Exhibit 1.1
National Atlantic Holdings Corporation
6,650,000 Shares(a)
Common Stock
(No Par Value Per Share)
Underwriting Agreement
New York, New York
__________, 2005
Citigroup Global Markets Inc.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Securities LLC
▇▇▇▇▇▇▇ & Partners Securities, LLC
▇▇▇-▇▇▇▇, ▇▇▇▇▇▇ Inc.
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇ & Partners, L.P.
As Representatives of the several Underwriters,
c/o Citigroup Global Markets Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
National Atlantic Holdings Corporation, a corporation organized
under the laws of the State of New Jersey (the "Company"), proposes to sell to
the several underwriters named in Schedule I hereto (the "Underwriters"), for
whom you (the "Representatives") are acting as representatives, 5,985,000 shares
of Common Stock, no par value ("Common Stock") of the Company and The Ohio
Casualty Insurance Company (the "Selling Stockholder") proposes to sell to the
Underwriters 665,000 shares of Common Stock (said shares to be issued and sold
by the Company and shares to be sold by the Selling Stockholder collectively
being hereinafter called the "Underwritten Securities"). The Company and the
Selling Stockholder also propose to grant to the Underwriters an option to
purchase up to 897,750 and 99,750, respectively, additional shares of Common
Stock to cover over-allotments (the "Option Securities"; the Option Securities,
together with the Underwritten Securities, being hereinafter called the
"Securities"). To the extent there are no additional Underwriters listed on
Schedule I other than you, the term Representatives as used herein shall mean
you, as Underwriters, and the terms Representatives and Underwriters shall mean
either the singular or plural as the context requires. Certain terms used herein
are defined in Section 17 hereof.
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(a) Plus an option to purchase from the Company and the Selling
Stockholder, up to 997,500 additional Securities to cover over-allotments.
As part of the offering contemplated by this Agreement, Citigroup
Global Markets Inc. has agreed to reserve out of the Securities set forth
opposite its name on the Schedule I to this Agreement, up to 332,500 shares, for
sale to qualified general partners of independent agents who are partner agents
that own shares of the Common Stock (collectively, "Participants"), as set forth
in the Prospectus under the heading "Underwriting" (the "Directed Share
Program"). The Securities to be sold by Citigroup Global Markets Inc. pursuant
to the Directed Share Program (the "Directed Shares") will be sold by Citigroup
Global Markets Inc. pursuant to this Agreement at the public offering price. Any
Directed Shares not orally confirmed for purchase by any Participants by 8:00
A.M. New York City time on the business day following the date on which this
Agreement is executed will be offered to the public by Citigroup Global Markets
Inc. as set forth in the Prospectus.
1. Representations and Warranties.
(i) The Company represents and warrants to, and agrees with, each
Underwriter as set forth below in this Section 1.
(a) The Company has prepared and filed with the Commission a
registration statement (file number 333-117804) on Form S-1, including a
related preliminary prospectus, for registration under the Act of the
offering and sale of the Securities. The Company may have filed one or
more amendments thereto, including a related preliminary prospectus, each
of which has previously been furnished to you. The Company will next file
with the Commission one of the following: either (1) prior to the
Effective Date of such registration statement, a further amendment to such
registration statement (including the form of final prospectus) or (2)
after the Effective Date of such registration statement, a final
prospectus in accordance with Rules 430A and 424(b). In the case of clause
(2), the Company has included in such registration statement, as amended
at the Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in such
registration statement and the Prospectus. As filed, such amendment and
form of final prospectus, or such final prospectus, shall contain all Rule
430A Information, together with all other such required information, and,
except to the extent the Representatives shall agree in writing to a
modification, shall be in all substantive respects in the form furnished
to you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information
and other changes (beyond that contained in the latest Preliminary
Prospectus) as the Company has advised you, prior to the Execution Time,
will be included or made therein.
(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectus is delivered to the Underwriters for use in
connection with this offering, and first filed (if required) in accordance
with Rule 424(b) and on the Closing Date (as defined herein) and on any
date on which Option Securities are purchased, if such date is not the
Closing Date (a "settlement date"), the Prospectus (and any supplements
thereto) will, comply in all material respects
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with the applicable requirements of the Act and the rules thereunder; on
the Effective Date and at the Execution Time, the Registration Statement
did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading; and, on the
Effective Date, the Prospectus, if not filed pursuant to Rule 424(b), will
not, and on the date of any filing pursuant to Rule 424(b) and on the
Closing Date and any settlement date, the Prospectus (together with any
supplement thereto) will not, include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or
omitted from the Registration Statement, or the Prospectus (or any
supplement thereto) in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of any Underwriter
through the Representatives specifically for inclusion in the Registration
Statement or the Prospectus (or any supplement thereto).
(c) Each of the Company and its subsidiaries (the "Subsidiaries")
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it is chartered
or organized with full corporate power and authority to own or lease, as
the case may be, and to operate its properties and conduct its business as
described in the Prospectus, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification, except where the failure
to so qualify or be in good standing would not reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the
Subsidiaries, taken as a whole, whether or not arising from transactions
in the ordinary course of business ("Material Adverse Effect").
Proformance Insurance Company ("Proformance"), National Atlantic Financial
Corporation ("Financial Corporation"), National Atlantic Insurance Agency,
Inc. ("Insurance Agency"), Riverview Professional Services, Inc.
("Riverview") and Mayfair Reinsurance Company Limited ("Mayfair") are the
only subsidiaries of the Company; Proformance and Mayfair are the only
insurance subsidiaries (the "Insurance Subsidiaries") of the Company.
(d) All the outstanding shares of capital stock of each Subsidiary
have been duly and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Prospectus, all
outstanding shares of capital stock of the Subsidiaries are owned by the
Company either directly or through wholly owned subsidiaries free and
clear of any perfected security interest or any other security interests,
claims, liens or encumbrances; and none of the outstanding shares of
capital stock of any Subsidiary of the Company was issued in violation of
preemptive or other similar rights of any security holder of such
Subsidiary; there are no outstanding subscriptions, options, warrants,
convertible or exchangeable securities or other rights granted to or by
the Company or any Subsidiary to purchase shares of common stock or other
securities of any Subsidiary and there are no commitments, plans or
arrangements
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to issue any such securities or any security convertible into or
exercisable for such securities.
(e) The Company's authorized equity capitalization is as set forth
in the Prospectus; the capital stock of the Company conforms in all
material respects to the description thereof contained in the Prospectus;
the outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable; the Securities
have been duly and validly authorized, and, when issued and delivered to
and paid for by the Underwriters pursuant to this Agreement, will be fully
paid and nonassessable; the Common Stock is registered pursuant to Section
12(b) of the Exchange Act; the Securities are duly listed, and admitted
and authorized for trading, subject to official notice of issuance of the
Securities, on the Nasdaq National Market; the certificates for the
Securities are in valid and sufficient form under New Jersey law; the
holders of outstanding shares of capital stock of the Company are not
entitled to preemptive or other rights to subscribe for the Securities;
and, except as set forth in the Prospectus, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or rights to
convert any obligations into or exchange any securities for, shares of
capital stock of or ownership interests in the Company are outstanding.
(f) There is no franchise, contract or other document of a character
required to be described in the Registration Statement or Prospectus, or
to be filed as an exhibit thereto, which is not described or filed as
required; and the statements in the Prospectus under the heading "Business
-- Supervision and Regulation" fairly summarize the matters therein
described.
(g) This Agreement has been duly authorized, executed and delivered
by the Company.
(h) The Company is not and, after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Prospectus, will not be an "investment company" as
defined in the Investment Company Act of 1940, as amended.
(i) No consent, approval, authorization, filing with or order of any
court or governmental agency or body is required in connection with the
transactions contemplated herein, except such as have been obtained under
the Act and such as may be required under the blue sky laws or insurance
securities laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters in the manner
contemplated herein and in the Prospectus.
(j) Neither the issue and sale of the Securities nor the
consummation of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in a breach or
violation of, or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its Subsidiaries pursuant to,
(i) the charter or by-laws of the Company or
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any of its Subsidiaries, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which the
Company or any of its Subsidiaries is a party or bound or to which its or
their property is subject, or (iii) any statute, law, rule, regulation,
judgment, order or decree applicable to the Company or any of its
Subsidiaries of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over
the Company or any of its Subsidiaries or any of its or their properties,
except in the case of clauses (ii) and (iii) above for such conflicts,
breaches, violations, liens, charges or encumbrances that would not
reasonably be expected to have a Material Adverse Effect.
(k) Except as set forth in the Prospectus, no holders of securities
of the Company have rights to the registration of such securities under
the Registration Statement.
(l) The consolidated historical financial statements and schedules
of the Company and its consolidated Subsidiaries included in the
Prospectus and the Registration Statement present fairly in all material
respects the financial condition, results of operations and cash flows of
the Company as of the dates and for the periods indicated, comply as to
form in all material respects with the applicable accounting requirements
of the Act and have been prepared in conformity with United States
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as otherwise noted therein). The
selected financial data set forth under the caption "Selected Financial
Information" in the Prospectus and Registration Statement fairly present
in all material respects, on the basis stated in the Prospectus and the
Registration Statement, the information included therein.
