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EXHIBIT 1.2
SUMMIT HOLDING SOUTHEAST, INC.
COMMON STOCK
SUBSCRIPTION ADVISORY AGREEMENT
February __, 1997
XXXXXXX XXXXX & ASSOCIATES, INC.
ABN AMRO CHICAGO CORPORATION
c/o Raymond Xxxxx & Associates, Inc.
000 Xxxxxxxx Xxxxxxx
Xx. Xxxxxxxxxx, XX 00000
Dear Sirs:
Subject to the terms and conditions stated herein, Summit Holding
Southeast, Inc., a Florida corporation (the "Company"), proposes to issue and
sell shares of its common stock, par value $.01 per share ("Common Stock"), in
connection with the Amended Plan of Conversion and Recapitalization (the
"Plan") of Employers Self Insurers Fund ("ESIF"), pursuant to which ESIF will
simultaneously convert from a Florida group self-insurance fund to a Florida
stock insurance company under the name Bridgefield Employers Insurance Company
("Bridgefield") and become a wholly owned subsidiary of the Company (the
"Conversion"). Pursuant to the Plan, the Company proposes: (1) to issue to
Eligible Policyholders (as defined in the Plan) of ESIF shares of Series A
Preferred Stock, par value $10 per share (the "Preferred Stock"), in exchange
for their membership interests in ESIF, and (2) to offer to issue and sell up
to 50,000,000 shares of Common Stock (the "Shares," the number of Shares
actually being subscribed for in the Subscription Offering being referred to as
the "Subscribed Shares") to Eligible Policyholders, as well as to certain
directors, officers and employees of the Company and its subsidiaries (the
"Management Group"), pursuant to nontransferable subscription rights (the
"Subscription Offering"). As used in this Agreement, unless the context
requires otherwise, the term "subsidiaries" refers to ESIF and its
subsidiaries, whether before or after the Company's acquisition of the Common
Stock of ESIF in connection with the Conversion.
It is currently the intention of the Company to offer all or a portion
of the Common Stock not subscribed for in the Subscription Offering to the
public in a public offering (the "Public Offering"). It is acknowledged that
the purchase of any of the Shares by each subscriber is subject to a maximum
purchase limitation of 249,999 shares if all shares of Common Stock offered in
the Subscription Offering and the Public Offering are sold, and a minimum
purchase limitation of 100 shares.
The Company desires to retain Xxxxxxx Xxxxx & Associates, Inc. and
ABN AMRO Chicago Corporation (the "Subscription Advisors") to act as the
Company's exclusive subscription advisors in connection with the Subscription
Offering. The Company hereby confirms its agreements contained herein with the
Subscription Advisors with respect to the appointment of the Subscription
Advisors as its advisors to assist in the sale of the Common Stock in the
Subscription Offering.
1. APPOINTMENT OF THE SUBSCRIPTION ADVISORS. Subject to the
terms and conditions of this Agreement, the Company hereby appoints the
Subscription Advisors, as its exclusive Subscription Advisors, to consult with
and advise the Company with regard to the pricing of the Common Stock and
otherwise in connection with the Subscription Offering, and to assist in the
solicitation of subscriptions for the Shares. On the basis of the
representations, warranties and agreements herein contained, the Subscription
Advisors accept such appointment and agree to assist the Company in the
Subscription Offering.
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2. SUBSCRIPTION PRICE. The Company, in consultation with the
Subscription Advisors has estimated a price range for the Common Stock of
$11.00 to $13.00 per share (the "Price Range"). This Price Range is not based
on an appraisal or any other objective factors. Using the lowest per share
price within the Price Range, the Company has set the subscription price at
$11.00 per share (the "Subscription Price"), which is the per share amount that
each Eligible Policyholder and members of the Management Group (as such terms
are described in the Plan) must pay in order to subscribe for shares of Common
Stock in the Subscription Offering, subject to adjustment as described below.
If the Public Offering is to close on the effective date of the
Conversion (the "Effective Date"), the Company will determine, after
consultation with the Subscription Advisors, the price per share at which the
shares of Common stock are to be sold to the public. If the Company determines
that the Effective Date shall occur prior to or without closing the Public
Offering, then, subject to the approval of the Florida DOI, the Company will
determine, after consultation with the Subscription Advisors, the price per
share at which the Common stock would trade in the public market on the
Effective Date (the "Revised Subscription Price"). If the Public Offering
Price or the Revised Subscription Price, as the case may be, is within the
Price Range so that such price is not less than $11.00 nor more than $13.00,
then the effective price per share paid by subscribers in the Subscription
Offering shall be adjusted to the Public Offering Price or Revised Subscription
Price, as the case may be. Such adjustment will be effected by reducing the
number of shares of Common Stock that each subscriber will receive relative to
the number of shares that such subscriber would have received based on a
Subscription Price of $11.00. No subscriber will be required to pay any
additional money for its subscription.
In the event that the Public Offering Price or Revised Subscription
Price, as the case may be, is not within the Price Range (either less than
$11.00 or more than $13.00), the Company will notify in writing each
subscribing Eligible Policyholder and member of the Management Group, and each
such person may then elect to either (i) rescind such person's subscription and
receive a full refund of the subscription amount paid by such person with
interest thereon as provided in the Company's prospectus related to the
Subscription Offering (the "Prospectus"), or (ii) continue to participate in
the Subscription Offering, receiving the number of shares that such person's
subscription amount paid will purchase at the applicable Public Offering Price
or Revised Subscription Price, provided that in no event will the Company issue
to any purchaser in the Subscription Offering more than 4.99% of the shares of
Common Stock to be outstanding immediately following the Conversion, and the
Company will refund in cash any portion of the subscription amount paid
necessary to effect this purchase limit.
3. FEES. In addition to the expenses specified in Section 7, as
compensation for the Subscription Advisors' services under this Agreement, the
Company will pay to the Subscription Advisors a fee of seven percent of the
total aggregate proceeds of the Subscription Offering.
4. CLOSING. In the event that the Subscription Offering is not
consummated for any reason, including but not limited to the inability to sell
the shares of Common Stock during the Subscription Offering and Public Offering
(including any permitted extension thereof), this Agreement shall terminate and
any persons who have subscribed for any of the shares of Common Stock shall
have refunded to them the full amount which has been received from such person,
together with interest, if any, as provided in the Prospectus relating to the
Subscription Offering. In the event of an over-subscription of the
Subscription Offering, the Company shall allocate the shares to subscribers in
accordance with the terms of the Subscription Offering. The Company hereby
agrees that the Subscription Advisors shall be held harmless from any liability
arising out of any allocation of shares of Common Stock. The closing of the
Subscription Offering (which may be simultaneous with the closing of the Public
Offering) shall be held at the offices of Xxxxxxx Xxxxx & Associates, Inc., 000
Xxxxxxxx Xxxxxxx, Xx. Xxxxxxxxxx, Xxxxxxx 00000, except that physical delivery
of certificates for the shares of Common Stock shall be made at the office of
ChaseMellon Shareholder Services, L.L.C., 000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, or at such other location designated by Xxxxxxx Xxxxx &
Associates, Inc. The Company will instruct ChaseMellon Shareholder Services,
L.L.C., its Subscription Agent, to report to the Subscription Advisors daily
the aggregate number of shares of Common Stock subscribed for by Eligible
Policyholders and the Management Group, and will notify the
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Subscription Advisors by 10:00 a.m., Eastern Time, on the day after the
expiration of the Subscription Offering as to the aggregate number of shares
subscribed for during the Subscription Offering. At the closing, the Company
shall deliver to the Subscription Advisors, in same day available funds, the
fees and expenses due and owing to the Subscription Advisors as set forth in
Sections 3 and 7 hereof, and any certificates required hereby and other
documents deemed reasonably necessary by the Subscription Advisors shall be
executed and delivered to effect the sale of the Common Stock as contemplated
hereby and pursuant to the terms of the Prospectus. The hour and date upon
which the Company shall release for delivery all the Subscribed Shares, in
accordance with the terms hereof, are referred to herein as the "Closing Date."
Such time and date for delivery of the shares of Common Stock is herein called
the "Time of Delivery." The Company will make certificates for the Subscribed
Shares of Common Stock available for checking and packaging at least 24 hours
prior to the Time of Delivery at the office of The Depository Trust Company,
00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or at such other location in New
York, New York specified by the Subscription Advisors in writing at least 48
hours prior to the Time of Delivery.
