EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
By and Among
NELX, INC.
(the "Buyer")
and
THE CELINA MUTUAL INSURANCE COMPANY
(the "Seller")
Dated as of July 31, 2005
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of the 31st
day of July, 2005, is entered into by and between
NELX, INC., a corporation
organized and existing under the laws of
the State of Kansas ("Buyer"), and THE
CELINA MUTUAL INSURANCE COMPANY, a
corporation organized
and existing under the
laws of the State of Ohio ("Seller").
WHEREAS, Seller owns
all of the issued and
outstanding stock of
WEST
VIRGINIA FIRE AND CASUALTY COMPANY, a West
Virginia Corporation (the "Company");
WHEREAS, Seller
deems the sale of 100%
of the issued and
outstanding
stock of the Company to Buyer in accordance with the applicable laws of the
State of West Virginia (the "Transaction"), to be desirable and in the best
interests of the Company and it as
shareholder of the Company; and
WHEREAS, Buyer
deems its acquisition of 100% of the issued and
outstanding stock of the Company from Seller
in accordance with the
applicable
laws of the State of West Virginia in the Transaction, to be desirable and in
its best interests.
NOW THEREFORE,
in consideration of the foregoing premises and the
mutual covenants and agreements
contained herein, the parties hereto agree as
follows:
1. DEFINITIONS
"Affiliate" means any
individual,
partnership,
corporation,
limited
liability company, trust or other entity or association which, directly or
indirectly, through one or more
intermediaries, controls is controlled by, or is
under common control with a party.
"Agreement" means this Stock Purchase Agreement.
"Audited Financial
Statements" means the audited financial statements
of the Celina Insurance Group companies (which includes the Company) as of
December 31, 2004, 2003 and 2002, including the balance sheet and the
related
statements of operations and policyholders' surplus, and cash flows for the
years then ended, with the accompanying
report thereon from Ernst & Young LLP.
"Claim" means any demand, assessment, judgment, action or
proceeding,
judicial or administrative (including arbitration and other
alternative dispute
resolution mechanisms), made or instituted by any third party
against a party
hereto.
"Closing"
shall have the meaning set forth in Section 2.2 below.
"Closing Assets"
means the Licenses, the Portfolio Investments,
Statutory Deposits, if any, and the
Corporate Records.
"Closing Date" shall have the meaning set forth in Section 2.2
below.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Company Shares"
means all of the shares of capital stock of the
Company that are issued and outstanding
immediately prior to the Closing.
"Confidential
Information" shall have the meaning set forth in Section
10.2 below.
"Corporate Records"
means the corporate records of the Company,
including, without limitation, articles of incorporation,
by-laws, corporate
seal, stock book and stock transfer ledger, minutes of meetings of the
shareholders and directors and other records of corporate actions, books of
account, ledgers, copies of Returns, all filings, correspondence and
communications with insurance regulatory authorities, business records and
documents reflecting the qualifications, assets, liabilities, commitments,
obligations, rights and entitlements of the Company of whatever
nature, but
specifically excluding all such records relating to Insurance Policies or
necessary to Seller's preparation of Taxes relating to the Company's
business
prior to Closing.
"Employee Benefit
Plan" means any benefit plan or arrangement of the
Company for its employees, including but
not limited to employee pension benefit
plans, as defined in Section 3(2) of ERISA, Multiemployer Plans, if any, as
defined in Section 3(37) of ERISA, employee
welfare benefit plans, as defined in
Section 3(1) of ERISA, deferred compensation plans, stock option plans,
bonus
plans, stock purchase plans, hospitalization, disability and other insurance
plans, severance or termination pay plans
and policies, whether or not described
in Section 3(3) of ERISA, in which employees of the Company,
their spouses or
dependents participate.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as
amended.
"Exclusivity
Agreement" means that
certain agreement dated May 28,
2004, between the parties hereto, as
subsequently amended,
providing Buyer with
the exclusive right for the period of time
provided therein to
negotiate with
Seller for the purchase of the stock of the
Company from Seller
consistent with
the terms thereof.