(m) The statutory financial statements of Proformance from which
certain ratios and other statistical data filed as part of the
Registration Statement have been derived have been prepared for each
relevant period in conformity with statutory accounting principles or
practices required or permitted by the National Association of Insurance
Commissioners and by the Department of Banking and Insurance of New
Jersey; and such statutory accounting practices have been applied on a
consistent basis throughout the periods involved, except as may otherwise
be indicated therein or in the notes thereto, and present fairly in all
material respects the statutory financial position of the Insurance
Subsidiaries as of the dates thereof, and the statutory basis results of
operations of the Insurance Subsidiaries for the periods covered thereby.
(n) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its Subsidiaries or its or their property is pending or,
to the best knowledge of the Company, threatened that (i) would reasonably
be expected to have a material adverse effect on the performance of this
Agreement or the consummation of any of the transactions contemplated
hereby or (ii) would
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reasonably be expected to have a Material Adverse Effect, except as set
forth in or contemplated in the Prospectus (exclusive of any supplement
thereto filed after the date hereof).
(o) Each of the Company and each of the Subsidiaries owns or leases
all such properties as are necessary to the conduct of its operations as
presently conducted.
(p) Neither the Company nor any Subsidiary is in violation or
default of (i) any provision of its charter or bylaws, (ii) the terms of
any indenture, contract, lease, mortgage, deed of trust, note agreement,
loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is
subject, or (iii) any statute, law, rule, regulation, judgment, order or
decree of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company
or such Subsidiary or any of its properties, as applicable, except in the
case of clauses (ii) and (iii) above for such violations or defaults that
would not reasonably be expected to have a Material Adverse Effect.
(q) Deloitte & Touche LLP, who have audited certain financial
statements of the Company and its consolidated Subsidiaries and delivered
their reports with respect to the audited consolidated financial
statements and schedules included in the Prospectus, are independent
registered public accountants with respect to the Company within the
meaning of the Act and the applicable published rules and regulations
thereunder.
(r) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP was, at the time of each respective audit of
the consolidated financial statements of the Company and its subsidiaries
for the fiscal years ended December 31, 1999 and 2000 included as part of
Registration Statement and the Prospectus, an independent public
accounting firm as required by the Act.
(s) There are no transfer taxes or other similar fees or charges
under Federal law or the laws of any state, or any political subdivision
thereof, required to be paid in connection with the execution and delivery
of this Agreement or the issuance by the Company or sale by the Company of
the Securities.
(t) The Company has filed all foreign, federal, state and local tax
returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not reasonably
be expected to have a Material Adverse Effect, and except as set forth in
or contemplated in the Prospectus (exclusive of any supplement thereto
filed after the date hereof)) and has paid all taxes required to be paid
by it and any other assessment, fine or penalty levied against it, to the
extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good
faith or as would not reasonably be expected to have a Material
6
Adverse Effect, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto filed after the date hereof).
(u) No labor problem or dispute with the employees of the Company or
any of the Subsidiaries exists or, to the Company's knowledge, is
threatened or imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or its
Subsidiaries' principal suppliers, contractors or customers, that could
have a Material Adverse Effect, except as set forth in or contemplated in
the Prospectus (exclusive of any supplement thereto filed after the date
hereof).
(v) The Company and each of the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which
they are engaged; all policies of insurance and fidelity or surety bonds
insuring the Company or any of the Subsidiaries or their respective
businesses, assets, employees, officers and directors are in full force
and effect; the Company and the Subsidiaries are in compliance with the
terms of such policies and instruments in all material respects; and there
are no material claims by the Company or any of the Subsidiaries under any
such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause; neither the
Company nor any such Subsidiary has been refused any insurance coverage
sought or applied for; and neither the Company nor any such Subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect, except
as set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto filed after the date hereof).
(w) No Subsidiary of the Company is currently prohibited, directly
or indirectly, from paying any dividends to the Company, from making any
other distribution on such Subsidiary's capital stock, from repaying to
the Company any loans or advances to such Subsidiary from the Company or
from transferring any of such Subsidiary's property or assets to the
Company or any other Subsidiary of the Company, except as described in or
contemplated by the Prospectus (exclusive of any supplement thereto filed
after the date hereof).
(x) The Company and its Subsidiaries possess all licenses,
certificates, permits and other authorizations (the "Governmental
Authorizations") issued by the appropriate federal, state or foreign
regulatory authorities (including, without limitation, licenses and
permits from the insurance regulatory agencies, authorities or bodies
having jurisdiction over the Company or any of its Subsidiaries or any of
their properties (the "Insurance Licenses")) necessary to conduct their
respective businesses except for such Governmental Authorizations the
failure of which to possess would not reasonably be expected to have a
Material Adverse Effect; all of the Governmental Authorizations are valid
and in full force and effect; and neither the Company nor any such
Subsidiary has
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received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would reasonably be expected to have a Material Adverse
Effect, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto filed after the date hereof); the
Company and the Insurance Subsidiaries have filed with the appropriate
governmental authorities (including regulatory authorities) all reports,
documents or other information required to be filed under the applicable
insurance laws and regulations, except in any case in which the failure so
to file would not reasonably be expected to have a Material Adverse
Effect.
(y) The Company and each of its Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) except as otherwise disclosed in the
Prospectus, transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(z) The Company has not taken, directly or indirectly, any action
designed to or that would constitute or that might reasonably be expected
to cause or result in, under the Exchange Act or otherwise, stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.
(aa) The Company and its Subsidiaries are (i) in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received and are in compliance with all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) have
not received notice of any actual or potential liability under any
environmental law, except where such non-compliance with Environmental
Laws, failure to receive required permits, licenses or other approvals, or
liability would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, and except as set forth in
or contemplated in the Prospectus (exclusive of any supplement thereto
filed after the date hereof). Except as set forth in the Prospectus,
neither the Company nor any of the Subsidiaries has been named as a
"potentially responsible party" under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
(bb) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements included in the Prospectus there has
been no material
8
adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or otherwise),
business affairs or prospects, properties or results of operations of the
Company and its Subsidiaries taken as a whole, and, except as disclosed in
or contemplated by the Prospectus, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock; since September 30, 2004, (i) no downgrading
shall have occurred in the financial strength, claims paying ability or
financial enhancement rating of any of the Company's Subsidiaries by A.M.
Best Company, Inc. ("A.M. Best") or any "nationally recognized statistical
rating organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, (ii) no downgrading shall have
occurred in the financial strength, claims paying ability or financial
enhancement rating of any of the Company's Subsidiaries by Demotech, Inc.
("Demotech"), and (iii) neither A.M. Best or any "nationally recognized
statistical rating organization," as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act nor Demotech shall
have publicly announced that it has placed under surveillance or review,
with possible negative implications, its rating of any of the financial
strength, claims paying ability or financial enhancement rating of any of
the Company's Subsidiaries.
(cc) Except as disclosed in the Prospectus, the Company and the
Insurance Subsidiaries have made no material change in their insurance
reserving practices since September 30, 2004.
(dd) All reinsurance treaties and arrangements to which the Company
and any Insurance Subsidiary is a party are in full force and effect and
neither the Company nor any Insurance Subsidiary is in violation of, or in
default in the performance, observance or fulfillment of, any obligation,
agreement, covenant or condition contained therein, except where the
failure to be in full force and effect or where such violation or default
would not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect; neither the Company nor any of the
Insurance Subsidiaries has received any notice from any of the other
parties to such treaties, contracts or agreements that such other party
intends not to perform such treaty and, to the knowledge of the Company
and the Insurance Subsidiaries, none of the other parties to such treaties
or arrangements will be unable to perform such treaty or arrangement
except to the extent adequately and properly reserved for in the audited
historical financial statements of the Company on a consolidated basis
included in the Prospectus, except where such nonperformance would not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
(ee) The minimum funding standard under Section 302 of the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
and published interpretations thereunder ("ERISA"), has been satisfied by
each "pension plan" (as defined in Section 3(2) of ERISA) which has been
established or maintained by the Company and/or one or more of its
Subsidiaries, and the trust forming part of each such plan which is
intended to be
9
qualified under Section 401 of the Code is so qualified; each of the
Company and its Subsidiaries has fulfilled its obligations, if any, under
Section 515 of ERISA; neither the Company nor any of its Subsidiaries
maintains or is required to contribute to a "welfare plan" (as defined in
Section 3(1) of ERISA) which provides retiree or other post-employment
welfare benefits or insurance coverage (other than "continuation coverage"
(as defined in Section 602 of ERISA)); each pension plan and welfare plan
established or maintained by the Company and/or one or more of its
Subsidiaries is in compliance in all material respects with the currently
applicable provisions of ERISA; and neither the Company nor any of its
Subsidiaries has incurred or could reasonably be expected to incur any
withdrawal liability under Section 4201 of ERISA, any liability under
Section 4062, 4063, or 4064 of ERISA, or any other liability under Title
IV of ERISA.