5. REPRESENTATIONS AND WARRANTIES.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to, and agrees with, each of the Subscription
Advisors that:
(i) A registration statement on Form S-1
(File No. 333-16499) with respect to the Preferred Stock and
Common Stock, including a prospectus subject to completion,
has been filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of
1933, as amended (the Act"), and one or more amendments,
including one or more post-effective amendments, to such
registration statement may have been so filed. After the
execution of this Agreement, the Company will file with the
Commission, if such registration statement, as it may have
been amended, has become effective under the Act and
information has been omitted therefrom (or from any
post-effective amendment thereto) in accordance with Rule 430A
under the Act, a prospectus in the form most recently included
in an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration
statement) with such changes or insertions as are required by
Rule 430A or permitted by Rule 424(b) under the Act and as
have been provided to and approved by the Subscription
Advisors. As used in this Agreement, the term "Registration
Statement" means such registration statement, as amended at
the time when it (or the most recent post-effective amendment
thereto) was or is declared effective, including all financial
statement schedules and exhibits thereto and including any
information omitted therefrom pursuant to Rule 430A under the
Act and included in the Prospectus (as hereinafter defined);
the term "Preliminary Prospectus" means each prospectus
subject to completion included in such Registration Statement
or any amendment or post-effective amendment thereto
(including the prospectus subject to completion, if any,
included in the Registration Statement (or the most recent
post-effective amendment thereto) at the time it was or is
declared effective); and the term "Prospectus" means the
prospectus first filed with the Commission pursuant to Rule
424(b) under the Act or, if no prospectus is required to be so
filed, such term means the prospectus included in the
Registration Statement. For purposes of the following
representations and warranties, to the extent reference is
made to the Prospectus and at the relevant time the Prospectus
is not yet in existence, such reference shall be deemed to be
to the most recent Preliminary Prospectus.
(ii) No order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus has been
issued and no proceeding for that purpose has been instituted
or threatened by the Commission or the securities authority of
any state or other jurisdiction. No stop order suspending the
effectiveness of the Registration Statement or any part
thereof has been issued and no proceeding for that purpose has
been instituted or, to the knowledge of the Company,
threatened or contemplated by the Commission or the securities
authority of any state or other jurisdiction.
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(iii) When any Preliminary Prospectus was
filed with the Commission it (A) contained all statements
required to be stated therein in accordance with, and complied
in all material respects with the requirements of, the Act and
the rules and regulations of the Commission thereunder, and
(B) did not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. When the Registration
Statement or any amendment thereto was or is declared
effective, and at the Time of Delivery, it (A) contained or
will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material
respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder, and (B) did not or
will not include any untrue statement of a material fact or
omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus or any
amendment or supplement thereto is filed with the Commission
pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required to be so filed, when
the Registration Statement or the amendment thereto containing
such amendment or supplement to the Prospectus was or is
declared effective) and at the Time of Delivery, the
Prospectus, as amended or supplemented at any such time, (A)
contained or will contain all statements required to be stated
therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the
rules and regulations of the Commission thereunder, and (B)
did not or will not include any untrue statement of a material
fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading. The foregoing
provisions of this paragraph (iii) do not apply to statements
or omissions made in any Preliminary Prospectus, the
Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to
the Company by any of the Subscription Advisors specifically
for use therein.
(iv) The descriptions in the Registration
Statement and the Prospectus of statutes, legal and
governmental proceedings or contracts and other documents are
accurate and fairly present the information required to be
shown; and there are no statutes or legal or governmental
proceedings required to be described in the Registration
Statement or the Prospectus that are not described as required
and no contracts or documents of a character that are required
to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration
Statement that are not described and filed as required.
(v) The Company and its subsidiaries each
has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its
jurisdiction of incorporation and has full power and authority
(corporate and other) to own or lease its properties and
conduct its business as described in the Prospectus. The
Company has full power and authority (corporate and other) to
enter into this Agreement and to perform its obligations
hereunder. The Company and each of its subsidiaries is duly
qualified to transact business as a foreign corporation and is
in good standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any business,
so as to require such qualification, except where the failure
to so qualify would not have a material adverse effect on the
financial position, results of operations or business of the
Company (a "Material Adverse Effect").
(vi) The Company's authorized, issued and
outstanding capital stock is as set forth in the Prospectus
under the caption "Capitalization." All of the issued shares
of capital stock of the Company and each of its subsidiaries
have been duly authorized and validly issued, are fully paid
and nonassessable and the Common Stock conforms to the
description of the Common Stock contained in the Prospectus.
None of the issued shares of capital stock of the Company and
its subsidiaries each has been issued or is owned or held in
violation of any preemptive rights of
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shareholders, and no person or entity has any preemptive or
other rights to subscribe for any of the Shares.
(vii) The Plan has been duly adopted by the
required vote of ESIF's Board of Trustees and policyholders
and is in compliance with the insurance laws of the State of
Florida applicable to the reorganization of group
self-insurance funds into stock property and casualty
insurance companies. On August 20, 1996, ESIF submitted an
application, including an initial Plan of Conversion and
Recapitalization, to the Department of Insurance of the State
of Florida (the "Florida DOI") for permission to convert from
a group self-insurance fund to a stock insurance company. On
or before September 30, 1996, ESIF gave notice of a public
hearing regarding the Plan in the appropriate publications.
The Florida DOI held a public hearing on October 10, 1996, and
issued a consent order dated November 15, 1996 (the "Order")
approving the Conversion, subject to the satisfaction of
certain conditions. [UPDATE FOR AMENDMENT] Other than the
conditions to effectiveness set forth in the Order or in the
Plan, no other approvals are required to be obtained under the
Florida Insurance Code for the effectiveness of the Plan.
Prior to or contemporaneously with the Time of Delivery, each
of the actions required to occur prior to the effectiveness of
the Plan pursuant to the Order or the Plan will have occurred.
(viii) The Company does not own, directly or
indirectly, any capital stock or other equity securities of
any other corporation or any ownership interest in any
partnership, joint venture or other entity or association
other than those listed on Exhibit 21.1 to the Registration
Statement.
(ix) Except as disclosed in the Prospectus,
there are no outstanding (A) securities or obligations of the
Company convertible into or exchangeable for any capital stock
of the Company, (B) warrants, rights or options to subscribe
for or purchase from the Company any such capital stock or any
such convertible or exchangeable securities or obligations, or
(C) obligations of the Company to issue any shares of capital
stock, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options.
(x) Since the date of the most recent
audited financial statements included in the Prospectus,
neither the Company nor any of its subsidiaries has sustained
any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as disclosed in or
contemplated by the Prospectus.
(xi) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (A) the Company has not incurred any liabilities
or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business, that are
material to the Company, (B) the Company has not purchased any
of its outstanding capital stock or declared, paid or
otherwise made any dividend or distribution of any kind on its
capital stock, (C) there has not been any change in the
capital stock, or any material increase or decrease in the
long-term debt or short-term debt of the Company, and (D)
there has not been any material adverse change, or any
development involving a prospective material adverse change,
in or affecting the financial position, results of operations
or business of the Company, in each case other than as
disclosed in or contemplated by the Prospectus.
(xii) The Subscribed Shares have been duly
authorized and, when issued and delivered against payment
therefor as provided herein, will be validly issued and fully
paid and nonassessable and will conform to the description of
the Common Stock contained in the Prospectus; and the
certificates evidencing the Shares will comply with all
applicable requirements of Florida law.
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(xiii) Except as disclosed in the Prospectus,
there are no contracts, agreements or understandings between
the Company and any person granting such person the right to
require the Company to file a registration statement under the
Act with respect to any securities of the Company owned or to
be owned by such person or to require the Company to include
such securities in the securities registered pursuant to the
Registration Statement (unless an such right has been
exercised or effectively waived) or any securities being
registered pursuant to any other registration statement filed
by the Company under the Act.
(xiv) All offers and sales of the Company's
capital stock prior to the date hereof were at all relevant
times duly registered under the Act or exempt from the
registration requirements of the Act and were duly registered
or the subject of an available exemption from the registration
requirements of the applicable state securities or blue sky
laws.
