Exhibit 1.1
14,000,000 Shares
Ceres Group, Inc.
Common Stock
par value $0.001 per share
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UNDERWRITING AGREEMENT
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December [ ], 2001
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
Sandler X'Xxxxx & Partners, L.P.
Xxxxxx Xxxxxxxx & Company Incorporated
As Representatives of the several Underwriters
named in Schedule I hereto,
c/o Friedman, Billings, Xxxxxx & Co., Inc.
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Ladies and Gentlemen:
Ceres Group, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
14,000,000 shares (the "Firm Shares") and, at the election of the Underwriters,
up to 2,100,000 additional shares (the "Optional Shares") of the common stock,
par value $0.001 per share ("Stock") of the Company (the Firm Shares and the
Optional Shares that the Underwriters elect to purchase pursuant to Section 2
hereof being collectively called the "Shares").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1, as amended prior to the date
hereof, (File No. 333- 59784) (the "Initial Registration Statement") in respect
of the Shares has been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any post-effective
amendment thereto, each in the form heretofore delivered to the Representatives,
and, excluding exhibits thereto, delivered to the Representatives for each of
the other Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size of the
offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b)
under the Securities Act of 1933, as
amended (the "Act"), which became effective upon filing, no other document with
respect to the Initial Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act, is hereinafter called a "Preliminary Prospectus;" the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective, each as amended at
the time such part of the Initial Registration Statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or
hereinafter becomes effective, are hereinafter collectively called the
"Registration Statement;" and such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus;"
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission. Each Preliminary Prospectus, at
the time of filing thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Friedman, Billings, Xxxxxx & Co., Inc., Sandler X'Xxxxx &
Partners, L.P. or Xxxxxx Xxxxxxxx & Company Incorporated expressly for use
therein;
(c) This Agreement has been duly authorized, executed and delivered
by the Company;
(d) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform as of their dates and at the time of the filing and
effectiveness thereof, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder. The Registration
Statements and any amendment thereto and the Prospectus and any amendment or
supplement thereto do not and will not, as of the applicable effective date as
to the Registration Statement and any amendment thereto, and as of the
applicable filing date as to the Prospectus and any amendment or supplement
thereto, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Friedman, Billings, Xxxxxx & Co., Inc., Sandler X'Xxxxx &
Partners, L.P. or Xxxxxx Xxxxxxxx & Company Incorporated expressly for use
therein;
(e) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus: (i) 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, (ii) there has been no material adverse change, or any development
that could reasonably be expected to result in a material adverse change, in or
affecting the general affairs, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries considered
as one enterprise (a "Material Adverse
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Effect"), (iii) there have been no transactions entered into by the Company or
any of its subsidiaries, other than in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as one
enterprise, and (iv) there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries;
(f) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or included in
the Prospectus present fairly the financial condition and results of operations
of the entities shown thereby, at the dates and for the periods indicated, and
have been prepared in conformity with generally acceptable accounting principles
applied on a consistent basis throughout the periods involved, except as
otherwise stated therein; and the pro forma consolidated statements of
operations (including the related notes) filed as part of the Registration
Statement or included in the Prospectus are based upon good faith estimates and
assumptions believed by the Company to be reasonable at the time made and have
been prepared in accordance with the applicable requirements of Regulation S-X;
(g) The statutory annual and quarterly statements of the subsidiaries
of the Company engaged in the business of insurance and listed on Schedule II
hereto (the "Insurance Subsidiaries") required to file such statutory statements
and the statutory balance sheets and income statements included in such
statutory annual and quarterly statements, most recently filed in each state
where they are required to be filed, or from which certain ratios and other
statistical data filed as part of the Registration Statement or included in the
Prospectus have been derived, have been prepared in conformity with accounting
practices prescribed or permitted by the National Association of Insurance
Commissioners and the insurance departments of their respective domiciliary
states in effect at such time of preparation ("SAP"), and present fairly in all
material respects the statutory financial position of the respective Insurance
Subsidiaries (on a statutory basis) for the periods covered thereby;
(h) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease or sublease
by the Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases or subleases with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries, and neither the Company nor any
subsidiary has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any subsidiary under
any of the leases or subleases mentioned above, or affecting or questioning the
rights of the Company or such subsidiary to the continued possession or the
leased or subleased premises under any such lease or sublease, except as would
not, individually or in the aggregate, have a Material Adverse Effect;
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own, lease and operate its properties and
conduct its business as described in the Prospectus (including the power to
execute and deliver this Agreement and to consummate the transactions
contemplated thereby) and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of the State
of Ohio and 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 be so qualified in any such jurisdiction could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
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(j) Each of the Insurance Subsidiaries and the other subsidiaries of
the Company listed on Schedule III hereto (the "Material Subsidiaries") has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its organization, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business or obtained the required licences or
