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EXHIBIT 1.1
Up to 3,769,444 Shares
▇▇▇▇▇▇ INSURANCE GROUP, INC
(a Pennsylvania corporation)
Common Stock
(no par value per share)
AGENCY AGREEMENT
____________, ▇▇▇▇
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇ & PARTNERS, L.P.
Two World Trade Center, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇▇▇ Insurance Group, Inc., a Pennsylvania corporation (the
"Company"), and ▇▇▇▇▇▇ Mutual Insurance Company, a Pennsylvania mutual insurance
company ("▇▇▇▇▇▇ Mutual"), hereby confirm their agreement with Sandler ▇'▇▇▇▇▇ &
Partners, L.P. ("Sandler ▇'▇▇▇▇▇" or the "Agent") with respect to the offer and
sale by the Company of up to 3,769,444 shares of the Company's Common Stock, no
par value (the "Common Stock"). The shares of Common Stock to be sold by the
Company are hereinafter called the "Securities."
The Company is the proposed holding company for ▇▇▇▇▇▇ Mutual and its
subsidiary, Queenstown Holding Company ("QHC"), the holding company for ▇▇▇▇▇▇
Insurance Company of New Jersey, Inc. ("MIC," and collectively with QHC and
▇▇▇▇▇▇ Mutual, the "▇▇▇▇▇▇ Companies"). The Securities are being offered in
connection with the conversion of ▇▇▇▇▇▇ Mutual from mutual to stock form (the
"Conversion") and the simultaneous acquisition of the capital stock of ▇▇▇▇▇▇
Mutual by the Company pursuant to a plan of conversion which has been adopted by
the Board of Directors of ▇▇▇▇▇▇ Mutual (the "Plan").
The Securities to be issued in the Conversion will be offered by the
Company at $10.00 per share (the "Purchase Price") in a subscription offering
(the "Subscription Offering") pursuant to nontransferable subscription rights in
the following order of priority: (i) named
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insureds under policies of insurance issued by ▇▇▇▇▇▇ Mutual and in force as of
the close of business on October 17, 1997 ("Eligible Policyholders"), (ii) a
tax-qualified employee stock ownership plan of the Company (the "ESOP"), and
(iii) directors, officers and employees of the ▇▇▇▇▇▇ Mutual. Subscription
rights in any category will be subordinated to subscription rights in a prior
category.
Concurrently, and subject to the prior rights of holders of
subscription rights, any Securities not subscribed for in the Subscription
Offering may be offered to members of the general public at the Purchase Price
in a direct community offering (the "Community Offering," and together with the
Subscription Offering, as each may be extended, the "Subscription and Community
Offering") to be commenced concurrently with the Subscription Offering.
Preference will be given in the Community Offering to (i) natural persons and
trusts of natural persons who are permanent residents of New Jersey and
Pennsylvania, (ii) principals of Eligible Policyholders in the case of an
Eligible Policyholder that is not a natural person, (iii) licensed insurance
agencies that have been appointed by ▇▇▇▇▇▇ Mutual to market and distribute
policies of insurance, and their owners, (iv) named insureds under policies of
insurance issued by ▇▇▇▇▇▇ Mutual after October 17, 1997, and (v) providers of
goods and services to, and identified by, ▇▇▇▇▇▇ Mutual.
It is currently anticipated by the Company and ▇▇▇▇▇▇ Mutual that any
Securities not subscribed for in the Subscription and Community Offering will be
offered in a syndicated community offering (the "Syndicated Community
Offering"). The Subscription and Community Offering and the Syndicated Community
Offering are hereinafter referred to collectively as the "Offerings."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-41497), including a
related prospectus, for the registration of the Securities under the Securities
Act of 1933, as amended (the "Securities Act"), has filed such amendments
thereto and such amended prospectuses as may have been required to the date
hereof by the Commission in order to declare such registration statement
effective, and will file such additional amendments thereto and such amended
prospectuses and prospectus supplements as may hereafter be required. Such
registration statement (as amended to date, if applicable, and as from time to
time amended or supplemented hereafter) and the prospectuses constituting a part
thereof (including in each case all documents incorporated or deemed to be
incorporated by reference therein and the information, if any, deemed to be a
part thereof pursuant to the rules and regulations of the Commission under the
Securities Act, as from time to time amended or supplemented pursuant to the
Securities Act or otherwise (the "Securities Act Regulations")), are hereinafter
referred to as the "Registration Statement" and the "Prospectus," respectively,
except that if any revised prospectus shall be used by the Company in connection
with the Subscription and Community Offering or the Syndicated Community
Offering which differs from the Prospectus on file at the Commission at the time
the Registration Statement becomes effective (whether or not such revised
prospectus is required to be filed by the Company pursuant to Rule 424(b) of the
Securities Act Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the Agent for such
use.
Concurrently with the execution of this Agreement, the Company is
delivering to
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the Agent copies of the Prospectus of the Company to be used in the Subscription
and Community Offering. Such prospectus contains information with respect to
▇▇▇▇▇▇ Mutual, the Company, the Subscription and Community Offering, and the
Common Stock.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) The Company and ▇▇▇▇▇▇ Mutual jointly and severally represent and
warrant to the Agent as of the date hereof as follows:
(i) The Registration Statement has been declared effective by
the Commission, no stop order has been issued with respect thereto and no
proceedings therefor have been initiated or, to the knowledge of the
Company or ▇▇▇▇▇▇ Mutual, threatened by the Commission. At the time the
Registration Statement became effective and at the Closing Time referred to
in Section 2 hereof, the Registration Statement complied and will comply in
all material respects with the requirements of the Securities Act and the
Securities Act Regulations and did not and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading. At the date hereof the Prospectus does not and at the Closing
Time referred to in Section 2 hereof, will not include an 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 representations
and warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or Prospectus made in reliance
upon and in conformity with information with respect to the Agent and the
services to be provided by the Agent furnished to the Company in writing by
the Agent expressly for use in the Registration Statement or Prospectus
(the "Agent Information," which the Company and ▇▇▇▇▇▇ Mutual acknowledge
appears only in the sections of the Prospectus captioned "Market for Common
Stock," the first two paragraphs of the section "The Conversion--Marketing
and Underwriting Arrangements" and the first and third paragraphs of the
section "Syndicated Community Offering," and as such information is
summarized elsewhere therein).
(ii) Pursuant to the Pennsylvania Insurance Company
Mutual-to-Stock Conversion Act (the "Conversion Act"), ▇▇▇▇▇▇ Mutual has
filed with the Pennsylvania Insurance Department (the "Department") an
application requesting approval of the Plan, and has filed such amendments
thereto and supplementary materials as may have been required to the date
hereof (such application, as amended to date, if applicable, and as from
time to time amended or supplemented hereafter, is hereinafter referred to
as the "Conversion Application"), including copies of ▇▇▇▇▇▇ Mutual's
Notice and Proxy Statement relating to the Conversion (the "Proxy
Statement"). The Department has, by written order dated October 20, 1998,
approved the Plan, such approval remains in full force and effect and no
order has been issued by the Department suspending or revoking such
approval and no proceedings therefor have been initiated or, to the
knowledge of the Company or ▇▇▇▇▇▇ Mutual, threatened by the Department. At
the date of such approval and at the Closing Time referred to in Section 2,
the Plan complied and will comply in all material respects with the
applicable provisions of the Conversion Act.
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(iii) At the time of their use, the Proxy Statement and any other
proxy solicitation materials will comply in all material respects with the
applicable provisions of the Conversion Act and will not contain an 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. The Company and ▇▇▇▇▇▇ Mutual
will promptly file the Prospectus and any supplemental sales literature
with the Commission and the Department. The Prospectus and all supplemental
sales literature, as of the date the Registration Statement became
effective and at the Closing Time referred to in Section 2, will have
received all required authorizations for use in final form.
(iv) Neither the Commission nor the Department has, by order or
otherwise, prevented or suspended the use of the Prospectus or any
supplemental sales literature authorized by the Company or ▇▇▇▇▇▇ Mutual
for use in connection with the Offerings.
(v) At the Closing Time referred to in Section 2, the Company
and ▇▇▇▇▇▇ Mutual will have completed the conditions precedent to the
Conversion in accordance with the Plan, the Conversion Act and all other
applicable laws, regulations, decisions and orders, including all material
terms, conditions, requirements and provisions precedent to the Conversion
imposed upon the Company or ▇▇▇▇▇▇ Mutual by any regulatory authority,
other than those which the regulatory authority permits to be completed
after the Conversion.
(vi) ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Co., which prepared the valuation of
▇▇▇▇▇▇ Mutual as part of the Conversion, has advised the Company and ▇▇▇▇▇▇
Mutual in writing that it believes it is independent of ▇▇▇▇▇▇ Mutual.
▇▇▇▇▇▇ Mutual believes that Sheshunoff is a "qualified expert" within the
meaning of the Conversion Act.
(vii) The accountants who certified the consolidated financial
statements and supporting schedules of ▇▇▇▇▇▇ Mutual included in the
Registration Statement have advised the Company and ▇▇▇▇▇▇ Mutual in
writing that they are independent public accountants with respect to the
Company within the meaning of the Code of Ethics of the American Institute
of Certified Public Accountants and the Securities Act Regulations.
