EXHIBIT 1.1
2,600,000 Shares of Common Stock
PENN-AMERICA GROUP, INC.
UNDERWRITING AGREEMENT
December ., 2002
BEAR, XXXXXXX & CO. INC.
XXXXXX, XXXXX XXXXX, INCORPORATED
XXXXX, XXXXXXXX & XXXXX, INC.
as Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Penn-America Group, Inc., a Pennsylvania corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the several underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 2,600,000 shares (the "Firm Shares") of its common stock, par value
$0.01 per share (the "Common Stock") and for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, at the option of
the Underwriters, up to an additional 390,000 shares (the "Additional Shares")
of Common Stock. The Firm Shares and any Additional Shares purchased by the
Underwriters are referred to herein as the "Shares." The Shares are more fully
described in the Registration Statement referred to below.
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, each of the Underwriters as of the date hereof
and as of the Closing Date and each Additional Closing Date (each as defined in
Section 2 below) that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-2 (No. 333-91362), and
amendments thereto, and related preliminary prospectuses for the registration
under the Securities Act of 1933, as amended (the "Securities Act"), of the
Shares which registration statement, as so amended (including post-effective
amendments, if any), has
been declared effective by the Commission and copies of which have heretofore
been delivered to the Underwriters. The registration statement, as amended at
the time it became effective, including the exhibits and information (if any)
deemed to be part of the registration statement at the time of effectiveness
pursuant to Rule 430A under the Securities Act, is hereinafter referred to as
the "Registration Statement." If the Company has filed or is required pursuant
to the terms hereof to file a registration statement pursuant to Rule 462(b)
under the Securities Act registering additional shares of Common Stock (a "Rule
462(b) Registration Statement"), then, unless otherwise specified, any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462(b) Registration Statement. Other than a Rule 462(b) Registration Statement,
which became effective upon filing, no other document with respect to the
Registration Statement has heretofore been filed with the Commission. No stop
order suspending the effectiveness of either the Registration Statement or the
Rule 462(b) Registration Statement, if any, has been issued and no proceeding
for that purpose has been initiated or, threatened by the Commission. The
Company, if required by the Securities Act and rules and regulations of the
Commission (together, the "Rules and Regulations"), proposes to file the
Prospectus with the Commission pursuant to Rule 424(b) of the Rules and
Regulations. The Prospectus, in the form in which it is to be filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations, or, if the
Prospectus is not to be filed with the Commission pursuant to Rule 424(b), the
Prospectus in the form included as part of the Registration Statement at the
time the Registration Statement became effective, is hereinafter referred to as
the "Prospectus," except that if any revised prospectus or prospectus supplement
shall be provided to the Underwriters by the Company for use in connection with
the offering and sale of the Shares (the "Offering") which differs from the
Prospectus (whether or not such revised prospectus or prospectus supplement is
required to be filed by the Company pursuant to Rule 424(b) of the Rules and
Regulations), the term "Prospectus" shall refer to such revised prospectus or
prospectus supplement, as the case may be, from and after the time it is first
provided to the Underwriters for such use. Any preliminary prospectus or
prospectus subject to completion included in the Registration Statement or filed
with the Commission pursuant to Rule 424 under the Securities Act is hereafter
called a "Preliminary Prospectus." Any reference herein to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-2 which were filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") on or before the effective date of the Registration
Statement, the date of such Preliminary Prospectus or the date of the
Prospectus, as the case may be, and any reference herein to the terms "amend",
"amendment" or "supplement" with respect to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and include
(i) the filing of any document under the Exchange Act after the effective date
of the Registration Statement, the date of such Preliminary Prospectus or the
date of the Prospectus, as the case may be, which is incorporated therein by
reference and (ii) any such document so filed. All references in this Agreement
to the Registration Statement, the Rule 462(b) Registration Statement, the
Preliminary Prospectus and the Prospectus, or any
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amendments or supplements to any of the foregoing, shall be deemed to include
any copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System ("XXXXX").
(b) At the time of the effectiveness of the Registration Statement or
the effectiveness of any post-effective amendment to the Registration Statement,
when the Prospectus is first filed with the Commission pursuant to Rule 424(b)
of the Rules and Regulations, when any supplement to or amendment of the
Prospectus is filed with the Commission, when any document filed under the
Exchange Act was or is filed and at the Closing Date and the Additional Closing
Date, if any (as hereinafter respectively defined), the Registration Statement
and the Prospectus and any amendments thereof and supplements thereto complied
or will comply in all material respects with the applicable provisions of the
Securities Act and the Rules and Regulations and did not and will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein (i) in
the case of the Registration Statement, not misleading and (ii) in the case of
the Prospectus or any related Preliminary Prospectus in light of the
circumstances under which they were made, not misleading. When any related
Preliminary Prospectus was first filed with the Commission (whether filed as
part of the registration statement for the registration of the Shares or any
amendment thereto or pursuant to Rule 424(a) of the Rules and Regulations) and
when any amendment thereof or supplement thereto was first filed with the
Commission, such Preliminary Prospectus and any amendments thereof and
supplements thereto complied in all material respects with the applicable
provisions of the Securities Act and the Rules and Regulations and the Exchange
Act and the respective rules and regulations thereunder and did not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein in
light of the circumstances under which they were made not misleading. No
representation and warranty is made in this subsection (b), however, with
respect to any information contained in or omitted from the Registration
Statement or the Prospectus or any related Preliminary Prospectus or any
amendment thereof or supplement thereto in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Underwriter through you specifically for use therein ("Underwriters'
Information"). The parties acknowledge and agree that the Underwriters'
Information consists solely of the material included in paragraphs 3, 10 (fourth
sentence only) 12 and 13 under the caption "Underwriting" in the Prospectus.
(c) Ernst & Young LLP, who have certified the financial statements
and supporting schedules included or incorporated in the Registration Statement,
are independent public accountants as required by the Securities Act and the
Rules and Regulations.
(d) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as set forth in
the
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Registration Statement and the Prospectus, the Company has not paid any
dividends on its Common Stock and there has been no material adverse change or
any development involving a prospective material adverse change on (i) the
business, prospects, properties, operations, condition (financial or other),
stockholders' equity or results of operations of the Company and each subsidiary
of the Company (each, a "Subsidiary" and together, the "Subsidiaries"), taken as
a whole; (ii) the Common Stock of the Company; (iii) the Offering; or (iv) the
consummation of the transactions contemplated by this Agreement or the Company's
performance of its obligations hereunder (a "Material Adverse Change" or
"Material Adverse Effect"), whether or not arising from transactions in the
ordinary course of business, and since the date of the latest balance sheet
presented in the Registration Statement and the Prospectus, neither the Company
nor any of the Subsidiaries has incurred or undertaken any liabilities or
obligations, direct or contingent, or entered into any transactions which are
material to the Company and the Subsidiaries taken as a whole, except for
liabilities or obligations which are reflected in the Registration Statement and
the Prospectus.
(e) This Agreement and the transactions contemplated herein have been
duly and validly authorized by the Company and this Agreement has been duly and
validly executed and delivered by the Company.
(f) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
conflict with or result in a breach of any of the terms and provisions of, or
constitute a default (or an event which with notice or lapse of time, or both,
would constitute a default) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company or
any of the Subsidiaries pursuant to any indenture, mortgage, deed of trust, loan
agreement or other agreement, instrument, franchise, license or permit to which
the Company or any of the Subsidiaries is a party or by which the Company or any
of the Subsidiaries or their respective properties or assets may be bound or
(ii) violate or conflict with any provision of the memorandum of association,
articles of association, certificate or articles of incorporation, charter,
by-laws or other organizational documents of the Company or any of the
Subsidiaries or any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of the Subsidiaries or any of their
respective properties, operations or assets. No consent, approval,
authorization, order, registration, filing, qualification, license or permit of
or with any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or any of the Subsidiaries or any of their
respective properties or assets is required to be made or obtained by the
Company for the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, by the Registration
Statement and by the Prospectus, including the issuance, sale and delivery of
the Shares to be issued, sold and delivered by the Company hereunder, except (A)
the registration under the Securities Act of the Shares and (B) such consents,
approvals, authorizations, orders, registrations, filings, qualifications,
licenses
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and permits as may be required under state securities, Blue Sky or insurance
laws or the rules of the National Association of Securities Dealers, Inc. in
connection with the purchase and distribution of the Shares by the Underwriters.