certificates of authority, as applicable, 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 be so
qualified in any such jurisdiction could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect;
(k) All ceded reinsurance and retrocessional treaties, contracts,
agreements and arrangements to which the Company or any of its subsidiaries is a
party are in full force and effect and neither the Company nor any of such
subsidiaries is in violation of, or in default in the performance, observance or
fulfillment of, any obligation, agreement, covenant or condition contained
therein, except for such violations or defaults which could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
neither the Company nor any such subsidiaries has received any notice from any
of the other parties to such agreements that such other party intends not to
perform in any material respect such agreement and none of the Company or any
such subsidiaries has any reason to believe that any of the other parties to
such agreements will be unable to perform such agreements, except to the extent
that (i) the Company or such subsidiary has established appropriate reserves on
its financial statements referred to in Subsection 1(f) herein or (ii) such
nonperformance could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect;
(l) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus, and all of the issued shares of
capital stock of the Company have been duly and validly authorized and issued,
are fully paid and nonassessable and conform in all material respects to the
description of the capital stock contained in the Prospectus; and all of the
issued shares of capital stock of each subsidiary of the Company have been duly
and validly authorized and issued, are fully paid and nonassessable and all of
the capital stock of each subsidiary of the Company that is owned by the Company
directly or through other subsidiaries of the Company is owned free and clear of
any pledge, lien, encumbrance, claim or equity, otherwise than as set forth in
the Prospectus;
(m) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and nonassessable and will conform in all material
respects to the description of the Stock contained in the Prospectus; and no
person is entitled to preemptive or other rights afforded by the Company to
subscribe for the Shares;
(n) The form of certificate used to evidence the Shares complies in all
material respects with the applicable requirements of the Company's Governing
Documents (as defined herein) any applicable state law and NASDAQ;
(o) Except as described in the Prospectus, there are no outstanding
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, or agreements or understandings with respect to the sale or
issuance of, any shares of capital stock of or other equity interest in the
Company;
(p) Except as described in the Prospectus (in each of the clauses
set forth in this Subsection
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1(p)), the Company and each of its subsidiaries hold such licenses,
certificates, permits, franchises and authorizations from governmental
authorities (including, without limitation, insurance licenses from the
insurance regulatory agencies of the states where the Company and its
subsidiaries conduct business or are otherwise necessary to the conduct of the
business as described in the Prospectus ("Insurance Licenses")); the Company and
each of its subsidiaries has fulfilled and performed all obligations necessary
to maintain such licenses, certificates and permits (including, without
limitation, the Insurance Licenses); there is no pending or, to the knowledge of
the Company, threatened action, suit, proceeding or investigation (and no facts
exist which the Company believes could reasonably be the basis for any such
action, suit, proceeding or investigation) that may reasonably be expected to
lead to the revocation, termination or suspension of any such license,
certificate or permit (including, without limitation, the Insurance Licenses);
the Company and its subsidiaries have made all required material filings under
the applicable insurance holding company statutes of each state in which they
are required to make such filings, and have filed all material reports,
registrations, documents or other information required to be filed thereunder;
no insurance regulatory agency or body has issued any order or decree impairing,
restricting or prohibiting the payment of dividends by the Company or its
subsidiaries; no order was filed or proposed and no filing of a request for an
order was made, and to the knowledge of the Company and its subsidiaries there
is no basis, for the filing of an order of liquidation, rehabilitation,
conservation or supervision or other delinquency proceedings with respect to any
of its Insurance Subsidiaries; and, to the knowledge of the Company, no change
in any insurance laws or regulations is pending which, if made effective, would
have, or would be reasonably likely to have, individually or in the aggregate
with all such changes, a Material Adverse Effect;
(q) Except as described in the Prospectus, none of the Company nor any
of its Insurance Subsidiaries has any reason to believe that the total adjusted
capital of each of the Insurance Subsidiaries will fall below 200% of each of
the Insurance Subsidiaries risk-based capital as of December 31, 2001;
(r) Except as disclosed in the Prospectus, the issue and sale of the
Shares by the Company, the execution and delivery of this Agreement by the
Company and the compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or constitute a "change of
control" under, or result in the reduction or loss of any benefit or the
creation or acceleration of any right or obligation under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, or would otherwise result in
the reduction or loss of any benefit to which the Company or any of its
subsidiaries are entitled, nor will such action result in any violation of the
provisions of the certificate of incorporation or by-laws or other similar
governing document of the Company or any of its subsidiaries, in each case as
amended (each such document, a "Governing Document") or any statute or any
order, rule or regulation of any court or governmental agency or body
(including, without limitation, any insurance regulatory agency or body) having
jurisdiction over the Company or any of its subsidiaries or any of their
properties, or could be the basis for any action, suit, proceeding or
investigation that may be expected to lead to the revocation, termination or
suspension of any license, certificate or permit (including, without limitation,
the Insurance Licenses), and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body (including, without limitation, any insurance regulatory agency or body)
is required for the issue and sale of the Shares, the execution and delivery of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under the
Act of the Shares and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
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Underwriters;
