-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MOSQGcR9+L1qFPzkCcnftSsq7REkvmwBBdEkO6Kry9TB3RN804ez9u0O1Eto+r7o 13wANZBQe3o2wj47QV2SeQ== 0000909518-02-000025.txt : 20020413 0000909518-02-000025.hdr.sgml : 20020413 ACCESSION NUMBER: 0000909518-02-000025 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20020110 GROUP MEMBERS: CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P. GROUP MEMBERS: CAPITAL Z PARTNERS, L.P. GROUP MEMBERS: CAPITAL Z PARTNERS, LTD. FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CAPITAL Z FINANCIAL SERVICES FUND II LP CENTRAL INDEX KEY: 0001075567 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: ONE CHASE MANHATTAN PLAZA CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2128988700 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VESTA INSURANCE GROUP INC CENTRAL INDEX KEY: 0000911576 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 631097283 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-50207 FILM NUMBER: 2506381 BUSINESS ADDRESS: STREET 1: 3760 RIVER RUN DR CITY: BIRMINGHAM STATE: AL ZIP: 35243 BUSINESS PHONE: 2059707000 MAIL ADDRESS: STREET 1: 3760 RIVER RUN DRIVE CITY: BIRMINGHAM STATE: AL ZIP: 35243 SC 13D 1 a1-9sc13d.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- SCHEDULE 13D (rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) VESTA INSURANCE GROUP, INC. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $0.01 PER SHARE - -------------------------------------------------------------------------------- (Title of Class of Securities) 925391 - -------------------------------------------------------------------------------- (CUSIP Number) Capital Z Management, LLC 54 Thompson Street New York, New York 10012 Attention: David A. Spuria, Esq. (212) 965-0800 - -------------------------------------------------------------------------------- (Name, address and telephone number of person authorized to receive notices and communications) December 31, 2001 - -------------------------------------------------------------------------------- (Date of event which requires filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), (f) or (g), check the following box. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent.
========= ============================================================================================================= 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Capital Z Financial Services Fund II, L.P. - --------- ------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - --------- ------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------- ------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - --------- ------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - --------- ------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - -------------------------------------------- ------- ------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF SHARES 2,044,875 BENEFICIALLY ------- ------------------------------------------------------------------ OWNED BY 8 SHARED VOTING POWER EACH REPORTING PERSON ------- ------------------------------------------------------------------ WITH 9 SOLE DISPOSITIVE POWER 2,044,875 ------- ------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER - -------------------------------------------- ------- ------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,044,875 - --------- ------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES [ ] - --------- ------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 5.67% - --------- ------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - --------- -------------------------------------------------------------------------------------------------------------
2
========= ============================================================================================================= 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Capital Z Financial Services Private Fund II, L.P. - --------- ------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - --------- ------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------- ------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - --------- ------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - --------- ------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - -------------------------------------------- ------- ------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF SHARES 10,863 BENEFICIALLY ------- ------------------------------------------------------------------ OWNED BY 8 SHARED VOTING POWER EACH REPORTING PERSON ------- ------------------------------------------------------------------ WITH 9 SOLE DISPOSITIVE POWER 10,863 ------- ------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER - -------------------------------------------- ------- ------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,863 - --------- ------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES [ ] - --------- ------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 .03% - --------- ------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - --------- -------------------------------------------------------------------------------------------------------------
3
========= ============================================================================================================= 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Capital Z Partners, L.P.* - --------- ------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - --------- ------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------- ------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS Not Applicable - --------- ------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - --------- ------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - -------------------------------------------- ------- ------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF SHARES BENEFICIALLY ------- ------------------------------------------------------------------ OWNED BY 8 SHARED VOTING POWER EACH REPORTING 2,055,738 PERSON ------- ------------------------------------------------------------------ WITH 9 SOLE DISPOSITIVE POWER ------- ------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 2,055,738 - -------------------------------------------- ------- ------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,055,738 - --------- ------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES [ ] - --------- ------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 5.7% - --------- ------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - --------- ------------------------------------------------------------------------------------------------------------- *Solely in its capacity as the sole general partner of Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P.
4
========= ============================================================================================================= 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only) Capital Z Partners, Ltd.* - --------- ------------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [ ] - --------- ------------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - --------- ------------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS Not Applicable - --------- ------------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - --------- ------------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda - -------------------------------------------- ------- ------------------------------------------------------------------ 7 SOLE VOTING POWER NUMBER OF SHARES BENEFICIALLY ------- ------------------------------------------------------------------ OWNED BY 8 SHARED VOTING POWER EACH REPORTING 2,055,738 PERSON ------- ------------------------------------------------------------------ WITH 9 SOLE DISPOSITIVE POWER ------- ------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 2,055,738 - -------------------------------------------- ------- ------------------------------------------------------------------ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,055,738 - --------- ------------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES [ ] - --------- ------------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 5.7% - --------- ------------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - --------- ------------------------------------------------------------------------------------------------------------- * Solely in its capacity as the sole general partner of Capital Z Partners, L.P.
5 Item 1. Security and Issuer. This Statement relates to the common stock, par value $0.01 per share (the "Common Stock"), of Vesta Insurance Group, Inc., a Delaware corporation (the "Company"). The Company's principal executive office is located at 3760 River Run Road, Birmingham, Alabama 35243. Item 2. Identity and Background. This Statement is being filed jointly on behalf of Capital Z Financial Services Fund II, L.P., a Bermuda limited partnership ("Capital Z Fund II"), Capital Z Financial Services Private Fund II, L.P. ("Capital Z Private Fund II"), Capital Z Partners, L.P., a Bermuda limited partnership ("Capital Z L.P."), and Capital Z Partners, Ltd., a Bermuda corporation ("Capital Z Ltd.", and together with Capital Z Fund II, Capital Z Private Fund II, Capital Z L.P., the "Reporting Persons"). Each of Capital Z Fund II, Capital Z Private Fund II, are referred to as a "Purchaser" and together they are referred to as the "Purchasers". Capital Z Fund II and Capital Z Private Fund II are each limited partnerships that invest in the securities of financial-service companies and related businesses. Capital Z L.P. is a limited partnership which acts as the sole general partner of Capital Z Fund II and Capital Z Private Fund II. Capital Z Ltd. is a corporation which acts as the sole general partner of Capital Z L.P. Information regarding the control persons and executive officers of the Reporting Persons is set forth on Schedule I attached hereto, which Schedule is hereby incorporated by reference. Except as set forth on Schedule I, all such persons are citizens of the United States. The principal business address of each Reporting Person is 54 Thompson Street, New York, New York 10012. None of the entities or persons identified on Schedule I hereto has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the Reporting Persons has been convicted in a criminal proceeding during the last 5 years. None of the entities or persons identified on Schedule I hereto has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. None of the Reporting Persons has, during the last 5 years, been a party to any civil proceeding as a result of which he or it was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. Item 3. Source and Amount of Funds. Capital Z Private Fund II and Capital Z Fund II purchased, pursuant to the Securities Purchase Agreement, dated as of December 21, 2000 (the "2000 Securities Purchase Agreement"), by and among Instant Insurance Holdings, Inc., a Delaware corporation ("Instant"), the Company, Thomas E. Mangold ("Mangold"), Capital Z Fund II and Capital Z Private Fund II, an aggregate of 555,738 shares of Common Stock, at a purchase price of $6.10 per share, which purchase price was paid with an aggregate of 3,000,000 shares of Series E Preferred Stock, par value $1.00 per share ("Series E Preferred Stock"), of Instant, valued at $1.13 per share. 6 Capital Z Private Fund II and Capital Z Fund II purchased, pursuant to the Securities Purchase Agreement, dated as of December 28, 2001 (the "Securities Purchase Agreement"), by and among the Company and the Purchasers, an aggregate of 1,500,000 shares of Common Stock. In addition, the Company paid the Purchasers cash in the amount of $138,284. The purchase price for each share of Common Stock was $6.77. In consideration for the cash and the Common Stock, the Purchasers transferred the following securities of Instant to the Company: 17,787 shares of common stock, par value $0.01 per share ("Instant Common Stock"), 200,000 shares of Series A Preferred Stock, par value $1.00 per share ("Series A Preferred Stock"), 7,450,000 shares of Series C Preferred Stock, par value $1.00 per share ("Series C Preferred Stock"), warrants to purchase an aggregate of 151,032 shares of Common Stock (the "Warrant") and certain rights to acquire an aggregate of 88,935 shares of Instant Common Stock held by management of Instant upon their termination (the "Call Rights"). None of the Reporting Persons borrowed any funds in connection with the purchase of the Common Stock. Item 4. Purpose of Transaction. The Reporting Persons consummated the transactions described herein in order to acquire an interest in the Company for investment purposes. The Reporting Persons intend to review continuously their position in the Company. Depending upon further evaluations of the business prospects of the Company and upon other developments, including, but not limited to, general economic and business conditions and stock market conditions, the Reporting Persons may retain or from time to time increase their holdings or dispose of all or a portion of their holdings subject to any applicable legal and contractual restrictions on their ability to do so in privately negotiated transactions, open market purchases or otherwise. In addition, the matters set forth in Item 6 below are incorporated in this Item 4 by reference as if fully set forth therein. Except as set forth in this Item 4 (including the matters described in Item 6 below which are incorporated in this Item 4 by reference), the Reporting Persons have no present plans or proposals that relate to or that would result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D of the Securities Exchange Act of 1934, as amended. Item 5. Interest in Securities of Issuer. (a) - (b) Capital Z Fund II has the sole power to vote and the sole power to dispose of 2,044,875 shares of Common Stock, which is 5.67% of the Common Stock. Capital Z Private Fund II has the sole power to vote and the sole power to dispose of 10,863 shares of Common Stock, which is .03% of the Common Stock. Capital Z L.P. and Capital Z Ltd. may be deemed to beneficially own 2,055,738 Common Stock by virtue of Capital Z Fund II's and Capital Z Private Fund II's ownership of 2,044,875 and 10,863 shares of Common Stock, respectively. Captial Z L.P. and Capital Z Ltd. each have the shared power to vote or direct the vote, and to dispose or to direct the disposition, of such shares. Such shares represent, in the aggregate, approximately 5.7% of the outstanding total Common Stock. All calculations made herein are made in accordance with Rule 13d-3(d) of the Securities Exchange Act of 1934, as amended and based on the number of shares of Common Stock outstanding as of December 28, 2001. (c) Except as set forth herein, none of the Reporting Persons has effected any transactions in shares of Common Stock during the past 60 days. (d) None. 7 (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. 1. Capital Z Private Fund II and Capital Z Fund II purchased, pursuant the 2000 Securities Purchase Agreement, an aggregate of 555,738 shares of Common Stock, at a purchase price of $6.10 per share of Common Stock, which purchase price was paid with an aggregate of 3,000,000 shares of Series E Preferred Stock, valued at $1.13 per share. 2. In connection with the transactions contemplated by the 2000 Securities Purchase Agreement, Capital Z Fund II, Capital Z Private Fund II and the Company entered into that certain Registration Rights Agreement (the "Registration Rights Agreement"), dated as of December 21, 2000. As more fully described in the Registration Rights Agreement, the Company granted certain registration rights to the Purchasers with respect to the 555,738 shares of Common Stock owned by the Purchasers, including demand registration rights and certain other incidental registration rights with respect to offerings made by the Company under the Securities Act of 1933, as amended. 3. Capital Z Private Fund II and Capital Z Fund II purchased, pursuant the Securities Purchase Agreement, an aggregate of 1,500,000 shares of Common Stock. In addition, and the Company paid the Purchasers cash in the amount of $138,284. The purchase price for each share of Common Stock was $6.77. In consideration for the cash and the Common Stock, the Purchasers transferred the following securities of Instant to the Company: 17,787 shares of Instant Common Stock, 200,000 shares of Series A Preferred Stock, 7,450,000 shares of Series C Preferred Stock, the Warrants and the Call Rights. 4. In connection with the transactions contemplated by the Securities Purchase Agreement, the Purchasers and the Company executed and delivered the First Amendment to the Registration Rights Agreement (the "First Amendment"), dated as of December 28, 2001, which amends certain provisions of the Registration Rights Amendment to make the 1,500,000 shares of Common Stock purchased under the Securities Purchase Agreement subject to the terms of the Registration Rights Agreement. The descriptions of the 2000 Securities Purchase Agreement, the Registration Rights Agreement, the Securities Purchase Agreement, and the First Amendment contained herein are qualified in their entirety by reference to the applicable agreements, which are incorporated by reference herewith as Exhibits I, II, III, and IV respectively. Item 7. Material to be Filed as Exhibits. 1. Securities Purchase Agreement, dated December 21, 2000, by and among Instant Insurance Holdings, Inc., Vesta Insurance Group, Inc., Thomas E. Mangold, Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P. 2. The Registration Rights Agreement, dated as of December 21, 2000, by and among Vesta Insurance Group, Inc., Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P. 3. Securities Purchase Agreement, dated December 28, 2001, by and among Vesta Insurance Group, Inc., Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P. 4. The First Amendment to the Registration Rights Agreement, dated as of December 28, 2001, by and among Vesta Insurance Group, Inc., Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P. 8 5. Joint Filing Agreement, dated January 9, 2002, by and among Capital Z Financial Services Fund II, L.P., Capital Z Financial Services Private Fund II, L.P., Capital Z Partners, L.P., and Capital Z Partners, Ltd. 9 SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete, and correct. Date: January 9, 2002. CAPITAL Z FINANCIAL SERVICES FUND II, L.P. By: Capital Z Partners, Ltd., it ultimate general partner By: /s/ David A. Spuria ------------------------------------------- David A. Spuria General Counsel, Vice President of Administration and Secretary CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P. By: Capital Z Partners, Ltd., it ultimate general partner By: /s/ David A. Spuria ------------------------------------------- David A. Spuria General Counsel, Vice President of Administration and Secretary CAPITAL Z PARTNERS, L.P. By: Capital Z Partners, Ltd., it ultimate general partner By: /s/ David A. Spuria ------------------------------------------- David A. Spuria General Counsel, Vice President of Administration and Secretary CAPITAL Z PARTNERS, LTD. By: Capital Z Partners, Ltd., it ultimate general partner By: /s/ David A. Spuria ------------------------------------------- David A. Spuria General Counsel, Vice President of Administration and Secretary 10 SCHEDULE I ---------- CONTROL PERSONS AND EXECUTIVE OFFICERS OF THE CAPITAL Z REPORTING PERSONS The names, present principal occupations and business addresses of the control persons and executive officers of the Capital Z Reporting Persons are set forth below. The control person's or executive officer's business address is that of the Reporting Person. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to the Reporting Person. Each of the named individuals is a citizen of the United States of America except for Laurence Cheng who is a citizen of Canada. Capital Z Partners, Ltd. is the ultimate general partner and control person of Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P. Robert A. Spass Chairman of the Board Laurence W. Cheng Chief Executive Officer and Director Bradley E. Cooper Senior Vice President and Director Mark K. Gormley Senior Vice President and Director Scott M. Delman Senior Vice President and Director David A. Spuria General Counsel, Vice President of Administration and Secretary Roland V. Bernardon Chief Financial Officer, Treasurer and Assistant Secretary 11 Exhibits 1. Securities Purchase Agreement, dated December 21, 2000, by and among Instant Insurance Holdings, Inc., Vesta Insurance Group, Inc., Thomas E. Mangold, Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P. 2. The Registration Rights Agreement, dated as of December 21, 2000, by and among Vesta Insurance Group, Inc., Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P. 3. Securities Purchase Agreement, dated December 28, 2001, by and among Vesta Insurance Group, Inc., Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P. 4. The First Amendment to the Registration Rights Agreement, dated as of December 28, 2001, by and among Vesta Insurance Group, Inc., Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P. 5. Joint Filing Agreement, dated January 9, 2002, by and among Capital Z Financial Services Fund II, L.P., Capital Z Financial Services Private Fund II, L.P., Capital Z Partners, L.P., and Capital Z Partners, Ltd. 12 EX-99 3 ex-1.txt EXHIBIT 1 Exhibit 1 [EXECUTION COPY] ---------------------------------------------- SECURITIES PURCHASE AGREEMENT AMONG INSTANT INSURANCE HOLDINGS, INC., AND THE PURCHASERS NAMED HEREIN ---------------------------------------------- DATED AS OF DECEMBER 21, 2000 ---------------------------------------------- TABLE OF CONTENTS
PAGE ---- Article 1 THE TRANSACTIONS........................................................................1 1.1 Purchase and Sale of the Company Shares......................................................1 1.2 Purchase and Sale of the Vesta Shares........................................................2 1.3 Closing Matters..............................................................................2 1.4 The Closing..................................................................................2 1.5 Waiver of Preemptive Rights..................................................................3 Article 2 CONCURRENT EVENTS AND DELIVERIES........................................................3 2.1 Termination of Lyon Option Agreement.........................................................3 2.2 Termination of Fund II Option Agreement......................................................3 2.3 Termination of Private Fund II Option Agreement..............................................3 2.4 Stockholders Agreement.......................................................................3 2.5 Termination of Employee $6.71 Option Agreements..............................................4 2.6 Management Stock Call Agreement..............................................................4 2.7 Promote Stock Agreement......................................................................4 2.8 Amendment to Omnibus Incentive Plan and Reservation of Additional Shares.....................4 2.9 Mangold Employment Agreement.................................................................4 2.10 Mangold Option Agreement.....................................................................4 2.11 Vesta Registration Rights Agreement..........................................................5 Article 3 REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER TO THE COMPANY.........................5 3.1 Organization.................................................................................5 3.2 Authority....................................................................................5 3.3 No Violation.................................................................................5 3.4 Brokers......................................................................................6 3.5 Funds Available..............................................................................6 3.6 Securities Act Representations...............................................................6 Article 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY TO THE PURCHASERS.........................7 4.1 Corporate Organization.......................................................................7 i TABLE OF CONTENTS (CONTINUED) 4.2 Capital Stock................................................................................8 4.3 Newly Issued Shares..........................................................................8 4.4 Subsidiaries.................................................................................9 4.5 Authority....................................................................................9 4.6 No Violation................................................................................10 4.7 Litigation..................................................................................10 4.8 Financial Statements........................................................................10 4.9 Compliance with Laws........................................................................11 4.10 No Material Adverse Change..................................................................11 4.11 No Undisclosed Liabilities..................................................................11 4.12 Conduct of Business; Certain Actions........................................................11 4.13 Contracts...................................................................................12 4.14 Taxes.......................................................................................13 4.15 Employee Benefit Plans......................................................................13 4.16 Brokers.....................................................................................13 4.17 Representations Regarding the Insurer.......................................................13 4.18 Private Offering............................................................................14 4.19 Accuracy of Information Furnished...........................................................14 Article 5 REPRESENTATIONS AND WARRANTIES OF CAPITAL Z TO VESTA...................................15 5.1 Organization................................................................................15 5.2 Authority...................................................................................15 5.3 No Violation................................................................................15 5.4 Brokers.....................................................................................15 5.5 Securities Act Representations..............................................................16 Article 6 REPRESENTATIONS AND WARRANTIES OF VESTA TO CAPITAL Z...................................17 6.1 Corporate Organization......................................................................17 6.2 Capital