(g) The Company has the authorized capitalization set forth in the
Prospectus and all of the issued shares of Common Stock of the Company have been
duly and validly authorized and issued, are fully paid and non-assessable and
were not issued in violation of or subject to any preemptive or similar rights
that entitle or will entitle any person to acquire any Shares from the Company
upon issuance or sale by the Company of Shares in the Offering, except for such
rights as may have been fully satisfied or waived prior to the effectiveness of
the Registration Statement; the Shares to be delivered on the Closing Date and
the Additional Closing Date, if any (as hereinafter respectively defined), have
been duly and validly authorized and, when delivered by the Company in
accordance with this Agreement against the receipt of the consideration called
for by this Agreement, will be duly and validly issued, fully paid and
non-assessable and will not have been issued in violation of or subject to any
preemptive or similar rights that entitle or will entitle any person to acquire
any Shares from the Company upon issuance thereof by the Company; and all of the
issued shares of capital stock of each of its Subsidiaries have been duly and
validly authorized and issued and are fully paid and non-assessable and are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims; the Common Stock, the Firm Shares and the
Additional Shares conform to the descriptions thereof contained or incorporated
by reference in the Registration Statement and the Prospectus.
(h) The only subsidiaries (as defined in Rule 405 of the Securities
Act) of the Company are those listed on Schedule III attached hereto. Each of
the Company and the Subsidiaries has been duly organized and is validly existing
as a corporation or a company limited by shares in good standing under the laws
of its jurisdiction of incorporation. Each of the Company and the Subsidiaries
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures to be so qualified
or in good standing which will not in the aggregate have a Material Adverse
Effect on the condition (financial or otherwise), results of operations,
business, properties or prospects of the Company and the Subsidiaries taken as a
whole. Each of the Company and the Subsidiaries has all requisite power and
authority, and all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses and permits (collectively, the
"Consents") of and from all public, regulatory or governmental agencies and
bodies, to own, lease and operate its properties and conduct its business as now
being conducted and as described in the Registration Statement and the
Prospectus, with such exceptions as would not have, individually or in the
aggregate a Material Adverse Effect. No Consent contains a materially burdensome
restriction not adequately disclosed in the Registration Statement and the
Prospectus.
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(i) Each of the Subsidiaries holds such insurance licenses,
certificates and permits from governmental authorities (including, without
limitation, from the insurance regulatory agencies of the various jurisdictions
where it conducts business) (the "Insurance Licenses") as are necessary to the
conduct of its business as described in the Prospectus; each Subsidiary has
fulfilled and performed all obligations necessary to maintain the Insurance
Licenses; there is no pending or, to the knowledge of the Company after due
inquiry, threatened action, suit, proceeding or investigation that could
reasonably be expected to result in the revocation, termination or suspension of
any Insurance License; and no insurance regulatory agency or body has issued, or
to our knowledge, commenced any proceeding for the issuance of, any order or
decree impairing, restricting or prohibiting the payment of dividends or the
making of any loan by any Subsidiary to its parent, which would have,
individually or in the aggregate, a Material Adverse Effect or which is not
described in the Registration Statement.
(j) All reinsurance treaties and arrangements to which the
Company or any Subsidiary is a party as a cedant are in full force and effect;
neither the Company nor any Subsidiary is in material violation of or in
material default in the performance, observance or fulfillment of any
obligation, agreement, covenant or condition contained therein; neither the
Company nor any Subsidiary has received any notice from any of the other parties
to such treaties or arrangements that such other party intends not to perform
such treaty; and, to the best knowledge of the Company and the Subsidiaries, the
Company and the Subsidiaries have no reason to believe that any of the other
parties to such treaties or arrangements will be unable to perform such treaty
or arrangement except to the extent adequately and properly reserved for in the
consolidated financial statements of the Company included in the Prospectus.
(k) The 2001 statutory annual statements of each of the
Subsidiaries required to prepare such statements and the statutory balance
sheets and income statements included in such statutory annual statements
together with related schedules and notes, have been prepared, in all material
respects, in conformity with statutory accounting principles or practices
required or permitted by the appropriate insurance department of the
jurisdiction of domicile of each such Subsidiary, and such statutory accounting
practices have been applied on a consistent basis throughout the periods
involved, except as may otherwise be indicated therein or in the notes thereto,
and present fairly, in all material respects, the statutory financial position
of the Subsidiaries as of the dates thereof, and the statutory basis results of
operations of the Subsidiaries for the periods covered thereby.
(l) The Subsidiaries have made no material changes in their
insurance reserving practices since December 31, 2001, except where such change
in such insurance reserving practices would not reasonably be expected to have a
Material Adverse Effect.
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(m) The Company is not aware of any threatened or pending
downgrading of its or any Subsidiary's financial strength rating from A.M. Best
Company, Inc. (the "Rating Agency").
(n) There are no pro forma or as adjusted financial statements
which are required to be included in the Registration Statement and Prospectus
in accordance with Regulation S-X.
(o) Except as described in the Prospectus, there is no legal or
governmental proceeding, including routine litigation, to which the Company or
any of the Subsidiaries is a party or of which any property of the Company or
any of the Subsidiaries is the subject which, individually or in the aggregate,
if determined adversely to the Company or any of the Subsidiaries, is reasonably
likely to have a Material Adverse Effect, and to the best of the Company's
knowledge, no such proceeding is threatened or contemplated by governmental
authorities or threatened or contemplated by others and the defense of all such
claims against the Company in the aggregate, including routine litigation, will
not have a Material Adverse Effect on the Company or any of the Subsidiaries.
(p) Except for the Subsidiaries or as otherwise set forth in the
Prospectus, the Company owns no capital stock, ordinary shares or other
beneficial interest, directly or indirectly, in any corporation, partnership,
joint venture or other business entity.
(q) The financial statements of the Company, including the notes
thereto, and supporting schedules included or incorporated by reference in the
Registration Statement and the Prospectus present fairly in all material
respects the financial position of the Company and its consolidated subsidiaries
and the other entities for which financial statements are included in the
Registration Statement and the Prospectus as of the dates indicated and
condition and results of operations for the periods specified; except as
otherwise stated in the Registration Statement, said financial statements have
been prepared in conformity with U.S. generally accepted accounting principles
("GAAP") in all material respects applied on a consistent basis throughout the
periods involved; and the supporting schedules included in the Registration
Statement present fairly in all material respects the information required to be
stated therein. The other financial and statistical information and data
relating to the Company and its consolidated subsidiaries included in the
Registration Statement and the Prospectus present fairly in all material
respects the information included therein and have been prepared on a basis
consistent with that of the financial statements included or incorporated by
reference in the Registration Statement and the Prospectus and the books and
records of the respective entities presented therein.
(r) The Company is not, and upon consummation of the transactions
contemplated hereby, and at all times up to and including the application of
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net proceeds as described in the Prospectus, will not be, subject to
registration as an "investment company" under the Investment Company Act of
1940.
(s) Any real property and buildings held under lease or sublease
by the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and the Subsidiaries. Neither the Company nor any of the Subsidiaries
has received any notice of any claim adverse to their ownership of any real or
personal property or of any claim against the continued possession of any real
property, whether owned or held under lease or sublease by the Company or any of
the Subsidiaries.
(t) The Company and each of the Subsidiaries have accurately
prepared and timely filed all federal, state and other tax returns that are
required to be filed by each of them and have paid or made provision for the
payment of all taxes, assessments, governmental or other similar charges,
including without limitation, all sales and use taxes and all taxes which the
Company and each of the Subsidiaries are obligated to withhold from amounts
owing to employees, creditors and third parties, with respect to the periods
covered by such tax returns (whether or not such amounts are shown as due on any
tax return), except in any case where the failure to file any such return or to
make any such provision, individually or in the aggregate, would not have a
Material Adverse Effect. No material deficiency assessment with respect to a
proposed adjustment of the Company's or any of the Subsidiaries' federal, state,
or other taxes is pending or, to the best of the Company's knowledge,
threatened. There is no tax lien, whether imposed by any federal, state, or
other taxing authority, outstanding against the assets, properties or business
of the Company or any of the Subsidiaries.