(xv) The Company and its subsidiaries each
is not, nor with the giving of notice or passage of time or
both would be, in violation of its Certificate of
Incorporation or Bylaws or in default under any indenture,
mortgage, deed of trust, loan agreement, lease, or other
agreement or instrument to which the Company or any of its
subsidiaries is a party or to which any of their respective
properties or assets is subject, which default would have a
Material Adverse Effect.
(xvi) Subject to the satisfaction of the
conditions to the effectiveness of the Conversion set forth in
the Plan, the issue and sale of the Subscribed Shares and the
performance of this Agreement and the consummation of the
transactions herein contemplated will not conflict with, or
(with or without the giving of notice or the passage of time
or both) result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which the Company or any of
its subsidiaries is a party or to which its properties or
assets is subject, nor will such action conflict with or
violate any provision of the Certificate of Incorporation or
Bylaws of the Company or any statute, rule or regulation
(assuming compliance with all applicable state securities or
blue sky laws) or any order, judgment or decree of any court
or governmental agency or body having jurisdiction over the
Company or any of its properties or assets.
(xvii) The Company and its subsidiaries each
has good title to all personal property owned by it free and
clear of all liens, security interests, pledges, charges,
encumbrances, mortgages, and defects, except such as are
disclosed in the Prospectus or such as do not materially and
adversely affect the value of such property and do not
interfere with the use made or proposed to be made of such
property by the Company; and any real property and buildings
held under lease by the Company are held under valid,
subsisting and enforceable leases, with such exceptions as are
disclosed in the Prospectus or are not material and do not
interfere with the use made or proposed to be made of such
property and buildings by the Company.
(xviii) No consent, approval, authorization,
order or declaration of or from, or registration,
qualification or filing with, any court or governmental agency
or body is required for the sale of the Subscribed Shares or
the consummation of the transactions contemplated by this
Agreement, except: (1) the approval by the Florida DOI of the
Plan, ESIF's Certificate of Incorporation and by-laws, and
ESIF's application to convert to a stock insurance company,
and (2) the registration of the Subscribed Shares under the
Act and as may be required by the National Association of
Securities Dealers, Inc. or under state securities or blue
sky laws in connection with the offer, sale and distribution
of the Subscribed Shares.
(xix) Other than as disclosed in the
Prospectus, there is no litigation, arbitration, claim,
proceeding (formal or informal) or investigation pending or,
to the knowledge of the Company, threatened (or any basis
therefor) in which the Company is a party or of which any of
its properties
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or assets is the subject which, if determined adversely to the
Company, would individually or in the aggregate have a
Material Adverse Effect. The Company is not in violation of,
or in default with respect to, any statute, rule, regulation,
order, judgment or decree, except as described in the
Prospectus or such as do not and will not individually or in
the aggregate have a Material Adverse Effect.
(xx) Ernst & Young LLP and Xxxxxxx &
Xxxxxx, who have certified certain financial statements of
ESIF and its subsidiaries for the fiscal years ended March 31,
1994, 1995 and 1996, and Ernst & Young LLP who has certified
certain financial statements of the Company Holding
Corporation and its subsidiaries (collectively, "SHC") for the
fiscal years ended December 31, 1993, 1994 and 1995 are, and
were at all times, during the periods covered by their reports
included in the Registration Statement and the Prospectus,
independent public accountants as required by the Act and the
rules and regulations of the Commission thereunder.
(xxi) The financial statements and schedules
(including the related notes) of ESIF and SHC and their
respective subsidiaries included in the Registration
Statement, the Prospectus or any Preliminary Prospectus were
prepared in accordance with generally accepted accounting
principles consistently applied (or, if not consistently
applied, as applied on the basis stated in such financial
statements and schedules or the related notes thereto)
throughout the periods involved and fairly present the
financial position and results of operations of ESIF and SHC
and their respective subsidiaries at the dates and for the
periods presented. The selected financial data set forth
under the caption "Selected Financial Data" in the Prospectus
fairly present, on the basis stated in the Prospectus, the
information included therein.
(xxii) This Agreement has been duly
authorized, executed and delivered by the Company.
(xxiii) None of the Company, any of its
subsidiaries, or, to the knowledge of the Company, their
respective officers, directors or affiliates, has (A) taken,
directly or indirectly, any action designed to cause or result
in, or that has constituted or might reasonably be expected to
constitute, the stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale
of the Common Stock or (B) since the filing of the
Registration Statement (1) sold, bid for, purchased or paid
anyone any compensation for soliciting purchases of the Common
Stock or (2) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
(xxiv) Neither the Company nor any of its
subsidiaries, nor, to the knowledge of the Company or any of
its subsidiaries, any other director, officer, agent, employee
or other person associated with or acting on behalf of the
Company or any of its subsidiaries has, directly or
indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns from
corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate,
payoff, influence payment kickback or other payment, unlawful
under the laws of the United States or any foreign
jurisdiction.
(xxv) The Company and its subsidiaries each
is in compliance in all material respects with all foreign,
federal, state, and local laws, ordinances, rules, and
regulations (collectively, "Laws"), and the Company and its
subsidiaries each has all licenses, permits, and
authorizations necessary to operate under all Laws, except
where the failure to have such license, permit, or
authorization would not (individually or in the aggregate with
respect to all such failures) have a Material Adverse Effect
and are in compliance in all material respects with all terms
and conditions
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of such licenses, permits, and authorizations; neither the
Company nor any of its subsidiaries has authorized, conducted,
or has knowledge of the generation, transportation, storage,
use, treatment, disposal or release of any hazardous
substance, hazardous waste, hazardous material, hazardous
constituent, toxic substance, pollutant, contaminant,
petroleum product, natural gas, liquefied gas or synthetic gas
defined or regulated under any environmental law; and there is
no pending or, to the knowledge of the Company and each of its
subsidiaries, threatened claim, litigation or any
administrative agency proceeding, nor has the Company or any
of its subsidiaries received any written or oral notice from
any governmental entity or third party, that: (A) alleges a
violation of any Laws by the Company or any of its
subsidiaries; (B) alleges the Company or any of its
subsidiaries is a liable party under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42
U.S.C. Section 9602 et seq. or any state superfund law; or
(C) alleges possible contamination of the environment by the
Company or any of its subsidiaries.
(xxvi) The Company owns or has the right to
use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights,
franchises, trade secrets, proprietary or other confidential
information and intangible properties and assets
(collectively, "Intellectual Property Rights") necessary to
conduct its business as presently conducted and as described
in the Prospectus, and as the Prospectus indicates the Company
proposes to conduct its business, except where the failure to
own or have such rights would not have a Material Adverse
Effect; and to the knowledge of the Company, the Company has
not infringed and is not infringing, and the Company has not
received notice of infringement with respect to, asserted
Intellectual Property Rights of others and there is no
infringement by others of Intellectual Property Rights of the
Company, in either case which might result in a Material
Adverse Effect.
(xxvii) The Company is insured by insurers of
recognized financial responsibility against such losses and
risks and in such amounts as management of the Company deems
prudent and in the best interests of the Company and its
shareholders; and the Company has no reason to believe that it
will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its
business at a comparable cost, except as disclosed in the
Prospectus.
(xxviii) The Company and its subsidiaries each
makes and keeps accurate books and records reflecting its
assets and maintains internal accounting controls which
provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation
of the Company's financial statements in accordance with
generally accepted accounting principles and to maintain
accountability for the assets of the Company, (C) access to
the assets of the Company is permitted only in accordance with
management's authorization, and (D) the recorded
accountability for assets of the Company is compared with
existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(xxix) The Company and its subsidiaries each
has filed all foreign, federal, state and local tax returns
that are required to be filed by it and has paid all taxes
shown as due on such returns as well as all other taxes,
assessments and governmental charges that are due and payable;
and no deficiency with respect to any such return has been
assessed or, to the knowledge of the Company, proposed.
(xxx) The Company is not and will not become
as a result of the transactions contemplated hereby, and does
not intend to conduct its business in a manner that would
cause it to become, an "investment company" or a company
"controlled" by an "investment company" within the meaning of
the Investment Company Act of 1940.
