▇▇▇▇▇ FINANCIAL
COMMON STOCK
(PAR VALUE $ .01 PER SHARE)
UNDERWRITING AGREEMENT
- , 1997
▇▇▇▇▇▇▇, Sachs & Co.,
Conning & Company,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, ▇▇▇▇▇ & Co.,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
Ladies and Gentlemen:
▇▇▇▇▇ Financial, a Delaware corporation (the "Company"), proposes, subject
to the terms and conditions stated herein, to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of - shares of
common stock, par value $.01 per share ("Stock"), of the Company and, at the
election of the Underwriters, up to - additional shares of Stock, and the
stockholder of the Company named in Schedule II hereto (the "Selling
Stockholder" proposes, subject to the terms and conditions stated herein, to
sell to the Underwriters an aggregate of 54,902 shares of Stock. The aggregate
of - shares to be sold by the Company and the Selling Stockholder is herein
called the "Firm Shares" and the aggregate of - additional shares to be sold by
the Company is herein called the "Optional Shares". The Firm Shares and the
Optional Shares that the Underwriters elect to purchase pursuant to Section 2
hereof are herein collectively called the "Shares". The merger of ▇▇▇▇▇
Financial, a California corporation and the predecessor corporation of the
Company, with and into the Company is herein referred to as the "Reincorporation
Merger".
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333--) (the "Initial
Registration Statement") in respect of the Shares has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such form; other
than a registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Act"), which became effective upon
filing, no other document with respect to the Initial Registration
Statement has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration Statement, if
any, has been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a) of
the rules and regulations of the Commission under the Act is hereinafter called
a "Preliminary Prospectus"); the various parts of the Initial Registration
Statement and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 6(a) hereof and deemed by virtue of Rule 430A under the
Act to be part of the Initial Registration Statement at the time it was declared
effective or such part of the Rule 462(b) Registration Statement, if any, became
or hereafter becomes effective, each as amended at the time such part of the
registration statement became effective, is hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus";
(ii) 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, conformed in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through ▇▇▇▇▇▇▇, Sachs & Co. expressly for use therein;
(iii) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the rules and regulations of the Commission thereunder and do not and will
not, as of the applicable effective date as to the Registration Statement and
any amendment thereto, and as of the applicable filing date as to the Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED, HOWEVER, that
this representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing to
the Company by an Underwriter through ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. expressly for use
therein;
(iv) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included in the Prospectus
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
there has not been (x) any material addition, or any development involving a
prospective material addition, to the Company's consolidated reserve for unpaid
losses and loss adjustment expenses, (y) any change in the capital stock of the
Company or any of its subsidiaries or any increase in the short-term or
long-term debt of the Company or any of its subsidiaries (except for the
retirement of 1,499 shares of Stock in July 1997)
2
or (z) any material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations (in the case
of financial position, stockholders' equity and results of operations considered
on either a statutory or generally accepted accounting principles ("GAAP")
basis) of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus;
(v) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries;
(vi) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as a
foreign corporation for the transaction of business or licensed as an insurance
company and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to require
such qualification or license, or is subject to no material liability or
disability by reason of the failure to be so qualified or licensed in any such
jurisdiction; and each subsidiary of the Company has been duly incorporated and
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority (corporate and other) to
own its properties and conduct its business as described in the Prospectus, and
has been duly qualified for the transaction of business or licensed as an
insurance company under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such qualification
or license, or is subject to no material liability or disability by reason of
the failure to be so qualified or licensed in any such jurisdiction;
(vii) Each subsidiary of the Company is duly licensed or authorized as an
insurer or insurance agency or third-party administrator in each jurisdiction
where it is required to be so licensed or authorized to conduct its business as
described in the Prospectus, or is subject to no material liability or
disability by reason of the failure to be so licensed or authorized in any such
jurisdiction; the Company and each of its subsidiaries have made all required
filings under applicable insurance holding company statutes; the Company and
each of its subsidiaries have all other necessary authorizations, approvals,
orders, consents, certificates, permits, registrations or qualifications of and
from all insurance regulatory authorities to conduct its businesses as described
in the Prospectus, or is subject to no material liability or disability by
reason of the failure to have such authorizations, approvals, orders, consents,
licenses, certificates, permits, registrations or qualifications; and none of
the Company or any of its subsidiaries has received any notification from any
insurance regulatory authority to the effect that any additional authorization,
approval, order, consent, license, certificate, permit, registration or
qualification from such insurance regulatory authority is needed to be obtained
by any of the Company or its subsidiaries in any case where it could be
reasonably expected that (x) the Company or its subsidiaries would in fact be
required either to obtain any such additional authorization, approval, order,
consent, license, certificate, permit, registration or qualification, or cease
or otherwise limit writing certain business
3
and (y) the failure to obtain such authorization, approval, order, consent,
license, certificate, permit, registration or qualification or the limiting of
such business would have a material adverse effect on the business, financial
position or results of operations of the Company and its subsidiaries;
(viii) Otherwise than as set forth in the Prospectus, each subsidiary of
the Company is in compliance with the requirements of the insurance laws and
regulations of its state of incorporation and the insurance laws and regulations
of other jurisdictions which are applicable to such subsidiary, and has filed