(u) As of the date hereof and on the Closing Date, the Company
and its Subsidiaries expect to engage predominantly in traditional insurance and
reinsurance activities that involve substantial transfer of insurance or annuity
risks, and intend to operate in a manner that they will not (1) engage in
certain nontraditional insurance or reinsurance activities that do not involve a
sufficient amount of risk transfer or (2) maintain financial reserves in excess
of the reasonable needs of the insurance business of the Company and its
Subsidiaries, either of which would cause the insurance company exception to the
passive foreign investment company rules described in Section 1297 of the
Internal Revenue Code of 1986, as amended from time to time (the "Code") not to
apply to the Company or its Subsidiaries.
(v) The shares of Common Stock are registered pursuant to Section
12(b) of the Exchange Act and the outstanding shares of Common Stock (including
the Shares) are listed on the New York Stock Exchange (the "NYSE"), and the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
de-listing the Common
8
Stock from the NYSE, nor has the Company received any notification that the
Commission or the NYSE is contemplating terminating such registration or
listing.
(w) Except as disclosed in the Registration Statement and the
Prospectus, no holder of securities of the Company has any registration or
similar rights to require registration of any debt or equity security of the
Company as part or on account of, or otherwise in connection with, the sale of
the Shares contemplated hereby.
(x) Neither the Company nor any of its affiliates has taken, nor
will any of them take, directly or indirectly, any action which constitutes or
is designed to cause or result in, or which might reasonably be expected to
constitute, cause or result in, the stabilization or manipulation of the price
of any security to facilitate the sale or resale of the Shares.
(y) The Company has not prior to the date hereof offered or sold
any securities which would be "integrated" with the offer and sale of the Shares
pursuant to the Registration Statement. Except as described in the Registration
Statement and the Prospectus, the Company has not sold or issued any shares of
Common Stock, any other equity security of the Company or any Subsidiaries and
any security convertible into, or exercisable or exchangeable for, any shares of
Common Stock or other such equity security (a "Relevant Security") during the
six-month period preceding the date of the Prospectus, including but not limited
to any sales pursuant to Rule 144A or Regulation D or S under the Securities
Act, other than shares of Common Stock issued pursuant to the registration
statement on Form S-2 (No. 333-87698), employee benefit plans, qualified stock
option plans or the employee compensation plans or pursuant to outstanding
options, rights or warrants as described in the Prospectus.
(z) No relationship, direct or indirect, exists between or among
any of the Company or any affiliate of the Company, on the one hand, and any
director, officer, stockholder, customer or supplier of the Company or any
affiliate of the Company, on the other hand, which is required by the Securities
Act, the Exchange Act or the Rules and Regulations to be described in the
Registration Statement or the Prospectus which is not so described or is not
described as required.
(aa) The Company and its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accounting for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
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(bb) The conditions for use of Form S-2, as set forth in the
General Instructions thereto, have been satisfied.
(cc) The documents incorporated by reference in the Prospectus,
at the time they were or hereafter are filed with the Commission, complied and
will comply in all respects with the requirements of the Exchange Act and the
rules and regulations of the Commission under the Exchange Act, and, when read
together with the other information in the Prospectus, at the time the
Registration Statement and any amendments thereto become effective and at the
Closing Date, will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(dd) There are no contracts or other documents (including,
without limitation, any voting agreement), which are required to be described in
the Prospectus or filed as exhibits to the Registration Statement or the
Prospectus by the Securities Act or by the Rules and Regulations and which have
not been so described or filed.
(ee) Neither the Company nor any of the Subsidiaries (i) is in
violation of its memorandum of association, articles of association, certificate
or articles of incorporation, charter or by-laws, (ii) is in default (and no
event has occurred which, with notice or lapse of time or both, would constitute
such a default) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which it is a party or by which it is bound
or to which any of its property or assets is subject or (iii) is in violation in
any respect of any statute or any judgment, decree, order, rule or regulation of
any court or governmental or regulatory agency or body having jurisdiction over
the Company or any of the Subsidiaries or any of their properties or assets,
except in the case of (iii), any violation or default that would not have a
Material Adverse Effect on the condition (financial or otherwise), results of
operations, business, properties or prospects of the Company and the
Subsidiaries taken as a whole.
(ff) Each of the Company and the Subsidiaries owns or possesses
adequate right to use all patents, patent applications, trademarks, service
marks, trade names, trademark registrations, service xxxx registrations,
copyrights, licenses, formulae, customer lists, and know-how and other
intellectual property (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures)
necessary for the conduct of their respective businesses as being conducted and
as described in the Registration Statement and Prospectus and have no reason to
believe that the conduct of their respective businesses will conflict with, and
have not received any notice of any claim of conflict with, any such right of
others, which claim, if the subject of an unfavorable decision, ruling or
judgment, could reasonably be
10
expected to result in a Material Adverse Effect. To the best of the Company's
knowledge, all material technical information developed by and belonging to the
Company which has not been patented has been kept confidential.
(gg) Neither the Company, any of the Subsidiaries nor, to the
Company's knowledge, any of its employees or agents has at any time during the
last five years (i) made any unlawful contribution to any candidate for foreign
office, or failed to disclose fully any contribution in violation of law or (ii)
made any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.
(hh) No labor disturbance by the employees of the Company or any
of the Subsidiaries exists or, to the best of the Company's knowledge, is
imminent which might be expected to have a Material Adverse Effect.
(ii) No "prohibited transaction" (as defined in Section 406 of
the Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section 4975
of the Code, or "accumulated funding deficiency" (as defined in Section 302 of
ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than
events with respect to which the 30-day notice requirement under Section 4043 of
ERISA has been waived) has occurred with respect to any employee benefit plan of
the Company or any of its Subsidiaries which could have a Material Adverse
Effect; each employee benefit plan of the Company or any of its Subsidiaries is
in compliance in all material respects with applicable law; including ERISA and
the Code; the Company has not incurred and does not expect to incur liability
under Title IV of ERISA with respect to the termination of, or withdrawal from
any "pension plan" (as defined in ERISA); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which could cause the loss of
such qualification.
(jj) The statistical and market-related data included in the
Prospectus are based on or derived from sources which are to the best knowledge
and belief of the Company reliable and accurate.
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2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Underwriters and the Underwriters
severally agree to purchase from the Company, at a purchase price per share of
$______, the number of Firm Shares set forth opposite the respective names of
the Underwriters in Schedule I hereto plus any additional number of Shares which
such Underwriter may become obligated to purchase pursuant to the provisions of
Section 9 hereof.
(b) Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the office of Xxxxxxx Xxxxxxx &
Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, ("Underwriters'
Counsel") or at such other place as shall be agreed upon by the Underwriters in
Schedule I hereto and the Company, at 10:00 A.M., New York City time on the
third or fourth business day (as permitted under Rule 15c6-1 under the Exchange
Act) (unless postponed in accordance with the provisions of Section 9 hereof)
following the date of the effectiveness of the Registration Statement (or, if
the Company has elected to rely upon Rule 430A of the Regulations, the third or
fourth business day (as permitted under Rule 15c6-1 under the Exchange Act)
after the determination of the public offering price of the Shares), or such
other time not later than ten business days after such date as shall be agreed
upon by Bear, Xxxxxxx & Co. Inc. and the Company (such time and date of payment
and delivery being herein called the "Closing Date").
(c) Payment for the Firm Shares shall be made to or upon the
order of the Company of the purchase price by wire transfer in Federal (same
day) funds to the Company upon delivery of certificates for the Shares to you
through the facilities of The Depository Trust Company for the respective
accounts of the several Underwriters against receipt therefor signed by you.