Stock...............................................................................17 6.3 Vesta Shares................................................................................18 ii TABLE OF CONTENTS (CONTINUED) 6.4 Subsidiaries................................................................................18 6.5 Authority...................................................................................18 6.6 No Violation................................................................................19 6.7 Brokers.....................................................................................19 6.8 Litigation..................................................................................19 6.9 Patents and Trademarks......................................................................20 6.10 Agreements; Action..........................................................................20 6.11 Registration Rights.........................................................................20 6.12 Disclosure..................................................................................20 6.13 Corporate Documents.........................................................................20 6.14 Title to Property and Assets................................................................21 6.15 Insurance...................................................................................21 6.16 No Adverse Changes..........................................................................21 6.17 Taxes.......................................................................................22 6.18 Private Offering............................................................................22 Article 7 COVENANTS AND AGREEMENTS...............................................................22 7.1 Company Access..............................................................................23 7.2 Vesta Access................................................................................23 7.3 Conduct of Business of the Company Prior to Closing.........................................23 7.4 Conduct of Business of the Company Prior to Conversion of the Series E Preferred Stock......23 7.5 Conduct of Business of Vesta................................................................25 7.6 Commercially Reasonable Efforts.............................................................25 7.7 Updating of Company Disclosure Schedules....................................................26 7.8 Updating of Vesta Disclosure Schedules......................................................26 7.9 Regulatory Approvals........................................................................26 Article 8 CONDITIONS PRECEDENT...................................................................27 8.1 Conditions to Each Party's Obligations......................................................27 8.2 Conditions to the Obligations of the Company................................................27 8.3 Conditions to the Obligations of Each Purchaser.............................................27 iii TABLE OF CONTENTS (CONTINUED) 8.4 Conditions to the Obligations of Vesta......................................................28 8.5 Conditions to the Obligations of Capital Z..................................................28 8.6 Conditions to the Obligations of Mangold....................................................29 Article 9 INDEMNIFICATION........................................................................29 9.1 Indemnification.............................................................................29 9.2 Defense of Third Party Claims...............................................................30 9.3 Limitations.................................................................................31 Article 10 MISCELLANEOUS..........................................................................32 10.1 Termination.................................................................................32 10.2 Effect of Termination.......................................................................32 10.3 Amendment...................................................................................32 10.4 Waiver......................................................................................32 10.5 Survival....................................................................................32 10.6 Notices.....................................................................................33 10.7 Confidentiality.............................................................................34 10.8 Headings....................................................................................34 10.9 Publicity...................................................................................34 10.10 Disclosure Schedules........................................................................34 10.11 Entire Agreement............................................................................34 10.12 Conveyance Taxes............................................................................34 10.13 Assignment..................................................................................35 10.14 Counterparts................................................................................35 10.15 Governing Law...............................................................................35 10.16 Third Party Beneficiaries...................................................................35 10.17 Costs and Expenses..........................................................................35 10.18 Incorporated by Reference...................................................................35 10.19 Number and Gender of Words..................................................................35 10.20 Execution of Additional Documents...........................................................35 10.21 Interpretation..............................................................................35 iv TABLE OF CONTENTS (CONTINUED) 10.22 Reformation; Severability...................................................................35 10.23 Time of the Essence.........................................................................36
v EXHIBITS Exhibit A Form of Lyon Termination Agreement Exhibit B Form of Fund II Termination Agreement Exhibit C Form of Private Fund II Termination Agreement Exhibit D Form of Stockholders Agreement Exhibit E Form of $6.71 Termination Agreement Exhibit F Form of Management Stock Call Agreement Exhibit G Form of Promote Stock Agreement Exhibit H Form of Mangold Employment Agreement Exhibit I Form of Mangold Option Agreement Exhibit J Form of Vesta Registration Rights Agreement Exhibit K Form of Amended Company Charter Exhibit L Insurance Reps vi SCHEDULES Schedule 1.1 Company Shares to be Purchased Schedule 1.2 Vesta Shares to be Purchased Schedule 2.5 $6.71 Options Schedule 4.2 $1.00 Options Schedule 4.4 Company Subsidiaries Schedule 4.6 Company Consents and/or Regulatory Approvals Schedule 4.7 Company Litigation Schedule 4.9 Company Compliance with Laws Schedule 4.10 No Company Material Adverse Change Schedule 4.11 No Company Undisclosed Liabilities Schedule 4.12 Company Conduct of Business Schedule 4.13 Company Contracts Schedule 4.15 Company Benefit Plans Schedule 4.17(a) Insurer's Insurance Matters Schedule 4.17(b) Insurer's Licenses Schedule 6.4 Vesta Subsidiaries Schedule 6.6 Vesta Consents and/or Regulatory Approvals vii Cross-Reference Regarding Defined Terms: SECTION DEFINED TERM WHERE DEFINED - ------------ ------------- $1.00 Options 4.15 $6.71 Options 2.5 $6.71 Termination Agreement 2.5 ACE 2.4 Affiliate 9.1 Agreement Preamble Amended Company Charter 4.2 Breach 9.1 Capital Z Preamble Closing 1.4 Closing Date 1.4 Company Preamble Company Common Stock 2.5 Company Purchase Price 1.1 Company Shares 1.1 Company Subsequent Event 7.7 control 9.1 Employee Benefit Plan 4.15 Encumbrances 4.3 ERISA 4.15 Exchange Act 6.13 Financial Statements 4.8 Fund II Preamble Fund II Option Agreement 2.2 Fund II Termination Agreement 2.2 GAAP 4.8 Gohr 2.4 viii SECTION DEFINED TERM WHERE DEFINED - ------------ ------------- Governmental Authority 3.3 Grandstaff 2.4 Indemnified Party 9.2 Indemnifying Party 9.2 Insurance Reps 4.17 Insurer 4.17 Interim Financial Statements 4.8 Losses 9.1 Lyon 2.1 Lyon Option Agreement 2.1 Management Stock Call Agreement 2.6 Mangold Preamble Mangold Employment Agreement 2.8 Mangold Option Agreement 2.9 Millers Mutual 2.4 Notes Recitals Option Plan 2.8 Orth 2.4 Person 3.3 Porter 2.4 Preferred Stock 4.2 Private Fund II Preamble Private Fund II Option Agreement 2.3 Private Fund II Termination Agreement 2.3 Promote Stock Agreement 2.7 Purchaser Transaction Documents 3.2 Purchasers Preamble Requirements of Law 3.3 ix SECTION DEFINED TERM WHERE DEFINED - ------------ ------------- Second Amended and Restated Management Stock Call Agreement 2.6 Second Amended and Restated Promote Stock Agreement 2.7 Second Amended and Restated Stockholders Agreement 2.4 SEC 6.13 Securities Act 3.6 Series A Preferred Stock 4.2 Series B Preferred Stock 4.2 Series C Preferred Stock 4.2 Series D Preferred Stock Recitals Series E Preferred Stock Recitals Series D Shares 1.1 Series E Shares 1.1 Stockholder 4.12 Stockholders Agreement 2.4 Subsequent Company Disclosure Schedule 7.7 Subsidiaries 4.4 Subsidiary 4.4 Transaction Documents 4.5 Vesta Preamble Vesta Balance Sheet 6.13 Vesta Bylaws 6.1 Vesta Charter 6.1 Vesta Common Stock Recitals Vesta Documents 6.13 Vesta Preferred Stock 6.2 Vesta Purchase Price 1.2 Vesta Registration Rights Agreement 2.11 x SECTION DEFINED TERM WHERE DEFINED - ------------ ------------- Vesta Series A Preferred Stock 6.2 Vesta Shares 1.2 Vesta Subsequent Event 7.8 Vesta Subsidiaries 6.4 Vesta Subsidiary 6.4 Vesta Transaction Documents 6.5 xi SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT ("Agreement"), dated as of December 21, 2000 by and among Instant Insurance Holdings, Inc., a Delaware corporation (the "Company"), Vesta Insurance Group, Inc., a Delaware corporation ("Vesta"), Thomas E. Mangold ("Mangold"), Capital Z Financial Services Fund II, L.P., a Bermuda limited partnership ("Fund II"), and Capital Z Financial Services Private Fund II, L.P., a Bermuda limited partnership ("Private Fund II" and, collectively with Fund II, "Capital Z"). Vesta, Mangold, Fund II and Private Fund II are referred to herein as the "Purchasers"). R E C I T A L S: WHEREAS, the Purchasers desire to purchase from the Company, and the Company desires to issue and sell to the Purchasers, the number of shares of (a) Series D Convertible Preferred Stock, par value $1.00 per share (the "Series D Preferred Stock"), of the Company or (b) Series E Convertible Preferred Stock, par value $1.00 per share (the "Series E Preferred Stock"), of the Company, as is set forth in Section 1.1 below, on the terms and subject to the conditions set forth herein; WHEREAS, Capital Z is the holder of Convertible Notes of the Company in aggregate principal amount of $1,835,576.94 (the "Notes"); WHEREAS, as partial consideration for its purchase of shares of Series E Preferred Stock, Capital Z will surrender the Notes to the Company for cancellation; WHEREAS, as partial consideration for its purchase of shares of Series E Preferred Stock, Capital Z contributed $500,000 in cash to the Company on December 20, 2000; WHEREAS, the Capital Z desires to purchase from Vesta, and Vesta desires to issue and sell to Capital Z, the number of shares of common stock, par value $0.1 per share (the "Vesta Common Stock"), of Vesta, as is set forth in Section 1.2 below, in consideration for the sale by Capital Z of 3,000,000 shares of Series E Preferred Stock being acquired by Capital Z pursuant hereto; NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to set forth the terms and conditions of the transactions described herein and the mode of carrying the same into effect, the parties hereby agree as follows: A G R E E M E N T: Article 1 THE TRANSACTIONS 1.1 Purchase and Sale of the Company Shares. Subject to the terms and conditions of this Agreement, the Purchasers hereby agree to purchase from the Company, and the Company agrees to issue and sell to the Purchasers, at the Closing, up to an aggregate of (a) 1,359,115 shares of Series D Preferred Stock (the "Series D Shares"), at a purchase price of $1.00 per Series D Share and 11,840,885 shares of Series E Preferred Stock (the "Series E Shares" and, collectively with the Series D Shares, the "Company Shares") at a purchase price of $1.00 per Series E Share. The total purchase price to be paid by the Purchasers for the Company Shares pursuant to this Section 1.1 is referred to herein as the "Company Purchase Price." The purchase obligation of each Purchaser will be the several obligation of such Purchaser to purchase, at the Closing, the number of Company Shares indicated on Schedule 1.1 hereto to be purchased at the Closing by such Purchaser, and no Purchaser will have any obligation with respect to the purchase obligations of any other Purchaser. 1.2 Purchase and Sale of the Vesta Shares. Subject to the terms and conditions of this Agreement, Capital Z hereby agrees to purchase from Vesta, and Vesta agrees to issue and sell to Capital Z, at the Closing, up to an aggregate of 555,738 shares of Vesta Common Stock (the "Vesta Shares"), at a purchase price of $6.10 per Vesta Share, which purchase price will be paid by transfer by Capital Z to Vesta of 3,000,000 shares of Series E Preferred Stock, valued at $1.13 per share. The total purchase price to be paid by Capital Z for the Vesta Shares pursuant to this Section 1.2 is referred to herein as the "Vesta Purchase Price." The purchase obligation of each of Fund II and Private Fund II will be the several obligation of such Purchaser to purchase, at the Closing the number of Vesta Shares indicated on Schedule 1.2 hereto to be purchased at the Closing by such Purchaser, and no Purchaser will have any obligation with respect to the purchase obligations of any other Purchaser. 1.3 Closing Matters. At the Closing: (a) Each of the Purchasers shall transfer by wire or otherwise deliver or cause to be delivered to the Company, in accordance with written wiring instructions delivered to the Purchasers at least two (2) days prior to the Closing, the cash portion of the Company Purchase Price for the Company Shares being purchased by such Purchaser at the Closing, in same day funds, in accordance with the amounts set forth opposite such Purchaser's name on Schedule 1.1; Capital Z shall surrender the Notes for cancellation and the Company shall deliver to each Purchaser (or its designees) a certificate or certificates, validly executed by a duly authorized officer of the Company and in proper form, representing the Company Shares being purchased by each such Purchaser at the Closing; and (b) Each of Fund II and Private Fund II shall transfer to Vesta, the Series E Shares being transferred by Fund II and Private Fund II in accordance with the amounts set forth opposite such Purchaser's name on Schedule 1.2, for the Vesta Shares being purchased by Fund II and Private Fund II at the 2 Closing, and Vesta shall deliver to each such Purchaser a certificate or certificates, validly executed by a duly authorized officer of Vesta and in proper form, representing the Vesta Shares being purchased by each such Purchaser at such Closing. 1.4 The Closing. Subject to the fulfillment of the conditions precedent specified in Article 8 (any or all of which may be waived in writing by the respective parties whose performance is conditioned upon satisfaction of such conditions precedent), the closing of the purchase and sale of the Company Shares and the Vesta Shares (the "Closing") shall be held at 9:00 a.m., central standard time, at the offices of Weil, Gotshal & Manges LLP, Dallas, Texas, on (a) December 21, 2000 or on the first practicable business day thereafter following the satisfaction of the conditions set forth in Article 8 hereof (other than any such conditions that, by their terms, cannot be satisfied until the Closing) or (b) such other date as the parties hereto may agree. The date on which the Closing occurs is referred to herein as the "Closing Date." 1.5 Waiver of Preemptive Rights. Each Purchaser hereby waives any preemptive rights (and any notices in connection therewith) that otherwise may be applicable to the issuance of the Company Shares (or to the issuance of any other securities contemplated by this Agreement). Article 2 CONCURRENT EVENTS AND DELIVERIES Concurrently with the execution and delivery of this Agreement, the following events are occurring and the following deliveries are being made: 2.1 Termination of Lyon Option Agreement. E. Buchanan Lyon III ("Lyon") and the Company are entering into a Termination Agreement in the form of Exhibit A hereto (the "Lyon Termination Agreement"), which terminates (effective upon the Closing) that certain Amended and Restated Option Agreement (the "Lyon Option Agreement"), dated as of February 17, 2000, by and between Lyon and the Company and which provides for the termination of the options granted pursuant thereto. 2.2 Termination of Fund II Option Agreement. The Company and Fund II are entering into a Termination Agreement in the form of Exhibit B hereto (the "Fund II Termination Agreement"), which terminates (effective upon the Closing) that certain Amended and Restated Option Agreement (the "Fund II Option Agreement"), dated as of February 17, 2000, by and between the Company and Fund II and which provides for the termination of the options granted pursuant thereto. 2.3 Termination of Private Fund II Option Agreement. The Company and Private Fund II are entering into a Termination Agreement in the form of Exhibit C hereto (the "Private Fund II Termination Agreement"), which terminates (effective upon the Closing) that certain Amended and Restated Option Agreement (the "Private Fund II Option Agreement"), dated as of February 17, 2000, by and between the Company and Private Fund II and which provides for the termination of the options granted pursuant thereto. 3 2.4 Stockholders Agreement. The Company, the Purchasers, Lyon, B.G. Porter ("Porter"), Michael Grandstaff ("Grandstaff"), Martin F. Gohr ("Gohr"), Randy Orth ("Orth"), The Millers Mutual Fire Insurance Company, a Texas insurance company ("Millers Mutual"), Millers Holding Corporation, a Nevada corporation, and ACE Cash Express, Inc. ("ACE") are entering into a Third Amended and Restated Stockholders Agreement in the form of Exhibit D hereto (the "Stockholders Agreement"), which amends and restates (effective upon the Closing) that certain Second Amended and Restated Stockholders Agreement (the "Second Amended and Restated Stockholders Agreement"), dated as of September 13, 2000, by and among all of the foregoing parties other than Vesta and Mangold. 2.5 Termination of Employee $6.71 Option Agreements. The Company and each of the individuals indicated on Schedule 2.5 are entering into a Termination Agreement in the form of Exhibit E hereto (each a "$6.71 Termination Agreement"), which terminates (effective upon the Closing) each Incentive Stock Option Agreement listed on Schedule 2.5, which agreements pertain to options having an exercise price of $6.71 per share of Company Common Stock and are by and between the Company and each such individual (collectively, the "$6.71 Options"). 2.6 Management Stock Call Agreement. Fund II, Lyon, Porter, Grandstaff, Gohr, Orth and the Company are entering into a Third Amended and Restated Management Stock Call Agreement in the form of Exhibit F hereto (the "Management Stock Call Agreement"), which amends and restates (effective upon the Closing) that certain Second Amended and Restated Management Stock Call Agreement (the "Second Amended and Restated Management Stock Call Agreement"), dated as of September 13, 2000, by and among the foregoing parties and which provides for the existence of call rights on the part of Fund II with respect to the issuance of certain shares of common stock, par value $.01 per share (the "Company Common Stock"), of the Company, held by certain members of management, on the terms and subject to the conditions set forth in the Management Stock Call Agreement. 2.7 Promote Stock Agreement. Lyon, Porter, Grandstaff, Gohr, Orth and the Company are entering into a Third Amended and Restated Promote Stock Agreement in the form of Exhibit G hereto (the "Promote Stock Agreement"), which amends and restates (effective upon the Closing) that certain Second Amended and Restated Promote Stock Agreement (the "Second Amended and Restated Promote Stock Agreement"), dated as of September 13, 2000, by and among the foregoing parties, and which provides for the issuance to certain members of management of certain shares of Company Common Stock, on the terms and subject to the conditions set forth in the Promote Stock Agreement. 2.8 Amendment to Omnibus Incentive Plan and Reservation of Additional Shares. The Instant Insurance Holdings, Inc. Omnibus Incentive Plan (the "Option Plan") is being amended by the Company (effective upon the Closing) to increase the maximum number of shares of Company Common Stock reserved and available for issuance under the Option Plan from 2,700,000 shares to 6,700,000 shares, and all of such shares, to the extent not already the subject of existing option grants and other than the shares subject to the Mangold Option Agreement, are being reserved for issuance to members of management on terms approved by the Board of Directors of the Company. 4 2.9 Mangold Employment Agreement. The Company and Mangold are entering into an Employment Agreement in the form of Exhibit H hereto (the "Mangold Employment Agreement"), which (effective upon the Closing) provides for the employment of Mangold by the Company. 2.10 Mangold Option Agreement. The Company and Mangold are entering into an Option Agreement in the form of Exhibit I hereto (the "Mangold Option Agreement"), which (effective upon the Closing) provides for the grant by the Company to Mangold of certain options to purchase Company Common Stock. 2.11 Vesta Registration Rights Agreement. Fund II, Private Fund II and Vesta are entering into a Registration Rights Agreement in the form of Exhibit J hereto (the "Vesta Registration Rights Agreement"), which (effective upon the Closing) grants certain registration rights to Capital Z with respect to the shares of Vesta Common Stock owned by Capital Z. Article 3 REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER TO THE COMPANY Each of the Purchasers severally, and not jointly, represents and warrants to the Company as follows: 3.1 Organization. If such Purchaser is an entity, such Purchaser is a corporation, limited liability company or limited partnership, as applicable, validly existing and in good standing under the laws of the jurisdiction of its organization. 3.2 Authority. (a) Such Purchaser has full corporate, partnership or limited liability company power (or, in the case of an individual, capacity) and authority to execute and deliver this Agreement and each other agreement to which it is or will be a party that is contemplated hereby (as to each such Purchaser, collectively, the "Purchaser Transaction Documents"), to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated on its part hereby and thereby; (b) the execution, delivery and performance by such Purchaser of this Agreement and each of the other applicable Purchaser Transaction Documents to which such Purchaser is or will be a party and the consummation of the transactions contemplated on its part hereby or thereby have been duly authorized by all necessary corporate, partnership, limited liability company or other action on the part of such Purchaser; and (c) this Agreement and each of the other applicable Purchaser Transaction Documents has been or will be duly executed and delivered by such Purchaser and (assuming due execution and delivery by the other parties hereto and thereto), constitutes or will constitute a legal, valid and binding agreement of such Purchaser, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally and subject to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.3 No Violation. The execution and delivery by such Purchaser of this Agreement and the Stockholders Agreement, the performance by 5 such Purchaser of its obligations hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby will not (a) assuming compliance with the requirements of the Missouri Department of Insurance, violate any provision of law, rule, regulation, order, writ, judgment, injunction, decree, determination or award (collectively, "Requirements of Law") applicable to such Purchaser, (b) require such Purchaser to obtain the consent, waiver, approval, license or authorization of, or make any notice or filing by such Purchaser with, any Person or Governmental Authority, except as may be required by the Missouri Department of Insurance, or (c) violate, result (with or without notice or the passage of time, or both) in a breach of or give rise to the right to accelerate, terminate or cancel any obligation under or constitute (with or without notice or the passage of time, or both) a default under, any of the terms or provisions of any charter, bylaws, certificate of limited partnership or limited liability company, partnership or limited liability company agreement, indenture, mortgage, agreement, contract, order, judgment, ordinance, regulation or decree to which such Purchaser is subject or by which such Purchaser is bound. As used in this Agreement, "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity. As used in this Agreement, "Governmental Authority" means any United States (federal, state, or local), foreign or supra-national government, or governmental regulatory or administrative authority, agency, commission, court or tribunal. 3.4 Brokers. Such Purchaser has not paid or become obligated to pay any fee or commission to any broker, finder, investment banker or other intermediary (not including attorneys' fees) in connection with this Agreement. 3.5 Funds Available. Such Purchaser has funds available, or commitments from third parties to provide funds, sufficient to pay the cash portion of the Company Purchase Price to be paid by such Purchaser. 