"Fair Market Value" shall mean, as at any applicable time, the values
for Portfolio Investments as prescribed by the
Securities Valuation
Office of
the National Association of Insurance
Commissioners.
"Financial
Statements"
means, collectively, the Audited Financial
Statements and the Unaudited Financial
Statements.
"GAAP" means those generally accepted accounting principles set forth
in Statements of the Financial Accounting
Standards Board and in Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants or which have other
substantial
authorities
support in the
United
States of America and are applicable in the circumstances, as applied on a
consistent basis, as distinct from
accounting practices
prescribed or permitted
by the Insurance Departments of Ohio and West Virginia.
The term "consistent
basis" shall, however, mean (here and in
the definition of Statutory Accounting)
not only that the accounting principles observed in the current period are
comparable in all material respects to those applied in the preceding
period,
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but that, in the case of financial
statements furnished to Buyer, the methods of
calculation, aggregation and presentation of the balance sheet,
statements of
income and retained earnings and statements
of cash flows shall be substantially
the same.
"Insurance
Policies" means
all fire, theft, casualty, general
liability, reinsurance,
stop-loss,
professional
liability,
business
interruption, product liability, automobile and
other insurance policies issued
by the Company prior to Closing.
"Licenses" means the Company's licenses or certificates of
authority to
transact insurance in the States of
Indiana, Ohio and West Virginia.
"Losses" means any loss, liability, deficiency, damage, expense or
cost
(including reasonable attorneys' fees)
incurred by a party.
"Portfolio
Investments" means the
portfolio of government securities
owned by the Company and, if government securities are not alone sufficient,
corporate equity securities that will be included
in the Closing Assets,
with
such securities having a Fair Market Value of no
less than $2,750,000 nor more
than $2,850,000 (in each case less the amount of
any Statutory
Deposits) at
Closing and the unrealized appreciation in
which is fairly representative of the
unrealized appreciation in the readily
marketable securities held by the Company
as of the date of this Agreement.
"Purchase Price" means One Hundred Fifty Thousand Dollars ($150,000),
plus, the Fair Market Value of the Portfolio Investments at the close of
business on the day immediately preceding the Closing Date, plus
any Statutory
Deposits, minus, $40,000, being the sum of the payments made under the
Exclusivity Agreement, and minus any payments made under
Section 7.6 which are
to be credited toward the Purchase
Price.
"Returns" means any
returns, reports or statements (including any
information returns) required to be filed
for purposes of a particular Tax.
"Statutory Accounting"
means the accounting
practices prescribed or
permitted by the Insurance Departments of Ohio and West Virginia, which are
distinct from GAAP and provide the basis for the Financial Statements, as
applied on a consistent basis.
"Statutory Deposits"
means any financial deposits required to be
maintained by the Company by the
Commissioners
or Departments of
Insurance (or
other governmental or regulatory authority), as a condition of the
Company's
conduct of business in the States of West
Virginia, Ohio and Indiana.
"Tax" or "Taxes" means all federal, state, county or local net or
gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental
charges of any
nature
whatsoever, together with any interest, penalties, additions to tax or
additional amounts with respect
thereto.
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"Transaction" shall
have the meaning set forth in the premises to this
Agreement.
"Unaudited Financial
Statements" means the unaudited interim financial
statements of the Celina Insurance Group companies
(including the
Company) for
the monthly periods since the date of the most recent Audited Financial
Statements.
2. THE TRANSACTION
2.1 Sale and Purchase of the Company's Capital Stock. At the Closing,
Seller shall sell to Buyer, and Buyer shall purchase from Seller, the Company
Shares; and, in consideration for Seller's sale of the Company
Shares, Buyer
shall pay to Seller, in cash by wire
transfer pursuant to Seller's instructions,
an amount equal to the Purchase Price, all
on the terms and conditions set forth
herein.