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(xxxi) The Company and its subsidiaries each
has complied with all provisions of Section 517.075, Florida
Statutes, relating to doing business with the Government of
Cuba and certain other persons and entities.
(xxxii) As of the date of this Agreement, the
Company is not required to be licensed as an insurance company
in any state. ESIF, U.S. Employers Insurance, Inc. and
Bridgefield Casualty Insurance Company (together, the
"Insurance Subsidiaries") are the only subsidiaries of the
Company that are insurance companies. Each of the Insurance
Subsidiaries holds all licenses, certificates and permits from
insurance departments and all other governmental authorities
(collectively, the "Insurance Licenses") necessary or
desirable to conduct its business as presently conducted or
the Company presently contemplates it will conduct its
business in the future. Each of the Insurance Subsidiaries
has fulfilled and performed all material obligations necessary
to maintain its Insurance Licenses, and no event or events
have occurred which would result in the impairment,
modification, termination, or revocation of such Insurance
Licenses. The Company and the Insurance Subsidiaries each
have filed all material reports, registrations and statements,
together with any amendments required to be made with respect
thereto, that they were required to file with any state
insurance commission, agency or authority. As of their
respective dates, such reports, registrations and statements
complied in all material respects with all the laws, statutes,
rules, and regulations of each such jurisdiction, including,
without limitation, those rules and regulations promulgated by
the applicable insurance commission, agency, or authority in
any such state.
(xxxiii) Except as set forth in the Prospectus,
no loss experience has occurred that would require or make it
necessary or appropriate for the Company to change, alter,
modify or amend the Company's methodology or assumptions
relating to losses.
(xxxiv) All reinsurance treaties, contracts,
agreements, and arrangements to which the Company or any of
its subsidiaries is a party and as to which any of them
reported recoverables, premiums due or other amounts in its
financial statements are in full force and effect and neither
the Company nor any of the Insurance Subsidiaries is in
violation of, or in default in the performance, observance or
fulfillment of, any material obligation, agreement, covenant
or condition contained therein, which violation or default
would, singularly or in the aggregate, have a Material Adverse
Effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company
and the Insurance Subsidiaries taken as a whole. Neither the
Company nor any of the Insurance Subsidiaries has any reason
to believe that any other party to such treaties, contracts,
agreements or arrangements will not or cannot perform in any
material respect its duties or obligations under such treaty,
contract, agreement, or arrangement, except where the failure
to perform would not have a Material Adverse Effect on the
condition (financial or other), business, properties, net
worth or results of operations of the Company and its
subsidiaries taken as a whole.
6. COVENANTS OF THE COMPANY.
The Company covenants and agrees with each of the Subscription
Advisors:
(a) If required by the rules and regulations of the
Commission, the Company will file the Prospectus with the Commission
pursuant to and in accordance with subparagraph (1) (or, if applicable
and if consented to by the Subscription Advisors, subparagraph (4)) of
Rule 424(b) not later than the earlier of (A) the second business day
following the execution and delivery of this Agreement or (B) the
fifth business
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day after the date on which a post-effective amendment to the
Registration Statement is declared effective. The Company will advise
the Subscription Advisors promptly of any such filing.
(b) The Company will not file with the Commission the
Prospectus or the amendment referred to in the second sentence of
Section 5(i) hereof, any amendment or supplement to the Prospectus or
any amendment to the Registration Statement unless the Subscription
Advisors have received a reasonable period of time to review any such
proposed amendment or supplement and consented to the filing thereof,
such consent not to be unreasonably delayed or withheld. The Company
will use its best efforts to cause any such amendment to the
Registration Statement to be declared effective as promptly as
possible. Upon the reasonable request of the Subscription Advisors or
counsel for the Subscription Advisors, the Company will promptly
prepare and file with the Commission, in accordance with the rules and
regulations of the Commission, any amendments to the Registration
Statement or amendments or supplements to the Prospectus that may be
necessary or advisable in connection with the distribution of the
Shares by the several Subscription Advisors and will use its best
efforts to cause any such amendment to the Registration Statement to
be declared effective as promptly as possible. If required, the
Company will file any amendment or supplement to the Prospectus with
the Commission in the manner and within the time period required by
Rule 424(b) under the Act. The Company will advise the Subscription
Advisors, promptly after receiving notice thereof, of the time when
any amendment to the Registration Statement has been filed or declared
effective or the Prospectus or any amendment or supplement thereto has
been filed and will provide evidence to the Subscription Advisors of
each such filing or effectiveness.
(c) The Company will advise the Subscription Advisors
promptly after receiving notice or obtaining knowledge of (A) the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any part thereof or
any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto
(B) the suspension of the qualification of the Shares for offer or
sale in any jurisdiction or of the initiation or threatening of any
proceeding for any such purpose, or (C) any request made by the
Commission or any securities authority of any other jurisdiction for
amending the Registration Statement, for amending or supplementing the
Prospectus or for additional information. The Company will use its
best efforts to prevent the issuance of any such stop order and, if
any such stop order is issued, to obtain the withdrawal thereof as
promptly as possible.
(d) If during the period when the delivery of a
prospectus relating to the Shares is required under the Act, any
events have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, or if for any reason it is necessary
during such same period to amend or supplement the Prospectus to
comply with the Act or the rules and regulations thereunder, the
Company will promptly notify the Subscription Advisors and upon their
request (but at the Company's expense) prepare and file with the
Commission an amendment or supplement to the Prospectus that corrects
such statement or omission or effects such compliance and will furnish
without charge to each Subscription Advisor and to any dealer in
securities as many copies of such amended or supplemented Prospectus
as the Subscription Advisors may from time to time reasonably request.
If a Subscription Advisor is required to deliver a prospectus relating
to the Shares at any time after the period when delivery of a
prospectus is required under the Act, upon request of the Subscription
Advisors but at the expense of the Subscription Advisors, the Company
will prepare and deliver to the Subscription Advisors as many copies
as the Subscription Advisors may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act. Neither the
Subscription Advisors' consent to, nor the Subscription Advisors'
delivery of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 8.
(e) The Company promptly from time to time will take such
action as the Subscription Advisors may reasonably request to qualify
the Shares for offering and sale under the securities or blue sky laws
of such jurisdictions as the Subscription Advisors may request and
will continue such qualification in
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effect for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall
not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction.
(f) The Company will promptly provide the Subscription
Advisors, without charge, (A) two manually executed copies of the
Registration Statement as originally filed with the Commission and of
each amendment thereto, and (B) so long as a prospectus relating to
the Shares is required to be delivered under the Act, as many copies
of each Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto as the Subscription Advisors may reasonably
request.
(g) As soon as practicable, but in any event not later
than the 45th day following the end of the fiscal quarter in which
occurs the first anniversary of the effective date of the Registration
Statement (except such date shall be the 90th day rather than the 45th
day if such quarter is then the fourth fiscal quarter of the Company's
fiscal year) after the effective date of the Registration Statement,
the Company will make generally available to its security holders an
earnings statement of the Company covering a period of at least 12
months beginning after the effective date of the Registration
Statement (which need not be audited) complying with Section 11(a) of
the Act and the rules and regulations thereunder.
(h) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Conversion, the Company will not, without the prior written consent of
Xxxxxxx Xxxxx & Associates, Inc., offer, pledge, issue, sell, contract
to sell, grant any option for the sale of, or otherwise dispose of (or
announce any offer, pledge, sale, grant of an option to purchase or
other disposition), directly or indirectly, any shares of Common Stock
or securities convertible into, exercisable or exchangeable for,
shares of Common Stock, except (a) as provided in Sections 2 and 4 and
except for the issuance of Common Stock upon the exercise of stock
options or warrants outstanding on the date of this Agreement to the
extent that such stock options or warrants were issued pursuant to
plans or agreements which are disclosed in the Prospectus, (b) the
grant of options to employees or directors under existing stock option
plans and the issuance of Common Stock upon the exercise thereof, or
(c) as otherwise disclosed or contemplated by the Prospectus.
(i) During a period of five years from the effective date
of the Registration Statement, the Company will furnish to the
Subscription Advisors, without charge, (A) copies of all reports or
other communications (financial or other) furnished to shareholders
generally, (B) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or
the National Association of Securities Dealers, Inc. or any national
securities exchange upon which trading in shares of the Common Stock
is listed or reported, and (C) such additional information concerning
the business and financial condition of the Company as the
Subscription Advisors may reasonably request subject to appropriate
confidentiality provisions with respect to material non-public
information.