3.6 Securities Act Representations. (a) Except as expressly contemplated hereby, such Purchaser is acquiring its portion of the Company Shares for investment for its own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act of 1933, as amended (the "Securities Act"). Except as expressly contemplated hereby, such Purchaser does not have any present intention of selling, granting any participation in, or otherwise distributing the Company Shares it is purchasing otherwise than pursuant to an effective registration statement under the Securities Act or in a transaction exempt from the registration requirements under the Securities Act and applicable state securities laws. Except as expressly contemplated hereby, such Purchaser does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Company Shares it is purchasing. (b) Such Purchaser acknowledges that the issuance of its portion of the Company Shares will not be registered under the Securities Act or any state securities laws on the basis of a claimed exemption by the Company that the issuance of the Company Shares as provided for herein is exempt from registration under the Securities Act and applicable state securities laws. Such 6 Purchaser acknowledges that the availability of such exemption is predicated in part on such Purchaser's representations set forth in this Article 3 and that the Company is relying on such representations. (c) Such Purchaser has received all the information it considers necessary or appropriate for deciding whether to accept the Company Shares it is purchasing. Such Purchaser has had an opportunity to ask questions of and to receive answers from the Company regarding the terms and conditions of the issuance of the Company Shares it is purchasing and the business, properties, financial condition and prospects of the Company and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to such Purchaser or to which such Purchaser had access. (d) Such Purchaser acknowledges that it is able to bear the economic risk of the investment in the Company Shares it is purchasing, and has such knowledge and experience in financial and business matters that it is capable of evaluating the benefits and risks of the investment in the Company Shares it is purchasing. (e) Such Purchaser is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. (f) Such Purchaser acknowledges that the Company Shares it is purchasing may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom and that in the absence of any effective registration statement covering such Company Shares or an available exemption from registration under the Securities Act, such Company Shares must be held indefinitely. Such Purchaser further acknowledges that the Company Shares it is purchasing may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of that rule are met. (g) Such Purchaser acknowledges that each certificate representing any of the Company Shares it is purchasing will be endorsed with a legend substantially similar to the following: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT. 7 Article 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY TO THE PURCHASERS The Company represents and warrants to each Purchaser as follows (each such representation and warranty being qualified by the information set forth in any disclosure schedule relating to such representation or warranty, as described in Section 10.10 hereof), provided, that the term "Company" shall refer to the Company and each of its Subsidiaries (as defined herein), unless the context otherwise requires: 4.1 Corporate Organization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite corporate power and authority to lease the properties it operates as lessee and to carry on its business as it is now being conducted and is duly qualified or licensed to do business and is in good standing in each jurisdiction in which such qualification is necessary, except where the failure to be so qualified or licensed or be in good standing would not reasonably be expected, individually or in the aggregate, to have a material adverse effect on the Company. True and complete copies of the Certificate of Incorporation and the Bylaws of the Company, as amended to date, have been delivered to each of the Purchasers. 4.2 Capital Stock. As of the date hereof and before giving effect to the Closing, the authorized capital stock of the Company consists in its entirety of (a) 22,000,000 shares of Common Stock, of which 182,100 shares are issued and outstanding and (b) 11,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred Stock"), of which (i) 701,250 shares are designated as Series A Convertible Preferred Stock, par value $1.00 per share (the "Series A Preferred Stock"), of which 330,000 shares are issued and outstanding, (ii) 2,235,469 shares are designated as Series B Convertible Preferred Stock, par value $1.00 per share (the "Series B Preferred Stock"), of which no shares are issued and outstanding and (iii) 7,898,000 shares are designated as Series C Convertible Preferred Stock, par value $1.00 per share (the "Series C Preferred Stock"), of which 7,898,000 shares are issued and outstanding. Prior to the Closing, a Certificate of Elimination and a Certificate of Amendment of the Certificate of Incorporation of the Company in the form of Exhibit K (the "Amended Company Charter") hereto shall be filed by the Company with the Secretary of State of the State of Delaware to (A) eliminate the Series B Preferred Stock, (B) increase the number of authorized shares of Common Stock to 40,000,000, (C) increase the number of authorized shares of Preferred Stock to 40,000,000 shares, (D) amend certain terms of the Series A Preferred Stock and the Series C Preferred Stock (including to provide for the issuance of 10,000 shares of Series C Preferred Stock to Chris Ladoulis, an employee of the Company), and (E) designate 13,200,000 shares of Series D Preferred Stock and 11,840,885 shares of Series E Preferred Stock. All of the outstanding shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws. Except for shares of capital stock of the Company issuable pursuant to (1) this Agreement, (2) that certain Amended and Restated Option Agreement, dated as of February 17, 2000, by and between the Company and ACE, (3) the Lyon Option Agreement, (4) the Fund II Option Agreement, (5) the Private Fund II Option Agreement, (8) the $6.71 Options, (9) the $1.00 Options listed on Schedule 4.2, (10) the Second 8 Amended and Restated Management Stock Call Agreement, (11) the Second Amended and Restated Promote Stock Agreement, (12) the currently issued and outstanding shares of Series A Preferred Stock and Series C Preferred Stock and (13) the 2,700,000 shares of Company Common Stock authorized for issuance pursuant to the Option Plan, as amended (certain of which options have already been granted as described above), there are no options, warrants, conversion privileges or other rights outstanding to purchase or otherwise acquire any authorized but unissued shares of capital stock or other securities of the Company. Except as provided in the Second Amended and Restated Stockholders Agreement, there are no preemptive rights held by any Person with respect to any capital stock or other securities of the Company. 4.3 Newly Issued Shares. The Company Shares to be issued and sold by the Company to the Purchasers in accordance with the terms of this Agreement have been duly authorized (other than the filing of the Amended Company Charter) and when issued as contemplated hereby at the Closing, will be validly issued, fully paid and non-assessable. At the Closing, each Purchaser will acquire good and marketable title to the Company Shares it is purchasing, free and clear of any and all liens, encumbrances, security interests, pre-emptive rights, adverse claims of another or restrictions on transfer ("Encumbrances"), except such Encumbrances as may exist under the Stockholders Agreement or applicable federal and state securities laws. The Common Stock to be issued upon conversion of the Series D Preferred Stock is duly authorized, will be reserved for issuance prior to the Closing, and, when so issued, will be validly issued, fully paid and non-assessable. The Series D Preferred Stock to be issued upon conversion of the Series E Preferred Stock is duly authorized, will be reserved for issuance prior to the Closing, and, when so issued, will be validly issued, fully paid and non-assessable. 4.4 Subsidiaries. (a) Schedule 4.4 sets forth (i) the name and number of shares of stock (or other equity interest) owned by the Company of each corporation, partnership, joint venture or in which the Company has, directly or indirectly, an equity interest therein (individually, a "Subsidiary" and collectively, "Subsidiaries"); (ii) the jurisdiction of incorporation or organization, capitalization and ownership of each Subsidiary; and (iii) the jurisdictions in which each Subsidiary is qualified or licensed to do business as a foreign entity. (b) The Company owns of record and beneficially all the capital stock of each of the Subsidiaries free and clear of all Encumbrances. Each Subsidiary is a Person duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted and is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction listed on Schedule 4.4. (c) No Subsidiary has a taxable presence or permanent establishment in any country other than the United States. (d) Each of the outstanding shares of capital stock (or other equity interests) of each Subsidiary has been duly authorized and is validly issued, fully paid and nonassessable and is free of preemptive rights. 9 Except as set forth on Schedule 4.4, there are not, and on the Closing Date there will not be, outstanding any (i) options, warrants or other rights to purchase or acquire the capital stock of any Subsidiary, (ii) securities convertible into or exchangeable for shares of such capital stock or any other debt or equity security of any Subsidiary or (iii) other commitments of any kind for the issuance of additional shares of capital stock or any other debt or equity security of any Subsidiary or options, warrants or other rights to purchase or acquire such securities. 4.5 Authority. The Company has full corporate power and authority to execute and deliver this Agreement and each other agreement to which it is or will be a party that is contemplated hereby (collectively, the "Transaction Documents"), to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated on its part, hereby and thereby. The execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents to which it is or will be a party and the consummation of the transactions contemplated on its part hereby or thereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement and each of the other Transaction Documents to which the Company currently is a party have been duly executed and delivered by the Company and (assuming due execution and delivery by the other parties hereto and thereto) constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally and subject to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). Each Transaction Document to be executed by the Company at the time of or following the execution of this Agreement will be duly executed and delivered by the Company, and (assuming due execution and delivery by the other party or parties thereto) will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting creditors' rights generally and subject to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.6 No Violation. The execution, delivery and performance of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby do not and will not (a) assuming compliance with requirements of the Missouri Department of Insurance and assuming the receipt of the other regulatory approvals identified on Schedule 4.6, violate any Requirements of Law applicable to the Company, (b) require the Company to obtain the consent, waiver, approval, license or authorization of, or make any notice or filing by the Company with, any Person or Governmental Authority, except as may be required by the Missouri Department of Insurance and for any other regulatory filings or consents identified on Schedule 4.6, or (c) violate, result (with or without notice or the passage of time, or both) in a breach of or give rise to the right to accelerate, terminate or cancel any obligation under, or constitute (with or without notice or the passage of time, or both) a default under, any of the terms or provisions of any charter or bylaws, indenture, mortgage, agreement, contract, order, judgment, ordinance, regulation or decree to which the Company is subject or by which the Company is bound. 10 4.7 Litigation. Except as set forth on Schedule 4.7 hereto, there are no actions, suits, proceedings, claims, disputes or investigations pending or, to the knowledge of the Company, threatened, at law, in equity, in arbitration or before any Governmental Authority against the Company or involving any assets of the Company. To the knowledge of the Company, no basis exists for any such action, suit, proceeding, claim, dispute or investigation. 4.8 Financial Statements. The following financial statements (the "Financial Statements") of the Company have been delivered to the Purchasers by the Company: (a) audited consolidated balance sheet, statement of income and cash flow, and statement of changes in financial position of the Company as of and for the year ended December 31, 1999, together with the notes thereto and the report of its independent auditors with respect thereto; and (b) unaudited consolidated balance sheet, statements of income and cash flow, and statement of changes in financial position of the Company as of and for each of the nine months ended September 30, 2000 and 1999 (collectively, the "Interim Financial Statements"). The Financial Statements have been prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods indicated and fairly present the financial position, results of operations, and changes in financial position of the Company as of the indicated dates and for the indicated periods (except, in the case of the Interim Financial Statements, for the absence of notes thereto and subject to normal year-end audit adjustments and accruals required to be made in the ordinary course of business which are not materially adverse to and are consistent with past practices of the Company). 4.9 Compliance with Laws. Except as set forth on Schedule 4.9, the Company is and since January 1, 1999, has been, in compliance, in all material respects, with all Requirements of Law. 4.10 No Material Adverse Change. Except as set forth on Schedule 4.10, since December 31, 1999, there has not been (a) any material adverse change in the assets, properties, liabilities, businesses, prospects, condition (financial or otherwise) or results of operations of the Company or (b) any sale, lease or other disposition or encumbrance of any material asset of the Company or any breach, default, violation or termination of any material contract of the Company. 4.11 No Undisclosed Liabilities. Except as set forth on Schedule 4.11 or disclosed or referred to in this Agreement, the Company: (a) does not have any debts, liabilities or obligations, whether accrued, absolute, contingent or otherwise, and whether due or to become due, except to the extent incurred in the ordinary course of business or reflected in the Financial Statements; and (b) has not incurred any debts, liabilities or obligations, materially adversely affecting, in the aggregate, the business, or financial condition, of the Company taken as a whole. 11 4.12 Conduct of Business; Certain Actions. Except as set forth on Schedule 4.12 or as contemplated by this Agreement or the Transaction Documents, since September 30, 2000, the Company has conducted its business and operations in the ordinary course and consistent with its past practices and has not (a) paid or declared any dividend or distribution or purchased or retired any indebtedness from any holder of capital stock of the Company (a "Stockholder") and has not purchased, retired, or redeemed any capital stock from any Stockholder, (b) increased the compensation of any of the directors, officers, or key employees of the Company, except for wage and salary increases made in the ordinary course of business and consistent with the past practices of the Company, (c) made any capital expenditures exceeding $100,000 individually or $800,000 in the aggregate, (d) sold any asset (or any group of related assets) in any transaction (or series of related transactions) in which the purchase price for such asset (or group of related assets) exceeded $25,000 individually or $100,000 in the aggregate, (e) discharged or satisfied any material Encumbrance or paid any obligation or liability, absolute or contingent, other than current liabilities incurred and paid in the ordinary course of business, (f) made or guaranteed any loans or advances to any party whatsoever, (g) suffered or permitted any Encumbrance to arise or be granted or created against or upon any of the assets of the Company, real or personal, tangible or intangible, (h) cancelled, waived, or released any of the Company's debts, rights, or claims against third parties, (i) amended the Certificate of Incorporation or Bylaws of the Company, (j) made, paid or incurred any severance or termination payment or obligation therefor with respect to any employee, consultant, or sales representative of the Company, (k) made any change in the method of accounting of the Company, (l) made any investment or commitment therefor in any Person, (m) made, entered into, amended, or terminated any written employment contract (or any oral employment contract involving more than $50,000 per year) created, made, amended, or terminated any bonus, stock option, pension, retirement, profit sharing, or other employee benefit plan or arrangement, or withdrawn from any "multi-employer plan" (as defined in Section 414(f) of the Internal Revenue Code of 1986, as amended) so as to create any liability under Article IV of ERISA to any entity, (n) amended or experienced a termination of any material contract, agreement, lease, franchise, or license to which the Company is a party, except in the ordinary course of business, (o) incurred or assumed any indebtedness (whether directly or by way of guaranty or otherwise) for borrowed money, except in the ordinary course of business, (p) entered into any other material transaction, except in the ordinary course of business, (q) entered into any contract, commitment, agreement, or understanding to do any acts described in the foregoing clauses (a)-(p) of this Section 4.12, (r) suffered any material damage, destruction, or loss (whether or not covered by insurance) to any assets, (s) experienced any strike, slowdown, or demand for recognition by a labor organization by or with respect to any of the employees of the Company, (t) experienced or effected any shutdown, slow-down, or cessation of any operations conducted by, or constituting part of, the Company, (u) materially accelerated the collection of accounts receivable or decelerated payment of accounts payable, except in the ordinary course of business consistent with past practice, or (v) made or rescinded any material express or deemed election relating to taxes, settled or compromised any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to taxes, or except as may be required by applicable law, made any change to any of its material methods of reporting income or deductions for federal income tax purposes from those employed in the preparation of its most recently filed federal income tax return. 12 4.13 Contracts. Set forth on Schedule 4.13 is a list of all written or oral contracts (other than the Transaction Documents), commitments, leases, and other agreements (including, without limitation, promissory notes, loan agreements, and other evidences of indebtedness) to which the Company is a party or by which the Company or its properties are bound, pursuant to which the obligations thereunder of either party thereto are, or are contemplated as being, in respect of any such individual contracts, commitments, leases, or other agreements during the term thereof, $50,000 or greater, or which are otherwise material to the business of the Company (including, without limitation, all mortgages, deeds of trust, security agreements, pledge agreements, and similar agreements and instruments and all confidentiality agreements). Each such contract, commitment, lease and other agreement is in full force and effect, and, except as set forth on Schedule 4.13, the Company is not and, to the knowledge of the Company, no other party thereto is in default (and no event has occurred which, with the passage of time or the giving of notice, or both, would constitute a default) under any such contracts, commitments, leases, or other agreements. The Company has not waived any right under any such contracts, commitments, leases, or other agreements. Except as set forth on Schedule 4.13, the Company has not guaranteed any obligations of any other Person. 4.14 Taxes. The Company has filed or caused to be filed, or has properly filed extensions for, all income tax returns that are required to be filed and has paid or caused to be paid all amounts as shown on said returns and on all assessments received by it to the extent that such taxes have become due, except taxes the validity or amount of which is being contested in good faith by appropriate proceedings and with respect to which adequate reserves, in accordance with GAAP, have been set aside. The Company has paid or caused to be paid, or has established reserves in accordance with GAAP that the Company reasonably believes to be adequate in all material respects, for all income tax liabilities applicable to the Company for all fiscal years that have not been examined and reported on by the taxing authorities (or closed by applicable statutes). The Company is not a party to any tax sharing agreements. 4.15 Employee Benefit Plans. Set forth on Schedule 4.15 is a list and accurate description of all bonus, deferred compensation, pension, retirement, profit-sharing, thrift savings, stock option (other than the Option Plan, the $6.71 Options and the $1.00 Options), stock ownership or other employee benefit plans applicable to any current or former employees of the Company or any subsidiary each as ("Employee Benefit Plan") including but not limited to "employee benefit plans" within meaning of Section 3(3) of the Employee Retirement and Income Security Act of 1974, as amended ("ERISA"). The Company is in compliance in all material respects with all Requirements of Law in connection with each Employee Benefit Plan. 4.16 Brokers. The Company has not paid and will not be obligated to pay any fee or commission to any broker, finder, investment banker or other intermediary (not including attorneys' fees) in connection with any of the transactions contemplated by this Agreement or by any of the other Transaction Documents. 4.17 Representations Regarding the Insurer. (a) Except as expressly provided on Schedule 4.17(a), the Company hereby reaffirms the representations and warranties (the "Insurance Reps") set forth in subparagraphs (a) through (n) of Section 4.2 of that certain 13 Amended and Restated Investment and Stock Transfer Agreement, dated as of December 11, 1998, by and between the Company and Millers Mutual and relating to the acquisition by the Company of The Millers Specialty Insurance Company, a Missouri property and casualty insurance company (the "Insurer"), and represents and warrants that such representations are true and correct as of the date hereof (other than representations and warranties that are made as of a specific date, which are true and correct as of the dates set forth below), and such subparagraphs (including for this purpose, any definitions of terms used in such subparagraphs, regardless of whether such definitions are included in such subparagraphs) are hereby incorporated by reference in this Section 4.17; provided, that in each case the name "Millers Specialty" shall be read instead to say "Instant Auto Insurance Company." Notwithstanding the foregoing, for the purposes of such representations and warranties that are incorporated by reference herein, (i) all references to "1997" shall instead be deemed to be references to "1999" and all references to "December 31, 1997" shall instead be deemed to be references to "December 31, 1999," (ii) all references to "March 26, 1997" shall instead be deemed to be references to "September 30, 2000," (iii) Sections 4.2(f)(v) and 4.2(g)(iii) and (iv) are not reaffirmed or incorporated by reference herein, (iv) Sections 4.2(i)and 4.2 (l) are not reaffirmed or incorporated by reference herein, and (v) all references to the "Annual Statement" and the "Interim Statement" shall be deemed to be references to the most recent annual statements and quarterly statements, respectively, of the Insurer, as filed with the appropriate insurance regulatory authorities. A copy of the Insurance Reps are attached hereto as Exhibit L. (b) Schedule 4.17(b) attached hereto sets forth a complete list of all licenses, permits and authorizations of any insurance regulatory authority that are held by or applied for by the Insurer (together, in the case of each such license, permit or authorization that has been applied for but not received, the status of such application). None of such licenses, permits or authorizations has been revoked, suspended or restricted by any insurance regulatory authority and, to the knowledge of the Company, no such action on the part of any insurance regulatory authority has been threatened. (c) The loss reserves of the Insurer on the most recent statutory financial statements of the Insurer (copies of which have been supplied to the Purchasers) have been determined in all material respects in accordance with generally accepted actuarial principles consistently applied, are fairly stated in accordance with sound actuarial principles, meet the requirements of applicable insurance laws and regulations of the applicable insurance regulatory authority and have been reviewed and approved of by Milliman & Robertson, Inc. in their Statement of Actuarial Opinion for the year ended December 31, 1999. (d) The Company has previously furnished to the Purchasers true and complete copies of the annual convention statements and quarterly convention statements of the Insurer for the years ended December 31, 1998 and December 31, 1999. Such statements and the statutory balance sheets and statements of operating included therein fairly present the admitted assets, liabilities and surplus, results of operations and changes in surplus of the Insurer as of the dates and for the periods indicated therein and have been prepared in conformity with applicable statutory accounting practices, applied on a consistent basis throughout the periods indicated. 14 4.18 Private Offering. No form of general solicitation or general advertising has been used by the Company or its representatives in connection with the offer or sale of the Company Shares. Assuming the accuracy of the representations made by each of the Purchasers, no registration of the Company Shares, pursuant to the provisions of the Securities Act or any state securities or "blue sky" laws, will be required by the offer, sale or issuance of such securities. 4.19 Accuracy of Information Furnished. Except as may be qualified by the information contained in this Agreement, including the exhibits and schedules hereto, the representations and warranties of the Company contained in this Agreement and the other historical factual information furnished by the Company to the Purchasers, taken as a whole, did not contain (as of the time any such statement was made or any such information was delivered) any untrue statement of a material fact, or omission to state any fact which is necessary to make such statements, in the light of the circumstances under which they were made, not misleading. Article 5 REPRESENTATIONS AND WARRANTIES OF CAPITAL Z TO VESTA Each of Fund II and Private Fund II severally, and not jointly, represents and warrants to Vesta as follows: 5.1 Organization. Such Purchaser is a limited partnership, validly existing and in good standing under the laws of the jurisdiction of its organization. 