(s) Neither the Company nor any of its subsidiaries is (i) in violation
of its Governing Documents or (ii) in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, note, lease or other agreement or
instrument to which it is a party or by which it or any of its properties may be
bound, other than in the case of clause (ii) any default that would not have a
Material Adverse Effect;
(t) The statements set forth in the Prospectus under the captions
"Description of Capital Stock" and "Shares Eligible for Future Sale" insofar as
they purport to constitute a summary of the terms of the capital stock and
warrants of the Company and under the captions "Risk Factors," "Business,"
"Management," "Principal Stockholders," "Certain Related Transactions" and
"Underwriting," insofar as they purport to describe the provisions of the laws
and documents referred to therein provide a fair summary in all material
respects, other than the information in the third, sixth and eight paragraphs
under the caption "Underwriting" in the Prospectus as to which the Company makes
no representation or warranty;
(u) Except as disclosed in the Prospectus, the Company and its
subsidiaries are conducting their respective businesses in compliance in all
material respects with all laws, rules, regulations, decisions, directives and
orders applicable to them; there is no action, suit, investigation or proceeding
before or by any government, governmental agency or body (including, without
limitation, any insurance regulatory agency or body) or court, domestic or
foreign, now pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries (A) that is required to be
disclosed in the Registration Statement and is not disclosed therein, (B) that
could, individually or in the aggregate, reasonably be expected to result in any
Material Adverse Effect, (C) that could materially and adversely affect the
properties, assets or leasehold interests of the Company and its subsidiaries,
or (D) that could adversely affect the consummation of the transactions
contemplated in this Agreement; and all pending legal or governmental
proceedings to which the Company or any of its subsidiaries is a party or of
which any of their property is the subject, which are not described in the
Registration Statement, including ordinary routine litigation incidental to
their respective businesses, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect;
(v) Except as described in the Prospectus, neither A.M. Best Company,
Inc. nor Fitch, Inc. has taken any action to, or to the Company's knowledge,
threatened to: (i) downgrade the rating of the Company's debt securities or the
claims paying ability or financial strength rating of the Company or any of its
subsidiaries or (ii) publicly announce or otherwise indicate to the Company or
a subsidiary of the Company that the rating of the Company's debt securities or
the claims paying ability or financial strength rating of the Company or any of
its subsidiaries is under review;
(w) Each of the Company and its subsidiaries is in compliance in all
material respects with all applicable federal, state and local environmental
laws and regulations, including, without limitation, those applicable to
emissions to the environment, waste management, and waste disposal
(collectively, the "Environmental Laws"), except where such noncompliance could
not reasonably be expected to have a Material Adverse Effect, and to the
knowledge of the Company, there are no circumstances that would prevent,
interfere with or materially increase the cost of such compliance in the future;
(x) There is no claim under any Environmental Law, including common
law, pending or, to the knowledge of the Company, threatened against the Company
(an "Environmental Claim"), which could reasonably be expected to have a
Material Adverse Effect, and, to the knowledge of the Company, under
6
applicable law, there are no past or present actions, activities, circumstances,
events or incidents, including, without limitation, releases of any material
into the environment, that are reasonably likely to form the basis of any
Environmental Claim against the Company or its subsidiaries which would be
reasonably likely to have a Material Adverse Effect;
(y) There are no contracts or documents of the Company or any of its
subsidiaries which would be required to be described in the Registration
Statement or to be filed as exhibits thereto by the Act or by the rules and
regulations of the Commission thereunder which have not been so described and
filed;
(z) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of proceeds as described in the
Prospectus, will not be an "investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act");
(aa) Each of the Company and its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally acceptable
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences;
(bb) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075, Florida Statutes;
(cc) There are no contracts, agreements or understandings between the
Company and any person granting such person the right, which has not been duly
waived (either by action or inaction), to require the Company to include any
securities of the Company owned or to be owned by such person in the securities
registered pursuant to the Registration Statement or to register any securities
of the Company that are substantially similar to the Stock for a period of 90
days following the Effective Date; and
(dd) The accountants who have certified certain financial statements of
the Company and its subsidiaries, are independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder.
2. Subject to the terms and conditions herein set forth, (a) the Company agrees
to issue and sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company, at a purchase
price per share of $[ ], the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule I hereto and (b) in the event and to the extent
that the Underwriters shall exercise the election to purchase Optional Shares as
provided below, the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by the Representatives
so as to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction, the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is 2,100,000.
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The Company hereby grants to the Underwriters the right to purchase at
their election up to 2,100,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from the Representatives
to the Company, given within a period of 30 calendar days after the date of this
Agreement, setting forth the aggregate number of Optional Shares to be purchased
and the date on which such Optional Shares are to be delivered, as determined by
the Representatives but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless the Representatives and the Company
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
It is understood that each Underwriter has authorized Friedman,
Billings, Xxxxxx & Co., Inc., for such Underwriter's account, to accept delivery
of, receipt for, and make payment of the purchase price for, the Firm Shares and
the Optional Shares, if any, which such Underwriter has agreed to purchase.