(ff) The Company and its Subsidiaries own, possess, license or have
other rights to use, on reasonable terms, all patents, patent
applications, trade and service marks, trade and service ▇▇▇▇
registrations, trade names, copyrights, licenses, inventions, trade
secrets, technology, know-how and other intellectual property
(collectively, the "Intellectual Property") necessary for the conduct of
the Company's business as now conducted or as proposed in the Prospectus
to be conducted except where the failure to own, possess, license or have
any such Intellectual Property would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
Except as set forth in the Prospectus, (a) there are no rights of third
parties to any such Intellectual Property; (b) there is no material
infringement by third parties of any such Intellectual Property; (c) there
is no pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others challenging the Company's rights in or to
any such Intellectual Property, and the Company is unaware of any facts
which would form a reasonable basis for any such claim; (d) there is no
pending or, to the Company's knowledge, threatened action, suit,
proceeding or claim by others challenging the validity or scope of any
such Intellectual Property, and the Company is unaware of any facts which
would form a reasonable basis for any such claim; (e) there is no pending
or threatened action, suit, proceeding or claim by others that the Company
infringes or otherwise violates any patent, trademark, copyright, trade
secret or other proprietary rights of others, and the Company is unaware
of any other fact which would form a reasonable basis for any such claim;
(f) to the Company's knowledge there is no U.S. patent or published U.S.
patent application which contains claims that dominate or may dominate any
Intellectual Property described in the Prospectus as being owned by or
licensed to the Company or that interferes with the issued or pending
claims of any such Intellectual Property; and (g) the Company does not
hold any U.S. patent issued by the U.S. Patent and Trademark Office.
(gg) To the knowledge of the Company, there are no affiliations with
member firms of the National Association of Securities Dealers, Inc. (the
"NASD") among the Company's officers, directors or any stockholder of the
Company, except as set forth in the Registration Statement or otherwise
disclosed in writing to the Representatives.
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(hh) No transaction has occurred (i) between the Company and any of
its officers or directors or 5% stockholders or any affiliate or
affiliates of any such officer or director or 5% stockholders or (ii) to
the knowledge of the Company, between or among any of the Company's
officers or directors or 5% stockholders or any affiliate or affiliates of
any such officer or director or 5% stockholders, in each case that is
required to be described in and is not described in the Registration
Statement and the Prospectus.
(ii) Neither the Company nor any of its Subsidiaries nor, to the
knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of its Subsidiaries is aware of or has
taken any action, directly or indirectly, that would result in a violation
by such Persons of the FCPA, including, without limitation, making use of
the mails or any means or instrumentality of interstate commerce corruptly
in furtherance of an offer, payment, promise to pay or authorization of
the payment of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any "foreign official"
(as such term is defined in the FCPA) or any foreign political party or
official thereof or any candidate for foreign political office, in
contravention of the FCPA and the Company, the Subsidiaries and, to the
knowledge of the Company, its affiliates have conducted their businesses
in compliance in all material respects with the FCPA and have instituted
and maintain policies and procedures designed to ensure, and which are
reasonably expected to continue to ensure, continued compliance in all
material respects therewith; "FCPA" means Foreign Corrupt Practices Act of
1977, as amended, and the rules and regulations thereunder.
(jj) The operations of the Company and its Subsidiaries are and have
been conducted at all times in compliance in all material respects with
applicable financial recordkeeping and reporting requirements of the
Currency and Foreign Transactions Reporting Act of 1970, as amended, the
money laundering statutes of all jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines,
issued, administered or enforced by any governmental agency (collectively,
the "Money Laundering Laws") and no action, suit or proceeding by or
before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its Subsidiaries with respect
to the Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.
(kk) Neither the Company nor any of its Subsidiaries nor, to the
knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of its Subsidiaries is currently subject
to any U.S. sanctions administered by the Office of Foreign Assets Control
of the U.S. Treasury Department ("OFAC"); and the Company will not
directly or indirectly use the proceeds of the offering contemplated
hereby, or lend, contribute or otherwise make available such proceeds to
any Subsidiary, joint venture partner or other person or entity, for the
purpose of financing the activities of any person currently subject to any
U.S. sanctions administered by OFAC.
11
Furthermore, the Company represents and warrants to Citigroup Global
Markets Inc. that (i) the Registration Statement, the Prospectus and any
preliminary prospectus comply, and any further amendments or supplements
thereto will comply, with any applicable laws or regulations of any
foreign jurisdictions in which the Prospectus or any preliminary
prospectus, as amended or supplemented, if applicable, are distributed in
connection with the Directed Share Program, and that (ii) no
authorization, approval, consent, license, order, registration or
qualification of or with any government, governmental instrumentality or
court, other than such as have been obtained, is necessary under the
securities laws and regulations of foreign jurisdictions in which the
Directed Shares are offered outside the United States, if any. The Company
has not offered, or caused the Underwriters to offer, Securities to any
person pursuant to the Directed Share Program with the specific intent to
unlawfully influence (i) a customer or supplier of the Company to alter
the customer's or supplier's level or type of business with the Company,
or (ii) a trade journalist or publication to write or publish favorable
information about the Company or its products.
Any certificate signed by any officer of the Company and delivered
to the Representatives or counsel for the Underwriters in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company, as to matters covered thereby, to each Underwriter.
(ii) The Selling Stockholder represents and warrants to, and agrees
with, each Underwriter that:
(a) The Selling Stockholder is the record and beneficial owner of
the Securities to be sold by it hereunder free and clear of all liens,
encumbrances, equities and claims and has duly endorsed such Securities in
blank, and, assuming that each Underwriter acquires its interest in the
Securities it has purchased from the Selling Stockholder without notice of
any adverse claim (within the meaning of Section 8-105 of the New York
Uniform Commercial Code ("UCC")), each Underwriter that has purchased such
Securities delivered on the Closing Date to The Depository Trust Company
or other securities intermediary by making payment therefor as provided
herein, and that has had such Securities credited to the securities
account or accounts of such Underwriters maintained with The Depository
Trust Company or such other securities intermediary will have acquired a
security entitlement (within the meaning of Section 8-102(a)(17) of the
UCC) to such Securities purchased by such Underwriter, and no action based
on an adverse claim (within the meaning of Section 8-105 of the UCC) may
be asserted against such Underwriter with respect to such Securities.
(b) The Selling Stockholder has not taken, directly or indirectly,
any action designed to or that would constitute or that might reasonably
be expected to cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities.
12
(c) The Selling Stockholder has full right, power and authority to
enter into this Agreement and to sell, assign, transfer and deliver the
Securities to be sold by such Selling Stockholder hereunder. The Selling
Stockholder has entered into and delivered to the Representatives a
lock-up agreement substantially in the form of Exhibit A hereto and the
Selling Stockholder as full right, power and authority to enter into such
lock-up agreement.
(d) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the
Selling Stockholder of the transactions contemplated herein, except such
as may have been obtained under the Act and such as may be required under
the blue sky laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters and such other
approvals as have been obtained.
(e) Neither the sale of the Securities being sold by the Selling
Stockholder nor the consummation of any other of the transactions herein
contemplated by the Selling Stockholder or the fulfillment of the terms
hereof by the Selling Stockholder will conflict with, result in a breach
or violation of, or constitute a default under (i) any law, (ii) the
charter or code of regulations of the Selling Stockholder or (iii) the
terms of any indenture or other agreement or instrument to which the
Selling Stockholder is a party or bound, or any judgment, order or decree
applicable to the Selling Stockholder of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over the Selling Stockholder, except in the case of clauses (i) and (iii)
above for such conflicts, breaches, violations or defaults as would not
materially and adversely affect the validity of this Agreement or the
ability of the Selling Stockholder to consummate the transactions
contemplated hereby.
(f) The sale of Securities by the Selling Stockholder pursuant
hereto is not prompted by any non-public information concerning the
Company or any of its subsidiaries.
(g) In respect of any statements in or omissions from the
Registration Statement or the Prospectus or any supplements thereto made
in reliance upon and in conformity with information furnished in writing
to the Company by the Selling Stockholder specifically for use in
connection with the preparation thereof, the Selling Stockholder hereby
makes the same representations and warranties to each Underwriter as the
Company makes to such Underwriter under paragraph (i)(b) of this Section.
Any certificate signed by any officer of the Selling Stockholder and
delivered to the Representatives or counsel for the Underwriters in connection
with the offering of the Securities shall be deemed a representation and
warranty by the Selling Stockholder, as to matters covered thereby, to each
Underwriter.
13
2. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company agrees to
issue and sell 5,985,000 Underwritten Securities, and the Selling
Stockholder agrees to sell 665,000 Underwritten Securities to each
Underwriter, and each Underwriter agrees, severally and not jointly, to
purchase from the Company and the Selling Stockholder, at a purchase price
of $ per share, the amount of the Underwritten Securities set forth
opposite such Underwriter's name in Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company, with respect
to 897,750 Option Securities, and the Selling Stockholder, with respect to
99,750 Option Securities, hereby grant an option to the several
Underwriters to purchase, severally and not jointly, the amount of Option
Securities at the same purchase price per share as the Underwriters shall
pay for the Underwritten Securities, as set forth opposite such
Underwriter's name in Schedule II hereto. Said option may be exercised
only to cover over-allotments in the sale of the Underwritten Securities
by the Underwriters. Said option may be exercised in whole or in part at
any time on or before the 30th day after the date of the Prospectus upon
written notice by the Representatives to the Company and the Selling
Stockholder setting forth the number of shares of the Option Securities as
to which the several Underwriters are exercising the option and the
settlement date. The number of Option Securities to be purchased by the
Underwriters from each of the Company and the Selling Stockholder shall be
in the same proportion as set forth in 2(a) above. The number of Option
Securities to be purchased by each Underwriter shall be in the same
percentage of the total number of shares of the Option Securities to be
purchased by the several Underwriters as such Underwriter is purchasing of
the Underwritten Securities, subject to such adjustments as you in your
absolute discretion shall make to eliminate any fractional shares.