all notices, reports, documents or other information required to be filed
thereunder, except where the failure to so comply or file would not have a
material adverse effect on the Company and its subsidiaries;
(ix) Without limitation of the foregoing, the Company and its
subsidiaries, as applicable, have filed all notices, reports, documents or other
information required to be filed pursuant to, and have obtained all
authorizations, approvals, orders, consents, licenses, certificates, permits,
registrations or qualifications required to be obtained under, and have
otherwise complied with all requirements of, all insurance laws and regulations
applicable to the Company and its subsidiaries in connection with the
Reincorporation Merger and the issuance and sale by the Company of the Shares
and the other transactions herein contemplated, in each case other than such
filings, authorizations, approvals, orders, consents, licenses, certificates,
permits, registrations or qualifications which (individually or in the
aggregate) the failure to make, obtain or comply with (x) would not have a
material adverse effect on the Company and its subsidiaries and (y) would not
affect the validity, performance or consummation of the transactions
contemplated by this Agreement or the Reincorporation Merger;
(x) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and conform to the description of the Stock contained in the Prospectus; and all
of the issued shares of capital stock of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and (except for directors' qualifying shares) are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities or claims;
(xi) The Shares have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(xii) The Reincorporation Merger, the issue and sale of the Shares by the
Company and the compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated did not
or will not, as applicable, conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will such action result
in any violation of the provisions of the Certificate of Incorporation or
By-laws of the Company or any of its subsidiaries or any statute or any order,
rule or regulation of any court or insurance regulatory authority or other
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties; and no consent, approval,
authorization, order, license, certificate, permit, registration or
qualification of or with any such court or insurance regulatory authority or
other governmental agency or body is or was required for the
4
Reincorporation Merger, the issue and sale of the Shares or the consummation by
the Company of the transactions contemplated by this Agreement, except (w) those
which have been obtained; (x) the registration under the Act of the Shares and
such consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters; (y) those relating
to the acquisition of 10% or more of the aggregate number of shares of Stock to
be outstanding upon the consummation of the transactions contemplated by this
Agreement by any person or affiliated persons (other than the purchase and sale
of the shares of Stock by the Underwriters pursuant to this Agreement); or (z)
such consents, approvals, authorizations, orders, licenses, certificates,
permits, registrations or qualifications which (individually or in the
aggregate) the failure to make, obtain or comply with (A) would not have a
material adverse effect on the Company and its subsidiaries and (B) would not
affect the validity, performance or consummation of the transactions
contemplated by this Agreement or the Reincorporation Merger;
(xiii) Neither the Company nor any of its subsidiaries is in violation
of its Certificate or Articles of Incorporation or By-laws or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement,
lease or other agreement or instrument to which it is a party or by which it or
any of its properties may be bound;
(xiv) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a summary
of the terms of the Stock, and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing to the
Company by an Underwriter through ▇▇▇▇▇▇▇, Sachs & Co. expressly for use
therein;
(xv) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its subsidiaries
is a party or of which any property of the Company or any of its subsidiaries is
the subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material adverse
effect on the current or future consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries; and, to the
best of the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(xvi) The Company is not and, after giving effect to the offering and sale
of the Shares, will not be an "investment company" or an entity "controlled" by
an "investment company", as such terms are defined in the Investment Company Act
of 1940, as amended (the "Investment Company Act"); and
(xvii) KPMG Peat Marwick LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
(b) The Selling Stockholder represents and warrants to, and agrees with,
each of the Underwriters and the Company that:
5
(i) All consents, approvals, authorizations and orders necessary
for the execution and delivery by the Selling Stockholder of this
Agreement, and the Election, the Power of Attorney and the Custody
Agreement hereinafter referred to, and for the sale and delivery of the
Shares to be sold by the Selling Stockholder hereunder, have been obtained;
and the Selling Stockholder has full right, power and authority to enter
into this Agreement, the Election, the Power-of-Attorney and the Custody
Agreement and to sell, assign, transfer and deliver the Shares to be sold
by the Selling Stockholder hereunder;
(ii) The sale of the Shares to be sold by the Selling Stockholder
hereunder and the compliance by the Selling Stockholder with all of the
provisions of this Agreement, the Election, the Power of Attorney and the
Custody Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Selling Stockholder is a party
or by which the Selling Stockholder is bound or to which any of the
property or assets of the Selling Stockholder is subject, nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Selling Stockholder or any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Selling Stockholder or the property of the
Selling Stockholder;
(iii) The Selling Stockholder has good and valid title to the Warrant
hereinafter referred to, free and clear of all liens, encumbrances,
equities or claims; immediately prior to the First Time of Delivery (as
defined in Section 5 hereof) the Selling Stockholder will have good and
valid title to the Shares to be sold by the Selling Stockholder hereunder,
free and clear of all liens, encumbrances, equities or claims; and, upon
delivery of such Shares and payment therefor pursuant hereto, good and
valid title to such Shares, free and clear of all liens, encumbrances,
equities or claims, will pass to the several Underwriters;
(iv) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted 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 Shares;
(v) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by the Selling
Stockholder expressly for use therein, such Preliminary Prospectus and the
Registration Statement did, and the Prospectus and any further amendments
or supplements to the Registration Statement and the Prospectus, when they
become effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and will not contain 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;