(viii) The only subsidiaries of ▇▇▇▇▇▇ Mutual are QHC and MIC.
Upon consummation of the Conversion, the ▇▇▇▇▇▇ Companies will be the only
subsidiaries of the Company.
(ix) The consolidated financial statements and the related notes
thereto included in the Registration Statement and the Prospectus present
fairly the financial position of ▇▇▇▇▇▇ Mutual and its consolidated
subsidiaries at the dates indicated and the related statements of
operations, changes in surplus, and cash flows for the periods specified,
and comply as to form in all material respects with the applicable
accounting requirements of the Securities Act Regulations; except as
otherwise stated in the Registration Statement, said financial statements
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis; and the supporting
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schedules and tables included in the Registration Statement present fairly
the information required to be stated therein. The pro forma consolidated
financial data of the Company included in the Registration Statement have
been prepared and compiled in all material respects on the pro forma basis
described therein, and the pro forma adjustments have in all material
respects been properly and fairly applied to the historical combined
financial statements of the ▇▇▇▇▇▇ Companies for the periods to which they
relate. The financial information set forth in the Prospectus under
"Selected Consolidated Financial Data" presents fairly, on the basis stated
in the Prospectus, the information set forth therein.
(x) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as otherwise
stated therein (A) there has been no material adverse change in the
financial condition, results of operations or business affairs of the
Company and the ▇▇▇▇▇▇ Companies considered as one enterprise, whether or
not arising in the ordinary course of business, and (B) except for
transactions specifically referred to or contemplated in the Prospectus,
there have been no transactions entered into by the Company or any of the
▇▇▇▇▇▇ Companies which are material with respect to the Company and the
▇▇▇▇▇▇ Companies, considered as one enterprise.
(xi) The Company and each of the ▇▇▇▇▇▇ Companies has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its respective jurisdiction of incorporation with full
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus; and the Company and
each of the ▇▇▇▇▇▇ Companies is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to
so qualify would not have a material adverse effect on the financial
condition, results of operations or business affairs of the Company and the
▇▇▇▇▇▇ Companies, considered as one enterprise. ▇▇▇▇▇▇ Mutual has all
requisite power and authority to carry on an insurance business pursuant to
and to the extent of the certificates of authority issued under the laws of
the States of Pennsylvania and New Jersey. MIC has all requisite power and
authority to carry on an insurance business pursuant to and to the extent
of the certificate of authority issued under the laws of the State of New
Jersey. Except as disclosed in the Prospectus, the authority of each of
▇▇▇▇▇▇ Mutual and MIC to write the classes and lines of insurance
authorized by such licenses, certificates, permits and other authorizations
and described in the Prospectus is unrestricted and neither the Company nor
any of the ▇▇▇▇▇▇ Companies is a party to any agreement, formal or
informal, with any regulatory official or other person limiting the ability
of any of the ▇▇▇▇▇▇ Companies from making full use of the licenses,
certificates, permits and other authorizations issued to it or requiring
the Company or any of the ▇▇▇▇▇▇ Companies to comply with regulatory
standards or procedures or requirements different from those applicable to
companies with comparable or similar licenses, certificates, permits and
other authorizations, except where such restriction, limitation or
requirement would not have a material adverse effect on the financial
condition, results of operations or business affairs of the Company and the
▇▇▇▇▇▇ Companies, considered as one enterprise.
(xii) The Company and each of the ▇▇▇▇▇▇ Companies conducts its
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business in compliance in all material respects with applicable federal,
state, local and foreign laws and regulations, except where the failure to
be in compliance would not have a material adverse effect on the financial
condition, results of operations or business affairs of the Company and the
▇▇▇▇▇▇ Companies, considered as one enterprise. The Company and each of the
▇▇▇▇▇▇ Companies has obtained all licenses, permits and other governmental
authorizations currently required for the conduct of their respective
businesses or required for the conduct of their respective businesses as
contemplated by the Conversion Application, except where the failure to
obtain such licenses, permits or other governmental authorizations would
not have a material adverse effect on the financial condition, results of
operations or business affairs of the Company and the ▇▇▇▇▇▇ Companies
considered as one enterprise; all such licenses, permits and other
governmental authorizations are in full force and effect and the Company
and each of the ▇▇▇▇▇▇ Companies is in all material respects in compliance
therewith; neither the Company nor any of the ▇▇▇▇▇▇ Companies has received
notice of any proceeding or action relating to the revocation or
modification of any such license, permit or other governmental
authorization which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a material adverse
effect on the financial condition, results of operations or business
affairs of the Company and the ▇▇▇▇▇▇ Companies, considered as one
enterprise.
(xiii) Upon consummation of the Conversion, the authorized,
issued and outstanding capital stock of the Company will be within the
ranges set forth in the Prospectus under "Capitalization" (except for
subsequent issuances, if any, pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectus); no shares of Common
Stock have been or will be issued and outstanding prior to the Closing Time
referred to in Section 2; at the time of Conversion, the Securities will
have been duly authorized for issuance and, when issued and delivered by
the Company pursuant to the Plan against payment of the consideration
calculated as set forth in the Plan and stated on the cover page of the
Prospectus, will be duly and validly issued and fully paid and
non-assessable; the terms and provisions of the Common Stock and the
capital stock of the Company conform to all statements relating thereto
contained in the Prospectus; the certificates representing the shares of
Common Stock conform to the requirements of applicable law and regulations;
and the issuance of the Securities is not subject to preemptive or other
similar rights. There are no options, agreements, contracts or other rights
in existence to acquire from the Company any shares of Common Stock, except
as set forth in the Prospectus.
(xiv) Upon consummation of the Conversion, the authorized capital
stock of ▇▇▇▇▇▇ Mutual will be 100,000 shares of common stock, par value
$40.00 per share (the "▇▇▇▇▇▇ Common Stock"), and no shares of ▇▇▇▇▇▇
Common Stock have been or will be issued prior to the Closing time referred
to in Section 2. The shares of ▇▇▇▇▇▇ Common Stock to be issued to the
Company will have been duly authorized for issuance and, when issued and
delivered by ▇▇▇▇▇▇ Mutual pursuant to the Plan against payment of the
consideration calculated as set forth in the Plan and as described in the
Prospectus, will be duly and validly issued and fully paid and
nonassessable, and all such ▇▇▇▇▇▇ Common Stock will be owned beneficially
and of record by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance or legal or equitable claim;
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the certificates representing the shares of ▇▇▇▇▇▇ Common Stock will
conform with the requirements of applicable laws and regulations; and the
issuance of ▇▇▇▇▇▇ Common Stock is not subject to preemptive or similar
rights.
(xv) All of the issued and outstanding capital stock of QHC and
MIC has been duly authorized and validly issued, is fully paid and
nonassessable and is owned by ▇▇▇▇▇▇ Mutual, directly or indirectly, free
and clear of any security interest, mortgage, pledge, lien, encumbrance or
legal or equitable claim.
(xvi) The Company and ▇▇▇▇▇▇ Mutual have the corporate power to
enter into and to perform this Agreement and have taken all corporate
action necessary for them to execute, deliver and perform this Agreement,
and this Agreement has been duly executed and delivered by, and is the
valid and binding agreement of, the Company and ▇▇▇▇▇▇ Mutual, enforceable
in accordance with its terms, except as may be limited by bankruptcy,
insolvency or other laws affecting the enforceability of the rights of
creditors generally and judicial limitations on the right of specific
performance and except as the enforceability of indemnification and
contribution provisions may be limited by applicable securities laws.
(xvii) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus and prior to the
Closing Time, except as otherwise may be indicated or contemplated therein,
none of the Company or any of the ▇▇▇▇▇▇ Companies will have (A) issued any
securities or incurred any liability or obligation, direct or contingent,
or borrowed money, except liabilities, obligations and borrowings in the
ordinary course of business consistent with past practices or as indicated
in the Prospectus, or (B) entered into any transaction or series of
transactions which is material in light of the business of the Company and
the ▇▇▇▇▇▇ Companies considered as one enterprise.
(xviii) No approval of any regulatory or supervisory or other
public authority is required in connection with the execution and delivery
of this Agreement or the issuance of the Securities that has not been
obtained and a copy of which has been delivered to the Agent, except as may
be required under the securities laws of various jurisdictions.
(xix) Neither the Company nor any of the ▇▇▇▇▇▇ Companies is in
violation of its certificate of incorporation, organization certificate,
articles of incorporation or charter, as the case may be, or bylaws (and
▇▇▇▇▇▇ Mutual will not be in violation of its charter or bylaws upon
consummation of the Conversion); and neither the Company nor any of the
▇▇▇▇▇▇ Companies is in default (nor has any event occurred which, with
notice or lapse of time or both, would constitute a default) in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company or any of the ▇▇▇▇▇▇
Companies is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company or any of the ▇▇▇▇▇▇
Companies is subject, except for such defaults that would not, individually
or in the aggregate, have a material adverse effect on the financial
condition, results of operations or business of the Company and the ▇▇▇▇▇▇
Companies considered as one
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enterprise; and there are no contracts or documents of the Company, ▇▇▇▇▇▇
Mutual or any of the ▇▇▇▇▇▇ Companies which are required to be filed as
exhibits to the Registration Statement or the Conversion Application which
have not been so filed.