2.2 The Closing. Subject to the terms and conditions of this
Agreement,
the closing of the Transaction contemplated by this Agreement (the
"Closing")
shall take place, at the offices of
Spilman, Thomas &
Battle, PLLC, 300 Kanawha
Boulevard, East, Charleston, West Virginia, or at such other location as
the
parties may agree, on the seventh business
day following
satisfaction or waiver
of the conditions set forth in Articles 6
and 7 of this Agreement (the "Closing
Date"). At the Closing, Seller and Buyer shall make the deliveries to one
another set forth in Article 8.
2.3 Purchase Price.
At least five
business days prior to
the Closing
Date, Seller shall provide Buyer with a tentative
statement of the
Purchase
Price and the elements thereof, and shall deliver to Buyer a schedule of
the
Portfolio Investments to be included in the Closing
Assets, together with a
statement of the Fair Market Value thereof as of the close of
business on the
immediately preceding business day. It is
intended that the parties will discuss
the particular securities of the Company that
will be included in the Portfolio
Investments, but Buyer acknowledges that the
final selection of such securities
shall be made by Seller in a manner
consistent with the
definition of Portfolio
Investments included in this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF
SELLER. Seller
represents and warrants to
Buyer that:
3.1 ORGANIZATION,
QUALIFICATION
AND CORPORATE
POWER. The Company
is
duly incorporated, validly existing and in good
standing under the laws of the
State of West Virginia and is duly licensed
or qualified to transact business as
a foreign corporation and is in good
standing in Ohio and Indiana. The Company
has all the requisite corporate power and authority to own and hold its
properties and to carry on its business as
now being conducted.
The copies of
the Company's current Articles of Incorporation and Bylaws that have been
furnished to Buyer reflect all amendments made thereto and are correct and
complete as of the Closing Date.
3.2 AUTHORIZED
CAPITAL. The
authorized
capital stock of the
Company
consists of One Thousand (1,000) shares of
common stock, par value of $1,000 per
share, of which, as of the date hereof,
One Thousand
(1,000) shares are
issued
and outstanding, all of which are owned by Seller. There are no stock
appreciation rights, subscriptions, warrants, options, preemptive rights,
convertible securities, offers, commitments or other rights (contingent or
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otherwise) to purchase or otherwise
acquire equity securities of the Company.
All of the shares of the Company's
common stock have been
duly authorized
and
are validly issued, fully paid and non-assessable. The Company has no other
equity securities or securities containing any equity features authorized,
issued or outstanding. No shares of the common stock of the Company are in
escrow or held as security for any
obligation of the
Company or any
beneficial
owner thereof. None of the securities of the
Company are subject to any voting
trust or any other agreement pertaining to
the voting of such securities.
3.3 VALIDITY. Seller
has the full legal power and authority to execute
and deliver this Agreement and all other
agreements and
documents necessary
to
consummate the Transaction. All corporate action of Seller necessary to
authorize such execution and delivery and
the performance
thereof has been duly
taken. This Agreement has been duly executed
and delivered by Seller and, when
duly executed and delivered by Buyer, will constitute the legal, valid and
binding obligation of Seller, enforceable in accordance with its
terms, subject
as to enforcement of remedies to the
discretion of courts in awarding equitable
relief and to applicable bankruptcy,
reorganization,
insolvency, moratorium and
similar laws affecting the rights of
creditors generally.
Any other agreement
contemplated to be entered into by the Company and Seller in
connection
with
this Transaction prior to Closing, when duly executed and delivered by the
Company and/or Seller and the other parties
thereto, will
constitute the legal,
valid and binding obligation of the Company and Seller, respectively,
enforceable in accordance with its respective terms (subject as to
enforcement
of remedies to the discretion of courts in awarding equitable relief and to
applicable bankruptcy, reorganization, insolvency, moratorium and similar
laws
affecting the rights of creditors
generally).