3. Delivery and Payment. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third Business
Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
, 2005 or at such time on such later date not more than three Business Days
after the foregoing date as the Representatives shall designate, which date and
time may be postponed by agreement between the Representatives and the Company
and the Selling Stockholder or as provided in Section 9 hereof (such date and
time of delivery and payment for the Securities being herein called the "Closing
Date"). Delivery of the Securities shall be made to the Representatives for the
respective accounts of the several Underwriters against payment by the several
Underwriters through the Representatives of the purchase price thereof to or
upon the order of the Company (with respect to the Securities sold by the
Company) and the Selling Stockholder (with respect to the Securities sold by the
Selling Stockholder) by wire transfer payable in same-day funds to the account
specified by the Company (with respect to the Securities sold by the Company)
and the account specified
14
by the Selling Stockholder (with respect to the Securities sold by the Selling
Stockholder). Delivery of the Underwritten Securities and the Option Securities
shall be made through the facilities of The Depository Trust Company unless the
Representatives shall otherwise instruct.
If the option provided for in Section 2(b) hereof is exercised after
the third Business Day prior to the Closing Date, the Company and the Selling
Stockholder each will deliver their portion of the Option Securities (at the
respective expense of the Company and the Selling Stockholder) to the
Representatives, at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ on the date specified
by the Representatives (which shall be not earlier than three Business Days
after the date of the exercise of said option) for the respective accounts of
the several Underwriters, against payment by the several Underwriters through
the Representatives of the purchase price thereof to or upon the order of the
Company (with respect to the Option Securities sold by the Company) and the
Selling Stockholder with respect to the Option Securities sold by the Selling
Stockholder) by wire transfer payable in same-day funds to an account specified
by the Company (with respect to the Option Securities sold by the Company) and
to the account designated by the Selling Stockholder (with respect to the Option
Securities sold by the Selling Stockholder). If settlement for the Option
Securities occurs after the Closing Date, the Company and the Selling
Stockholder will deliver to the Representatives on the settlement date for the
Option Securities, and the obligation of the Underwriters to purchase the Option
Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements.
(i) The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereof, to become effective. Prior to the termination of the offering of
the Securities, the Company will not file any amendment of the
Registration Statement or supplement to the Prospectus or any Rule 462(b)
Registration Statement unless the Company has furnished you a copy for
your review prior to filing and will not file any such proposed amendment
or supplement to which you reasonably object. Subject to the foregoing
sentence, if the Registration Statement has become or becomes effective
pursuant to Rule 430A, or filing of the Prospectus is otherwise required
under Rule 424(b), the Company will cause the Prospectus, properly
completed, and any supplement thereto to be filed in a form approved by
the Representatives with the Commission pursuant to the applicable
paragraph of Rule 424(b) within the time period prescribed and will
provide evidence reasonably satisfactory to the Representatives of such
timely filing. The
15
Company will promptly advise the Representatives (1) when the Registration
Statement, if not effective at the Execution Time, shall have become
effective, (2) when the Prospectus, and any supplement thereto, shall have
been filed (if required) with the Commission pursuant to Rule 424(b) or
when any Rule 462(b) Registration Statement shall have been filed with the
Commission, (3) when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement shall have been
filed or become effective, (4) of any request by the Commission or its
staff for any amendment of the Registration Statement, or any Rule 462(b)
Registration Statement, or for any supplement to the Prospectus or for any
additional information, (5) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose of which the
Company is aware and (6) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Securities for
sale in any jurisdiction or the institution or threatening of any
proceeding for such purpose. The Company will use its best effort to
prevent the issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the withdrawal
thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Prospectus to comply with the
Act or the rules thereunder, the Company promptly will (1) notify the
Representatives of any such event; (2) prepare and file with the
Commission, subject to the second sentence of paragraph (a) of this
Section 5, an amendment or supplement which will correct such statement or
omission or effect such compliance; and (3) supply any supplemented
Prospectus to you in such quantities as you may reasonably request.
(c) 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.
(d) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an earnings
statement or statements of the Company and its Subsidiaries which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under the
Act.
(e) The Company will furnish to the Representatives and counsel for
the Underwriters signed copies of the Registration Statement (including
exhibits
16
thereto) and to each other Underwriter a copy of the Registration
Statement (without exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, as many
copies of each Preliminary Prospectus and the Prospectus and any
supplement thereto as the Representatives may reasonably request.
(f) The Company will arrange, if necessary, for the qualification of
the Securities for sale under the laws of such jurisdictions as the
Representatives may designate and will maintain such qualifications in
effect so long as required for the distribution of the Securities;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take
any action that would subject it to service of process in suits, other
than those arising out of the offering or sale of the Securities, in any
jurisdiction where it is not now so subject or subject it to taxation in
any jurisdiction where it is not now so subject.
(g) The Company will not, without the prior written consent of
Citigroup Global Markets Inc., offer, sell, contract to sell, pledge, or
otherwise dispose of, (or enter into any transaction which is designed to,
or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash
settlement or otherwise) by the Company or any affiliate of the Company or
any person in privity with the Company or any affiliate of the Company),
directly or indirectly, including the filing (or participation in the
filing) of a registration statement with the Commission in respect of, or
establish or increase a put equivalent position or liquidate or decrease a
call equivalent position within the meaning of Section 16 of the Exchange
Act, any shares of Common Stock other than those being issued pursuant
hereto or any securities convertible into, or exercisable, or exchangeable
for, shares of Common Stock; or publicly announce an intention to effect
any such transaction for a period of 180 days following the Execution
Time, provided, however, that the Company may issue stock options,
restricted stock and other awards pursuant to its employee or agent
benefit plans described in the Prospectus (the "Benefit Plans"), issue and
sell Common Stock pursuant to the Benefit Plans (or pursuant to an
outstanding option or award issued under such plans) and the Company may
issue Common Stock issuable upon the conversion of the non-voting common
stock of the Company outstanding at the Execution Time.
(h) The Company will comply in all material respects with all
applicable securities and other applicable laws, rules and regulations,
including, without limitation, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the
rules and regulations promulgated in connection therewith (the
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act"), and use all reasonable efforts to cause the
Company's directors and officers, in their capacities as such, to comply
in all material respects with such laws, rules and regulations, including,
without limitation, the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
17
(i) The Company will not take, directly or indirectly, any action
designed to or that would constitute or that might reasonably be expected
to cause or result in, under the Exchange Act or otherwise, stabilization
or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities.
(j) The Company will use the net proceeds received by it from the
sale of the Underwritten Securities pursuant to this Agreement in the
manner specified in the Prospectus under the caption "Use of Proceeds."
(k) The Company will its best efforts to effect and maintain the
quotation of the Securities on the Nasdaq National Market and will file
with the Nasdaq National Market all documents and notices required by the
Nasdaq National Market of companies that have securities that are listed
on the Nasdaq National Market.
(l) The Company will file with the Commission such information as
may be required by Rule 463 under the Act.
(m) The Company, during the period when the Prospectus is required
to be delivered under the Act or the Exchange Act, will file all documents
required to be filed with the Commission pursuant to the Exchange Act
within the time periods required by the Exchange Act and the rules and
regulations under the Exchange Act (the "Exchange Act Regulations").
(n) The Company agrees to pay the costs and expenses relating to the
following matters: (i) the preparation, printing or reproduction and
filing with the Commission of the Registration Statement (including
financial statements and exhibits thereto), each Preliminary Prospectus,
the Prospectus, and each amendment or supplement to any of them; (ii) the
printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus, and
all amendments or supplements to any of them, as may, in each case, be
reasonably requested for use in connection with the offering and sale of
the Securities; (iii) the preparation, printing, authentication, issuance
and delivery of certificates for the Securities, including any stamp or
transfer taxes in connection with the original issuance and sale of the
Securities; (iv) the printing (or reproduction) and delivery of this
Agreement, any blue sky memorandum and all other agreements or documents
printed (or reproduced) and delivered in connection with the offering of
the Securities; (v) the registration of the Securities under the Exchange
Act and the listing of the Securities on the Nasdaq National Market; (vi)
any registration or qualification of the Securities for offer and sale
under the securities or blue sky and insurance securities laws of the
several states (including filing fees and the reasonable fees and expenses
of counsel, not to exceed $10,000, for the Underwriters relating to such
registration and qualification); (vii) any filings required to be made
with the NASD (including filing fees and the reasonable fees and expenses
of counsel, not to exceed
18
$15,000, for the Underwriters relating to such filings); (viii) the
travel, transportation and other expenses incurred by or on behalf of
Company representatives in connection with presentations to prospective
purchasers of the Securities; (ix) the fees and expenses of the Company's
accountants and the fees and expenses of counsel (including local and
special counsel) for the Company; and (x) all other costs and expenses
incident to the performance by the Company and the Selling Stockholder of
their obligations hereunder.