(xx) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein do not and
will not conflict with or constitute a breach of, or default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of the ▇▇▇▇▇▇ Companies
pursuant to any contract, indenture, mortgage, loan agreement, note, lease
or other instrument to which the Company or any of the ▇▇▇▇▇▇ Companies is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any of its subsidiaries is subject,
except for such defaults that would not, individually or in the aggregate,
have a material adverse effect on the financial condition, results of
operations or business affairs of the Company and the ▇▇▇▇▇▇ Companies
considered as one enterprise; nor will such action result in any violation
of the provisions of certificate of incorporation, organization
certificate, articles of incorporation or charter or by-laws of the Company
or any of the ▇▇▇▇▇▇ Companies, or any applicable law, administrative
regulation or administrative or court decree.
(xxi) No labor dispute with the employees of the Company or any
of the ▇▇▇▇▇▇ Companies exists or, to the knowledge of the Company or
▇▇▇▇▇▇ Mutual, is imminent or threatened; and the Company and ▇▇▇▇▇▇ Mutual
are not aware of any existing or threatened labor disturbance by the
employees of any of its principal suppliers or contractors which might be
expected to result in any material adverse change in the financial
condition, results of operations or business affairs of the Company and the
▇▇▇▇▇▇ Companies considered as one enterprise.
(xxii) Each of the Company and the ▇▇▇▇▇▇ Companies has good and
marketable title to all properties and assets for which ownership is
material to the business of the Company or any of the ▇▇▇▇▇▇ Companies and
to those properties and assets described in the Prospectus as owned by
them, free and clear of all liens, charges, encumbrances or restrictions,
except such as are described in the Prospectus or are not material in
relation to the business of the Company or any of the ▇▇▇▇▇▇ Companies
considered as one enterprise; and all of the leases and subleases material
to the business of the Company or any of the ▇▇▇▇▇▇ Companies under which
the Company or any of the ▇▇▇▇▇▇ Companies hold properties, including those
described in the Prospectus, are valid and binding agreements of the
Company and the ▇▇▇▇▇▇ Companies, enforceable in accordance with their
terms.
(xxiii) Neither the Company nor any of the ▇▇▇▇▇▇ Companies is in
violation of any directive from the Department or any other regulatory
authority to make any material change in the method of conducting their
respective businesses; the ▇▇▇▇▇▇ Companies have conducted and are
conducting their business so as to comply in all material respects with all
applicable statutes, regulations and administrative and court decrees
(including, without limitation, all regulations, decisions, directives and
orders of the Department).
(xxiv) Except as disclosed in the Prospectus, there is no action,
suit or
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proceeding before or by any court or governmental agency or body, domestic
or foreign, now pending, or, to the knowledge of the Company or ▇▇▇▇▇▇
Mutual, threatened, against or affecting the Company or any of the ▇▇▇▇▇▇
Companies which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which might result in any material
adverse change in the financial condition, results of operations or
business affairs of the Company and the ▇▇▇▇▇▇ Companies considered as one
enterprise, or which might materially and adversely affect the properties
or assets thereof or which might materially and adversely affect the
consummation of the Conversion; and all pending legal or governmental
proceedings to which the Company or any of the ▇▇▇▇▇▇ Companies is a party
or of which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary routine
litigation incidental to the business, are considered in the aggregate not
material.
(xxv) ▇▇▇▇▇▇ Mutual has obtained an opinion of its counsel,
▇▇▇▇▇▇▇ & ▇▇▇, with respect to the legality of the Securities to be issued
in the Conversion, a copy of which is filed as an exhibit to the
Registration Statement. ▇▇▇▇▇▇ Mutual has obtained from the Internal
Revenue Service a private letter ruling (the "PLR"), concerning the
material tax effects of the Conversion and the Subscription Offering to
▇▇▇▇▇▇ Mutual, Eligible Policyholders, and certain other participants in
the Subscription Offering. All material aspects of the aforesaid opinion
and PLR are accurately summarized in the Prospectus; the facts and
representations upon which such opinion and PLR are based are truthful,
accurate and complete in all material respects; and neither ▇▇▇▇▇▇ Mutual
nor the Company has taken or will take any action inconsistent therewith.
(xxvi) The Company is not required to be registered under the
Investment Company Act of 1940, as amended.
(xxvii) To the knowledge of the Company and ▇▇▇▇▇▇ Mutual, with
the exception of the intended loan to ▇▇▇▇▇▇ Mutual's ESOP by the Company
to enable the ESOP to purchase shares of Common Stock in an amount of up to
10% of the Common Stock issued in the Conversion, none of the Company,
▇▇▇▇▇▇ Mutual or employees of any of the ▇▇▇▇▇▇ Companies has made any
payment of funds of the Company or any of the ▇▇▇▇▇▇ Companies as a loan
for the purchase of the Common Stock or made any other payment of funds
prohibited by law, and no funds have been set aside to be used for any
payment prohibited by law.
(xxviii) Neither the Company nor any of the ▇▇▇▇▇▇ Companies nor
any properties owned or operated by the Company or any of the ▇▇▇▇▇▇
Companies is in violation of or liable under any Environmental Law (as
defined below), except for such violations or liabilities that,
individually or in the aggregate, would not have a material adverse effect
on the financial condition, results of operations or business affairs of
the Company and the ▇▇▇▇▇▇ Companies considered as one enterprise. There
are no actions, suits or proceedings, or demands, claims, notices or
investigations (including, without limitation, notices, demand letters or
requests for information from any environmental agency) instituted or
pending, or to the knowledge of the Company or any of the ▇▇▇▇▇▇ Companies
threatened, relating to the liability of any property owned or operated by
the Company or any of the ▇▇▇▇▇▇ Companies, under any Environmental Law.
For purposes
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of this subsection, the term "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, order, judgment, decree,
injunction or agreement with any regulatory authority relating to (i) the
protection, preservation or restoration of the environment (including,
without limitation, air, water, vapor, surface water, groundwater, drinking
water supply, surface soil, subsurface soil, plant and animal life or any
other natural resource), and/or (ii) the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, whether by type or by quantity, including any material
containing any such substance as a component.
(xxix) The Company and the ▇▇▇▇▇▇ Companies have filed all
federal income and state and local franchise tax returns required to be
filed and have made timely payments of all taxes shown as due and payable
in respect of such returns, and no deficiency has been asserted with
respect thereto by any taxing authority.
(xxx) The Company has received approval, subject to completion of
the Conversion, to have the Securities quoted on the National Market Tier
of the Nasdaq Stock Market ("Nasdaq Stock Market") effective as of the
Closing Time referred to in Section 2 hereof.
(xxxi) The Company has filed a registration statement on Form 8-A
to register the Common Stock under Section 12(g) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and has requested that such
registration statement be effective concurrent with the effectiveness of
the Registration Statement.
(xxxii) There is no contract or other document of a character
required to be described in the Registration Statement or the Prospectus or
to be filed as an exhibit to the Registration Statement or the Conversion
Application which is not described or filed as required.
(xxxiii) The Company and each of the ▇▇▇▇▇▇ Companies maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to cash and other liquid assets is
permitted only in accordance with management's general or specific
authorization, and (iv) the recorded ledger assets are compared with
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(xxxiv) Except as described in the Prospectus, there are no
contractual encumbrances or contractual restrictions on the ability (i) of
the Company to pay dividends or make any other distributions on the
Company's capital stock or (ii) of the Company or any of the ▇▇▇▇▇▇
Companies (A) to pay any indebtedness owed to the Company or any of the
Mercer Companies, or (B) to make any loans or advances to, or
11
investments in, the Company or any of the Mercer Companies, or (C) to
transfer any of its property or assets to the Company or any of the ▇▇▇▇▇▇
Companies.
(b) Any certificate signed by any officer of the Company or ▇▇▇▇▇▇ Mutual
and delivered to either of the Agent or to counsel for the Agent shall be deemed
a representation and warranty by the Company or ▇▇▇▇▇▇ Mutual to the Agent as to
the matters covered thereby.
SECTION 2. APPOINTMENT OF SANDLER ▇'▇▇▇▇▇; SALE AND DELIVERY OF THE SECURITIES;
CLOSING.
On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Company hereby
appoints Sandler ▇'▇▇▇▇▇ as its Agent to consult with and advise the Company,
and to assist the Company with the solicitation of subscriptions and purchase
orders for Securities, in connection with the Company's sale of Common Stock in
the Subscription and Community Offering and the Syndicated Community Offering.