5.2 Authority. (a) Such Purchaser has full partnership power and authority to execute and deliver this Agreement and the Vesta Registration Rights Agreement, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated on its part hereby and thereby; (b) the execution, delivery and performance by such Purchaser of this Agreement and the Vesta Registration Rights Agreement have been duly authorized by all necessary partnership action on the part of such Purchaser; and (c) each of this Agreement and the Vesta Registration Rights Agreement has been duly executed and delivered by such Purchaser and (assuming due execution and delivery by the other parties hereto and thereto) constitutes a legal, valid and binding agreement of such Purchaser, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally and subject to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3 No Violation. The execution and delivery by such Purchaser of this Agreement and the Vesta Registration Rights Agreement, the performance by such Purchaser of its obligations hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby will not (a) assuming compliance with the requirements of the Missouri Department of Insurance, violate any Requirements of Law applicable to such Purchaser, (b) require such Purchaser to obtain the consent, waiver, approval, license or authorization of, or make any notice or filing by such Purchaser with, any Person or Governmental Authority, except as may be required by the requirements 15 of the Missouri Department of Insurance, or (c) violate, result (with or without notice or the passage of time, or both) in a breach of or give rise to the right to accelerate, terminate or cancel any obligation under or constitute (with or without notice or the passage of time, or both) a default under, any of the terms or provisions of any certificate of limited partnership or partnership agreement, indenture, mortgage, agreement, contract, order, judgment, ordinance, regulation or decree to which such Purchaser is subject or by which such Purchaser is bound. 5.4 Brokers. Such Purchaser has not paid or become obligated to pay any fee or commission to any broker, finder, investment banker or other intermediary (not including attorneys' fees) in connection with this Agreement. 5.5 Securities Act Representations. (a) Except as expressly contemplated hereby, such Purchaser is acquiring its portion of the Vesta Shares for investment for its own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act. Except as expressly contemplated hereby, such Purchaser does not have any present intention of selling, granting any participation in, or otherwise distributing the Vesta Shares it is purchasing otherwise than pursuant to an effective registration statement under the Securities Act or in a transaction exempt from the registration requirements under the Securities Act and applicable state securities laws. Except as expressly contemplated hereby, such Purchaser does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Vesta Shares it is purchasing. (b) Such Purchaser acknowledges that the issuance of its portion of the Vesta Shares will not be registered under the Securities Act or any state securities laws on the basis of a claimed exemption by Vesta that the issuance of the Vesta Shares as provided for herein is exempt from registration under the Securities Act and applicable state securities laws. Such Purchaser acknowledges that the availability of such exemption is predicated in part on such Purchaser's representations set forth in this Article 5 and that Vesta is relying on such representations. (c) Such Purchaser has received all the information it considers necessary or appropriate for deciding whether to accept the Vesta Shares it is purchasing. Such Purchaser has had an opportunity to ask questions of and to receive answers from Vesta regarding the terms and conditions of the issuance of the Vesta Shares it is purchasing and the business, properties, financial condition and prospects of Vesta and to obtain additional information (to the extent Vesta possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to such Purchaser or to which such Purchaser had access. (d) Such Purchaser acknowledges that it is able to bear the economic risk of the investment in the Vesta Shares it is purchasing, and has such knowledge and experience in financial and business matters that it is 16 capable of evaluating the benefits and risks of the investment in the Vesta Shares it is purchasing. (e) Such Purchaser is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. (f) Such Purchaser acknowledges that the Vesta Shares it is purchasing may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom and that in the absence of any effective registration statement covering such Vesta Shares or an available exemption from registration under the Securities Act, such Company Shares must be held indefinitely. Such Purchaser further acknowledges that the Vesta Shares it is purchasing may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of that rule are met. (g) Such Purchaser acknowledges that each certificate representing any of the Vesta Shares it is purchasing will be endorsed with a legend substantially similar to the following: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT. Article 6 REPRESENTATIONS AND WARRANTIES OF VESTA TO CAPITAL Z Vesta represents and warrants to each of Fund II and Private Fund II as follows (each such representation and warranty being qualified by the information set forth in any disclosure schedule relating to such representation or warranty, as described in Section 10.10 hereof), provided, that the term "Vesta" shall refer to Vesta and each of the Vesta Subsidiaries, unless the context otherwise requires: 6.1 Corporate Organization. Vesta is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite corporate power and authority to lease the properties it operates as lessee and to carry on its business as it is now being conducted and is duly qualified or licensed to do business and is in good standing in each jurisdiction in which such qualification is necessary, except where the failure to be so qualified or licensed or be in good standing would not reasonably be expected, individually or in the aggregate, to have a material adverse effect on Vesta. True and complete copies of the Restated Certificate of 17 Incorporation of Vesta (the "Vesta Charter") and the Bylaws of Vesta (the "Vesta Bylaws"), as amended to date, have been delivered to each of Fund II and Private Fund II. 6.2 Capital Stock. As of the date hereof, the authorized capital stock of Vesta consists in its entirety of (a) 100,000,000 shares of Vesta Common Stock, of which 18,825,832 shares are issued and outstanding (as of December 15, 2000) and (b) 5,000,000 shares of Preferred Stock, par value $.01 per share (the "Vesta Preferred Stock"), of which 2,950,000 shares are designated as Series A Convertible Preferred Stock, par value $.01 per share (the "Vesta Series A Preferred Stock"), of which 2,950,000 shares are issued and outstanding. All of the outstanding shares of capital stock of Vesta have been duly and validly authorized and issued, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws. Except for shares of capital stock of Vesta issuable pursuant to (i) this Agreement, (ii) the conversion of the Vesta Series A Preferred Stock, and (iii) stock options granted under (A) the Vesta Insurance Group, Inc. Long Term Incentive Plan and (B) the Vesta Insurance Group, Inc. Non-Employee Directors Stock Plan, there are no options, warrants, conversion privileges or other rights outstanding to purchase or otherwise acquire any authorized but unissued shares of capital stock or other securities of Vesta. There are no preemptive rights held by any Person with respect to any capital stock or other securities of Vesta. 6.3 Vesta Shares. The Vesta Shares to be sold by Vesta to Capital Z in accordance with the terms of this Agreement have been duly authorized and have been or, by the Closing, will be, validly issued, fully paid and non-assessable. At the Closing, each of Fund II and Private Fund II will acquire good and marketable title to the Vesta Shares it is purchasing, free and clear of any and all Encumbrances, except such Encumbrances as may exist under applicable federal and state securities laws. 6.4 Subsidiaries. (a) Schedule 6.4 sets forth (i) the name and percentage of the equity interests owned by Vesta of each Person in which Vesta has, directly or indirectly, an equity interest therein (individually, a "Vesta Subsidiary" and collectively, "Vesta Subsidiaries"); (ii) the jurisdiction of incorporation or organization and ownership of each Vesta Subsidiary; and (iii) the jurisdictions in which each Vesta Subsidiary is qualified or licensed to do business as an insurance company. (b) Vesta owns of record and beneficially all the capital stock of each of the Vesta Subsidiaries free and clear of all Encumbrances. Each Vesta Subsidiary is a Person duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted and is duly qualified to do business as an insurance company and is in good standing in each jurisdiction listed on Schedule 6.4. (c) No Vesta Subsidiary has a taxable presence or permanent establishment in any country other than the United States. 18 (d) Each of the outstanding shares of capital stock (or other equity interests) of each Vesta Subsidiary has been duly authorized and is validly issued, fully paid and nonassessable and is free of preemptive rights. There are not, and on the Closing Date there will not be, outstanding any (i) options, warrants or other rights to purchase or acquire the capital stock of any Vesta Subsidiary, (ii) securities convertible into or exchangeable for shares of such capital stock or any other debt or equity security of any Vesta Subsidiary or (iii) other commitments of any kind for the issuance of additional shares of capital stock or any other debt or equity security of any Vesta Subsidiary or options, warrants or other rights to purchase or acquire such securities. 6.5 Authority. Vesta has full corporate power and authority to execute and deliver this Agreement and each other agreement to which it is or will be a party that is contemplated hereby (collectively, the "Vesta Transaction Documents"), to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated on its part, hereby and thereby. The execution, delivery and performance by Vesta of this Agreement and each of the other Vesta Transaction Documents to which it is or will be a party and the consummation of the transactions contemplated on its part hereby or thereby have been duly authorized by all necessary corporate action on the part of Vesta. This Agreement and each of the other Vesta Transaction Documents to which Vesta currently is a party have been duly executed and delivered by Vesta and (assuming due execution and delivery by the other parties hereto and thereto) constitute the legal, valid and binding obligation of Vesta, enforceable against Vesta in accordance with their terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally and subject to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). Each Vesta Transaction Document to be executed by Vesta at the time of or following the execution of this Agreement will be duly executed and delivered by Vesta, and (assuming due execution and delivery by the other party or parties thereto) will constitute a legal, valid and binding obligation of Vesta, enforceable against Vesta in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization, or similar laws affecting creditors' rights generally and subject to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). 6.6 No Violation. The execution, delivery and performance of this Agreement and each of the other Vesta Transaction Documents by Vesta and the consummation by it of the transactions contemplated hereby and thereby do not and will not (a) assuming compliance with the requirements of the Missouri Department of Insurance and assuming the receipt of the other regulatory approvals identified on Schedule 6.6, violate any Requirements of Law applicable to Vesta, (b) require Vesta to obtain the consent, waiver, approval, license or authorization of, or make any notice or filing by Vesta with, any Person or Governmental Authority, except as may be required by the Missouri Department of Insurance and for any other regulatory filings or consents identified on Schedule 6.6 hereto, or (c) violate, result (with or without notice or the passage of time, or both) in a breach of or give rise to the right to accelerate, terminate or cancel any obligation under, or constitute (with or without notice or the passage of time, or both) a default under, any of the terms or provisions of the Vesta Charter or Vesta Bylaws or any indenture, 19 mortgage, agreement, contract, order, judgment, ordinance, regulation or decree to which Vesta is subject or by which Vesta is bound. 6.7 Brokers. Vesta has not paid or become obligated to pay any fee or commission to any broker, finder, investment banker or other intermediary (not including attorneys' fees) in connection with this Agreement. 6.8 Litigation. Except as disclosed in the Vesta Documents, to the best of Vesta's knowledge, there is no action, suit, proceeding or investigation pending or overtly threatened against Vesta which questions the validity of this Agreement or any of the Vesta Transaction Documents or the right of Vesta to enter into them, or to consummate the transactions contemplated hereby or thereby, or which might result, either individually or in the aggregate, in any material adverse changes in the assets, condition, affairs or prospects of Vesta, financially or otherwise, nor is Vesta aware that there is any basis for the foregoing. Except as disclosed in the Vesta Documents, Vesta is not subject to the provisions of any order, writ, action, judgment or decree of any court or government agency or instrumentality which names Vesta as a party. 6.9 Patents and Trademarks. Vesta has sufficient right, title and ownership of all patents, trademarks, service marks, trade names, copyrights, licenses, information and proprietary rights, or adequate licenses, rights or purchase options with respect to the foregoing, necessary for its business as presently conducted, or is able to obtain on terms which will not materially adversely affect its business all necessary permits, licenses and other authority with respect thereto without any known conflict with or infringement of the rights of others. 6.10 Agreements; Action. (a) Except for agreements explicitly identified herein or in the Vesta Documents, there are no employment or other material agreements, understandings or proposed transactions between Vesta and any of its officers, directors, affiliates, or any affiliate thereof that would be required to be disclosed pursuant to the Securities Act or the Exchange Act or the rules and regulations promulgated by the SEC with respect thereto. (b) Except in the ordinary course of business consistent with past practices or as set forth in the Vesta Documents, there are no agreements, understandings, instruments, contracts or proposed transactions to which Vesta is a party or by which it is bound which involve obligations of, or payments to Vesta of, amounts in excess of one million dollars ($1,000,000). (c) Vesta is not a party to or is not bound by any contract, agreement or instrument, or subject to any restriction under the Vesta Charter or the Vesta Bylaws, which materially and adversely affects its business as now conducted, its properties or its financial conditions. 6.11 Registration Rights. Except as contemplated by this Agreement and except for registration rights granted to (a) the holders of the Vesta Series A Preferred Stock, (b) FolksAmerica Reinsurance Company and (c) RK 20 Carvill Ltd., Vesta has not granted or agreed in writing to grant any registration rights, including piggyback rights, to any Person. 6.12 Disclosure. Vesta has fully provided each of Fund II and Private Fund II with all the information that such Purchaser has requested relating to Vesta, the issuance of the Vesta Shares and the Vesta Registration Rights Agreement. No representation, warranty or statement by Vesta in this Agreement or in any written statement or certificate furnished or to be furnished to either Fund II or Private Fund II pursuant to this Agreement contains or will contain any untrue statement of a material fact or, when taken together, omits or will omit to state a material fact necessary to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. 6.13 Corporate Documents. (a) Vesta has heretofore furnished each of Fund II and Private Fund II with a true and complete copy of each report, schedule, registration statement and definitive proxy statement filed by it with the Securities and Exchange Commission (the "SEC") (as any such documents have since the time of their original filing been amended, the "Vesta Documents") since January 1, 1999, which are all the documents (other than preliminary material) that it was required to file with the SEC since such date. As of its respective dates, each Vesta Document did not contain any untrue statements of material facts or omit to state material facts required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the financial statements set forth in Vesta's Annual Report on Form 10-K for the year ended December 31, 1999 were subsequently restated. As of its respective date, each Vesta Document complied in all material respects with the applicable requirements of the Securities Act, and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated under each of such statutes. The financial statements contained in the Vesta Documents, together with the notes thereto, have been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods indicated (except as may be indicated in the notes thereto, or, in the case of the unaudited financial statements, as permitted by Form 10-Q), reflect all known liabilities of Vesta required to be stated therein, including all known contingent liabilities as of the end of each period reflected therein, and present fairly the financial condition of Vesta at and as of said dates and the consolidated results of operations and cash flows of Vesta for the periods then ended; provided, however, that the financial statements set forth in Vesta's Annual Report on Form 10-K for the year ended December 31, 1999 were subsequently restated. The consolidated balance sheet of Vesta at September 30, 2000 included in the Vesta Documents is herein sometimes referred to as the "Vesta Balance Sheet." (b) Except as disclosed in the Vesta Documents and except for liabilities and obligations incurred in the ordinary course of business consistent with past practices, since the date of the Vesta Balance Sheet, neither Vesta nor any of the Vesta Subsidiaries has incurred any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that have, or would be required to be reflected or reserved against on a consolidated balance sheet of Vesta (including the notes thereto) prepared in accordance with GAAP, as applied in preparing the Vesta Balance Sheet. 21 6.14 Title to Property and Assets. Vesta owns its property and assets free and clear of all Encumbrances, except such Encumbrances which arise in the ordinary course of business and do not materially impair Vesta's ownership or use of such property or assets. With respect to the property and assets it leases, Vesta is in compliance with such leases and, to the best of its knowledge, holds a valid leasehold interest with respect thereto, free of any Encumbrances. 6.15 Insurance. Vesta maintains such types and amounts of insurance with respect to its business and properties, on both a per occurrence and an aggregate basis, as are customarily carried by persons or entities engaged in the same or similar business as Vesta. 6.16 No Adverse Changes. Except as set forth in the Vesta Documents, since September 30, 2000, there has not been (a) any material adverse change in the financial condition, results of operations, assets, liabilities, business or prospects of Vesta; (b) any material liability or obligation of any nature whatsoever (contingent or otherwise) incurred by Vesta, other than (i) liabilities incurred in the ordinary course of business and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under GAAP to be reflected in the financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of Vesta; (c) any material asset or property of Vesta made subject to an Encumbrance of any kind; (d) any waiver of any material valuable right of Vesta, or any cancellation of any material debt or claim held by Vesta; (e) except for (i) the payment of quarterly dividends and interest on Vesta's trust preferred securities and (ii) interest on unpaid dividends owing to the holders of Vesta's Class A Preferred Stock, in each case in the ordinary course of business consistent with past practice, any payment of dividends on, other distributions with respect to, or any direct or indirect redemption or acquisition of, any shares of the capital stock of the Vesta, or any agreement or commitment therefor; (f) any issuance of any capital stock of Vesta, other than (1) upon the exercise of employee stock options, and (2) the issuance of shares of Vesta Common Stock, or stock options to purchase Vesta Common Stock, to members of the Board of Directors, key employees, special advisors and consultants of Vesta, all of which issuances were authorized by the Board of Directors of Vesta, including committees and individuals authorized by the Board of Directors of Vesta; (g) any sale, assignment or transfer of any tangible or intangible material assets of Vesta, except for sales, assignments or transfers in the ordinary course of business; (h) any loan by Vesta to any officer, director, employee, consultant or shareholder of Vesta, or any agreement or commitment therefor other than routine travel or relocation advances, or loans made in the ordinary course of business; (i) any material damage, destruction or loss (whether or not covered by insurance) affecting the assets, property, business or prospects of Vesta; or (j) any change in the accounting methods, practices or policies followed by Vesta, including any change in depreciation or amortization policies or rates. 6.17 Taxes. Vesta has filed or caused to be filed all federal, state and local tax returns which are required to be filed by it, and, to the best of Vesta's knowledge, all such returns are true and correct. Except for taxes which are being contested in good faith by Vesta or for which adequate reserves are being held by Vesta, Vesta has paid or caused to be paid all taxes pursuant to such returns or pursuant to any assessments received by it or which 22 it is obligated to withhold from amounts owing to any employee, creditor or third party. The income tax returns of Vesta have never been audited by any federal, state, or local authorities. 6.18 Private Offering. No form of general solicitation or general advertising has been used by Vesta or its representatives in connection with the offer or sale of the Vesta Shares. Assuming the accuracy of the representations made by each of Fund II and Private Fund II, no registration of the Vesta Shares, pursuant to the provisions of the Securities Act or any state securities or "blue sky" laws, will be required by the offer, sale or issuance of such securities. Article 7 COVENANTS AND AGREEMENTS To induce the other parties to enter into this Agreement and to consummate the transactions contemplated hereby, and without limiting any covenant, agreement, representation or warranty made elsewhere in this Agreement, each party agrees that between the date of this Agreement and the termination of this Agreement pursuant to Section 9.1, except as may be consented to by each of the other parties or as otherwise contemplated by this Agreement, as follows: 7.1 Company Access. Upon reasonable notice, the Company will afford each Purchaser and each of the officers, employees, counsel, accountants, actuaries and other authorized representatives of each Purchaser access, during normal business hours, to all the properties, books, contracts, commitments, records and employees of the Company and the Company will furnish promptly to each Purchaser true and complete copies of all such information concerning the business, properties and personnel of the Company as such Purchaser may reasonable request. 7.2 Vesta Access. Upon reasonable notice, Vesta will afford each of Fund II and Private Fund II and each of the officers, employees, counsel, accountants, actuaries and other authorized representatives of each such Purchaser access, during normal business hours, to all the properties, books, contracts, commitments, records and employees of Vesta and Vesta will furnish promptly to each such Purchaser true and complete copies of all such information concerning the business, properties and personnel of Vesta as such Purchaser may reasonable request. 7.3 Conduct of Business of the Company Prior to Closing. After the date hereof and prior to the Closing Date, except as expressly provided for in this Agreement or as consented to in writing by Vesta and Fund II, the Company will not: (a) amend its Certificate of Incorporation or Bylaws or similar organizational documents; provided, however, that prior to the Closing, the Company will file the Certificate of Elimination and the Certificate of Amendment of the Certificate of Incorporation of the Company in the form attached as Exhibit K hereto; 23 (b) split, combine or reclassify any shares of the Company's capital stock; (c) declare or pay any dividend or distribution (whether in cash, stock or property) in respect of its capital stock; (d) take any action, or knowingly omit to take any action, that would, or that would reasonably be expected to, result in (i) any of the representations and warranties of the Company set forth in Article 4 becoming untrue or (ii) any of the conditions to the obligations of the Purchasers set forth in Section 8.1 or Section 8.3 not being satisfied; or (e) enter into any agreement or commitment to do any of the foregoing. 