not define, limit, explain or modify this AGREEMENT or its
interpretation, construction or meaning and are not to be construed as a part
hereof.
Section 13.08. Severability. If any provision of this AGREEMENT
----------------------------
shall be invalid or unenforceable for any reason, such invalidity or
enforceability shall not affect the validity or enforceability of any other
provision or portion hereof.
Section 13.09. Schedules. The Schedules referred to herein and
-------------------------
attached hereto are part of this AGREEMENT as if fully set forth herein.
Section 13.10. Governing Law; Venue. This AGREEMENT shall be
------------------------------------
governed by and construed and enforced in accordance with the internal laws of
the State of Indiana applicable to agreements made and to be performed entirely
within such state, without giving effect to the choice-of-law or conflict-of-
laws principles thereof. Any action, suit or proceeding in respect of or
arising from or out of this AGREEMENT must be prosecuted as to any party hereto
at Indianapolis, Indiana. Each party hereto consents to the exercise of
jurisdiction over its person by any court situated at Indianapolis, Indiana and
having jurisdiction over the subject matter of such action, suit or proceeding.
Adequate notice of any such action, suit or proceeding in any such court shall
conclusively be deemed to have been given to any party hereto against whom the
same is instituted if given to such party in accordance with the provisions of
this AGREEMENT or of the applicable rules of civil procedure or otherwise in
accordance with due process of law.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
-59-
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
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0
0
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125,620
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<INCOME-TAX> 6,588
<INCOME-CONTINUING> 19,146
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<EXTRAORDINARY> 0
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<NET-INCOME> 12,558
<EPS-PRIMARY> .68
<EPS-DILUTED> 0
<RESERVE-OPEN> 247,224
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
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