On the basis of the representations and warranties herein contained, and subject
to the terms and conditions herein set forth, Sandler ▇'▇▇▇▇▇ accepts such
appointment and agrees to use its best efforts to assist the Company with the
solicitation of subscriptions and purchase orders for Securities in accordance
with this Agreement; provided, however, that the Agent shall not be obligated to
take any action which is inconsistent with any applicable laws or regulations,
or decisions or orders of any governmental department, private or public
arbitral tribunal, court, governmental commission, governmental agency or other
governmental entity or authority. The services to be rendered by Sandler ▇'▇▇▇▇▇
pursuant to this appointment include the following: (i) consulting as to the
securities marketing implications of any aspect of the Plan or related corporate
documents; (ii) reviewing with the Board of Directors the independent
appraiser's appraisal of the Common Stock; (iii) reviewing all offering
documents, including the Prospectus, stock order form and related offering
materials (it being understood that such documents are the sole responsibility
of the Company and ▇▇▇▇▇▇ Mutual); (iv) assisting in the design and
implementation of a marketing strategy for the Offerings; (v) assisting the
Company and ▇▇▇▇▇▇ Mutual in obtaining all requisite regulatory approvals; (vi)
assisting management in preparing for meetings with potential investors and
broker-dealers; and (vii) providing such other general advice and assistance as
may be requested to promote the successful completion of the Offerings.
The appointment of the Agent hereunder shall terminate upon the
earlier to occur of (a) forty-five (45) days after the last day of the
Subscription and Community Offering, unless the Company and the Agent agree in
writing to extend such period, or (b) the receipt and acceptance of
subscriptions and purchase orders for all of the Securities, or (c) the
completion of the Syndicated Community Offering.
If any of the Securities remain available after the expiration of the
Subscription and Community Offering, at the request of the Company and ▇▇▇▇▇▇
Mutual, Sandler ▇'▇▇▇▇▇ will seek to form a syndicate of registered brokers or
dealers ("Selected Dealers") to assist in the solicitation of purchase orders of
such Securities on a best efforts basis, subject to the terms and conditions set
forth in a selected dealers' agreement (the "Selected Dealers' Agreement"),
substantially in the form set forth in Exhibit A to this Agreement. Sandler
▇'▇▇▇▇▇ will endeavor to limit the aggregate fees to be paid by the Company and
▇▇▇▇▇▇ Mutual under any such Selected Dealers' Agreement to an amount
competitive with gross underwriting discounts charged at such time for
underwritings of comparable amounts of stock sold at a comparable
12
price per share in a similar market environment; provided, however, that the
aggregate fees payable to Sandler ▇'▇▇▇▇▇ and Selected Dealers shall not exceed
7% of the aggregate Purchase Price of the Securities sold by such Selected
Dealers. Sandler ▇'▇▇▇▇▇ will endeavor to distribute the Securities among the
Selected Dealers in a fashion which best meets the distribution objective of the
Company and the requirements of the Plan, which may result in limiting the
allocation of stock to certain Selected Dealers. It is understood that in no
event shall Sandler ▇'▇▇▇▇▇ be obligated to act as a Selected Dealer or to take
or purchase any Securities.
In the event the Company is unable to sell at least the total minimum
of the Securities, as set forth on the cover page of the Prospectus, within the
period herein provided, this Agreement shall terminate and the Company shall
refund to any persons who have subscribed for any of the Securities the full
amount which it may have received from them, without interest, and no party to
this Agreement shall have any obligation to the others hereunder, except for the
obligations of the Company and ▇▇▇▇▇▇ Mutual as set forth in Sections 4, 6(a)
and 7 hereof and the obligations of the Agent as provided in Sections 6(b) and 7
hereof. Arrangements for placing the funds received from subscriptions for
Securities or other offers to purchase Securities in a separate escrow account
with State Street Bank and Trust Company until all Securities are sold and paid
for were made prior to the commencement of the Subscription Offering, with
provision for refund to the purchasers as set forth above, or for delivery to
the Company if all Securities are sold.
If at least the total minimum of Securities, as set forth on the cover
page of the Prospectus, are sold, the Company agrees to issue or have issued the
Securities sold and to release for delivery certificates for such Securities at
the Closing Time against payment therefor by release of funds from the escrow
account referred to above. The closing shall be held at the ▇▇▇▇▇, Pennsylvania
offices of ▇▇▇▇▇▇▇ & ▇▇▇, at 10:00 a.m., local time, or at such other place and
time as shall be agreed upon by the parties hereto, on a business day to be
agreed upon by the parties hereto. The Company shall notify the Agent by
telephone, confirmed in writing, when funds shall have been received for all the
Securities. Certificates for Securities shall be delivered directly to the
purchasers thereof in accordance with their directions. Notwithstanding the
foregoing, certificates for Securities purchased through Selected Dealers shall
be made available to the Agent for inspection at least 48 hours prior to the
Closing Time at such office as the Agent shall designate. The hour and date upon
which the Company shall release for delivery all of the Securities, in
accordance with the terms hereof, is herein called the "Closing Time."
The Company will pay any stock issue and transfer taxes which may be
payable with respect to the sale of the Securities.
In addition to reimbursement of the expenses specified in Section 4
hereof, the Agent will receive the following compensation for its services
hereunder:
(a) two percent (2%) of the aggregate Purchase Price of the
Securities sold in the Subscription and Community Offering, excluding in each
case shares purchased by (i) any employee benefit plan of the Company or Mercer
Mutual established for the benefit of their respective directors, officers and
employees, and (ii) any director, officer or employee of the Company or Mercer
Mutual or members of their immediate families (which term shall mean parents,
grandparents, spouse, siblings, children and grandchildren); and
13
(b) with respect to any Securities sold by an NASD member firm (other
than Sandler ▇'▇▇▇▇▇) under the Selected Dealers' Agreement in the Syndicated
Community Offering, (i) the compensation payable to Selected Dealers under any
Selected Dealers' Agreement, (ii) any sponsoring dealer's fees; and (iii) a
management fee to Sandler ▇'▇▇▇▇▇ of one and one-half percent (1.5%) of the
aggregate Purchase Price for the Securities. Any fees payable to Sandler ▇'▇▇▇▇▇
for Securities sold by Sandler ▇'▇▇▇▇▇ under any such agreement shall be limited
to an aggregate of two percent (2%) of the aggregate Purchase Price of such
Securities, and the aggregate fees payable to Sandler ▇'▇▇▇▇▇ and the selected
and sponsoring dealers will not exceed seven percent (7%) of the aggregate
Purchase Price for such Securities.
If this Agreement is terminated by the Agent in accordance with the
provisions of Section 9(a) hereof or the Conversion is terminated by the
Company, no fee shall be payable by the Company to Sandler ▇'▇▇▇▇▇; however, the
Company shall reimburse the Agent for all of its reasonable out-of-pocket
expenses incurred prior to termination, including the reasonable fees and
disbursements of counsel for the Agent in accordance with the provisions of
Section 4 hereof.
All fees payable to the Agent hereunder shall be payable in
immediately available funds at Closing Time, or upon the termination of this
Agreement, as the case may be. In recognition of the long lead times involved in
the conversion process, ▇▇▇▇▇▇ Mutual has made advance payments to the Agent in
the aggregate amount of $25,000, which shall be credited against any fees or
reimbursement of expenses payable hereunder.
SECTION 3. COVENANTS OF THE COMPANY. The Company and ▇▇▇▇▇▇ Mutual covenant with
the Agent as follows:
(a) The Company and ▇▇▇▇▇▇ Mutual will prepare and file such
amendments or supplements to the Registration Statement, the Prospectus, the
Conversion Application and the Proxy Statement as may hereafter be required by
the Securities Act Regulations or the Conversion Act or as may hereafter be
requested by the Agent. Following completion of the Offerings, the Company and
▇▇▇▇▇▇ Mutual will promptly prepare and file with the Commission a
post-effective amendment to the Registration Statement relating to the results
of the updated valuation of ▇▇▇▇▇▇ Mutual prepared by ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Co. The
Company and ▇▇▇▇▇▇ Mutual will notify the Agent immediately, and confirm the
notice in writing, (i) of the effectiveness of any post-effective amendment of
the Registration Statement, the filing of any supplement to the Prospectus and
the filing of any amendment to the Conversion Application, (ii) of the receipt
of any comments from the Department or the Commission with respect to the
transactions contemplated by this Agreement or the Plan, (iii) of any request by
the Commission or the Department for any amendment to the Registration Statement
or the Conversion Application or any amendment or supplement to the Prospectus
or for additional information, (iv) of the issuance by the Department of any
order suspending the Offerings or the use of the Prospectus or the initiation of
any proceedings for that purpose, (v) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, and (vi) of the receipt of any
notice with respect to the suspension of any qualification of the Securities for
offering or sale in any jurisdiction. The Company and ▇▇▇▇▇▇ Mutual will make
every reasonable effort to prevent the issuance of any stop order and, if any
stop order is issued, to obtain the lifting thereof at the earliest possible
14
moment.
(b) The Company and ▇▇▇▇▇▇ Mutual will give the Agent notice of its
intention to file or prepare any amendment to the Conversion Application or
Registration Statement (including any post-effective amendment) or any amendment
or supplement to the Prospectus (including any revised prospectus which the
Company proposes for use in connection with the Syndicated Community Offering of
the Securities which differs from the prospectus on file at the Commission at
the time the Registration Statement becomes effective, whether or not such
revised prospectus is required to be filed pursuant to Rule 424(b) of the
Securities Act Regulations), will furnish the Agent with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Agent or counsel for the
Agent may object.
(c) The Company and ▇▇▇▇▇▇ Mutual will deliver to the Agent as many
signed copies and as many conformed copies of the Conversion Application and the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein) as the
Agent may reasonably request, and from time to time such number of copies of the
Prospectus as the Agent may reasonably request.