7.4 Conduct of Business of the Company Prior to Conversion of the Series E Preferred Stock. After the date hereof and prior to the earlier of (i) date on which the Series E Preferred Stock is automatically converted into Series D Preferred Stock pursuant to Section 7(b) of the Certificate of Designations of the Series E Preferred Stock and (ii) June 1, 2001, except as expressly provided for in this Agreement or as consented to in writing by Vesta, the Company will carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted, pay its debts and taxes when due, pay or perform other obligations when due, and, to the extent consistent with its business, use all reasonable efforts consistent with past practice and policies to preserve intact the Company's present business organization, keep availabomers, suppliers, distributors, licensors, licensees, and others having business dealings with itle the services of its present officers and key employees and preserve its relationships with cust, to the end that the goodwill and ongoing business of the Company shall be unimpaired at the time of the conversion of the Series E Preferred Stock into Series D Preferred Stock. The Company shall promptly notify Vesta of any event or occurrence not in the ordinary course of business of the Company. Except as expressly contemplated by this Agreement, the Company shall not, without the prior written consent of Vesta: (a) enter into any commitment or transaction (i) that requires performance over a period longer than six months in duration except transactions in the ordinary course of business, or (ii) to purchase fixed assets for a purchase price in excess of $10,000; (b) grant any severance or termination pay to any director, officer or any other employee; (c) transfer to any Person any rights to patents, trademarks, trade names, service marks, copyrights, and any applications therefor, maskworks, net lists, schematics, technology, know-how, computer software programs or applications and tangible or intangible proprietary information or material that are used or currently proposed to be used in the business of the Company; (d) enter into or amend any agreements pursuant to which any other party is granted marketing or other rights of any type or scope with respect to any products or technology of the Company; 24 (e) violate, amend or otherwise modify the terms of any of the contracts set forth in Schedule 4.13; (f) commence or settle any litigation or arbitration; (g) incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities of the Company or guarantee any debt securities of others, in an amount in excess of $50,000; (h) adopt or amend any employee benefit plan, or enter into any employment contract, pay any special bonus or special remuneration to any of its directors or employees, or increase the salaries or wage rates of its employees; (i) revalue any of its assets, including without limitation writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business; (j) pay, discharge or satisfy in an amount in excess of $10,000 with respect to any one case, claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business of liabilities reflected or reserved against in the Company's financial statements (or the notes thereto); (k) make or change any material election in respect of taxes, adopt or change any accounting method in respect of taxes, file any material return or any amendment to a material return, enter into any closing agreement, settle any claim or assessment in respect of taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; (l) consummate the acquisition of the capital stock of, or all or substantially all of the assets of, the Harbor Insurance Group, Inc.; or (m) take, or agree in writing or otherwise to take, any of the actions described in Sections 7.4(a) through (l) above, or any action which would make any of the representations or warranties of the Company contained in this Agreement untrue or incorrect or prevent the Company from performing its covenants hereunder. 7.5 Conduct of Business of Vesta. After the date hereof and prior to the Closing Date, except as expressly provided for in this Agreement or as consented to in writing by Fund II, Vesta will not: (a) amend the Vesta Charter of the Vesta Bylaws; (b) split, combine or reclassify any shares of Vesta's capital stock; 25 (c) declare or pay any dividend or distribution (whether in cash, stock or property) in respect of its capital stock, other than (i) the declaration and payment of regular quarterly dividends and interest on its trust preferred securities and (ii) interest on unpaid dividends owing to the holders of Vesta's Class A Preferred Stock in the ordinary course of business consistent with practice; (d) take any action that would, or that would reasonably be expected to, result in (i) any of the representations and warranties of Vesta set forth in Article 6 becoming untrue or (ii) any of the conditions to the obligations of Fund II or Private Fund II set forth in Section 8.1 or Section 8.5 not being satisfied; or (e) enter into any agreement or commitment to do any of the foregoing. 7.6 Commercially Reasonable Efforts. Subject to the terms and conditions of this Agreement, each party will use its commercially reasonable efforts to fulfill all conditions to the Closing within the party's reasonable control, and to consummate and make effective as promptly as practicable the transactions provided for herein. 7.7 Updating of Company Disclosure Schedules. If, subsequent to the date of this Agreement and prior to the Closing Date, an event occurs that renders untrue any representation or warranty of the Company made herein (a "Company Subsequent Event"), the Company shall promptly deliver to each Purchaser an amended or supplemented disclosure schedule (a "Subsequent Company Disclosure Schedule") which will contain a description of the Company Subsequent Event. Neither the existence of any Company Subsequent Event nor the delivery of any Company Subsequent Disclosure Schedule shall in any way modify the representations and warranties of the Company in this Agreement made as of the date of this Agreement, nor shall the foregoing in any way be taken into account in determining whether the conditions to the obligations of each Purchaser to effect the Closing have been satisfied. If the Company acknowledges in writing that, as a result of any Company Subsequent Event disclosed in any Company Subsequent Disclosure Schedule, the conditions to the obligations of each Purchaser to effect the Closing are not satisfied, and if each Purchaser nevertheless elects to effect the Closing, then such Company Subsequent Disclosure Schedule shall be deemed (for purposes of the Company's bring-down of its representations and warranties to the Closing Date in accordance with Section 8.3(b) hereof) to modify the representations and warranties to which it relates. 7.8 Updating of Vesta Disclosure Schedules. If, subsequent to the date of this Agreement and prior to the Closing Date, an event occurs that renders untrue any representation or warranty of Vesta made herein (a "Vesta Subsequent Event"), Vesta shall promptly deliver to each of Fund II and Private Fund II an amended or supplemented disclosure schedule (a "Subsequent Vesta Disclosure Schedule") which will contain a description of the Vesta Subsequent Event. Neither the existence of any Vesta Subsequent Event nor the delivery of any Vesta Subsequent Disclosure Schedule shall in any way modify the representations and warranties of the Vesta in this Agreement made as of the date of this Agreement, nor shall the foregoing in any way be taken into account in determining whether the conditions to the obligations of each of Fund II and Private Fund II to effect the Closing have been satisfied. If Vesta acknowledges 26 in writing that, as a result of any Vesta Subsequent Event disclosed in any Vesta Subsequent Disclosure Schedule, the conditions to the obligations of each of Fund II and Private Fund II to effect the Closing are not satisfied, and if each such Purchaser nevertheless elects to effect the Closing, then such Vesta Subsequent Disclosure Schedule shall be deemed (for purposes of Vesta's bring-down of its representations and warranties to the Closing Date in accordance with Section 8.5(b) hereof) to modify the representations and warranties to which it relates. 7.9 Regulatory Approvals. As promptly as practicable, Vesta will file with the Missouri Department of Insurance a statement relating to its acquisition of voting securities of the Company (the "Acquisition of Control Statement"). Vesta will diligently seek the approval of the Missouri Department of Insurance with respect to the transactions contemplated by this Agreement and referred to in the Acquisition of Control Statement and will consult with the Company in connection with Vesta's attempts to obtain such approval. The Company will provide reasonable cooperation with respect to Vesta's attempts to obtain such approval. Article 8 CONDITIONS PRECEDENT 8.1 Conditions to Each Party's Obligations. The respective obligations of each party to effect the transactions contemplated by this Agreement shall be subject to the fulfillment (or waiver by each Purchaser and the Company) on or before the Closing Date of the following conditions: (a) No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, injunction or other order (whether temporary, preliminary, or permanent) which is in effect and has the effect of prohibiting consummation of the transactions contemplated by this Agreement or restricting in any material respect the operation of the business of the Company and its Subsidiaries or Vesta and the Vesta Subsidiaries (in each case, as contemplated to be conducted following the Closing). (b) Vesta shall have filed a Notice of Disclaimer with the Missouri Department of Insurance relating to its acquisition of Series D Preferred Stock and Series E Preferred Stock hereunder. 8.2 Conditions to the Obligations of the Company. The obligation of the Company to effect the transactions contemplated by this Agreement shall be subject to the fulfillment (or waiver by the Company) on or before the Closing Date of the following additional conditions: (a) Each Purchaser shall have performed in all material respects its obligations under this Agreement required to be performed by it on or prior to the Closing Date pursuant to the terms hereof. 27 (b) The representations and warranties of each Purchaser to the Company contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date as if made at and as of such date, except to the extent that any such representation or warranty is made as of a specified date in which case such representation or warranty shall have been true and correct as of such date. (c) Each of the agreements referenced in Article 2 hereof shall be in full force and effect on the Closing Date. 8.3 Conditions to the Obligations of Each Purchaser. The obligation of each Purchaser to effect the transactions contemplated by this Agreement shall be subject to the fulfillment (or waiver by such Purchaser) on or before the Closing Date of the following additional conditions: (a) The Company shall have performed in all material respects its obligations under this Agreement required to be performed by it on or prior to the Closing Date pursuant to the terms hereof. (b) The representations and warranties of the Company set forth in this Agreement shall be true and correct in all material respects at and as of the Closing Date as if made at and as of such date, except to the extent that any such representation or warranty is made as of a specified date in which case such representation or warranty shall have been true and correct as of such date. (c) Each of the agreements referenced in Article 2 hereof shall be in full force and effect on the Closing Date. (d) There shall not have occurred, since the date of this Agreement, any material adverse change in the assets, properties, liabilities, businesses, business prospects, condition (financial or otherwise) or results of operation of the Company. 8.4 Conditions to the Obligations of Vesta. The obligation of Vesta to effect the transactions contemplated by this Agreement shall be subject to the fulfillment (or waiver by Vesta) on or before the Closing Date of the following additional conditions: (a) Each of Fund II and Private Fund II shall have performed in all material respects its obligations under this Agreement required to be performed by it on or prior to the Closing Date pursuant to the terms hereof. (b) The representations and warranties of each of Fund II and Private Fund II to Vesta contained in this Agreement shall be true and correct in all material respects at and as of the Closing Date as if made at and as of such date, except to the extent that any such representation or warranty is made as of a specified date in which case such representation or warranty shall have been true and correct as of such date. 8.5 Conditions to the Obligations of Capital Z. The obligation of each of Fund II and Private Fund II to effect the transactions contemplated by this Agreement shall be subject to the fulfillment (or waiver by 28 such Purchaser) on or before the Closing Date of the following additional conditions: (a) Vesta shall have performed in all material respects its obligations under this Agreement required to be performed by it on or prior to the Closing Date pursuant to the terms hereof. (b) The representations and warranties of Vesta set forth in this Agreement shall be true and correct in all material respects at and as of the Closing Date as if made at and as of such date, except to the extent that any such representation or warranty is made as of a specified date in which case such representation or warranty shall have been true and correct as of such date. (c) There shall not have occurred, since the date of this Agreement, any material adverse change in the assets, properties, liabilities, businesses, business prospects, condition (financial or otherwise) or results of operation of Vesta. 8.6 Conditions to the Obligations of Mangold. The obligation of Mangold to effect the transactions contemplated by this Agreement shall be subject to the fulfillment (or waiver by Mangold) on or before the Closing Date of the following additional conditions: (a) Vesta shall have purchased the Series D Preferred Stock and the Series E Preferred Stock to be purchased by it pursuant hereto. Article 9 INDEMNIFICATION 9.1 Indemnification. (a) From and after the Closing, each Purchaser severally, and not jointly, shall indemnify and hold harmless the Company, its officers, directors, employees, agents, representatives, subsidiaries, Affiliates and permitted successors and assigns from and against, and promptly reimburse for, any and all loss, diminution in value, damage, cost, expense (including court costs and reasonable attorneys' fees and expenses and costs of investigation), fine, penalty, suit, action, claim, deficiency, liability or obligation (collectively, "Losses"), whether or not involving a Third Party Claim caused by or arising from (i) any Breach by such Purchaser, or (ii) any and all claims of third parties made based upon facts alleged that, if true, would constitute such a Breach by such Purchaser. As used herein, "Affiliate" means, with respect to any Person, any Person who, directly or indirectly, controls, is controlled by or is under common control with that Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. As used herein, "Breach" means, with respect to a party hereto, any representation or warranty of such party to the applicable other party under this Agreement or 29 in any certificate delivered pursuant to this Agreement being untrue when made by such first party to such other party or any breach of any of such first party's covenants or agreements with such other party under this Agreement. (b) From and after the Closing, the Company shall indemnify and hold harmless each Purchaser, its officers, directors, employees, agents, partners, representatives, subsidiaries, Affiliates and permitted successors and assigns from and against, and promptly reimburse for, any and all Losses, whether or not involving a Third Party Claim, caused by or arising from (i) any Breach by the Company, or (ii) any and all claims of third parties made based upon facts alleged that, if true, would constitute such a Breach by the Company. (c) From and after the Closing, each of Fund II and Private Fund II severally, and not jointly, shall indemnify and hold harmless Vesta, its officers, directors, employees, agents, representatives, subsidiaries, Affiliates and permitted successors and assigns from and against, and promptly reimburse for, any and all Losses, whether or not involving a Third Party Claim caused by or arising from (i) any Breach by such Purchaser, or (ii) any and all claims of third parties made based upon facts alleged that, if true, would constitute such a Breach by such Purchaser. (d) From and after the Closing, Vesta shall indemnify and hold harmless each of Fund II and Private Fund II, its officers, directors, employees, agents, partners, representatives, subsidiaries, Affiliates and permitted successors and assigns from and against, and promptly reimburse for, any and all Losses, whether or not involving a Third Party Claim, caused by or arising from (i) any Breach by Vesta, or (ii) any and all claims of third parties made based upon facts alleged that, if true, would constitute such a Breach by Vesta. (e) The representations, warranties, covenants and agreements contained in this Agreement shall not be affected by any party hereto or by anyone on behalf of any such party: (i) investigating, verifying or examining any matters with respect to the Company, Vesta, any Purchaser or the transactions contemplated hereby; (ii) having the opportunity to investigate, verify or examine any matters related to the Company, Vesta, any Purchaser or the transactions contemplated hereby; or (iii) failing to determine or discover any facts which were determinable or discoverable by any such party. All rights contained in this Article 9 are cumulative and are in addition to all other rights and remedies which are otherwise available, pursuant to the terms of this Agreement or applicable law. All indemnification rights shall be deemed to apply in favor of the indemnified party's officers, directors, employees, agents, partners, representatives, subsidiaries, affiliates, and permitted successors and assigns. 9.2 Defense of Third Party Claims. With respect to each third party claim subject to this Article 9 (a "Third Party Claim"), the party seeking indemnification (the "Indemnified Party") shall give prompt notice to the indemnifying party (the "Indemnifying Party") of the Third Party Claim, provided that failure to give such notice promptly shall not relieve or limit the obligations of the Indemnifying Party except to the extent the Indemnifying Party is materially prejudiced thereby. The Indemnifying Party, at its sole cost and expense, may, upon notice to the Indemnified Party within fifteen (15) days after the Indemnifying Party receives notice of the Third Party Claim, assume the defense of the Third Party Claim. If it assumes the defense of a Third Party Claim, then the Indemnifying Party shall select counsel reasonably satisfactory 30 to the Indemnified Party to conduct the defense. The Indemnifying Party shall not consent to a settlement of, or the entry of any judgment arising from, any Third Party Claim, unless (a) the settlement or judgment is solely for money damages and the Indemnifying Party admits in writing its liability to hold the Indemnified Party harmless from and against any losses, damages, expenses and liabilities arising out of such settlement or (b) the Indemnified Party consents thereto, which consent shall not be unreasonably withheld and, in the case of either clause (a) or clause (b), the settlement contains an unconditional release of the Indemnified Party with respect to the Third Party Claim from each Person asserting such claim. The Indemnifying Party shall provide the Indemnified Party with fifteen (15) days prior notice before it consents to a settlement of, or the entry of a judgment arising from, any Third Party Claim. The Indemnified Party shall be entitled to participate in the defense of any Third Party Claim, the defense of which is assumed by the Indemnifying Party, with its own counsel and at its own expense. With respect to Third Party Claims in which the remedy sought is not solely money damages, (i) the Indemnifying Party shall, upon notice to the Indemnified Party within fifteen (15) days after the Indemnifying Party receives notice of the Third Party Claim, be entitled to participate in the defense with its own counsel at its own expense and (ii) the Indemnified Party shall not consent to any settlement of, or entry of any judgment arising from, such Third Party Claim unless the Indemnifying Party consents thereto, which consent shall not be unreasonably withheld. If the Indemnifying Party does not elect to assume or participate in the defense of any Third Party Claim in accordance with the terms of this Section, then the Indemnifying Party shall be bound by the results obtained by the Indemnified Party with respect to the Third Party Claim. The parties shall cooperate in the defense of any Third Party Claim and the relevant records of each party shall be made available on a timely basis. 9.3 Limitations. (a) Company Basket. Notwithstanding anything in this Agreement to the contrary (including Section 9.1(e) hereof), neither the Purchasers, on the one hand, nor the Company, on the other hand, shall be entitled to indemnification from the other for breaches of representations or warranties hereunder unless and until the aggregate amount of indemnifiable claims of the Purchasers, on the one hand, or the Company, on the other hand, as applicable, equals or exceeds $250,000, but the party entitled to indemnification then will be entitled to recover the full amount of all such claims, including the first $250,000 thereof. (b) Vesta Basket. Notwithstanding anything in this Agreement to the contrary (including Section 9.1(e) hereof), neither Capital Z, on the one hand, nor Vesta, on the other hand, shall be entitled to indemnification from the other for breaches of representations or warranties hereunder unless and until the aggregate amount of indemnifiable claims of Capital Z, on the one hand, or Vesta, on the other hand, as applicable, equals or exceeds $100,000, but the party entitled to indemnification then will be entitled to recover the full amount of all such claims, including the first $100,000 thereof. (c) Company Cap. Notwithstanding anything in this Agreement to the contrary (including Section 9.1(e) hereof), following the Closing, neither the Purchasers, on the one hand, nor the Company, on the other hand, shall be liable for, and neither the Purchasers, on the one hand pursuant to Section 9.1(a) or 9.2, nor the Company, on the other hand pursuant to Section 31 9.1(b) or 9.2, shall be obligated to pay, an amount in excess of the total amount that, as of such date, the Purchasers have invested in securities of the Company. (d) Vesta Cap. Notwithstanding anything in this Agreement to the contrary (including Section 9.1(e) hereof), following the Closing, neither Capital Z, on the one hand, nor Vesta, on the other hand, shall be liable for, and neither Capital Z, on the one hand pursuant to Section 9.1(c) or 9.2, nor Vesta, on the other hand pursuant to Section 9.1(d) or 9.2, shall be obligated to pay, an amount in excess of the total amount that, as of such date, Capital Z has invested in securities of Vesta. (e) Commencing Claims for Indemnification. No party shall have any liability for any Breach or for any claims for indemnification hereunder unless a demand for indemnification is made (or the parties agree in writing that a party shall have liability for a Loss hereunder as provided in Section 9.1 related to such Breach, prior to the thirty-sixth (36) month anniversary of the Closing and any such liability shall be deemed waived, and no Person shall have any remedy for any such Breaches; it being the intention of the parties that all claims relating to a Breach of the Agreement shall thereafter be forever barred. Any demand for indemnification hereunder made during such thirty-sixth (36) month period shall remain valid and the representations, warranties, covenants and agreements relating thereto shall remain in effect for purposes of such indemnification claim notwithstanding that the amount or validity of such claim may not be established or resolved within such thirty-sixth (36) month period. Article 10 MISCELLANEOUS 10.1 Termination. This Agreement (and the transactions contemplated hereby) may be terminated as follows: (a) Upon the mutual written consent of the Company, Fund II and Vesta; (b) By the Company or Fund II, if Vesta or Mangold is in material breach of this Agreement and such breach has not been cured within thirty (30) days following the delivery of notice thereof to the applicable Purchaser (provided, that the Company shall not be permitted to terminate this Agreement pursuant to this Section 10.1(b) if, within such thirty (30) day period, another Purchaser that is not in breach agrees to purchase the Company Shares to be purchased by the Purchaser that is in breach); (c) By Vesta, if the Company, Fund II or Private Fund II is in material breach of this Agreement and such breach has not been cured within thirty (30) days following the delivery of notice thereof to the Company; or (d) By any party, if the Closing has not occurred on or before December 31, 2000. 10.2 Effect of Termination. Upon the termination of this Agreement in accordance with Section 10.1 hereof, the parties shall be relieved of any further obligations under this Agreement (other than the obligations set 32 forth in Section 10.7; provided, however, that no termination shall relieve any party of liability for its breach prior to such termination. 10.3 Amendment. This Agreement may be amended only by an instrument in writing signed by each of the parties hereto. 10.4 Waiver. The observance of any term of this Agreement may be waived by the party or parties entitled to enforce such term, but such waiver shall be effective only if it is in a writing signed by the party or parties entitled to enforce such term and against which such waiver is to be asserted. No delay or omission on the part of any party in exercising any right or privilege under this Agreement shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right or privilege under this Agreement operate as a waiver of any other right or privilege under this Agreement nor shall any single or partial exercise of any right or privilege preclude any other or further exercise thereof or the exercise of any other right or privilege under this Agreement. 10.5 Survival. The representations, warranties, covenants and agreements set forth in this Agreement shall survive the Closing. 