(o) The Company will use its best efforts to obtain and furnish to
the Representatives a letter substantially in the form of the letter
contemplated by Section 6(k) from each stockholder that is not an officer
or director and owns less than 5% of the Common Stock.
(p) The Company agrees to pay (1) all reasonable fees and
disbursements of counsel incurred by the Underwriters in connection with
the Directed Share Program, (2) all costs and expenses incurred by the
Underwriters in connection with the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting
and packaging) of copies of the Directed Share Program material and (3)
all stamp duties, similar taxes or duties or other taxes, if any, incurred
by the Underwriters in connection with the Directed Share Program.
Furthermore, the Company covenants with Citigroup Global Markets
Inc. that the Company will comply with all applicable securities and other
applicable laws, rules and regulations in each foreign jurisdiction in
which the Directed Shares are offered in connection with the Directed
Share Program, if any.
(ii) The Selling Stockholder agrees with the several Underwriters
that:
(a) The Selling Stockholder will not take, directly or indirectly,
any action designed to or that would constitute or that might reasonably
be expected to cause or result in, under the Exchange Act or otherwise,
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities.
(b) The Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, so long as delivery
of a prospectus relating to the Securities by an underwriter or dealer may
be required under the Act, of any change in information in the
Registration Statement or the Prospectus relating to the Selling
Stockholder.
(c) The Selling Stockholder will pay all fees and expenses of
counsel for the Selling Stockholder incurred in connection with the
offering of the Securities.
6. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on
19
the part of the Company and the Selling Stockholder contained herein as of the
Execution Time, the Closing Date and any settlement date pursuant to Section 3
hereof, to the accuracy of the statements of the Company and the Selling
Stockholder made in any certificates pursuant to the provisions hereof, to the
performance by the Company and the Selling Stockholder of its obligations
hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later
time, the Registration Statement will become effective not later than (i)
6:00 PM New York City time on the date of determination of the public
offering price, if such determination occurred at or prior to 3:00 PM New
York City time on such date or (ii) 9:30 AM on the Business Day following
the day on which the public offering price was determined, if such
determination occurred after 3:00 PM New York City time on such date; if
filing of the Prospectus, or any supplement thereto, is required pursuant
to Rule 424(b), the Prospectus, and any such supplement, will be filed in
the manner and within the time period required by Rule 424(b); and no stop
order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or threatened.
(b) The Company shall have requested and caused ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
General Counsel of the Company, to have furnished to the Representatives
her opinion, dated the Closing Date and addressed to the Representatives,
to the effect that:
(i) each of the Company and Proformance, Insurance Agency and
Riverview (collectively, "New Jersey Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of New Jersey, with full corporate power and
authority to own or lease, as the case may be, and to operate its
properties and conduct its business as described in the Prospectus,
and is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each jurisdiction which requires
such qualification, except where the failure to be so qualified
would not reasonably be expected to have a Material Adverse Effect;
other than the Subsidiaries set forth in the Underwriting Agreement,
to such counsel's knowledge, the Company does not own or control,
directly or indirectly, more than 5% of any class of equity security
of any corporation, association or other entity;
(ii) each of the New Jersey Subsidiaries has all permits,
licenses and authorizations under the laws, rules and regulations of
the United States and the State of New Jersey (including, without
limitation, any insurance laws) as are necessary to conduct its
existing business as described in the Prospectus, except for such
permits, licenses and authorizations the failure of which to have
would not reasonably be expected to have a Material Adverse Effect;
to the knowledge of such
20
counsel, there is no pending or threatened action, suit, proceeding
or investigation that would reasonably be expected to result in the
revocation, termination or suspension of any Insurance Licenses; and
except as disclosed in the Prospectus, to the knowledge of such
counsel, no regulatory agency or body has issued, or commenced any
proceeding for the issuance of, any order or decree impairing,
restricting or prohibiting the payment of dividends by Proformance
to its parent;
(iii) the Company's authorized equity capitalization is as set
forth in the Prospectus; the capital stock of the Company conforms
in all material respects to the description thereof contained in the
Prospectus; the outstanding shares of Common Stock (including the
Securities being sold hereunder by the Selling Stockholder) have
been duly and validly authorized and issued and are fully paid and
nonassessable; to such counsel's knowledge, none of the outstanding
shares of capital stock, including the Securities to be purchased by
the Underwriters, was issued in violation of or are otherwise
subject to any preemptive or other similar rights of any
securityholder of the Company.
(iv) all the outstanding shares of capital stock of each New
Jersey Subsidiary have been duly and validly authorized and issued
and are fully paid and nonassessable, and, except as otherwise set
forth in the Prospectus, all outstanding shares of capital stock of
the New Jersey Subsidiaries are owned by the Company either directly
or through wholly owned subsidiaries free and clear of any perfected
security interest and, to the knowledge of such counsel, any other
security interest, claim, lien or encumbrance;
(v) except as disclosed in the Prospectus, there are no
restrictions on the voting or transfer of any Common Stock pursuant
to the Company's certificate of incorporation, by-laws or any
agreement or other instrument known to such counsel to which the
Company is a party or by which the Company is bound;
(vi) to the knowledge of such counsel, (i) there is no statute
or regulation, no pending or threatened action, suit or proceeding
by or before any court or governmental agency, authority or body or
any arbitrator involving the Company or any of its Subsidiaries or
its or their property of a character required to be disclosed in the
Prospectus which is not disclosed in the Prospectus, and (ii) there
is no franchise, contract, indenture, lease or other document of a
character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit thereto, which is not
described or filed as required;
(vii) the statements included in the Prospectus under the
headings "Risk Factors -- We are subject to comprehensive regulation
in the State of New Jersey, particularly by the New Jersey
Department of
21
Banking and Insurance, and we must obtain prior approval to take
certain actions which may limit our ability to take advantage of
profitable opportunities," "Risk Factors -- There are anti-takeover
provisions contained in our organizational documents and in laws of
the State of New Jersey that could delay or impede the removal of
our directors and management and could make a merger, tender offer
or proxy contest involving us more difficult, or could discourage a
third party from attempting to acquire control of us, even if such a
transaction were beneficial to the interest of our shareholders,"
"Business - Supervision and Regulation" and under Item 14
(Indemnification of Directors and Officers) in Part II of the
Registration Statement insofar as such statements summarize legal
matters, agreements, documents or proceedings discussed therein, are
accurate summaries in all material respects of such legal matters,
agreements, documents or proceedings; the statements made in the
Prospectus under the caption "Description of Capital Stock", insofar
as they purport to constitute summaries of the terms of the
Company's capital stock (including the Securities), constitute
accurate summaries of the terms of such capital stock in all
material respects;
(viii) the Securities have been duly and validly authorized,
and, when issued and delivered to and paid for by the Underwriters
pursuant to this Agreement, will be fully paid and nonassessable;
(ix) the certificates for the Securities comply in all
material respects with all applicable statutory requirements, and
with any applicable requirements of the certificate of incorporation
and by-laws of the Company;
(x) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated
nor the fulfillment of the terms hereof will conflict with, result
in a breach or violation of, or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or its
Subsidiaries pursuant to the charter or by-laws of the Company or
its Subsidiaries, and
(xi) this Agreement has been duly authorized, executed and
delivered by the Company.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of New Jersey or the Federal laws of the United States, to the extent they
deem proper and specified in such opinion, upon the opinion of other
counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Underwriters and (B) as to matters of
fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Prospectus
in this paragraph (b) shall also include any supplements thereto at the
Closing Date.
22
(c) The Company shall have requested and caused ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
LLP, special counsel for the Company, to have furnished to the
Representatives their opinion, dated the Closing Date and addressed to the
Representatives, to the effect that:
(i) the Securities are duly listed, and admitted and
authorized for trading, subject to official notice of issuance of
the Securities, on the Nasdaq National Market; the certificates for
the Securities comply in all material respects with the requirements
of the Nasdaq National Market; to the knowledge of such counsel,
except as set forth in the Prospectus, the holders of outstanding
shares of capital stock of the Company are not entitled to
preemptive or other rights to subscribe for the Securities; and to
the knowledge of such counsel, except as set forth in the
Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of capital
stock of or ownership interests in the Company are outstanding;
(ii) to the knowledge of such counsel, except as set forth in
the Prospectus, no holders of securities of the Company have rights
to the registration of such securities under the Registration
Statement or to demand registration of any security owned by such
holder during the period ending 180 days after the date of this
Agreement;
(iii) to the knowledge of such counsel, (i) there is no
pending or threatened action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator
involving the Company or any of its Subsidiaries or its or their
property of a character required to be disclosed in the Registration
Statement which is not disclosed in the Prospectus, and (ii) there
is no franchise, contract, agreement, indenture, lease or other
document of a character required to be described in the Registration
Statement or Prospectus, or to be filed as an exhibit thereto, which
is not described or filed as required;
(iv) the statements included in the Prospectus under the
headings "Shares Eligible for Future Sale" and "Material United
States Federal Income and Estate Tax Considerations for Non-United
States Holders of Common Stock" insofar as such statements summarize
legal matters, agreements, documents or proceedings discussed
therein, are accurate summaries in all material respects of such
legal matters, agreements, documents or proceedings;
(v) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated
nor the fulfillment of the terms hereof will conflict with, result
in a breach or violation of, or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or its
Subsidiaries pursuant to, (i) the
23
terms of any indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company or its
Subsidiaries is a party or bound or to which its or their property
is subject and which is known to such counsel, or (ii) any New York
or Federal statute, law, rule, regulation, or judgment, order or
decree applicable to the Company or its Subsidiaries of any New York
or federal court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction
over the Company or its Subsidiaries or any of its or their
properties, and which is known to such counsel.
