Shares1 Hallmark Financial Services, Inc. PURCHASE AGREEMENT
Exhibit 1.1
Shares1
Hallmark Financial Services, Inc.
September [ ], 2006
XXXXX XXXXXXX & CO.
XXXXXXX XXXXX & COMPANY, L.L.C.
XXXXX, XXXXXXXX & XXXXX, INC.
XXXXXXX XXXXX & ASSOCIATES, INC.
As Representatives of the several
Underwriters named in Schedule II hereto
c/o Xxxxx Xxxxxxx & Co.
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
XXXXXXX XXXXX & COMPANY, L.L.C.
XXXXX, XXXXXXXX & XXXXX, INC.
XXXXXXX XXXXX & ASSOCIATES, INC.
As Representatives of the several
Underwriters named in Schedule II hereto
c/o Xxxxx Xxxxxxx & Co.
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Ladies and Gentlemen:
Hallmark Financial Services, Inc., a Nevada corporation (the “Company”), and the stockholder
of the Company listed in Schedule I hereto (the “Selling Stockholder”) severally propose to sell to
the several Underwriters named in Schedule II hereto (the “Underwriters”) an aggregate of [
] shares (the “Firm Shares”) of Common Stock, $0.18 par value per share (the “Common
Stock”), of the Company. The Firm Shares consist of [
] authorized but unissued
shares of Common Stock to be issued and sold by the Company and [
] outstanding
shares of Common Stock to be sold by the Selling Stockholder. The Selling Stockholder has also
granted to the several Underwriters an option to purchase up to [
] of Common Stock,
on the terms and for the purposes set forth in Section 3 hereof (the “Option Shares”). The Firm
Shares and any Option Shares purchased pursuant to this Agreement are herein collectively called
the “Securities.”
The Company and the Selling Stockholder hereby confirm their agreement with respect to the
sale of the Securities to the several Underwriters, for whom you are acting as representatives (the
“Representatives”).
1. Registration Statement and Prospectus. A registration statement on Form S-1 (File No.
333-_______ ) with respect to the Securities, including a preliminary form of prospectus, has
been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as
amended (the “Act”), and the rules and regulations (“Rules and
| 1 | Plus an option to purchase up to [_______] additional shares to cover over-allotments. |
Regulations”) of the Securities and Exchange Commission (the “Commission”) thereunder and has
been filed with the Commission; one or more amendments to such registration statement have also
been so prepared and have been, or will be, so filed; and, if the Company has elected to rely upon
Rule 462(b) of the Rules and Regulations to increase the size of the offering registered under the
Act, the Company will prepare and file with the Commission a registration statement with respect to
such increase pursuant to Rule 462(b). Copies of such registration statement(s) and amendments and
each related preliminary prospectus have been delivered to the Underwriters.
Promptly after execution of this Agreement, the Company will prepare and file a prospectus
pursuant to Rule 424(b) that discloses the information previously omitted from the prospectus in
reliance upon Rule 430A of the Rules and Regulations. Each part of such registration statement as
amended at the time it is or was declared effective by the Commission, and, in the event of any
amendment thereto after the effective date, each part of such registration statement as so amended
(but only from and after the effectiveness of such amendment), including a registration statement
(if any) filed pursuant to Rule 462(b) of the Rules and Regulations increasing the size of the
offering registered under the Act, and information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rules 430A(b) of the Rules and Regulations, is
hereinafter called the “Registration Statement.” The prospectus included in the Registration
Statement at the time it is or was declared effective by the Commission is hereinafter called the
“Prospectus,” except that if any prospectus filed by the Company with the Commission pursuant to
Rule 424(b) of the Rules and Regulations or any other such prospectus provided to the Underwriters
by the Company for use in connection with the offering of the Securities (whether or not required
to be filed by the Company with the Commission pursuant to Rule 424(b) of the Rules and
Regulations, but not including a “free writing prospectus” as defined in Rule 405 of the Rules and
Regulations) differs from the prospectus on file at the time the Registration Statement is or was
declared effective by the Commission, the term “Prospectus” shall refer to such differing
prospectus from and after the time such prospectus is filed with the Commission or transmitted to
the Commission for filing pursuant to such Rule 424(b) or from and after the time of its first use
within the meaning of the Rules and Regulations. The term “Preliminary Prospectus” as used herein
means any preliminary prospectus included in the Registration Statement prior to the time it
becomes or became effective under the Act and any prospectus subject to completion as described in
Rule 430A of the Rules and Regulations. All references in this Agreement to the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement to any of the
foregoing, shall be deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System (“XXXXX”).
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2. Representations and Warranties of the Company and the Selling Stockholder.
(a) The Company represents and warrants to, and agrees with, the several Underwriters as
follows:
(i) No order preventing or suspending the use of any Preliminary Prospectus has been
issued by the Commission and each Preliminary Prospectus, at the time of filing thereof or
the time of first use within the meaning of the Rules and Regulations, complied in all
material respects with the requirements of the Securities Act and the Rules and Regulations
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; except that the foregoing
shall not apply to statements in or omissions from any Preliminary Prospectus in reliance
upon, and in conformity with, written information furnished to the Company by Xxxxx Xxxxxxx,
or by any Underwriter through Xxxxx Xxxxxxx, specifically for use in the preparation
thereof.
(ii) As of the time any part of the Registration Statement (or any post-effective
amendment thereto, including a registration statement (if any) filed pursuant to Rule 462(b)
of the Rules and Regulations increasing the size of the offering registered under the Act)
became effective, upon the filing or first use within the meaning of the Rules and
Regulations of the Prospectus (or any supplement to the Prospectus) and at the First Closing
Date and Second Closing Date (each as hereinafter defined), (A) the Registration Statement
and the Prospectus (in each case, as so amended and/or supplemented) conformed and will
conform in all material respects to the requirements of the Act and the Rules and
Regulations, (B) the Registration Statement (as so amended) did not and will not include 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, and (C) the Prospectus
(as so supplemented) did not and will not include 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 light of the circumstances in which they are or were made, not
misleading; except that the foregoing shall not apply to statements in or omissions from any
such document in reliance upon, and in conformity with, written information furnished to the
Company by Xxxxx Xxxxxxx, or by any Underwriter through Xxxxx Xxxxxxx, specifically for use
in the preparation thereof. If the Registration Statement has been declared effective by
the Commission, no stop order suspending the effectiveness of the Registration Statement has
been issued, and no proceeding for that purpose has been initiated or, to the Company’s
knowledge, threatened by the Commission.
(iii) Neither (A) the Issuer General Free Writing Prospectus(es) issued at or prior to
the Time of Sale and the Statutory Prospectus, all considered together (collectively, the
“Time of Sale Disclosure Package”), nor (B) any individual Issuer Limited-Use Free Writing
Prospectus, when considered together
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with the Time of Sale Disclosure Package, includes or included as of the Time of Sale any untrue
statement of a material fact or omit or omitted as of the Time of Sale 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 preceding sentence does not apply to
statements in or omissions from any Statutory Prospectus included in the Registration
Statement or any Issuer Free Writing Prospectus based upon and in conformity with written
information furnished to the Company by Xxxxx Xxxxxxx or by any Underwriter through Xxxxx
Xxxxxxx specifically for use therein. As used in this paragraph and elsewhere in this
Agreement:
(1) “Time of Sale” means [___]:00 **[a/p]m (Eastern time) on the date of this
Agreement
(2) “Statutory Prospectus” as of any time means the prospectus that is included in
the Registration Statement immediately prior to that time. For purposes of this
definition, information contained in a form of prospectus that is deemed
retroactively to be a part of the Registration Statement pursuant to Rule 430A shall
be considered to be included in the Statutory Prospectus as of the actual time that
form of prospectus is filed with the Commission pursuant to Rule 424(b) under the
Act.
(3) “Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as
defined in Rule 433 under the Act, relating to the Securities that (A) is required
to be filed with the Commission by the Company, or (B) is exempt from filing
pursuant to Rule 433(d)(5)(i) under the Act or pursuant to Rule 433(d)(8)(i), in
each case in the form filed or required to be filed with the Commission or, if not
required to be filed, in the form retained in the Company’s records pursuant to Rule
433(g) under the Act.
(4) “Issuer General Free Writing Prospectus” means any Issuer Free Writing
Prospectus that is intended for general distribution to prospective investors, as
evidenced by its being specified in Schedule III to this Agreement.
(5) “Issuer Limited-Use Free Writing Prospectus” means any Issuer Free Writing
Prospectus that is not an Issuer General Free Writing Prospectus. The term Issuer
Limited-Use Free Writing Prospectus also includes any “road show,” as defined in
Rule 433 of the Rules and Regulations, that is not required to be filed with the
Commission pursuant to Rule 433(d)(8)(i).
(iv) (A) Each Issuer Free Writing Prospectus, as of its issue date and at all
subsequent times through the completion of the public offer and sale of the Securities or
until any earlier date that the Company notified or notifies the Representatives as
described in Section 4(a)(iii)(B), did not, does not and will not include any information
that conflicted, conflicts or will conflict with the information contained in the
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Registration Statement, any Statutory Prospectus or the Prospectus.
The foregoing sentence does not apply to statements in or omissions from any Issuer Free
Writing Prospectus based upon and in conformity with written information furnished to the
Company by Xxxxx Xxxxxxx or by any Underwriter through Xxxxx Xxxxxxx specifically for use
therein.
(B) (1) At the time of filing the Registration Statement and (2) at the date hereof,
the Company was not and is not an “ineligible issuer,” as defined in Rule 405 under the Act,
including the Company or any subsidiary in the preceding three years not having been
convicted of a felony or misdemeanor or having been made the subject of a judicial or
administrative decree or order as described in Rule 405 (without taking account of any
determination by the Commission pursuant to Rule 405 that it is not necessary that the
Company be considered an ineligible issuer), nor an “excluded issuer” as defined in Rule 164
under the Act.
(C) Each Issuer Free Writing Prospectus satisfied, as of its issue date and at all
subsequent times through the completion of the public offer and sale of the Securities, all
other conditions to use thereof as set forth in Rules 164 and 433 under the Act.
(v) The financial statements of the Company, together with the related notes, and the
financial statements of Texas General Agency, Inc., together with the related notes, each as
set forth in the Registration Statement, the Time of Sale Disclosure Package and Prospectus,
comply in all material respects with the requirements of the Act and fairly present the
financial condition of the Company and Texas General Agency, Inc., respectively, as of the
dates indicated and the results of operations and changes in cash flows for the periods
therein specified in conformity with generally accepted accounting principles consistently
applied throughout the periods involved; and the supporting schedules included in the
Registration Statement, the Time of Sale Disclosure Package and the Prospectus present
fairly the information required to be stated therein. No other financial statements or
schedules are required to be included in the Registration Statement, the Time of Sale
Disclosure Package or the Prospectus. To the Company’s knowledge, KPMG LLP, which has
expressed its opinion with respect to the financial statements and schedules, including,
without limitation, the financial statements and schedules of Texas General Agency, Inc.,
filed as a part of the Registration Statement, the Time of Sale Disclosure Package and the
Prospectus and included in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, is (x) an independent public accounting firm within the meaning of the
Act and the Rules and Regulations, (y) a registered public accounting firm (as defined in
Section 2(a)(12) of the Xxxxxxxx-Xxxxx Act of 2002 (the “Xxxxxxxx-Xxxxx Act”)) and (z) not
in violation of the auditor independence requirements of the Xxxxxxxx-Xxxxx Act.
(vi) Each of the Company and its subsidiaries has been duly organized and is validly
existing as a corporation in good standing under the laws of its jurisdiction
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of incorporation. Each of the Company and its subsidiaries has full corporate power and
authority to own its properties and conduct its business as currently being carried on and
as described in the Registration Statement, the Time of Sale Disclosure Package and
Prospectus, and is duly qualified to do business as a foreign corporation in good standing
in each jurisdiction in which it owns or leases real property or in which the conduct of its
business makes such qualification necessary and in which the failure to so qualify would
have a material adverse effect upon the business, prospects, properties, operations,
condition (financial or otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole (“Material Adverse Effect”).