10.6 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been given or made if in writing and delivered personally, sent by commercial carrier or registered or certified mail (postage prepaid, return receipt requested) or transmitted by facsimile with automated receipt confirmation to the parties at the following addresses and numbers: If to the Company, to: Instant Insurance Holdings, Inc. 8113 Ridgepoint Drive Suite 214 Dallas, Texas 75201 Attention: President with copies, which shall not constitute notice, to: Weil, Gotshal & Manges LLP 100 Crescent Court, Suite 1300 Dallas, Texas 75201-6950 Fax: (214) 746-7777 Attention: R. Jay Tabor 33 If to Fund II or Private Fund II, to: Capital Z Financial Services Fund II, L.P. 54 Thompson Street New York, NY 10012 Fax: (212) 965-2301 Attention: Bradley E. Cooper with copies, which shall not constitute notice to: Weil, Gotshal & Manges LLP 100 Crescent Court, Suite 1300 Dallas, Texas 75201-6950 Fax: (214) 746-7777 Attention: R. Jay Tabor If to Vesta, to: Vesta Insurance Group, Inc. 3760 River Run Road Birmingham, Alabama 35243 Fax: (205) 970-7022 Attention: John W. McCullough If to Mangold, to: 14 Bridgenorth Lane San Antonio, Texas 78218 Fax: (210) 822-6485 10.7 Confidentiality. Each party hereto shall, and shall cause its respective officers, directors, employees, agents and representatives to, maintain confidentiality with respect to, and not disclose, any proprietary or otherwise confidential information of any other party hereto; provided, however, that the limitations provided in this Section 10.7 shall not apply, with respect to any party, to (a) information in the public domain or otherwise publicly available (other than as a result of disclosure by such party or its officers, directors, employees, agents or representatives, in violation of this Agreement), (b) information the disclosure of which is required by law or compelled by judicial or administrative process, or (c) disclosure of any such information to such party's officers, directors, employees, agents and representatives for legitimate purposes in connection with the transactions contemplated by this Agreement (provided that the Persons to whom such information is disclosed are notified of such party's confidentiality obligations under this Agreement), or (d) information already in the possession of such party prior to its receipt from the other party. 10.8 Headings. The headings contained in this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 34 10.9 Publicity. So long as this Agreement is in effect, except as required by law, regulation or stock exchange requirements, the parties hereto shall not, and shall cause their Affiliates not to, issue or cause the publication of any press release or other announcement with respect to the transactions contemplated by this Agreement or the other agreements contemplated hereby without the consent of the other parties, which consent shall not be unreasonably withheld or delayed. 10.10 Disclosure Schedules. Matters disclosed in any disclosure schedule shall be deemed to be disclosed also in each other disclosure schedule to the extent that it is reasonably apparent from such disclosure that the matters disclosed in the first disclosure schedule would apply also to such other disclosure schedule. 10.11 Entire Agreement. This Agreement constitutes the entire agreement among the parties and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. 10.12 Conveyance Taxes. The Company agrees to assume liability for and to hold each Purchaser harmless against any sales, use, transfer, stamp, stock transfer, real property transfer or gains, and value added taxes, any transfer, registration, recording or other fees, and any similar taxes incurred as a result of the issuance and sale to such Purchaser of his or its portion of the Company Shares, issuance of Common Stock upon conversion of shares of Series D Preferred Stock or issuance of Series D Preferred Stock upon conversion of shares of Series E Preferred Stock. 10.13 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Prior to the Closing, no party shall assign any of its rights under this Agreement; provided, however, that each of Fund II, Private Fund II and Vesta may assign its rights (but not obligations) under this Agreement, in whole or in part, to any entity that, directly or indirectly, controls, is controlled by, or is under common control with such Purchaser. No assignment of rights will relieve the assigning party of liability in the event of any breach hereof. Any attempted assignment in violation of this Agreement shall be void ab initio. 10.14 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original. 10.15 Governing Law. The validity and interpretation of this Agreement shall be governed by the laws of the State of Delaware, without reference to the conflict of laws principles thereof. 10.16 Third Party Beneficiaries. This Agreement (except as otherwise expressly indicated in the indemnification provisions hereof) is not intended to confer upon any other Person any rights or remedies hereunder. 35 10.17 Costs and Expenses. Each party hereto shall bear its own legal and due diligence fees and expenses and other out-of-pocket expenses relating to the transactions contemplated by this Agreement. 10.18 Incorporated by Reference. The disclosure schedules, Company Subsequent Disclosure Schedules and Vesta Subsequent Disclosure Schedules are incorporated as a part of this Agreement by reference. 10.19 Number and Gender of Words. When the context so requires in this Agreement, words of any gender shall include either or both of the other genders and the singular number shall include the plural. 10.20 Execution of Additional Documents. Each party hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. 10.21 Interpretation. References to "Sections" herein are references to sections of this Agreement. The words "herein," "hereof," "hereto" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. 10.22 Reformation; Severability. In case any provision hereof shall be invalid, illegal or unenforceable, such provision shall be reformed to best effectuate the intent of the parties and permit enforcement thereof, and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. If such provision is not capable of reformation, it shall be severed from this Agreement and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 10.23 Time of the Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. 36 IN WITNESS WHEREOF, each of the Purchasers and the Company has caused this Agreement to be duly signed as of the date first written above. THE COMPANY: INSTANT INSURANCE HOLDINGS, INC. By: /s/ B. G. Porter ------------------------------------------------- Name: B. G. Porter Title: President THE PURCHASERS: CAPITAL Z FINANCIAL SERVICES FUND II, L.P. By: Capital Z Partners, L.P., its sole general partner By: Capital Z Partners, Ltd., its sole general partner By: /s/ Bradley E. Cooper --------------------------------------- Name: Bradley E. Cooper Title: Senior Vice President CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P. By: Capital Z Partners, L.P., its sole general partner By: Capital Z Partners, Ltd., its sole general partner By: /s/ Bradley E. Cooper --------------------------------------- Name: Bradley E. Cooper Title: Senior Vice President [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT] VESTA INSURANCE GROUP, INC. By: /s/ Norman W. Kayle, III ------------------------------------------- Name: Norman W. Kayle, III Title: President /s/ Thomas E. Mangold --------------------------------------------- Thomas E. Mangold [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT] SCHEDULE 1.1 COMPANY SHARES --------------
NUMBER OF COMPANY SHARES TOTAL PORTION OF COMPANY PURCHASER PURCHASED AT CLOSING PURCHASE PRICE --------- -------------------- -------------- Capital Z Financial Services Fund II, L.P. 2,984,148 shares of Series E Preferred Stock $1,825,877.57 principal amount of Notes and $1,158,270.13 in cash(1) Capital Z Financial Services Private Fund 15,852 shares of Series E Preferred Stock $9,699.37 principal amount of Notes II, L.P. and $6,152.93 in cash(2) Vesta Insurance Group, Inc. or its designees 1,159,115 shares of Series D Preferred Stock $10,000,000 in cash 8,840,885 shares of Series E Preferred Stock Tom Mangold 200,000 shares of Series D Preferred Stock $200,000 in cash TOTAL 1,359,115 SHARES OF SERIES D PREFERRED STOCK $1,835,576.94 PRINCIPAL AMOUNT OF NOTES 11,840,885 SHARES OF SERIES E PREFERRED STOCK $11,364,423.06 IN CASH(3)
- ------------------------------ 1 $497,358.00 of which was paid to the Company on December 20, 2000. 2 $2,642.00 of which was paid to the Company on December 20, 2000. 3 $500,000 of which was paid to the Company on December 20, 2000. SCHEDULE 1.2 VESTA SHARES ------------
NUMBER OF VESTA SHARES TOTAL PORTION OF PURCHASER PURCHASED AT CLOSING VESTA PURCHASE PRICE --------- -------------------- -------------------- Capital Z Financial Services Fund II, L.P. 552,801 2,984,148 shares of Series E Preferred Stock, valued at $1.13 per share Capital Z Financial Services Private Fund 2,937 15,852 shares of Series E Preferred II, L.P. Stock, valued at $1.13 per share TOTAL 555,738 3,000,000 SHARES OF SERIES E PREFERRED STOCK, VALUED AT $1.13 PER SHARE
EXHIBIT L INSURANCE REPS -------------- 4.2 Representation and Warranties by Millers and Millers Mutual Regarding Millers Specialty. Millers represents and warrants to the Company that to the knowledge of Millers and Millers Mutual: (a) Organization and Qualification, Etc. Millers Specialty is incorporated as an insurance company, duly organized, validly existing and in good standing under the laws of the State of Missouri has full corporate power to own all its properties and assets, to carry on its business as it is now being conducted, and to perform and consummate the transactions contemplated by this Agreement, and is duly licensed to conduct insurance business in the State of Missouri and all those states outlined on Schedule A attached hereto. (b) Subsidiaries. Millers Specialty has no subsidiaries. The only stocks, bonds, or securities owned by Millers Specialty are those which it owns and controls as investments. (c) Capital Stock. The authorized capital stock of Millers Specialty consists solely of four hundred thousand (400,000) shares of common stock, Three and No/100 Dollars ($3.00) par value per share, of which as of Effective Date hereof all four hundred thousand (400,000) shares are issued and outstanding. All such issued and outstanding shares are duly authorized and validly issued, fully paid and non-assessable, and none of such outstanding shares was issued in violation of any preemptive right of any shareholder. Millers Specialty is not bound by any option, warrant, call or other commitment of any kind to issue or sell any shares of its capital stock, or any securities or obligations convertible into or exchangeable for, or giving, any person any right to acquire from Millers Specialty, any shares of its capital stock. (d) Financial Condition of Millers Specialty. The Annual Statement and the Interim Statement each correctly and accurately reflects and financial condition and operations of Millers Specialty as of their respective dates, reported in accordance with statutory insurance accounting principles as established by the laws of the State of Missouri, the rules, regulations and practices of the State of Missouri, the rules, regulations and practices of the Missouri Department of Insurance and the National Association of Insurance Commissioners, as applicable. The Annual Statement and the Interim Statement were each prepared in accordance with applicable laws, regulations and statutory accounting principles applied on a consistent basis. (e) Changes. Since December 31, 1997 there has not been: (i) any material adverse change in the financial condition or results of operations Millers Specialty, taken as a whole, from those reflected in its 1997 Annual Statement, or any material adverse change in the nature of the business or the assets of Millers Specialty taken as a whole; (ii) any damage, destruction or other casualty loss with respect to property owned or leased by Millers Specialty (whether or not covered by insurance) materially and adversely affecting the business, financial condition or results of operations of Millers Specialty, or any sale, lease or other disposition or encumbrance of any material asset or property of Millers Specialty, or any breach, default, violation or termination of any material contract or lease; (iii) any direct or indirect redemption, purchase or acquisition of any Millers Specialty shares, or any declaration, setting aside or payment of any dividend or distribution in respect of Millers Specialty shares. (f) Tax Returns and Payments. (i) since March 26, 1997, Millers Specialty has filed all tax returns on extensions required to be filed and has paid, or setup adequate reserves for the payment of, all taxes and duties required or anticipated to be paid on account of the operations, acts or omissions of Millers Specialty; (ii) since March 26, 1997, Millers Specialty is not delinquent in the payment of any tax, duty, assessment or governmental charge for 1997 and has not requested any extension of time within which to file any duty or tax return for 1997 which return has not since been filed, and further has timely paid all amounts withheld or payable by Millers Specialty under or in respect of F.I.C.A. (including but not limited to agents and employees) or employee income tax withholdings; (iii) since March 26, 1997, no deficiencies for any duty, tax, assessment or governmental charge have been asserted or assessed against Millers Specialty for 1997, which have not been paid, settled or otherwise disposed of; Millers Specialty has provided for all tax liabilities of every kind, direct or contingent (excluding tax on amounts accumulated in the policyholder surplus account); (iv) the Internal Revenue Service is not presently auditing the federal income tax returns of Millers Specialty for any years; and (v) at the Closing, Millers Mutual and Millers Specialty shall enter into an Addendum No. 3 to Consolidated Federal Income Tax Allocation Agreement in the form of Exhibit F. L-2 (g) No Undisclosed Liabilities or Agreements. Except as disclosed in writing in or pursuant to this Agreement or as an exhibit hereto, Millers Specialty: (i) did not have, as of December 31, 1997, any debts, liabilities or obligations materially adversely affecting the business condition (financial or otherwise) of Millers Specialty, whether accrued, absolute, contingent or otherwise, and whether due or to become due, except to the extent reflected in the Annual Statement or the Interim Statement; (ii) has not incurred since December 31, 1997, any debts, liabilities or obligations which, in the aggregate, materially adversely affect the business, or financial condition of Millers Specialty taken as a whole; (iii) has not conducted business other than cash and investment activity since December 31, 1997; and (iv) has not issued policies of insurance since December 31, 1997. (h) Litigation, Disciplinary or Delinquency Action. There is no action, suit, proceeding, disciplinary or delinquency action pending, or threatened, against Millers Specialty before any court or arbitration tribunal or before any governmental department, agency or instrumentally which will survive the Closing. (i) Contracts. (i) Millers Specialty is not a party to outstanding executory contracts of any kind or nature. (ii) Millers Specialty does not have any liability of the type normally covered by insurance by a substantial corporate entity arising out of or in connection with any act, omission, error or other event occurring prior to the Closing Date that is not covered in full (except for customary deductible amounts) by such in force policies or by a prior issued policy or policies insuring Millers Specialty. (iii) Millers Specialty has no agency contracts in force. (iv) Millers Specialty has no insurance policies in force. (j) Regulatory Filings. Millers Specialty has filed all required registrations, filings or submissions for 1997 with any federal regulatory commission, agency or authority and each and every annual statement or other report for 1997 (including without limitation any statements under each applicable Holding Company Act) required to be filed by Millers Specialty with any state insurance regulatory commission, and all other reports or documents L-3 required to be filed by it for 1997; and all such filings were in material compliance with applicable law when filed and no material deficiencies have been asserted by any such regulatory commission, agency or authority with respect to such filings or submissions which will survive Closing. (k) Compliance with Applicable Law. Millers Specialty is, in the conduct of its business, in compliance with all federal, state or local laws, statutes, ordinances and regulations, which failure to comply with would materially adversely affect the business of Millers Specialty taken as a whole or in the value of its properties or assets, including without limitation EEOC or similar laws, ERISA, and any advertising or Deceptive Trade Practice or similar law. (l) Non-Contravention. The execution, delivery and performance by Millers and Millers Mutual of this Agreement and each of the Transaction Documents do not and, subject to compliance with regulatory requirements, the consummation of the transactions contemplated hereby and thereby will not (i) violate any provision of the Articles of Incorporation or Bylaws of Millers, Millers Mutual or Millers Specialty, (ii) violate or result with the passage of time in the violation of any provision of, or result in the acceleration of, or entitle any party to accelerate (whether after the giving of notice or lapse of time or both) any obligation under, or result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon any of the shares of stock of Millers Specialty, or any of the property of Millers Specialty pursuant to any provisions of any mortgage, lien, lease, agreement, license, instrument, law, order, arbitration award, judgment or decree, to which Millers, Millers Mutual or Millers Specialty is a party or by which is bound, (iii) violate or conflict with any other restriction of any kind or character to which Millers, Millers Mutual or Millers Specialty is subject, or by which any of its assets may be bound, nor will the same constitute an event permitting termination of an agreement to which Millers Specialty is subject except for such violations, conflict or other similar events which would not have a material adverse effect on the business or financial condition of Millers Specialty or (iv) require Millers, Millers Mutual or Millers Specialty to obtain the consent, waiver, approval, license or authorization of, or make any notice or filing by Millers, Millers Mutual or Millers Specialty with, any Person or Governmental Authority (as such terms are defined in the Securities Purchase Agreement), except for the filing of the Acquisition of Control Statement with, and approval by, the Missouri Department of Insurance and any filings required with respect to a Reinsurance Agreement and any contracts referenced in the Securities Purchase Agreement. (m) Accuracy of Information Furnished. Except as may be qualified by the information contained in this Agreement including the exhibits and schedules hereto, no representations or warranty by Millers contained in this Agreement, no factual information furnished by Millers Specialty or Millers contained in this Agreement, no factual information furnished by Millers Specialty or Millers, and no statement contained in any exhibit hereto, certificate, schedule or other instrument furnished or to be furnished to the Company pursuant hereto in connection with the transactions contemplated hereby, L-4 contains or will contain any untrue statement of a material fact, or omits or will omit to state any material fact which is necessary to make the statement contained therein not misleading. (n) Illegal Payments. Millers Specialty has not made, and no employee, agent or representative of Millers Specialty has made, (i) any bribes, kickbacks, illegal payments, political contributions with corporate funds not recorded on the books and records of Millers Specialty, (ii) payments from corporate funds that were falsely recorded on the books and records of Millers Specialty, or (iii) payments from corporate funds to governmental officials for improper purposes or illegal payments from corporate funds to obtain or retain business either within the United States or abroad. L-5 EX-99 4 ex-2.txt EXHIBIT 2 Exhibit 2 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into as of December 21, 2000 by and among Vesta Insurance Group, Inc., a Delaware corporation (the "Company"), and Capital Z Financial Services Fund II, L.P. and Capital Z Financial Services Private Fund II, L.P., together with their permitted transferees (the "Purchasers"). WHEREAS, the Company sold 555,738 shares of its common stock (the "Shares") to the Purchasers in reliance upon the exemption from registration under the Securities Act of 1933, as amended (the "Securities Act") provided by Section 4(2) thereof and Rule 506 thereunder; WHEREAS, the Company has agreed to register the resale of the Shares by the Purchasers on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the parties agree as follows: 1. DEMAND REGISTRATION. Following the second anniversary of the Closing Date, the Purchaser may request the Company, in writing (a "Demand Request"), to effect the registration under the Securities Act (a "Demand Registration") of all of the Shares. Subject to Section 1.1 below, the Company shall take such actions as may be required under Section 3 below. 1.1 Effective Registration; Withdrawal. Subject to Section 3, a registration will not count as a Demand Registration until it has become effective (unless the Purchaser withdraws their Shares and the Company has performed its obligations hereunder in all material respects, in which case such demand will count as a Demand Registration); provided, that if, after it has become effective, an offering of Shares pursuant to a registration is interfered with by any stop order, injunction, or other order of the Commission (as hereinafter defined) or other Governmental Authority, such registration will be deemed not to have been effected and will not count as a Demand Registration. In the event material adverse changes in the U.S. capital markets render it unfeasible to complete the proposed offering on terms reasonably acceptable to the Purchaser, the Purchaser may elect to withdraw the registration and it will not count as a Demand Registration. 1.2 Manner of Offering. The offering of Shares pursuant to a Demand Registration may, at Purchasers' option, be in the form of a "firm commitment" underwritten offering, in which event the Purchaser may select one investment banking firm acceptable to the Company to manage the underwritten offering. 1.3 Deferral. The Company may defer the filing of a Demand Registration until a date not later than one hundred eighty (180) days after the Required Filing Date (or, if longer, one hundred eighty (180) days after the effective date of the registration statement contemplated by clause (ii) below) if (i) at the time the Company receives the Demand Request, the Company or any of its Subsidiaries are engaged in confidential negotiations or other confidential business activities, disclosure of which would be required in such registration statement (but would not be required if such registration statement were not filed), and the Board of Directors of the Company determines in good faith that such disclosure would be materially adverse to the Company and its stockholders, or (ii) prior to receiving the Demand Request, the Board of Directors had determined to effect a registered underwritten public offering of the Company's securities for the Company's account and the Company had taken substantial steps (including, but not limited to, selecting a managing underwriter for such offering) and is proceeding with reasonable diligence to effect such offering. A deferral of the filing of a registration statement pursuant to this Section 1.3 shall be lifted, and the requested registration statement shall be filed within 30 days of such lifting of the deferral, if, in the case of a deferral pursuant to clause (i) of the preceding sentence, the negotiations or other activities are disclosed or terminated, or, in the case of a deferral pursuant to clause (ii) of the preceding sentence, the proposed registration for the Company's account is abandoned or delayed by the Company. In order to defer the filing of a registration statement pursuant to this Section 1.3, the Company shall promptly (but in any event within ten (10) days), upon determining to seek such deferral, deliver to the Purchaser a certificate signed by an executive officer of the Company stating that the Company is deferring such filing pursuant to this Section 1.3 and a general statement of the reason for such deferral and an approximation of the anticipated delay. Within twenty (20) days after receiving such certificate, the Purchaser may withdraw such Demand Request by giving notice to the Company; if withdrawn, the Demand Request shall be deemed not to have been made for all purposes of this Agreement. 1.4 Expenses of Demand Registration. Subject to the next sentence, the Company shall pay all fees and expenses incurred in connection with the Demand Registration, including registration fees, filing fees, fees of Company counsel, any fees of Purchaser's counsel reasonably incurred in connection with their review of the Registration Statement, and amendments and supplements thereto, and the Company's accountants' fees incurred in connection with their review of the registration statement and any consents necessary to permit such registration statement to be filed. The Purchaser shall pay all fees and expenses incurred by the underwriter (including all commissions and underwriters discounts) and underwriter's counsel, and shall pay all accountants fees incurred in connection with obtaining any "comfort letters" or other accountants work product that may be requested by the Purchaser or the underwriters. 2. PIGGYBACK REGISTRATION. From and after the first anniversary of the Closing Date, each time the Company proposes to register its common stock (other than pursuant to an Excluded Registration (as defined below)), under the Securities Act for sale to the public (whether for the account of the Company or the account of any securityholder of the Company) and the form of registration statement to be used permits the registration of Shares, the Company shall give prompt written notice to the Purchaser (which notice shall be given not less 2 than thirty (30) days prior to the effective date of the Company's registration statement), which notice shall offer each Purchaser the opportunity to include all of its Shares in such registration statement, subject to the limitations contained in Section 2.1 below. If the Purchaser desires to have its Shares included in such registration statement, Purchaser shall so advise the Company in writing within twenty (20) days after the date of such notice from the Company, which advice may be withdrawn (by subsequent written notice) at any time prior to the filng of such registration statement. Subject to 2.1 below, the Company shall include in such registration statement all the Shares; provided, however, that the Company may at any time withdraw or cease proceeding with any such registration if it shall at the same time withdraw or cease proceeding with the registration of all other common stock originally proposed to be registered. As used herein, "Excluded Registration" means a registration under the Securities Act of (i) securities registered pursuant to a Demand Registration pursuant to Section 1 hereof, (ii) securities registered on Form S-4 or S-8 or any similar successor form and (iii) securities registered to effect the acquisition by the Company of, or combination by the Company with, another Person or registered to effect an offering solely to the Company's existing stockholders. 