Friedman, Billings, Xxxxxx & Co., Inc., individually and not as representative
of the Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Firm Shares or the Optional Shares, if any, to be
purchased by any Underwriter whose funds have not been received by the relevant
Time of Delivery but such payment shall not relieve such Underwriter from its
obligations hereunder.
3. Upon the authorization by the Representatives of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
It is understood that approximately ______ shares of the Firm Shares
("Directed Shares") will initially be reserved by the Underwriters for offer and
sale to employees and persons having business relationships with the Company and
its subsidiaries ("Directed Share Participants") upon the terms and conditions
set forth in the Prospectus and in accordance with the rules and regulations of
the National Association of Securities Dealers, Inc. Under no circumstances will
the Representatives or any Underwriter be liable to the Company or to any
Directed Share Participant for any action taken or omitted to be taken in good
faith in connection with such Directed Share Program. To the extent that any
Directed Shares are not affirmatively reconfirmed for purchase by any Directed
Share Participant on or immediately after the date of this Agreement, such
Directed Shares may be offered to the public as part of the public offering
contemplated hereby.
In connection with the offer and sale of the Directed Shares, the
Company agrees, promptly upon a request in writing, to indemnify and hold
harmless the Representatives and the other Underwriters from and against any
loss, claim, damage, expense, liability or action which (i) arises out of, or is
based upon, any untrue statement or alleged untrue statement of a material fact
contained in any material prepared by or with the approval of the Company for
distribution to Directed Share Participants in connection with the Directed
Share Program or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) arises out of the failure of any Directed Share Program
participant to pay for and accept delivery of Directed Shares that the
Participant agreed to purchase or (iii) is otherwise related to the Directed
Share Program, other than losses, claims, damages or liabilities (or expenses
relating thereto) that are finally judicially determined to have resulted
directly from the bad faith or gross negligence of the Representatives.
4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive
form, and in such authorized denominations and registered in such names as
Friedman, Billings, Xxxxxx & Co., Inc. may request upon at least forty-eight
hours' prior notice to the Company shall be delivered by or on behalf of the
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Company to Friedman, Billings, Xxxxxx & Co., Inc., through the facilities of the
Depository Trust Company ("DTC"), for the account of such Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of immediately available funds to bank accounts designated by the
Company. The Company will cause the certificates representing the Shares to be
made available for checking and packaging at least twenty-four hours prior to
the Time of Delivery (as defined below) at the office of DTC or its designated
custodian (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., Eastern Time, on
[December ], 2001 or such other time and date as Friedman, Billings, Xxxxxx &
Co., Inc. and the Company may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York time, on the date specified by Friedman,
Billings, Xxxxxx & Co., Inc. in the written notice given by Friedman, Billings,
Xxxxxx & Co., Inc. of the Underwriters' election to purchase such Optional
Shares, or such other time and date as Friedman, Billings, Xxxxxx & Co., Inc.
and the Company may agree upon in writing. Such time and date for delivery of
the Firm Shares is herein called the "First Time of Delivery," such time and
date for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery," and each such time and date for
delivery is herein called a "Time of Delivery."
(b) The documents to be delivered at each Time of Delivery by or on behalf of
the parties hereto pursuant to Section 7 hereof, including the cross receipt for
the Shares and any additional documents requested by the Underwriters pursuant
to Section 7(l) hereof, will be delivered at the offices of Skadden, Arps,
Slate, Xxxxxxx & Xxxx L.L.P., Xxxx Xxxxx Xxxxxx, Xxx Xxxx, XX 00000 (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at such Time of Delivery. A meeting will be held at the Closing Location at
3:00 p.m., Eastern Time, on the New York Business Day immediately preceding such
Time of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by the Representatives
and to file such Prospectus pursuant to Rule 424(b) under the Act not later than
the Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus which
shall be disapproved by the Representatives promptly after reasonable notice
thereof; to advise the Representatives, promptly after it receives notice
thereof, of the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with copies
thereof; to advise the Representatives, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or prospectus, of
the suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or suspending any
such qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
(b) Promptly from time to time to take such action as the
Representatives may reasonably
9
request to qualify the Shares for offering and sale under the securities laws of
such jurisdictions as the Representatives may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions 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;
(c) Prior to 10:00 am, Eastern Time, on the New York Business Day next
succeeding the date of this Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus at such locations and in such
quantities as Underwriters may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of nine
months after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any event shall 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 the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary during such period to amend or
supplement the Prospectus in order to comply with the Act, to notify the
Representatives and upon the Representatives request to prepare and furnish
without charge to each Underwriter and to any dealer in securities as many
copies as the Representatives may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the Shares
at any time nine months or more after the time of issue of the Prospectus, upon
such Underwriter's request but at the expense of such Underwriter, to prepare
and deliver to such Underwriter as many copies as such Underwriter may request
of an amended or supplemented Prospectus complying with Section 10(a)(3) of the
Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
thereunder (including, at the option of the Company, Rule 158);
(e) Except as may otherwise by provided in writing between any
director, executive officer and stockholder of the Company and Friedman,
Billings, Xxxxxx & Co., Inc., during the period beginning from the date hereof
and continuing to and including the date 180 days after the date of the
Prospectus, not to, and not to allow its directors, executive officers and
certain of the Company's other stockholders listed on Schedule IV hereto, to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder, any securities of the Company that are substantially similar to the
Stock, including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, the Stock or any such
substantially similar securities, without Friedman, Billings, Xxxxxx & Co.,
Inc.'s prior written consent;
(f) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and statements
of income, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants) and, to
furnish or to make available as soon as practicable after the end of each of the
first three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement), consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish
10
to the Representatives copies of all reports or other communications (financial
or other) furnished to stockholders, and to deliver to the Representatives (i)
as soon as they are available, copies of any reports and financial statements
furnished to or filed with the Commission or any national securities exchange on
which any class of securities of the Company is listed or quoted (including the
National Association of Securities Dealers Automated Quotations National Market
System ("NASDAQ")); and (ii) such additional information concerning the business
and financial condition of the Company as the Representatives may from time to
time reasonably request (such financial statements to be on a consolidated basis
to the extent the accounts of the Company and its subsidiaries are consolidated
in reports furnished to its stockholders generally or to the Commission);
(h) In connection with the Directed Share Program, the Company will
ensure that the Directed Shares will be restricted to the extent required by the
NASD or the NASD rules from sale, transfer, assignment, pledge or hypothecation
for a period of three months following the date of the effectiveness of the
Registration Statement; and following notification by the Underwriters as to
which Directed Share Participants will need to be so restricted, the Company
will direct the transfer agent to place stop transfer restrictions upon such
securities for such period of time;
(i) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds";
(j) If the Company elects to rely on Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 P.M., Washington, D.C. time on the date of this Agreement,
and the Company shall at the time of filing either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act;
and
(k) To use its best efforts to list the Shares for quotation on NASDAQ.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the reasonable
out-of-pocket expenses incurred by the Underwriters in connection with the
transactions contemplated hereby (regardless of whether the sale of the Shares
is consummated), including, without limitation, disbursements, fees and expenses
of the Underwriters' counsel and marketing, syndication and travel expense and
out-of-pocket expenses as may otherwise was agreed or may be agreed by the
parties hereto; (ii) 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
filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing and delivering
of copies thereof to the Underwriters and dealers; (iii) the cost of printing or
producing any Agreement among Underwriters, this Agreement, the Blue Sky
Memorandum, closing documents (including any compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Shares; (iv) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(v) all fees and expenses in connection with listing the Shares on NASDAQ; (vi)
the filing fees incident to, and the fees and disbursements of counsel for the
Underwriters in connection with, securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the Shares;
(vii) the cost of preparing stock certificates; (viii) the cost and charges of
any transfer agent or registrar; (ix) all costs and expenses of the
Underwriters, including the fees and disbursements of counsel for the
Underwriters, incident
11
to the offer and sale of shares of the Directed Shares by the Underwriters to
the Directed Share Participants, as described in Section 3; and (x) all other
costs and expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5(a)
hereof; if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., Eastern Time,
on the date of this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to the Representatives' reasonable
satisfaction;
(b) Skadden, Arps, Slate, Xxxxxxx & Xxxx L.L.P., counsel for the
Underwriters, shall have furnished to the Representatives such opinion or
opinions, dated such Time of Delivery, with respect to such matters as the
Representatives may reasonably request, and such counsel shall have received
such documents and information as they may reasonably request to enable them to
pass upon such matters;
(c) Xxxxxxx Xxxxxxx & Xxxxxx P.L.L., counsel for the Company, shall
have furnished to the Representatives their written opinion, dated such Time of
Delivery, in form and substance satisfactory to the Representatives, to the
effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with requisite corporate power and authority to own its
properties and conduct its business as described in the Prospectus;
(ii) The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated thereby;
(iii) The Shares have been duly authorized by the Company
and, when delivered to and paid for by the Underwriters in accordance
with the terms of this Agreement, will be validly issued, fully paid
and nonassessable and free and clear of any preemptive rights or any
similar rights arising under any applicable law, the Company's
Governing Documents or under any contract filed as an exhibit to the
Registration Statement (each, an "Applicable Contract");
(iv) The form of certificate used to evidence the Shares
complies in all material respects with the applicable requirements of
the Company's Governing Documents, any applicable state law and NASDAQ;
(v) The Shares conform in all material respects to the
description of the Shares contained in the Prospectus;
12
(vi) This Agreement has been duly authorized, executed
and delivered by the Company;
(vii) The issue and sale of the Shares being delivered at such
Time of Delivery by the Company, the execution and delivery of this
Agreement by the Company and the compliance by the Company with all of
the provisions of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, any Applicable Contract, nor will such action result
in any violation of the provisions of the Governing Documents of the
Company nor will it, to such counsel's knowledge, conflict with or
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 or other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of or any statute
or any order, rule or regulation known to such counsel of any court or
governmental agency or body (including, without limitation, any
insurance regulatory agency or body) having jurisdiction over the
Company or any of its subsidiaries or any of their properties;
(viii) No consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body (including, without limitation, any insurance regulatory
agency or body) is required for the issue and sale of the Shares, the
execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters;
(ix) The statements set forth in the Prospectus under the
captions "Description of Capital Stock" and "Shares Eligible for Future
Sale" insofar as they purport to constitute a summary of the terms of
the capital stock and warrants of the Company and under the captions
"Risk Factors," "Business," "Management," "Principal Stockholders,"
"Certain Related Transactions" and "Underwriting," insofar as they
purport to describe the provisions of the laws and documents referred
to therein, are accurate, complete and fair in all material respects;
(x) The Company is not, and after giving effect to the
offering and sale of the Shares and the application of the proceeds as
described in the Prospectus, will not be, an "investment company" or an
entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act;
(xi) The Company has an authorized capitalization as set forth
in the Prospectus and the authorized capital stock of the Company
conforms as to legal matters to the description of the capital stock
contained in the Prospectus. The shares of Common Stock shown by the
Company's stock record books as being issued and outstanding
immediately prior to the date hereof have been duly authorized and are
validly issued and are fully paid and nonassessable, and to the
knowledge of such counsel, except as described in the Prospectus, are
free and clear of any preemptive rights or any similar rights arising
under any applicable law, the Company's Governing Document or, to the
knowledge of such counsel, under any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument known to such
counsel to which it is a party or by which it or any of its properties
may be bound;
13
(xii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of the State of Ohio and each other jurisdiction in
which it owns or leases properties or conducts any business so as to
require such qualification or is subject to no material liability to
the Company and its subsidiaries considered as one enterprise by reason
of failure to be so qualified in any such jurisdiction (such counsel
being entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company, provided that such counsel
shall state that she believes that both the Representatives and such
counsel are justified in relying upon such opinions and certificates);
(xiii) Each Material Subsidiary and Insurance Subsidiary has
been duly incorporated and is validly existing as a corporation in each
case in good standing under the laws of the jurisdiction of its
organization, with the requisite corporate power and authority to own
its properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business 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, or is subject to no
material liability to the Company and its subsidiaries, considered as
one enterprise, by reason of the failure to be so qualified in any such
jurisdiction; all of the issued and outstanding capital stock of each
Insurance Subsidiary and Material Subsidiary has been duly authorized
and validly issued and is fully paid and nonassessable and, to the
knowledge of such counsel, expect as set forth in the Registration
Statement, is owned, directly or through other subsidiaries of the
Company, by the Company; and expect as set forth in the Registration
Statement all of the capital stock of each Insurance Subsidiary and
Material Subsidiary is owned free and clear of any pledge, lien,
encumbrance, claim or equity;
(xiv) To such counsel's knowledge, the Company and its
subsidiaries have good and marketable title in fee simple to all real
property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus
or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and to such counsel's
knowledge any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries;
(xv) To such counsel's knowledge, except as disclosed in the
Prospectus, the Company and its subsidiaries are conducting their
respective businesses in compliance in all material respects with all
laws, rules, regulations, decisions, directives and orders applicable
to them; there is no action, suit, investigation or proceeding before
or by any government, governmental agency or body (including, without
limitation, any insurance regulatory agency or body) or court, domestic
or foreign, now pending or, to the knowledge of such counsel,
threatened against or affecting the Company or any of its subsidiaries
(A) that is required to be disclosed in the Registration Statement and
not disclosed therein, (B) that could result in any material liability
to the Company and its subsidiaries, considered as one enterprise, (C)
that could materially and adversely affect the properties, assets or
leasehold interests of the Company and its subsidiaries, considered as
one enterprise, or (D) that could adversely affect the consummation of
the transactions contemplated in this Agreement; all pending legal or
governmental proceedings to which the Company or any of its
14
subsidiaries is a party or of which any of their property is the
subject, which are not described in the Registration Statement,
including ordinary routine litigation incidental to their respective
businesses, would not have a Material Adverse Effect;
(xvi) To such counsel's knowledge, neither the Company nor any
of its subsidiaries is (i) in violation of its Governing Documents or
(ii) in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
known to such counsel to which it or any of its properties may be bound
or to which the Company or any of its subsidiaries is a party , except
in the case of clause (ii) any default that would not result in a
material liability to the Company and its subsidiaries, considered as
one enterprise; and
(xvii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of the
Act and the rules and regulations thereunder; although they do not
assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement or the
Prospectus, except for those referred to in the opinion in subsection
(ix) of this section 7(c), they have no reason to believe that, as of
its effective date, the Registration Statement or any further amendment
thereto made by the Company prior to such Time of Delivery (other than
the financial statements and related schedules therein, as to which
such counsel need express no opinion) contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as of
such Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be described in the
Registration Statement or the Prospectus which are not filed or
described as required;
(d) No event shall have occurred that would make it likely, in the
Representatives discretion, that the Chase Amendment shall not become effective
immediately following the First Time of Delivery.
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., Eastern Time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Ernst & Young LLP
shall have furnished to the Representatives a letter or letters, dated the
respective dates of delivery thereof, in form and substance satisfactory to the
Representatives, to the effect set forth in Annex I hereto (the executed copy of
the letter delivered prior to the execution of this Agreement is attached as
Annex I(a) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the Registration
15
Statement and as of each Time of Delivery is attached as Annex I(b) hereto);
(f) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus: (i) neither the Company nor any of
its subsidiaries shall have 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 set forth in the Prospectus, (ii) there shall have
been no material adverse change, or any development that could reasonably be
expected to result in a material adverse change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth in
the Prospectus; (iii) there have been no transactions entered into by the
Company or any of its subsidiaries, other than in the ordinary course of
business, which are material with respect to the Company and its subsidiaries
considered as one enterprise, (iv) no order was filed or proposed and no filing
of a request for an order was made, and to the knowledge of the Company and its
subsidiaries there is no basis for the filing of an order of liquidation,
rehabilitation, conservation or supervision or other delinquency proceedings
with respect to any of the Insurance Subsidiaries; and (v) there has not been
any change in the capital stock or long-term debt of the Company or any of its
subsidiaries, the effect of which, in any such case described in Clause (i)
(ii), (iii), (iv) or (v), is in the judgment of the Representatives so material
and adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such Time of
Delivery on the terms and in the manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrade shall have occurred in
the rating accorded the Company's debt securities or the claims paying ability
or financial strength rating of the Company or any of its subsidiaries by any
"nationally recognized statistical rating organization," as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced (other than the announcement
described in the Prospectus) that it has under surveillance or review, with
possible negative implications, its rating of any of the Company's debt
securities or the claims paying ability or financial strength rating of the
Company or any of its subsidiaries. On or after the date hereof, neither A.M.
Best Company, Inc. nor Fitch, Inc. shall have taken any action (other than the
actions described in the Prospectus) to, or to the Company's knowledge,
threatened to: (i) downgrade the claims paying ability or financial strength
rating of the Company or any of its subsidiaries or (ii) publicly announce or
otherwise indicate to the Company or any of its subsidiaries that the claims
paying ability or financial strength rating of the Company or any of its
subsidiaries is under review;
(h) On or after the date hereof, there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on NASDAQ; (iii) a
general moratorium on commercial banking activities declared by either Federal
or New York or Delaware state authorities, or a material disruption has occurred
in commercial banking or securities settlement or clearance services in the
United States; or (iv) any material adverse change in the financial markets in
the United States or in the international financial markets, the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war or other calamity or crisis or any
change or development involving a prospective change in national or
international political, financial or economic condition, if the effect of any
such event specified in this Clause (iv) in the judgment of the Representatives
makes it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the terms and
in the manner contemplated in the Prospectus;
16
(i) The Shares to be sold at such Time of Delivery shall have been duly
listed for quotation on NASDAQ;
(j) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from the stockholders listed on Schedule II hereto,
substantially to the effect set forth in Subsection 5(e) hereof in form and
substance satisfactory to the Representatives;
(k) The Company shall have complied with the provisions of Subsection
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(l) The Company shall have furnished or caused to be furnished to the
Representatives at such Time of Delivery certificates of the Chief Executive
Officer and Chief Financial Officer of the Company satisfactory to the
Representatives as to the accuracy of the representations and warranties of the
Company herein at and as of such Time of Delivery, as to the performance by the
Company of all of its obligations hereunder to be performed at or prior to such
Time of Delivery, as to the matters set forth in subsections (a) and (f) of this
Section 7 and as to such other matters as the Representatives may reasonably
request; and
(m) The Company shall have entered into an amendment (the "Chase
Amendment"), in the form previously provided (with sufficient notice) to the
Representatives, to the Credit Agreement, dated as of February 17, 1999, among
the Company, the lending institutions and JPMorgan Chase Bank (f/k/a The Chase
Manhattan Bank), as Administrative Agent, as amended.
8. (a) The Company will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter 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 an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Friedman, Billings, Xxxxxx & Co., Inc., Sandler X'Xxxxx & Partners, L.P.
or Xxxxxx Xxxxxxxx & Company Incorporated expressly for use therein ; provided
further, that the foregoing indemnification with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter if a copy of the
Prospectus (as then amended or supplemented) was not sent or given by or on
behalf of the Underwriters to the person asserting any losses, claims, damages
or liabilities, and if the Prospectus (as amended or supplemented) would have
cured the defect giving rise to such losses, claims, damages or liabilities.
(b) Each Underwriter will 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 an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are
17
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 any Preliminary Prospectus, the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Friedman,
Billings, Xxxxxx & Co., Inc., Sandler X'Xxxxx & Partners, L.P. or Xxxxxx
Xxxxxxxx & Company Incorporated 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 action or claim as such
expenses are incurred. The Company acknowledges for all purposes of this
Agreement that the statements set forth in the third and sixth paragraphs under
the caption "Underwriting" in the Prospectus concerning the terms of the
offering by the Underwriters and over-allotment and stabilization by the
Underwriter constitute the only information that is to be furnished in writing
by or on behalf of the several Underwriters for inclusion in any Preliminary
Prospectus, the Registration Statement or the Prospectus, each as amended or
supplemented or any amendment or supplement thereto.
(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 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 (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) 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 Underwriters
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 or if the indemnified party failed to give the notice required under
subsection (c) above, 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 Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
18
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. 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 Underwriters 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 Underwriters 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 Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this 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), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. 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 Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 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
Underwriter within the meaning of the Act or who is an affiliate or partner of
any Underwriter; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each other person, if any, who
controls the Company within the meaning of the Act or who is an affiliate of the
Company.
9. (a) If any Underwriter shall default in its obligation to purchase the Shares
which it has agreed to purchase hereunder at a Time of Delivery, the
Representatives may in their discretion arrange for the Underwriters or another
party or other parties to purchase such Shares on the terms contained herein. If
within thirty-six hours after such default by any Underwriter the
Representatives do not arrange for the purchase of such Shares, then the Company
shall be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to the Representatives to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, the Representatives notify the Company that the
Representatives have so arranged for the purchase of such Shares, or the Company
notifies the Representatives that it has so arranged for the purchase of such
Shares, the Representatives or the Company shall have the right to postpone such
Time of Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in the Representatives' opinion may thereby be made necessary.
The term "Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had originally
been a party to this Agreement with respect to such Shares.
19
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the Representatives and
the Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-tenth of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Company shall have the right to require each non-defaulting Underwriter to
purchase the number of shares which such Underwriter agreed to purchase
hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase by the
non-defaulting Underwriters of the Shares of a defaulting Underwriter or
Underwriters as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-tenth of the aggregate number of
all the Shares to be purchased at such Time of Delivery, or if the Company shall
not exercise the right described in subsection (b) above to require
non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or
Underwriters, then this Agreement (or, with respect to the Second Time of
Delivery, the obligations of the Underwriters to purchase and of the Company to
sell the Optional Shares) shall thereupon terminate, without liability on the
part of any non-defaulting Underwriter or the Company, except for the expenses
to be borne by the Company as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, 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 Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through the Representatives for all
out-of-pocket expenses approved in writing by the Representatives, including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of the Shares not so
delivered, but the Company shall then be under no further liability to any
Underwriter except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, the Representatives shall act on behalf of each
of the Underwriters, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any Underwriter
made or given by the Representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Representatives at Friedman, Billings, Xxxxxx &
Co., Inc., 0000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxx 00000, Attention:
__________ and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
General Counsel; PROVIDED, HOWEVER, that any notice to an
20
Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail,
or facsimile transmission to such Underwriter at its address set forth in its
Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by the Representatives upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit of,
the Underwriters, the Company and, to the extent provided in Sections 8 and 10
hereof, the officers and directors of the Company and each person who controls
the Company or any Underwriter, 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. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the term
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
16. 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.
21
If the foregoing is in accordance with the Representatives'
understanding, please sign and return to us four counterparts hereof, and upon
the acceptance hereof by the Representatives, on behalf of each of the
Underwriters, this letter and such acceptance hereof shall constitute a binding
agreement between each of the Underwriters and the Company.
Very truly yours,
CERES GROUP, INC.
By:
-----------------------------------
Name:
Title:
Accepted as of the date hereof:
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
SANDLER X'XXXXX & PARTNERS, L.P.
XXXXXX XXXXXXXX & COMPANY INCORPORATED
As representatives of the several Underwriters
named in Schedule I hereto,
By: Friedman, Billings, Xxxxxx & Co., Inc.
By:
----------------------------------------------------
Name:
Title:
SCHEDULE I
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- -----------
Friedman, Billings, Xxxxxx & Co., Inc......................
Sandler X'Xxxxx & Partners, L.P............................
Xxxxxx Xxxxxxxx & Company..................................
--------------- -----------
Total..............................................
=============== ===========
23
SCHEDULE II
Central Reserve Life Insurance Company
Continental General Insurance Company
Provident American Life & Health Insurance Company
The Pyramid Life Insurance Company
United Benefit Life Insurance Company
24
SCHEDULE III
Ceres Administrators, L.L.C.
Ceres Health Care, Inc.
Ceres Sales, LLC
Continental General Corporation
HealthMark Sales of Ohio, LLC
QQ Agency of Ohio, Inc.
XXXxxx.xxx, Inc.
25
SCHEDULE IV
Certain Stockholders
26