(d) During the period when the Prospectus is required to be delivered,
the Company and ▇▇▇▇▇▇ Mutual will comply, at their own expense, with all
requirements imposed upon them by the Department, by the Conversion Act, as from
time to time in force, and by the Securities Act, the Securities Act
Regulations, the Exchange Act, and the rules and regulations of the Commission
promulgated thereunder, including, without limitation, Regulation M under the
Exchange Act, so far as necessary to permit the continuance of sales or dealing
in shares of Common Stock during such period in accordance with the provisions
hereof and the Prospectus.
(e) If any event or circumstance shall occur as a result of which it
is necessary to amend or supplement the Prospectus in order to make the
Prospectus not misleading in the light of the circumstances existing at the time
it is delivered to a purchaser, the Company and ▇▇▇▇▇▇ Mutual will forthwith
amend or supplement the Prospectus (in form and substance satisfactory to
counsel for the Agent) so that, as so amended or supplemented, the Prospectus
will not include an 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 existing at the time it is delivered to a purchaser, not
misleading, and the Company and ▇▇▇▇▇▇ Mutual will furnish to the Agent a
reasonable number of copies of such amendment or supplement. For the purpose of
this subsection, the Company and ▇▇▇▇▇▇ Mutual will each furnish such
information with respect to itself as the Agent may from time to time reasonably
request.
(f) The Company and ▇▇▇▇▇▇ Mutual will take all necessary action, in
cooperation with the Agent, to qualify the Securities for offering and sale
under the applicable securities laws of such states of the United States and
other jurisdictions as may be required and as the Agent and the Company have
agreed; provided, however, that the Company and ▇▇▇▇▇▇ Mutual shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified. In each
jurisdiction in which the Securities have been so qualified, the Company and
▇▇▇▇▇▇ Mutual will file such statements and reports as may be required by the
laws of such jurisdiction to continue such
15
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement.
(g) The Company authorizes Sandler ▇'▇▇▇▇▇ and any Selected Dealers to
act as agent of the Company in distributing the Prospectus to persons entitled
to receive subscription rights and other persons to be offered Securities having
record addresses in the states or jurisdictions set forth in a survey of the
securities or "blue sky" laws of the various jurisdictions in which the
Offerings will be made (the "Blue Sky Survey").
(h) The Company will make generally available to its security holders
as soon as practicable, but not later than 60 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 of the Securities Act Regulations) covering a twelve month period
beginning not later than the first day of the Company's fiscal quarter next
following the "effective date" (as defined in said Rule 158) of the Registration
Statement.
(i) During the period ending on the third anniversary of the
expiration of the fiscal year during which the closing of the transactions
contemplated hereby occurs, the Company will furnish to its shareholders as soon
as practicable after the end of each such fiscal year an annual report
(including consolidated statements of financial condition and consolidated
statements of income, shareholders' equity and cash flows, certified by
independent public accountants) and, as soon as practicable after the end of
each of the first three quarters of each fiscal year (beginning with the first
such fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company and the
Mercer Companies for such quarter in reasonable detail. In addition, annual and
quarterly consolidated summary financial information shall be made public
through the issuance of appropriate press releases at the same time or prior to
the time of the furnishing thereof to shareholders of the Company.
(j) During the period ending on the third anniversary of the
expiration of the fiscal year during which the closing of the transactions
contemplated hereby occurs, the Company will furnish to the Agent (i) as soon as
publicly available, a copy of each report or other document of the Company
furnished generally to shareholders of the Company or furnished to or filed with
the Commission under the Exchange Act or any national securities exchange or
system on which any class of securities of the Company is listed, and (ii) from
time to time, such other publicly available information concerning the Company
as the Agent may reasonably request.
(k) The Company and ▇▇▇▇▇▇ Mutual will conduct the Conversion in all
material respects in accordance with the Plan, the Conversion Act and all other
applicable regulations, decisions and orders, including all applicable terms,
requirements and conditions precedent to the Conversion imposed upon the Company
or ▇▇▇▇▇▇ Mutual by the Department.
(l) The Company and ▇▇▇▇▇▇ Mutual will use the net proceeds received
from the sale of the Securities in the manner specified in the Prospectus under
"Use of Proceeds."
(m) The Company will file with the Commission such reports on Form SR
as may be required pursuant to Rule 463 of the Securities Act Regulations, if
such report or
16
substantially similar report is required by the SEC.
(n) The Company will file with the Nasdaq Stock Market all documents
and notices required by the rules of the (i) Nasdaq Stock Market for companies
(i) that have issued securities that are traded in the over-the-counter market
and (ii) quotations for which are reported by the Nasdaq Stock Market.
(o) The Company and ▇▇▇▇▇▇ Mutual will take such actions and furnish
such information as are reasonably requested by the Agent in order for the Agent
to ensure compliance with the National Association of Securities Dealers, Inc.'s
"Interpretation Relating to Free-Riding and Withholding."
(p) Other than in connection with any employee benefit plan or
arrangement described in the Prospectus, the Company will not, without the prior
written consent of the Agent, sell or issue, contract to sell or otherwise
dispose of, any shares of Common Stock other than the Securities for a period of
180 days following the Closing Time.
(q) During the period beginning on the date hereof and ending on the
third anniversary of the Closing Time, or the date on which the Agent receives
full payment in satisfaction of any claim for indemnification or contribution to
which it may be entitled pursuant to Sections 6 or 7 which is pending upon such
third anniversary, neither the Company nor ▇▇▇▇▇▇ Mutual shall, without the
prior written consent of the Agent, which consent shall not be unreasonably
withheld, take or permit to be taken any action that could result in ▇▇▇▇▇▇
Common Stock becoming subject to any security interest, mortgage, pledge, lien
or encumbrance.
(r) The Company and ▇▇▇▇▇▇ Mutual will comply with any conditions
imposed by or agreed to with the Department in connection with their approval of
the Plan.
(s) The Company shall not deliver the Securities until the Company and
▇▇▇▇▇▇ Mutual have satisfied each condition set forth in Section 5 hereof,
unless such condition is waived by the Agent.
(t) The Company or ▇▇▇▇▇▇ Mutual will furnish to Sandler ▇'▇▇▇▇▇ as
early as practicable prior to the delivery of the letters to be furnished by
KPMG Peat Marwick LLP pursuant to subsections (e) and (f) of Section 5 hereof,
but no later than two (2) full business days prior thereto, a copy of the latest
available unaudited interim consolidated financial statements of Mercer Mutual
and the Subsidiaries which have been read by KPMG Peat Marwick LLP, as stated in
their letters to be furnished pursuant to subsections (e) and (f) of Section 5
hereof.
SECTION 4. PAYMENT OF EXPENSES.
The Company and ▇▇▇▇▇▇ Mutual jointly and severally agree to pay all
expenses incident to the performance of their obligations under this Agreement,
including but not limited to (i) the cost of obtaining all securities and
insurance regulatory approvals, (ii) the printing and filing of the Registration
Statement as originally filed and of each amendment thereto, (iii) the
preparation, issuance and delivery of the certificates for the Securities to the
purchasers in the
17
Offerings, (iv) the fees and disbursements of the Company's and ▇▇▇▇▇▇ Mutual's
counsel, accountants, appraiser and other advisors, (v) the qualification of the
Securities under securities laws in accordance with the provisions of Section
3(f) hereof, including filing fees and the fees and disbursements of counsel in
connection therewith and in connection with the preparation of the Blue Sky
Survey, (vi) the printing and delivery to the Agent of copies of the
Registration Statement as originally filed and of each amendment thereto and the
printing and delivery of the Prospectus and any amendments or supplements
thereto to the purchasers in the Offerings and the Agent, (vii) the printing and
delivery to the Agent of copies of a Blue Sky Survey, and (viii) the fees and
expenses incurred in connection with the listing of the Securities on the Nasdaq
Stock Market. In the event the Agent incurs any such fees and expenses on behalf
of ▇▇▇▇▇▇ Mutual or the Company, ▇▇▇▇▇▇ Mutual will reimburse the Agent for such
fees and expenses whether or not the Conversion is consummated; provided,
however, that the Agent shall not incur any substantial expenses on behalf of
▇▇▇▇▇▇ Mutual or the Company pursuant to this Section without the prior approval
of ▇▇▇▇▇▇ Mutual.
The Company and ▇▇▇▇▇▇ Mutual jointly and severally agree to pay
certain expenses incident to the performance of the Agent's obligations under
this Agreement, regardless of whether the Conversion is consummated, including
(i) the filing fees paid or incurred by the Agent in connection with all filings
with the National Association of Securities Dealers, Inc., and (ii) all
reasonable out of pocket expenses incurred by the Agent relating to the
Offerings, including, without limitation, advertising, promotional, syndication
and travel expenses and fees and expenses of the Agent's counsel, up to a
maximum amount of $75,000. All fees and expenses to which the Agent is entitled
to reimbursement under this paragraph of this Section 4 shall be due and payable
upon receipt by the Company or ▇▇▇▇▇▇ Mutual of a written accounting therefor
setting forth in reasonable detail the expenses incurred by the Agent.
SECTION 5. CONDITIONS OF AGENT'S OBLIGATIONS.