3.4 NO BREACH. None of the execution and delivery of this Agreement
and
related agreements contemplated herein,
compliance with their
respective terms,
or performance of any obligation hereunder or thereunder
will result in the
breach or violation of the Articles of
Incorporation or Bylaws of the Company or
Seller, or any provision of law or any
provision of any
agreement,
indenture,
mortgage, lease or other obligation or
instrument, or any judgment, or any order
or decree of any court or other agency of government, to or by which the
Company, Seller or any of its respective properties or assets are bound, or
conflict with, result in a breach of or
constitute (with due notice or lapse of
time or both) a default under any such
indenture, agreement or other instrument,
or result in the creation or imposition of
any lien, charge, restriction, claim
or encumbrance of any nature whatsoever upon any of the
properties or assets of
the Company or result in a violation
by the Company or
Seller of any
federal,
state or local laws or regulations, except
in any of the foregoing instances for
minor breaches, violations, conflicts, defaults or liens, none of which will
have a material adverse effect, singly or
in the aggregate, on the Company.
3.5 ASSETS AND
LIABILITIES
AT CLOSING. On the Closing Date, the
Company's assets shall consist exclusively
of the Closing Assets and the Company
shall have no liabilities, absolute or
contingent (including claims incurred but
not reported), no obligations and no contractual commitments of any nature
except for continuing reporting obligations to the West Virginia Insurance
Commissioner and any liabilities,
obligations or
commitments caused by the acts
or omissions of Buyer. The Closing Assets
shall be free and clear of all claims,
assessments, security interests, liens, restrictions and
encumbrances,
except
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for minor or correctable defects of title, none of which will have a
material
adverse effect, singly or in the aggregate,
on the Company.
3.6 COMPLIANCE WITH LAW.
3.6.1 Except for
matters disclosed
in Schedule
3.6.2, the
Company has the lawful authority and all state, federal, special or local
governmental authorizations, licenses or permits (including,
but not limited to
the Licenses) required to conduct its
businesses, and such
businesses presently
are being conducted in compliance with all
applicable laws,
ordinances,
rules
and regulations of all governmental authorities related to its businesses,
except for minor or correctable failings, none of which will have a
material
adverse effect, singly or in the aggregate,
on the Company.
Except for matters
disclosed in Schedule 3.6.2, there are no pending or, to the
best knowledge of
Seller (after making due inquiry of Company
management),
threatened
actions,
notices or proceedings by any state,
federal, special or local government or any
subdivision thereof or any public or private
group which would have
the effect
of changing the operation of such
businesses.
Schedule 3.6 contains
a list and
brief description of the Licenses and all other
material licenses, permits,
franchises, certificates, authorizations, approvals, accreditations,
consents
and rights, including those granted or
derived from governmental sources, issued
or granted to the Company. Except for matters disclosed in Schedule 3.6.2,
neither the Company's operations,
nor any of the assets
owned, leased, occupied
or used by the Company in the operation of
its businesses,
violates or fails to
comply in any material respect with applicable federal, state or local laws,
regulations or ordinances. Except for matters disclosed in Schedule 3.6.2,
the
Company's activities (as currently
conducted),
the conduct of its
businesses,
the use of its properties and assets and all premises occupied by it, are in
compliance in all material respects with all requirements of all governmental
bodies or agencies having jurisdiction over it. Seller has delivered to
Buyer
true and correct copies of the Licenses and all
other such material
licenses,
permits, certificates and authorizations. Except for matters disclosed in
Schedule 3.6.2, there is no act or omission
on the part of the Company or Seller
that would subject the Company to any fine or suspension, which fine or
suspension would have a material adverse
effect, singly or in the aggregate, on
the Company. Except for matters disclosed in
Schedule 3.6.2, neither Seller nor
the Company have received any notice not
heretofore
complied with, from any
federal, state or other governmental authority or agency having
jurisdiction
over their properties or activities,
or any insurance or
inspection body, that
the Company's operations or any of its properties, facilities, equipment or
business procedures (whether leased or owned) or practices fail
to materially
comply with any applicable law, ordinance or regulation or
requirement of any
public authority or body.
3.6.2 Schedule 3.6.2 attached hereto contains a complete
list
of all violations, consent orders and regulatory
enforcement actions entered or
issued by any Commissioner or Department of Insurance with respect to the
Company since January 1, 1999 or that are
still in effect.