(vi) no consent, approval, authorization, filing with or order
of any New York or Federal court or governmental agency or body is
required in connection with the transactions contemplated herein,
except such as have been obtained under the Act and such as may be
required under the blue sky or insurance securities laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters in the manner contemplated in this
Agreement and in the Prospectus and such other approvals (specified
in such opinion) as have been obtained;
(vii) the Registration Statement has become effective under
the Act; any required filing of the Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the knowledge of
such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened and the Registration
Statement and the Prospectus (other than the financial statements
and other financial and statistical information contained therein,
as to which such counsel need express no opinion) comply as to form
in all material respects with the applicable requirements of the Act
and the rules thereunder; and
(viii) the Company is not and, after giving effect to the
offering and sale of the Securities and the application of the
proceeds thereof as described in the Prospectus, will not be, an
"investment company" as defined in the Investment Company Act of
1940, as amended.
Such counsel will also indicate that it has no reason to believe that on
the Effective Date or the date the Registration Statement was last deemed
amended the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Prospectus as of its date and on the Closing Date included or includes
any untrue statement of a material fact or omitted 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 (in each
case, other than the financial statements and other financial
24
and statistical information contained therein, as to which such counsel
need express no opinion);
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of New York or the Federal laws of the United States, to the extent they
deem proper and specified in such opinion, upon the opinion of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials.
References to the Prospectus in this paragraph (c) shall also include any
supplements thereto at the Closing Date.
(d) The Selling Stockholder shall have requested and caused ▇▇▇▇▇ ▇.
▇▇▇▇▇, Esq., counsel for the Selling Stockholder, to have furnished to the
Representatives their opinion dated the Closing Date and addressed to the
Representatives, to the effect that:
(i) this Agreement and the lock-up agreement have been duly
authorized, executed and delivered by the Selling Stockholder, and
the Selling Stockholder has full legal right and authority to sell,
transfer and deliver in the manner provided in this Agreement the
Securities being sold by the Selling Stockholder hereunder;
(ii) assuming that each Underwriter acquires its interest in
the Securities it has purchased from the Selling Stockholder without
notice of any adverse claim (within the meaning of Section 8-105 of
the UCC), each Underwriter that has purchased such Securities
delivered on the Closing Date to The Depository Trust Company or
other securities intermediary by making payment therefor as provided
herein, and that has had such Securities credited to the securities
account or accounts of such Underwriters maintained with The
Depository Trust Company or such other securities intermediary will
have acquired a security entitlement (within the meaning of Section
8-102(a)(17) of the UCC) to such Securities purchased by such
Underwriter, and no action based on an adverse claim (within the
meaning of Section 8-105 of the UCC) may be asserted against such
Underwriter with respect to such Securities;
(iii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation by the Selling Stockholder of the transactions
contemplated herein, except such as may have been obtained under the
Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals (specified
in such opinion) as have been obtained; and
(iv) neither the sale of the Securities being sold by the
Selling Stockholder nor the consummation of any other of the
transactions herein contemplated by the Selling Stockholder or the
fulfillment of the terms
25
hereof by the Selling Stockholder will conflict with, result in a
breach or violation of, or constitute a default under any law or the
charter or Regulations of the Selling Stockholder or the terms of
any indenture or other agreement or instrument known to such counsel
and to which the Selling Stockholder is a party or bound, or any
judgment, order or decree known to such counsel to be applicable to
the Selling Stockholder of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over the Selling Stockholder.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
Ohio or the Federal laws of the United States, to the extent they deem proper
and specified in such opinion, upon the opinion of other counsel of good
standing whom they believe to be reliable and who are reasonably satisfactory to
counsel for the Underwriters, and (B) as to matters of fact, to the extent they
deem proper, on certificates of responsible officers of the Selling Stockholder
and public officials.
(e) The Representatives shall have received from LeBoeuf, Lamb,
▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel for the Underwriters, such opinion or
opinions, dated the Closing Date and addressed to the Representatives,
with respect to the issuance and sale of the Securities, the Registration
Statement, the Prospectus (together with any supplement thereto filed
after the date hereof) and other related matters as the Representatives
may reasonably require, and the Company and the Selling Stockholder shall
have furnished to such counsel such documents as they reasonably request
for the purpose of enabling them to pass upon such matters.
(f) The Company shall have furnished to the Representatives a
certificate of the Company, signed on behalf of the Company and not in
their personal capacity by the Chairman of the Board or the President and
the principal financial or accounting officer of the Company, dated the
Closing Date, to the effect that the signers of such certificate have
carefully examined the Registration Statement, the Prospectus, any
supplements to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct on and as of the Closing Date with
the same effect as if made on the Closing Date and the Company has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the Closing
Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened;
(iii) since the date of the most recent financial statements
included in the Prospectus (exclusive of any supplement thereto
filed after
26
the date hereof), there has been no material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its Subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto filed after the date hereof);
and
(iv) no downgrading has occurred in the rating accorded to the
financial strength or claims paying ability of the Company or any of
the Insurance Subsidiaries by A.M. Best or any "nationally
recognized statistical rating organization," as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Act; no
downgrading has occurred in the rating according to the financial
strength or claims paying ability of the Company or any of the
Insurance Subsidiaries by Demotech; and no such organization has
publicly announced that it has under surveillance or review, with
possible negative implications, its rating of the financial strength
or claims paying ability of the Company or any of the Insurance
Subsidiaries.
(g) The Selling Stockholder shall have furnished to the
Representatives a certificate, signed by the Chief Executive Officer and
the principal financial or accounting officer of the Selling Stockholder,
dated the Closing Date, to the effect that the representations and
warranties of the Selling Stockholder in this Agreement are true and
correct in all material respects on and as of the Closing Date to the same
effect as if made on the Closing Date.
(h) The Company shall have requested and caused Deloitte & Touche
LLP to have furnished to the Representatives, at the Execution Time and at
the Closing Date, letters, dated respectively as of the Execution Time and
as of the Closing Date, in form and substance satisfactory to the
Representatives, confirming that they are independent certified public
accountants within the meaning of the Act and the applicable rules and
regulations adopted by the Commission thereunder and stating in effect
that:
(i) in their opinion the audited consolidated financial
statements and financial statement schedules included in the
Registration Statement and the Prospectus and reported on by them
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related rules and
regulations adopted by the Commission;
(ii) on the basis of certain specified procedures (but not an
audit or a review in accordance with standards of the Public Company
Accounting Oversight Board (United States) which would not
necessarily reveal matters of significance with respect to the
comments set forth in
27
such letter; a reading of the minutes of the meetings of the board
of directors of the Company and the Subsidiaries; and inquiries of
certain officials of the Company who have responsibility for
financial and accounting matters of the Company and its Subsidiaries
as to transactions and events subsequent to September 30, 2004,
nothing came to their attention which caused them to believe that:
(1) with respect to the period subsequent to September
30, 2004, there were any changes, at a specified date not more
than five days prior to the date of the letter, in the common
stock of the Company or, decrease in the stockholders' equity
or increase of long-term debt of the Company and its
Subsidiaries as compared with the amounts shown on the
September 30, 2004 audited balance sheet included in the
Registration Statement and the Prospectus, or for the period
from October 1, 2004 to such specified date there were any
decreases, as compared with the corresponding period in the
preceding year in net revenues or income before income taxes
or in total or per share amounts of net income of the Company
and its Subsidiaries, except in all instances for changes or
decreases set forth in such letter, in which case the letter
shall be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is not deemed
necessary by the Representatives; or
(2) the information included in the Registration
Statement and Prospectus in response to Regulation S-K, Item
301 (Selected Financial Data; other than the financial data
with respect to fiscal years 1999 and 2000 and as of and for
the nine-month period ended September 30, 2003), Item 302
(Supplementary Financial Information) and Item 402 (Executive
Compensation) is not in conformity with the applicable
disclosure requirements of Regulation S-K.
(iii) they have performed certain other specified procedures
as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its Subsidiaries) set
forth in the Registration Statement and the Prospectus, including
the information set forth under the captions "Selected Historical
Financial Data"; (other than financial data with respect to fiscal
years 1999 and 2000) in the Prospectus, agrees with the accounting
records of the Company and its Subsidiaries, excluding any questions
of legal interpretation.
References to the Prospectus in this paragraph (g) include any
supplement thereto at the date of the letter.
28
Deloitte & Touche LLP shall have completed certain procedures relating to
the unaudited interim financial information of the Company for the nine-month
period ended September 30, 2003, and as of September 30, 2003 included in the
Prospectus in accordance with the procedures agreed upon between Deloitte &
Touche LLP and the Representatives.
(i) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto
filed after the date hereof), there shall not have been (i) any change or
decrease specified in the letter or letters referred to in paragraph (g)
of this Section 6 or (ii) any change, or any development involving a
prospective change, in or affecting the condition (financial or
otherwise), earnings, business or properties of the Company and its
Subsidiaries taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in
the Prospectus (exclusive of any supplement thereto filed after the date
hereof) the effect of which, in any case referred to in clause (i) or (ii)
above, is, in the sole judgment of the Representatives, so material and
adverse as to make it impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Registration
Statement (exclusive of any amendment thereof) and the Prospectus
(exclusive of any supplement thereto filed after the date hereof).
(j) Subsequent to the Execution Time, (A) there shall not have been
any decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act) or any notice given of any intended
or potential decrease in any such rating or of a possible change in any
such rating that does not indicate the direction of the possible change;
and (B) no downgrading shall have occurred in the rating accorded to the
financial strength or claims paying ability of the Company or any of the
Insurance Subsidiaries by Demotech, A.M. Best or any "nationally
recognized statistical rating organization" and no such organization shall
have publicly announced that it has under surveillance or review, with
possible negative implications, its rating of the financial strength or
claims paying ability of the Company or any of the Insurance Subsidiaries.
(k) The Securities shall have been listed and admitted and
authorized for trading on the Nasdaq National Market, subject to notice of
issuance of the Securities, and reasonably satisfactory evidence of such
actions shall have been provided to the Representatives.
(l) At the Execution Time, the Company shall have furnished to the
Representatives a letter substantially in the form of Exhibit A hereto
from each officer, director and 5% stockholder of the Company addressed to
the Representatives; such letters shall be in force and effect as of the
Execution Time and the Closing Date.
29
(m) The Company shall have furnished to the Representatives such
further information, certificates and documents as the Representatives may
reasonably request, including, without limitation, (i) a certificate
signed by the Chief Executive Officer of the Company on behalf of the
Company and not in his individual capacity confirming as of the time they
were made the representations by the Company to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP at the
time of each respective audit of the consolidated financial statements of
the Company and its Subsidiaries for the years ended December 31, 1999 and
2000, and (ii) a certificate signed by the Executive Vice President -
Corporate Finance and Treasurer of the Company on behalf of the Company
and not in his individual capacity as to (A) the consolidated financial
statements of the Company and its Subsidiaries for the years ended
December 31, 1999 and 2000, (B) the unaudited consolidated financial
statements of the Company and its Subsidiaries for the nine months ended
and as of September 30, 2003 and (C) the statutory financial statements of
Proformance for the years ended and as of December 31, 1995, 1996, 1997,
1998, 1999, 2000, 2001, 2002 and 2003 and for the nine months ended and as
of September 30, 2003 and 2004.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as provided in this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Representatives and counsel
for the Underwriters, this Agreement and all obligations of the Underwriters
hereunder may be canceled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Company in
writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel for
the Underwriters, at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, on the Closing
Date.
7. Reimbursement of Underwriters' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company or the Selling
Stockholder to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally through Citigroup Global Markets Inc. on
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the proposed purchase and sale of the Securities. If the Company is
required to make any payments to the Underwriters under this Section 7 because
of the Selling Stockholder's refusal, inability or failure to satisfy any
condition to the obligations of the Underwriters set forth in Sections 6(d) and
(g), the Selling Stockholder pro rata in proportion to the percentage of
Securities to be sold shall reimburse the Company on demand for all amounts so
paid.
30
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Selling
Stockholder and each Underwriter, the directors, officers, employees and
agents of the Selling Stockholder and each Underwriter and each person who
controls the Selling Stockholder and any Underwriter within the meaning of
either the Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for
the registration of the Securities as originally filed or in any amendment
thereof, or in any Preliminary Prospectus or the Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will 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 any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) The Company agrees to indemnify and hold harmless Citigroup
Global Markets Inc., the directors, officers, employees and agents of
Citigroup Global Markets Inc. and each person, who controls Citigroup
Global Markets Inc. within the meaning of either the Act or the Exchange
Act ("Citigroup Entities"), from and against any and all losses, claims,
damages and liabilities to which they may become subject under the Act,
the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating
any such action or claim), insofar as such losses, claims damages or
liabilities (or actions in respect thereof) (i) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the prospectus wrapper material, if any, prepared by or with
the consent of the Company for distribution in foreign jurisdictions in
connection with the Directed Share Program attached to the Prospectus or
any preliminary prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein, when considered in
conjunction with the Prospectus or any applicable preliminary prospectus,
not misleading; (ii) caused by the failure of any Participant to pay for
and accept delivery of the securities which immediately
31
following the Effective Date of the Registration Statement, were subject
to a properly confirmed agreement to purchase; or (iii) related to,
arising out of, or in connection with the Directed Share Program, , except
that this clause (iii) shall not apply to the extent that such loss,
claim, damage or liability is finally judicially determined to have
resulted primarily from the gross negligence or willful misconduct of the
Citigroup Entities.
(c) The Selling Stockholder severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who
signs the Registration Statement, each Underwriter, the directors,
officers, employees and agents of each Underwriter and each person who
controls the Company or any Underwriter within the meaning of either the
Act or the Exchange Act to the same extent as the foregoing indemnity from
the Company to each Underwriter, but only with reference to written
information furnished to the Company by or on behalf of the Selling
Stockholder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which the Selling Stockholder may otherwise have.
(d) Each Underwriter severally and not jointly agrees to indemnify
and hold harmless the Company, each of its directors, each of its officers
who signs the Registration Statement, and each person who controls the
Company within the meaning of either the Act or the Exchange Act and the
Selling Stockholder, to the same extent as the foregoing indemnity to each
Underwriter, but only with reference to written information relating to
such Underwriter furnished to the Company by or on behalf of such
Underwriter through the Representatives specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement
will be in addition to any liability which any Underwriter may otherwise
have. The Company and the Selling Stockholder acknowledge that the
statements set forth in the last paragraph of the cover page regarding
delivery of the Securities and, under the heading "Underwriting" or "Plan
of Distribution", (i) the list of Underwriters and their respective
participation in the sale of the Securities, (ii) the sentences related to
concessions and reallowances, (iii) the paragraph related to
stabilization, syndicate covering transactions and penalty bids, (iv) the
paragraph relating to the availability of the Prospectus on the Internet
and possible Internet distributions, and (v) the paragraph related to
restrictions with respect to the underwriters' offering of the Securities
in non-U.S. jurisdictions, in any Preliminary Prospectus and the
Prospectus constitute the only information furnished in writing by or on
behalf of the several Underwriters for inclusion in any Preliminary
Prospectus or the Prospectus.
(e) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph
(a), (b), (c) or (d) above unless and to the extent it did
32
not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a), (b), (c) or (d) above. The
indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by
the indemnified party or parties except as set forth below); provided,
however, that such counsel shall be satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall
have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
the institution of such action or (iv) the indemnifying party shall
authorize in writing the indemnified party to employ separate counsel at
the expense of the indemnifying party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
(f) In the event that the indemnity provided in paragraph (a), (b),
(c) or (d) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Company, the Selling
Stockholder and the Underwriters agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company, the Selling Stockholder and
one or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company, by
the Selling Stockholder and by the Underwriters from the
33
offering of the Securities; provided, however, that in no case shall (i)
any Underwriter (except as may be provided in any agreement among
underwriters relating to the offering of the Securities) be responsible
for any amount in excess of the underwriting discount or commission
applicable to the Securities purchased by such Underwriter hereunder. If
the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company, the Selling Stockholder and the
Underwriters shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company, of the Selling Stockholder and of the Underwriters in connection
with the statements or omissions which resulted in such Losses as well as
any other relevant equitable considerations. Benefits received by the
Company and by the Selling Stockholder shall be deemed to be equal to the
total net proceeds from the offering (before deducting expenses) received
by each of them, and benefits received by the Underwriters shall be deemed
to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the Prospectus. Relative fault
shall be determined by reference to, among other things, whether any
untrue or any alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
provided by the Company, or the Selling Stockholder on the one hand or the
Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company, the Selling Stockholder
and the Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (f),
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. For
purposes of this Section 8, each person who controls an Underwriter within
the meaning of either the Act or the Exchange Act and each director,
officer, employee and agent of an Underwriter shall have the same rights
to contribution as such Underwriter, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have signed the Registration Statement
and each director of the Company shall have the same rights to
contribution as the Company; and each person who controls the Selling
Stockholder within the meaning of the Act or the Exchange Act, each
officer of the Selling Stockholder and each director of the Selling
Stockholder shall have the same rights to contribution as the Selling
Stockholder, subject in each case to the applicable terms and conditions
of this paragraph (f).