The Company, ▇▇▇▇▇▇ Mutual and the Agent agree that the issuance and the
sale of Securities and all obligations of the Agent hereunder are subject to the
accuracy of the representations and warranties of the Company and ▇▇▇▇▇▇ Mutual
herein contained as of the date hereof and the Closing Time, to the accuracy in
all material respects of the statements of officers and directors of the Company
and ▇▇▇▇▇▇ Mutual made pursuant to the provisions hereof, to the performance by
the Company and ▇▇▇▇▇▇ Mutual of their obligations hereunder, and to the
following further conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement shall have been issued under the Securities Act or proceedings
therefor initiated or threatened by the Commission, no order suspending the
Conversion shall have been issued or proceedings therefor initiated or
threatened by the Department, and no order suspending the sale of the Securities
in any jurisdiction shall have been issued.
(b) At Closing Time, the Agent shall have received:
(1) The favorable opinion, dated as of Closing Time, of ▇▇▇▇▇▇▇
& ▇▇▇, counsel for the Company and ▇▇▇▇▇▇ Mutual, in form and substance
satisfactory to counsel for the Agent, to the effect that:
18
(i) The Company has been incorporated and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Pennsylvania with full corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Registration Statement and Prospectus and to enter into
and perform its obligations under this Agreement; and to the best of such
counsel's knowledge the Company is not transacting business in any other
jurisdiction in which qualification as a foreign corporation is required to
transact business, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
would not have a material adverse effect upon the financial condition,
results of operations or business affairs of the Company and the Mercer
Companies, considered as one enterprise.
(ii) An opinion to the same general effect as subsection
5(b)(1)(i) in respect of each of the ▇▇▇▇▇▇ Companies.
(iii) ▇▇▇▇▇▇ Mutual has all requisite power and authority to
carry on an insurance business pursuant to and to the extent of the
certificates of authority issued under the laws of the States of
Pennsylvania and New Jersey; MIC has all requisite power and authority to
carry on an insurance business pursuant to and to the extent of the
certificate of authority issued under the laws of the State of New Jersey;
the Company and each of the ▇▇▇▇▇▇ Companies has obtained all licenses,
permits and other governmental authorizations currently required for the
conduct of their respective businesses, except where the failure to obtain
any such license, permit or authorization would not have a material adverse
effect upon the financial condition, results of operations or business
affairs of the Company and the Mercer Companies, considered as one
enterprise.
(iv) The Securities have been duly and validly authorized
for issuance and sale and, when issued and delivered by the Company
pursuant to the Plan against payment of the consideration calculated as set
forth in the Plan, will be duly and validly issued and fully paid and
non-assessable; and all corporate actions required to be taken for the
authorization, issuance and sale of the Securities have been validly and
sufficiently taken.
(v) The issuance of the Securities is not subject to
preemptive or other similar rights arising by operation of law or under the
articles of incorporation or bylaws of the Company or ▇▇▇▇▇▇ Mutual.
(vi) Upon consummation of the Conversion, the authorized,
issued and outstanding capital stock of the Company will be within the
range set forth in the Prospectus under "Capitalization" and no shares of
Common Stock have been or will be issued and outstanding prior to the
Closing Time.
(vii) All of the issued and outstanding capital stock of
each of QHC and MIC has been duly authorized and validly issued and, to
such counsel's best knowledge, is fully paid and non-assessable and is
owned by ▇▇▇▇▇▇ Mutual,
19
directly or through subsidiaries, to such counsel's knowledge free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim
or equity, except such as would not result in a material adverse effect on
the financial condition or results of operations of ▇▇▇▇▇▇ Mutual and its
subsidiaries, taken as a whole.
(viii) Upon consummation of the Conversion, all of the
issued and outstanding capital stock of ▇▇▇▇▇▇ Mutual when issued and
delivered pursuant to the Plan against payment of consideration as set
forth in the Plan and set forth in the Prospectus, will be duly authorized
and validly issued and fully paid and nonassessable, and all such capital
stock will be owned beneficially and of record by the Company to the best
of such counsel's knowledge free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity, except such as would
not result in a material adverse effect on the financial condition or
results of operations of ▇▇▇▇▇▇ Mutual and its subsidiaries, taken as a
whole.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including without
limitation the Conversion, have been duly and validly authorized by all
necessary corporate action on the part of each of the Company and ▇▇▇▇▇▇
Mutual, and this Agreement constitutes the legal, valid and binding
agreement of each of the Company and ▇▇▇▇▇▇ Mutual, enforceable in
accordance with its terms, except as rights to indemnity and contribution
hereunder may be limited under applicable law (it being understood that
such counsel may avail itself of customary exceptions concerning the effect
of bankruptcy, insolvency or similar laws and the availability of equitable
remedies); the execution and delivery of this Agreement, the incurrence of
the obligations herein set forth and the consummation of the transactions
contemplated herein, including without limitation the Conversion, will not
result in any violation of the provisions of the charter or by-laws of the
Company or any of the ▇▇▇▇▇▇ Companies; and, to the best of such counsel's
knowledge, the execution and delivery of this Agreement, the incurrence of
the obligations herein set forth and the consummation of the transactions
contemplated herein, including without limitation the Conversion, will not
constitute a breach of, or default under, and no event has occurred which,
with notice or lapse of time or both, would constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance,
that, individually or in the aggregate, would have a material adverse
effect on the financial condition, results of operations or business
affairs of the Company and the ▇▇▇▇▇▇ Companies considered as one
enterprise, upon any property or assets of the Company or any of the ▇▇▇▇▇▇
Companies pursuant to any contract, indenture, mortgage, loan agreement,
note, lease or other instrument described in or filed as a exhibit to the
Registration Statement.
(x) The Registration Statement is effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement has been issued under the Securities Act or, to the
best of such counsel's knowledge, proceedings therefor initiated or
threatened by the Commission.
20
(xi) Subject to the satisfaction of any conditions set forth
in any approvals or orders received from the Department or the New Jersey
Department of Banking and Insurance required to be performed after the date
of the opinion, no further approval, authorization, consent or other order
of any public board or body is required in connection with the execution
and delivery of this Agreement, the issuance of the Securities and the
consummation of the Conversion, except as may be required under the
securities or Blue Sky laws of various jurisdictions as to which no opinion
need be rendered.
(xii) At the time the Registration Statement became
effective, the Registration Statement (other than the financial statements,
notes to financial statements, financial tables and other financial and
statistical data included therein and the appraisal valuation as to which
no opinion need be rendered) complied as to form in all material respects
with the requirements of the Securities Act and the Securities Act
Regulations and the Conversion Act.
(xiii) The Common Stock conforms to the description thereof
contained in the Prospectus, and the form of certificate used to evidence
the Common Stock is in due and proper form and complies with all applicable
statutory requirements.
(xiv) To the best of such counsel's knowledge and without
performing any docket search or similar search of judicial or
administrative records (i) there are no legal or governmental proceedings
pending or threatened against or affecting the Company or any of the ▇▇▇▇▇▇
Companies which are required, individually or in the aggregate, to be
disclosed in the Registration Statement and Prospectus, other than those
disclosed therein, and (ii) all pending legal or governmental proceedings
to which the Company or any of the ▇▇▇▇▇▇ Companies is a party or to which
any of their property is subject which are not described in the
Registration Statement, including ordinary routine litigation incidental to
the business, are considered, in the aggregate, not material.
(xv) The information in the Prospectus under
"Business--Regulation," "The Conversion--Effect of Conversion on
Policyholders," "The Conversion--Tax Effects," "Certain Restrictions on
Acquisition of the Company" and "Description of Capital Stock," to the
extent that it constitutes matters of law, summaries of legal matters,
documents or proceedings, or legal conclusions, has been reviewed by them
and is complete and accurate in all material respects.
(xvi) To the best of such counsel's knowledge, there are no
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto, the descriptions thereof
or references thereto are correct in all material respects.
21
(xvii) The Conversion Application complies in all material
respects with the applicable requirements of the Conversion Act, includes
all documents required to be filed as exhibits thereto, and is, to the best
of such counsel's knowledge and information, truthful, accurate and
complete in all material respects. The Plan has been duly authorized by all
necessary corporate actions, and all necessary regulatory consents thereto
and regulatory approvals thereof have been obtained and the Conversion has
been consummated; ▇▇▇▇▇▇ Mutual's charter has been amended to authorize the
issuance of capital stock; to the best of such counsel's knowledge, the
Company and ▇▇▇▇▇▇ Mutual have conducted the Conversion in all material
respects in accordance with applicable requirements of the Conversion Act,
the Plan and all other applicable regulations, decisions and orders of the
Department, including all material applicable terms, conditions,
requirements and conditions precedent to the Conversion imposed upon the
Company or ▇▇▇▇▇▇ Mutual by the Department, except for those required to be
completed after the date of the opinion, and, to the best of such counsel's
knowledge, no order has been issued by the Department to suspend the
Conversion and no action for such purpose has been instituted or threatened
by the Department; and, to the best of such counsel's knowledge, no person
has sought to obtain review of the final action of the Department in
approving the Plan, except as disclosed in writing by ▇▇▇▇▇▇ Mutual to the
Agent and its counsel.