(vi) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, the Selling Stockholder will deliver to you prior to or at
the First Time of Delivery (as hereinafter defined) a properly completed
and executed United
6
States Treasury Department Form W-9 (or other applicable form or statement
specified by Treasury Department regulations in lieu thereof);
(vii) A Warrant Certificate of the Company (the "Warrant")
exercisable for all of the Shares to be sold by the Selling Stockholder
hereunder and an Election to Purchase (the "Election") designating the
number of Shares as to which the Warrant is to be exercised duly executed
by the Selling Stockholder have been placed in custody under a Custody
Agreement, in the form heretofore furnished to you (the "Custody
Agreement"), duly executed and delivered by the Selling Stockholder to -,
as custodian (the "Custodian"), and the Selling Stockholder has duly
executed and delivered a Power of Attorney, in the form heretofore
furnished to you (the "Power of Attorney"), appointing the persons
indicated in Schedule II hereto, and each of them, as the Selling
Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with authority to
execute and deliver this Agreement on behalf of the Selling Stockholder, to
determine the purchase price to be paid by the Underwriters to the Selling
Stockholder as provided in Section 2 hereof, to authorize the delivery of
the Shares to be sold by the Selling Stockholder hereunder and otherwise to
act on behalf of the Selling Stockholder in connection with the
transactions contemplated by this Agreement and the Custody Agreement; and
(viii) The Warrant, the Election and the Shares to be issued upon
the exercise of the Warrant held in custody for the Selling Stockholder
under the Custody Agreement are subject to the interests of the
Underwriters hereunder; the arrangements made by the Selling Stockholder
for such custody, and the appointment by the Selling Stockholder of the
Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable;
the obligations of the Selling Stockholder hereunder shall not be
terminated by operation of law, whether by the dissolution of the Selling
Stockholder or by the occurrence of any other event; if the Selling
Stockholder should be dissolved, or if any other such event should occur,
before the delivery of the Shares hereunder, certificates representing the
Shares shall be delivered by or on behalf of the Selling Stockholder in
accordance with the terms and conditions of this Agreement and of the
Custody Agreement; and actions taken by the Attorneys-in-Fact pursuant to
the Power of Attorney shall be as valid as if such dissolution or other
event had not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such
dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the Company
and the Selling Stockholder agree, severally and not jointly, to sell to each of
the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company and the Selling Stockholder, at a purchase
price per share of $_______, the number of Firm Shares (to be adjusted by you so
as to eliminate fractional shares ) determined by multiplying the aggregate
number of Shares to be sold by the Company and the Selling Stockholder as set
forth opposite their respective names in Schedule II hereto by a fraction, the
number of which is the aggregate number of Firm Shares to be purchased by such
Underwriter as set forth opposite the name of such Underwriter in Schedule I
hereto and the denominator of which is the aggregate number of Firm Shares by
all of the Underwriters from the Company and the Selling Stockholder hereunder
and (b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Shares as provided below, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the purchase price
per share set forth in clause (a) of this Section 2, that portion of the number
of Optional
7
Shares as to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional shares) determined by multiplying such number
of Optional Shares by a fraction, the numerator of which is the maximum number
of Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to - Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering overallotments in
the sale of the Firm Shares. Any such election to purchase Optional Shares may
be exercised only by written notice from you to the Company, given within a
period of 30 calendar days after the date of this Agreement, setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 5 hereof) or,
unless you and the Company otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice.
3. The Company hereby confirms its engagement of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. as,
and ▇▇▇▇▇▇▇, Sachs & Co. hereby confirms its agreement with the Company to
render services as, a "qualified independent underwriter" within the meaning of
Rule 2720 of the National Association of Securities Dealers, Inc. (the "NASD")
with respect to the offering and sale of the Shares. ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., in
its capacity as qualified independent underwriter and not otherwise, is referred
to herein as the "QIU". As compensation for the services of the QIU hereunder,
the Company agrees to pay the QIU $10,000 at the First Time of Delivery.
4. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
5. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as ▇▇▇▇▇▇▇, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholder shall be delivered by or on
behalf of the Company and the Selling Stockholder to ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., for
the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer of same day funds.
The Company will cause the certificates representing the Shares to be made
available for checking and packaging at least twenty-four hours prior to the
Time of Delivery (as defined below) with respect thereto at the office of
▇▇▇▇▇▇▇, Sachs & Co., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 7:00 a.m., Los Angeles time, on ________, 1997 or such other
time and date as ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., the Company and the Selling Stockholder
may agree upon in writing, and, with respect to the Optional Shares, 7:00 a.m.,
Los Angeles time, on the date specified by ▇▇▇▇▇▇▇, Sachs & Co. in the written
notice given by ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. of the Underwriters' election to purchase
such Optional Shares, or such other time and date as ▇▇▇▇▇▇▇, Sachs & Co. and
the Company may agree upon in writing. Such time and date for delivery of the
Firm Shares is herein called the "First Time of Delivery", such time and date
for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 8 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 8(m) hereof, will be delivered at the
8
offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ (the "Closing Location"), and the Shares will be
delivered at the Designated Office, all at such Time of Delivery. A
meeting will be held at the Closing Location at 4:00 p.m., Los Angeles
time, on the New York Business Day next preceding such Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to
the preceding sentence will be available for review by the parties hereto.
For the purposes of this Section 5, "New York Business Day" shall mean each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by
law or executive order to close.
6. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof; to advise
you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m. New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to
time, to furnish the Underwriters with copies of the Prospectus in New York
City in such quantities as you may from time to time reasonably request,
and, if the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time any
event shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading, or, if for any
other reason it shall be necessary during such period to amend or
supplement the Prospectus in order to comply with the Act, to notify you
and upon your request to prepare and furnish without charge to each
Underwriter and to any dealer in
9
securities as many copies as you may reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the time of issue
of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earning statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations thereunder (including, at the option of the Company,
Rule 158);
(e) During the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, or file or cause to
be filed with the Commission a registration statement (other than a
registration statement on Form S-8) with respect to, except as provided
hereunder any securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities or exercise of
warrants outstanding as of, the date of this Agreement), without your prior
written consent;
(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on The
Nasdaq National Market ("Nasdaq");
10
(j) To file with the Commission such reports on Form SR as may be
required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the
date of this Agreement, and the Company shall at the time of filing either
pay to the Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Act.
7. The Company and the Selling Stockholder covenant and agree with one
another and with the several Underwriters that (a) the Company will pay or cause
to be paid the following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Shares under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in Section
6(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey (iv) all fees and expenses in connection with listing the Shares
on the Nasdaq; (v) the filing fees incident to, and the fees and disbursements
of counsel for the Underwriters in connection with, securing any required review
by the National Association of Securities Dealers, Inc. of the terms of the sale
of the Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; (viii) any fees and expenses of one
counsel for the Selling Stockholder, (ix) fees and expenses of the
Attorneys-in-Fact and the Custodian, and (x) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section; and (b) the Selling Stockholder will
pay or cause to be paid all costs and expenses incident to the performance of
the Selling Stockholder's obligations hereunder which are not otherwise
specifically provided for in this Section, including all expenses and taxes
incident to the sale and delivery of the Shares to be sold by the Selling
Stockholder to the Underwriters hereunder. In connection with the preceding
sentence, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. agrees to pay New York State stock transfer tax,
and the Selling Stockholder agrees to reimburse ▇▇▇▇▇▇▇, Sachs & Co. for
associated carrying costs if such tax payment is not rebated on the day of
payment and for any portion of such tax payment not rebated. It is understood,
however, that the Company shall bear, and the Selling Stockholder shall not be
required to pay or to reimburse the Company for, the cost of any other matters
not directly relating to the sale and purchase of the Shares pursuant to this
Agreement, and that, except as provided in this Section, and Sections 10 and 13
hereof, the Underwriters will pay all of their own costs and expenses, including
the fees of their counsel, stock transfer taxes on resale of any of the Shares
by them, and any advertising expenses connected with any offers they may make.
8. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholder herein are, at and as of such Time of
Delivery, true and correct, the condition that each of the Company, and the
11
Selling Stockholder shall have performed all of its obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 6(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become effective
by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no
stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all requests
for additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of each such opinion is
attached as Annex II(a) hereto), dated such Time of Delivery, with respect
to the incorporation of the Company, the validity of the Shares being
delivered at such Time of Delivery, the Registration Statement, the
Prospectus, and other related matters as you may reasonably request, and
such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the Company and the
Selling Stockholder, shall have furnished to you their written opinion (a
draft of each such opinion is attached as Annex II(b) hereto), dated such
Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the State of Delaware, with power and authority (corporate and
other) to own its properties and conduct its business as
described in the Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of
capital stock of the Company (including the Shares being
delivered at such Time of Delivery) have been duly and validly
authorized and issued and are fully paid and non-assessable;
and the Shares conform to the description of the Stock
contained in the Prospectus;
(iii) This Agreement has been duly authorized, executed and
delivered by the Company;
(iv) An Election, a Power-of-Attorney and a Custody
Agreement have been duly authorized, executed and delivered by
the Selling Stockholder and constitute valid and binding
agreements of the Selling Stockholder in accordance with their
terms;
(v) This Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Stockholder; and the
sale of the Shares to be sold by the Selling Stockholder
hereunder and the compliance by the Selling Stockholder with
all of the provisions of this Agreement, the Election, the
Power-of-Attorney and the Custody Agreement and the
consummation of the transactions herein and therein
12
contemplated will not result in any violation of the provisions
of the Certificate of Incorporation or By-laws of the Selling
Stockholder;
(vi) The issue and sale of the Shares being delivered at
such Time of Delivery by the Company and the compliance by the
Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated (including
consummation of the Reincorporation Merger) will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which the Company or any of
its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject,
nor will such action result in any violation of the provisions
of the Certificate of Incorporation or By-laws of the Company
or any statute or any order, rule or regulation known to such
counsel of any court or regulatory authority or other
governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties
(other than those made or established by any insurance official
or regulatory authority as to which no opinion need be given),
in each case other than such conflicts, breaches, violations or
defaults which, individually or in the aggregate, (x) would not