Certificates for the Shares to be delivered to you shall be registered in such
name or names and shall be in such denominations as you may request at least one
business day before the Closing Date. The Company will permit you to examine and
package such certificates for delivery at least one full business day prior to
the Closing Date.
(d) In addition, the Company hereby grants to the Underwriters
the option to purchase up to 390,000 Additional Shares at the same purchase
price per share to be paid by the Underwriters to the Company for the Firm
Shares as set forth in this Section 2, for the sole purpose of covering
over-allotments in the sale of Firm Shares by the Underwriters. This option may
be exercised at any time and from time to time, in whole or in part, on or
before the thirtieth day following the date of the Prospectus, by written notice
by you to the Company. Such notice shall set forth the aggregate number of
Additional Shares as to which the option is being exercised and the date and
time, as reasonably determined by you, when the Additional Shares are to be
delivered (such date
12
and time being herein sometimes referred to as the "Additional Closing Date");
provided, however, that the Additional Closing Date shall not be earlier than
the Closing Date or earlier than the second full business day after the date on
which the option shall have been exercised nor later than the eighth full
business day after the date on which the option shall have been exercised
(unless such time and date are postponed in accordance with the provisions of
Section 9 hereof). Certificates for the Additional Shares shall be registered in
such name or names and in such authorized denominations as you may request in
writing at least two full business days prior to the Additional Closing Date.
The Company will permit you to examine and package such certificates for
delivery at least one full business day prior to the Additional Closing Date.
The number of Additional Shares to be sold to each Underwriter
shall be the number which bears the same ratio to the aggregate number of
Additional Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto (or such number
increased as set forth in Section 9 hereof) bears to the total number of Firm
Shares, subject, however, to such adjustments to eliminate any fractional shares
as Bear, Xxxxxxx & Co. Inc. in its sole discretion shall make.
Payment for the Additional Shares shall be made to or upon the
order of the Company of the purchase price by wire transfer in Federal (same
day) funds to the Company at the offices of Underwriters' Counsel, or such other
location as may be mutually acceptable upon delivery of the certificates for the
Additional Shares to you for the respective accounts of the Underwriters.
3. Offering. Upon your authorization of the release of the Firm
Shares, the Underwriters propose to offer the Shares for sale to the public upon
the terms and conditions set forth in the Prospectus.
4. Covenants of the Company. The Company covenants and agrees
with each of the Underwriters that:
(a) The Registration Statement and any amendments thereto have
become effective, and if Rule 430A is used or the filing of the Prospectus is
otherwise required under Rule 424(b), the Company will file the Prospectus
(properly completed if Rule 430A has been used) pursuant to Rule 424(b) within
the prescribed time period and will provide evidence satisfactory to you of such
timely filing.
The Company will notify you immediately (and, if requested by
you, will confirm such notice in writing) (i) when the Registration Statement
and any amendments thereto become effective, (ii) of any request by the
Commission for any amendment of or supplement to the Registration Statement or
the Prospectus or for any additional information, (iii) of the Company's
intention to file or prepare any amendments to the Registration Statement
(including pursuant to rule 462(b)), the term sheet or any supplement, revision
or amendment to the Registration Statement or the Prospectus, (iv)
13
of the mailing or the delivery to the Commission for filing of any amendment of
or supplement to the Registration Statement or the Prospectus, (v) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of the
initiation, or the threatening, of any proceedings therefor, it being understood
that the Company shall make every effort to avoid the issuance of any such stop
order, (vi) of the receipt of any comments from the Commission, and (vii) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose. If the Commission shall propose
or enter a stop order at any time, the Company will make every reasonable effort
to prevent the issuance of any such stop order and, if issued, to obtain the
lifting of such order as soon as possible. The Company will not file any
amendment to the Registration Statement or any amendment of or supplement to the
Prospectus (including the prospectus required to be filed pursuant to Rule
424(b)) that differs from the Prospectus on file at the time of the
effectiveness of the Registration Statement before or after the effective date
of the Registration Statement, or file any document under the Exchange Act if
such document would be deemed to be incorporated by reference into the
Prospectus to which you shall object in a timely manner in writing after being
timely furnished in advance a copy thereof.
(b) The Company shall comply with the Securities Act and the
Exchange Act to permit completion of the distribution as contemplated in this
Agreement, Registration Statement and Prospectus. If at any time when a
prospectus relating to the Shares is required to be delivered under the
Securities Act or the Exchange Act in connection with the sales of Shares, any
event shall have occurred as a result of which the Prospectus as then amended or
supplemented would, in the judgment of the Underwriters or the Company, include
an 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, in
the light of the circumstances existing at the time of delivery to the
purchaser, not misleading, or if it shall be necessary at any time to amend or
supplement the Prospectus or Registration Statement to comply with the
Securities Act or the Rules and Regulations, or to file under the Exchange Act
so as to comply therewith any document incorporated by reference in the
Registration Statement or the Prospectus or in any amendment thereof or
supplement thereto, the Company will notify you promptly and prepare and file
with the Commission, subject to the second paragraph of Section 4(a) hereof, an
appropriate amendment or supplement (in form and substance satisfactory to you)
which will correct such statement or omission or which will effect such
compliance and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible.
(c) The Company will promptly deliver to each of the Underwriters
and Underwriters' Counsel a signed copy of the Registration Statement, including
all consents and exhibits filed therewith and all documents incorporated by
reference therein and all amendments thereto, and the Company will promptly
deliver to
14
each of the Underwriters such number of copies of any Preliminary Prospectus,
the Prospectus, the Registration Statement, and all amendments of and
supplements to such documents, if any, and all documents incorporated by
reference in the Registration Statement and Prospectus or any amendment thereof
or supplement thereto, as you may reasonably request. Prior to 10:00 A.M., New
York time, on the business day next succeeding the date of this Agreement and
from time to time thereafter the Company will furnish the Underwriters with
copies of the Prospectus in New York City in such quantities as you may
reasonably request.
(d) The Company consents to the use and delivery of the
Preliminary Prospectus by the Underwriters in accordance with Rule 430 and
Section 5(b) of the Securities Act. The Company shall also furnish to each of
the Underwriters copies of the Final Prospectus as requested by any of the
Underwriters.
(e) The Company will use its best efforts, in cooperation with
you, at or prior to the time of effectiveness of the Registration Statement, to
qualify the Shares for offering and sale under the securities laws relating to
the offering or sale of the Shares of such jurisdictions as you may designate
and to maintain such qualification in effect for so long as required for the
distribution thereof; except that in no event shall the Company be obligated in
connection therewith to qualify as a foreign corporation or to execute a general
consent to service of process.
(f) The Company will make generally available to its security
holders and to the Underwriters as soon as practicable, but in any event not
later than fifteen months after the end of the Company's fiscal quarter in which
the effective date of the Registration Statement (as defined in Rule 158(c)
under the Securities Act) falls, an earnings statement of the Company and the
Subsidiaries (which need not be audited) complying with Section 11(a) of the
Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158).
(g) During the period of 90 days from the date of the Prospectus,
the Company will not, directly or indirectly, without your prior written
consent, issue, sell, offer or agree to sell, grant any option for the sale of,
pledge, make any short sale or maintain any short position, establish or
maintain a "put equivalent position" (within the meaning of Rule 16-a-1(h) under
the Exchange Act ), enter into any swap, derivative transaction or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock (whether any such transaction is
to be settled by delivery of Common Stock, other securities, cash or other
consideration) or otherwise dispose of, any Common Stock (or any securities
convertible into, exercisable for or exchangeable for Common Stock) or interest
therein of the Company or of any of the Subsidiaries, and the Company will
obtain the undertaking of each of its officers and directors and such of its
shareholders as have been heretofore designated by you and listed on Schedule II
attached hereto not to engage in any of the aforementioned transactions on their
own behalf, other than the Company's
15
sale of Shares hereunder and the Company's issuance of Common Stock upon (i) the
exercise of warrants outstanding on the date hereof; (ii) the exercise of
currently outstanding options; and (iii) the grant and exercise of options
under, or the issuance and sale of shares pursuant to, the Company's Contingent
Profit Commission Plan and its employee stock option plans in effect on the date
hereof.
(h) During the period of three years from the effective date of
the Registration Statement, the Company will furnish to you copies of all
reports or other communications (financial or other) furnished to security
holders, and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the Commission or
any national securities exchange on which any class of securities of the Company
is listed; and (ii) such additional information concerning the business and
financial condition of the Company as you may from time to time reasonably
request, provided, however that such information may be given legally pursuant
to Regulation FD and Rule 10b-5 promulgated under the Exchange Act (such
financial statements to be on a consolidated basis to the extent the accounts of
the Company and the Subsidiaries are consolidated in reports furnished to its
security holders generally or to the Commission). This paragraph (h) shall be
deemed satisfied by the placement of such information on the Company's internet
website and timely notification to you of such placement.
(i) The Company will apply the net proceeds it receives from the
sale of the Shares as set forth under the caption "Use of Proceeds" in the
Prospectus.
(j) The Company will use its best efforts to list the Shares on
the NYSE.
(k) The Company, during the period when the Prospectus is
required to be delivered under the Securities Act or the Exchange Act, will file
all documents required to be filed with the Commission pursuant to Section 13,
14 or 15 of the Exchange Act within the time periods required by the Exchange
Act and the rules and regulations thereunder.
5. Payment of Expenses. Whether or not the transactions contemplated
in this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Securities Act and all
other expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of duplicating and
binding any Agreement among Underwriters, this Agreement, the blue sky
memoranda, closing documents (including any compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Shares; (iii)
16
all expenses in connection with the qualification of the Shares for offering and
sale under state securities laws as provided in Section 4(e) hereof, including
the fees and disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the blue sky survey; (iv) all fees and
expenses in connection with listing the Shares on the NYSE; (v) all travel
expenses of the Company's officers and employees and any other expense of the
Company incurred in connection with attending or hosting meetings with
prospective purchasers of the Shares; (vi) any stock transfer taxes incurred in
connection with this Agreement or the Offering and (vii) the filing fees
incident to, and the fees and disbursements of counsel for the Underwriters in
connection with, securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares. The Company
also will pay or cause to be paid: (i) the cost of preparing stock certificates;
(ii) the cost and charges of any transfer agent or registrar; and (iii) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section 5.
It is understood, however, that except as provided in this Section, and Sections
7 and 11 hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes on resale of any of
the Shares by them, and any advertising expenses connected with any offers they
may make.
6. Conditions of Underwriters' Obligations. The obligations of
the Underwriters to purchase and pay for the Firm Shares and the Additional
Shares, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Company herein contained, as of the date
hereof and as of the Closing Date (for purposes of this Section 6 "Closing Date"
shall refer to the Closing Date for the Firm Shares and any Additional Closing
Date, if different, for the Additional Shares), to the absence from any
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 of any misstatement or
omission, to the performance by the Company of its obligations hereunder, and to
each of the following additional terms and conditions:
(a) The Registration Statement shall have become effective and
all necessary approvals from the NYSE shall have been received not later than,
if pricing pursuant to Rule 430A, 5:30 P.M., New York time, on the date of this
Agreement or at such later time and date as shall have been consented to in
writing by you; if the Company shall have elected to rely upon Rule 430A of the
Regulations, the Prospectus shall have been filed with the Commission in a
timely fashion in accordance with Section 4(a) hereof and a form of the
Prospectus containing information relating to the description of the Shares and
the method of distribution and similar matters shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period; and, at or
prior to the Closing Date no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereof shall have been
issued and no proceedings therefor shall have been initiated or threatened by
the Commission.
17
(b) At the Closing Date, you shall have received the favorable
written opinion of (i) Xxxx Xxxxx LLP, counsel for the Company and (ii) Xxxxxxx
Xxxxxxxx, Esq., General Counsel of the Company, each dated the Closing Date and
addressed to the Underwriters in the forms attached hereto as Annexes I and II,
respectively.
(c) All proceedings taken in connection with the sale of the Firm
Shares and the Additional Shares as herein contemplated shall be satisfactory in
form and substance to you and to Underwriters' Counsel, and the Underwriters
shall have received from said Underwriters' Counsel a favorable opinion, dated
as of the Closing Date with respect to the issuance and sale of the Shares, the
Registration Statement and the Prospectus and such other related matters as you
may require, and the Company shall have furnished to Underwriters' Counsel such
documents as they request for the purpose of enabling them to pass upon such
matters.
(d) At the Closing Date, you shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the Company, dated
the Closing Date, to the effect that (i) the condition set forth in subsection
(a) of this Section 6 has been satisfied, (ii) as of the date hereof and as of
the Closing Date the representations and warranties of the Company set forth in
Section 1 hereof are accurate, (iii) as of the Closing Date all agreements,
conditions and obligations of the Company to be performed or complied with
hereunder on or prior thereto have been duly performed or complied with, (iv)
except (A) as disclosed in the Registration Statement and Prospectus and (B) for
such losses or interferences as would not result, individually or in the
aggregate, in a Material Adverse Effect, the Company and the Subsidiaries have
not sustained any material loss or interference with their respective businesses
or properties from fire, flood, hurricane, accident or other calamity, whether
or not covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and (v) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus there has
not been any Material Adverse Change in the capital stock or Common Stock of the
Company or any of the Subsidiaries or any change, or any development involving a
prospective change, in the business, prospects, properties, operations,
condition (financial or otherwise) or results of operations of the Company and
the Subsidiaries taken as a whole, except in each case as described in or
contemplated by the Prospectus.
(e) At the time this Agreement is executed and at the Closing
Date, you shall have received a comfort letter, from Ernst & Young LLP,
independent public accountants for the Company dated, respectively, as of the
date of this Agreement and as of the Closing Date addressed to the Underwriters
and in form and substance satisfactory to the Underwriters and Underwriters'
counsel.
(f) You shall have also received from the Company, a letter from
Ernst & Young LLP addressed to the Company stating that the Company's system
18
of internal accounting controls taken as a whole is sufficient to meet the broad
objectives of internal accounting control insofar as those objectives pertain to
the prevention or detection of errors or irregularities in amounts that would be
material in relation to the financial statements of the Company and the
Subsidiaries.
(g) Subsequent to the execution and delivery of this Agreement
or, if earlier, the dates as of which information is given in the Registration
Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of
any supplement thereto), there shall not have been any change in the capital
stock or Common Stock of the Company or any of the Subsidiaries or any change,
or any development involving a prospective change, in or affecting the condition
(financial or otherwise), results of operations, business, properties or
prospects of the Company and the Subsidiaries taken as a whole, including,
without limitation, the occurrence of a fire, flood, explosion or other calamity
at any of the properties owned or leased by the Company or any of its
Subsidiaries, the effect of which, in any such case described above, is, in the
judgment of the Underwriters, so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares on the terms and in the manner contemplated in the Prospectus
(exclusive of any supplement).
(h) You shall have received a lock-up agreement from each person
who is a director or officer of the Company and each shareholder as shall have
been heretofore designated by you and listed on Schedule II hereto substantially
in the form attached hereto as Annex III.
(i) At the Closing Date, the Shares shall have been approved for
listing on the NYSE.
(j) The Company shall have complied with the provisions of
Section 4(c) hereof with respect to the furnishing of prospectuses.
(k) The Company shall have furnished the Underwriters and
Underwriters' Counsel with such other certificates, opinions or other documents
as they may have reasonably requested.
(l) Neither the Company nor any of its Subsidiaries shall have
been downgraded by the Rating Agency nor have been put on credit watch with
negative implications (or similar action) by the Rating Agency.
(m) At the Closing Date, the National Association of Securities
Dealers, Inc. shall have confirmed that it has not raised any objection with
respect to the fairness and reasonableness of the underwriting terms and
arrangements.
If any of the conditions specified in this Section 6 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to you or to Underwriters'
Counsel pursuant to this
19
Section 6 shall not be in all material respects reasonably satisfactory in form
and substance to you and to Underwriters' Counsel, all obligations of the
Underwriters hereunder may be cancelled by you at, or at any time prior to, the
Closing Date and the obligations of the Underwriters to purchase the Additional
Shares may be cancelled by you at, or at any time prior to, the Additional
Closing Date. Notice of such cancellation shall be given to the Company in
writing or by telephone. Any such telephone notice shall be confirmed promptly
thereafter in writing.
7. Indemnification.
(a) The Company shall indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
against any and all losses, liabilities, claims, damages and expenses whatsoever
as incurred (including but not limited to reasonable attorneys' fees and any and
all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement for the registration of the Shares, as
originally filed or any amendment thereof, or any related Preliminary Prospectus
or the Prospectus, or in any supplement thereto or amendment thereof, 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
therein not misleading; provided, however, that the Company will not be liable
in any such case to the extent but only to the extent that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with the information furnished
to the Company and referred to in the last sentence of Section 1(b); provided,
further, that the foregoing indemnity agreement with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter who failed to
deliver a Prospectus (as then amended or supplemented, provided by the Company
to the several Underwriters in the requisite quantity and on a timely basis to
permit proper delivery on or prior to the Closing Date) to the person asserting
any losses, claims, damages and liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, if such material misstatement or omission or alleged material
misstatement or omission was cured, as determined by a court of competent
jurisdiction in a decision not subject to further appeal, in such Prospectus and
such Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person. This indemnity agreement will
20
be in addition to any liability which the Company may otherwise have including
under this Agreement.
(b) Each Underwriter severally, and not jointly, shall indemnify
and hold harmless the Company, each of the directors of the Company, each of the
officers of the Company who shall have signed the Registration Statement, and
each other person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, against
any losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to reasonable attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim, and any and all amounts
paid in settlement of any claim or litigation), jointly or severally, to which
they or any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, liabilities, claims, damages or
expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement for the registration of the Shares, as originally filed
or any amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any amendment thereof 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 therein
not misleading, in each case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with the information
furnished to the Company and referred to in the last sentence of Section 1(b);
provided, however, that in no case shall any Underwriter be liable or
responsible for any amount in excess of the underwriting discount applicable to
the Shares purchased by such Underwriter hereunder. This indemnity will be in
addition to any liability which any Underwriter may otherwise have including
under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of any claims or the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under such subsection, notify each party
against whom indemnification is to be sought in writing of the claim or the
commencement thereof (but the failure so to notify an indemnifying party shall
not relieve the indemnifying party from any liability which it may have under
this Section 7 to the extent that it is not materially prejudiced as a result
thereof and in any event shall not relieve it from any liability that such
indemnifying party may have otherwise than on account of the indemnity agreement
hereunder). In case any such claim or action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, an
indemnifying party may participate, at its own expense in the defense of such
action, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense
21
thereof with counsel reasonably satisfactory to such indemnified party; provided
however, that counsel to the indemnifying party shall not (except with the
written consent of the indemnified party) also be counsel to the indemnified
party. Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
or parties unless (i) the employment of such counsel shall have been authorized
in writing by one of the indemnifying parties in connection with the defense of
such action, (ii) the indemnifying parties shall not have employed counsel to
have charge of the defense of such action within a reasonable time after notice
of commencement of the action, (iii) the indemnifying party does not diligently
defend the action after assumption of the defense, or (iv) such indemnified
party or parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. No
indemnifying party shall, without the prior written consent of the indemnified
parties, effect any settlement or compromise of, or consent to the entry of
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could have been
sought under Section 7 or 8 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless (i) such settlement, compromise or
consent (A) includes an unconditional release of the indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(B) does not include a statement as to, or an admission of, fault, culpability
or a failure to act, by or on behalf of the indemnified party and (ii) the
indemnifying party reaffirms its indemnification obligations pursuant to this
Agreement.
8. Contribution. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company and
the Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company any
contribution received by the Company from persons, other than the Underwriters,
who may also be liable for contribution, including persons who control the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, officers of the Company who signed the Registration Statement
and directors of the Company) as incurred to which the Company and one or more
of the Underwriters may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Company and the Underwriters from
the Offering or, if such allocation is not permitted by applicable law, in such
22
proportion as are appropriate to reflect not only the relative benefits referred
to above but also the relative fault of the Company and the Underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Underwriters shall be deemed to be in the same proportion as (x) the total
proceeds from the Offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company bears to (y) the underwriting
discount or commissions received by Underwriters, in each case as set forth in
the table on the cover page of the Prospectus. The relative fault of the Company
and of the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 8. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 8 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section 8, (i) no Underwriter shall be required to contribute any amount in
excess of the amount of the underwriting discount applicable to the Shares
underwritten by it and (ii) 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. For purposes of this Section 8, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
such Underwriter, 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,
each officer of the Company who shall have signed the Registration Statement and
each director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of the immediately
preceding sentence. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties, notify each party or parties from whom contribution may be
sought, but the omission to so notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have under this Section 8 or otherwise. The obligations of the
Underwriters to contribute pursuant to this Section 8 are several in
23
proportion to the respective number of Shares to be purchased by each of the
Underwriters hereunder and not joint.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Additional Shares hereunder, and if
the Firm Shares or Additional Shares with respect to which such default relates
do not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares
or Additional Shares, the Firm Shares or Additional Shares to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion to
the respective proportions which the numbers of Firm Shares set forth opposite
their respective names in Schedule I hereto bear to the aggregate number of Firm
Shares set forth opposite the names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Additional Shares, as the case may be, you may in your
discretion arrange for yourself or for another party or parties (including any
non-defaulting Underwriter or Underwriters who so agree) to purchase such Firm
Shares or Additional Shares, as the case may be, to which such default relates
on the terms contained herein. In the event that within five calendar days after
such a default you do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as provided
in this Section 9, this Agreement or, in the case of a default with respect to
the Additional Shares, the obligations of the Underwriters to purchase and of
the Company to sell the Additional Shares shall thereupon terminate, without
liability on the part of the Company with respect thereto (except in each case
as provided in Sections 5, 7(a) and 8 hereof) or the Underwriters, but nothing
in this Agreement shall relieve a defaulting Underwriter or Underwriters of its
or their liability, if any, to the other Underwriters and the Company for
damages occasioned by its or their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as aforesaid,
you or the Company shall have the right to postpone the Closing Date or
Additional Closing Date, as the case may be for a period, not exceeding five
business days, in order to effect whatever changes may thereby be made necessary
in the Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus which, in the opinion
of Underwriters' Counsel, may thereby be made necessary or advisable. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 9 with like effect as if it had originally been a party to
this Agreement with respect to such Firm Shares and Additional Shares.
24
10. Survival of Representations and Agreements. All representations
and warranties, covenants and agreements of the Underwriters, and the Company
contained in this Agreement or in certificates of officers of the Company or any
Subsidiary submitted hereto or thereto, including the agreements contained in
Section 5, the indemnity agreements contained in Section 7 and the contribution
agreements contained in Section 8, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof, and shall survive
delivery of and payment for the Shares to and by the Underwriters. The
representations contained in Section 1 and the agreements contained in Sections
5, 7, 8, 10 and 11(d) hereof shall survive the termination of this Agreement,
including termination pursuant to Section 9 or 11 hereof.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective, upon the later of when
(i) you and the Company shall have received notification of the effectiveness of
the Registration Statement or (ii) the execution of this Agreement. If either
the public offering price or the purchase price per Share has not been agreed
upon prior to 5:00 P.M., New York City time, on the fifth full business day
after the Registration Statement shall have become effective, this Agreement
shall thereupon terminate without liability to the Company or the Underwriters
except as herein expressly provided. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying you or by you
notifying the Company. Notwithstanding the foregoing, the provisions of this
Section 11 and of Sections 1, 5, 7, 8 and 12 through 17, inclusive shall at all
times be in full force and effect.
(b) You shall have the right to terminate this Agreement at any
time prior to the Closing Date or to terminate the obligations of the
Underwriters to purchase the Additional Shares at any time prior to the
Additional Closing Date, as the case may be, if (A) any domestic or
international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, the market for the
Company's securities or securities in general; or (B) if trading on the NYSE,
the Nasdaq Stock Market (the "Nasdaq") or the American Stock Exchange shall have
been suspended, or minimum or maximum prices for trading shall have been fixed,
or maximum ranges for prices for securities shall have been required, on the
NYSE, the Nasdaq or the American Stock Exchange by the NYSE, the Nasdaq or the
American Stock Exchange or by order of the Commission or any other governmental
authority having jurisdiction; or (C) if a banking moratorium has been declared
by any state or federal authority or if any material disruption in commercial
banking or securities settlement or clearance services shall have occurred; or
(D) any downgrading shall have occurred in the Company's corporate credit rating
or the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization" as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Securities Act or
25
if any such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of the Company's debt securities; or (E) (i) if there shall have occurred any
outbreak or escalation of hostilities or acts of terrorism involving the United
States or there is a declaration of a national emergency or war by the United
States or (ii) if there shall have been any other calamity or crisis or any
change in political, financial or economic conditions if the effect of any such
event in (A) or (E) in your judgment makes it impracticable or inadvisable to
proceed with the offering, sale and delivery of the Firm Shares or the
Additional Shares, as the case may be, on the terms and in the manner
contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 11 shall
be in writing.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 11(a) hereof or (ii) Section 9(b)), or if the sale of the
Shares provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth herein is not satisfied or because of
any refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof, the Company will reimburse
the Underwriters for all out-of-pocket expenses (including the fees and expenses
of their counsel), incurred by the Underwriters in connection herewith. If this
Agreement shall be terminated pursuant to Section 11(b) hereof, then no party
shall have any liability hereunder except for the Company's obligation, pursuant
to Section 5 hereof, to pay all out-of-pocket expenses of the Underwriters
(including the fees and expenses of their counsel) incurred in connection with
this Agreement.
12. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing, and:
(a) if sent to any Underwriter, shall be mailed, delivered, or
faxed and confirmed in writing, to such Underwriter c/o Bear, Xxxxxxx & Co.
Inc., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Equity Capital
Markets, with a copy to Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, 00000, Attention: Xxxx X. Xxxxxxxx, Esq.
(b) if sent to the Company, shall be mailed, delivered, or faxed
and confirmed in writing to the Company at 000 X. Xxxx Xxxx, Xxxxxxx, XX 00000,
Attention: Xxxxxxx Xxxxxxxx, Esq., with a copy to Xxxxxxx X. Xxxxxxx, Esq., Xxxx
Xxxxx LLP, One Liberty Place, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000.
provided, however, that any notice to an Underwriter pursuant to Section 7 shall
be delivered or sent by mail or facsimile transmission to such Underwriter at
its address set forth in its acceptance facsimile to you, which address will be
supplied to any other party hereto by you upon request. Any such statements,
requests, notices or agreements shall take effect at the time of receipt
thereof.
26
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Underwriters and the Company and the controlling
persons, directors, officers, employees and agents referred to in Sections 7 and
8 hereof, and their respective successors and assigns, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the parties hereto and their
respective successors, and said controlling persons, and officers and directors
and their heirs and legal representatives, and it is not for the benefit of any
other person, firm or corporation. The term "successors and assigns" shall not
include a purchaser, in its capacity as such, of Shares from any of the
Underwriters.
14. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be delivered by facsimile and shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
16. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
17. Time is of the Essence. Time shall be of the essence of this
Agreement. As used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
[signature page follows]
27
If the foregoing correctly sets forth the understanding between you
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us. It
is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company for
examination, upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
PENN-AMERICA GROUP, INC.
By:____________________________
Name:
Title:
Accepted as of the date first above written
BEAR, XXXXXXX & CO. INC.
XXXXXX, XXXXX XXXXX, INCORPORATED
XXXXX, XXXXXXXX & XXXXX, INC.
By: BEAR, XXXXXXX & CO. INC.
By:_______________________________
Name:
Title:
On behalf of themselves and the other
Underwriters named in Schedule I hereto.
28
SCHEDULE I
NAME OF UNDERWRITER NUMBER OF FIRM SHARES
TO BE PURCHASED
Bear, Xxxxxxx & Co. Inc. .......................
Xxxxxx, Xxxxx Xxxxx, Incorporated ..............
Xxxxx, Xxxxxxxx & Xxxxx, Inc. ..................
Total: .................................... 2,600,000
I-1
SCHEDULE II
NAMES OF STOCKHOLDERS SUBJECT TO THE LOCK-UP PROVISION
Penn Independent Corporation
Xxxx X. Xxxxx
Xxxxxxx Xxxxxx
Xxxxxx X. Xxxx
X. Xxxxxxx Xxxxxx
Xxxxxxx X. XxXxxxx
Xxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxxx
M. Xxxxx Xxxxx
Xxxxx X. Xxxxxx
E. Xxxxxxx Xxxxxxxx
Xxxxx Xxxxxxxx
Xxx X. Xxxxxxxx
Xxxx Xxxxxxxx-Xxxx
Xxxxxx Xxxxxxxxx
Xxxx Xxxxx
II-1
SCHEDULE III
LIST OF SUBSIDIARIES
Penn-America Insurance Company
Penn-Star Insurance Company
Penn-America Statutory Trust I
III-1
ANNEX I
Form of Opinion of Company's Counsel
(i) Each of the Company and its Subsidiaries has been duly organized
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation with all requisite corporate
power to own its properties and conduct its business as described in
the Prospectus.
(ii) The Shares to be sold by the Company have been duly authorized by
the Company and, upon payment and delivery in accordance with the
Underwriting Agreement, will be validly issued, fully paid and
nonassessable.
(iii) The Common Stock currently outstanding are listed, and the Shares
to be sold under the Underwriting Agreement to the Underwriters have
been approved for listing, on the NYSE, subject to notice of issuance.
(iv) The issuance and sale of the Shares by the Company, the execution,
delivery, and performance of the Underwriting Agreement, compliance by
the Company with all provisions of the Underwriting Agreement and the
consummation of the transactions contemplated hereby by the Company do
not and will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of the Subsidiaries
pursuant to, any agreement or instrument that is expressed to be
governed by Pennsylvania law and filed (or incorporated by reference)
as an exhibit to the Registration Statement.
(v) No consent, approval, authorization, order, registration, filing,
qualification, license or permit pursuant to U.S. Federal law or the
Pennsylvania Business Corporation Law with any U.S. Federal or
Pennsylvania court or any U.S. Federal, New York or Pennsylvania
public, governmental, or regulatory agency or body having jurisdiction
over the Company or any of the Subsidiaries or any of their respective
properties or assets is required for the issuance, sale and delivery
of the Shares, the execution, delivery and performance of the
Underwriting Agreement or the consummation of the transactions
contemplated hereby, except for (1) such as may be required under state
securities or Blue Sky or insurance securities laws in connection with
the purchase and distribution of the Shares by the Underwriters (as to
which such counsel need express no opinion), (2) such as have been
made or obtained and (3) such as are required by the National
Association of Securities Dealers, Inc. (as to which such counsel need
express no opinion).
(vi) The Registration Statement and the Prospectus and any amendments
thereof or supplements thereto (other than the financial statements and
schedules and other financial data included or incorporated by
reference therein, as to which
no opinion need be rendered) comply as to form in all material respects
with the requirements of the Securities Act and the Rules and
Regulations. To our actual knowledge, without due inquiry other than of
the attorneys at this firm who have been involved in the preparation of
the Registration Statement, all documents required by the Rules and
Regulations to be filed in connection with, incorporated by reference,
or described in the Registration Statement have been so filed,
incorporated by reference or described. The documents filed under the
Exchange Act and incorporated by reference in the Registration
Statement and the Prospectus or any amendment thereof or supplement
thereto (other than the financial statements and schedules and other
financial data included or incorporated by reference therein, as to
which no opinion need be rendered) when they were filed with the
Commission (or at the time they were amended, if applicable) complied
as to form in all material respects with the Exchange Act and the Rules
and Regulations of the Commission thereunder.
(vii) The statements in the Prospectus under the captions (A)
"Description of Capital Stock" and (B) "Tax Matters", insofar as such
statements constitute a summary of the U.S. Federal or Pennsylvania
legal matters referred to therein relating to the Pennsylvania
Business Corporation Law, fairly present the information called for
with respect to such legal matters.
(viii) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended.
(ix) The Registration Statement is effective under the Securities Act,
and, to the best knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement or any post-effective
amendment thereof has been issued and no proceedings therefor have
been initiated or threatened by the Commission. All filings required
by Rule 424(b) and Rule 430A of the Rules and Regulations with respect
to the Registration Statement have been made.
In addition, such opinion shall also contain a statement that such counsel has
participated in conferences with officers and representatives of the Company,
representatives of the independent public accountants for the Company and the
Underwriters at which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, no facts have come to the
attention of such counsel which would lead such counsel to believe that either
the Registration Statement, at the time it became effective (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b)), or in the event of any amendment
thereof made prior to the Closing Date, as of the date of such amendment,
contained or incorporated by reference any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus (including
the documents incorporated by reference therein), as of its date (or in the
event of any amendment thereof or supplement thereto made prior to the Closing
Date as of the date of such amendment or supplement) and as of the Closing
-2-
Date, contained or contains an untrue statement of a material fact or omitted or
omits to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief or opinion with respect to
the financial statements and schedules and other financial data included or
incorporated by reference therein).
-3-
ANNEX II
Form of Opinion of Company's General Counsel
(i) The Underwriting Agreement has been duly and validly authorized,
executed and delivered by the Company.
(ii) All of the issued shares of each of the Company and its
Subsidiaries have been duly and validly authorized and issued and are
fully paid and non-assessable.
(iii) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending with any U.S. Federal or any Pennsylvania governmental agency
or body acting pursuant to the Pennsylvania Business Corporation Law
or Pennsylvania Insurance Code to which the Company or any of the
Subsidiaries is a party or of which any property of the Company or any
of the Subsidiaries is the subject which, if determined adversely to
the Company or any of the Subsidiaries, would individually or in the
aggregate have a Material Adverse Effect.
(iv) No consent, approval, authorization, order, registration, filing,
qualification, license or permit pursuant to the Pennsylvania Insurance
Code with any Pennsylvania public, governmental or regulatory agency or
body having jurisdiction over the Company or any of the Subsidiaries or
any of their respective properties or assets is required for the
issuance, sale and delivery of the Shares, the execution, delivery and
performance of the Underwriting Agreement or the consummation of the
transactions contemplated hereby, except for such as have been made or
obtained.
(v) The statements in the Prospectus under the caption "Risks Related
To This Offering - Applicable insurance laws and certain provisions in
our Articles of Incorporation make it difficult to effect a change of
control and a large shareholder may have significant influence over
potential change in control transactions," insofar as such statements
constitute a summary of the Pennsylvania legal matters referred to
therein relating to the Pennsylvania Business Corporation Law or the
Pennsylvania Insurance Code, fairly present the information called for
with respect to such legal matters.
(vi) The issuance and sale of the Shares by the Company, the execution,
delivery, and performance of the Underwriting Agreement, compliance by
the Company with all provisions of the Underwriting Agreement and the
consummation of the transactions contemplated hereby by the Company do
not and will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of the Subsidiaries
pursuant to, any agreement or instrument filed (or incorporated by
reference) as an exhibit to the Registration Statement.
-4-
(vii) Each of the Subsidiaries holds such Insurance Licenses, certificates
and permits from Pennsylvania governmental authorities which are necessary
to the conduct of its business as described in the Prospectus; to the best
knowledge of such counsel, there is no pending or threatened action, suit,
proceeding or threatened action, suit, proceeding or investigation that
could reasonably be expected to result in the revocation, termination or
suspension of any Insurance License; and to the knowledge of such counsel,
no Pennsylvania insurance regulatory agency or body has issued, or
commenced any proceeding for the issuance of, any order or decree
impairing, restricting or prohibiting the payment of dividends by any
Subsidiary to its parent.
In addition, such opinion shall also contain a statement that such counsel has
participated in conferences with officers and representatives of the Company,
representatives of the independent public accountants for the Company and the
Underwriters at which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, no facts have come to the
attention of such counsel which would lead such counsel to believe that either
the Registration Statement, at the time it became effective (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b)), or in the event of any amendment
thereof made prior to the Closing Date, as of the date of such amendment,
contained or incorporated by reference any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus (including
the documents incorporated by reference therein), as of its date (or in the
event of any amendment thereof or supplement thereto made prior to the Closing
Date as of the date of such amendment or supplement) and as of the Closing Date,
contained or contains an untrue statement of a material fact or omitted or omits
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading (it being
understood that such counsel need express no belief or opinion with respect to
the financial statements and schedules and other financial data included or
incorporated by reference therein).
-5-
ANNEX III
_______________ __, 2002
BEAR, XXXXXXX & CO. INC.
XXXXXX, XXXXX XXXXX, INCORPORATED
XXXXX, XXXXXXXX & XXXXX, INC.
as Representatives of the
several Underwriters named in
Schedule I attached to the
Underwriting Agreement
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Equity Capital Markets
Penn-America Group, Inc. Lock-Up Agreement
Ladies and Gentlemen:
This letter agreement (this "Agreement") relates to the proposed
public offering (the "Offering") by Penn-America Group, Inc., a Pennsylvania
corporation (the "Company"), of 2,600,000 shares of its ordinary shares, US$0.01
par value (the "Common Stock").
In order to induce you to underwrite the Offering, the undersigned
hereby agrees that, without the prior written consent of Bear, Xxxxxxx & Co.
Inc. ("Bear Xxxxxxx"), during the period from the date hereof until ninety (90)
days from the date of the final prospectus for the Offering (the "Lock-Up
Period"), the undersigned (a) will not, directly or indirectly, offer, sell,
agree to offer or sell, solicit offers to purchase, grant any call option or
purchase any put option with respect to, pledge, borrow or otherwise dispose of
any Relevant Security (as defined below), (b) will not establish or increase any
"put equivalent position" or liquidate or decrease any "call equivalent
position" with respect to any Relevant Security (in each case within the meaning
of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder), or (c) will not otherwise enter into
any swap, derivative or other transaction or arrangement that transfers to
another, in whole or in part, any of the economic consequence of ownership of a
Relevant Security, whether or not such transaction is to be settled by delivery
of Relevant Securities, other securities, cash or other consideration. As used
herein "Relevant Security" means the Common Stock, any other equity security of
the Company or any of its subsidiaries and any security convertible into, or
exercisable or exchangeable for, any Share or other such equity security.
The undersigned hereby authorizes the Company during the Lock-Up
Period to cause any transfer agent for the Relevant Securities to decline to
transfer, and to note stop transfer restrictions on the stock register and other
records relating to, Relevant Securities for which the undersigned is the record
holder and, in the case of Relevant Securities for which the undersigned is the
beneficial but not the record holder, agrees during the Lock-Up Period to cause
the record holder to cause the relevant transfer agent to decline to transfer,
and to note stop transfer restrictions on the stock register and other records
relating to, such Relevant Securities. The undersigned hereby further agrees
that, without the prior written consent of Bear Xxxxxxx, during the Lock-Up
Period the undersigned (x) will not file or participate in the filing with the
Securities and Exchange Commission of any registration statement, or circulate
or participate in the circulation of any preliminary or final prospectus or
other disclosure document with respect to any proposed offering or sale of a
Relevant Security and (y) will not exercise any rights the undersigned may have
to require registration with the Securities and Exchange Commission of any
proposed offering or sale of a Relevant Security.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to enter into this Agreement and that this
Agreement constitutes the legal, valid and binding obligation of the
undersigned, enforceable in accordance with its terms. Upon request, the
undersigned will execute any additional documents necessary in connection with
enforcement hereof. Any obligations of the undersigned shall be binding upon the
successors and assigns of the undersigned from the date first above written.
[signature page follows]
-2-
This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York. Delivery of a signed copy of this letter
by telecopier or facsimile transmission shall be effective as delivery of the
original hereof.
Very truly yours,
By: _____________________________
Print Name: ______________________
-3-