(vii) Except as contemplated in the Time of Sale Disclosure Package, the Registration
Statement and in the Prospectus, subsequent to the respective dates as of which information
is given therein, neither the Company nor any of its subsidiaries has incurred any material
liabilities or obligations, direct or contingent, or entered into any material transactions,
or declared or paid any dividends or made any distribution of any kind with respect to its
capital stock; and there has not been any change in the capital stock (other than a change
in the number of outstanding shares of Common Stock due to the issuance of shares upon the
exercise of outstanding options or warrants), or any material change in the short-term or
long-term debt, or any issuance of options, warrants, convertible securities or other rights
to purchase the capital stock, of the Company or any of its subsidiaries, or any material
adverse change in the general affairs, condition (financial or otherwise), business,
prospects, property, operations or results of operations of the Company and its
subsidiaries, taken as a whole (“Material Adverse Change”) or any development known to the
Company involving a prospective Material Adverse Change.
(viii) Except as set forth in the Registration Statement, the Time of Sale Disclosure
Package and the Prospectus, there is not pending or, to the knowledge of the Company,
threatened or contemplated, any action, suit or proceeding to which the Company or any of
its subsidiaries is a party or of which any property or assets of the Company is the subject
before or by any court or governmental agency, authority or body, or any arbitrator, which,
individually or in the aggregate, might result in any Material Adverse Change.
(ix) There are no statutes, regulations, contracts or documents that are required to be
described in the Registration Statement, in the Time of Sale Disclosure Package or in the
Prospectus or to be filed as exhibits to the Registration Statement by the Act or by the
Rules and Regulations that have not been so described or filed.
(x) This Agreement has been duly authorized, executed and delivered by the Company, and
constitutes a valid, legal and binding obligation of the Company, enforceable in accordance
with its terms, except as rights to indemnity hereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of
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creditors generally and subject to general principles of equity. The execution, delivery
and performance of this Agreement and the consummation of the transactions contemplated
herein and in the Registration Statement will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any statute, any agreement or
instrument to which the Company is a party or by which it is bound or to which any of its
property is subject, the Company’s charter or by-laws, or any order, rule, regulation or
decree of any court or governmental agency or body having jurisdiction over the Company or
any of its properties; no consent, approval, authorization or order of, or filing with, any
court or governmental agency or body is required for the execution, delivery and performance
of this Agreement or for the consummation of the transactions contemplated hereby or by the
Registration Statement, including the issuance or sale of the Securities by the Company,
except such as may be required under the Act or state securities or blue sky laws; and the
Company has full power and authority to enter into this Agreement and to authorize, issue
and sell the Securities as contemplated by this Agreement.
(xi) All of the issued and outstanding shares of capital stock of the Company,
including the outstanding shares of Common Stock, are duly authorized and validly issued,
fully paid and nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities that have not been waived in writing (a
copy of which has been delivered to counsel to the Representatives), and the holders thereof
are not subject to personal liability by reason of being such holders; the Securities which
may be sold hereunder by the Company have been duly authorized and, when issued, delivered
and paid for in accordance with the terms of this Agreement, will have been validly issued
and will be fully paid and nonassessable, and the holders thereof will not be subject to
personal liability by reason of being such holders; and the capital stock of the Company,
including the Common Stock, conforms to the description thereof in the Registration
Statement, in the Time of Sale Disclosure Package and in the Prospectus. The Company has
taken all requisite action and received all necessary approvals and consents to effectuate
the six-to-one reverse stock split of its Common Stock. Except as otherwise stated in the
Registration Statement, in the Time of Sale Disclosure Package and in the Prospectus, there
are no preemptive rights or other rights to subscribe for or to purchase, or any restriction
upon the voting or transfer of, any shares of Common Stock pursuant to the Company’s
charter, by-laws or any agreement or other instrument to which the Company is a party or by
which the Company is bound. Neither the filing of the Registration Statement nor the
offering or sale of the Securities as contemplated by this Agreement gives rise to any
rights for or relating to the registration of any shares of Common Stock or other securities
of the Company. All of the issued and outstanding shares of capital stock of each of the
Company’s subsidiaries have been duly and validly authorized and issued and are fully paid
and nonassessable, and, except as otherwise described in the
Registration Statement, in the Time of Sale Disclosure Package and in the Prospectus
and except for any directors’ qualifying shares, the Company owns of record and
beneficially, free and clear of any security interests,
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claims, liens, proxies, equities or
other encumbrances, all of the issued and outstanding shares of such stock. Except as
described in the Registration Statement, in the Time of Sale Disclosure Package and in the
Prospectus, there are no options, warrants, agreements, contracts or other rights in
existence to purchase or acquire from the Company or any subsidiary
of the Company any shares of the capital stock of the Company or any subsidiary of the Company. The Company
has an authorized and outstanding capitalization as set forth in the Registration Statement,
in the Time of Sale Disclosure Package and in the Prospectus.
(xii) The Company and each of its subsidiaries holds, and is operating in compliance in
all material respects with, all franchises, grants, authorizations, licenses, including
insurance licenses, permits, easements, consents, certificates and orders of any
governmental or self-regulatory body (including, without limitation, of the insurance
regulatory agencies of the various jurisdictions where it conducts its business) required
for the conduct of its business and all such franchises, grants, authorizations, licenses,
permits, easements, consents, certifications and orders are valid and in full force and
effect; the Company and each of its subsidiaries is in compliance in all material respects
with all applicable federal, state, local and foreign laws, regulations, orders and decrees;
there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding
or investigation that would reasonably be expected to result in the revocation, termination
or suspension of any franchises, grants, authorizations, licenses, permits, easements,
consents, or certificates that would reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect; and no insurance regulatory agency or body has
issued, or commenced any proceeding for the issuance of, any order or decree impairing,
restricting or prohibiting the payment of dividends by a subsidiary to the Company.
(xiii) The Company and its subsidiaries have good and marketable title to all property
(whether real or personal) described in the Registration Statement, in the Time of Sale
Disclosure Package and in the Prospectus as being owned by them, in each case free and clear
of all liens, claims, security interests, other encumbrances or defects except such as are
described in the Registration Statement, in the Time of Sale Disclosure Package and in the
Prospectus. The property held under lease by the Company and its subsidiaries is held by
them under valid, subsisting and enforceable leases with only such exceptions with respect
to any particular lease as do not interfere in any material respect with the conduct of the
business of the Company or its subsidiaries.
(xiv) Except as set forth on Schedule 2(a)(xiv), the Company and each of its
subsidiaries owns or possesses all patents, patent applications, trademarks, service marks,
tradenames, trademark registrations, service xxxx registrations, copyrights, licenses,
inventions, trade secrets and rights necessary for the conduct of the business of
the Company and its subsidiaries as currently carried on and as described in the
Registration Statement, in the Time of Sale Disclosure Package and in the Prospectus; except
as stated in the Registration Statement, in the Time of Sale Disclosure Package
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and in the Prospectus, no name which the Company or any of its subsidiaries uses and no other aspect of
the business of the Company or any of its subsidiaries will involve or give rise to any
infringement of, or license or similar fees for, any patents, patent applications,
trademarks, service marks, tradenames, trademark registrations, service xxxx registrations,
copyrights, licenses, inventions, trade secrets or other similar rights of others material
to the business or prospects of the Company and neither the Company nor any of its
subsidiaries has received any notice alleging any such infringement or fee.
(xv) Neither the Company nor any of its subsidiaries is in violation of its respective
charter or by-laws or in breach of or otherwise in default, and no event has occurred which,
with notice or lapse of time or both, would constitute such a default in the performance of
any material obligation, agreement or condition contained in any bond, debenture, note,
indenture, loan agreement or any other material contract, lease or other instrument to which
it is subject or by which any of them may be bound, or to which any of the material property
or assets of the Company or any of its subsidiaries is subject.
(xvi) The Company and its subsidiaries have timely filed all federal, state, local and
foreign income and franchise tax returns required to be filed and are not in default in the
payment of any taxes which were payable pursuant to said returns or any assessments with
respect thereto, other than any which the Company or any of its subsidiaries is contesting
in good faith.
(xvii) The Company has not distributed and will not distribute any prospectus or other
offering material in connection with the offering and sale of the Securities other than any
Preliminary Prospectus, the Time of Sale Disclosure Package or the Prospectus or other
materials permitted by the Act to be distributed by the Company; provided, however, that,
except as set forth on Schedule III, the Company has not made and will not make any offer
relating to the Securities that would constitute a “free writing prospectus” as defined in
Rule 405 under the Act, except in accordance with the provisions of Section 4(a)(xvii) of
this Agreement.
(xviii) The Securities have been approved for listing on the NASDAQ Global Market upon
official notice of issuance and, on the date the Registration Statement became effective,
(i) the Company’s Registration Statement on Form 8-A or other applicable form under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), became or will become
effective and (ii) the Company will comply with the Rules and Regulations of the National
Association of Securities Dealers as if the Company were not a “controlled company” under
National Association of Securities Dealers Rule 4350(c)(5).
(xix) Other than the subsidiaries of the Company listed in Exhibit 21.1 to the
Registration Statement, the Company, directly or indirectly, owns no capital stock
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or other equity or ownership or proprietary interest in any corporation, partnership, association,
trust or other entity.
(xx) The Company 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 accepted
accounting principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. Except as
disclosed in the Registration Statement, in the Time of Sale Disclosure Package and in the
Prospectus, the Company’s internal control over financial reporting is effective and the
Company is not aware of any material weaknesses in its internal control over financial
reporting, and since the end of the latest audited fiscal year, there has been no change in
the Company’s internal control over financial reporting (whether or not remediated) that has
materially affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
(xxi) Other than as contemplated by this Agreement, the Company has not incurred any
liability for any finder’s or broker’s fee or agent’s commission in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(xxii) The Company carries, or is covered by, insurance in such amounts and covering
such risks as is adequate for the conduct of its business and the value of its properties
and as is customary for companies engaged in similar businesses in similar industries.
(xxiii) The Company is not and, after giving effect to the offering and sale of the
Securities, will not be an “investment company,” as such term is defined in the Investment
Company Act of 1940, as amended.
(xxiv) The Company is in compliance with all applicable provisions of the
Xxxxxxxx-Xxxxx Act and the rules and regulations of the Commission thereunder.
(xxv) The Company has established and maintains disclosure controls and procedures (as
defined in Rules 13a-14 and 15d-14 under the Exchange Act) and such controls and procedures
are effective in ensuring that material information relating to the Company, including its
subsidiaries, is made known to the principal executive officer and the principal financial
officer. The Company has utilized such controls and procedures in preparing and evaluating the disclosures in the Registration
Statement, in the Time of Sale Disclosure Package and in the Prospectus.
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(xxvi) The Company has received no written comments from the SEC staff regarding its
periodic or current reports under the 1934 Act that remain unresolved and have not been
disclosed in the Registration Statement, Time of Sale Disclosure Package and Prospectus.
(xxvii) No relationship, direct or indirect, exists between or among the Company or any
of its subsidiaries on the one hand and any director, officer or shareholder of the Company
or any of its subsidiaries, or any member of his or her immediate family, or any customers
or suppliers on the other hand, which is required to be described in the Registration
Statement, the Time of Sale Disclosure Package or the Prospectus which is not so described
in compliance with such requirement. There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or directors of the
Company or any member of their respective immediate families, except as disclosed in the
Registration Statement, the Time of Sale Disclosure Package and the Prospectus. Since
December 31, 2004, the Company has not, directly or indirectly, including through any
subsidiary, (A) extended or maintained credit, arranged for the extension of credit, or
renewed an extension of credit, in the form of a personal loan to or for any director or
executive officer of the Company or any subsidiary, or to or for any family member or
affiliate of any director or executive officer of the Company or any subsidiary; or (B) made
any material modification, including any renewal thereof, to any term of any personal loan
to any director or executive officer of the Company or any subsidiary or any family member
or affiliate of any director or executive officer.
(xxviii) To the knowledge of the Company, no change in any laws or regulations is
pending which could reasonably be expected to be adopted and if adopted, could reasonably be
expected to have, individually or in the aggregate with all such changes, a Material Adverse
Effect, except as set forth in or contemplated in each of the Regulation Statement, Time of
Sale Disclosure Package and the Prospectus.