have a material adverse effect on the Company and its
subsidiaries and (y) would not affect the validity, performance
or consummation of the transactions contemplated by this
Agreement or the Reincorporation Merger, nor will such actions
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company (such counsel being
entitled to rely in respect of the opinion in this clause upon
a certificate of an officer of the Company in respect of
matters of fact, provided that such counsel shall state that
both you and they are justified in relying upon such
certificate);
(vii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body (other than any insurance
regulatory authority, as to which no opinion need be given) is
required for the issue and sale of the Shares or the
consummation by the Company or the Selling Stockholder of the
transactions contemplated by this Agreement, except the
registration under the Act of the Shares, and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by
the Underwriters;
(viii) Neither the Company nor any of its subsidiaries is
in violation of its Certificate of Incorporation or By-laws or
in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by
which it or any of its properties may be bound, in each case
other than such violations or defaults which, individually or
in the aggregate, (x) would not have a material adverse effect
on the Company and its subsidiaries and (y) would not affect
the validity, performance or consummation of the transactions
contemplated by this Agreement or the Reincorporation Merger,
nor will such actions result in any violation of the provisions
of the Certificate of Incorporation or By-Laws of the Company;
13
(ix) Immediately prior to the First Time of Delivery, the
Selling Stockholder had good and valid title to the Shares to
be sold at the First Time of Delivery by the Selling
Stockholder under this Agreement, free and clear of all liens,
encumbrances, equities or claims, and full right, power and
authority to sell, assign, transfer and deliver the Shares to
be sold by the Selling Stockholder hereunder (such counsel
being entitled to rely in respect of the opinion in this clause
without independent investigation upon a certificate of the
Selling Stockholder in respect of matters of fact as to the
ownership of, and liens, encumbrances, equities or claims on
the Shares sold by the Selling Stockholder);
(x) Good and valid title to such Shares, free and clear
of all liens, encumbrances, equities or claims, has been
transferred to each of the several Underwriters who have
purchased such Shares in good faith and without notice of any
such lien, encumbrance, equity or claim or any other adverse
claim within the meaning of the Uniform Commercial Code;
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport
to constitute a summary of the terms of the Stock, and under
the caption "Underwriting", insofar as they purport to describe
the provisions of the laws and documents referred to therein,
are accurate, complete and fair;
(xii) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms
are defined in the Investment Company Act;
(xiii) The Registration Statement and the Prospectus and
any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which
such counsel need not comment) comply as to form in all
material respects with the requirements of the Act and the
rules and regulations thereunder; and
Such counsel shall also state that although they do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, except for those
referred to in the opinion in subsection (xi) of this Section 8(c), they
have no reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need not comment) contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need not comment) contained an untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time of Delivery,
either the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need not comment) contains an untrue
statement of a material fact or omits to state a material fact
14
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and they do not know of any
amendment to the Registration Statement required to be filed or of any
contracts or other documents of a character required to be filed as an
exhibit to the Registration Statement or required to be described in the
Registration Statement or the Prospectus which are not filed or described
as required;
(d) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President and General Counsel of
the Company, shall have furnished to you his written opinion (a draft of
such opinion is attached as Annex II(c) hereto), dated such Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) Each of ▇▇▇▇▇ Insurance Company ("PICO"), ▇▇▇▇▇
Assurance Company, Pan American Underwriters, Inc., Pan
American Underwriters Insurance Agents & Brokers, Inc., Pan
Pacific Benefit Administrators, Inc. and ▇▇▇▇▇ Trading Company
Insurance Agents & Brokers, Inc. has been duly incorporated and
is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation; and all of the
issued shares of capital stock of each such subsidiary of the
Company have been duly and validly authorized and issued, are
fully paid and non-assessable, and (except for directors'
qualifying shares) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims (such counsel being entitled to advise you that his
opinion in this clause with respect to matters pertaining to
state laws other than those of California is based upon
examinations of applicable statutes and the published rules and
regulations, if any, of governmental authorities administering
such laws, as reported in the unofficial compilations thereof
available to him, and such counsel has not obtained any special
ruling with regard to such matters from any governmental
authority);
(ii) The Company has been duly qualified as a foreign
corporation for the transaction of business or is licensed as
an insurance company and is in good standing under the laws of
each jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification or
license or is subject to no material liability or disability by
reason of failure to be so qualified or licensed in any such
jurisdiction (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel and
in respect of matters of fact upon certificates of officers of
the Company, provided that such counsel shall state that he
believes that both you and he are justified in relying upon
such opinions and certificates);
(iii) The Company and its subsidiaries have good and
marketable title in fee simple to all real property owned by
them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of
such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries
(in giving the opinion in this clause, such counsel may state
that no examination of record titles for the purpose of such
opinion has been made, and that
15
he is relying upon a general review of the titles of the
Company and its subsidiaries, upon opinions of local counsel
and abstracts, reports and policies of title companies rendered
or issued at or subsequent to the time of acquisition of such
property by the Company or its subsidiaries, upon opinions of
counsel to the lessors of such property and, in respect to
matters of fact, upon certificates of officers of the Company
or its subsidiaries, provided that such counsel shall state
that he believes that both you and he are justified in relying
upon such opinions, abstracts, reports, policies and