(g) The liability of the Selling Stockholder under the Selling
Stockholder's representations and warranties contained in Section 1 hereof
and under the indemnity and contribution agreements contained in this
Section 8 shall be limited to an amount equal to the initial public
offering price of the Securities sold by the Selling Stockholder to the
Underwriters. The Company and the Selling Stockholder may agree, as among
themselves and without limiting the
34
rights of the Underwriters under this Agreement, as to the respective
amounts of such liability for which they each shall be responsible.
9. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter, the
Selling Stockholder or the Company. In the event of a default by any Underwriter
as set forth in this Section 9, the Closing Date shall be postponed for such
period, not exceeding five Business Days, as the Representatives and the Company
jointly shall determine in order that the required changes in the Registration
Statement and the Prospectus or in any other documents or arrangements may be
effected. Nothing contained in this Agreement shall relieve any defaulting
Underwriter of its liability, if any, to the Company, the Selling Stockholder
and any nondefaulting Underwriter for damages occasioned by its default
hereunder.
10. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Representatives, by notice given to the Company
prior to delivery of and payment for the Securities, if at any time prior to
such time (i) trading in the Company's Common Stock shall have been suspended by
the Commission or the Nasdaq National Market or trading in securities generally
on the Nasdaq National Market or the New York Stock Exchange shall have been
suspended or limited or minimum prices shall have been established on the Nasdaq
National Market or the New York Stock Exchange, (ii) a banking moratorium shall
have been declared either by Federal or New York State authorities or (iii)
there shall have occurred any outbreak or escalation of hostilities, declaration
by the United States of a national emergency or war, or other calamity or crisis
the effect of which on financial markets is such as to make it, in the sole
judgment of the Representatives, impractical or inadvisable to proceed with the
offering or delivery of the Securities as contemplated by the Prospectus
(exclusive of any supplement thereto filed after the date hereof).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter, the Selling Stockholder
or the Company or any of the officers, directors, employees, agents or
controlling persons referred to in Section 8
35
hereof, and will survive delivery of and payment for the Securities. The
provisions of Sections 7 and 8 hereof shall survive the termination or
cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telefaxed to the Citigroup Global Markets Inc. General Counsel (fax
no.: (▇▇▇) ▇▇▇-▇▇▇▇) with a confirming copy sent to the General Counsel,
Citigroup Global Markets Inc., at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇▇▇, Attention: General Counsel; or, if sent to the Company, will be mailed,
delivered or telefaxed to (▇▇▇) ▇▇▇-▇▇▇▇ with a confirming copy sent to it at ▇
▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, attention of the Chief Executive
Officer; or if sent to the Selling Stockholder, will be mailed, delivered or
telefaxed to ▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice President, General Counsel and
Secretary, The Ohio Casualty Insurance Company (fax no.: (▇▇▇) ▇▇▇-▇▇▇▇) with a
confirming copy sent to The Ohio Casualty Insurance Company, at ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, attention of the General Counsel.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 8 hereof, and no other person will have any right or obligation
hereunder.
14. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed within the State of New York.
15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The section headings used herein are for convenience
only and shall not affect the construction hereof.
17. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, a Sunday or
a legal holiday or a day on which banking institutions or trust companies
are authorized or obligated by law to close in New York City.
"Commission" shall mean the Securities and Exchange Commission.
"Effective Date" shall mean each date and time that the Registration
Statement, any post-effective amendment or amendments thereto and any Rule
462(b) Registration Statement became or become effective.
36
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(a) above and any preliminary prospectus
included in the Registration Statement at the Effective Date that omits
Rule 430A Information.
"Prospectus" shall mean the prospectus relating to the Securities
that is first filed pursuant to Rule 424(b) after the Execution Time or,
if no filing pursuant to Rule 424(b) is required, shall mean the form of
final prospectus relating to the Securities included in the Registration
Statement at the Effective Date.
"Registration Statement" shall mean the registration statement
referred to in paragraph 1(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in
the event any post-effective amendment thereto or any Rule 462(b)
Registration Statement becomes effective prior to the Closing Date, shall
also mean such registration statement as so amended or such Rule 462(b)
Registration Statement, as the case may be. Such term shall include any
Rule 430A Information deemed to be included therein at the Effective Date
as provided by Rule 430A.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules under the
Act.
"Rule 430A Information" shall mean information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the registration statement referred to
in Section 1(a) hereof.
37
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and the several Underwriters.
Very truly yours,
National Atlantic Holdings Corporation
By:___________________________________
Name:
Title:
The Ohio Casualty Insurance Company
By:___________________________________
Name:
Title:
38
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Citigroup Global Markets Inc.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Securities LLC
▇▇▇▇▇▇▇ & Partners Securities, LLC
▇▇▇-▇▇▇▇, ▇▇▇▇▇▇ Inc.
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇ & Partners, L.P.,
c/o Citigroup Global Markets Inc.
By: ________________________________
Name:
Title:
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
39
SCHEDULE I
NUMBER OF NUMBER OF
UNDERWRITTEN UNDERWRITTEN
SECURITIES TO BE SECURITIES TO BE
PURCHASED FROM PURCHASED FROM
UNDERWRITERS THE COMPANY SELLING STOCKHOLDER
------------ ---------------- -------------------
Citigroup Global Markets Inc. ..........
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Securities LLC ........
▇▇▇▇▇▇▇ & Partners Securities, LLC .....
▇▇▇-▇▇▇▇, ▇▇▇▇▇▇ Inc. ..................
Sandler ▇'▇▇▇▇▇ & Partners, L.P. .......
--------- -------
Total............................. 5,985,000 665,000
========= =======
SCHEDULE II
NUMBER OF OPTION NUMBER OF OPTION
SECURITIES TO BE SECURITIES TO BE
PURCHASED FROM PURCHASED FROM
THE COMPANY SELLING STOCKHOLDER
---------------- -------------------
Citigroup Global Markets Inc. ..........
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Securities LLC ........
▇▇▇▇▇▇▇ & Partners Securities, LLC .....
▇▇▇-▇▇▇▇, ▇▇▇▇▇▇ Inc. ..................
Sandler ▇'▇▇▇▇▇ & Partners, L.P. .......
------- ------
Total ............................ 897,750 99,750
======= ======
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
National Atlantic Holdings Corporation
Public Offering of Common Stock
_______ __, 2004
Citigroup Global Markets Inc.
As Representative of the several Underwriters,
c/o Citigroup Global Markets Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed Underwriting Agreement (the "Underwriting Agreement"), between National
Atlantic Holdings Corporation, a New Jersey corporation (the "Company"), The
Ohio Casualty Insurance Company as selling shareholder, and you as
representative of a group of Underwriters named therein, relating to an
underwritten public offering of Common Stock, no par value per share (the
"Common Stock"), of the Company.
In order to induce you and the other Underwriters to enter into the
Underwriting Agreement, the undersigned will not, without the prior written
consent of Citigroup Global Markets Inc., (a) offer, sell, contract to sell,
pledge or otherwise dispose of, (b) enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise) by the undersigned or any affiliate of the undersigned or any person
in privity with the undersigned with respect to any shares of Common Stock or
any affiliate of the undersigned, directly or indirectly or in the filing of a
registration statement with the Securities and Exchange Commission in respect
of, or (c) establish or increase a put equivalent position or liquidate or
decrease a call equivalent position within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Securities and Exchange Commission promulgated thereunder with respect to,
any shares of capital stock of the Company or any securities convertible into,
or exercisable or exchangeable for such capital stock, or publicly announce an
intention to effect any such transaction, for a period of 180 days after the
date of the Underwriting Agreement.
Notwithstanding the foregoing: (a) if the undersigned is a
partnership, the partnership may transfer shares of capital stock (or any
securities convertible into, exercisable for, or exchangeable for capital stock)
to a partner of such partnership or by operation of law; (b) if the undersigned
is an individual, he or she may transfer shares of capital stock (or any
securities convertible into, exercisable for, or exchangeable for capital stock)
by gift, will, or intestate succession; and (c) the undersigned may transfer any
shares of capital stock (or any securities convertible into, exercisable for, or
exchangeable for capital stock) to an affiliate (as such term is defined in Rule
3b-18 of the regulations under the Securities Exchange Act of 1934 ("Exchange
Act")) of the undersigned; provided, however, that in any such case it shall be
a condition to the transfer that (i) each transferee execute an agreement
stating that the transferee is receiving and holding the shares of capital stock
(or any securities convertible into, exercisable for, or exchangeable for
capital stock) subject to the provisions of this Lock-Up Agreement, and there
shall be no further transfer of such shares of capital stock (or any securities
convertible into, exercisable for, or exchangeable for capital stock) except in
accordance with this Lock-Up Agreement, and (ii) no filing by any party
(transferee or transferor) under Section 16(a) of or Regulation 13D-G under the
Exchange Act shall be required or shall be made voluntarily in connection with
such transfer or distribution.
If for any reason the Underwriting Agreement shall be terminated
prior to the Closing Date (as defined in the Underwriting Agreement), the
agreement set forth above shall likewise be terminated. This Lock-Up Agreement
shall terminate and be of no further force and effect in the event the Company
has not consummated the public offering as contemplated by this Lock-Up
Agreement on or prior to March 31, 2005.
Yours very truly,
____________________________________________
[Name of officer, director or stockholder]
Address: ___________________________________
___________________________________