(xxix) No insurance agent appointed by the Company or any of its subsidiaries has
ceased selling insurance policies on behalf of the Company or its subsidiaries or has
indicated an interest in decreasing or ceasing the amount of insurance it sells on behalf of
the Company or its subsidiaries or otherwise modifying its relationship with the Company or
its subsidiaries, other than (A) in the normal and ordinary course of business consistent
with past practices or (B) that would not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
(xxx) All reinsurance treaties and similar arrangements (including placement slips) to
which the Company or any subsidiary is a party are in full force and effect and neither the
Company nor any subsidiary is in violation of, or in default
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in the performance, observance or fulfillment of, any obligation, agreement, covenant or condition contained therein;
neither the Company nor any subsidiary has received any notice from any of the other parties
to such treaties or arrangements that such other party intends not to perform such treaty or
arrangement and, to the knowledge of the Company, none of the other parties to such treaties
or arrangements will be unable to perform such treaty or arrangement except to the extent
adequately and properly reserved for in the audited historical financial statements of the
Company included in or incorporated by reference in the Registration Statement or the
Prospectus.
(xxxi) Except as disclosed in each of the Registration Statement, Time of Sale
Disclosure Package and the Prospectus, the Company and its subsidiaries have made no
material change in their insurance reserving practices since December 31, 2005.
(xxxii) The reserves reflected on the statutory statements of each of American Hallmark
Insurance Company, Phoenix Indemnity Insurance Company and Gulf States Insurance Company
(collectively, the “Insurance Subsidiaries”), as of the dates specified in such statements,
(A) were computed in accordance with presently accepted actuarial standards consistently
applied and are fairly stated, in accordance with sound actuarial principles; (B) were based
on actuarial assumptions that produce reserves at least as great as those called for in any
contract provision as to reserve basis and method, and are in accordance with all other
contract provisions; (C) met the requirements of the applicable insurance laws, rules and
regulations of the States of Texas, Arizona and Oklahoma, respectively, and are at least as
great as the minimum aggregate amounts required by applicable law; and (D) included
provision for all actuarial reserves and related statement items which should be
established.
(xxxiii) The statutory financial statements of the Insurance Subsidiaries are prepared
for each relevant period in conformity with statutory accounting principles or practices
required or permitted by the National Association of Insurance Commissioners and by the
appropriate insurance department of the jurisdiction of domicile of each Insurance
Subsidiary, respectively, and such statutory accounting practices have been applied on a
consistent basis throughout the periods involved, except as may otherwise be indicated
therein or in the notes thereto, and present fairly in all material respects the statutory
financial position of each Insurance Subsidiary as of the dates thereof, and the statutory
basis results of operations of each Insurance Subsidiary for the periods covered thereby.
(xxxiv) No transaction has occurred between or among the Company and any of its
officers or directors or beneficial owners of 5% or more of the Company’s outstanding Common
Stock (the “5% Shareholders”) or any affiliate or affiliates of any such officer or director
or 5% Shareholders that is required to be described in and is not described in the Registration
Statement, Time of Sale Disclosure Package and the Prospectus.
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(xxxv) To the knowledge of the Company, there are no affiliations or associations
between any member of the National Association of Securities Dealers, Inc. and any of the
Company’s officers, directors or 5% Shareholders, except as set forth in the Registration
Statement, Time of Sale Disclosure Package or Prospectus or disclosed to the Underwriters in
the July 20, 2006 NASD Response Letter from the General Counsel of the Company to
Underwriter’s counsel.
(xxxvi) The Company and each subsidiary is in compliance in all material respects with
all currently applicable provisions of the Employee Retirement Income Security Act of 1974,
as amended, including the regulations and published interpretations thereunder (herein
called “ERISA”); with respect to each “employee benefit plan” (as defined in Section 3(3) of
ERISA), the Company and each subsidiary is in compliance in all material respects with all
currently applicable provisions of the Internal Revenue Code (the “Code”), including the
regulations and published interpretations thereunder; to the knowledge of the Company, no
“reportable event” (as defined in Section 4043 of ERISA) has occurred with respect to any
“pension plan” (as defined in Section 3(2) of ERISA) for which the Company or any subsidiary
would have any liability; neither the Company nor any subsidiary has incurred, and does not
expect to incur, liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Code; and each
“pension plan” sponsored by the Company or any subsidiary that is intended to be qualified
under Section 401(a) of the Code has received a favorable letter of determination from the
Internal Revenue Service as to its qualified status within the last three years, and nothing
has occurred, to Company’s knowledge, since such date, whether by action or failure to act,
that would reasonably be expected to cause the loss of such qualification.
(xxxvii) The operations of the Company and its Subsidiaries are and have been conducted
at all times in compliance in all material respects with applicable financial recordkeeping
and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, the money laundering statutes of all jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued, administered
or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no
action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money
Laundering Laws is pending, or to the knowledge of the Company, threatened.
(xxxviii) Neither the Company nor any of its Subsidiaries nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the Company or any of its
Subsidiaries has been or is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the
offering, or lend, contribute or otherwise make available such
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proceeds to any subsidiary, joint venture partner or other person or entity, which, to the Company’s knowledge, will use
such proceeds for the purpose of financing the activities of any person currently subject to
any U.S. sanctions administered by OFAC.
(b) The Selling Stockholder represents and warrants to, and agrees with, the several
Underwriters as follows:
(i) Such Selling Stockholder is the record and beneficial owner of, and has, and on the
First Closing Date and the Second Closing Date, as the case may be, will have, valid and
marketable title to the Securities to be sold by such Selling Stockholder, free and clear of
all security interests, claims, liens, restrictions on transferability, legends, proxies,
equities or other encumbrances; and upon delivery of and payment for such Securities
hereunder, the several Underwriters will acquire valid and marketable title thereto, free
and clear of any security interests, claims, liens, restrictions on transferability,
legends, proxies, equities or other encumbrances. Such Selling Stockholder is selling the
Securities to be sold by such Selling Stockholder for such Selling Stockholder’s own account
and is not selling such Securities, directly or indirectly, for the benefit of the Company,
and no part of the proceeds of such sale received by such Selling Stockholder will inure,
either directly or indirectly, to the benefit of the Company other than as described in the
Registration Statement, Prospectus and Time of Sale disclosure Package.
(ii) Such Selling Stockholder has duly authorized, executed and delivered a Custody
Agreement and Power of Attorney (“Custody Agreement”), which Custody Agreement is a valid
and binding obligation of such Selling Stockholder, to **[full name of custodian], as
Custodian (the “Custodian”); pursuant to the Custody Agreement the Selling Stockholder has
placed in custody with the Custodian, for delivery under this Agreement, the Securities to
be sold by such Selling Stockholder; the Securities are validly issued, outstanding, fully
paid and nonassessable shares of Common Stock; and all action has been taken to validate the
transfer of title of such Securities, to the Underwriters, free of any legend, restriction
on transferability, proxy, lien or claim, whatsoever.
(iii) Such Selling Stockholder has the power and authority to enter into this Agreement
and to sell, transfer and deliver the Securities to be sold by such Selling Stockholder; and
such Selling Stockholder has duly authorized, executed and delivered to Xxxx X. Xxxxxxx,
as attorney-in-fact (the “Attorney-in-Fact”), an irrevocable power of attorney (a “Power of
Attorney”) authorizing and directing the Attorney-in-Fact to effect the sale and delivery of
the Securities being sold by such Selling Stockholder, to enter into this Agreement and to take all such other action as
may be necessary hereunder.
(iv) This Agreement, the Custody Agreement and the Power of Attorney have each been
duly authorized, executed and delivered by or on behalf of such
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Selling Stockholder and each constitutes a valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms, except as rights to indemnity hereunder or thereunder may be
limited by federal or state securities laws and except as such enforceability may be limited
by bankruptcy, insolvency, reorganization or laws affecting the rights of creditors
generally and subject to general principles of equity. The execution and delivery by the
Selling Stockholder of this Agreement, the Custody Agreement and the Power of Attorney and
the performance by the Selling Stockholder of the terms hereof and thereof and the
consummation by the Selling Stockholder of the transactions herein and therein contemplated
will not result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any agreement or instrument to which such Selling Stockholder is
a party or by which such Selling Stockholder is bound, or any law, regulation, order or
decree applicable to such Selling Stockholder, except for any such breach, violation or
default as would not prevent the Selling Stockholder’s ability to consummate the
transactions contemplated by this Agreement; no consent, approval, authorization or order
of, or filing with, any court or governmental agency or body is required for the execution,
delivery and performance by the Selling Stockholder of this Agreement, the Custody Agreement
and the Power of Attorney or for the consummation by the Selling Shareholder of the
transactions contemplated hereby and thereby, including the sale of the Securities being
sold by such Selling Stockholder, except such as may be required under the Act or state
securities laws or blue sky laws.
(v) Such Selling Stockholder has not distributed and will not distribute any prospectus
or other offering material in connection with the offering and sale of the Securities other
than any Preliminary Prospectus, the Time of Sale Disclosure Package or the Prospectus or
other materials permitted by the Act to be distributed by such Selling Stockholder;
provided, however, that no Selling Stockholder has made nor will make any offer relating to
the Securities that would constitute a “free writing prospectus” as defined in Rule 405
under the Act except a Permitted Free Writing Prospectus authorized by the Company and the
Underwriters for distribution in accordance with the provisions of Section 4(a)(xvii)
hereof.
(vi) Such Selling Stockholder has reviewed the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus and neither the Registration Statement, the Time of
Sale Disclosure Package nor the Prospectus contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary to make the
statements therein not misleading regarding such Selling Stockholder, and, to the knowledge
of such Selling Stockholder, the Company or otherwise.
(vi) Nothing has come to the attention of the Selling Stockholder that has caused the
Selling Stockholder to believe that the representations and warranties of the Company
contained in paragraph (a) of this Section 2 are true and correct.
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(c) Any certificate signed by any officer of the Company and delivered to the Underwriters or
to counsel for the Underwriters shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby; any certificate signed by or on behalf of any
Selling Stockholder as such and delivered to the Underwriters or to counsel for the Underwriters
shall be deemed a representation and warranty by such Selling Stockholder to each Underwriter as to
the matters covered thereby.
3. Purchase, Sale and Delivery of Securities.
(a) On the basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company agrees to issue and sell
[______] Firm Shares, and the Selling Stockholder agrees, severally and not jointly, to sell the
number of Firm Shares set forth opposite the name of such Selling Stockholder in Schedule I hereto,
to the several Underwriters, and each Underwriter agrees, severally and not jointly, to purchase
from the Company and the Selling Stockholder the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule II hereto. The purchase price for each Firm Share shall be $[______] per share. The obligation of each Underwriter to each of the Company and the Selling
Stockholder shall be to purchase from each of the Company and the Selling Stockholder that number
of Firm Shares (to be adjusted by the Representatives to avoid fractional shares) which represents
the same proportion of the number of Firm Shares to be sold by each of the Company and the Selling
Stockholder pursuant to this Agreement as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule II hereto represents to the total number of Firm Shares to be
purchased by all Underwriters pursuant to this Agreement. In making this Agreement, each
Underwriter is contracting severally and not jointly. Except as provided in paragraph (c) of this
Section 3 and in Section 8 hereof, the agreement of each Underwriter is to purchase only the
respective number of Firm Shares specified in Schedule II.
The Firm Shares will be delivered by the Company and the Custodian to the Representatives for
the accounts of the several Underwriters against payment of the purchase price therefor by wire
transfer of same day funds payable to the order of the Company and the Custodian, as appropriate,
at the offices of Xxxxx Xxxxxxx & Co., 000 Xxxxxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxxxx, or such other
location as may be mutually acceptable, at 9:00 a.m. Central time on the third (or if the
Securities are priced, as contemplated by Rule 15c6-1(c) under the Exchange Act, after 4:30 p.m.
Eastern time, the fourth) full business day following the date hereof, or at such other time and
date as the Representatives and the Company determine pursuant to Rule 15c6-1(a) under the Exchange
Act, such time and date of delivery being herein referred to as the “First Closing Date.” If the
Representatives so elect, delivery of the Firm Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the Representatives. Certificates representing the Firm Shares, in definitive form
and in such denominations and registered in such names as the Representatives may request upon at
least two business days’ prior notice to the Company, will be made available for checking and
packaging not later than 10:30 a.m., Central time, on the business day next preceding the First
Closing Date at the offices of Xxxxx Xxxxxxx & Co., Minneapolis, Minnesota, or such other
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location as may be mutually acceptable. The Firm Shares to be sold by the Selling Stockholder will be
registered in such names and denominations as the Representatives may request upon at least two
business days’ prior notice to the Selling Stockholder and will be made available for delivery not
later than 10:30 a.m., Central time, on the business day next preceding the First Closing Date at
the offices of Xxxxx Xxxxxxx & Co., Minneapolis, Minnesota, or such other location as may be
mutually acceptable.
(b) On the basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Selling Stockholder, with respect to the
Option Shares, hereby grants to the several Underwriters an option to purchase all or any portion
of the Option Shares at the same purchase price as the Firm Shares, for use solely in covering any
over-allotments made by the Underwriters in the sale and distribution of the Firm Shares. The
option granted hereunder may be exercised in whole or in part at any time (but not more than once)
within 30 days after the effective date of this Agreement upon notice (confirmed in writing) by the
Representatives to the Company and to the Attorney-in -Fact setting forth the aggregate number of
Option Shares as to which the several Underwriters are exercising the option, the names and
denominations in which the Option Shares are to be registered and the date and time, as determined
by the Representatives, when the Option Shares are to be delivered, such time and date being herein
referred to as the “Second Closing” and “Second Closing Date”, respectively; provided, however,
that the Second Closing Date shall not be earlier than the First Closing Date nor earlier than the
second business day after the date on which the option shall have been exercised. If the option is
exercised, the obligation of each Underwriter shall be to purchase from the Selling Stockholder the
Option Shares or any portion of the Option Shares, on a pro rata basis. The number of Option
Shares to be purchased by each Underwriter shall be the same percentage of the total number of
Option Shares to be purchased by the several Underwriters as the number of Firm Shares to be
purchased by such Underwriter is of the total number of Firm Shares to be purchased by the several
Underwriters, as adjusted by the Representatives in such manner as the Representatives deem
advisable to avoid fractional shares. No Option Shares shall be sold and delivered unless the Firm
Shares previously have been, or simultaneously are, sold and delivered.
The Option Shares will be delivered by the Custodian to the Representatives for the accounts
of the several Underwriters against payment of the purchase price therefor by wire transfer of same
day funds payable to the order of the Custodian at the offices of Xxxxx Xxxxxxx & Co., 000 Xxxxxxxx
Xxxx, Xxxxxxxxxxx, Xxxxxxxxx, or such other location as may be mutually acceptable at 9:00 a.m.,
Central time, on the Second Closing Date. If the Representatives so elect, delivery of the Option
Shares may be made by credit through full fast transfer to the accounts at The Depository Trust
Company designated by the Representatives. The Option Shares will be registered in such names and
denominations as the Representatives have set forth in the Representatives’ notice of option exercise and will be made available for delivery not later
than 10:30 a.m., Central time, on the business day next preceding the Second Closing Date at the
office of Xxxxx Xxxxxxx & Co., 000 Xxxxxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxxxx, or such other location as
may be mutually acceptable.
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(c) It is understood that you, individually and not as Representatives of the several
Underwriters, may (but shall not be obligated to) make payment to the Company or the Selling
Stockholder, on behalf of any Underwriter for the Securities to be purchased by such Underwriter.
Any such payment by you shall not relieve any such Underwriter of any of its obligations hereunder.
Nothing herein contained shall constitute any of the Underwriters an unincorporated association or
partner with the Company or any Selling Stockholder.
4. Covenants.
(a) The Company covenants and agrees with the several Underwriters as follows:
(i) If the Registration Statement has not already been declared effective by the
Commission, the Company will use its best efforts to cause the Registration Statement and
any post-effective amendments thereto to become effective as promptly as possible; the
Company will notify the Representatives promptly of the time when the Registration Statement
or any post-effective amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed, the receipt of any comments from the
Commission with respect to the Registration Statement, Time of Sale Disclosure Package or
Prospectus and the receipt of any request by the Commission for any amendment or supplement
to the Registration Statement or Prospectus or for additional information; the Company will
prepare and file a Prospectus containing the information omitted therefrom pursuant to Rule
430A of the Rules and Regulations with the Commission within the time period required by,
and otherwise in accordance with the provisions of, Rules 424(b) and 430A of the Rules and
Regulations; if the Company has elected to rely upon Rule 462(b) of the Rules and
Regulations to increase the size of the offering registered under the Act, the Company will
prepare and file a registration statement with respect to such increase with the Commission
within the time period required by, and otherwise in accordance with the provisions of, Rule
462(b); the Company will prepare and file with the Commission, promptly upon the
Representatives’ request, any amendments or supplements to the Registration Statement, Time
of Sale Disclosure Package or Prospectus that, in the Representatives’ opinion, may be
necessary or advisable in connection with the distribution of the Securities by the
Underwriters; and the Company will not file any amendment or supplement to the Registration
Statement, Time of Sale Disclosure Package or Prospectus to which the Representatives shall
reasonably object by notice to the Company after having been furnished a copy a reasonable
time prior to the filing.
(ii) The Company will advise the Representatives, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement, or any post-effective amendment
thereto or preventing or suspending the use of any Preliminary Prospectus, the Time of Sale
Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus, of the suspension
of the qualification of the Securities for offering or
-18-
sale in any jurisdiction, or of the
initiation or threatening of any proceeding for any such purpose; and the Company will
promptly use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such a stop order should be issued. Additionally, the Company agrees that it
shall comply with the provisions of Rules 424(b) and 430A, as applicable, under the Act and
will use its reasonable efforts to confirm that any filings made by the Company under Rule
424(b), Rule 433 or Rule 462 were received in a timely manner by the Commission.
(iii) (A) Within the time during which a prospectus (or in lieu thereof the notice
referred to in Rule 173(a)) relating to the Securities is required to be delivered under the
Act, the Company will comply as far as it is able with all requirements imposed upon it by
the Act, as now and hereafter amended, and by the Rules and Regulations, as from time to
time in force, so far as necessary to permit the continuance of sales of or dealings in the
Securities as contemplated by the provisions hereof, the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus. If during such period any event occurs as a
result of which the Prospectus (or if the Prospectus is not yet available to prospective
purchasers, the Time of Sale Disclosure Package) would include an untrue statement of a
material fact or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances then existing, not misleading, or if during such period it is
necessary to amend the Registration Statement or supplement the Prospectus (or if the
Prospectus is not yet available to prospective investors, the Time of Sale Disclosure
Package) to comply with the Act, the Company will promptly notify the Representatives and
will amend the Registration Statement or supplement the Prospectus (or, if the Prospectus is
not yet available to prospective purchasers, the Time of Sale Disclosure Package) (at the
expense of the Company) so as to correct such statement or omission or effect such
compliance.
(B) If at any time following issuance of an Issuer Free Writing Prospectus there
occurred or occurs an event or development as a result of which such Issuer Free Writing
Prospectus conflicted or would conflict with the information contained in the Registration
Statement, any Statutory Prospectus or the Prospectus relating to the Securities or included
or would include an untrue statement of a material fact or omitted or would omit to state a
material fact necessary in order to make the statements therein, in the light of the
circumstances prevailing at that subsequent time, not misleading, the Company has promptly
notified or promptly will notify the Representatives and has promptly amended or will
promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict,
untrue statement or omission.
(iv) The Company shall take or cause to be taken all necessary action to qualify the
Securities for sale under the securities laws of such jurisdictions as the Representatives
reasonably designate and to continue such qualifications in effect so long as required for
the distribution of the Securities, except that the Company shall not be
-19-
required in
connection therewith to qualify as a foreign corporation or to execute a general consent to
service of process in any state.
(v) The Company will furnish to the Underwriters and counsel for the Underwriters
copies of the Registration Statement (three of which will be signed and will include all
consents and exhibits filed therewith), each Preliminary Prospectus, the Time of Sale
Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus and all amendments
and supplements to such documents, in each case as soon as available and in such quantities
as the Representatives may from time to time reasonably request.
(vi) During a period of five years commencing with the date hereof, the Company will
furnish to the Representatives, and to each Underwriter who may so request in writing,
copies of all periodic and special reports furnished to the stockholders of the Company and
all information, documents and reports filed with the Commission, the National Association
of Securities Dealers, Inc., the NASDAQ Global Market or any securities exchange (other than
any such information, documents and reports that are filed with the Commission
electronically via XXXXX or any successor system).
(vii) The Company will make generally available to its security holders as soon as
practicable, but in any event not later than 15 months after the end of the Company’s
current fiscal quarter, an earnings statement (which need not be audited) covering a
12-month period beginning after the effective date of the Registration Statement that shall
satisfy the provisions of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations.
(viii) The Company, whether or not the transactions contemplated hereunder are
consummated or this Agreement is prevented from becoming effective under the provisions of
Section 9(a) hereof or is terminated, will pay or cause to be paid (A) all expenses
(including transfer taxes allocated to the respective transferees) incurred in connection
with the delivery to the Underwriters of the Securities, (B) all expenses and fees
(including, without limitation, fees and expenses of the Company’s accountants and counsel
but, except as otherwise provided below, not including fees and expenses of the
Underwriters’ counsel) in connection with the preparation, printing, filing, delivery, and
shipping of the Registration Statement (including the financial statements therein and all
amendments, schedules, and exhibits thereto), the Securities, each Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus, any
Issuer Free Writing Prospectus and any amendment thereof or supplement thereto, and the
printing, delivery, and shipping of this Agreement and other underwriting documents,
including Blue Sky Memoranda (covering the states and other applicable jurisdictions), (C)
all filing fees and fees and disbursements of the Underwriters’ counsel incurred in
connection with the qualification of the Securities for offering and sale by the
Underwriters or by dealers under the securities or blue sky laws of the states and other
jurisdictions which the Representatives shall designate, (D) the fees and expenses of any
transfer agent or registrar, (E) the filing fees and fees and disbursements of the
Underwriters’ counsel
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incident to any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Securities, (F) listing fees of the
American Stock Exchange and the NASDAQ Global Market, if any, and (G) all other costs and
expenses incident to the performance of its obligations hereunder that are not otherwise
specifically provided for herein. If the sale of the Securities provided for herein is not
consummated by reason of action by the Company pursuant to Section 9(a) hereof which
prevents this Agreement from becoming effective, or by reason of any failure, refusal or
inability on the part of the Company or the Selling Stockholder to perform any agreement on
its part to be performed, or because any other condition of the Underwriters’ obligations
hereunder required to be fulfilled by the Company or the Selling Stockholder is not
fulfilled, the Company will reimburse the several Underwriters for all out-of-pocket
disbursements (including fees and disbursements of counsel) incurred by the Underwriters in
connection with their investigation, preparing to market and marketing the Securities or in
contemplation of performing their obligations hereunder. The Company shall not in any event
be liable to any of the Underwriters for loss of anticipated profits from the transactions
covered by this Agreement.
(ix) The Company will apply the net proceeds from the sale of the Securities to be sold
by it hereunder for the purposes set forth in the Registration Statement, Time of Sale
Disclosure Package and Prospectus and will file such reports with the Commission with
respect to the sale of the Securities and the application of the proceeds therefrom as may
be required in accordance with Rule 463 of the Rules and Regulations.
(x) The Company will not, without the prior written consent of Xxxxx Xxxxxxx & Co.,
from the date of execution of this Agreement and continuing to and including the date 180
days after the date of the Prospectus (the “Lock-Up Period”) offer for sale, sell, contract
to sell, pledge, grant any option for the sale of, enter into any transaction which is
designed to, or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or otherwise) by
the Company or any affiliate, or otherwise issue or dispose of, directly or indirectly (or
publicly disclose the intention to make any such offer, sale, pledge, grant, issuance or
other disposition), any Common Stock or any securities convertible into or exchangeable for,
or any options or rights to purchase or acquire, Common Stock, except to the Underwriters pursuant to this Agreement. The Company
agrees not to accelerate the vesting of any option or warrant or the lapse of any repurchase
right prior to the expiration of the Lock-Up Period. If (1) during the period that begins
on the date that is 18 calendar days before the last day of the Lock-Up Period and ends on
the last day of the Lock-Up Period, (a) the Company issues an earnings release, (b) the
Company publicly announces material news or (c) a material event relating to the Company
occurs; or (2) prior to the expiration of the Lock-Up Period, the Company announces that it
will release earnings results during the 16-day period beginning on the last day of the
Lock-Up Period, then the restrictions in this Agreement, unless otherwise waived by Xxxxx
Xxxxxxx & Co. in writing, shall continue to apply until
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the expiration of the date that is 18 calendar days after the date on which (a) the Company issues the earnings release, (b)
the Company publicly announces material news or (c) a material event relating to the Company
occurs. The Company will provide the Representatives, any co-managers and each shareholder
subject to the Lock-Up Agreement (as defined below) with prior notice of any such
announcement that gives rise to the extension of the Lock-Up Period.