certificates);
(iv) Each subsidiary of the Company is duly licensed or
authorized as an insurer or insurance agent or third-party
administrator in each jurisdiction where it is required to be
so licensed or authorized to conduct its business as described
in the Prospectus, or is subject to no material liability or
disability by reason of the failure to be so licensed or
authorized in any such jurisdiction; the Company and each of
its subsidiaries have made all required filings under
applicable insurance holding company statutes; each of the
Company and each of its subsidiaries has all other necessary
authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations or qualifications of and
from all insurance regulatory authorities to conduct their
respective businesses as described in the Prospectus, or is
subject to no material liability or disability by reason of the
failure to have such authorizations, approvals, orders,
consents, licenses, certificates, permits, registrations or
qualifications; and to the best of such counsel's knowledge,
none of the Company or any of its subsidiaries has received any
notification from any insurance regulatory authority to the
effect that any additional authorization, approval, order,
consent, license, certificate, permit, registration or
qualification from such insurance regulatory authority is
needed to be obtained by any of the Company or any of its
subsidiaries in any case where it could be reasonably expected
that (x) the Company or any of its subsidiaries would in fact
be required either to obtain any such additional authorization,
approval, order, consent, license, certificate, permit,
registration or qualification or cease or otherwise limit
writing certain business and (y) the failure to obtain such
authorization, approval, order, consent, license, certificate,
permit, registration or qualification or limiting such business
would have a material adverse effect on the business, financial
position or results of operations of the Company and its
subsidiaries;
(v) To the best of such counsel's knowledge, each
subsidiary of the Company is in compliance with the
requirements of the insurance laws and regulations of its state
of incorporation and the insurance laws and regulations of
other jurisdictions which are applicable to such subsidiary,
and has filed all notices, reports, documents or other
information required to be filed thereunder, or is subject to
no material liability or disability by reason of the failure to
so comply or file (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local
counsel and in respect of matters of fact upon certificates of
officers of the Company, provided that such counsel shall state
that he believes that both you and he are justified in relying
upon such opinions and certificates);
(vi) All statements made in the Prospectus with respect to
existing and proposed federal and state statutes, regulations
and rules, and, to the best of such counsel's knowledge, with
respect to regulatory policies and practices, fairly and
accurately
16
present the information set forth therein in all material
respects and the statements in the Prospectus under the caption
"Management -- Employee Stock Ownership Plan", insofar as they
purport to describe the provisions of the laws and documents
referred to therein and the ▇▇▇▇▇ Financial and Subsidiaries
Employee Stock Ownership Plan (the "ESOP") and the ▇▇▇▇▇
Financial and Subsidiaries Employee Stock Ownership Trust,
fairly and accurately present the information set forth therein
in all material respects (such counsel being entitled to rely
in respect of the opinion in this clause upon opinions of
regulatory counsel, provided that such counsel shall state that
he believes that both you and he are justified in relying upon
such opinions);
(vii) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a material adverse
effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the
Company and its subsidiaries; and, to the best of such
counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by
others;
(viii) The issue and sale of the Shares being delivered
at such Time of Delivery by the Company and the compliance by
the Company with all of the provisions of this Agreement and
the consummation of the Reincorporation Merger and the other
transactions herein contemplated did not or will not, as
applicable, conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which
the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any
of the property or assets of the Company or any of its
subsidiaries is subject, and such action did not or will not,
as applicable, result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any
statute or any order, rule or regulation known to such counsel
of any court or insurance regulatory authority or other
governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties,
in each case other than such conflicts, breaches, violations or
defaults which, individually or in the aggregate, (x) would not
have a material adverse effect on the Company and its
subsidiaries and (y) would not affect the validity,
performance or consummation of the transactions contemplated by
this Agreement or the Reincorporation Merger, nor will such
actions result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company; and
(ix) The Company and its subsidiaries, as applicable, have
filed all notices, reports, documents or other information
required to be filed pursuant to, and have obtained all
authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations or qualifications required
to be obtained by the Company and its subsidiaries under, and
have otherwise complied with all requirements of, all insurance
laws and regulations applicable to the Company and its
subsidiaries in connection with the Reincorporation Merger and
the issuance and sale by the
17
Company of the Shares; and, except as have been obtained
pursuant to the foregoing clause, no filing, authorization,
approval, order, consent, license, certificate, permit,
registration or qualification of or with any court, insurance
regulatory agency or other governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any
of their properties, is required for the issuance and sale by
the Company of the Shares, the Reincorporation Merger or the
consummation of the other transactions contemplated by this
Agreement, except (x) the registration under the Act of the
Shares, and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws (other than state insurance
securities laws of the state of California) in connection with
the purchase and distribution of the Shares by the
Underwriters; (y) those relating to the acquisition of 10% or
more of the aggregate number of shares of Stock to be
outstanding upon the consummation of the transactions
contemplated by this Agreement by any person or affiliated
persons (other than the purchase and sale of the shares of
Stock by the Underwriters pursuant to this Agreement) or (z)
such filings, authorizations, approvals, orders, consents,
licenses, certificates, permits, registrations or
qualifications which (individually or in the aggregate) the
failure to make, obtain or comply with (A) would not have a
material adverse effect on the Company and its subsidiaries and
(B) would not affect the validity, performance or consummation
of the transactions contemplated by this Agreement or the
Reincorporation Merger.