(j) The Company will not (A) take, directly or
indirectly, prior to the termination of the underwriting syndicate
contemplated in connection with the Public Offering, any action
designed to cause or to result in, or that might reasonably be
expected to constitute, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any
of the Common Stock, (B) sell, bid for, purchase or pay anyone any
compensation for soliciting purchases of, the Common Stock, or (C) pay
or agree to pay to any person any compensation for soliciting another
to purchase any other securities of the Company.
(k) The Company will apply the net proceeds from the
offering in the manner set forth under "Use of Proceeds" in the
Prospectus.
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(l) The Company will use its best efforts to cause the
Common Stock to be listed on the Nasdaq National Market at the Time of
Delivery and maintain such listing on a continuous basis for at least
one year from the date hereof.
(m) If at any time during the period beginning on the
date the Registration Statement becomes effective and ending on the
later of (A) the date 25 days after such effective date and (B) the
date that is the earlier of (1) the date on which the Company first
files with the Commission a Quarterly Report on Form 10-Q after such
effective date and (2) the date on which the Company first issues a
quarterly financial report to shareholders after such effective date,
any rumor, publication or event relating to or affecting the Company
shall occur as a result of which in the reasonable opinion of the
Subscription Advisors the market price of the Common Stock has been or
is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates an amendment of or supplement to the
Prospectus), the Company will, after written notice from the
Subscription Advisors advising the Company to the effect set forth
above, forthwith prepare, consult with the Subscription Advisors
concerning the substance of, and consult with Company counsel to
determine whether or not it is advisable, under the circumstances, to
disseminate a press release or other public statement, reasonably
satisfactory to the Subscription Advisors, responding to or commenting
on such rumor, publication or event.
7. EXPENSES. The Company will pay all costs and expenses
incident to the performance of its respective obligations under this Agreement,
whether or not the transactions contemplated hereby are consummated or this
Agreement is terminated pursuant to Section 10 hereof, including, without
limitation, all costs and expenses incident to (i) the fees, disbursements and
expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and, if applicable, filing of the Registration
Statement (including all amendments thereto), any Preliminary Prospectus, the
Prospectus and any amendments and supplements thereto, and any blue sky
memoranda; (ii) the delivery of copies of the foregoing documents and this
Agreement to the Subscription Advisors; (iii) the filing fees of the Commission
and the National Association of Securities Dealers, Inc. relating to the
Shares; (iv) the preparation, issuance and delivery to the Subscription
Advisors of any certificates evidencing the Subscribed Shares, including
transfer agent's and registrar's fees; (v) the qualification of the Shares for
offering and sale under state securities and blue sky laws, including filing
fees and the reasonable fees and disbursements of counsel for the Subscription
Advisors relating thereto; (vi) any listing of the Shares on the Nasdaq
National Market and (vii) any expenses for travel, lodging and meals incurred
by the Company and any of its officers, directors and employees in connection
with any meetings with prospective investors in the Shares.
8. CONDITIONS OF THE SUBSCRIPTION ADVISORS' OBLIGATIONS. The
several obligations of the Subscription Advisors hereunder shall be subject, in
their discretion, to the accuracy of the representations and warranties of the
Company contained herein as of the date hereof and as of the Time of Delivery,
to the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company of their respective
covenants and agreements hereunder, and to the following additional conditions
precedent:
(a) If the registration statement as amended to date has
not become effective prior to the execution of this Agreement, such
registration statement shall have been declared effective not later than 5:30
p.m., St. Petersburg time, on the date of this Agreement or such later date
and/or time as shall have been consented to by the Subscription Advisors in
writing. If required, the Prospectus and any amendment or supplement thereto
shall have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period prescribed for such filing and in accordance with
Section 6(a) of this Agreement; no stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued and no
proceedings for that purpose shall have been instituted, or to the knowledge of
the Company and the Subscription Advisors, threatened or contemplated by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to the reasonable satisfaction of the
Subscription Advisors.
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(b) Holland & Knight, counsel for the Subscription
Advisors, shall have furnished to the Subscription Advisors such opinion or
opinions, dated the Time of Delivery, with respect to the incorporation of the
Company, the validity of the Subscribed Shares being delivered at the Time of
Delivery, the Registration Statement, the Prospectus, and other related matters
as the Subscription Advisors may reasonably request, and the Company shall have
furnished to such counsel such documents as such counsel or the Subscription
Advisors request prior to the Time of Delivery for the purpose of enabling them
to pass upon such matters.
(c) The Subscription Advisors shall have received an
opinion, dated at the Time of Delivery, of Xxxxxx & Bird, to the effect that:
(i) The Company and each of its
subsidiaries is duly qualified to transact business as a
foreign corporation and is in good standing under the laws of
each jurisdiction other than Florida in which it owns or
leases property, or conducts any business, so as to require
such qualification, except where the failure to so qualify
would not have a Material Adverse Effect.
(ii) The Company has no subsidiaries other
than those listed on Exhibit 21.1 to the Registration
Statement and, to the knowledge of such counsel, does not have
any ownership interest in any partnership, joint venture, or
other entity or association.
(iii) Except as disclosed in the Prospectus,
to the knowledge of such counsel there are no outstanding (A)
securities or obligations of the Company convertible into or
exchangeable for any capital stock of the Company, (B)
warrants, rights or options to subscribe for or purchase from
the Company any such capital stock or any such convertible or
exchangeable securities or obligations, or (C) obligations of
the Company to issue any shares of capital stock, any such
convertible or exchangeable securities or obligations, or any
such warrants, rights, or options.
(iv) Except as disclosed in the Prospectus,
to the knowledge of such counsel there are no contracts,
agreements, or understandings between the Company and any
person granting such person the right to require the Company
to file a registration statement under the Act with respect to
any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in
the securities registered pursuant to the Registration
Statement (or any such right has been effectively exercised or
waived) or in any securities being registered pursuant to any
other registration statement filed by the Company under the
Act.
(v) All offers and sales of the Company's
capital stock prior to the date hereof were at all relevant
times duly registered under the Act or exempt from the
registration requirements of the Act.
(vi) The Company is not, nor with the
giving of notice or passage of time or both, will it be, in
violation of its Articles of Incorporation or Bylaws or in
default under any indenture, mortgage, deed of trust, loan
agreement, lease, or other agreement or instrument to which
the Company is a party or to which any of its properties or
assets is subject and which in each instance is an exhibit to
the Registration Statement.
(vii) The issue and sale of the Subscribed
Shares and the performance of this Agreement and the
consummation of the transactions herein contemplated will not
conflict with, or (with or without the giving of notice or the
passage of time or both) result in a breach or violation of
any of the terms or provisions of, or constitute a default
under, any material indenture, mortgage, deed of trust, loan
agreement, lease, or other agreement or instrument known to
such counsel to which the Company is party or to which any of
its properties or assets is subject, nor will such action
conflict with or violate any provision of the Articles of
Incorporation or Bylaws of the Company or any federal statute,
rule or regulation normally applicable to transactions of the
type
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herein contemplated, or to the knowledge of such counsel, any
other statute, rule or regulation (assuming compliance with
all applicable state securities or blue sky laws) or, to the
extent known to such counsel, any order, judgment, or decree
of any court or governmental agency or body having
jurisdiction over the Company or any of its properties or
assets (it being understood that such counsel need not express
any opinion with regard to insurance regulatory matters or,
under this paragraph, compliance with federal securities
laws).
(viii) No consent, approval, authorization,
order, or declaration of or from, or registration,
qualification or filing with, any federal court or
governmental agency or body, or to the knowledge of such
counsel, any other court or governmental agency or body, is
required for the issue and sale of the Subscribed Shares or
the consummation of the transactions contemplated by this
Agreement, except such as have been obtained under the Act and
the rules and regulations thereunder and such as may be
required by the National Association of Insurance Dealers,
Inc. or under state securities or blue sky laws in connection
with the offer, sale, and distribution of the Shares (it being
understood that such counsel need not express any opinion with
regard to insurance regulatory matters).