2.1 Cutback. If the registration involves an underwritten offering, and the managing underwriter or underwriters advise the Company that the inclusion of the Purchaser's Shares would materially and adversely affect the price or success of the offering (a "Material Adverse Effect"), then (i) the number of Purchaser's Shares to be included in the registration statement shall be reduced to an amount which, in the judgment of the managing underwriter or underwriters, would eliminate such Material Adverse Effect, or (ii) if no such reduction would, in the judgment of the managing underwriter or underwriters eliminate such Material Adverse Effect, then the Company shall have the right to exclude all such Shares from such registration statement. If Purchaser desires to include its Shares in such a registration statement, it shall (x) agree to sell its Shares on the basis provided in any underwriting arrangements approved by the Company and (y) complete and execute all questionnaires, powers of attorney, indemnities, underwriting agreements, and other documents, each in customary form, reasonably required under the terms of such underwriting arrangements. 2.2 Expenses. The Company shall pay all fees and expenses incurred in connection with the filing of any registration statement contemplated by this Section 2. 3. PROCEDURES. Whenever required under this Agreement to effect the registration of Shares, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-1 or Form S-3 (or such other successor "short-form" as may be authorized by the Commission at that time), as appropriate, relating to the sale of the Shares by the Purchasers (the "Registration Statement"), and use its best efforts to cause such Registration Statement to become effective; 3 (b) Promptly prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith, to the extent necessary to keep the Registration Statement effective for a period of not less than one hundred eighty (180) days (or such lesser period as is necessary for the underwriters in an underwritten offering to sell unsold allotments) and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; provided, however, that the Company will not be required pursuant to this Agreement to effect a shelf registration pursuant to Rule 415 promulgated under the Securities Act; (c) Furnish to the Purchasers with respect to the Shares registered under the Registration Statement (and to each underwriter, if any, of such Shares) such number of copies of such Registration Statement, each amendment and supplement thereto, the prospectus included in such Registration Statement (including each preliminary prospectus), any documents incorporated by reference therein and such other documents as the Purchasers (or such underwriter) may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Shares by the Purchasers (it being understood that, subject to the requirements of the Securities Act and applicable state securities laws, the Company consents to the use of the prospectus and any amendment or supplement thereto by the Purchaser and the underwriters in connection with the offering and sale of the Shares covered by the registration statement of which such prospectus, amendment or supplement is a part); (d) Use its commercially reasonable efforts to register or qualify such Shares under such other securities or blue sky laws of such jurisdictions as the managing underwriter or underwriters reasonably request (or, in the event the registration statement does not relate to an underwritten offering, as the holders of a majority of such Shares may reasonably request); use its commercially reasonable efforts to keep each such registration or qualification (or exemption therefrom) effective during the period in which such registration statement is required to be kept effective; and do any and all other acts and things which may be reasonably necessary or advisable to enable the Purchaser to consummate the disposition of the Shares owned by the Purchaser in such jurisdictions (provided, however, that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph or (B) consent to general service of process in any such jurisdiction); (e) Promptly notify the Purchaser and each underwriter and (if requested by any such Person) confirm such notice in writing (A) when a prospectus or any prospectus supplement or post-effective amendment has been filed and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (B) of the issuance by any state securities or other regulatory authority of any order suspending the qualification or exemption from qualification of any of the Shares under state securities or "blue sky" laws or the initiation of any proceedings for that purpose, and (C) of the happening of any event which makes any statement made in 4 a Registration Statement or related prospectus untrue or which requires the making of any changes in such registration statement, prospectus or documents so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and, as promptly as practicable thereafter, prepare and file with the Commission and furnish a supplement or amendment to such prospectus so that, as thereafter deliverable to the purchasers of such Shares, such prospectus will not contain any untrue statement of a material fact or omit a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (f) Make generally available to the Company's securityholders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than thirty (30) days after the end of the twelve (12) month period beginning with the first day of the Company's first fiscal quarter commencing after the effective date of a registration statement, which earnings statement shall cover said twelve (12) month period, and which requirement will be deemed to be satisfied if the Company timely files complete and accurate information on Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act; (g) If requested by the managing underwriter or underwriters or the Purchaser, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters or the Purchaser reasonably requests to be included therein, including, without limitation, with respect to the Shares being sold by the Purchaser, the purchase price being paid therefor by the underwriters and with respect to any other terms of the underwritten offering of the Shares to be sold in such offering, and promptly make all required filings of such prospectus supplement or post-effective amendment; (h) As promptly as practicable after filing with the Commission of any document which is incorporated by reference into a Registration Statement (in the form in which it was incorporated), deliver a copy of each such document to the Purchaser; (i) Cooperate with the Purchaser and the managing underwriter or underwriters to facilitate the timely preparation and delivery of certificates (which shall not bear any restrictive legends unless required under applicable law) representing securities sold under any Registration Statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or underwriters or the Purchaser may request and keep available and make available to the Company's transfer agent prior to the effectiveness of such registration statement a supply of such certificates; (j) Promptly make available for inspection by the Purchaser, any underwriter participating in any disposition pursuant to any Registration Statement, and any attorney, accountant or other agent or representative retained by any the Purchaser or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence 5 responsibility, and cause the Company's officers, directors and employees to supply all information requested by any such Inspector in connection with such registration statement; provided, that, unless the disclosure of such Records is necessary to avoid or correct a misstatement or omission in the registration statement or the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, the Company shall not be required to provide any information under this subparagraph (x) if (A) the Company believes, after consultation with counsel for the Company, that to do so would cause the Company to forfeit an attorney-client privilege that was applicable to such information, (B) either (1) the Company has requested and been granted from the Commission confidential treatment of such information contained in any filing with the Commission or documents provided supplementally or otherwise or (2) the Company reasonably determines in good faith that such Records are confidential and so notifies the Inspectors in writing, unless prior to furnishing any such information with respect to (A) or (B) the Purchaser agrees to enter into a confidentiality agreement in customary form and subject to customary exceptions or (C) the information is subject to a confidentiality agreement restricting its disclosure; and provided further, that the Purchaser agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action and to prevent disclosure of the Records deemed confidential; (k) Furnish to the Purchaser and underwriter a signed counterpart of (A) an opinion or opinions of counsel to the Company, and (B) a comfort letter or comfort letters from the Company's independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Purchaser or managing underwriter reasonably requests; (l) Cooperate with the Purchaser and each underwriter participating in the disposition of such Shares and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; (m) During the period when the prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act; (n) Notify the Purchaser promptly of any request by the Commission for the amending or supplementing of such Registration Statement or prospectus or for additional information; (o) Prepare and file with the Commission promptly any amendments or supplements to such Registration Statement or prospectus which, in the opinion of counsel for the Company or in the reasonable opinion of counsel for the managing underwriter, is required in connection with the distribution of the Shares; (p) Enter into such agreements (including underwriting agreements in the managing underwriter's customary form) as are customary in connection with an underwritten registration; and 6 (q) Advise the Purchaser, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for such purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued. 4. AGREEMENTS OF THE PURCHASERS. (a) Purchasers hereby covenant with the Company not to make any sale of the Shares under the Registration Statement without effectively causing the prospectus delivery requirement under the Securities Act to be satisfied, and the Purchaser acknowledges and agrees that no transfer of Shares purported to be sold under the Registration Statement will be reflected on the books and records of the Company unless the Purchasers certify to the Company's transfer agent that (i) the Shares have been sold in accordance with the Registration Statement, the Securities Act and any applicable state securities or blue sky laws and (ii) the requirement of delivering a current prospectus has been satisfied. (b) Purchasers acknowledge that there may occasionally be times when the Company must suspend the use of the prospectus forming a part of the Registration Statement until such time as an amendment to the Registration Statement has been filed by the Company and declared effective by the Commission, or until such time as the Company has filed an appropriate report with the Commission pursuant to the Exchange Act. The Purchasers hereby covenant that they will not sell any Shares pursuant to said prospectus during the period commencing at the time at which the Company gives the Purchasers written notice of the suspension of the use of said prospectus and ending at the time the Company gives the Purchasers written notice that the Purchasers may thereafter effect sales pursuant to said prospectus (a "Blackout Period"). No single Blackout Period will be longer than sixty (60) days, and, in the aggregate, all Blackout Periods in any twelve month period shall not include more than sixty (60) calendar days. The Purchasers further covenant to notify the Company promptly of the sale of all of their Shares. 5. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless the Purchasers against any Damages (as defined below) that the Purchasers may suffer or become obligated to pay under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise, insofar as such Damages arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, including the prospectus (including any preliminary prospectus), financial statements and schedules, and all other documents filed as a part thereof, as amended at the time of effectiveness of the Registration Statement, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact 7 required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made. For this purpose, "Damages" includes (without limitation): (A) any and all costs and expenses (including reasonable fees and disbursements of counsel) as may be reasonably incurred in investigating, preparing, or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon, arising out of, related to or resulting from any such untrue statement or omission or alleged untrue statement or omission and (B) any amount paid in settlement of any litigation or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon, arising out of, related to or resulting from any such untrue statement or omission or alleged untrue statement or omission. Notwithstanding the foregoing, the Company shall not be required to indemnify the Purchasers against any Damages which arise out of or are based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement or any amendment or supplement thereto in reliance upon and in strict conformity with written information furnished to the Company by or on behalf of the Purchasers or an underwriter designated by or with the consent of the Purchasers expressly for use therein, or (ii) the failure of such Purchasers to comply with the covenants and agreements contained in Section 4 hereof respecting the sale of the Shares, or (iii) any statement or omission in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the Purchasers prior to the pertinent sale or sales by the Purchasers. The reimbursements required by this Section will be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred. (b) Each Purchaser will jointly and severally indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any Damages that such persons may suffer or become obligated to pay under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise insofar as such Damages arise out of or are based upon (i) any failure to comply with the covenants and agreements contained in Section 4 hereof respecting the sale of the Shares or (ii) any untrue or alleged untrue statement of any material fact contained in the Registration Statement or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements in the Registration Statement or any amendment or supplement thereto not misleading in the light of the circumstances under which they were made, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement or any amendment or supplement thereto, in reliance upon and in strict conformity with written information furnished to the Company by the Purchaser expressly for use therein, and will reimburse the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person for any legal and other expense 8 reasonably incurred by the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person in connection with investigating, defending, settling, compromising or paying any such Damages; provided, that the liability of each Purchaser will be in proportion to, and limited to, the net amount received by such Purchaser from the sale of Shares pursuant to such registration statement; provided, further, that such Purchaser shall not be liable in any such case to the extent that prior to the filing of any such registration statement or prospectus (or amendment thereof or supplement thereto from which such loss has arisen), such person has furnished in writing to the Company information expressly for use in such registration statement or prospectus or any amendment thereof or supplement thereto which corrected or made not misleading information previously furnished to the Company. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 5, promptly notify the indemnifying party in writing thereof (provided that the failure to give such notice shall not limit the rights of such Person unless the indemnifying party is materially prejudiced thereby). In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the defendants in any such action include both the indemnified party and the indemnifying party, and each of the indemnifying party and the indemnified party shall have reasonably concluded, based upon the advice of their counsel, that there may be a conflict of interest between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action, or that there may be legal defenses available to the indemnified party which are different from or additional to those available to the indemnifying party, in which event the indemnified party may engage separate counsel reasonably satisfactory to the indemnifying party to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel representing the indemnified party) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of action, in which event the indemnified party may engage counsel of its selection. In the event the indemnified party engages its own counsel pursuant to the provisos set forth in the preceding sentence, the indemnifying party shall pay all reasonable fees and expenses of such counsel. If such defense is not assumed by the indemnifying party as permitted hereunder, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). If such defense is assumed by the indemnifying party 9 pursuant to the provisions hereof, such indemnifying party shall not settle or otherwise compromise the applicable claim unless (i) such settlement or compromise contains a full and unconditional release of the indemnified party or (ii) the indemnified party otherwise consents in writing, such consent not to be unreasonably withheld. (d) Each party hereto agrees that, if for any reason the indemnification provisions contemplated by Section 5(a) or Section 5(b) are unavailable to hold harmless an indemnified party in respect of any losses referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the actions which resulted in the losses as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 5(d). The amount paid or payable by an indemnified party as a result of the losses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or, except as provided in Section 5(c), defending any such action or claim. Notwithstanding the provisions of this Section 5(d), no Purchaser shall be required to contribute an amount greater than the dollar amount by which the net proceeds received by such Purchaser with respect to the sale of any Shares exceeds the amount of damages which such Purchaser has otherwise been required to pay by reason of any and all untrue or alleged untrue statements of material fact or omissions or alleged omissions of material fact made in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto related to such sale of Securities. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Each Purchaser's obligations in this Section 5(b) to contribute shall be several in proportion to the amount of Shares registered by them and not joint. If indemnification is available under this Section 5, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 5(a) and Section 5(b) without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in Section 5(d) subject, in the case of each Purchaser, to the limited dollar amounts set forth in Section 5(b). [Signature Pages Attached] 10 IN WITNESS WHEREOF, each of the Capital Z and Vesta has caused this Agreement to be duly signed as of the date first written above. VESTA INSURANCE GROUP, INC. By: /s/ Norman W. Kayle, III --------------------------------------- Name: Norman W. Kayle, III Title: President CAPITAL Z FINANCIAL SERVICES FUND II, L.P. By: Capital Z Partners, L.P., its sole general partner By: Capital Z Partners, Ltd., its sole general partner By: /s/ Bradley E. Cooper --------------------------------------- Name: Bradley E. Cooper Title: Senior Vice President CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P. By: Capital Z Partners, L.P., its sole general partner By: Capital Z Partners, Ltd., its sole general partner By: /s/ Bradley E. Cooper --------------------------------------- Name: Bradley E. Cooper Title: Senior Vice President EX-99 5 ex-3.txt EXHIBIT 3 Exhibit 3 SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT ("Agreement"), dated as of December 28, 2001, by and among Vesta Insurance Group, Inc., a Delaware corporation ("Vesta"), Capital Z Financial Services Fund II, L.P., a Bermuda limited partnership ("Fund II"), and Capital Z Financial Services Private Fund II, L.P., a Bermuda limited partnership ("Private Fund II" and, together with Fund II, each a "Capital Z Party" and collectively, "Capital Z"). R E C I T A L S: WHEREAS, Capital Z desires to purchase from Vesta, and Vesta desires to issue and sell to Capital Z, shares of common stock of Vesta ("Vesta Common Stock"); WHEREAS, Fund II and Private Fund II are the record and beneficial owners of the securities of Instant Insurance Holdings, Inc., a Delaware corporation (the "Company"), listed on Annex I attached hereto (the "Securities"); and WHEREAS, as consideration for the Vesta Common Stock being purchased and cash being delivered pursuant to this Agreement, Capital Z desires to transfer to Vesta, and Vesta desires to accept as full payment, the Securities; NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to set forth the terms and conditions of the transactions described herein and the mode of carrying the same into effect, the parties hereby agree as follows: A G R E E M E N T: ARTICLE 1 THE TRANSACTIONS 1.1 Purchase and Sale of the Vesta Shares. Subject to the terms and conditions of this Agreement, Capital Z hereby agrees to purchase from Vesta, and Vesta agrees to issue and sell to Capital Z an aggregate of 1,500,000 shares of Vesta Common Stock (the "Vesta Shares") and Vesta agrees to pay to Capital Z cash in the amount of $138,284 (the "Cash"), allocated between the Capital Z Parties as set forth on Schedule 1.1. The purchase price for each Vesta Share is $6.77. In consideration for the Vesta Shares and the Cash, Capital Z is transferring the Securities to Vesta. The allocation of the Cash and Vesta Shares received by each Capital Z Party to the Securities sold by such Capital Z Party shall be pro rata in accordance with each such Security's fair market value. The purchase obligation of each Capital Z Party is the several obligation of such Capital Z Party to purchase the number of Vesta Shares indicated on Schedule 1.1 hereto and no Capital Z Party will have any obligation with respect to the purchase obligations of any other Capital Z Party. 1.2 The Closing. The closing of the purchase and sale of the Vesta Shares (the "Closing") shall be held on the date hereof at the offices of Weil, Gotshal & Manges LLP, Dallas, Texas, or such other date as the parties hereto may agree. The date on which the Closing occurs is referred to herein as the "Closing Date." 1.3 Waiver of Preemptive Rights. Vesta hereby waives any rights of first offer (and any notices in connection therewith) that may be applicable to the transfer of the Securities under the terms of the Third Amended and Restated Stockholders Agreement, dated December 21, 2000, by and among the Company and the stockholder party thereto. ARTICLE 2 CONCURRENT EVENTS AND DELIVERIES Concurrently with the execution and delivery of this Agreement, the following events are occurring and the following deliveries are being made: 2.1 Amendment to Registration Rights Agreement. Capital Z and Vesta are executing and delivering the First Amendment to the Registration Rights Agreement (the "Amendment"), which amends certain provisions of the Registration Rights Agreement, dated December 21, 2000, by and among Vesta, Fund II and Private Fund II. 2.2 Cash, Stock Certificates and Warrants. Each Capital Z Party is hereby delivering to Vesta stock certificates and warrants, accompanied by stock powers or other instruments of transfer duly executed in blank, representing the Securities being purchased by Vesta, and Vesta is delivering to each such Capital Z Party its portion of the Cash, by wire transfer of immediately available funds to an account designated by such Capital Z Party, and a certificate or certificates, validly executed by a duly authorized officer of Vesta and in proper form, representing the Vesta Shares being purchased by each such Capital Z Party. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF CAPITAL Z Each of Fund II and Private Fund II severally, and not jointly, represents and warrants to each of the other parties as follows: 3.1 Organization. Such Capital Z Party is a limited partnership, validly existing and in good standing under the laws of the jurisdiction of its organization. 3.2 Authority. (a) Such Capital Z Party has full partnership power and authority to execute and deliver this Agreement and the Amendment, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated on its part hereby and thereby; (b) the execution, delivery and performance by such Capital Z Party of this Agreement and the Amendment have been duly authorized by all necessary partnership action on the part of such Capital Z Party; and (c) each of this Agreement and the Amendment has been duly executed and delivered by such Capital Z Party and (assuming due execution and delivery by the other parties hereto and thereto) 2 constitutes a legal, valid and binding agreement of such Capital Z Party, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally and subject to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.3 No Violation. The execution and delivery by such Capital Z Party of this Agreement and the Amendment, the performance by such Capital Z Party of its obligations hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby will not (a) violate any provision of law, rule, regulation, order, writ, judgment, injunction, decree, determination or award (collectively, "Requirements of Law") applicable to such Capital Z Party, (b) require such Capital Z Party to obtain the consent, waiver, approval, license or authorization of, or make any notice or filing by such Capital Z Party with, any Person or Governmental Authority, or (c) violate, result (with or without notice or the passage of time, or both) in a breach of or give rise to the right to accelerate, terminate or cancel any obligation under or constitute (with or without notice or the passage of time, or both) a default under, any of the terms or provisions of any certificate of limited partnership or partnership agreement, indenture, mortgage, agreement, contract, order, judgment, ordinance, regulation or decree to which such Capital Z Party is subject or by which such Capital Z Party is bound. As used in this Agreement, "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or other entity. As used in this Agreement, "Governmental Authority" means any United States (federal, state, or local), foreign or supra-national government, or governmental regulatory or administrative authority, agency, commission, court or tribunal. 