Such counsel shall also state that although he does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, except for those
referred to in the opinion in subsection (vi) of this Section 8(d), he has
no reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need not comment) contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need not comment) contained an untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time of Delivery,
either the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related schedules
therein, as to which such counsel need not comment) contains an untrue
statement of a material fact or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; and he does not know of any amendment to
the Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as required;
(e) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., New York City time, on the effective date
of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time
18
of Delivery, KPMG Peat Marwick LLP shall have furnished to you a letter or
letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annex I hereto
(the executed copy of the letter delivered prior to the execution of this
Agreement is attached as Annex I(a) hereto and a draft of the form of
letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(f)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been (x) any addition, or any development
involving a prospective addition, to the Company's consolidated reserve for
unpaid losses and loss adjustment expenses, (y) any change in the capital
stock of the Company or any of its subsidiaries or any increase in
short-term or long-term debt of the Company or any of its subsidiaries or
(z) any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations (in the case of financial
position, stockholders' equity and results of operations considered on
either a statutory or GAAP basis) of the Company and its subsidiaries,
otherwise than as set forth or contemplated in the Prospectus, the effect
of which, in any such case described in Clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded PICO's financial strength or claims paying
ability by A.M. Best Company and (ii) A.M. Best Company shall not have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of PICO's financial strength or claims
paying ability;
(h) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on Nasdaq; (ii) a
suspension or material limitation in trading in the Company's securities on
Nasdaq; (iii) a general moratorium on commercial banking activities
declared by Federal or New York or California State authorities; or (iv)
the outbreak or escalation of hostilities involving the United States or
the declaration by the United States of a national emergency or war, if the
effect of any such event specified in this Clause (iv) in the judgment of
the Representatives makes it impracticable or inadvisable to proceed with
the public offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(i) The Shares to be sold at such Time of Delivery shall have been
duly admitted for quotation on Nasdaq;
(j) On or prior to the date hereof, each executive officer and each
director of the Company, the ESOP and each person or entity set forth in
Schedule III hereto shall have furnished to you his or its executed written
agreement, in form and substance satisfactory to
19
you, that, during the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, or file or cause to
be filed with the Commission a registration statement (other than a
registration statement on Form S-8) with respect to, shares of Stock or any
securities of the Company that are substantially similar to the Shares,
including but not limited to any securities convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities, without your prior written consent,
except that the ESOP may distribute shares of Stock to participants in the
ESOP upon termination of such participants employment with the Company;
(k) The Company shall have complied with the provisions of Section
6(c) hereof with respect to the furnishing of Prospectuses on the New York
Business Day next succeeding the date of this Agreement; and
(l) The Company shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (f) of this Section and as to such other matters as
you may reasonably request.
9. (a) The Company will indemnify and hold harmless ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
Co., in its capacity as QIU, against any losses, claims, damages or liabilities,
joint or several, to which the QIU may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the QIU for any legal
or other expenses reasonably incurred by the QIU in connection with
investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through ▇▇▇▇▇▇▇, Sachs & Co. expressly for use therein;
(b) Promptly after receipt by the QIU under subsection (a) above of notice
of the commencement of any action, the QIU shall, if a claim in respect thereof
is to be made against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party shall not relieve it from any liability which
it may have to the QIU otherwise than under such subjection. In case any such
action shall be brought against the QIU and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to the QIU (who shall not, except with the consent of the
QIU, be counsel to the indemnifying party), and, after notice from the
indemnifying party to the QIU of its election so to assume the defense thereof,
the indemnifying party shall not be liable to the
20
QIU under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by the QIU, in connection with the
defense thereof other than reasonable costs of investigation. The indemnifying
party shall not, without the written consent of the QIU, effect the settlement
or compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the QIU is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the QIU from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
QIU.
(c) If the indemnification provided for in this Section 9 is unavailable
to or insufficient to hold harmless ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., in its capacity as
QIU, under subsection (a) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then the
indemnifying party shall contribute to the amount paid or payable by the QIU as
a result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the QIU on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the QIU failed to
give the notice required under subsection (b) above, then the Company shall
contribute to such amount paid or payable by the QIU in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the QIU on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the QIU 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, as set forth in the table on the cover page of the Prospectus,
bear to the fee payable to the QIU pursuant to Section 3 hereof. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the QIU on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the QIU agree that it would not be just
and equitable if contributions pursuant to this subsection (c) were determined
by PRO RATA allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this subsection
(c). The amount paid or payable by the QIU as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (c) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. 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.
(d) The obligations of the Company under this Section 9 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the QIU
within the meaning of the Act.
21
10. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through ▇▇▇▇▇▇▇, Sachs & Co. expressly for use therein.
(b) The Selling Stockholder will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by the
Selling Stockholder expressly for use therein; and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Each Underwriter will indemnify and hold harmless the Company and the
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or the Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. expressly for use therein; and will
reimburse the Company and the Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or the Selling Stockholder in
connection with investigating or defending any such action or claim as such
expenses are incurred.
22
(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 it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 10 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a),
(b) or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company, and the Selling Stockholder on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (d) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholder on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any 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 the 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 or the Selling
Stockholder on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company the Selling Stockholder and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were determined by PRO RATA allocation (even if
the
23
Underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this subsection (e). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (e), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(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 10 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
10 shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company or the Selling Stockholder within the meaning of the Act.
11. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholder shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholder that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholder notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholder shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholder as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Stockholder shall have the right to require
each non-defaulting
24
Underwriter to purchase the number of shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholder as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Stockholder shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company to sell the Optional Shares) shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company or the Selling Stockholder, except for the expenses
to be borne by the Company and the Selling Stockholder and the Underwriters as
provided in Section 7 hereof and the indemnity and contribution agreements in
Section 10 hereof; but nothing herein shall relieve a defaulting Underwriter
from liability for its default.
12. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholder and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or the Selling Stockholder, or any officer or
director or controlling person of the Company, or any controlling person of the
Selling Stockholder, and shall survive delivery of and payment for the Shares.
Anything herein to the contrary notwithstanding, the indemnity agreement of
the Company in subsection (a) of Section 10 hereof, the representations and
warranties in subsections (b) and (c) of Section 1 hereof and any
representation or warranty as to the accuracy of the Registration Statement or
the Prospectus contained in any certificate furnished by the Company pursuant to
Section 8 hereof, insofar as they may constitute a basis for indemnification for
liabilities (other than payment by the Company of expenses incurred or paid in
the successful defense of any action, suit or proceeding) arising under the Act,
shall not extend to the extent of any interest therein of a controlling person
or partner of an Underwriter who is a director, officer or controlling person of
the Company when the Registration Statement has become effective, except in each
case to the extent that an interest of such character shall have been determined
by a court of appropriate jurisdiction as not against public policy as expressed
in the Act. Unless in the opinion of counsel for the Company the matter has
been settled by controlling precedent, the Company will, if a claim for such
indemnification is asserted, submit to a court of appropriate jurisdiction the
question of whether such interest is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
25
13. If this Agreement shall be terminated pursuant to Section 11 hereof,
neither the Company nor the Selling Stockholder shall then be under any
liability to any Underwriter except as provided in Sections 7 and 10 hereof;
but, if for any other reason, any Shares are not delivered by or on behalf of
the Company and the Selling Stockholder as provided herein, the Company will
reimburse the Underwriters through you for all out-of-pocket expenses approved
in writing by you, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company and the Selling
Stockholder shall then be under no further liability to any Underwriter in
respect of the Shares not so delivered except as provided in Sections 7 and 10
hereof.
14. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. on behalf of you as the
representatives; and in all dealings with the Selling Stockholder hereunder, you
and the Company shall be entitled to rely upon any statement, request, notice or
agreement on behalf of such Selling Stockholder made or given by any or all of
the Attorneys-in-Fact for the Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of ▇▇▇▇▇▇▇, Sachs &
Co., ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Registration
Department; if to the Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for the Selling Stockholder at its
address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 10(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company or the Selling
Stockholder by you upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
15. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholder and, to the extent
provided in Sections 10 and 12 hereof, the officers and directors of the Company
and each person who controls the Company, the Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
16. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
17. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
26
If the foregoing is in accordance with your understanding, please sign and
return to us eight counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and the Selling Stockholder. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters, the form of which shall be
submitted to the Company and the Selling Stockholder for examination upon
request, but without warranty on your part as to the authority of the signers
thereof.
Any person executing and delivering this Agreement as Attorney-in-Fact for
the Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by the Selling Stockholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
▇▇▇▇▇ Financial
By:
---------------------------------
Name:
Title:
Prudential Securities Incorporated
By:
---------------------------------
Name:
As Attorney-in-Fact acting on behalf of
the Selling Stockholder
Accepted as of the date hereof:
▇▇▇▇▇▇▇, Sachs & Co.
Conning & Company
By:
-------------------------------
(▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.)
On behalf of each of the Underwriters
27
SCHEDULE I
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- --------------------
▇▇▇▇▇▇▇, Sachs & Co. . . . . . . .
Conning & Company. . . . . . . . .
Total . . . . . . . . . . -------------- ---------------
-------------- ---------------
-------------- ---------------
28
SCHEDULE II
Number of Optional
Total Number of Shares to be Sold if
Firm Shares Maximum Option
Underwriter to be Sold Exercised
----------- --------------- --------------------
The Company. . . . . . . . . . . . . .
The Selling Stockholder:
Prudential Securities Incorporated . 54,902 -----
-------------- ---------------
Total . . . . . . . . . . . .
-------------- ---------------
-------------- ---------------
-------------------------
(a) The ▇▇▇▇▇▇▇▇ Stockholder is represented by ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and has appointed * and
*, and each of them, as the Attorneys-in-Fact, for the Selling Stockholder.
29
SCHEDULE III
Conning Insurance Capital Limited Partnership II
Conning Insurance Capital International Partners II
Conning Insurance Capital Limited Partnership III
Conning Insurance Capital International Partners III, L.P.
Conning Corporation
RFE Investment Partners IV, L.P.
Saugatuck Capital Company
30
ANNEX I
Pursuant to Section 8(g) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the Act
and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement comply as
to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance with
standards established by the American Institute of Certified Public
Accountants of the unaudited consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have been
furnished to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon copies of which have been
separately furnished to the Representatives and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether the
unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects with
the applicable accounting requirements of the Act and the related published
rules and regulations, nothing came to their attention that cause them to
believe that the unaudited condensed consolidated financial statements do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
Company's audited consolidated financial statements for such five fiscal
years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
31
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial statements
included in the Prospectus) or any increase in the consolidated
short-term or long-term debt or consolidated reserve for unpaid losses
and loss adjustment expenses, or any decreases in consolidated fixed
income securities available for sale, consolidated total investments
or stockholders' equity, or any decrease in the unassigned funds
(surplus) or statutory capital of ▇▇▇▇▇ Insurance Company, or other
items specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the Prospectus,
32
except in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are described
in such letter; and
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of consolidated
net income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case
as compared with the comparable period of the preceding year and with
any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which
the Prospectus discloses have occurred or may occur or which are
described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(vi) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company and its subsidiaries, which
appear in the Prospectus, or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have
found them to be in agreement.
33