(xi) The Company has caused to be delivered to the Representatives prior to the date of
this Agreement a letter agreement, substantially in the form of Exhibit A hereto, from each
of the Company’s directors and officers and each of the persons listed on Schedule IV hereto
stating that such person agrees that he or she will not, without Xxxxx Xxxxxxx’x prior
written consent, offer for sale, sell, contract to sell or otherwise dispose of, as set
forth in such letter, any shares of Common Stock or rights to purchase Common Stock, except
to the Underwriters pursuant to this Agreement, for a period of 180 days after commencement
of the public offering of the Securities by the Underwriters (each a “Lock-Up Agreement”).
The Company will enforce the terms of each Lock-Up Agreement and issue stop-transfer
instructions to the transfer agent for the Common Stock with respect to any transaction or
contemplated transaction that would constitute a breach of or default under the applicable
Lock-Up Agreement.
(xii) The Company has not taken and will not take, directly or indirectly, any action
designed to or which might reasonably be expected to cause or result in, or which has
constituted, the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities, and has not effected any sales of Common
Stock which are required to be disclosed in response to Item 701 of Regulation S-K under the
Act which have not been so disclosed in the Registration Statement.
(xiii) The Company will not incur any liability for any finder’s or broker’s fee or
agent’s commission in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(xiv) The Company will file with the Commission such periodic and special reports as
required by the Rules and Regulations.
(xv) The Company and its subsidiaries will maintain such controls and other procedures,
including without limitation those required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx
Act and the applicable regulations thereunder, that are designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the Commission’s rules and forms, including without limitation, controls and
procedures designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is accumulated and communicated
to the Company’s
-22-
management, including its principal executive officer and its principal
financial officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure, to ensure that material information relating to
Company, including its subsidiaries, is made known to them by others within those entities.
(xvi) The Company and its subsidiaries will comply with all effective applicable
provisions of the Xxxxxxxx-Xxxxx Act.
(xvii) The Company represents and agrees that, unless it obtains the prior written
consent of Xxxxx Xxxxxxx & Co., and each Underwriter severally represents and agrees that,
unless it obtains the prior written consent of the Company and Xxxxx Xxxxxxx & Co., it has
not made and will not make any offer relating to the Securities that would constitute an
“issuer free writing prospectus,” as defined in Rule 433 under the Act, or that would
otherwise constitute a “free writing prospectus,” as defined in Rule 405 under the Act,
required to be filed with the Commission; provided that the prior written consent of the
parties hereto shall be deemed to have been given in respect of the free writing
prospectuses included in Schedule III. Any such free writing prospectus consented to by the
Company and Xxxxx Xxxxxxx & Co. is hereinafter referred to as a “Permitted Free Writing
Prospectus.” The Company represents that it has treated or agrees that it will treat each
Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as defined in Rule
433, and has complied and will comply with the requirements of Rule 433 applicable to any
Permitted Free Writing Prospectus, including timely Commission filing where required,
legending and record keeping. The Company represents that it has satisfied and agrees that
it will satisfy the conditions in Rule 433 to avoid a requirement to file with the
Commission any electronic road show.
(b) The Selling Stockholder covenants and agrees with the several Underwriters as follows:
(i) Except as otherwise agreed to by the Company and the Selling Stockholder pursuant
to an outstanding registration rights agreement, a true and correct copy of which has been
delivered to counsel to the Underwriters, such Selling Stockholder will pay all taxes, if any, on the transfer and sale, respectively, of the
Securities being sold by such Selling Stockholder and the fees of such Selling Stockholder’s
counsel; provided, however, that each Selling Stockholder severally agrees to reimburse the
Company for any reimbursement made by the Company to the Underwriters pursuant to Section
4(a)(viii) hereof to the extent such reimbursement resulted from the failure or refusal on
the part of such Selling Stockholder to comply under the terms or fulfill any of the
conditions of this Agreement.
(ii) The Securities to be sold by such Selling Stockholder, in the custody of the
Custodian pursuant to the Custody Agreement, are subject to the interest
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of the several Underwriters; the arrangements made for such custody are, except as specifically provided in
the Custody Agreement, irrevocable; and the obligations of such Selling Stockholder
hereunder shall not be terminated, except as provided in this Agreement or in the Custody
Agreement, by any act of such Selling Stockholder, by operation of law, whether by the
liquidation, dissolution or merger of such Selling Stockholder or by the occurrence of any
other event. If any Selling Stockholder should liquidate, dissolve or be a party to a
merger or if any other such event should occur before the delivery of the Securities
hereunder, the Securities in the custody of the Custodian shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if such
liquidation, dissolution, merger or other event had not occurred, whether or not the
Custodian shall have received notice thereof.
(iii) Such Selling Stockholder will not, without the prior written consent of Xxxxx
Xxxxxxx & Co., during the Lock-Up Period, offer for sale, sell, contract to sell, pledge,
grant any option for the sale of, enter into any transaction which is designed to, or might
reasonably be expected to, result in disposition (whether by actual disposition or effective
economic disposition due to cash settlement or otherwise) or otherwise dispose of, directly
or indirectly (or publicly disclose the intention to make any such offer, sale, pledge,
grant, or other disposition), any Common Stock or any securities convertible into or
exchangeable for, or any options or rights to purchase or acquire, Common Stock, except to
the Underwriters pursuant to this Agreement. In addition, each Selling Stockholder agrees
that, without the prior written consent of Xxxxx Xxxxxxx & Co., it will not, during the
Lock-Up Period, make any demand for or exercise any right with respect to, the registration
of any shares of Common Stock or any security convertible into or exercisable or
exchangeable for shares of Common Stock. If (1) during the period that begins on the date
that is 18 calendar days before the last day of the Lock-Up Period and ends on the last day
of the Lock-Up Period, (a) the Company issues an earnings release, (b) the Company publicly
announces material news or (c) a material event relating to the Company occurs; or (2) prior
to the expiration of the Lock-Up Period, the Company announces that it will release earnings
results during the 16-day period beginning on the last day of the Lock-Up Period, then the
restrictions in this Agreement, unless otherwise waived by Xxxxx Xxxxxxx & Co. in writing,
shall continue to apply until the expiration of the date that is 18 calendar days after the
date on which (a) the Company issues the earnings release, (b) the Company publicly announces material
news or (c) a material event relating to the Company occurs.
Any shares of Common Stock received upon exercise of options granted to a Selling
Stockholder will also be subject to this clause (iv). The restrictions on transfers of this
clause (iv), however, will not apply to any shares of Common Stock acquired by the Selling
Stockholder in the open market. In addition, notwithstanding the foregoing, if a Selling
Stockholder is a corporation, business trust, association, limited liability company,
partnership, limited liability partnership, limited liability limited partnership or other
entity (collectively, the “Entities” or, individually, the “Entity”), such Selling
Stockholder may transfer shares of Common Stock or securities convertible into or
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exchangeable or exercisable for any shares of Common Stock to any Entity which is directly
or indirectly controlled by, or is under common control with such Selling Stockholder and,
if such Selling Stockholder is a partnership or limited liability company, such Selling
Stockholder may transfer the Common Stock or securities convertible into or exchangeable or
exercisable for any shares of Common Stock to its partners, former partners or an affiliated
partnership (or members, former members or an affiliated limited liability company) managed
by the same manager or managing partner (or managing member, as the case may be) or
management company, or managed by an entity controlling, controlled by, or under common
control with, such manager or managing partner (or managing member) or management company in
accordance with partnership (or membership) interests; provided, however, that in any such
case, it shall be a condition to the transfer that the transferee execute an agreement
stating that the transferee is receiving and holding such shares of Common Stock or
securities convertible into or exchangeable or exercisable for any shares of Common Stock
subject to the provisions of this Agreement and there shall be no further transfer of such
Common Stock or securities convertible into or exchangeable or exercisable for any shares of
Common Stock except in accordance with this Agreement, and provided further that any such
transfer shall not involve a disposition for value.
(iv) Such Selling Stockholder has not taken and will not take, directly or indirectly,
any action designed to or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities, and has not effected any sales of Common Stock which, if
effected by the Company, would be required to be disclosed in response to Item 701 of
Regulation S-K.
(v) Such Selling Stockholder shall immediately notify the Representatives (A) of any
change in information relating to such Selling Stockholder in the Registration Statement,
Time of Sale Disclosure Package or Prospectus or (B) if any event occurs or any new
information relating to the Company or relating to any matter stated in the Time of Sale
Disclosure Package or in the Prospectus or any supplement thereto or any Issuer General Free
Writing Prospectus comes to the attention of the Selling Stockholder, which, in either case,
results in the Registration Statement, Time of Sale Disclosure Package or in the Prospectus (as amended or supplemented) or any Issuer
General Free Writing Prospectus including an untrue statement of a material fact or omitting
to state any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(vi) Such Selling Stockholder shall deliver to the Custodian or the Representatives, as
appropriate, prior to the First Closing Date, a properly completed and executed United
States Treasury Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
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5. Conditions of Underwriters’ Obligations. The obligations of the several Underwriters
hereunder are subject to the accuracy, as of the date hereof and at each of the First Closing Date
and the Second Closing Date (as if made at such Closing Date), of and compliance with all
representations, warranties and agreements of the Company and the Selling Stockholder contained
herein, to the performance by the Company and the Selling Stockholder of their respective
obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later than 5:00 p.m., Central
time, on the date of this Agreement, or such later time and date as the Representatives of the
several Underwriters shall approve and all filings required by Rules 424, 430A and 433 of the Rules
and Regulations shall have been timely made (without reliance on Rule 424(b)(8) or Rule 164(b)); no
stop order suspending the effectiveness of the Registration Statement or any part thereof or any
amendment thereof, nor suspending or preventing the use of the Time of Sale Disclosure Package, the
Prospectus or any Issuer Free Writing Prospectus shall have been issued; no proceedings for the
issuance of such an order shall have been initiated or threatened; and any request of the
Commission for additional information (to be included in the Registration Statement, the Time of
Sale Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus or otherwise) shall
have been complied with to the Representatives’ satisfaction.
(b) No Underwriter shall have advised the Company that the Registration Statement, the Time of
Sale Disclosure Package or the Prospectus, or any amendment thereof or supplement thereto, or any
Issuer Free Writing Prospectus contains an untrue statement of fact which, in the Representatives’
opinion, is material, or omits to state a fact which, in the Representatives’ opinion, is material
and is required to be stated therein or necessary to make the statements therein not misleading.
(c) Except as contemplated in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, subsequent to the respective dates as of which information is given therein,
neither the Company nor any of its subsidiaries shall have incurred any material liabilities or
obligations, direct or contingent, or entered into any material transactions, or declared or paid
any dividends or made any distribution of any kind with respect to its capital stock; and there
shall not have been any change in the capital stock (other than a change in the number of
outstanding shares of Common Stock due to the issuance of shares upon the exercise of outstanding options or warrants), or any material change in the
short-term or long-term debt of the Company, or any issuance of options, warrants, convertible
securities or other rights to purchase the capital stock of the Company or any of its subsidiaries,
or any Material Adverse Change or any development involving a prospective Material Adverse Change
(whether or not arising in the ordinary course of business), that, in Representatives’ judgment,
makes it impractical or inadvisable to offer or deliver the Securities on the terms and in the
manner contemplated in the Time of Sale Disclosure Package and in the Prospectus.
(d) On or after the Time of Sale (i) no downgrading shall have occurred in the rating accorded
the Company’s debt securities or preferred stock by any “nationally
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recognized statistical 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 that it has under surveillance or
review, with possible negative implications, its rating of any of the Company’s debt securities or
preferred stock;
(e) As of the date hereof, A.M. Best Company has assigned a financial strength rating of “A-”
(Excellent) to the Company’s individual and pooled Insurance Subsidiaries. On or after the date
hereof (i) no downgrading or other negative development shall have occurred in the rating accorded
the Company’s or any of the Insurance Subsidiaries financial strength by A.M. Best Company or any
other “nationally recognized statistical rating organization,” as that term is defined by the SEC
for purposes of Rule 436(g)(2) under the 1933 Act (whether or not such negative development has
been publicly announced by A.M. Best Company), and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible negative implications, its rating
of any of the Company’s or any of its Insurance Subsidiaries’ financial strength.
(f) On each Closing Date, there shall have been furnished to the Representatives of the
several Underwriters the opinion of XxXxxxx, Xxxxxxxx & Xxxxxxxx, P.C., counsel for the Company,
dated such Closing Date and addressed to the Underwriters, to the effect that:
(i) Each of the Company and its subsidiaries (other than the Insurance Subsidiaries)
has been duly incorporated or, if such entity is not a corporation, has been duly formed,
and is validly existing as a corporation in good standing under the laws of its jurisdiction
of incorporation. Each of the Company and its subsidiaries (other than the Insurance
Subsidiaries) has full corporate power and authority to own its properties and conduct its
business as currently being carried on and as described in the Registration Statement, in
the Time of Sale Disclosure Package and in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction in which it
owns or leases real property or in which the conduct of its business makes such
qualification necessary and in which the failure to so qualify would have a Material Adverse
Effect.
(ii) The capital stock of the Company conforms as to legal matters to the description
thereof contained in the Time of Sale Disclosure Package and in the Prospectus under the
caption “Description of Capital Stock.” All of the Securities have been duly authorized and
validly issued and are fully paid and nonassessable, and the holders thereof are not subject
to personal liability by reason of being such holders. The Securities to be issued and sold
by the Company hereunder have been duly authorized and, when issued, delivered and paid for
in accordance with the terms of this Agreement, will have been validly issued and will be
fully paid and nonassessable, and the holders thereof will not be subject to personal
liability by reason of being such holders. Except as otherwise stated in the Registration
Statement, in the Time of Sale Disclosure Package and in the Prospectus, there are no
preemptive rights or other rights to subscribe for or to
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purchase, or any restriction upon
the voting or transfer of, any shares of Common Stock pursuant to the Company’s charter,
by-laws or any agreement or other instrument known to such counsel to which the Company is a
party or by which the Company is bound. To such counsel’s knowledge, neither the filing of
the Registration Statement nor the offering or sale of the Securities as contemplated by
this Agreement gives rise to any rights for or relating to the registration of any shares of
Common Stock or other securities of the Company.
(iii) All of the issued and outstanding shares of capital stock of each of the
Company’s subsidiaries have been duly and validly authorized and issued and are fully paid
and nonassessable, and, to such counsel’s knowledge, except as otherwise described in the
Registration Statement, in the Time of Sale Disclosure Package and in the Prospectus, the
Company owns of record and beneficially, free and clear of any security interests, claims,
liens, proxies, equities or other encumbrances, all of the issued and outstanding shares of
such stock. To such counsel’s knowledge, except as described in the Registration Statement,
in the Time of Sale Disclosure Package and in the Prospectus, there are no options,
warrants, agreements, contracts or other rights in existence to purchase or acquire from the
Company or any subsidiary any shares of the capital stock of the Company or any subsidiary
of the Company.
(iv) The Registration Statement has become effective under the Act and, to such
counsel’s knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been instituted or, to the
knowledge of such counsel, threatened by the Commission.
(v) The descriptions in the Registration Statement, in the Time of Sale Disclosure
Package and in the Prospectus of statutes, regulations, legal and governmental proceedings,
contracts and other documents (other than insurance policies issued by the Insurance
Subsidiaries in the ordinary course of their respective businesses) are accurate and fairly
present the information required to be shown; provided, however, for the purposes of this
clause (v) such counsel shall not be required to opine as to statutes, regulations, legal or
governmental proceedings specifically relating to insurance matters required to be described in the Time of Sale
Disclosure Package or in the Prospectus.
(vi) Such counsel does not know of any statutes, regulations, legal or governmental
proceedings or contracts or other documents required to be described in the Time of Sale
Disclosure Package or in the Prospectus or included as exhibits to the Registration
Statement that are not described or included as required.
(vii) The Company has full corporate power and authority to enter into this Agreement,
and this Agreement has been duly authorized, executed and delivered by the Company and
constitutes a valid, legal and binding obligation of the Company enforceable in accordance
with its terms (except as rights to indemnity hereunder may be
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limited by federal or state
securities laws and except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally and subject to
general principles of equity); the execution, delivery and performance of this Agreement and
the consummation of the transactions herein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under, any statute,
rule or regulation, any agreement or instrument known to such counsel to which the Company
is a party or by which it is bound or to which any of its property is subject, the Company’s
charter or by-laws, or any order or decree known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any of its respective
properties; and no consent, approval, authorization or order of, or filing with, any court
or governmental agency or body is required for the execution, delivery and performance of
this Agreement or for the consummation of the transactions contemplated hereby, including
the issuance or sale of the Securities by the Company, except such as may be required under
the Act or state securities laws.
(viii) The Registration Statement, the Statutory Prospectus included in the Time of
Sale Disclosure Package and the Prospectus, and any amendment thereof or supplement thereto,
comply, and as of their respective effective or issue dates (including without limitation
each deemed effective date with respect to the Underwriters pursuant to the Rules and
Regulations) complied, as to form in all material respects with the requirements of the Act
and the Rules and Regulations (except that such counsel need express no opinion as to the
financial statements, schedules, notes or other financial data or statistical data derived
therefrom); and on the basis of conferences with officers of the Company, examination of
documents referred to in the Registration Statement, the Time of Sale Disclosure Package and
the Prospectus and such other procedures as such counsel deemed appropriate, nothing has
come to the attention of such counsel that causes such counsel to believe that (a) any part
of the Registration Statement or any amendment thereof (including any information omitted
from the Registration Statement at the time it became effective but that is deemed to be
part of and included in the Registration Statement pursuant to Rule 430A), when such part
became effective (including each deemed effective date with respect to the Underwriters
pursuant to the Rules and Regulations) and as of such Closing Date (including any Registration
Statement filed under Rule 462(b) of the Rules and Regulations), contained or contains any
untrue statement of a material fact or omitted or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading or (b) the
documents specified in a schedule to such counsel’s letter, consisting of those included in
the Time of Sale Disclosure Package as of the Time of Sale and as of such Closing Date,
included or includes any untrue statement of material fact or omitted or omits to state a
material fact necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; or (c) the Prospectus (as of its issue date and as of
such Closing Date), as amended or supplemented, included or includes any untrue statement of
material fact or omitted or omits to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
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misleading; it being understood that such counsel need express no opinion as to the financial statements,
schedules, notes or other financial data or statistical data derived therefrom included in
any of the documents mentioned in this clause.
In rendering such opinion such counsel may rely (i) as to matters of law other than Texas and
federal law, upon the opinion or opinions of local counsel provided that the extent of such
reliance is specified in such opinion and that such counsel shall state that such opinion or
opinions of local counsel are satisfactory to them and that they believe they and the Underwriters
are justified in relying thereon and (ii) as to matters of fact, to the extent such counsel deems
reasonable, upon certificates of officers of the Company and its subsidiaries provided that the
extent of such reliance is specified in such opinion.
(g) On each Closing Date, there shall have been furnished to the Representatives of the
several Underwriters the opinions of [ ], [ ] and [ ] special counsel to
the Company and the appropriate Insurance Subsidiary, dated such Closing Date and addressed to the
Underwriters, to the effect that:
(i) The respective Insurance Subsidiary has been duly incorporated and is validly existing as
a corporation in good standing (or the equivalent) under the laws of its jurisdiction of
incorporation. The respective Insurance Subsidiary has full corporate power and authority
to own its properties and conduct its business as currently being carried on and as
described in the Registration Statement, in the Time of Sale Disclosure Package and in the
Prospectus.
(ii) With regard to the respective Insurance Subsidiary, the descriptions in the
Registration Statement, in the Time of Sale Disclosure Package and in the Prospectus of
statutes, regulations, legal and governmental proceedings specifically related to insurance
matters are accurate and fairly present the information required to be shown.
In rendering such opinion such counsel to the Insurance Subsidiaries may rely (i) as to
matters of law other than [appropriate jurisdiction] and federal law, upon the opinion or opinions
of local counsel provided that the extent of such reliance is specified in such opinion and that
such counsel shall state that such opinion or opinions of local counsel are satisfactory to them
and that they believe they and the Underwriters are justified in relying thereon and (ii) as to
matters of fact, to the extent such counsel deems reasonable upon certificates of officers of the
Insurance Subsidiaries provided that the extent of such reliance is specified in such opinion.
(h) On each Closing Date, there shall have been furnished to the Representatives of the
several Underwriters the opinion of Xxxxx X. Xxxx, General Counsel of the Company, dated such
Closing Date and addressed to the Underwriters, to the effect that:
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(i) The descriptions in the Registration Statement, in the Time of Sale Disclosure
Package and in the Prospectus of insurance policies issued by the Insurance Subsidiaries in
the ordinary course of their respective businesses are accurate and fairly present the
information required to be shown.
(ii) Each Insurance Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which it owns or leases real
property or in which the conduct of its business makes such qualification necessary and in
which the failure to so qualify would have a Material Adverse Effect.
(iii) The descriptions in the Registration Statement, in the Time of Sale Disclosure
Package and in the Prospectus of statutes, regulations, legal and governmental proceedings
specifically related to insurance matters are accurate and fairly present the information
required to be shown.
(i) On each Closing Date, there shall have been furnished to the Representatives of the
several Underwriters opinions of [in-house], counsel for the Selling Stockholder, dated such
Closing Date and addressed to the Underwriters, to the effect that:
(i) Assuming that each Underwriter acquires its interest in the Securities it has
purchased from the Selling Stockholder without notice of any adverse claim (within the
meaning of Section 8-105 of the UCC), that each Underwriter has purchased such Securities
delivered on the Closing Date to The Depository Trust Company or other securities
intermediary (as defined in Section 8-102(a)(14) of the UCC) by making payment therefor as
provided herein, has had such Securities credited to the securities account or accounts (as
defined in Section 8-501(a) of the UCC) of such Underwriter maintained with The Depository
Trust Company or such other securities intermediary, and the records of The Depository Trust
Company or such other securities intermediary identify such Underwriter as the entitlement
holder with respect to such securities, each Underwriter will have acquired a security
entitlement (within the meaning of Section 8-102(a)(17) of the UCC) to such Securities
purchased by such Underwriter, and no action based on an adverse claim (within the meaning of Section
9-105 of the UCC) may be asserted against such Underwriter with respect to such Securities.
(ii) The Selling Stockholder has the power and authority to enter into the Custody
Agreement and this Agreement and to perform and discharge such Selling Stockholder’s
obligations thereunder and hereunder; and this Agreement, the Custody Agreement and the
Power of Attorney have been duly and validly authorized, executed and delivered by (or by
the Attorney-in-Fact on behalf of) the Selling Stockholder.
(iii) This Agreement, the Custody Agreement and the Power of Attorney are valid and
binding agreements of the Selling Stockholder, enforceable in accordance with their
respective terms (except as rights to indemnity hereunder or thereunder may be
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limited by
federal or state securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally
and subject to general principles of equity).
(iv) The execution and delivery by the Selling Stockholder of this Agreement and the
Custody Agreement and the performance by the Selling Stockholder of the terms hereof and
thereof and the consummation by the Selling Stockholder of the transactions herein and
therein contemplated will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any statute, rule or regulation by which such
Selling Stockholder is bound or to which any of its property is subject (“Applicable Law”)
or any order or decree known to such counsel of any court or government agency or body
having jurisdiction over such Selling Stockholder or any of its respective properties.
(v) The execution and delivery by the Selling Stockholder of this Agreement and the
Custody Agreement and the performance by the Selling Stockholder of the terms hereof and
thereof and the consummation by the Selling Stockholder of the transactions herein and
therein contemplated will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under (A) any agreement or instrument known to such
counsel to which such Selling Stockholder is a party or to which such
Selling Stockholder is
bound or to which any of its property is subject or (B) such Selling Stockholder’s charter
or by-laws.
(vi) No consent, approval, authorization or order of, or filing with, any court or
governmental agency or body under Applicable Law is required for the execution, delivery and
performance by the Selling Stockholder of this Agreement and the Custody Agreement or for
the consummation by the Selling Stockholder of the transactions contemplated hereby and
thereby, including the sale of the Securities being sold by such Selling Stockholder, except
such as may be required under the Act or state securities laws or blue sky laws.
In rendering such opinion such counsel may rely (i) as to matters of law other than New York,
Texas and federal law, upon the opinion or opinions of local counsel provided that the extent of
such reliance is specified in such opinion and that such counsel shall state that such opinion or
opinions of local counsel are satisfactory to them and that they believe they and the Underwriters
are justified in relying thereon and (ii) as to matters of fact, to the extent such counsel deems
reasonable upon certificates of officers of the Selling Stockholder provided that the extent of
such reliance is specified in such opinion.
(j) On each Closing Date, there shall have been furnished to the Representatives of the
several Underwriters such opinion or opinions from Sidley Austin, LLP, counsel for the several
Underwriters, dated such Closing Date and addressed to the Underwriters, with respect to the
matters the Representatives reasonably may request (in rendering such opinion, Sidley Austin, LLP
may rely as to matters involving the application of
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the laws of the State of Nevada on [ ]), and
such counsel shall have received such papers and information as they request to enable them to pass
upon such matters and in order to evidence the accuracy, completeness and satisfaction of the
representations, warranties and conditions herein contained.
(k) Immediately prior to execution hereof and on each Closing Date the Representatives of the
several Underwriters shall have received a letter of KPMG LLP, dated such Closing Date and
addressed to the Underwriters, confirming that they are independent public accountants within the
meaning of the Act and are in compliance with the applicable requirements relating to the
qualifications of accountants under Rule 2-01 of Regulation S-X of the Commission, and stating, as
of the date of such letter (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the Time of Sale
Disclosure Package, as of a date not prior to the date hereof or more than five days prior to the
date of such letter), the conclusions and findings of said firm with respect to the financial
information and other matters covered by its letter delivered to the Underwriters concurrently with
the execution of this Agreement, and the effect of the letter so to be delivered on such Closing
Date shall be to confirm the conclusions and findings set forth in such prior letter.
(l) On each Closing Date, there shall have been furnished to the Representatives of the
Underwriters, a certificate, dated such Closing Date and addressed to Underwriters, signed by the
principal executive officer and by the principal financial officer of the Company, to the effect
that:
(i) The representations and warranties of the Company in this Agreement are true and
correct, in all material respects, as if made at and as of such Closing Date, and the
Company has complied with all the agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to such Closing Date;
(ii) No stop order or other order suspending the effectiveness of the Registration
Statement or any part thereof or any amendment thereof or the qualification
of the Securities for offering or sale, nor suspending or preventing the use of the
Time of Sale Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus, has
been issued, and no proceeding for that purpose has been instituted or, to the best of their
knowledge, is contemplated by the Commission or any state or regulatory body; and
(iii) The signers of said certificate have carefully examined the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus, and any amendments
thereof or supplements thereto, and (A) each part of the Registration Statement and the
Prospectus, and any amendments thereof or supplements thereto contain, and contained when
such part of the Registration Statement, or any amendment thereof, became effective, all
statements and information required to be included therein, the Registration Statement, or
any amendment thereof, does not contain and did not contain when such part of the
Registration Statement, or any amendment thereof, became
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effective, any untrue statement of
a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Prospectus, as amended or
supplemented, does not include and did not include as of its date or the time of first use
within the meaning of the Rules and Regulations, any untrue statement of material fact or
omit to state and did not omit to state as of its date or the time of first use within the
meaning of the rules and Regulations a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading, (B)
neither (1) the Time of Sale Disclosure Package nor (2) any individual Issuer Limited-Use
Free Writing Prospectus, when considered together with the Time of Sale Disclosure Package,
include, nor included as of the Time of Sale any untrue statement of a material fact or
omits, or omitted as of the Time of Sale, 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, (C) since the Time of Sale there has occurred no event required to be set
forth in an amended or supplemented prospectus which has not been so set forth, (D)
subsequent to the respective dates as of which information is given in the Time of Sale
Disclosure Package, neither the Company nor any of its subsidiaries has incurred any
material liabilities or obligations, direct or contingent, or entered into any material
transactions, not in the ordinary course of business, or declared or paid any dividends or
made any distribution of any kind with respect to its capital stock, and except as disclosed
in the Time of Sale Disclosure Package and in the Prospectus, there has not been any change
in the capital stock (other than a change in the number of outstanding shares of Common
Stock due to the issuance of shares upon the exercise of outstanding options or warrants),
or any material change in the short-term or long-term debt, or any issuance of options,
warrants, convertible securities or other rights to purchase the capital stock, of the
Company, or any of its subsidiaries, or any Material Adverse Change or any development
involving a prospective Material Adverse Change (whether or not arising in the ordinary
course of business), and (E) except as stated in the Time of Sale Disclosure Package and in
the Prospectus, there is not pending, or, to the knowledge of the Company, threatened or
contemplated, any action, suit or proceeding to which the Company or any of its subsidiaries is a party before or by any
court or governmental agency, authority or body, or any arbitrator, which could reasonably
be expected to result in any Material Adverse Change.
(m) On each Closing Date, there shall have been furnished to the Representatives of the
several Underwriters a certificate or certificates, dated such Closing Date and addressed to the
Underwriters, signed by the Selling Stockholder or the Selling Stockholder’s Attorney-in-Fact to
the effect that the representations and warranties of such Selling Stockholder contained in this
Agreement are true and correct as if made at and as of such Closing Date, and that such Selling
Stockholder has complied with all the agreements and satisfied all the conditions on such Selling
Stockholder’s part to be performed or satisfied at or prior to such Closing Date.
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(n) The Company shall have furnished to the Representatives and counsel for the Underwriters
such additional documents, certificates and evidence as the Representatives or counsel for the
Underwriters may have reasonably requested.
(o) The Common Stock has been registered pursuant to Section 12(b) of the 1934 Act, and the
Shares have been approved for listing on the NASDAQ Global Market, subject to official notice of
issuance.
(p) The Company shall have furnished to the Representatives and counsel for the Underwriters
all of the duly and validly executed letter agreements referred to in Section 4(a)(xi) hereof.
All such opinions, certificates, letters and other documents will be in compliance with the
provisions hereof only if they are satisfactory in form and substance to the Representatives and
counsel for the Underwriters. The Company will furnish the Representatives with such conformed
copies of such opinions, certificates, letters and other documents as they shall reasonably
request.
6. Indemnification and Contribution.
(a) The Company agrees to 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 (including in settlement of any litigation if such settlement is
effected with the written consent of the Company), 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 the Registration Statement, including the information deemed to be a part of the
Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules
430A and 430C of the Rules and Regulations, if applicable, any Preliminary Prospectus, the Time of
Sale Disclosure Package, the Prospectus, or any amendment or supplement thereto, any Issuer Free
Writing Prospectus or in any materials or information provided to investors by, or with the approval of, the Company in connection with
the marketing of the offering of the Common Stock (“Marketing Materials”), including any roadshow
or investor presentations made to investors by the Company (whether in person or electronically) 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 it in connection
with investigating or defending against 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, any
Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus, or any such amendment
or supplement, any Issuer Free Writing Prospectus or in any Marketing Materials, in reliance upon
and in conformity with written information furnished to the Company by Piper
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Jaffray, or by any Underwriter through Xxxxx Xxxxxxx, specifically for use in the preparation thereof.
In
addition to its other obligations under this Section 6(a), the Company agrees that, as an
interim measure during the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any alleged statement or
omission, described in this Section 6(a), the Company will reimburse each Underwriter on a monthly
basis for all reasonable legal fees or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of the Company’s
obligation to reimburse the Underwriters for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent jurisdiction. To the extent that
any such interim reimbursement payment is so held to have been improper, the Underwriter that
received such payment shall promptly return it to the party or parties that made such payment,
together with interest, compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing) announced from time to time
by
[_______________] (the “Prime Rate”). Any such interim reimbursement payments which are
not made to an Underwriter within 30 days of a request for reimbursement shall bear interest at the
Prime Rate from the date of such request. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
(b) The Selling Stockholder agrees to 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 (including in settlement of any litigation if such settlement
is effected with the written consent of the Company and/or such Selling Stockholder, as the case
may be) to the same extent as the indemnity from the Company to each Underwriter set forth in the
first paragraph of Section 6(a) above, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the documents referred to in Section 6(a), in
reliance upon and in conformity with information relating to the Selling Stockholder furnished to the Company by or on behalf of the Selling
Stockholder specifically for inclusion in such documents.
(c) Each Underwriter, on a several but not joint basis, will indemnify and hold harmless the
Company and the Selling Stockholder against any losses, claims, damages or liabilities to which the
Company and the Selling Stockholder may become subject, under the Act or otherwise (including in
settlement of any litigation, if such settlement is effected with the written consent of such
Underwriter), 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 the Registration Statement, any Preliminary Prospectus, the Time of Sale
Disclosure Package, the Prospectus, or any amendment or supplement thereto, or any Issuer Free
Writing Prospectus 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
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untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement,
any Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus, or any such
amendment or supplement, or any Issuer Free Writing Prospectus in reliance upon and in conformity
with written information furnished to the Company by Xxxxx Xxxxxxx, or by such Underwriter through
Xxxxx Xxxxxxx, specifically for use in the preparation thereof, and will reimburse the Company and
the Selling Stockholder for any legal or other expenses reasonably incurred by the Company or such
Selling Stockholder in connection with investigating or defending against any such loss, claim,
damage, liability or action.
(d) Promptly after receipt by an indemnified party under subsection (a), (b) or (c) 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 the indemnifying party from any liability that it may have to any indemnified
party except to the extent such indemnifying party has been materially prejudiced by such failure.
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 in, 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, and after notice from the indemnifying party to such indemnified party of the indemnifying
party’s election so to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that if, in the sole judgment of the Representatives, it is
advisable for the Underwriters to be represented as a group by separate counsel, the
Representatives shall have the right to employ a single counsel to represent the Representatives
and all Underwriters who may be subject to liability arising from any claim in respect of which
indemnity may be sought by the Underwriters under subsection (a) of this Section 6, in which event
the reasonable fees and expenses of such separate counsel shall be borne by the indemnifying party or parties and reimbursed to the
Underwriters as incurred (in accordance with the provisions of the second paragraph in subsection
(a) above). An indemnifying party shall not be obligated under any settlement agreement relating
to any action under this Section 6 to which it has not agreed in writing.
(e) If the indemnification provided for in this Section 6 is unavailable or insufficient to
hold harmless an indemnified party under subsection (a), (b) or (c) above, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a), (b) or (c) above, (i) in such
proportion as is appropriate to reflect the relative benefits received by the Company and the
Selling Stockholder on the one hand and the Underwriters on the other from the offering of the
Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the Selling Stockholder on the one
hand and the Underwriters on the other in connection with the statements
-37-
or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling Stockholder 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 and
Selling Stockholder 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, the Selling Stockholder or the Underwriters
and the parties’ relevant intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The Company, the Selling Stockholder and the
Underwriters agree that it would not be just and equitable if contributions pursuant to this
subsection (e) were to be 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 in the first sentence of this subsection (e). The amount
paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to
in the first sentence of this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating or defending against
any action or claim which is the subject of this subsection (e). 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 Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages that 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 (e) to contribute
are several in proportion to their respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholder under this Section 6 shall be
in addition to any liability which the Company and the Selling Stockholder 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; and the obligations of the Underwriters under this
Section 6 shall be in addition to any liability that the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each director of the Company (including
any person who, with his consent, is named in the Registration Statement as about to become a
director of the Company), to each officer of the Company who has signed the Registration Statement
and to each person, if any, who controls the Company or the Selling Stockholder within the meaning
of the Act.
(g) The Underwriters severally confirm that the statements with respect to the public offering
of the Securities by the Underwriters set forth in (i) the third, fourth, fifth and sixth sentences
of the second paragraph, (ii) the sixth paragraph, (iii) the seventh paragraph, (iv) the first and
fourth sentences of the eighth paragraph and (v) the tenth paragraph of the
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“Underwriting” section of the Registration Statement (the “Underwriters’ Information”) are correct and constitute the only information concerning such
Underwriters furnished in writing to the Company by or on behalf of the Underwriters specifically
for inclusion in the Registration Statement, any Preliminary Prospectus, the Time of Sale
Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus. The Company and the
Selling Stockholder acknowledge that the Underwriters’
Information set forth in the Registration Statement, the Time of Sale
Disclosure Package and in the Prospectus constitute the only information concerning such
Underwriters furnished in writing to the Company by or on behalf of the Underwriters specifically
for inclusion in the Registration Statement, any Preliminary Prospectus, the Time of Sale
Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus.
7. Representations and Agreements to Survive Delivery. All representations, warranties, and
agreements of the Company and the Selling Stockholder herein or in certificates delivered pursuant
hereto, and the agreements of the several Underwriters, the Company and the Selling Stockholder
contained in Section 6 hereof, shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any Underwriter or any controlling person thereof, or the
Company or any of its officers, directors, or controlling persons, or any Selling Stockholder or
any controlling person thereof, and shall survive delivery of, and payment for, the Securities to
and by the Underwriters hereunder.
8. Substitution of Underwriters.
(a) If any Underwriter or Underwriters shall fail to take up and pay for the amount of
Securities agreed by such Underwriter or Underwriters to be purchased hereunder, upon tender of
such Securities in accordance with the terms hereof, and the amount of Securities not purchased
does not aggregate more than 10% of the total amount of Securities set forth in Schedule II hereto,
the remaining Underwriters shall be obligated to take up and pay for (in proportion to their respective underwriting obligations hereunder as set forth in Schedule
II hereto except as may otherwise be determined by the Representatives) the Securities that the
withdrawing or defaulting Underwriters agreed but failed to purchase.
(b) If any Underwriter or Underwriters shall fail to take up and pay for the amount of
Securities agreed by such Underwriter or Underwriters to be purchased hereunder, upon tender of
such Securities in accordance with the terms hereof, and the amount of Securities not purchased
aggregates more than 10% of the total amount of Securities set forth in Schedule II hereto, and
arrangements satisfactory to the Representatives for the purchase of such Securities by other
persons are not made within 36 hours thereafter, this Agreement shall terminate. In the event of
any such termination neither the Company nor the Selling Stockholder shall be under any liability
to any Underwriter (except to the extent provided in Section 4(a)(viii) and Section 6 hereof) nor
shall any Underwriter (other than an Underwriter who shall have failed, otherwise than for some
reason permitted under this Agreement, to purchase the amount
-39-
of Securities agreed by such Underwriter to be purchased hereunder) be under any liability to the Company or the Selling
Stockholder (except to the extent provided in Section 6 hereof).
If Securities to which a default relates are to be purchased by the non-defaulting
Underwriters or by any other party or parties, the Representatives or the Company shall have the
right to postpone the First Closing Date for not more than seven business days in order that the
necessary changes in the Registration Statement, in the Time of Sale Disclosure Package, in the
Prospectus or in any other documents, as well as any other arrangements, may be effected. As used
herein, the term “Underwriter” includes any person substituted for an Underwriter under this
Section 8.
9. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at 10:00 a.m., Central time, on the first full
business day following the effective date of the Registration Statement, or at such earlier time
after the effective time of the Registration Statement as the Underwriters in their discretion
shall first release the Securities for sale to the public; provided, that if the Registration
Statement is effective at the time this Agreement is executed, this Agreement shall become
effective at such time as the Underwriters in their discretion shall first release the Securities
for sale to the public. For the purpose of this Section, the Securities shall be deemed to have
been released for sale to the public upon release by the Representatives of an electronic
communication authorizing commencement of the offering of the Securities for sale by the
Underwriters or other securities dealers. By giving notice as hereinafter specified before the
time this Agreement becomes effective, the Representatives of the several Underwriters, or the
Company, may prevent this Agreement from becoming effective without liability of any party to any
other party, except that the provisions of Section 4(a)(viii), Section 4(b)(i) and Section 6 hereof
shall at all times be effective.
(b) The Representatives of the several Underwriters shall have the right to terminate this
Agreement by giving notice as hereinafter specified at any time at or prior to the First Closing
Date, and the option referred to in Section 3(b), if exercised, may be cancelled at any time prior
to the Second Closing Date, if (i) the Company shall have failed, refused or been unable, at or
prior to such Closing Date, to perform any agreement on its part to be performed hereunder, (ii)
any other condition of the Underwriters’ obligations hereunder is not fulfilled, (iii) trading on
the NASDAQ Global Market, New York Stock Exchange or the American Stock Exchange shall have been
wholly suspended, (iv) minimum or maximum prices for trading shall have been fixed, or maximum
ranges for prices for securities shall have been required, on the NASDAQ Global Market, New York
Stock Exchange or the American Stock Exchange, by such Exchange or by order of the Commission or
any other governmental authority having jurisdiction, (v) a banking moratorium shall have been
declared by federal or state authorities, or (vi) there shall have occurred any outbreak or
escalation of hostilities or any change in financial markets or any calamity or crisis that, in the
Representatives’ reasonable judgment, is material and adverse and makes it impractical or
inadvisable to proceed with the completion of the sale of and payment for the Securities. Any such
termination shall be without liability of any party to
-40-
any other party except that the provisions of Section 4(a)(viii), Section 4(b)(i) and Section 6 hereof shall at all times be effective.
(c) If the Representatives elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section, the Company and the Selling Stockholder shall
be notified promptly by the Representatives by telephone, confirmed by letter. If the Company
elects to prevent this Agreement from becoming effective, the Representatives and the Selling
Stockholder shall be notified by the Company by telephone, confirmed by letter.
10. Default by the Selling Stockholder or the Company. If the Selling Stockholder shall fail
at the First Closing Date to sell and deliver the number of Securities which such Selling
Stockholder is obligated to sell hereunder, then the Underwriters may at the Representatives’
option, by notice from the Representatives to the Company either (a) terminate this Agreement
without any liability on the part of any non-defaulting party or (b) elect to purchase the
Securities which the Company has agreed to sell hereunder.
In the event of a default by the Selling Stockholder as referred to in this Section, either
the Representatives or the Company shall have the right to postpone the First Closing Date for a
period not exceeding seven days in order to effect any required changes in the Registration
Statement, in the Time of Sale Disclosure Package or in the Prospectus or in any other documents or
arrangements.
If the Company shall fail at the First Closing Date to sell and deliver the number of
Securities which it is obligated to sell hereunder, then this Agreement shall terminate without any
liability on the part of any non-defaulting party. No action taken pursuant to this Section shall relieve the Company or the Selling Stockholder
so defaulting from liability, if any, in respect of such default.
11. Notices. Except as otherwise provided herein, all communications hereunder shall be in
writing and, if to the Underwriters, shall be mailed or delivered to the Representatives c/o Xxxxx
Xxxxxxx & Co., 000 Xxxxxxxx Xxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, except that notices given to an
Underwriter pursuant to Section 6 hereof shall be sent to such Underwriter at the address stated in
the Underwriters’ Questionnaire furnished by such Underwriter in connection with this offering; if
to the Company, shall be mailed or delivered to it at 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxx Xxxxx,
Xxxxx 00000 Attention: Xxxx X. Xxxxxxxx, with a copy to XxXxxxx, Xxxxxxxx & Xxxxxxxx, P.C., 3550
Lincoln Plaza, 000 X. Xxxxx, Xxxxxx, Xxxxx 00000, Attention: Xxxxxx X. Xxxxxxxx; if to the Selling
Stockholder, at the address of the Attorney-in-Fact as set forth in the Power of Attorney, or in
each case to such other address as the person to be notified may have requested in writing. Any
party to this Agreement may change such address for notices by sending to the parties to this
Agreement written notice of a new address for such purpose.
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12. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and assigns and the
controlling persons, officers and directors referred to in Section 6. Nothing in this Agreement is
intended or shall be construed to give to any other person, firm or corporation any legal or
equitable remedy or claim under or in respect of this Agreement or any provision herein contained.
The term “successors and assigns” as herein used shall not include any purchaser, as such
purchaser, of any of the Securities from any of the several Underwriters.
13. Absence of Fiduciary Relationship. The Company acknowledges and agrees that: (a) the
Representatives have been retained solely to act as an underwriter in connection with the sale of
the Securities and that no fiduciary, advisory or agency relationship between the Company and the
Representatives have been created in respect of any of the transactions contemplated by this
Agreement, irrespective of whether the Representatives have advised or are advising the Company on
other matters; (b) the price and other terms of the Securities set forth in this Agreement were
established by the Company following discussions and arms-length negotiations with the
Representatives and the Company is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (c) it
has been advised that the Representatives and their affiliates are engaged in a broad range of
transactions which may involve interests that differ from those of the Company and that the
Representatives have no obligation to disclose such interest and transactions to the Company by
virtue of any fiduciary, advisory or agency relationship; (d) it has been advised that the
Representatives are acting, in respect of the transactions contemplated by this Agreement, solely
for the benefit of the Representatives and the other Underwriters, and not on behalf of the
Company; (e) it waives to the fullest extent permitted by law, any claims it may have against the
Representatives for breach of fiduciary duty or alleged breach of fiduciary duty in respect of any
of the transactions contemplated by this Agreement and agrees that the Representatives shall have
no liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim on
behalf of or in right of the Company, including stockholders, employees or creditors of the
Company.
14. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
15. Counterparts. This Agreement may be executed in one or more counterparts and, if executed
in more than one counterpart, the executed counterparts shall each be deemed to be an original and
all such counterparts shall together constitute one and the same instrument.
[Signature Page Follows]
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Please sign and return to the Company the enclosed duplicates of this letter whereupon this
letter will become a binding agreement between the Company, the Selling Stockholder and the several
Underwriters in accordance with its terms.
| Very truly yours, | ||||||
| Hallmark Financial Services, Inc. | ||||||
| By | ||||||
| President | ||||||
| Selling Stockholder | ||||||
| By | ||||||
| [As the managing member of Newcastle Capital Group LLC, as the general partner of Newcastle Capital Management, L.P., as the general partner of Newcastle Partners, L.P.] | ||||||
| Confirmed as of the date first above mentioned, on behalf of themselves and the other several Underwriters named in Schedule II hereto. | ||||||
| Xxxxx Xxxxxxx & Co. | ||||||
By |
||||||
| Managing Director | ||||||
SCHEDULE I
Selling Stockholder
| Number of | Maximum Number of | |||
| Firm Shares | Option Shares | |||
| Name | to be Sold | Subject to Option | ||
Newcastle Partners, L.P.
|
[ ] | [ ] | ||
Total
|
[ ] | [ ] | ||
SCHEDULE II
| Underwriter | Number of Firm Shares (1) | |
Xxxxx Xxxxxxx & Co.
|
[ ] | |
Xxxxxxx Xxxxx & Company, L.L.C.
|
[ ] | |
Xxxxx, Xxxxxxxx & Xxxxx, Inc.
|
[ ] | |
Xxxxxxx Xxxxx & Associates, Inc.
|
[ ] | |
Total
|
[ ] | |
| (1) | The Underwriters may purchase up to an additional [ ] Option Shares, to the extent the option described in Section 3(b) of the Agreement is exercised, in the proportions and in the manner described in the Agreement. |
SCHEDULE III
Issuer General Free Writing Prospectuses
SCHEDULE IV
Non-Officer/Director Persons Delivering a Lock-up Agreement
Newcastle Partners, L.P.
Newcastle Special Opportunity Fund I, L.P.
Newcastle Special Opportunity Fund II, L.P.
Newcastle Special Opportunity Fund I, L.P.
Newcastle Special Opportunity Fund II, L.P.
Exhibit A
Form of Lock-up Agreement
(attached)