3.4 Brokers. Such Capital Z Party has not paid or become obligated to pay any fee or commission to any broker, finder, investment banker or other intermediary (not including attorneys' fees) in connection with this Agreement. 3.5 Securities Act Representations. (a) Except as expressly contemplated hereby, such Capital Z Party is acquiring its portion of the Vesta Shares for investment for its own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act of 1933, as amended (the "Securities Act"). Except as expressly contemplated hereby, such Capital Z Party does not have any present intention of selling, granting any participation in, or otherwise distributing the Vesta Shares it is purchasing otherwise than pursuant to an effective registration statement under the Securities Act or in a transaction exempt from the registration requirements under the Securities Act and applicable state securities laws. Except as expressly contemplated hereby, such Capital Z Party does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Vesta Shares it is purchasing. (b) Such Capital Z Party acknowledges that the issuance of its portion of the Vesta Shares will not be registered under the Securities Act or any state securities laws on the basis of a claimed exemption by Vesta that the issuance of the Vesta Shares as provided for herein is exempt from 3 registration under the Securities Act and applicable state securities laws. Such Capital Z Party acknowledges that the availability of such exemption is predicated in part on such Capital Z Party's representations set forth in this Article 3 and that Vesta is relying on such representations. (c) Such Capital Z Party has received all the information it considers necessary or appropriate for deciding whether to accept the Vesta Shares it is purchasing. Such Capital Z Party has had an opportunity to ask questions of and to receive answers from Vesta regarding the terms and conditions of the issuance of the Vesta Shares it is purchasing and the business, properties, financial condition and prospects of Vesta and to obtain additional information (to the extent Vesta possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to such Capital Z Party or to which such Capital Z Party had access. (d) Such Capital Z Party acknowledges that it is able to bear the economic risk of the investment in the Vesta Shares it is purchasing, and has such knowledge and experience in financial and business matters that it is capable of evaluating the benefits and risks of the investment in the Vesta Shares it is purchasing. (e) Such Capital Z Party is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. (f) Such Capital Z Party acknowledges that the Vesta Shares it is purchasing may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom and that in the absence of any effective registration statement covering such Vesta Shares or an available exemption from registration under the Securities Act, such Company Shares must be held indefinitely. Such Capital Z Party further acknowledges that the Vesta Shares it is purchasing may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of that rule are met. (g) Such Capital Z Party acknowledges that each certificate representing any of the Vesta Shares it is purchasing will be endorsed with a legend substantially similar to the following: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT. 3.6 Securities. Such Capital Z Party is the true and lawful owner, of record and beneficially, of the Securities, free and clear of any liens, restrictions (other restrictions relating to transfer under the 4 Securities Act), security interests, claims, rights of another or encumbrances (collectively, "Liens"). There are no outstanding options or other similar rights, agreements or commitments to acquire from such Capital Z Party any of its Securities. Such Capital Z Party has the full power and authority to convey, and is conveying to Vesta, good and marketable title to the Securities, free and clear of all Liens. To Capital Z's knowledge, the Securities consisting of capital stock of the Company are validly issued and outstanding and no action has been taken by Capital Z to redeem such Securities. The Securities consisting of warrants or rights to acquire capital stock of the Company have not been terminated and are in full force and effect. The Securities constitute all of Capital Z's ownership interests or rights to acquire ownership interests in the Company, whether issued by the Company or a third party. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF VESTA Vesta represents and warrants to each of Fund II and Private Fund II to each of the other parties as follows: 4.1 Corporate Organization. Vesta is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. 4.2 Vesta Shares. The Vesta Shares to be sold by Vesta to Capital Z in accordance with the terms of this Agreement have been duly authorized, validly issued and, upon Vesta's receipt of the Securities, will be fully paid and non-assessable. Each of Fund II and Private Fund II are acquiring good and marketable title to the Vesta Shares it is purchasing, free and clear of any and all Liens, except such Liens as may exist under applicable federal and state securities laws. 4.3 Authority. Vesta has full corporate power and authority to execute and deliver this Agreement and the Amendment, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated on its part, hereby and thereby. The execution, delivery and performance by Vesta of this Agreement and each of the Amendment and the consummation of the transactions contemplated on its part hereby or thereby have been duly authorized by all necessary corporate action on the part of Vesta. This Agreement and the Amendment have been duly executed and delivered by Vesta and (assuming due execution and delivery by the other parties hereto and thereto) constitute the legal, valid and binding obligation of Vesta, enforceable against Vesta in accordance with their terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally and subject to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.4 No Violation. The execution, delivery and performance of this Agreement and the Amendment and the consummation by it of the transactions contemplated hereby and thereby do not and will not (a) violate any Requirements of Law applicable to Vesta, (b) require Vesta to obtain the consent, waiver, approval, license or authorization of, or make any notice or filing by Vesta with, any Person or Governmental Authority, or (c) violate, 5 result (with or without notice or the passage of time, or both) in a breach of or give rise to the right to accelerate, terminate or cancel any obligation under, or constitute (with or without notice or the passage of time, or both) a default under, any of the terms or provisions of Vesta's certificate of incorporation or bylaws or any indenture, mortgage, agreement, contract, order, judgment, ordinance, regulation or decree to which Vesta is subject or by which Vesta is bound. 4.5 Brokers. Vesta has not paid or become obligated to pay any fee or commission to any broker, finder, investment banker or other intermediary (not including attorneys' fees) in connection with this Agreement. 4.6 Corporate Documents. (a) Vesta has heretofore filed each report, schedule, registration statement and definitive proxy statement required to be filed by it with the Securities and Exchange Commission (the "SEC") (as any such documents have since the time of their original filing been amended, the "Vesta Documents") since January 1, 2000. As of its respective dates, each Vesta Document did not contain any untrue statements of material facts or omit to state material facts required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. As of its respective date, each Vesta Document complied in all material respects with the applicable requirements of the Securities Act, and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated under each of such statutes. The financial statements contained in the Vesta Documents, together with the notes thereto, have been prepared in accordance with generally accepted accounting principles consistently followed throughout the periods indicated (except as may be indicated in the notes thereto, or, in the case of the unaudited financial statements, as permitted by Form 10-Q), reflect all known liabilities of Vesta required to be stated therein, including all known contingent liabilities as of the end of each period reflected therein, and present fairly the financial condition of Vesta at and as of said dates and the consolidated results of operations and cash flows of Vesta for the periods then ended. The consolidated balance sheet of Vesta at September 30, 2001 included in the Vesta Documents is referred to herein as the "Vesta Balance Sheet." (b) Except as disclosed in the Vesta Documents and except for liabilities and obligations incurred in the ordinary course of business consistent with past practices, since the date of the Vesta Balance Sheet, neither Vesta nor any entity in which Vesta has an equity or other ownership interest has incurred any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that have, or would be required to be reflected or reserved against on a consolidated balance sheet of Vesta (including the notes thereto) prepared in accordance with generally accepted accounting principles, as applied in preparing the Vesta Balance Sheet. 4.7 Private Offering. No form of general solicitation or general advertising has been used by Vesta or its representatives in connection with the offer or sale of the Vesta Shares. Assuming the accuracy of the representations made by each of Fund II and Private Fund II, no registration of the Vesta Shares, pursuant to the provisions of the Securities Act or any state 6 securities or "blue sky" laws, will be required by the offer, sale or issuance of such securities. ARTICLE 5 MISCELLANEOUS 5.1 Amendment. This Agreement may be amended only by an instrument in writing signed by each of the parties hereto. 5.2 Waiver. The observance of any term of this Agreement may be waived by the party or parties entitled to enforce such term, but such waiver shall be effective only if it is in a writing signed by the party or parties entitled to enforce such term and against which such waiver is to be asserted. No delay or omission on the part of any party in exercising any right or privilege under this Agreement shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right or privilege under this Agreement operate as a waiver of any other right or privilege under this Agreement nor shall any single or partial exercise of any right or privilege preclude any other or further exercise thereof or the exercise of any other right or privilege under this Agreement. 5.3 Survival. The representations, warranties, covenants and agreements set forth in this Agreement shall survive the Closing. 5.4 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been given or made if in writing and delivered personally, sent by commercial carrier or registered or certified mail (postage prepaid, return receipt requested) or transmitted by facsimile with automated receipt confirmation to the parties at the following addresses and numbers: If to Fund II or Private Fund II, to: Capital Z Financial Services Fund II, L.P. 54 Thompson Street New York, NY 10012 Fax: (212) 965-2301 Attention: Bradley E. Cooper with copies, which shall not constitute notice to: Weil, Gotshal & Manges LLP 100 Crescent Court, Suite 1300 Dallas, Texas 75201-6950 Fax: (214) 746-7777 Attention: R. Jay Tabor 7 If to Vesta, to: Vesta Insurance Group, Inc. 3760 River Run Road Birmingham, Alabama 35243 Fax: (205) 970-7022 Attention: John W. McCullough 5.5 Confidentiality. Each party hereto shall, and shall cause its respective officers, directors, employees, agents and representatives to, maintain confidentiality with respect to, and not disclose, any proprietary or otherwise confidential information of any other party hereto; provided, however, that the limitations provided in this Section 5.5 shall not apply, with respect to any party, to (a) information in the public domain or otherwise publicly available (other than as a result of disclosure by such party or its officers, directors, employees, agents or representatives, in violation of this Agreement), (b) information the disclosure of which is required by law or compelled by judicial or administrative process, or (c) disclosure of any such information to such party's officers, directors, employees, agents and representatives for legitimate purposes in connection with the transactions contemplated by this Agreement (provided that the Persons to whom such information is disclosed are notified of such party's confidentiality obligations under this Agreement), or (d) information already in the possession of such party prior to its receipt from the other party. 5.6 Headings. The headings contained in this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 5.7 Publicity. So long as this Agreement is in effect, except as required by law, regulation or stock exchange requirements, the parties hereto shall not, and shall cause their Affiliates not to, issue or cause the publication of any press release or other announcement with respect to the transactions contemplated by this Agreement or the other agreements contemplated hereby without the consent of the other parties, which consent shall not be unreasonably withheld or delayed. 5.8 Entire Agreement. This Agreement constitutes the entire agreement among the parties and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. 5.9 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Prior to the Closing, no party shall assign any of its rights under this Agreement; provided, however, that each of Fund II, Private Fund II and Vesta may assign its rights (but not obligations) under this Agreement, in whole or in part, to any entity that, directly or indirectly, controls, is controlled by, or is under common control with such Capital Z Party. No assignment of rights will relieve the assigning party of liability in the event of any breach hereof. Any attempted assignment in violation of this Agreement shall be void ab initio. 8 5.10 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original. 5.11 Governing Law. The validity and interpretation of this Agreement shall be governed by the laws of the State of Delaware, without reference to the conflict of laws principles thereof. 5.12 Third Party Beneficiaries. This Agreement (except as otherwise expressly indicated in the indemnification provisions hereof) is not intended to confer upon any other Person any rights or remedies hereunder. 5.13 Costs and Expenses. Each party hereto shall bear its own legal and due diligence fees and expenses and other out-of-pocket expenses relating to the transactions contemplated by this Agreement. 5.14 Number and Gender of Words. When the context so requires in this Agreement, words of any gender shall include either or both of the other genders and the singular number shall include the plural. 5.15 Execution of Additional Documents. Each party hereto shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions as may be reasonably required in order to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. 5.16 Interpretation. References to "Sections" herein are references to sections of this Agreement. The words "herein," "hereof," "hereto" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. 5.17 Reformation; Severability. In case any provision hereof shall be invalid, illegal or unenforceable, such provision shall be reformed to best effectuate the intent of the parties and permit enforcement thereof, and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. If such provision is not capable of reformation, it shall be severed from this Agreement and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 5.18 Further Assurances. At and from time to time after the date hereof, at the request of Vesta but without further consideration, Capital Z shall execute and deliver such other instruments of conveyance, assignment, transfer and delivery and take such other action as Vesta may reasonably request in order to give effect to the transactions contemplated hereby. 5.19 Time of the Essence. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 9 IN WITNESS WHEREOF, each of the Capital Z and Vesta has caused this Agreement to be duly signed as of the date first written above. CAPITAL Z: CAPITAL Z FINANCIAL SERVICES FUND II, L.P. By: Capital Z Partners, L.P., its sole general partner By: Capital Z Partners, Ltd., its sole general partner By: /s/ Bradley E. Cooper --------------------------------------- Name: Bradley E. Cooper Title: Senior Vice President CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P. By: Capital Z Partners, L.P., its sole general partner By: Capital Z Partners, Ltd., its sole general partner By: /s/ Bradley E. Cooper --------------------------------------- Name: Bradley E. Cooper Title: Senior Vice President VESTA: VESTA INSURANCE GROUP, INC. By: /s/ John Micollough --------------------------------------- Name: John Micollough Title: Vice President [SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT] SCHEDULE 1.1
CAPITAL Z PARTY NUMBER OF VESTA SHARES PURCHASED --------------- -------------------------------- Capital Z Financial Services Fund II, L.P. $137,553 1,492,074 Capital Z Financial Services Private Fund $731 7,926 II, L.P. TOTAL $138,284 1,500,000
ANNEX I SECURITIES A. STOCK OWNERSHIP:
- ---------------------------------------- --------------------- --------------------------- ------------------ -------------------- STOCK CERTIFICATE # HOLDER # OF SHARES DATE OF ISSUE ----- ------------- ------ ----------- ------------- - ---------------------------------------- --------------------- --------------------------- ------------------ -------------------- Common, $0.01 par 26 Fund II 17,693 1/31/01 - ---------------------------------------- --------------------- --------------------------- ------------------ -------------------- Series A Preferred, $1.00 par 5 Fund II 198,943 4/14/00 - ---------------------------------------- --------------------- --------------------------- ------------------ -------------------- Series C Preferred, $1.00 par 001 Fund II 3,705,317 2/17/00 - ---------------------------------------- --------------------- --------------------------- ------------------ -------------------- Series C Preferred, $1.00 par 008 Fund II 3,705,317 4/28/00 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL FUND II SERIES C: 7,410,634 - ---------------------------------------------------------------------------------------------------------------------------------- Common, $0.01 par 27 Private Fund II 94 1/31/01 - ---------------------------------------- --------------------- --------------------------- ------------------ -------------------- Series A Preferred, $1.00 par 6 Private Fund II 1,057 4/14/00 - ---------------------------------------- --------------------- --------------------------- ------------------ -------------------- Series C Preferred, $1.00 par 002 Private Fund II 19,683 2/17/00 - ---------------------------------------- --------------------- --------------------------- ------------------ -------------------- Series C Preferred, $1.00 par 009 Private Fund II 19,683 4/28/00 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL PRIVATE FUND II SERIES C: 39,366 - ----------------------------------------------------------------------------------------------------------------------------------
B. WARRANTS TO PURCHASE COMMON STOCK:
- --------------------------------------------------------------------------------------------------- DATE OF WARRANT FUND II WARRANTS PRIVATE FUND II WARARNTS TOTAL WARRANTS --------------- ---------------- ------------------------ -------------- 9/14/00 41,446.83 220.17 41,667 10/6/00 4,144.98 22.02 4,167 10/13/00 3,315.39 17.61 3,333 10/19/00 21,552.51 114.49 21,667 11/2/00 17,969.54 95.46 18,065 11/15/00 26,208.78 139.22 26,348 11/30/00 17,863.11 94.89 17,958 12/14/00 17,732.81 94.19 17,827 TOTALS: 150,233.95 798.05 151,032 - ---------------------------------------------------------------------------------------------------
C. CALL RIGHTS: Any rights to acquire securities of the Company in favor of Capital Z contained in the Third Amended and Restated Management Stock Call Agreement, dated as of December 21, 2000, among Capital Z, E. Buchanan Lyon III, B.G. Porter, Michael Grandstaff, Martin F. Gohr and the Company. EX-99 6 ex-4.txt EXHIBIT 4 Exhibit 4 FIRST AMENDMENT TO THE REGISTRATION RIGHTS AGREEMENT THIS FIRST AMENDMENT TO THE REGISTRATION RIGHTS AGREEMENT (the "Amendment") is made and entered into as of December 28, 2001 by and among Vesta Insurance Group, Inc., a Delaware corporation (the "Company"), and Capital Z Financial Services Fund II, L.P., a Bermuda limited partnership, and Capital Z Financial Services Private Fund II, L.P., a Bermuda limited partnership, together with their permitted transferees (the "Purchasers"). WHEREAS, on December 21, 2000, the Company sold 555,738 shares of its common stock (the "Original Shares") to the Purchasers in reliance upon the exemption from registration under the Securities Act of 1933, as amended (the "Securities Act"), provided by Section 4(2) thereof and Rule 506 thereunder; WHEREAS, in connection with such sale, the Company granted certain registration rights to the Purchasers pursuant to the terms of the Registration Rights Agreement (the "Agreement"), dated December 21, 2001, among the Company and the Purchasers; WHEREAS, on the date hereof, the Company sold an additional 1,500,000 shares of its common stock (the "New Shares") to the Purchasers in reliance upon the exemption from registration under the Securities Act provided by Section 4(2) thereof and Rule 506 thereunder; WHEREAS, the Company and the Purchasers desire to amend the Agreement to provide for the registration of the resale of the New Shares by the Purchaser; NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the parties agree as follows: 1. AMENDMENT OF THE RECITALS. The Recitals to the Agreement are hereby deleted and replaced in their entirety with the following: "WHEREAS, on December 21, 2000, the Company sold 555,738 shares of its common stock (the "Original Shares") to the Purchasers in reliance upon the exemption from registration under the Securities Act of 1933, as amended (the "Securities Act") provided by Section 4(2) thereof and Rule 506 thereunder; WHEREAS, on December 28, 2001, the Company sold an additional 1,500,000 shares of its common stock (the "New Shares," together with the Original Shares, the "Shares") to the Purchasers in reliance upon the exemption from registration under the Securities Act provided by Section 4(2) thereof and Rule 506 thereunder; WHEREAS, the Company has agreed to register the resale of the Shares by the Purchasers on the terms and conditions set forth herein;" 2. (a) All capitalized terms used and not defined herein shall have the meanings ascribed to such terms in the Agreement. (b) Except as specifically provided herein, the Agreement is in all respects ratified and confirmed. All of the terms, conditions and provisions of the Agreement as hereby amended shall be and remain in full force and effect. (c) This Amendment, together with the unaltered portions of the Agreement, embodies the entire agreement and understanding of the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. (d) The Agreement and this Amendment shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of laws rules thereof. (e) This Amendment may be executed in as many counterparts as may be necessary or convenient and each of which, when so executed, shall be deemed to be an original, but all such counterparts shall constitute but one and the same agreement. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, each of the Purchasers and the Company have caused this Agreement to be duly signed as of the date first written above. THE PURCHASERS: CAPITAL Z FINANCIAL SERVICES FUND II, L.P. By: Capital Z Partners, L.P., its sole general partner By: Capital Z Partners, Ltd., its sole general partner By: /s/ Bradley E. Cooper --------------------------------------- Name: Bradley E. Cooper Title: Senior Vice President CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P. By: Capital Z Partners, L.P., its sole general partner By: Capital Z Partners, Ltd., its sole general partner By: /s/ Bradley E. Cooper --------------------------------------- Name: Bradley E. Cooper Title: Senior Vice President THE COMPANY: VESTA INSURANCE GROUP, INC. By: /s/ Norman W. Kayle, III ------------------------------------------- Name: Norman W. Kayle, III Title: President 3 EX-99 7 ex5.txt EXHIBIT 5 EXHIBIT 5 --------- JOINT FILING AGREEMENT ---------------------- This will confirm the agreement by and among all the undersigned that the Schedule 13D filed on or about this date with respect to the beneficial ownership of the undersigned of shares of common stock, par value $0.01 per share, of Vesta Insurance Group, Inc. is being filed on behalf of each of the undersigned. This agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Dated: January 9, 2002 CAPITAL Z FINANCIAL SERVICES FUND II, L.P. By: Capital Z Partners, Ltd., it ultimate general partner By:/s/ David A. Spuria ------------------------------------------- David A. Spuria General Counsel, Vice President of Administration and Secretary CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P. By: Capital Z Partners, Ltd., it ultimate general partner By:/s/ David A. Spuria ------------------------------------------- David A. Spuria General Counsel, Vice President of Administration and Secretary CAPITAL Z PARTNERS, L.P. By: Capital Z Partners, Ltd., it ultimate general partner By:/s/ David A. Spuria ------------------------------------------- David A. Spuria General Counsel, Vice President of Administration and Secretary 13 CAPITAL Z PARTNERS, LTD. By: Capital Z Partners, Ltd., it ultimate general partner By:/s/ David A. Spuria ------------------------------------------- David A. Spuria General Counsel, Vice President of Administration and Secretary 14 -----END PRIVACY-ENHANCED MESSAGE-----