(xviii) Neither the Company nor any of the ▇▇▇▇▇▇ Companies
is in violation of its articles of incorporation or, to the best of such
counsel's knowledge, in default (nor has any event occurred which, with
notice or lapse of time or both, would constitute a default) in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other instrument described in or filed as an exhibit to the
Registration Statement.
(xix) The Company is not required to be registered as an
investment company under the Investment Company Act of 1940.
(2) The favorable opinion, dated as of Closing Time, of Lord, Bissell
& Brook, counsel for the Agent, with respect to certain of the matters set forth
in Sections 5(b)(1)(i), (iv), (v), (vi) and (xii) as the Agent may reasonably
require.
(3) In giving their opinions required by subsections (b)(l) and
(b)(2), respectively, of this Section, ▇▇▇▇▇▇▇ & ▇▇▇ and Lord, Bissell & Brook
shall each additionally state to the effect that during the preparation of the
Registration Statement and the Prospectus, such counsel participated in
conferences with certain officers and other representatives of the independent
public accountants for the Company and the ▇▇▇▇▇▇ Companies and representatives
of the Agent at which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although such counsel is not
passing upon the accuracy of the statements contained in the Registration
Statement and Prospectus (except as otherwise provided in subsections (b)(1) and
(b)(2)), on the basis of the foregoing and without independent verification
22
(relying as to factual matters on certificates and other factual representations
provided by officers of the Company and the ▇▇▇▇▇▇ Companies), nothing has come
to their attention that would lead them to believe that the Registration
Statement (except for financial statements and schedules and other financial or
statistical data included therein, as to which counsel need make no statement),
at the time it became effective, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the Prospectus
(except for financial statements and schedules and other financial or
statistical data included therein, as to which counsel need make no statement),
at the time the Registration Statement became effective or at Closing Time,
included an untrue statement of a material fact or omitted 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. In giving their
opinions, ▇▇▇▇▇▇▇ & ▇▇▇ and Lord, Bissell & Brook may rely as to matters of
fact, to the extent such counsel deems proper, on certificates of officers and
directors of the Company and ▇▇▇▇▇▇ Mutual and certificates of public officials,
provided that copies of any such certificates are delivered to the Agent
together with the opinion to be rendered by such counsel, and Lord, Bissell &
Brook may also rely on the opinion of ▇▇▇▇▇▇▇ & ▇▇▇ regarding matters of
Pennsylvania law. Further, the opinion of ▇▇▇▇▇▇▇ & ▇▇▇ may be limited to
matters governed by the laws of the Commonwealth of Pennsylvania and federal
law.
(c) At Closing Time referred to in Section 2, the Plan shall have been
approved by the policyholders of ▇▇▇▇▇▇ Mutual and ▇▇▇▇▇▇ Mutual shall have
completed in all material respects the conditions precedent to the Conversion in
accordance with the Plan, the Conversion Act and all other applicable laws,
regulations, decisions and orders, including all terms, conditions, requirements
and provisions precedent to the Conversion imposed upon the Company or ▇▇▇▇▇▇
Mutual by the Department, or any other regulatory authority, other than those
which the Department permits to be competed after the Conversion.
(d) At Closing Time, there shall not have been, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, any material adverse change in the financial condition, results of
operations or business affairs of the Company and the ▇▇▇▇▇▇ Companies
considered as one enterprise, whether or not arising in the ordinary course of
business, and the Agent shall have received a certificate of the President and
Chief Executive Officer of the Company and of ▇▇▇▇▇▇ Mutual, and the chief
financial or chief accounting officer of the Company and of ▇▇▇▇▇▇ Mutual, dated
as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) there shall have been no material transaction entered into
by the Company or ▇▇▇▇▇▇ Mutual from the latest date as of which the financial
condition of the Company or ▇▇▇▇▇▇ Mutual is set forth in the Registration
Statement and the Prospectus, other than transactions referred to or
contemplated therein and transactions in the ordinary cause of business, (iii)
neither the Company nor ▇▇▇▇▇▇ Mutual shall have received from the Department
any direction (oral or written) to make any material change in the method of
conducting its business (which direction, if any, shall have been disclosed to
the Agent) which materially and adversely would affect the business, financial
condition or results of operations of the Company or ▇▇▇▇▇▇ Mutual, (iv) the
representations and warranties in Section 1 hereof are true and correct in all
material respects with the same force and
23
effect as though expressly made at and as of the Closing Time, (v) the Company
and ▇▇▇▇▇▇ Mutual have complied in all material respects with all agreements and
satisfied in all material respects all conditions on their part to be performed
or satisfied at or prior to Closing Time, (vi) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been initiated or threatened by the Commission and (vii)
no order suspending any of the Offerings or the authorization for final use of
the Prospectus has been issued and no proceedings for that purpose have been
initiated or threatened by the Department and, other than the appeal of the
Department's Order Nos. ID-RC-98-24 and ID-RC-98-25 (the "Orders") filed by
Franklin Mutual Insurance Company ("Franklin") with the Department on October
27, 1998 and the Petition for Review filed on November 9, 1998 by Franklin with
the Pennsylvania Commonwealth Court with respect to the Orders, no person has
sought to obtain regulatory or judicial review of the action of the Department
in approving the Plan in accordance with the Conversion Act.
(e) At the time of the execution of this Agreement, the Agent shall
have received from KPMG Peat Marwick LLP a letter dated such date, in form and
substance satisfactory to the Agent, to the effect that (i) they are independent
public accountants with respect to the Company and the ▇▇▇▇▇▇ Companies within
the meaning of the Code of Ethics of the American Institute of Certified Public
Accountants, the Securities Act and the Securities Act Regulations and the
Conversion Act; (ii) it is their opinion that the consolidated financial
statements and supporting schedules included in the Registration Statement and
covered by their opinions therein comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and the
Securities Act Regulations; (iii) based upon limited procedures as agreed upon
by the Agent and KPMG Peat Marwick set forth in detail in such letter, nothing
has come to their attention which causes them to believe that (A) the unaudited
financial statements of the ▇▇▇▇▇▇ Companies included in the Registration
Statement do not comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, the Securities Act Regulations
Act or are not presented in conformity with generally accepted accounting
principles, (B) the unaudited pro forma consolidated financial data of the
Company included in the Registration Statement do not comply as to form in all
material respects with the applicable accounting requirements of rule 11-02 of
Regulation S-X and that the pro forma adjustments were not properly applied to
the applicable historical amounts in the compilation of such data, (C) at a
specified date not more than five days prior to the date of this Agreement,
there has been any change in capital stock, increase in the consolidated debt or
any decrease in consolidated assets or surplus of the ▇▇▇▇▇▇ Companies, in each
case as compared with the amounts shown in the September 30, 1998 balance sheet
included in the Registration Statement or, (D) during the period from the date
of such balance sheet to a specified date not more than five days prior to the
date of this Agreement, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated net income of the
▇▇▇▇▇▇ Companies, except in all instances for increases or decreases which the
Registration Statement and the Prospectus disclose have occurred or may occur;
and (iv) in addition to the examination referred to in their opinions and the
limited procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are included in the
Registration
24
Statement and Prospectus and which are specified by the Agent, and have found
such amounts, percentages and financial information to be in agreement with the
relevant accounting, financial and other records of the Company and the ▇▇▇▇▇▇
Companies identified in such letter.
(f) At Closing Time, the Agent shall have received from KPMG Peat
Marwick LLP a letter, dated as of Closing Time, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (d) of this
Section, except that the specified date referred to shall be a date not more
than five days prior to Closing Time.
(g) At Closing Time, the Securities shall have been approved for
listing on the Nasdaq Stock Market upon notice of issuance.
(h) At Closing Time, the Agent shall have received a letter from ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ & Company, dated as of the Closing Time, confirming its appraisal.
(i) At Closing Time, counsel for the Agent shall have been furnished
with such documents and opinions as they may require for the purpose of enabling
them to pass upon the issuance and sale of the Securities as herein contemplated
and related proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection with
the issuance and sale of the Securities as herein contemplated shall be
reasonably satisfactory in form and substance to the Agent and counsel for the
Agent.
(j) At any time prior to Closing Time, (i) there shall not have
occurred any material adverse change in the financial markets in the United
States or elsewhere or any outbreak of hostilities or escalation thereof or
other calamity or crisis the effect of which it, in the reasonable judgment of
the Agent, are so material and adverse as to make it impracticable to market the
Securities or to enforce contracts, including subscriptions or orders, for the
sale of the Securities, and (ii) trading generally on either the Nasdaq Stock
Market or the New York Stock Exchange shall not have been suspended, and minimum
or maximum prices for trading shall not have been fixed, or maximum ranges for
prices for securities have been required, by either of said trading markets or
by order of the Commission or any other governmental authority, and a banking
moratorium shall not have been declared by either Federal or New York
authorities.
SECTION 6. INDEMNIFICATION.