3.7 GOVERNMENTAL AUTHORITIES; CONSENTS. Except as set forth on
Schedule
3.7 attached hereto and for the consents of
the Insurance
Commissioners of West
Virginia, Ohio and Indiana, to the best of Seller's knowledge, neither the
Company, Seller, nor any of their
Affiliates is required to obtain any approval,
consent, qualification, order or authorization, or to
submit any notice, report
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or other filing with any governmental
authority in connection with the execution
or delivery by Seller of this Agreement or
the consummation
of the Transaction
contemplated by this Agreement.
3.8 TAXES. The
Company has timely
filed all Returns required to be
filed by it, and such Returns, when filed, were (and continue to be) true,
correct and complete in all material
respects. All Taxes due by reason of the
operations of the Company have been paid,
including,
without limitation, all
Taxes which the Company is obligated to pay pursuant to any Tax sharing
agreement with members of a group filing a
consolidated or combined Return or to
withhold from amounts owing to employees,
creditors and third
parties. Any Tax
liability of the Company resulting from the
operations of the Company, including
the Transaction contemplated hereby, prior to
Closing shall be paid or provided
for by Seller. The federal income tax returns of the Company
have never been
audited by the Internal Revenue Service.
No deficiency
assessment with
respect
to any proposed adjustment of the Company's federal, state, county or local
taxes is pending or, to the best of
Seller's knowledge,
threatened. There is no
tax lien, whether imposed by any federal, state, county or local taxing
authority outstanding against the assets, properties or businesses of the
Company, except for liens arising by
operation of law for accrued taxes not yet
due. There is no pending examination or proceeding by any authority or
agency
relating to the assessment or collection of any such Taxes, interest or
penalties thereon, nor to the best of Seller's knowledge do there exist any
facts that would provide a basis for any such
assessment.
The Company has
not
executed or filed any consent or agreement
to extend the period
for assessment
or collection of any such Taxes. As of the
Closing Date, the Company will not be
a party to any tax sharing agreement and will have no
liability with respect to
any such agreement to which it was
previously a party. All federal, state, local
and foreign Tax Returns filed by the
Company with respect to periods commencing
after December 31, 2001, are listed on
Schedule 3.8. Copies
of all such Returns
have been delivered to Buyer.
3.9 FINANCIAL
STATEMENTS.
The Company has
furnished to Buyer (i) the
Audited Financial Statements, including any management
letters regarding
the
internal operations of the Company with respect to such fiscal year
that have
been delivered to the Company's Board of Directors, and (ii) the Unaudited
Financial Statements. The Financial Statements have not been prepared in
accordance with GAAP, but instead in conformity with Statutory Accounting,
consistently applied (except, in the case
of the Unaudited Financial Statements,
for the absence of footnotes and year end adjustments which will not be
material, individually or in the aggregate) and fairly
present in all material
respects the financial position of the
Company and the results of operations and
changes in financial position as of the dates and for
the periods
specified.
Since December 31, 2004, except as
specifically
contemplated by this Agreement,
(a) there has been no material change in the assets, liabilities or financial
condition of the Company from that reflected in the most recent Audited
Financial Statement, except for changes in the ordinary
course of business and
consistent with past practice which, in the
aggregate, have not
been materially
adverse to the business, prospects,
financial condition, operations, property or
affairs of the Company, and (b) none of the business, prospects, financial
condition, operations, property or affairs of the Company
has been
materially
adversely affected by any occurrence or development, individually or in the
aggregate, whether or not insured against, except respecting all of the
foregoing for notifications to the West Virginia Department of Insurance
relating to the Transaction.
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3.10 SUBSIDIARIES.
As of the Closing, except for the Portfolio
Investments, the Company will not (i) own
of record or beneficially, directly or
indirectly, any shares of capital stock or
securities convertible
into capital
stock of any other corporation or have any participating interest in any
partnership, limited liability company, joint venture or other business
enterprise; or (ii) control, directly or
indirectly, any other entity.
3.11 LITIGATION AND INVESTIGATIONS. Except as listed on Schedule
3.11,
there is no: (i) action, suit, claim,
proceeding or investigation pending or, to
the best of Seller's knowledge (after due inquiry of Company management),
threatened against or affecting the Company, by any private party or any
federal, state, municipal or other
governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign; (ii) arbitration
proceeding relating to the Company pending under collective bargaining
agreements or otherwise; or (iii) governmental or
professional inquiry
pending
or, to the best of Seller's knowledge
(after due inquiry of Company management),
threatened against or directly or indirectly
affecting the Company
(including
without limitation any inquiry as to the
qualification of the Company to hold or
receive the Licenses or any other material
license or permit),
and to the best
of Seller's knowledge there is no basis for any of the foregoing as to the
Company. The Company has not received any
opinion, memorandum
or legal advice
from legal counsel to the effect that the Company is exposed, from a legal
standpoint, to any liability which may be material to the business of the
Company as now conducted. There is no action or suit by the
Company pending or
threatened against others. Except as listed
on Schedule 3.11, the Company is not
subject to any order, writ, injunction or
decree known to (or served upon) it by
any court, or any federal, state, municipal or other governmental
department,
commission, board, bureau, agency or
instrumentality.
3.12 EMPLOYEES AND BENEFIT PLANS. Effective as of the Closing,
the
Company shall have (i) no employees,
(ii) no Employee
Benefit Plans,
(iii) no
liability or responsibility with respect to any person who was
previously
an
employee of the Company or with respect to
any Employee Benefit
Plan previously
maintained by the Company, and (iv) no liability or
responsibility with respect
to any employee or any Employee
Benefit Plan
sponsored or
maintained by Seller
or any other Affiliate of the Company.
The Company
shall have complied in
all
material respects with all applicable laws,
rules, regulations and agreements
with respect to its termination of
employees and Employee Benefit Plans.
3.13 AGENTS.
Effective as of the Closing, the Company will have
terminated all agency relationships and
will have no liability or responsibility
with respect to any person or entity with
whom it has had an agency relationship
(including licensed insurance agents and
brokers); provided,
however, that such
representation is conditioned upon the
understanding that
Seller will cause the
Company to transfer all current insurance lines and business prior to the
Closing, and that after the Closing Buyer
shall cause the Company to engage only
in unrelated insurance lines for a period of not less
than two (2) years.
The
Company shall have complied in all material respects with the terms of all
applicable laws, rules, regulations and agreements with respect to its
termination of its agency relationships,
including providing its agents with not
less than 90 days' notice of
termination.
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3.14 INSURANCE.
3.14.1 Seller has
caused the
Company to provide
Buyer with
access to all Insurance Policies issued by the Company,
for which records
are
reasonably available. No Insurance Policies still in
force have been issued in
Ohio or Indiana.
3.14.2 Prior
to or effective at Closing, all Insurance
Policies shall have been satisfied,
eliminated,
transferred, assigned, conveyed
or otherwise divested from the Company.
3.14.3 Seller shall
have obtained all
necessary or desirable
governmental and regulatory approvals necessary to effect the
satisfaction,
elimination, transfer, assignment, conveyance or divestiture of the
Insurance
Policies.
3.14.4 Except for continuing reporting responsibilities to the
West Virginia Insurance Commissioner with respect to
Insurance Policies,
the
Company shall have no liability or
responsibility with
respect to any Insurance
Policies.
3.14.5 Prior to or effective at Closing, all contracts with or
appointments of agencies, agents, brokerages, brokers and the like shall
have
been terminated by the Company.
3.15 BOOKS AND
RECORDS. The books of account, ledgers, and other
Corporate Records of the Company accurately and completely reflect in all
material respects all information
relating to the
business of the Company, the
nature and location and the collection of its assets, and the nature of all
liabilities, commitments and obligations of the
Company, subject to those items
excluded from the definition of Corporate
Records in this Agreement.
3.16 INSURANCE
AGREEMENTS.
Prior
to the Closing, the following
agree