(ix) To such counsel's knowledge and other
than as disclosed in or contemplated by the Prospectus, (A)
there is no litigation, arbitration, claim, proceeding (formal
or informal) or investigation pending or threatened (or any
reasonable basis therefor) in which the Company or any of its
subsidiaries is a party or of which any of its properties or
assets is the subject which, if determined adversely to the
Company or any of its subsidiaries, would, individually or in
the aggregate, reasonably be expected to have a Material
Adverse Effect; and (B) neither the Company nor any of its
subsidiaries is in violation of, or in default with respect
to, any foreign or domestic statute, rule, regulation, order,
judgment or decree (excluding any insurance law, rule,
regulation, order, judgment or decree).
(x) This Agreement has been duly
authorized, executed and delivered by the Company.
(xi) The Registration Statement and the
Prospectus and each amendment or supplement thereto (other
than the financial statements and related schedules and other
financial and statistical data therein and the section therein
entitled ["PLAN OF DISTRIBUTION"], as to which such counsel
need express no opinion), as of their respective effective or
issue dates, complied as to form in all material respects with
the requirements of the Act and the rules and regulations
thereunder. The descriptions in the Registration Statement
and the Prospectus of statutes, legal and governmental
proceedings (excluding insurance and Florida laws,
regulations, and governmental proceedings, as to which such
counsel need not express an opinion), or contracts and other
documents are accurate in all material respects and fairly
present the information required to be shown, and such counsel
does not know of any statutes or legal or governmental
proceedings required to be described in the Registration
Statement or Prospectus that are not described as required or
of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement which are not
described and filed as required.
(xii) The Registration Statement is
effective under the Act, any required filing of the Prospectus
pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b), and no stop order
suspending the effectiveness of the Registration Statement or
any part thereof has been issued and, to such counsel's
knowledge, no proceedings for that purpose have been
instituted or threatened or are contemplated by the
Commission.
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(xiii) The Company is not, and will not be as
a result of the consummation of the transactions contemplated
by this Agreement, an "investment company," or a company
"controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940.
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deem proper, on warranties,
representations and certificates of responsible officers of the Company and
public officials and, as to matters involving the application of laws of any
jurisdiction other than Georgia or the United States, to the extent
satisfactory in form and scope to counsel for the Subscription Advisors, upon
the opinion of local counsel satisfactory to counsel for the Subscription
Advisors, provided that such counsel states such counsel believes that the
Subscription Advisors are justified in relying upon such opinion and copies of
such opinion are delivered to the Subscription Advisors and counsel for the
Subscription Advisors.
In addition, such counsel shall state that (i) based solely
upon a letter from The Nasdaq Stock Market to the Company attached to such
counsel's opinion, the Subscribed Shares have been approved for quotation on
The Nasdaq National Market upon issuance, (ii) based solely upon a certificate
of officers of the Company, no securities of the Company have previously been
offered or sold to any person who is not a Florida resident, except in
connection with the transactions contemplated by this Agreement, and (iii) such
counsel has participated in conferences with officers and other representatives
of the Company and the Subscription Advisors and their counsel during which the
contents of the Registration Statement and the Prospectus and related matters
were discussed and reviewed, and, although such counsel has not independently
verified and is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, on the basis of the information that
such counsel developed in the course of the performance of the services
referred to above, considered in the light of such counsel's understanding of
the applicable law, nothing came to their attention that caused them to believe
that the Registration Statement or the Prospectus (other than the financial
statements and schedules and the other financial and statistical data therein,
as to which such counsel need express no belief), on such effective date,
contained 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.
(d) The Subscription Advisors shall have received an
opinion, dated at the Time of Delivery, of XxXxxxxxxxxxx, Xxxxxx, Xxxxx &
Cherr, P.A., to the effect that:
(i) The Company and each of its
subsidiaries has been duly incorporated, is validly existing
as a corporation in good standing under the laws of Florida
and has the corporate power and authority to own or lease its
properties and conduct its business as described in the
Registration Statement and the Prospectus. The Company has
the corporate power and authority to enter into this Agreement
and perform its obligations hereunder.
(ii) The Company's authorized, issued and
outstanding capital stock is set forth in the Prospectus. All
of the issued shares of Common Stock of the Company have been
duly authorized and validly issued, are fully paid and
nonassessable and conform to the description of the Common
Stock contained in the Prospectus. None of the issued shares
of capital stock of the Company has been issued or is owned or
held in violation of any preemptive rights of shareholders,
and no person or entity (including any holder of outstanding
shares of capital stock of the Company) has any statutory
preemptive or, to the knowledge of such counsel, other rights
to subscribe for any of the Shares. All offers and sales of
the Company's capital stock outstanding prior to the date
hereof were the subject of an available exemption from the
registration or qualification requirements of the Florida
securities or blue sky laws (to the extent such offers and
sales were subject to such Florida laws).
(iii) The Subscribed Shares have been duly
authorized and, when issued and delivered against payment
therefor as provided herein, will be validly issued and fully
paid and nonassessable
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and will conform to the description of the Common Stock
contained in the Prospectus, and the certificates evidencing
the Subscribed Shares comply with all requirements of
applicable law.
(iv) ESIF holds such insurance licenses,
certificates and permits from governmental authorities
(including, without limitation, Insurance Licenses) which are
necessary to the conduct of its business as described in the
Prospectus, and the Company and ESIF have fulfilled and
performed all obligations necessary to maintain the Insurance
Licenses. Neither the Company nor ESIF has received any
notice of, and such counsel has no knowledge of, any action,
suit, proceeding, or investigation, and to the best knowledge
of such counsel there has been no threatened action, suit,
proceeding or investigation, that could reasonably be expected
to result in the revocation, termination or suspension of any
Insurance Licenses.
(v) The issue and sale of the Subscribed
Shares and the performance of this Agreement and the
consummation of the transactions herein contemplated will not
violate any Florida statute, rule, or regulation, or to the
extent known to such counsel, any order, judgment, or decree
of any court or governmental agency or body having
jurisdiction over the Company or any of its properties or
assets related to insurance regulatory matters.
(vi) No consent, approval, authorization,
order, or declaration of or from, or registration,
qualification or filing with, any Florida court or Florida
governmental agency or body or to the knowledge of such
counsel from any other court, governmental agency or body
related to insurance regulatory matters is required for the
issue and sale of the Subscribed Shares or the consummation of
the transactions contemplated by this Agreement, except such
as have been obtained under the Florida Insurance Code and the
rules and regulations thereunder.
(vii) The Plan has been duly adopted by the
required vote of ESIF's Board of Trustees and is in compliance
with the insurance laws of the State of Florida applicable to
the reorganization of group self-insurance funds into stock
property and casualty insurance companies. Other than the
conditions to effectiveness set forth in the Order or in the
Plan, no other approvals are required to be obtained under the
Florida Insurance Code for the effectiveness of the Plan.
Prior to or contemporaneously with the Time of Delivery, each
of the actions required to occur prior to the effectiveness of
the Plan pursuant to the Order or the Plan will have occurred.
(viii) To such counsel's knowledge and other
than as disclosed in or contemplated by the Prospectus,
neither the Company nor any of its subsidiaries is in
violation of, or in default with respect to, any Florida
statute, rule, regulation, order, judgment or decree, or as to
insurance regulatory matters, any other statute, rule,
regulation, order, judgment or decree.
(ix) The descriptions in the Registration
Statement and the Prospectus of insurance-related and Florida
laws and regulations and governmental proceedings are accurate
and fairly present the information required to be shown, and
such counsel does not know of any insurance related or Florida
laws or regulations or governmental proceedings required to be
described in the Registration Statement or Prospectus that are
not described as required.
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deem proper, on warranties,
representations and certificates of responsible officers of the Company and
public officials.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company and the Subscription Advisors and their counsel during which the
contents of the Registration Statement and the Prospectus and related matters
were discussed and reviewed, and, although such counsel has not independently
verified and is not passing upon and does not assume any responsibility for the
accuracy,
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completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, on the basis of the information that such counsel
developed in the course of the performance of the services referred to above,
considered in the light of such counsel's understanding of the applicable law,
nothing came to their attention that caused them to believe that the
Registration Statement or the Prospectus, on such effective date, contained 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.
(e) The Subscription Advisors shall have received from
Ernst & Young LLP and Xxxxxxx & Xxxxxx letters as of the date hereof and as of
the Effective Date and the Time of Delivery, in form and substance satisfactory
to the Subscription Advisors, to the effect set forth in Annex I and Annex II
hereto, respectively. In the event that the letters referred to in this
Section 8(e) set forth any changes, decreases or increases in the items
specified in clause (iii) of Annex I, it shall be a further condition to the
obligations of the Subscription Advisors that (i) such letters shall be
accompanied by a written explanation by the Company as to the significance
thereof, unless the Subscription Advisors deem such explanation unnecessary,
and (ii) such changes, decreases, or increases do not, in the reasonable
judgment of the Subscription Advisors, make it impracticable or inadvisable to
proceed with the purchase, sale and delivery of the Subscribed Shares being
delivered at the Time of Delivery as contemplated by the Registration
Statement, as amended as of the date of such letter.
(f) Since the date of the latest audited financial
statements included in the Prospectus, the Company and its subsidiaries shall
not have sustained (i) any loss or interference with their respective
businesses from fire, explosion, flood, hurricane or other calamity, whether or
not covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as disclosed in or contemplated by the
Prospectus, or (ii) any change, or any development involving a prospective
change (including without limitation a change in management or control of the
Company) in or affecting the position (financial or otherwise), results of
operations, net worth or business prospects of the Company and its
subsidiaries, otherwise than as disclosed in or contemplated by the Prospectus,
the effect of which, in either such case, is in the reasonable judgment of the
Subscription Advisors so material and adverse as to make it impracticable or
inadvisable to proceed with the purchase, sale, and delivery of the Subscribed
Shares being delivered at the Time of Delivery as contemplated by the
Registration Statement, as amended as of the date hereof.
(g) Subsequent to the date hereof there shall not have
occurred any of the following: (i) any suspension or limitation in trading in
securities generally on the New York Stock Exchange, or any setting of minimum
prices for trading on such exchange or in the Common Stock by the Commission or
The Nasdaq Stock Market; (ii) a moratorium on commercial banking activities in
New York or Florida declared by either federal or state authorities; or (iii)
any outbreak or escalation of hostilities involving the United States,
declaration by the United States of a national emergency or war or any other
national or international calamity or emergency if the effect of any such event
specified in this clause (iii) in the reasonable judgment of the Subscription
Advisors makes it impractical or inadvisable to proceed with the purchase, sale
and delivery of the Subscribed Shares being delivered at the Time of Delivery
as contemplated by the Registration Statement, as amended as of the date
hereof.
(h) The Company shall have furnished to the Subscription
Advisors at the Time of Delivery certificates of officers of the Company,
reasonably satisfactory to the Subscription Advisors, as to the accuracy in all
material respects of the representations and warranties of the Company herein
at and as of the Time of Delivery, as to the performance by the Company of all
of their respective obligations hereunder to be performed at or prior to the
Time of Delivery, and as to such other matters as the Subscription Advisors may
reasonably request, and the Company shall have furnished or caused to be
furnished certificates as to the matters set forth in subsections (a) and (f)
of this Section 8, and as to such other matters as the Subscription Advisors
may reasonably request.
(i) The Common Stock shall have been approved for
quotation on the Nasdaq National Market.
9. INDEMNIFICATION AND CONTRIBUTION.
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(a) The Company agrees to indemnify and hold harmless
each Subscription Advisor against any losses, claims, damages or liabilities,
joint or several, to which such Subscription Advisor may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement made by the Company in Section 5 of this
Agreement; (ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or (B) any application or other document, or any amendment
or supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Shares under the securities or blue sky laws thereof or
filed with the Commission or any securities association or securities exchange
(each an "Application"); or (iii) the omission or alleged omission to state in
the Registration Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or any
Application a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Subscription
Advisor for any legal or other expenses reasonably incurred by such
Subscription Advisor in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement or any amendment thereto, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto or any Application in
reliance upon and in conformity with written information furnished to the
Company by any Subscription Advisor expressly for use therein. The obligations
of the Company to indemnify the Subscription Advisors (or any controlling
person of such Subscription Advisor) pursuant to this indemnity agreement are
subject to the condition that, insofar as such losses, claims, damages,
liabilities or expenses relate to any such untrue statement, alleged untrue
statement, omission or alleged omission made in a Preliminary Prospectus that
is corrected in the Prospectus, such indemnity agreement shall not inure to the
benefit of any Subscription Advisor from whom the person asserting such losses,
liabilities, claims, damages or expenses purchased the Shares in the
Subscription Offering, if (i) such Subscription Advisor failed to deliver a
copy of the Prospectus to such person at or prior to the time delivery of the
Prospectus as is required by the Act, unless such failure was due to the
failure by the Company to provide copies of the Prospectus to such Subscription
Advisor; and (ii) the delivery of such Prospectus to such person would have
constituted a complete defense to the losses, claims, damages, liabilities or
expenses asserted by such person. The Company will not, without the prior
written consent of each Subscription Advisor, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit
or proceeding (or related cause of action or portion thereof) in respect to
which indemnification may be sought hereunder (whether or not such Subscription
Advisor is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of such
Subscription Advisor from all liability arising out of such claim, action, suit
or proceeding (or related cause of action or portion thereof).
(b) Each Subscription Advisor, severally but not jointly,
agrees to indemnify and hold harmless the Company against any losses, claims,
damages or liabilities to which the Company may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus,
or any amendment or supplement thereto, or any Application 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 such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by such Subscription Advisor expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
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the indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be one or more legal defenses available to
it or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party
and such indemnified party shall have the right to select separate counsel to
defend such action oh behalf of such indemnified party, provided, further,
however, that the Company shall be liable for the fees and expenses of only one
separate firm of attorneys (in addition to local counsel) for all indemnified
parties at any time in connection with any action, suit or proceeding, or in a
series of separate but substantially similar or related actions, suits or
proceedings arising out of the same general allegations and circumstances.
After such notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 9 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence or (ii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. Nothing in this Section 9(c)
shall preclude an indemnified party from participating at its own expense in
the defense of any such action so assumed by the indemnifying party.
(d) If the indemnification provided for in this Section 9
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Subscription Advisors on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Subscription Advisors on the other
in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Subscription Advisors on the other shall be
deemed to be in the same proportion as the total net proceeds from the
Subscription Offering (before deducting expenses) received by the Company bear
to the total fees received by the Subscription Advisors. The relative fault
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 on the
one hand or the Subscription Advisors on the other and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission. The Company and the Subscription Advisors agree
that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if the Subscription
Advisors 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 subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Subscription Advisors' obligations in this
subsection (d) to contribute are several and not joint.
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(e) The obligations of the Company under this Section 9
shall be in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls any Subscription Advisor within the meaning of the Act; and the
obligations of the Subscription Advisors under this Section 9 shall be in
addition to any liability which the respective Subscription Advisors may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls
the Company within the meaning of the Act.
10. TERMINATION. This Agreement may be terminated in the sole
discretion of the Subscription Advisors, by notice to the Company given prior
to the Time of Delivery, in the event that (a) any condition to the obligations
of the Subscription Advisors set forth in Section 8 hereof has not been
satisfied, or (b) the Company shall have failed, refused or been unable to
deliver the shares of Common Stock or to perform all obligations and satisfy
all conditions on its part to be performed or satisfied hereunder at or prior
to the Time of Delivery. If this Agreement is terminated pursuant to this
Section 10, the Company will reimburse the Subscription Advisors severally upon
demand for all out-of-pocket expenses (including reasonable counsel fees and
disbursements) that shall have been reasonably incurred by them in connection
with the Subscription Offering. The Company shall not in any event be liable
to any of the Subscription Advisors for the loss of expected profits from the
transactions covered by this Agreement.
11. SURVIVAL. The respective indemnities, agreements,
representations, warranties and other statements of the Company and the several
Subscription Advisors, as set forth in this Agreement or made by or on behalf
of them, respectively, pursuant to this Agreement, shall remain in full force
and effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Subscription Advisor or any controlling
person referred to in Section 9(e) or the Company or any officer or director or
controlling person of the Company referred to in Section 9(e), and shall
survive delivery of and payment for the Shares. The respective agreements,
covenants, indemnities and other statements set forth in Sections 7 and 9
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
12. EFFECTIVE DATE. This Agreement shall become effective
immediately upon execution.
13. NOTICES. All communications hereunder shall be in writing
and, if sent to any of the Subscription Advisors, shall be mailed, delivered or
telecopied and confirmed in writing to the Subscription Advisors in care of
Xxxxxxx Xxxxx & Associates, Inc., 000 Xxxxxxxx Xxxxxxx, Xx. Xxxxxxxxxx, Xxxxxxx
00000, Attention: Xxxx X. Xxxxxx, with a copy to Holland & Knight, 000 Xxxxx
Xxxxxx Xxxxx, Xxxxx, Xxxxxxx 00000, Attention Xxxxxxx X. Xxxxxxxx, Esq.; and
if sent to the Company, shall be mailed, delivered or telecopied and confirmed
in writing to the Company at 0000 X-X Xxxx Xxxx, Xxxxxxxx, Xxxxxxx 00000, with
a copy to Xxxxxx & Bird, 0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx
00000-0000, Attention X. Xxxx Xxxxxxxx, Esq.
14. ACTION BY THE SUBSCRIPTION AGENTS. Any action under this
Agreement taken by Xxxxxxx Xxxxx & Associates, Inc. will be binding upon ABN
AMRO Chicago Corporation.
15. BINDING EFFECT. This Agreement shall be binding upon, and
inure solely to the benefit of, the Subscription Advisors, the Company and to
the extent provided in Section 9 hereof, the officers and directors and
controlling persons referred to therein and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement.
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida without giving
effect to any provisions regarding conflicts of laws.
17. COUNTERPARTS. This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall
be deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
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18. CONSTRUCTION WITH UNDERWRITING AGREEMENT. In the event the
Public Offering occurs, the Company and the Subscription Advisors will enter
into an Underwriting Agreement. It is understood that any certificates or
opinions required to be rendered by both this Agreement and the Underwriting
Agreement may be rendered in a single certificate or opinion covering both the
Public Offering and the Subscription Offering.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one of the counterparts hereof, and
upon the acceptance hereof by Xxxxxxx Xxxxx & Associates, Inc., on behalf of
each of the Subscription Advisors, this letter will constitute a binding
agreement among the Subscription Advisors and the Company.
Very truly yours,
SUMMIT HOLDING SOUTHEAST, INC.
By:
---------------------------------
Title:
------------------------------
The foregoing Agreement is hereby confirmed and
accepted as of the date first written above at
January ____, 1997.
XXXXXXX XXXXX & ASSOCIATES, INC.
By: Xxxxxxx Xxxxx & Associates, Inc.
On behalf of each of the Subscription Advisors
By:
------------------------------------------
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ANNEX I
Pursuant to Section 8(e) of the Subscription Agency Agreement, Ernst &
Young LLP shall furnish a letter to the Subscription Advisors to the effect
that:
(i) they are independent public accountants with respect
to the Company within the meaning the Act and the applicable published
rules and regulations thereunder;
(ii) in their opinion, the financial statements and
schedules audited by them and included in the Prospectus and the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the related
published rules and regulations thereunder;
(iii) On the basis of limited procedures, not constituting
an audit in accordance with generally accepted auditing standards,
consisting of a reading of the latest available interim financial
statements of the Company, inspection of the minute books of the
Company since the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of the Company
responsible for financial accounting matters and such other inquiries
and procedures as may be specified in such letter, nothing came to
their attention that caused them to believe that:
(A) the unaudited financial statements of the
Company included in the Registration Statement and the
Prospectus do not comply in form in all material respects with
the applicable accounting requirements of the Act and the
related published rules and regulations thereunder or are not
in conformity with generally accepted principles applied on
the basis substantially consistent with that of the audited
financial statements included in the Registration Statement
and the Prospectus;
(B) the unaudited amounts for sales, net revenues
and total and per share amounts of net income included in the
Registration Statement and the Prospectus do not agree with
the amounts set forth in the unaudited financial statements
for those same periods or are not in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the corresponding
amounts in the audited financial statements included in the
Registration Statement and the Prospectus;
(C) as of a specified date not more than five
days prior to the date of such letter, there were any changes
in the capital stock (other than the issuance of capital stock
upon exercise of options which were outstanding on the date of
the latest balance sheet included in the Prospectus) or any
increase in inventories or the long-term debt or short-term
debt of the Company, or any decreases in net current assets or
net assets or other items specified by the Subscription
Advisors, or any increases in any items specified by the
Subscription Advisors, in each case as compared with amounts
shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which
are described in such letter;
(D) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in Clause (A) there were any
decreases in net sales or operating income or the total or per
share amounts of net income or other items specified by the
Subscription Advisors, or any increases in any items specified
by the Subscription Advisors, in each case as compared with
the comparable period of the preceding year and with any other
period of corresponding length specified by the Subscription
Advisors, except in each case for increases or decreases which
the Prospectus discloses have occurred or may occur which are
described in such letter; and
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(iv) In addition to the audit referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraph (iii) above, they have carried out certain specified
procedures, not constituting an audit in accordance with generally
accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Subscription
Advisors which are derived from the general accounting records of the
Company, included in the Registration Statement and the Prospectus, or
which appear in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Subscription Advisors, and
have compared certain of such amounts, percentages and financial
information with the accounting records of the Company and have found
them to be in agreement.
References to the Registration Statement and the Prospectus in this
Annex I shall include any amendment or supplement thereto at the date of such
letter.
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ANNEX II
Pursuant to Section 8(e) of the Subscription Agency Agreement, Xxxxxxx
& Xxxxxx shall furnish a letter to the Subscription Advisors to the effect
that:
(i) they are independent public accountants with respect
to the Company within the meaning the Act and the applicable published
rules and regulations thereunder;
(ii) in their opinion, the financial statements and
schedules audited by them and included in the Prospectus and the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the related
published rules and regulations thereunder;
(iii) On the basis of limited procedures, not constituting
an audit in accordance with generally accepted auditing standards,
consisting of a reading of the latest available interim financial
statements of the Company, inspection of the minute books of the
Company since the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of the Company
responsible for financial accounting matters and such other inquiries
and procedures as may be specified in such letter, nothing came to
their attention that caused them to believe that:
(A) the unaudited financial statements of the
Company included in the Registration Statement and the
Prospectus do not comply in form in all material respects with
the applicable accounting requirements of the Act and the
related published rules and regulations thereunder or are not
in conformity with generally accepted principles applied on
the basis substantially consistent with that of the audited
financial statements included in the Registration Statement
and the Prospectus;
(B) the unaudited amounts for sales, net revenues
and total and per share amounts of net income included in the
Registration Statement and the Prospectus do not agree with
the amounts set forth in the unaudited financial statements
for those same periods or are not in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the corresponding
amounts in the audited financial statements included in the
Registration Statement and the Prospectus;
(C) as of a specified date not more than five
days prior to the date of such letter, there were any changes
in the capital stock (other than the issuance of capital stock
upon exercise of options which were outstanding on the date of
the latest balance sheet included in the Prospectus) or any
increase in inventories or the long-term debt or short-term
debt of the Company, or any decreases in net current assets or
net assets or other items specified by the Subscription
Advisors, or any increases in any items specified by the
Subscription Advisors, in each case as compared with amounts
shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which
are described in such letter;
(D) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in Clause (A) there were any
decreases in net sales or operating income or the total or per
share amounts of net income or other items specified by the
Subscription Advisors, or any increases in any items specified
by the Subscription Advisors, in each case as compared with
the comparable period of the preceding year and with any other
period of corresponding length specified by the Subscription
Advisors, except in each case for increases or decreases which
the Prospectus discloses have occurred or may occur which are
described in such letter; and
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(iv) In addition to the audit referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraph (iii) above, they have carried out certain specified
procedures, not constituting an audit in accordance with generally
accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Subscription
Advisors which are derived from the general accounting records of the
Company, included in the Registration Statement and the Prospectus, or
which appear in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Subscription Advisors, and
have compared certain of such amounts, percentages and financial
information with the accounting records of the Company and have found
them to be in agreement.
References to the Registration Statement and the Prospectus in this
Annex I shall include any amendment or supplement thereto at the date of such
letter.
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