(a) The Company and ▇▇▇▇▇▇ Mutual, jointly and severally, agree to
indemnify and hold harmless the Agent, each person, if any, who controls the
Agent, within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, and its respective partners, directors, officers, employees
and agents as follows:
(i) from and against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, related to or arising out of the
Conversion or any action taken by the Agent where acting as agent of the
Company or ▇▇▇▇▇▇ Mutual or otherwise
25
as described in Section 2 hereof; provided, however, that this indemnity
agreement shall not apply to any loss, liability, claim, damage or expense
found in a final judgment by a court of competent jurisdiction to have
resulted primarily from the bad faith, willful misconduct or gross
negligence of the Agent seeking indemnification hereunder.
(ii) from and against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, based upon or arising out of any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement (or any amendment thereto), or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(iii) from and against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any claim
whatsoever described in clauses (i) or (ii) above, if such settlement is
effected with the written consent of the Company or ▇▇▇▇▇▇ Mutual, which
consent shall not be unreasonably withheld; and
(iv) from and against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the fees and disbursements of
counsel chosen by the Agent), reasonably incurred in investigating,
preparing for or defending against any litigation, or any investigation,
proceeding or inquiry by any governmental agency or body, commenced or
threatened, or any claim whatsoever described in clauses (i) or (ii) above,
to the extent that any such expense is not paid under (i), (ii) or (iii)
above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Prospectus (or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading which was made in reliance upon and in conformity with the Agent
Information furnished to the Company or ▇▇▇▇▇▇ Mutual expressly for use in the
Prospectus (or any amendment or supplement thereto).
(b) The Agent agrees to indemnify and hold harmless the Company,
▇▇▇▇▇▇ Mutual, their directors, each of their officers, agents and employees,
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, of a
material fact made in the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with the Agent Information.
(c) Each indemnified party shall give notice as promptly as reasonably
26
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of any such
action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to no more than one local counsel
in each separate jurisdiction in which any action or proceeding is commenced)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall be liable for any loss, liability, claim, damage and
expense incurred in connection with the settlement of any action, proceeding or
suit which is effected without the consent of the indemnifying party.
(d) The Company and ▇▇▇▇▇▇ Mutual also agree that the Agent shall not
have any liability (whether direct or indirect, in contract or tort or
otherwise) to ▇▇▇▇▇▇ Mutual, the Company, its security holders or ▇▇▇▇▇▇
Mutual's or the Company's creditors relating to or arising out of the engagement
of the Agent pursuant to, or the performance by the Agent in good faith of the
services contemplated by, this Agreement, except to the extent that any loss,
claim, damage or liability is found in a final judgment by a court of competent
jurisdiction to have resulted primarily from the Agent's bad faith, willful
misconduct or gross negligence.
(e) In addition to, and without limiting, the provisions of Section
(6)(a)(iv) hereof, in the event that any Agent, any person, if any, who controls
the Agent within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act or any of its partners, directors, officers, employees or
agents is requested or required to appear as a witness or otherwise gives
testimony in any action, proceeding, investigation or inquiry brought by or on
behalf of or against the Company, ▇▇▇▇▇▇ Mutual, the Agent or any of its
respective affiliates or any participant in the transactions contemplated hereby
in which the Agent or such person or agent is not named as a defendant, the
Company and ▇▇▇▇▇▇ Mutual jointly and severally agree to reimburse the Agent for
all reasonable and necessary out-of-pocket expenses incurred by it in connection
with preparing or appearing as a witness or otherwise giving testimony and to
compensate the Agent in an amount to be mutually agreed upon.
SECTION 7. CONTRIBUTION.
In order to provide for just and equitable contribution in circumstances in
which the indemnity agreement provided for in Section 6 hereof is for any reason
held to be unenforceable by the indemnified parties although applicable in
accordance with its terms, the Company, ▇▇▇▇▇▇ Mutual and the Agent shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company or
▇▇▇▇▇▇ Mutual and the Agent, as incurred, in such proportions (i) that the Agent
is responsible for that portion represented by the percentage that the maximum
aggregate marketing fees appearing on the cover page of the Prospectus bears to
the maximum aggregate gross proceeds appearing thereon and the Company and
▇▇▇▇▇▇ Mutual are jointly and severally responsible for the balance or (ii) if,
but only if, the allocation provided for in clause (i) is for any reason held
unenforceable, in such proportion as is appropriate to reflect not only the
relative benefits to the Company and ▇▇▇▇▇▇ Mutual on the one hand and the Agent
on the other, as reflected in clause
27
(i), but also the relative fault of the Company and ▇▇▇▇▇▇ Mutual on the one
hand and the Agent on the other, as well as any other relevant equitable
considerations; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section, each partner,
director, officer, employee and agent of the Agent, and each person, if any, who
controls the Agent within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Agent, and each director, officer, agent and employee of the Company, and ▇▇▇▇▇▇
Mutual, and each person, if any, who controls the Company or ▇▇▇▇▇▇ Mutual
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the Company and
▇▇▇▇▇▇ Mutual. Notwithstanding anything to the contrary set forth herein, to the
extent permitted by applicable law, in no event shall the Agent be required to
contribute an aggregate amount in excess of the aggregate marketing fees to
which the Agent is entitled and actually paid pursuant to this Agreement.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
All representations, warranties and agreements contained in this Agreement,
or contained in certificates of officers of the Company or ▇▇▇▇▇▇ Mutual
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Agent or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities.
SECTION 9. TERMINATION OF AGREEMENT.
(a) The Agent may terminate this Agreement, by notice to the Company,
at any time at or prior to Closing Time (i) if there has been, since the
respective dates as of which information is given in the Registration Statement,
any material adverse change in the financial condition, results of operations or
business affairs of the Company or ▇▇▇▇▇▇ Mutual, or the Company and the ▇▇▇▇▇▇
Companies considered as one enterprise, whether or not arising in the ordinary
course of business, or (ii) if there has occurred any material adverse change in
the financial markets in the United States or elsewhere or any outbreak of
hostilities or escalation thereof or other calamity or crisis the effect of
which, in the reasonable judgment of the Agent, are so material and adverse as
to make it impracticable to market the Securities or to enforce contracts,
including subscriptions or orders, for the sale of the Securities, (iii) or if
trading generally on the Nasdaq Stock Market or New York Stock Exchange has been
suspended, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices for securities have been required, by either of said trading
markets or by order of the Commission or any other governmental authority, or if
a banking moratorium has been declared by either Federal or New York
authorities, (iv) if any condition specified in Section 5 shall not have been
fulfilled when and as required to be fulfilled; (v) if there shall have been
such material adverse change in the condition or prospects of the Company or
▇▇▇▇▇▇ Mutual or the prospective market for the Company's securities which in
the Agent's good faith opinion would make it inadvisable to proceed with the
offering, sale or delivery of the Securities; (vi) if in the Agent's good faith
opinion, the price for the Securities established by ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Co. is
not reasonable or equitable under then prevailing market conditions, or (vii) if
the Conversion is not consummated within 45 days following the Termination Date
(as defined in the Prospectus).
28
(b) If this Agreement is terminated pursuant to this Section 9, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof relating to the reimbursement of expenses and
except that the provisions of Sections 6 and 7 hereof shall survive any
termination of this Agreement.
SECTION 10. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Agent shall be directed to the Agent
at Two World Trade Center, 104th Floor, New York, New York 10048, attention of
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Principal (with a copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., Lord,
Bissell & Brook, ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 60603); notices to the
Company and ▇▇▇▇▇▇ Mutual shall be directed to either of them at ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇,
President (with a copy to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., ▇▇▇▇▇▇▇ & ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ 19087).
SECTION 11. PARTIES.
This Agreement shall inure to the benefit of and be binding upon the Agent,
the Company and ▇▇▇▇▇▇ Mutual and their respective successors. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the Agent, the Company and ▇▇▇▇▇▇ Mutual
and their respective successors and the controlling persons and officers and
directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein or therein contained. This
Agreement and all conditions and provisions hereof and thereof are intended to
be for the sole and exclusive benefit of the Agent, the Company and ▇▇▇▇▇▇
Mutual and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation.
SECTION 12. ENTIRE AGREEMENT; AMENDMENT.
This Agreement represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made, except for the engagement
letter dated October 23, 1997, by and between the Agent and the Company and
▇▇▇▇▇▇ Mutual, relating to the Agent's providing conversion agent services to
the Company and ▇▇▇▇▇▇ Mutual in connection with the Conversion. No waiver,
amendment or other modification of this Agreement shall be effective unless in
writing and signed by the parties hereto.
SECTION 13. GOVERNING LAW AND TIME.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be performed
in said State without regard to the conflicts of laws provisions thereof. Unless
otherwise noted, specified times of day refer to Eastern time.
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SECTION 14. SEVERABILITY.
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
SECTION 15. HEADINGS.
Sections headings are not to be considered part of this Agreement, are for
convenience and reference only, and are not to be deemed to be full or accurate
descriptions of the contents of any paragraph or subparagraph.
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Agent, the Company and ▇▇▇▇▇▇ Mutual in accordance with its terms.
Very truly yours,
▇▇▇▇▇▇ INSURANCE GROUP, INC.
By:
Title:
▇▇▇▇▇▇ MUTUAL INSURANCE COMPANY
By:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
Sandler ▇'▇▇▇▇▇ & Partners, L.P.
By: Sandler ▇'▇▇▇▇▇ & Partners Corp.,
the sole general partner
By:
Title: