Exhibit 1.1
TOWER GROUP, INC.
_____________ SHARES OF COMMON STOCK
UNDERWRITING AGREEMENT
________________, 2004
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, INC.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & CO.
as Representatives of the several Underwriters
c/o Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Tower Group, Inc., a Delaware corporation (the "Company"), and certain
stockholders of the Company that are all listed on Schedule I hereto (the
"Selling Stockholders"), each confirms its agreement with each of the
Underwriters listed on Schedule II hereto (collectively, the "Underwriters"),
for whom Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. ("FBR"), ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, Inc. and ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Co. are acting as Representatives (in such
capacity, the "Representatives"), with respect to (i) the sale by the Company of
an aggregate of _____________ shares of Common Stock, par value $.01 per share,
of the Company ("Common Stock") as set forth opposite the name of the Company in
Schedule I hereto (the "Initial Shares"), and the purchase by the Underwriters,
acting severally and not jointly, of the respective number of shares of Common
Stock set forth opposite the names of the Underwriters in Schedule II hereto,
and (ii) the grant of the option described in Section 1(b) hereof to purchase
all or any part of _____________ additional shares of Common Stock to cover
over-allotments, if any, from the Company and the Selling Stockholders, in the
respective numbers of shares of Common Stock set forth opposite the names of the
Company and the Selling Stockholders in Schedule I hereto (the "Option Shares"),
to the Underwriters, acting severally and not jointly, in the respective numbers
of shares of Common Stock set forth opposite the names of the Underwriters in
Schedule II hereto. The _____________ shares of Common Stock to be purchased by
the Underwriters and all or any part of the _____________ shares of Common Stock
subject to the option described in Section l(b) hereof are hereinafter called,
collectively, the "Shares."
The Company and the Selling Stockholders understand that the
Underwriters propose to make a public offering of the Shares as soon as the
Underwriters deem advisable after this Agreement has been executed and
delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a registration statement on Form S-1 (No. 333-115310) and a
related preliminary prospectus for the registration of the Shares under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder (the "Securities Act Regulations"). The Company has
prepared and filed such amendments thereto, if any, and such amended preliminary
prospectuses, if any, as may have been required to the date hereof, and will
file such additional amendments thereto and such amended prospectuses as may
hereafter be required. The registration statement has been declared effective
under the Securities Act by the Commission. The registration statement as
amended at the time it became effective (including all information deemed to be
a part of the registration statement at the time it became effective pursuant to
Rule 430A(b) of the Securities Act Regulations) is hereinafter called the
"Registration Statement," except that, if the Company files a post-effective
amendment to such registration statement which becomes effective prior to the
Closing Time (as defined below), "Registration Statement" shall refer to such
registration statement as so amended. Any registration statement filed pursuant
to Rule 462(b) of the Securities Act Regulations is hereinafter called the "Rule
462(b) Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. Each prospectus
included in the Registration Statement, or amendments thereof or supplements
thereto, before the Registration Statement became effective under the Securities
Act and any prospectus filed with the Commission by the Company with the consent
of the Underwriters pursuant to Rule 424(a) of the Securities Act Regulations is
hereinafter called the "Preliminary Prospectus." The term "Prospectus" means the
final prospectus, as first filed with the Commission pursuant to paragraph (1),
(3) or (4) of Rule 424(b) of the Securities Act Regulations, and any amendments
thereof or supplements thereto. The Commission has not issued any order
preventing or suspending the use of any Preliminary Prospectus.
Each Selling Stockholder has executed and delivered a Custody Agreement
and a Power of Attorney in the form attached hereto as Exhibit A (collectively,
the "Custody Documents") pursuant to which each Selling Stockholder has placed
the Option Shares to be sold by it pursuant to this Agreement in custody and
appointed the persons designated therein as attorneys-in-fact (the "Attorneys")
with the authority to execute and deliver this Agreement on behalf of such
Selling Stockholder and to take certain other actions with respect thereto and
hereto.
The Company, each of the Selling Stockholders and the Underwriters
agree as follows:
1. Sale and Purchase:
(a) Initial Shares. Upon the basis of the warranties and
representations and other terms and conditions herein set forth, at the purchase
price per share of $________, the Company hereby agrees to sell to the
Underwriters the Initial Shares, and each Underwriter agrees, severally and not
jointly, to purchase from the Company the number of Initial Shares set forth in
Schedule II opposite such Underwriter's name, plus any additional number of
Initial Shares which such Underwriter may become obligated to purchase pursuant
to the provisions of Section 10 hereof, subject in each case, to such
adjustments among the Underwriters as the Representatives in their sole
discretion shall make to eliminate any sales or purchases of fractional shares.
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(b) Option Shares. In addition, upon the basis of the warranties and
representations and other terms and conditions herein set forth, at the purchase
price per share set forth in paragraph (a), the Company and the Selling
Stockholders set forth on Schedule I, severally and not jointly, hereby grant an
option to the Underwriters, acting severally and not jointly, to purchase all or
any part of the Option Shares, plus any additional number of Option Shares which
each such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof. The option hereby granted will expire 30 days
after the date hereof and may be exercised in whole or in part from time to time
only for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Initial Shares upon notice by the
Representatives to the Company and the Attorneys setting forth the number of
Option Shares as to which the several Underwriters are then exercising the
option and the time and date of payment and delivery for such Option Shares. Any
such time and date of delivery shall be determined by the Representatives, but
shall not be later than three full business days (or earlier than two full
business days, without the consent of the Company) after the exercise of such
option, nor in any event prior to the Closing Time, as hereinafter defined. If
the option is exercised as to all or any portion of the Option Shares, the
Company and such Selling Stockholders, severally and not jointly, will sell that
proportion of the total number of Option Shares then being purchased which the
number of Option Shares set forth in Schedule I opposite the name of the Company
or such Selling Stockholder bears to the total number of Option Shares, and each
of the Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of Option Shares then being purchased which the
number of Initial Shares set forth in Schedule II opposite the name of such
Underwriter bears to the total number of Initial Shares, subject in each case to
such adjustments among the Underwriters as the Representatives in their sole
discretion shall make to eliminate any sales or purchases of fractional shares.
2. Payment and Delivery:
(a) Initial Shares. Delivery to the Underwriters of the Initial Shares
shall be made in book-entry form through the facilities of the Depository Trust
Company ("DTC") for the account of such Underwriters against payment by or on
behalf of such Underwriters of the purchase price therefor by wire transfer of
federal (same-day) funds to the account specified to the Representatives by the
Company upon at least 48 hours prior notice. The time and date of such delivery
and payment shall be 9:30 a.m. New York City time, on the third full business
day (fourth, if pricing occurs after 4:30 p.m. New York City time) following the
date hereof (unless another time and date shall be agreed to by the
Representatives and the Company). The time at which such payment and delivery
are actually made is hereinafter sometimes called the "Closing Time" and the
date of delivery of both Initial Shares and Option Shares is hereinafter
sometimes called the "Date of Delivery." The closing shall take place at the
offices of Lord, Bissell & Brook LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, or such other place as the Company and the Representatives may agree.
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(b) Option Shares. Delivery to the Underwriters of any Option Shares to
be purchased by the several Underwriters shall be made in book-entry form
through the facilities of DTC for the account of such Underwriters against
payment by or on behalf of such Underwriters of the purchase price therefor by
wire transfer of federal (same-day) funds to the account specified to the
Representatives by the Company and the Selling Stockholders set forth on
Schedule I upon at least 48 hours prior notice. The time and date of such
delivery and payment shall be 9:30 a.m., New York City time on the date
specified by the Representatives in the notice given by the Representatives to
the Company of the Underwriters' election to purchase such Option Shares or on
such other time and date as the Company and the Representatives may agree upon
in writing (the "Option Closing Time").
(c) Manner of Delivery. Unless the Representatives request otherwise,
the Initial Shares and the Option Shares shall be delivered in global form and
shall be deposited with, or on behalf of, DTC and registered in the name of
DTC's nominee. If, at the request of the Representatives, the Initial Shares or
the Option Shares are delivered in definitive form, certificates for such Shares
shall be registered in such names and in such denominations as the
Representatives shall request upon at least 48 hours prior notice to the Company
preceding the Closing Time or the Option Closing Time, as the case may be. Such
certificates shall be made available to the Representatives for inspection and
packaging not later than at least 24 hours prior to the Closing Time or the
Option Closing Time, as the case may be.
(d) Directed Shares. It is understood that approximately __________
shares of the Initial Shares ("Directed Shares") initially will be reserved by
the Underwriters for offer and sale to employees and persons having business
relationships with the Company ("Directed Share Participants") upon the terms
and conditions set forth in the Prospectus and in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc. (the
"NASD"), referred to herein as the "Directed Share Program." Under no
circumstances will the Representatives or any Underwriter be liable to the
Company or to any Directed Share Participant for any action taken or omitted to
be taken in good faith in connection with the Directed Share Program. To the
extent that any Directed Shares are not affirmatively reconfirmed for purchase
by any Directed Share Participant on or immediately after the date of this
Agreement, the Directed Shares may be offered to the public as part of the
public offering contemplated herein.
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3. Representations and Warranties of the Company:
The Company represents and warrants to the Underwriters that:
(a) the Company has an authorized capitalization as set forth in the
Prospectus; the outstanding shares of capital stock of the Company and each
subsidiary of the Company (each, a "Subsidiary") have been duly and validly
authorized and issued and are fully paid and non-assessable, and all of the
outstanding shares of capital stock of the Subsidiaries are directly or
indirectly owned of record and beneficially by the Company; except as disclosed
in the Prospectus, there are no outstanding (i) securities or obligations of the
Company or any of the Subsidiaries convertible into or exchangeable for any
capital stock of the Company or any such Subsidiary, (ii) warrants, rights or
options to subscribe for or purchase from the Company or any such Subsidiary any
such capital stock or any such convertible or exchangeable securities or
obligations, or (iii) obligations of the Company or any such Subsidiary to issue
any shares of capital stock, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options; the description of the
Company's stock option and stock purchase plans and the options or other rights
granted and exercised thereunder set forth in the Prospectus accurately and
fairly presents the information required by the Securities Act and the
Securities Act Regulations to be shown with respect to such plans, options and
rights;
(b) each of the Company and the Subsidiaries (all of which are named in
Exhibit 21 to the Registration Statement) 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 its respective properties and to conduct its respective businesses as
described in the Registration Statement and Prospectus and, in the case of the
Company, to execute and deliver this Agreement and the Warrant Agreement to be
entered into between the Company and FBR at the Closing Time in substantially
the form attached hereto as Exhibit C (the "Warrant Agreement") and to
consummate the transactions contemplated herein and therein;
(c) the Company and each of the Subsidiaries is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which it
conducts its respective business or in which it owns or leases real property or
otherwise maintains an office and in which the failure, individually or in the
aggregate, to be so qualified would not have a material adverse effect on the
assets, business, operations, earnings, properties or condition (financial or
otherwise), present or prospective, of the Company and the Subsidiaries taken as
a whole (any such effect or change, where the context so requires, is
hereinafter called a "Material Adverse Effect" or "Material Adverse Change");
(d) the Company and each Subsidiary holds such licenses, certificates,
permits, consents, orders, approvals, accreditations and other authorizations
from governmental authorities (including, without limitation, from the insurance
regulatory agencies of the various jurisdictions where it conducts business)
("Permits") and has made all necessary filings required under any federal, state
or local law, regulation or rule, and has obtained all necessary authorizations,
consents and approvals from other persons, required in order to conduct their
respective businesses as described in the Prospectus, except where the failure
to hold any Permit or make such filings required under any federal, state or
local law, regulation or rule or obtain such authorizations, consents and
approvals from other persons would not reasonably be expected to result in a
Material Adverse Effect; each such Permit is valid and in full force and effect;
neither the Company nor any of the Subsidiaries is in violation of, in default
under, or has received any written notice regarding or alleging a violation of
or default under or revocation of any such Permit or a violation of any federal,
state or local law, regulation or rule or any decree, order or judgment
applicable to the Company or any of the Subsidiaries the effect of which, in
each case, would reasonably be expected to result in a Material Adverse Effect;
except as disclosed in the Prospectus, the authority of each Subsidiary to write
or produce the classes and lines of insurance authorized by such Permit is
unrestricted and no such Permit contains a materially burdensome restriction
that is not adequately disclosed in the Prospectus; and neither the Company nor
any of the Subsidiaries is a party to any agreement, formal or informal, with
any regulatory official or other person limiting the ability of the Company or
any Subsidiary from making full use of the Permits issued to it;
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(e) except as disclosed in the Prospectus, no Subsidiary is prohibited
or restricted, directly or indirectly, from paying dividends to the Company, or
from making any other distribution with respect to such Subsidiary's capital
stock or from repaying to the Company or any other Subsidiary any amounts which
may from time to time become due under any loans or advances to such Subsidiary
from the Company or such other Subsidiary, or from transferring any such
Subsidiary's property or assets to the Company or to any other Subsidiary; other
than as disclosed in the Prospectus, the Company does not own, directly or
indirectly, more than 5% of any capital stock or other equity securities of any
other corporation or any ownership interest of more than 5% in any partnership,
joint venture or other association;
(f) the Company and each Subsidiary is in compliance with all
applicable laws, rules, regulations, orders, decrees and judgments, including
those relating to transactions with affiliates, except where such
non-compliance, individually or in the aggregate, would not have a Material
Adverse Effect;
(g) except as disclosed in the Prospectus, the Company and Tower
Insurance Company of New York ("TICNY") have made no material change in their
insurance reserving practices since December 31, 2003;
(h) all reinsurance treaties and arrangements to which the Company or
any Subsidiary is a party are in full force and effect and neither the Company
nor any Subsidiary is in violation of, or in default in the performance,
observance or fulfillment of, any obligation, agreement, covenant or condition
contained therein, except where the failure of such reinsurance treaties and
arrangements to be in full force and effect or where such violation or default
would not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect; neither the Company nor any Subsidiary has received any
notice from any of the other parties to such treaties, contracts or agreements
that such other party intends not to perform such treaty and, to the knowledge
of the Company and the Subsidiaries, none of the other parties to such treaties
or arrangements is in breach of any such treaty or arrangement except to the
extent adequately and properly reserved for in the audited historical financial
statements of the Company included in the Prospectus, except where such breach
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect;
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(i) the statutory financial statements of TICNY from which certain
ratios and other statistical data filed as part of the Registration Statement
have been derived have been prepared for each relevant period in conformity with
statutory accounting principles or practices required or permitted by the
National Association of Insurance Commissioners and by the New York State
Insurance Department, and such statutory accounting practices have been applied
on a consistent basis throughout the periods involved, except as may otherwise
be indicated therein or in the notes thereto, and present fairly in all material
respects the statutory financial position of TICNY as of the dates thereof, and
the statutory basis results of operations of TICNY for the periods covered
thereby;
(j) neither the Company nor any Subsidiary is in breach of or in
default under (nor has any event occurred which with notice, lapse of time, or
both would constitute a breach of, or default under) its respective
organizational documents, or in the performance or observance of any obligation,
agreement, covenant or condition contained in any license, indenture, mortgage,
deed of trust, loan or credit agreement or other agreement or instrument to
which the Company or any Subsidiary is a party or by which any of them or their
respective properties is bound, except for such breaches or defaults which would
not have a Material Adverse Effect;
(k) the execution, delivery and performance of this Agreement and the
Warrant Agreement, and consummation of the transactions contemplated herein and
therein will not (A) conflict with, or result in any breach of, or constitute a
default under (nor constitute any event which with notice, lapse of time, or
both would constitute a breach of, or default under): (i) any provision of the
organizational documents of the Company or any Subsidiary, (ii) any provision of
any license, indenture, mortgage, deed of trust, loan or credit agreement or
other agreement or instrument to which the Company or any Subsidiary is a party
or by which any of them or their respective properties may be bound or affected,
or under any federal, state, local or foreign law, regulation or rule or any
decree, judgment or order applicable to the Company or any Subsidiary, or (B)
result in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Company or the Subsidiaries, except, in the
case of clauses (A)(ii) and (B), for such conflicts, breaches, defaults, liens,
charges, claims or encumbrances that would not have a Material Adverse Effect;
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(l) this Agreement has been and at the Closing Time the Warrant
Agreement shall be duly authorized, executed and delivered by the Company and
this Agreement is and the Warrant Agreement when so executed and delivered shall
be legal, valid and binding agreements of the Company enforceable in accordance
with their terms, subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, and to general equitable
principles (regardless of whether such principles are considered in a proceeding
at law or in equity), and except to the extent that the indemnification and
contribution provisions of Section 11 hereof may be limited by federal or state
securities laws and public policy considerations in respect thereof;
(m) no approval, authorization, consent or order of or filing with any
federal, state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with the Company's execution,
delivery and performance of this Agreement or the Warrant Agreement, its
consummation of the transactions contemplated herein or therein, and its sale
and delivery of the Shares to be sold by it hereunder, other than (A) such as
have been obtained, or will have been obtained at the Closing Time or the
relevant Date of Delivery, as the case may be, under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (B) such
approvals as have been obtained in connection with the approval of the listing
of the Shares on the Nasdaq National Market, (C) any necessary qualifications
under the securities or blue sky laws of the various jurisdictions in which the
Shares are being offered by the Underwriters, and (D) written confirmation from
the NASD that it has decided to raise no objections with respect to the fairness
and reasonableness of the underwriting terms and arrangements;
(n) the Registration Statement has become effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been issued
under the Securities Act and no proceedings for that purpose have been
instituted or are pending or, to the knowledge of the Company, are threatened by
the Commission, and the Company has complied to the Commission's satisfaction
with any request on the part of the Commission for additional information;
(o) the Preliminary Prospectus and the Registration Statement comply,
and the Prospectus and any further amendments or supplements thereto will
comply, when they have become effective or are filed with the Commission, as the
case may be, in all material respects with the requirements of the Securities
Act and the Securities Act Regulations; the Registration Statement did not, and
any amendment thereto will not, in each case as of the applicable effective
date, 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; and the Preliminary Prospectus does not, and the Prospectus or
any amendment or supplement thereto will not, as of the applicable filing date
and at the Closing Time and on each Date of Delivery, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no warranty or representation with respect to any
statement contained in the Registration Statement or the Prospectus in reliance
upon and in conformity with the information concerning the Underwriters and
furnished in writing by or on behalf of the Underwriters through the
Representatives to the Company expressly for use in the Registration Statement
or the Prospectus (that information being limited to that described in the
second to last sentence of the first paragraph of Section 11(c) hereof);
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(p) the Preliminary Prospectus was and the Prospectus delivered to the
Underwriters for use in connection with this offering will be identical to the
versions of the Preliminary Prospectus and Prospectus created to be transmitted
to the Commission for filing via the Electronic Data Gathering Analysis and
Retrieval system ("▇▇▇▇▇"), except to the extent permitted by Regulation S-T or
Rule 424 of the Securities Act Regulations;
(q) except as disclosed in the Prospectus, there are no actions, suits,
proceedings, inquiries or investigations pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary or any of their
respective officers and directors or to which the properties, assets or rights
of any such entity are subject, at law or in equity, before or by any federal,
state, local or foreign governmental or regulatory commission, board, body,
authority, arbitral panel or agency which would reasonably be expected to result
in a judgment, decree, award or order having a Material Adverse Effect;
(r) the consolidated financial statements, including the notes thereto,
included in the Registration Statement and the Prospectus present fairly in all
material respects the consolidated financial position of the Company and the
Subsidiaries as of the dates indicated and the consolidated results of
operations and changes in financial position and cash flows of the Company and
the Subsidiaries for the periods specified, except as may be otherwise indicated
therein or in the notes thereto; such financial statements have been prepared in
conformity with generally accepted accounting principles as applied in the
United States and on a consistent basis during the periods involved and in
accordance with Regulation S-X promulgated by the Commission; the financial
statement schedules included in the Registration Statement and the amounts in
the Prospectus under the captions "Prospectus Summary - Summary Consolidated
Financial Information" and "Selected Consolidated Financial Information" fairly
present the information shown therein and have been compiled on a basis
consistent with the financial statements included in the Registration Statement
and the Prospectus; no other financial statements or supporting schedules are
required to be included in the Registration Statement; no pro forma financial
information is required to be included in the Registration Statement;
(s) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., whose reports on the consolidated financial
statements of the Company and the Subsidiaries are filed with the Commission as
part of the Registration Statement and Prospectus, is and was during the periods
covered by its reports, independent public accountants as required by the
Securities Act and the Securities Act Regulations, and their appointment has
been ratified by the Audit Committee of the Company's board of directors, which
is comprised entirely of independent directors as defined under the applicable
standards of the Nasdaq Stock Market and the applicable rules and regulations of
the Commission;
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(t) subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as may be otherwise
stated in the Registration Statement or Prospectus, there has not been (A) any
Material Adverse Change or any development that could reasonably be expected to
result in a Material Adverse Change, whether or not arising in the ordinary
course of business, (B) any transaction or agreement in principle that is
material to the Company and the Subsidiaries taken as a whole, entered into by
the Company or any of the Subsidiaries, (C) any obligation, contingent or
otherwise, that is material to the Company and Subsidiaries taken as a whole,
directly or indirectly, incurred by the Company or any Subsidiary or (D) any
dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock;
(u) the Shares conform in all material respects to the description
thereof contained in the Registration Statement and the Prospectus;
(v) except as described in the Prospectus, there are no persons with
registration or other similar rights to have any equity or debt securities,
including securities which are convertible into or exchangeable for equity
securities, registered pursuant to the Registration Statement or otherwise
registered by the Company under the Securities Act;
(w) the Shares to be sold by the Company as contemplated herein have
been duly authorized and, when issued and duly delivered against payment
therefor as contemplated by this Agreement, will be validly issued, fully paid
and non-assessable, free and clear of any pledge, lien, encumbrance, security
interest or other claim, and the issuance and sale of such Shares by the Company
is not subject to preemptive or other similar rights arising by operation of
law, under the organizational documents of the Company or under any agreement to
which the Company or any Subsidiary is a party that is not described in the
Prospectus or otherwise; and no further approval or authority of the
stockholders or the board of directors of the Company will be required for the
issuance and sale of the Shares to be sold by the Company as contemplated
herein;
(x) the Shares have been approved for listing on the Nasdaq National
Market, subject only to official notice of issuance, and the Company is in
compliance in all material respects with all applicable listing standards of the
Nasdaq National Market;
(y) the Company has not taken, and will not take, directly or
indirectly, any action which is designed to or which has constituted or which
might reasonably be expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Shares;
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(z) neither the Company nor any of its affiliates (i) is required to
register as a "broker" or "dealer" in accordance with the provisions of the
Exchange Act, or the rules and regulations thereunder (the "Exchange Act
Regulations"), or (ii) directly, or indirectly through one or more
intermediaries, controls or has any other association with (within the meaning
of Article I of the By-Laws and the applicable rules of the NASD) any member
firm of the NASD;
(aa) the Company has not relied upon the Representatives or legal
counsel for the Representatives for any legal, tax or accounting advice in
connection with the offering and sale of the Shares;
(bb) the form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements, any
applicable requirements of the organizational documents of the Company and the
requirements of the Nasdaq National Market;
(cc) the Company and the Subsidiaries have good and marketable title in
fee simple to all real property, if any, and good title to all personal property
owned by them, in each case free and clear of all liens, security interests,
pledges, charges, encumbrances, mortgages and defects, except such as are
disclosed in the Prospectus or such as do not materially and adversely affect
the value of such property and do not interfere with the use made or proposed to
be made of such property by the Company and the Subsidiaries; and any real
property and buildings held under lease by the Company or any Subsidiary are
held under valid, existing and enforceable leases, with such exceptions as are
disclosed in the Prospectus or are not material and do not interfere with the
use made or proposed to be made of such property and buildings by the Company or
such Subsidiary;
(dd) the descriptions in the Registration Statement and the Prospectus
of the legal or governmental proceedings, contracts, leases and other legal
documents therein described present fairly the information required to be
described by the Securities Act or by the Securities Act Regulations, and there
are no legal or governmental proceedings, contracts, leases, or other documents
of a character required to be described in the Registration Statement or the
Prospectus or required to be filed as exhibits to the Registration Statement by
the Securities Act or by the Securities Act Regulations which are not described
or filed; all agreements between the Company or one or more of its Subsidiaries
and third parties expressly referenced in the Prospectus have been duly
authorized, executed and delivered by the Company or one or more of its
Subsidiaries and are legal, valid and binding obligations of the Company or one
or more of its Subsidiaries, enforceable in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and to general equitable principles
(regardless of whether such principles are considered in a proceeding at law or
in equity), and are in full force and effect on the date hereof, except where
the failure of any such agreement to be duly authorized, executed and delivered,
enforceable and in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect; and neither the Company nor any of
its Subsidiaries nor, to the Company's knowledge, any other party thereto, is in
breach of or default under any of such contracts, except for such breaches or
defaults that would not result in a Material Adverse Change;
-11-
(ee) the Company and each Subsidiary owns or possesses adequate
licenses or other rights to use all patents, trademarks, service marks, trade
names, copyrights, software and design licenses, trade secrets, manufacturing
processes, other intangible property rights and know-how (collectively
"Intangibles") necessary to entitle the Company and each Subsidiary to conduct
its business as described in the Prospectus, and neither the Company nor any
Subsidiary has received notice of any infringement of or conflict with and the
Company does not know of any such infringement of or conflict with asserted
rights of others with respect to any Intangibles which would have a Material
Adverse Effect;
(ff) the Company and each of the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles as applied in the United States and to maintain asset
accountability; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences;
(gg) each of the Company and the Subsidiaries has filed on a timely
basis all necessary federal, state, local and foreign income and franchise tax
returns required to be filed through the date hereof, each of which has been
true and correct in all material respects, and has paid all taxes shown as due
thereon; and no tax deficiency has been asserted against any such entity, nor
does any such entity know of any tax deficiency which is likely to be asserted
against any such entity which, if determined adversely to any such entity, would
have a Material Adverse Effect; all tax liabilities are adequately provided for
on the respective books of such entities;
(hh) each of the Company and the Subsidiaries maintains insurance
(issued by insurers of recognized financial responsibility) of the types and in
the amounts generally deemed adequate for their respective businesses and
consistent with insurance coverage maintained by similar companies in similar
businesses, including, but not limited to, insurance covering real and personal
property owned or leased by the Company and the Subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect; it being understood
that no representation is made in this subsection (hh) as to the reinsurance
ceded by the Company and the Subsidiaries;
-12-
(ii) neither the Company nor any of the Subsidiaries is in violation
of, or has received written notice of any violation with respect to, any
applicable environmental, safety or similar law applicable to the business of
the Company or any of the Subsidiaries; the Company and the Subsidiaries have
received all permits, licenses or other approvals required of them under
applicable federal and state occupational safety and health and environmental
laws and regulations to conduct their respective businesses, and the Company and
the Subsidiaries are in compliance with all terms and conditions of any such
permit, license or approval, except any such violation of law or regulation,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
which would not, individually or in the aggregate, result in a Material Adverse
Change;
(jj) neither the Company nor any Subsidiary is in violation of or has
received written notice of any violation with respect to any federal or state
law relating to discrimination in the hiring, promotion or pay of employees, nor
any applicable federal or state wages and hours law, nor any applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder, the
violation of any of which would have a Material Adverse Effect;
(kk) neither the Company nor any of the Subsidiaries nor any officer or
director purporting to act on behalf of the Company or any of the Subsidiaries
has at any time (i) made any contributions to any candidate for political
office, or failed to disclose fully any such contributions, in violation of law;
(ii) made any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or allowed by applicable law; (iii) engaged in any
transactions, maintained any bank account or used any corporate funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the Company and the Subsidiaries; or
(iv) otherwise made any payment of funds of the Company or of any Subsidiary or
received or retained any funds in violation of any law, rule or regulation or of
a character required to be disclosed in the Prospectus;
(ll) except as otherwise disclosed in the Prospectus, there are no
outstanding loans or advances or material guarantees of indebtedness by the
Company or any of the Subsidiaries to or for the benefit of any of the officers
or directors of the Company or any of the Subsidiaries or any of the members of
the families of any of them;
(mm) all securities issued by the Company, any of the Subsidiaries or
any trusts established by the Company or any Subsidiary, have been issued and
sold in compliance with (i) all applicable federal and state securities laws,
(ii) the laws of the applicable jurisdiction of incorporation of the issuing
entity and, (iii) to the extent applicable to the issuing entity, the
requirements of the Nasdaq National Market;
-13-
(nn) in connection with the offering contemplated hereby, the Company
has not offered and will not offer its Common Stock or any other securities
convertible into or exchangeable or exercisable for Common Stock in a manner in
violation of the Securities Act or the Securities Act Regulations; the Company
has not distributed and will not distribute any offering material other than the
Prospectus in connection with the offer and sale of the Shares;
(oo) except as otherwise contemplated by this Agreement, the Company
has not incurred any liability for any finder's fees or similar payments in
connection with the transactions herein contemplated;
(pp) no relationship, direct or indirect, exists and no transaction has
occurred between or among the Company or any of the Subsidiaries on the one
hand, and the directors, officers, stockholders, customers or suppliers of the
Company or any of the Subsidiaries on the other hand, which is required by the
Securities Act and the Securities Act Regulations to be described in the
Registration Statement and the Prospectus and which is not so described;
(qq) neither the Company nor any of the Subsidiaries is or, after
giving effect to the offering and sale of the Shares, will be an "investment
company" or an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(rr) there are no existing or, to the knowledge of the Company,
threatened labor disputes with the employees of the Company or any of the
Subsidiaries which are likely to have, individually or in the aggregate, a
Material Adverse Effect;
(ss) no consent, approval, authorization or order of, or qualification
with, any governmental body or agency, other than those obtained, is required in
connection with the offering of the Directed Shares in any jurisdiction where
the Directed Shares are being offered. The Company has not offered, or caused
the Representatives to offer, Shares to any person pursuant to the Directed
Share Program with the specific intent to unlawfully influence (i) a customer or
supplier of the Company to alter the customer's or supplier's level or type of
business with the Company or (ii) a trade journalist or publication to write or
publish favorable information about the Company or its products; and
(tt) the Company is in compliance in all material respects with all
applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and
regulations of the Commission promulgated pursuant thereto.
4. Representations and Warranties of the Selling Stockholders:
Each Selling Stockholder severally represents and warrants to the
Underwriters that:
-14-
(a) such Selling Stockholder has full power and authority to enter into
this Agreement and the Custody Documents to which it is a party. All
authorizations and consents necessary for the execution and delivery by such
Selling Stockholder of the Custody Documents, and for the execution of this
Agreement on behalf of such Selling Stockholder, have been given. Each of the
Custody Documents and this Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder and constitutes a valid
and binding agreement of such Selling Stockholder and is enforceable against
such Selling Stockholder in accordance with the terms thereof and hereof,
subject to bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and to general equitable principles
(regardless of whether such principles are considered in a proceeding at law or
in equity), and except to the extent that the indemnification and contribution
provisions of Section 11 hereof may be limited by federal or state securities
laws and public policy considerations in respect thereof;
(b) such Selling Stockholder now has and, at the Option Closing Time or
the Date of Delivery of the Option Shares, will have (i) good and marketable
title to the Shares to be sold by such Selling Stockholder hereunder, free and
clear of all pledges, liens, encumbrances, security interests and claims
whatsoever (other than pursuant to the Custody Documents), and (ii) full legal
right and power, and all authorizations and approvals required by law, to sell,
transfer and deliver such Shares to the Underwriters hereunder and to make the
representations, warranties and agreements made by such Selling Stockholder
herein;
(c) certificates in negotiable form for the Shares to be sold hereunder
by such Selling Stockholder have been placed in custody, for the purpose of
making delivery of such Shares to the Underwriters under this Agreement;
(d) upon payment for the Shares to be sold by each Selling Stockholder
pursuant to this Agreement, delivery of the certificates representing such
Shares, as directed by the Underwriters, to Cede & Co. or such other nominee as
may be designated by DTC, registration of such Shares in the name of Cede & Co.
or such other nominee and the crediting of such Shares on the records of DTC to
securities accounts of the respective Underwriters, (A) DTC will be a "protected
purchaser" of such Shares within the meaning of Section 8-303 of the Uniform
Commercial Code of the State of New York ("UCC") if it has no notice of any
adverse claim with respect to such Shares within the meaning of Section 8-105 of
the UCC, (B) under Section 8-501 of the UCC, the respective Underwriters will
acquire a security entitlement in respect of such Shares and (C) no action based
on an adverse claim to such security entitlement may be asserted against the
respective Underwriters, if the respective Underwriters have no notice of such
adverse claim within the meaning of Section 8-105 of the UCC;
(e) at the Option Closing Time or the Date of Delivery of the Option
Shares, all stock transfer or other taxes (other than income taxes) which are
required to be paid in connection with the sale and transfer of the Shares to be
sold by such Selling Stockholder to the Underwriters hereunder will have been
fully paid or provided for by such Selling Stockholder and all laws imposing
such taxes will have been fully complied with;
-15-
(f) the performance of this Agreement and the consummation of the
transactions contemplated herein will not conflict with, or result in any breach
of, or constitute a default under (nor constitute any event which with notice,
lapse of time, or both would constitute a breach of, or default under) (i) any
provision of the organizational documents or the bylaws of the Selling
Stockholder, (ii) any provision of any license, indenture, mortgage, deed of
trust, loan or credit agreement or other agreement or instrument to which the
Selling Stockholder is a party or by which it or its properties may be bound or
affected, or (iii) any federal, state, local or foreign law, regulation or rule
or any decree, judgment or order applicable to the Selling Stockholder; or
result in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Selling Stockholder;
(g) no approval, authorization, consent or order of or filing with any
federal, state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with the Selling Stockholder's
execution, delivery and performance of this Agreement, its consummation of the
transactions contemplated herein, and its sale and delivery of the Shares to be
sold by such Selling Stockholder, other than (i) such as have been obtained, or
will have been obtained at the Option Closing Time, under the Securities Act and
the Exchange Act, (ii) such approvals as have been obtained in connection with
the approval of the listing of the Shares on the Nasdaq National Market and
(iii) any necessary qualification under the securities or blue sky laws of the
various jurisdictions in which the Shares are being offered by the Underwriters;
(h) such Selling Stockholder (i) has carefully reviewed the
representations and warranties of the Company contained in Section 3(ll) of this
Agreement and has no reason to believe that such representations and warranties
insofar as such representations and warranties relate to such Selling
Stockholder are untrue or incorrect; and (ii) is not prompted to sell Shares to
be sold by it by any information concerning the Company which is not set forth
in the Registration Statement or the Prospectus;
(i) all material information with respect to such Selling Stockholder
contained in the Registration Statement, the Preliminary Prospectus and the
Prospectus (as amended or supplemented, if the Company shall have filed with the
Commission any amendment or supplement thereto) complied and will comply in all
material respects with all applicable provisions of the Securities Act and the
Securities Act Regulations; the Registration Statement, the Preliminary
Prospectus and the Prospectus, as amended and supplemented, contain and will
contain all statements of material fact with respect to such Selling Stockholder
required to be stated therein in accordance with the Securities Act and the
Securities Act Regulations; the Registration Statement, as amended, does not and
will not contain an untrue statement of a material fact with respect to such
Selling Stockholder or omit to state a material fact with respect to such
Selling Stockholder required to be stated therein or necessary in order to make
the statements therein not misleading; and the Preliminary Prospectus and the
Prospectus, as amended and supplemented, does not and will not contain an untrue
statement of a material fact with respect to such Selling Stockholder or omit to
state a material fact with respect to such Selling Stockholder required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading;
-16-
(j) other than as permitted by the Securities Act and the Securities
Act Regulations, such Selling Stockholder has not distributed and will not
distribute any Preliminary Prospectus, the Prospectus or any other offering
material in connection with the offering and sale of the Shares; such Selling
Stockholder has not taken, directly or indirectly, any action intended, or which
might reasonably be expected, to cause or result in, under the Securities Act,
the Securities Act Regulations or otherwise, or which has constituted,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares;
(k) such Selling Stockholder agrees that the Shares represented by the
certificates held in custody under the Custody Documents are for the benefit of
and coupled with and subject to the interest hereunder of the Bank of New York,
as custodian (the "Custodian"), the Attorneys, the Underwriters, each other
Selling Stockholder and the Company; that the arrangements made by such Selling
Stockholder for such custody and the appointment of the Custodian and the
Attorneys by such Selling Stockholder are irrevocable;
(l) such Selling Stockholder has not relied upon the Representatives or
legal counsel for the Representatives for any legal, tax or accounting advice in
connection with the offering and sale of the Shares to be sold by it;
(m) such Selling Stockholder does not have any registration or other
similar rights to have any equity or debt securities registered for sale by the
Company under the Registration Statement or included in the offering
contemplated by this Agreement, except for such rights as are described in the
Prospectus under "Shares Eligible for Future Sale";
(n) such selling Stockholder does not have, or has waived prior to the
date hereof, any preemptive right, co-sale right or right of first refusal or
other similar right to purchase any of the Shares that are to be sold by the
Company or any of the other Selling Stockholders to the Underwriters pursuant to
this Agreement; and such Selling Stockholder does not own any warrants, options
or similar rights to acquire, and does not have any right or arrangement to
acquire, any capital stock, right, warrants, options or other securities from
the Company, other than those described in the Registration Statement and the
Prospectus; and
-17-
(o) such Selling Stockholder is not a member of or an affiliate of or
associated with any member of the NASD (within the meaning of Article 1 of the
By-Laws and the applicable rules of the NASD).
5. Certain Covenants by the Company:
The Company hereby agrees with each Underwriter:
(a) to furnish such information as may be required and otherwise to
cooperate in qualifying the Shares for offering and sale under the securities or
blue sky laws of such jurisdictions (both domestic and foreign) as the
Representatives may designate and to maintain such qualifications in effect as
long as requested by the Representatives for the distribution of the Shares,
provided that the Company shall not be required to qualify as a foreign
corporation, to subject itself to taxation or to consent to the service of
process under the laws of any such state (except service of process with respect
to the offering and sale of the Shares);
(b) to advise the Representatives promptly, and (if requested by
Representatives) to confirm such advice in writing, when the Registration
Statement becomes effective under the Securities Act Regulations; if, at the
time this Agreement is executed and delivered, it is necessary for a
post-effective amendment to the Registration Statement to be declared effective
before the offering of the Shares may commence, the Company will endeavor to
cause such post-effective amendment to become effective as soon as possible and
will advise the Representatives promptly and, if requested by the
Representatives, will confirm such advice in writing, when such post-effective
amendment has become effective under the Securities Act Regulations;
(c) to prepare the Prospectus in a form approved by the Underwriters
and file such Prospectus (or a term sheet as permitted by Rule 434) with the
Commission pursuant to Rule 424(b) under the Securities Act not later than 10:00
a.m. (New York City time), on the day following the execution and delivery of
this Agreement or on such other day as the parties may mutually agree and to
furnish promptly (and with respect to the initial delivery of such Prospectus,
not later than 10:00 a.m. (New York City time) on the day following the
execution and delivery of this Agreement, or on such other day as the parties
may mutually agree), to the Underwriters copies of the Prospectus (or of the
Prospectus as amended or supplemented if the Company shall have made any
amendments or supplements thereto after the effective date of the Registration
Statement) in such quantities and at such locations as the Underwriters may
reasonably request for the purposes contemplated by the Securities Act
Regulations, which Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the versions created to be
transmitted to the Commission for filing via ▇▇▇▇▇, except to the extent
permitted by Regulation S-T and Rule 424 of the Securities Act Regulations;
(d) to advise the Representatives immediately, confirming such advice
in writing, of (i) the receipt of any comments from, or any request by, the
Commission for amendments or supplements to the Registration Statement or
Prospectus or for additional information with respect thereto, or (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, or of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes and, if
the Commission or any other government agency or authority should issue any such
order, to make every reasonable effort to obtain the lifting or removal of such
order as soon as possible; to advise the Representatives promptly of any
proposal to amend or supplement the Registration Statement or Prospectus and to
file no such amendment or supplement to which the Representatives shall
reasonably object;
-18-
(e) to furnish to the Underwriters for a period of five years from the
date of this Agreement (i) as soon as available, copies of all annual, quarterly
and current reports or other communications supplied to holders of shares of
Common Stock in their capacity as such, (ii) as soon as practicable after the
filing thereof, copies of all reports filed by the Company with the Commission,
the Nasdaq National Market or any securities exchange and (iii) such other
information as the Underwriters may reasonably request regarding the Company and
the Subsidiaries, provided that (A) such information may be given legally
pursuant to Regulation FD and Rule 10b-5 promulgated under the Exchange Act, (B)
such information will be subject to such confidentiality and use restrictions as
the Company may reasonably impose, and (C) the obligations of the Company under
this paragraph (f) shall be deemed satisfied by the placement of such
information on the Company's internet website and timely notification to the
Representatives of such placement;
(f) to advise the Underwriters promptly of the happening of any event
known to the Company within the time during which a Prospectus relating to the
Shares is required to be delivered under the Securities Act Regulations which,
in the judgment of the Company or in the reasonable opinion of the
Representatives or counsel for the Underwriters, would require the making of any
change in the Registration Statement or the Prospectus then being used so that
the Registration Statement would not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and so that the Prospectus would
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Registration Statement or supplement
the Prospectus to comply with any law and, during such time, to promptly prepare
and furnish to the Underwriters copies of the proposed amendment or supplement
before filing any such amendment or supplement with the Commission and
thereafter promptly furnish at the Company's own expense to the Underwriters and
to dealers, copies in such quantities and at such locations as the
Representatives may from time to time reasonably request of an appropriate
amendment to the Registration Statement or supplement to the Prospectus so that
the Registration Statement as so amended will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and the Prospectus as
so amended or supplemented will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and so that the Registration Statement and the
Prospectus will comply with the law;
-19-
(g) to file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or the Representatives, be required by
the Securities Act or requested by the Commission;
(h) prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 under the Securities Act, to furnish a copy thereof to the
Representatives and counsel for the Underwriters and obtain the consent of the
Representatives to the filing;
(i) to furnish promptly to each Representative a signed copy of the
Registration Statement, as initially filed with the Commission, and of all
amendments or supplements thereto (including all exhibits filed therewith or
incorporated by reference therein) and such number of conformed copies of the
foregoing as the Representatives may reasonably request;
(j) to apply the net proceeds of the sale of the Shares in accordance
with its statements under the caption "Use of Proceeds" in the Prospectus and in
a manner such that the Company will not become an "investment company" as that
term is defined in the Investment Company Act;
(k) to make generally available to its security holders and to deliver
to the Representatives as soon as practicable, but in any event not later than
the end of the fiscal quarter first occurring after the first anniversary of the
effective date of the Registration Statement an earnings statement complying
with the provisions of Section 11(a) of the Securities Act (in form, at the
option of the Company, complying with the provisions of Rule 158 of the
Securities Act Regulations) covering a period of 12 months beginning after the
effective date of the Registration Statement;
(l) to use its best efforts to maintain the listing of the Shares on
the Nasdaq National Market and to file with the Nasdaq National Market all
documents and notices required thereby of companies that have securities for
which quotations are reported by the Nasdaq National Market;
(m) to engage and maintain, at its expense, a registrar and transfer
agent for the Shares;
-20-
(n) except with respect to the Shares to be sold hereunder, during the
period commencing on the date hereof and ending on the 180-day anniversary of
the date of the Prospectus, (1) not to offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for any shares of Common Stock,
and (2) not to enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise; provided, however, that notwithstanding the foregoing the
Company shall be permitted to grant options to purchase Common Stock or issue
shares of restricted stock pursuant to the Company's benefit plans described in
the Registration Statement, and may issue shares of Common Stock upon the
exercise of outstanding options, provided that in the event any holder of such
shares would become a 1% or greater stockholder as a result of such issuance,
the Company shall cause such holder to furnish to the Representatives a letter
substantially in the form of Exhibit B hereto;
(o) not to, and to use its best efforts to cause its officers,
directors and affiliates not to, (i) take, directly or indirectly prior to
termination of the underwriting syndicate contemplated by this Agreement, any
action designed to stabilize or manipulate the price of any security of the
Company, or which may cause or result in, or which might in the future
reasonably be expected to cause or result in, the stabilization or manipulation
of the price of any security of the Company, to facilitate the sale or resale of
any of the Shares, (ii) sell, bid for, purchase or pay anyone any compensation
for soliciting purchases of the Shares or (iii) pay or agree to pay to any
person any compensation for soliciting any order to purchase any other
securities of the Company;
(p) to cause each 1% or greater stockholder, officer and director of
the Company to furnish to the Representatives, prior to the Closing Time, a
letter or letters substantially in the form of Exhibit B hereto, pursuant to
which each such person shall agree not to (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for any shares of
Common Stock (whether such shares or any such securities are now owned by such
person or are hereafter acquired), or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise, in each case for a period
commencing on the date hereof and ending on the 180-day anniversary of the date
of the Prospectus, without the prior written consent of the Representatives on
behalf of the Underwriters;
-21-
(q) that the provisions of the letter agreement dated January 7, 2004
between the Company and the Representatives (other than Section 1 thereof) shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated herein, provided that with respect to any matter for
which the Company is required to provide indemnification pursuant to Section 11
of this Agreement, Section 5 of such letter agreement shall be superseded by
Section 11 of this Agreement;
(r) during the 30-day period after the Registration Statement becomes
effective, the Company will provide the Representatives the opportunity to
review any press release or other public statement within a reasonable time
prior to its release;
(s) that the Company (i) shall comply with all applicable securities
and other applicable laws, rules and regulations, including without limitation,
the rules and regulations of the NASD, in each jurisdiction in which the
Directed Shares are offered in connection with the Directed Share Program and
(ii) shall pay all reasonable fees and disbursements of counsel incurred by the
Underwriters in connection with the Directed Share Program and any stamp duties,
similar taxes or duties or other taxes, if any, incurred by the Underwriters in
connection with the Directed Share Program;
(t) if any of the Selling Stockholders defaults in the delivery of any
of the Shares to be sold by such Selling Stockholder hereunder, the Company
shall issue and deliver to the Representatives, upon payment therefor as
provided herein, such additional shares of Common Stock as is necessary to
satisfy such Selling Stockholder's obligation hereunder;
(u) the Company maintains and shall maintain a system of information
disclosure controls and procedures designed to ensure that information required
to be disclosed by the Company in its periodic filings with the Commission is
recorded, processed, summarized and reported within the time periods specified
by the Commission; and
(v) at the Closing Time, the Company shall execute and deliver to FBR
the Warrant Agreement together with a warrant certificate representing the
right, subject to the terms and conditions of such certificate and the Warrant
Agreement, to purchase ___ shares of Common Stock of the Company (the "Warrant
Certificate").
6. Certain Covenants by each Selling Stockholder:
Each Selling Stockholder hereby agrees with each Underwriter:
(a) to deliver to the Representatives prior to the Option Closing Time
a properly completed and executed United States Treasury Department Form W-8 (if
the Selling Stockholder is a non-United States person, within the meaning of the
Code) or Form W-9 (if the Selling Stockholder is a United States person, within
the meaning of the Code);
-22-
(b) to furnish to the Representatives, prior to the Option Closing
Time, a letter or letters, substantially in the form of Exhibit B hereto,
pursuant to which each such Selling Stockholder shall agree not to (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for any shares of Common Stock (whether such shares or any such
securities are now owned by such Selling Stockholder or are hereafter acquired),
or (2) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise, in each case for a period commencing on the date hereof and ending on
the 180-day anniversary of the date of the Prospectus, without the prior written
consent of the Representatives on behalf of the Underwriters;
(c) if, at any time prior to the date on which the distribution of the
Shares as contemplated herein and in the Prospectus has been completed, as
determined by the Representatives, any information that the Selling Stockholder
has provided to the Company or the Underwriters becomes incorrect or the Selling
Stockholder has knowledge of the occurrence of any event as a result of which
the Registration Statement, as then amended, would include an untrue statement
of a material fact with respect to such Selling Stockholder or omit to state any
material fact with respect to such Selling Stockholder necessary to make the
statements therein not misleading, or the Prospectus, as then amended and
supplemented, would include an untrue statement of a material fact with respect
to such Selling Stockholder or omit to state any material fact with respect to
such Selling Stockholder necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, such Selling
Stockholder will promptly notify the Company and the Representatives so that the
Company may, if necessary, prepare and file with the Commission an appropriate
amendment or supplement (in form and substance satisfactory to the
Representatives) that will correct such information; and
(d) such Selling Stockholder agrees to deliver to the Company or the
Underwriters such documentation as the Company or the Underwriters or any of
their respective counsel may reasonably request in order to effectuate any of
the provisions of this Agreement.
7. Payment of Expenses:
(a) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated hereunder are consummated or this Agreement is
terminated, including expenses, fees and taxes in connection with (i) the
preparation and filing of the Registration Statement, each Preliminary
Prospectus, the Prospectus, and any amendments or supplements thereto, and the
printing and furnishing of copies of each thereof to the Underwriters and to
dealers (including costs of mailing and shipment), (ii) the preparation,
issuance and delivery of the certificates for the Shares to the Underwriters,
including any stock or other transfer taxes or duties payable upon the sale of
the Shares to the Underwriters, (iii) the printing of this Agreement and any
dealer agreements and furnishing of copies of each to the Underwriters and to
dealers (including costs of mailing and shipment), (iv) the qualification of the
Shares for offering and sale under state and foreign laws that the Company and
the Representatives have mutually agreed are appropriate and the determination
of their eligibility for investment under such laws as aforesaid, including the
legal fees and filing fees and other disbursements of counsel for the
Underwriters assuming that the Common Stock is approved for listing on the
Nasdaq National Market, and the printing and furnishing of copies of any blue
sky or foreign securities law surveys or legal investment surveys to the
Underwriters and to dealers, (v) filing for review of the public offering of the
Shares by the NASD (including the legal fees and filing fees and other
disbursements of counsel for the Underwriters relating thereto), (vi) the fees
and expenses of any transfer agent or registrar for the Shares and miscellaneous
expenses referred to in the Registration Statement, (vii) the fees and expenses
incurred in connection with the inclusion of the Shares for listing on the
Nasdaq National Market, (viii) the expenses of FBR and Company personnel in
making road show presentations with respect to the offering of the Shares, (ix)
preparing and distributing bound volumes of transaction documents for the
Representatives and its legal counsel and (x) the performance of the Company's
other obligations hereunder. Upon the request of the Representatives, the
Company will provide funds in advance for filing fees.
-23-
(b) In addition to the expenses to be paid or reimbursed by the Company
under subsection (a) above, the Company agrees to reimburse FBR for its
reasonable out-of-pocket expenses in connection with the performance of its
activities under this Agreement, including, but not limited to, the fees and
expenses of the Underwriters' outside legal counsel and any other advisors,
accountants, appraisers, etc., provided that the amount of reimbursement under
this subsection (b) shall not be greater than $500,000 without the prior consent
of the Company.
(c) The Selling Stockholders, jointly and severally, agree with each
Underwriter to pay (directly or by reimbursement) all fees and expenses incident
to the performance of their obligations under this Agreement which are otherwise
specifically provided for herein, including, but not limited to, (i) fees and
expenses of counsel and other advisors for such Selling Stockholders, (ii) fees
and expenses of the Custodian and (iii) expenses and taxes incident to the sale
and delivery of the Shares to be sold by such Selling Stockholder to the
Underwriters hereunder (which taxes, if any, may be deducted by the Custodian).
(d) If this Agreement shall be terminated by the Underwriters, or any
of them, because of any failure or refusal on the part of the Company or the
Selling Stockholders to comply with the terms or to fulfill any of the
conditions of this Agreement, or if for any reason the Company or the Selling
Stockholders shall be unable to perform their obligations under this Agreement,
the Company also shall reimburse the Underwriters or such Underwriters as have
so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (such as printing, facsimile, courier service, direct
computer expenses, accommodations, travel and the fees and disbursements of
Underwriters' counsel and any other advisors, accountants, appraisers, etc.)
reasonably incurred by such Underwriters in connection with this Agreement or
the transactions contemplated herein.
-24-
8. Conditions of the Underwriters' Obligations:
(a) The obligations of the Underwriters hereunder to purchase Shares at
the Closing Time or on each Date of Delivery, as applicable, are subject to the
accuracy of the representations and warranties on the part of the Company and
the Selling Stockholders hereunder and under the Custody Documents on the date
hereof and at the Closing Time and on each Date of Delivery, as applicable, the
performance by the Company and the Selling Stockholders of their respective
obligations hereunder and under the Custody Documents and the satisfaction of
the following further conditions at the Closing Time or on each Date of
Delivery, as applicable:
(b) The Company shall furnish to the Underwriters at the Closing Time
and on each Date of Delivery an opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Senior Vice
President and General Counsel for the Company and the Subsidiaries, addressed to
the Underwriters and dated the Closing Time and each Date of Delivery, in form
and substance satisfactory to Lord, Bissell & Brook LLP, counsel for the
Underwriters, as set forth in Exhibit D attached hereto.
(c) The Company shall furnish to the Underwriters at the Closing Time
and on each Date of Delivery an opinion of LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
L.L.P., counsel for the Company and the Subsidiaries, addressed to the
Underwriters and dated the Closing Time and each Date of Delivery, in form and
substance satisfactory to Lord, Bissell & Brook LLP, counsel for the
Underwriters, as set forth in Exhibit E attached hereto.
(d) Each Selling Stockholder shall furnish to the Underwriters at the
Option Closing Time an opinion of counsel for the Selling Stockholders
reasonably satisfactory to the Underwriters, addressed to the Underwriters and
dated the Date of Delivery of the Option Shares, in form and substance
satisfactory to Lord, Bissell & Brook LLP, counsel for the Underwriters, as set
forth in Exhibit F attached hereto.
(e) The Representatives shall have received from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.,
letters dated, respectively, as of the date of this Agreement, the Closing Time
and each Date of Delivery, as the case may be, addressed to the Representatives,
in form and substance satisfactory to the Representatives, relating to the
financial statements of the Company and the Subsidiaries, and such other matters
customarily covered by comfort letters issued in connection with registered
public offerings. In the event that the letters referred to above set forth any
change in the capital stock, increase in long-term debt or any decreases in
stockholders' equity, operating income or net income of the Company, it shall be
a further condition to the obligations of the Underwriters that (A) such letters
shall be accompanied by a written explanation of the Company as to the
significance thereof, unless the Representatives deems such explanation
unnecessary, and (B) such changes, decreases or increases do not, in the sole
judgment of the Representatives, make it impractical or inadvisable to proceed
with the purchase and delivery of the Shares as contemplated by the Registration
Statement.
-25-
(f) The Representatives shall have received at the Closing Time and on
each Date of Delivery the favorable opinion of Lord, Bissell & Brook LLP, dated
the Closing Time or such Date of Delivery, addressed to the Representatives and
in form and substance satisfactory to the Representatives.
(g) No amendment or supplement to the Registration Statement or
Prospectus shall have been filed to which the Underwriters shall have objected
in writing.
(h) Prior to the Closing Time and each Date of Delivery (i) no stop
order suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus or Prospectus has
been issued, and no proceedings for such purpose shall have been initiated or
threatened, by the Commission, and no suspension of the qualification of the
Shares for offering or sale in any jurisdiction, or the initiation or
threatening of any proceedings for any of such purposes, shall have occurred;
(ii) all requests for additional information on the part of the Commission shall
have been complied with to the reasonable satisfaction of the Representatives;
and (iii) the Registration Statement or any amendment thereto, in each case as
of their respective effective dates, shall 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, and the Preliminary
Prospectus, the Prospectus, and any amendment or supplement thereto, as of the
applicable filing dates and at the Closing Time and each Date of Delivery, shall
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(i) All filings with the Commission required by Rule 424 under the
Securities Act to have been filed by the Closing Time shall have been made
within the applicable time period prescribed for such filing by such Rule.
(j) Between the time of execution of this Agreement and the Closing
Time or the relevant Date of Delivery, there shall not have been any Material
Adverse Change and no transaction which is material and unfavorable to the
Company shall have been entered into by the Company or any of the Subsidiaries,
in each case, which in the Representatives' sole judgment, makes it
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Registration Statement.
-26-
(k) The Shares shall have been approved for inclusion in the Nasdaq
National Market.
(l) The NASD shall have confirmed in writing that it has decided to
raise no objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements and shall not have raised any such objection
after the date of such confirmation.
(m) The Representatives shall have received lock-up agreements from
each officer, director, Selling Stockholder, 1% or greater stockholder of the
Company and holder of a security convertible or exercisable into 1% or more of
the Company's Common Stock, in the form of Exhibit B attached hereto, and such
letter agreements shall be in full force and effect.
(n) The Company will, at the Closing Time and on each Date of Delivery,
deliver to the Underwriters a certificate of its Chief Executive Officer and
Chief Financial Officer to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the
date hereof, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the date hereof;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment
thereto has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the
Securities Act;
(iii) when the Registration Statement became effective and at all
times subsequent thereto up to the date of such certificate,
the Registration Statement and the Prospectus, and any
amendments or supplements thereto, contained all material
information required to be included therein by the Securities
Act and the Exchange Act and the applicable rules and
regulations of the Commission thereunder, as the case may be,
and in all material respects conformed to the requirements of
the Securities Act and the Exchange Act and the applicable
rules and regulations of the Commission thereunder, as the
case may be; the Registration Statement, and any amendments
thereto, did not, as of their applicable effective dates,
include any 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; the
Preliminary Prospectus, Prospectus, and any supplement
thereto, did not and does not, as of their applicable filing
dates, at the Closing Time and on such Date of Delivery,
include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
and, since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an
amendment or supplemented Prospectus which has not been so
set forth; and
-27-
(iv) subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has
not been (a) any Material Adverse Change, (b) any transaction
that is material to the Company and the Subsidiaries
considered as one enterprise, except transactions entered
into in the ordinary course of business, (c) any obligation,
direct or contingent, that is material to the Company and the
Subsidiaries considered as one enterprise, incurred by the
Company or the Subsidiaries, except obligations incurred in
the ordinary course of business, (d) any change in the
capital stock or outstanding indebtedness of the Company or
any Subsidiary that is material to the Company and the
Subsidiaries considered as one enterprise, (e) any dividend
or distribution of any kind declared, paid or made on the
capital stock of the Company or any Subsidiary, or (f) any
loss or damage (whether or not insured) to the property of
the Company or any Subsidiary which has been sustained or
will have been sustained which has or would be likely to have
a Material Adverse Effect, other than losses occurring under
policies of insurance or reinsurance agreements issued by
TICNY.
(o) Each Selling Stockholder will, at the Option Closing Time, deliver
to the Underwriters a certificate, to the effect that:
(i) the representations and warranties of such Selling
Stockholder set forth in this Agreement and in the Custody
Documents are true and correct as of such date; and
(ii) such Selling Stockholder has complied with all the agreements
and satisfied all the conditions on its part to be performed
or satisfied hereunder and under the Custody Documents at or
prior to the date hereof.
(p) The Company and the Selling Stockholders, as applicable, shall have
furnished to the Underwriters such other documents and certificates as to the
accuracy and completeness of any statement in the Registration Statement and the
Prospectus, the representations, warranties and statements of the Company
contained herein and in the Custody Documents, and the performance by the
Company and the Selling Stockholders of their respective covenants contained
herein and therein, and the fulfillment of any conditions contained herein or
therein, as of the Closing Time and any Date of Delivery, as the Underwriters
may reasonably request.
-28-
(q) The Company shall have duly executed and delivered to FBR the
Warrant Agreement and the Warrant Certificate.
9. Termination:
The obligations of the several Underwriters hereunder shall be subject
to termination in the absolute discretion of the Representatives, at any time
prior to the Closing Time or any Date of Delivery, (i) if any of the conditions
specified in Section 8 shall not have been fulfilled when and as required by
this Agreement to be fulfilled, or (ii) if there has been since the respective
dates as of which information is given in the Registration Statement, any
Material Adverse Change, or material change in management of the Company or any
Subsidiary, whether or not arising in the ordinary course of business, or (iii)
if there has occurred any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic, political or
other conditions the effect of which on the financial markets of the United
States is such as to make it, in the judgment of the Representatives,
impracticable to market the Shares or enforce contracts for the sale of the
Shares, or (iv) if trading in any securities of the Company has been suspended
by the Commission or by the Nasdaq National Market, or if trading generally on
the New York Stock Exchange or in the Nasdaq over-the-counter market has been
suspended (including an automatic halt in trading pursuant to market-decline
triggers, other than those in which solely program trading is temporarily
halted), or limitations on prices for trading (other than limitations on hours
or numbers of days of trading) have been fixed, or maximum ranges for prices for
securities have been required, by such exchange or the NASD or the
over-the-counter market or by order of the Commission or any other governmental
authority, or (v) if there has been any downgrade in the ratings of the Company
or its Subsidiaries by A.M. Best Company, Fitch or Standard & Poor's, or (vi)
any federal or state statute, regulation, rule or order of any court or other
governmental authority has been enacted, published, decreed or otherwise
promulgated which, in the reasonable opinion of the Representatives, materially
adversely affects or will materially adversely affect the business or operations
of the Company.
If the Representatives elect to terminate this Agreement as provided in
this Section 9, the Company and the Underwriters shall be notified promptly by
telephone, promptly confirmed by facsimile or e-mail.
If the sale to the Underwriters of the Shares, as contemplated by this
Agreement, is not carried out by the Underwriters for any reason permitted under
this Agreement or if such sale is not carried out because the Company shall be
unable to comply in all material respects with any of the terms of this
Agreement, the Company shall not be under any obligation or liability under this
Agreement (except to the extent provided in Sections 7 and 11 hereof) and the
Underwriters shall be under no obligation or liability to the Company under this
Agreement (except to the extent provided in Section 11 hereof) or to one another
hereunder.
-29-
10. Increase in Underwriters' Commitments:
If any Underwriter shall default at the Closing Time or on a Date of
Delivery to purchase the Shares that it is obligated to purchase (the "Defaulted
Shares") under this Agreement on such date, the Representatives shall have the
right, within 36 hours after such default, to make arrangements for one or more
of the non-defaulting Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Shares. Absent the completion of such
arrangements within such 36-hour period, (i) if the total number of Defaulted
Shares does not exceed 10% of the total number of Shares to be purchased on such
date, each non-defaulting Underwriter shall be obligated, severally and not
jointly, to purchase (in addition to the number of Shares which it is otherwise
obligated to purchase on such date pursuant to this Agreement) the portion of
the total number of Shares agreed to be purchased by the defaulting Underwriter
on such date in the proportion that its underwriting obligations hereunder bears
to the underwriting obligations of all non-defaulting Underwriters; and (ii) if
the total number of Defaulted Shares exceeds 10% of such total, the
Representatives may terminate this Agreement by notice to the Company, without
liability of any party to any other party except that the provisions of Sections
7 and 11 hereof shall at all times be effective and shall survive such
termination.
Without relieving any defaulting Underwriter from its obligations
hereunder, the Company agrees with the non-defaulting Underwriters that it will
not sell any Shares hereunder on such date unless all of the Shares to be
purchased on such date are purchased on such date by the Underwriters (or by
substituted Underwriters selected by the Representatives with the approval of
the Company or selected by the Company with the approval of the
Representatives).
If a new Underwriter or Underwriters are substituted for a defaulting
Underwriter in accordance with the foregoing provision, the Company or the
non-defaulting Underwriters shall have the right to postpone the Closing Time or
the relevant Date of Delivery for a period not exceeding five business days in
order that any necessary changes in the Registration Statement and Prospectus
and other documents may be effected.
The term "Underwriter" as used in this Agreement shall refer to and
include any Underwriter substituted under this Section 10 with the same effect
as if such substituted Underwriter had originally been named in this Agreement.
11. Indemnity and Contribution by the Company, the Selling Stockholders and the
Underwriters:
-30-
(a) The Company agrees to indemnify, defend and hold harmless each
Underwriter and any person who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any loss, expense, liability, damage or claim (including the reasonable
cost of investigation) which, jointly or severally, any such Underwriter or
controlling person may incur under the Securities Act, the Exchange Act or
otherwise, insofar as such loss, expense, liability, damage or claim arises out
of or is based upon (A) any breach of any representation, warranty or covenant
of the Company contained herein, (B) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment thereof by the
Company), the Prospectus (the term Prospectus for the purpose of this Section 11
being deemed to include any Preliminary Prospectus, the Prospectus and the
Prospectus as amended or supplemented by the Company), (C) any application or
other document, or any amendment or supplement thereto, executed by the Company
or based upon written information furnished by or on behalf of the Company filed
in any jurisdiction (domestic or foreign) in order to qualify the Shares under
the securities or blue sky laws thereof or filed with the Commission or any
securities association or securities exchange (each an "Application"), or (D)
any omission or alleged omission to state a material fact required to be stated
in any such Registration Statement or necessary to make the statements made
therein not misleading, (E) any omission or alleged omission to state a material
fact required to be stated in any such Prospectus or Application or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading; except insofar as any such loss, expense, liability,
damage or claim arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
and in conformity with information furnished in writing by the Underwriters
through the Representatives to the Company expressly for use in such
Registration Statement, Prospectus or Application; provided, further, that with
respect to any untrue statement or alleged untrue statement in or omission or
alleged omission from any Preliminary Prospectus the foregoing indemnity
agreement shall not inure to the benefit of any Underwriter from whom the person
asserting any such losses, expenses, liabilities, damages or claims purchased
the Shares, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such losses, expenses, liabilities, damages or claims,
unless such failure is the result of noncompliance by the Company in furnishing
copies of the Prospectus (or amendments or supplements thereto) pursuant to
Section 5(c) hereof. The indemnity agreement set forth in this Section 11(a)
shall be in addition to any liability which the Company and any "controlling"
Selling Stockholders may otherwise have.
-31-
(b) Each Selling Stockholder, severally not jointly, agrees to
indemnify, defend and hold harmless each Underwriter and any person who controls
any Underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any loss, expense, liability,
damage or claim (including the reasonable cost of investigation) which, jointly
or severally, any such Underwriter or controlling person may incur under the
Securities Act, the Exchange Act or otherwise, insofar as such loss, expense,
liability, damage or claim arises out of or is based upon (A) any breach of any
representation, warranty or covenant of such Selling Stockholder contained
herein or in the Custody Documents, (B) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment thereof by the
Company), Prospectus (the term Prospectus for the purpose of this Section 11
being deemed to include any Preliminary Prospectus, the Prospectus and the
Prospectus as amended or supplemented by the Company), or any Application or (C)
any omission or alleged omission to state a material fact required to be stated
in any such Registration Statement or necessary to make the statements made
therein not misleading, or any omission or alleged omission to state a material
fact required to be stated in any such Prospectus or Application or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading; but only insofar as any such loss, expense,
liability, damage or claim under subsections (B) and (C) of this Section 11(b)
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission of a material fact contained in and in
conformity with information furnished in writing by such Selling Stockholder to
the Company expressly for use in such Registration Statement, Prospectus or
Application; provided, further, that with respect to any untrue statement or
alleged untrue statement in or omission or alleged omission from any Preliminary
Prospectus the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any such losses, expenses,
liabilities, damages or claims purchased the Shares, or any person controlling
such Underwriter, if a copy of the Prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of such Underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
losses, expenses, liabilities, damages or claims, unless such failure is the
result of noncompliance by the Company in furnishing copies of the Prospectus
(or amendments or supplements thereto) pursuant to Section 5(c) hereof;
provided, however, that the indemnity agreement contained in this subsection (b)
shall not require any such Selling Stockholder to reimburse the Underwriters for
any amount in excess of the aggregate gross sale price of the Shares sold by
such Selling Stockholder pursuant to this Agreement. The indemnity agreement set
forth in this Section 11(b) shall be in addition to any liabilities that the
Selling Stockholders may otherwise have.
-32-
If any action is brought against an Underwriter or controlling person
in respect of which indemnity may be sought from the Company or any Selling
Stockholder pursuant to subsection (a) or the first paragraph of this subsection
(b) above or subsection (f) below, such Underwriter shall promptly notify the
Company or such Selling Stockholder, as applicable, in writing of the
institution of such action, and the Company or such Selling Stockholder, as
applicable, shall assume the defense of such action, including the employment of
counsel and payment of expenses; provided, however, that any failure or delay to
so notify the Company or such Selling Stockholder, as applicable, will not
relieve the Company or such Selling Stockholder, as applicable, of any
obligation hereunder, except to the extent that its ability to defend is
actually impaired by such failure or delay. Such Underwriter or controlling
person shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Underwriter or such controlling person unless (i) the Company or such Selling
Stockholder, as applicable, shall not have employed counsel to have charge of
the defense of such action within a reasonable time after notice of the
institution of such action is given by the Underwriter or controlling person,
(ii) such indemnified party or parties shall have reasonably concluded (based on
the advice of counsel) that there may be defenses available to it or them which
are different from or additional to those available to the Company or such
Selling Stockholder, as applicable (in which case neither the Company nor such
Selling Stockholder shall have the right to direct the defense of such action on
behalf of the indemnified party or parties) or (iii) the employment of such
counsel shall have been authorized in writing by the Company or such Selling
Stockholder, as applicable, in connection with the defense of such action, in
any of which events the counsel employed by such Underwriter or controlling
person shall be reasonably acceptable to the Company or Selling Stockholder, as
the case may be, and the fees and expenses of such counsel shall be borne by the
Company or the Selling Stockholder, as applicable, and paid as incurred (it
being understood, however, that neither the Company nor any Selling Stockholder
shall be liable for the expenses of more than one separate firm of attorneys for
the Underwriters or controlling persons in any one action or series of related
actions in the same jurisdiction (other than local counsel in any such
jurisdiction) representing the indemnified parties who are parties to such
action). Anything in this paragraph to the contrary notwithstanding, neither the
Company nor any Selling Stockholder shall be liable for any settlement of any
such claim or action effected without its consent.
(c) Each Underwriter agrees, severally and not jointly, to indemnify,
defend and hold harmless the Company and each Selling Stockholder, the Company's
directors, the Company's officers that signed the Registration Statement, and
any person who controls the Company or any Selling Stockholder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any loss, expense, liability, damage or claim (including the
reasonable cost of investigation) which, jointly or severally, the Company, the
Selling Stockholder or any such person may incur under the Securities Act, the
Exchange Act or otherwise, but only insofar as such loss, expense, liability,
damage or claim arises out of or is based upon (A) any untrue statement or
alleged untrue statement of a material fact contained in and in conformity with
information furnished in writing by such Underwriter through the Representatives
to the Company expressly for use in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment thereof by the
Company), the Prospectus, or any Application, (B) any omission or alleged
omission to state a material fact in connection with such information required
to be stated in such Registration Statement or necessary to make such
information not misleading, or (C) any omission or alleged omission to state a
material fact in connection with such information required to be stated in such
Prospectus or any Application or necessary to make such information, in light of
the circumstances under which they were made, not misleading. The concession and
reallowance figures appearing in the fourth paragraph and the statements set
forth in the ninth, eleventh, twelfth and fourteenth paragraphs under the
caption "Underwriting" in the Preliminary Prospectus and the Prospectus (to the
extent such statements relate to the Underwriters) constitute the only
information furnished by or on behalf of any Underwriter through the
Representatives to the Company for purposes of Section 3(n) and this Section 11.
The indemnity agreement set forth in this Section 11(c) shall be in addition to
any liabilities that such Underwriters may otherwise have.
-33-
If any action is brought against the Company, any Selling Stockholder
or any such person in respect of which indemnity may be sought from any
Underwriter pursuant to the foregoing paragraph, the Company, the Selling
Stockholder or such person shall promptly notify the Representatives in writing
of the institution of such action and the Representatives, on behalf of the
Underwriters, shall assume the defense of such action, including the employment
of counsel and payment of expenses, provided, however, that any failure or delay
to so notify the Representatives will not relieve the Underwriters of any
obligation hereunder, except to the extent that their ability to defend is
actually impaired by such failure or delay. The Company, the Selling Stockholder
or such person shall have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of the
Company, the Selling Stockholder or such person unless (i) the Representatives
shall not have employed counsel to have charge of the defense of such action
within a reasonable time after notice of the institution of such action is given
by the Company, the Selling Stockholder or such person, (ii) such indemnified
party or parties shall have reasonably concluded (based on the advice of
counsel) that there may be defenses available to it or them which are different
from or additional to those available to the Underwriters (in which case the
Representatives shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), or (iii) the employment of such
counsel shall have been authorized in writing by the Representatives in
connection with the defense of such action, in any of which events the counsel
employed by the Company, Selling Stockholder or such person shall be reasonably
acceptable to the Representatives, and the fees and expenses shall be borne by
such Underwriter and paid as incurred (it being understood, however, that the
Underwriters shall not be liable for the expenses of more than one separate firm
of attorneys in any one action or series of related actions in the same
jurisdiction (other than local counsel in any such jurisdiction) representing
the indemnified parties who are parties to such action). Anything in this
paragraph to the contrary notwithstanding, no Underwriter shall be liable for
any settlement of any such claim or action effected without the written consent
of the Representatives.
-34-
(d) If the indemnification provided for in this Section 11 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a), (b), (c) and (f) of this Section 11 in respect of any losses,
expenses, liabilities, damages or claims referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, expenses, liabilities, damages or claims (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Selling Stockholders and the Underwriters from the offering of the
Shares or (ii) if (but only if) the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company, of the Selling Stockholders and of the
Underwriters in connection with the statements or omissions which resulted in
such losses, expenses, liabilities, damages or claims, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, the Selling Stockholders and the Underwriters shall be deemed to be in
the same proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
or the Selling Stockholders, as applicable, bear to the underwriting discounts
and commissions received by the Underwriters. The relative fault of the Company,
of the Selling Stockholders and of the Underwriters shall be determined by
reference to, among other things, whether the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission relates to
information supplied by the Company, by the Selling Stockholders or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with investigating
or defending any claim or action.
(e) The Company, the Selling Stockholders and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
11 were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in subsection
(d)(i) and, if applicable (ii), above. Notwithstanding the provisions of this
Section 11, no Underwriter shall be required to contribute any amount in excess
of the underwriting discounts and commissions applicable to the Shares purchased
by such Underwriter and no Selling Stockholder shall be required to contribute
any amount in excess of the gross sale price of the Shares sold by such Selling
Stockholder pursuant to this Agreement. 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. The Underwriters' obligations to contribute
pursuant to this Section 11 are several in proportion to their respective
underwriting commitments and not joint.
-35-
(f) The Company agrees to indemnify and hold harmless each Underwriter
and its affiliates and each person, if any, who controls each Underwriter and
its affiliates within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in any material prepared by or with the
consent of the Company for distribution to participants in connection with the
Directed Share Program, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
and when considered in conjunction with the Prospectus or Preliminary
Prospectus, not misleading; (ii) as a result of the failure of any Directed
Share Participant to pay for and accept delivery of Directed Shares that, by the
end of the first business day following the date of this Agreement, were subject
to a properly confirmed agreement to purchase; or (iii) the violation of any
applicable laws or regulations of foreign jurisdictions where Directed Shares
have been offered, other than losses, claims, damages or liabilities that are
finally judicially determined to have resulted from the bad faith or gross
negligence of the Directed Share Participants.
12. Survival:
The indemnity and contribution agreements contained in Section 11 and
the covenants, warranties and representations of the Company and the Selling
Stockholders contained in Sections 3, 4, 5, 6 and 7 of this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of any Underwriter, or any person who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
or by or on behalf of the Company, its directors and officers, the Selling
Stockholders or any person who controls the Company or any Selling Stockholder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and shall survive any termination of this Agreement or the sale
and delivery of the Shares. The Company, each Selling Stockholder and each
Underwriter agree promptly to notify the others of the commencement of any
litigation or proceeding against it and, in the case of the Company, against any
of the Company's officers and directors, in connection with the sale and
delivery of the Shares, or in connection with the Registration Statement or
Prospectus.
13. Notices:
Except as otherwise provided herein, all statements, requests, notices
and agreements shall be in writing and, if to the Underwriters, shall be
delivered or sent by mail or facsimile transmission in care of Friedman,
Billings, ▇▇▇▇▇▇ & Co., Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Syndicate Department; facsimile number ▇▇▇-▇▇▇-▇▇▇▇; if to the
Company, shall be delivered or sent by mail or facsimile transmission to the
offices of the Company at ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇;
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇; facsimile number ▇▇▇-▇▇▇-▇▇▇▇; or if to a Selling
Stockholder, shall be delivered or sent by mail or facsimile transmission in
care of ▇▇▇▇▇▇▇ ▇. ▇▇▇, Tower Group, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇; facsimile number ▇▇▇-▇▇▇-▇▇▇▇.
-36-
14. Governing Law; Headings:
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES. The section headings in this Agreement have been inserted as a
matter of convenience of reference and are not a part of this Agreement.
15. Parties at Interest:
The Agreement herein set forth has been and is made solely for the
benefit of the Underwriters, the Company, the Selling Stockholders and the
controlling persons, directors and officers referred to in Sections 11 and 12
hereof, and their respective successors, assigns, executors and administrators.
No other person, partnership, association or corporation (including a purchaser,
as such purchaser, from any of the Underwriters) shall acquire or have any right
under or by virtue of this Agreement.
16. Certificates:
Any certificate signed by any officer of the Company or any Subsidiary
delivered to the Representatives or to counsel for the Underwriters pursuant to
or in connection with this Agreement shall be deemed a representation and
warranty by the Company to each Underwriter as to the matters covered thereby.
17. Counterparts and Facsimile Signatures:
This Agreement may be signed by the parties in counterparts which
together shall constitute one and the same agreement among the parties. A
facsimile signature shall constitute an original signature for all purposes.
-37-
If the foregoing correctly sets forth the understanding among the
Company, the Selling Stockholders and the Underwriters, please so indicate in
the space provided below, whereupon this Agreement shall constitute a binding
agreement among the Company, the Selling Stockholders and the Underwriters.
Very truly yours,
TOWER GROUP, INC.
By:_____________________________
Name:
Title:
EACH OF THE SELLING STOCKHOLDERS
LISTED ON SCHEDULE I
ATTACHED HERETO
By: ___________________________
As Attorney-in-Fact
acting on behalf of
each of the Selling
Stockholders listed on
Schedule I attached
hereto
Accepted and agreed to as
of the date first above written:
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, INC.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & CO.
Acting on behalf of themselves and as the Representatives
of any other Underwriters named on Schedule II hereto.
By: FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
By: _______________________________________
Name:______________________________
Title:_____________________________
-38-
Schedule I
Maximum
Number of Initial Number of Option
Name of Party Selling Shares Shares to be Sold Shares to be Sold
-----------------------------------------------------------------------------------
TOWER GROUP, INC. [ ] [ ]
---------------------------------------
[INSERT NAME OF
SELLING STOCKHOLDER] --- [ ]
---------------------------------------
[INSERT NAME OF
SELLING STOCKHOLDER] --- [ ]
---------------------------------------
Total [ ]
========================================
Schedule II
Number of Initial Maximum Number
Shares to be of Option Shares to
Underwriter Purchased be Purchased
-----------------------------------------------------------------------------------------------------
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. [ ] [ ]
----------------- -------------
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. [ ] [ ]
----------------- -------------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Co. [ ] [ ]
----------------- -------------
Total [ ]
-------------
S-2
EXHIBIT A
POWER OF ATTORNEY AND CUSTODY AGREEMENT
A-1
TOWER GROUP, INC.
IRREVOCABLE POWER OF ATTORNEY OF SELLING STOCKHOLDER
[ ]
c/o Tower Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Ladies and Gentlemen:
The undersigned selling stockholder (the "SELLER"), Tower Group, Inc.
(the "COMPANY") and certain other holders of shares of the Company's common
stock, $.01 par value per share or securities convertible into the foregoing
(the "COMMON STOCK") (such holders and the Seller being hereinafter sometimes
collectively referred to as the "SELLING STOCKHOLDERS"), propose to sell shares
of Common Stock to the Underwriters (as defined below) pursuant to, and as
specified in, an Underwriting Agreement (the "UNDERWRITING AGREEMENT") with
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc., ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. and
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Co., as representatives (the "REPRESENTATIVES") of the
underwriters to be named therein (the "UNDERWRITERS"). It is understood that at
this time there is no commitment on the part of the Underwriters to purchase any
shares of Common Stock that the Company and the Selling Stockholders propose to
sell (the "OFFERED STOCK"), and there is no assurance that the Underwriting
Agreement will be entered into by the Company or the Underwriters.
The Seller hereby irrevocably constitutes and appoints [ ], each with
full power and authority to act alone in any matter hereunder and with full
power of substitution, the true and lawful attorneys-in-fact of the Seller
(individually an "ATTORNEY" and collectively the "ATTORNEYS"), with full power
and authority in the name of, for and on behalf of, the Seller with respect to
all matters arising in connection with the sale of any shares of Common Stock by
the Seller including, but not limited to, the power and authority on behalf of
the Seller to take any and all of the actions set forth below.
1. To sell, assign, transfer and deliver to the several Underwriters up
to the number of shares of Common Stock set forth on the signature page hereof
(the "SECURITIES"), such Securities to be represented by certificate(s)
deposited by the Seller pursuant to the Custody Agreement (the "CUSTODY
AGREEMENT") by and among the Company, the Seller and [ ], as Custodian (the
"CUSTODIAN"), at a purchase price per share equal to the price per share
determined by the Attorneys, or any of them acting alone[; it being understood
that the number of Securities set forth on the signature
A-2
page will be divided between those to be sold pursuant to a firm commitment (the
"INITIAL SECURITIES") and those to be sold pursuant to the Underwriters'
over-allotment option (the "OPTION SECURITIES")]. [The Underwriters will have no
obligation to purchase the Option Securities even if they purchase the Initial
Securities.] (The date of the closing of the sale for the [Securities] [Initial
Securities and the Option Securities] shall [each] be referred to herein as a
"CLOSING DATE");
2. To determine the number of [Initial] Securities to be sold by the
Seller to the Underwriters which number[, together with the Option Securities,]
shall be no greater but may be fewer than that set forth on the signature page
hereof;
3. To prepare, execute, deliver and perform the Underwriting Agreement,
a form of which has been delivered to the Seller, with full power to make such
amendments to the Underwriting Agreement as the Attorneys, or any of them acting
alone, in their sole discretion, may deem advisable and, together with the
Representatives, to determine the public offering price and the purchase price
per share of Offered Stock to be paid by the Underwriters (subject to paragraph
(1) above) and the other terms of sale;
4. To make the representations and warranties and enter into the
agreements contained in or annexed to the Underwriting Agreement;
5. (a) To instruct the Company and the Custodian on all matters
pertaining to the sale of the Securities and the delivery of certificates
therefor, including: (i) the transfer of the Securities on the books of the
Company in order to effect the sale of the Securities (including designating the
name or names in which new certificate(s) for the Securities are to be issued
and the denominations thereof), (ii) the delivery to or for the account of the
Underwriters of the certificate(s) for the Securities against receipt of the
purchase price to be paid therefor in accordance with the Underwriting
Agreement, (iii) the payment, out of the proceeds (net of underwriting
discounts) from the sale of the Securities to the Underwriters, of any expense
incurred in accordance with paragraph (6) immediately below that is not payable
by the Company and any transfer taxes payable in connection with the transfer of
the Securities to the Underwriters ("TRANSFER TAXES") and (iv) the transmission
to the Seller of the proceeds from the sale of the Securities (after deducting
all amounts payable by the Seller pursuant to clause (iii) hereof) and the
return to the Seller of new certificate(s) representing the excess, if any, of
the number of shares of Common Stock represented by certificate(s) deposited
with the Custodian over the Securities; and (b) to amend the Custody Agreement
and any related documents in such manner as the Attorneys, or any of them acting
alone, may determine to be not materially adverse to the Seller;
6. To incur or authorize the incurrence of any necessary or appropriate
expense in connection with the sale of the Securities and to determine the
amount of any Transfer Taxes;
7. To take any and all steps deemed necessary or desirable by the
Attorneys, or any of them acting alone, in connection with the registration of
the Offered Stock under the Securities Act of 1933, as amended (the "ACT"), the
Securities Exchange Act of 1934, as amended, and the securities or "blue sky"
laws of various states and jurisdictions, including, without limitation, the
filing of any amendments to the Registration Statement (as defined below), the
filing of a prospectus pursuant to Rule 424(b) under the Act, the giving, making
or filing of such undertakings, consents to service of process and
representations and agreements and the taking of such other steps as the
Attorneys, or any of them acting alone, may deem necessary or desirable;
A-3
8. To retain legal counsel to represent the Seller in connection with
any and all matters referred to herein;
9. To make, execute, acknowledge and deliver all such other contracts,
stock powers, orders, receipts, notices, instructions, certificates, letters and
other writings, including, without limitation, communications with the
Securities and Exchange Commission (the "COMMISSION") and the National
Association of Securities Dealers, Inc. ("NASD"), and in general to do all
things and to take all actions that the Attorneys, or any of them acting alone,
in their sole discretion, may consider necessary or desirable in connection with
the sale of the Securities to the Underwriters and the public offering thereof,
as fully as could the Seller if personally present and acting;
10. If necessary, to endorse (in blank or otherwise) on behalf of the
Seller the certificate(s) representing the Common Stock to be sold by the
Seller, or a stock power or powers attached to such certificate(s); and
11. To sign such other certificates, documents and agreements and take
any and all other actions as the Attorneys, or any of them acting alone, may
deem necessary or desirable, in their sole discretion, in connection with the
consummation of the transactions contemplated by this Power of Attorney.
The Seller ratifies all that the Attorneys have done and shall do by
virtue of this Power of Attorney. Each Attorney may act alone in exercising the
rights and powers conferred on the Attorneys in this Power of Attorney. Each
Attorney is hereby empowered to determine in his or her sole discretion the time
or times when, the purpose for and the manner in which any power herein
conferred upon him or her shall be exercised, and the conditions, provisions or
covenants of any instrument or document that may be executed by him or her
pursuant hereto.
The Seller acknowledges receipt of a copy of the Preliminary Prospectus
as filed with the Commission on May 7, 2004 (the "PRELIMINARY PROSPECTUS"),
which is subject to completion pursuant to Item 7 above, relating to the Offered
Stock and a copy of the preliminary form of the Underwriting Agreement. The
Seller has reviewed the Preliminary Prospectus and the preliminary form of the
Underwriting Agreement and understands the obligations and agreements of the
Seller set forth in the Underwriting Agreement. ALL REPRESENTATIONS AND
WARRANTIES OF THE SELLING STOCKHOLDERS IN THE FORM OF UNDERWRITING AGREEMENT
WITH RESPECT TO THE SELLER ARE AS OF THE DATE HEREOF, AND WILL BE AS OF THE DATE
OF THE EXECUTION OF THE UNDERWRITING AGREEMENT AND EACH CLOSING DATE (AS
DETERMINED IN ACCORDANCE WITH THE UNDERWRITING AGREEMENT), TRUE AND CORRECT. ALL
SUCH REPRESENTATIONS AND WARRANTIES SHALL, AS PROVIDED IN THE UNDERWRITING
AGREEMENT, SURVIVE THE TERMINATION OF THE UNDERWRITING AGREEMENT AND THE
DELIVERY OF AND PAYMENT FOR THE OFFERED STOCK.
A-4
Upon the execution and delivery of the Underwriting Agreement by the
Attorneys, or any of them acting alone, on behalf of the Selling Stockholders,
the Seller agrees to be bound by and to perform each and every covenant and
agreement contained therein of the Seller as a Selling Stockholder (including,
without limitation, the agreements contained therein regarding indemnification
and contribution and the delivery of opinions of attorneys to the Selling
Stockholders).
The Seller agrees, if so requested, to provide an opinion of counsel,
addressed to the Underwriters, which opinion shall expressly permit reliance
thereon by Lord, Bissell & Brook LLP and LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
setting forth such matters as the Underwriters may reasonably request and such
other documentation as the Attorneys, or any of them acting alone, the Company,
the Representatives or any of their respective counsel may request to effectuate
any of the provisions hereof or of the Underwriting Agreement, all of the
foregoing to be in form and substance satisfactory in all respects to the party
requesting such documentation.
This Power of Attorney and all authority conferred hereby are granted
and conferred subject to and in consideration of the interests of the Attorneys,
the several Underwriters, the Company and the other Selling Stockholders who may
become parties to the Underwriting Agreement, and for the purposes of completing
the transactions contemplated by the Underwriting Agreement, the Custody
Agreement and this Power of Attorney.
This Power of Attorney is an agency coupled with an interest and all
authority conferred hereby SHALL BE IRREVOCABLE, and shall not be terminated by
any act of the Seller or by operation of law, whether by the death or incapacity
of the Seller or by the occurrence of any other event or events (including,
without limitation, the termination of any trust or estate for which the Seller
is acting as a fiduciary or fiduciaries, the death or incapacity of one or more
trustees, guardians, executors or administrators under such trust or estate or
the dissolution or liquidation of any corporation or partnership) (any of the
foregoing being hereinafter referred to as an "EVENT"). If an Event shall occur
after the execution hereof but before completion of the transactions
contemplated by the Underwriting Agreement, the Custody Agreement or this Power
of Attorney, then certificate(s) representing the Securities will be delivered
to the Underwriters by or on behalf of the Seller in accordance with the terms
and conditions of the Underwriting Agreement and the Custody Agreement and any
actions taken hereunder by the Attorneys shall be as valid as if such Event had
not occurred, regardless of whether or not the Custodian, the Attorneys, the
Underwriters, or any one of them, shall have received notice of such Event.
Notwithstanding any of the foregoing provisions, if the Underwriting
Agreement shall not have been executed and delivered prior to November 30, 2004,
then, upon the written notice of the Seller on or after that date to the
Attorneys, this Power of Attorney shall terminate subject, however, to all
lawful action done or performed pursuant hereto prior to the receipt of actual
notice.
A-5
The Seller hereby represents and warrants to and agrees with the
Company, Lord, Bissell & Brook LLP, the Underwriters, LeBoeuf, Lamb, ▇▇▇▇▇▇ &
▇▇▇▇▇▇, L.L.P., the Custodian, the Attorneys and the other Selling Stockholders
that:
1. The Seller is the lawful owner of the Securities and has, and on each
Closing Date will have, valid and marketable title to the Securities to be
sold by the Seller pursuant to the Underwriting Agreement, free and clear of
any pledge, lien, security interest, charge, claim, equity or encumbrance of
any kind, and has full right, power and authority to sell, transfer and
deliver such Securities pursuant to the Underwriting Agreement. By delivery
of a certificate or certificates therefor the Seller will transfer to the
Underwriters who have purchased such Securities pursuant to the Underwriting
Agreement valid and marketable title to such Securities, free and clear of
any pledge, lien, security interest, charge, claim, equity or encumbrance of
any kind.
2. The Seller has, and on each Closing Date will have, all necessary
authorization and approval to enter into, and perform its obligations under,
this Power of Attorney, the Custody Agreement and the Underwriting Agreement
and to sell, transfer and deliver the Securities.
3. The Underwriting Agreement has been duly authorized, executed and delivered
by or on behalf of the Seller.
4. The Custody Agreement has been duly authorized, executed and delivered by
the Seller and constitutes the legal, valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms.
5. This Power of Attorney has been duly authorized, executed and delivered by
the Seller and constitutes the legal, valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms, and,
pursuant to this Power of Attorney, the Seller has, among other things,
authorized the Attorneys, or any of them acting alone, in any case as
authorized by the Attorneys, to execute and deliver on the Seller's behalf
the Underwriting Agreement and any other document that they, or any one of
them, may deem necessary or desirable in connection with the transactions
contemplated hereby and thereby and to deliver the Securities in accordance
with the terms of the Underwriting Agreement. IF THE SELLER IS ACTING AS A
FIDUCIARY, OFFICER, PARTNER OR AGENT, THE SELLER IS ENCLOSING WITH THIS
POWER OF ATTORNEY CERTIFIED COPIES OF THE APPROPRIATE INSTRUMENTS PURSUANT
TO WHICH THE SELLER IS AUTHORIZED TO ACT HEREUNDER.
6. Assuming that neither the Representatives nor any Underwriter has notice of
any adverse claims with respect to the certificates registered in the name
of the Seller and evidencing the respective amount of the Securities then,
upon delivery as directed by the Representatives of such certificates to The
Depository Trust Company ("DTC") or its nominee, registration of the
Securities in the name of DTC or such nominee and the crediting of the
Securities on the records of DTC to securities accounts of the Underwriters,
(A) DTC will be a "protected purchaser" of such Securities within the
meaning of Section 8-303 of the Uniform Commercial Code of the State of New
York (the "UCC") if it has no notice of any adverse claim with respect to
such Securities within the meaning of Section 8-105 of the UCC, (B) under
Section 8-501 of the UCC, the respective Underwriters will acquire a
security entitlement in respect of such Securities and (C) no action based
on an adverse claim to such security entitlement may be asserted against the
respective Underwriters, if the respective Underwriters have no notice of
such adverse claim within the meaning of Section 8-105 of the UCC.
A-6
7. The execution, delivery and performance of this Power of Attorney, the
Underwriting Agreement and the Custody Agreement, the sale and delivery of
the Securities by or on behalf of the Seller, the compliance by the Seller
with all the provisions and obligations hereof and thereof and the
consummation of the transactions contemplated hereby and thereby and by the
Company's registration statement on Form S-1 (No. 333-115310) as filed with
the Commission on May 7, 2004, as amended (the "REGISTRATION Statement"),
have been duly authorized by all necessary action on the part of the Seller
and such action will not contravene any provision of applicable law, the
organizational documents of the Seller, or any agreement or other instrument
binding upon the Seller or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Seller, and no filing
with, or consent, approval, authorization, license, order, registration,
qualification or decree of, any court or governmental authority or agency,
domestic or foreign, is necessary or required to be obtained by the Seller
for the performance by the Seller of its obligations under the Underwriting
Agreement or the Custody Agreement or this Power of Attorney or in
connection with the offer, sale or delivery of the Securities, except such
as may be required by the securities or Blue Sky laws of the various states
in connection with the offer and sale of the Offered Stock.
8. The Registration Statement does not, and will not when it becomes effective,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and the Prospectus (as defined below) does
not, and will not when it is filed pursuant to the Act, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading; except that the
representations and warranties set forth in this paragraph 8 apply only to
statements or omissions in the Registration Statement and the Prospectus
based upon information furnished by the Seller to the Company expressly for
use in the Registration Statement and the Prospectus (as defined below).
9. The Seller has not taken, and will not take, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or result
in stabilization or manipulation of the price of any security of the Company
or facilitate the sale or resale of the Offered Stock pursuant to the
distribution contemplated by the Underwriting Agreement, and other than as
permitted by the Act, the Seller has not distributed and will not distribute
any prospectus or other offering material in connection with the offering
and sale of the Offered Stock.
A-7
10. Certificate(s) in negotiable form for up to the maximum number of Securities
that may be sold by the Seller to the Underwriters have been placed in
custody with the Custodian for the purpose of effecting delivery thereof
under the Underwriting Agreement.
11. Except as noted on Attachment A hereof, the Seller (and, if the Seller is
(i) a trust, each of the trustees and beneficiaries of such trust or (ii) a
partnership, each of the partners) is not a "MEMBER"(1) of the NASD, a
controlling stockholder of a "MEMBER", a "PERSON ASSOCIATED WITH A MEMBER"*
or an "AFFILIATE"* of a "MEMBER" or a member of the "IMMEDIATE FAMILY"* of
any of the foregoing or an "UNDERWRITER OR RELATED PERSON"* with respect to
the Offered Stock.
12. The Seller will furnish any and all information that the Company, the
Underwriters or their respective counsel deems necessary or desirable in
connection with the preparation and filing of all amendments, post-effective
amendments and supplements to the Registration Statement, the Preliminary
Prospectus or the prospectus in the form first used to confirm sales of the
Offered Stock (the "PROSPECTUS") or any other filing with any regulatory
body or agency (including the NASD), as well as any and all information that
the Commission, the NASD or any state securities regulatory authority may
request.
The foregoing representations, warranties and agreements, as well as
those contained in the Underwriting Agreement and the Custody Agreement, are
made for the benefit of, and may be relied upon by, the other Selling
Stockholders, the Attorneys, the Company, Lord, Bissell & Brook LLP, the
Underwriters, LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. and the Custodian and their
representatives, agents and counsel. In addition, the foregoing representations,
warranties and agreements shall remain operative and in full force and effect,
and shall survive delivery of and payment for the Securities, regardless of (i)
any investigation, or statement as to the results thereof, made by or on behalf
of any of the persons listed in the preceding sentence, (ii) acceptance of the
Securities and payment for them under the Underwriting Agreement and (iii)
termination of this Power of Attorney.
The Seller will immediately notify the Attorneys, the Company and the
Underwriters of the occurrence of any event that shall cause the representations
and warranties herein contained not to be true and correct at any time from the
date hereof until the later of (i) the Closing Date for the Initial Securities
and (ii) any Closing Date for the Option Securities.
-------------------
1 See Appendix A hereto for the definition of these terms.
A-8
It is understood that none of the Attorneys assumes responsibility or
liability to any person other than to deal with the certificate(s) for the
Common Stock deposited with the Custodian pursuant to the Custody Agreement and
the proceeds from the sale of the Offered Stock in accordance with the
provisions hereof. In connection with his or her role as an Attorney hereunder,
none of the Attorneys makes any representations with respect to, nor shall any
Attorney have any responsibility for, the Registration Statement or the
Prospectus nor, except as herein expressly provided, for any aspect of the
Offered Stock, and none of the Attorneys shall be liable for any error of
judgment or for any act done or omitted or for any mistake of fact or law except
for the Attorneys' own gross negligence or willful misconduct. The Seller agrees
to indemnify the Attorneys for and to hold the Attorneys, jointly and severally,
free from and harmless against any and all loss, claim, damage, liability or
expense incurred by or on behalf of the Attorneys, or any of them, arising out
of or in connection with acting as Attorneys under this Power of Attorney, as
well as the cost and expense of defending against any claim of liability
hereunder, and not due to the Attorneys' own gross negligence or willful
misconduct. The Seller agrees that the Attorneys may consult with counsel of
their choice (which may but need not be counsel for the Company) and the
Attorneys shall have full and complete authorization and protection for any
action taken or suffered by the Attorneys, or any of them hereunder, in good
faith and in accordance with the opinion of such counsel.
It is understood that the Attorneys shall serve entirely without
compensation.
This Power of Attorney shall be binding upon the Seller and the heirs,
legal representatives, distributees, successors and assigns of the Seller.
This Power of Attorney shall be governed by and construed in accordance
with the laws of the State of New York without regard to conflicts of laws
principles thereof.
Witness the due execution of the foregoing Power of Attorney as of the
date written below.
Maximum Number of shares of Common Stock to be Sold by the Seller:
----------------------
Very truly yours,
*
------------------------------
*
------------------------------
Signature(s)
Dated:________________, 2004
-------------------
* To be signed in EXACTLY the same manner as the Common Stock is registered.
A-9
Print Name and Address of Selling
Stockholder(s) and Name and Title of
any Person Signing as Agent or
Fiduciary:
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
Telephone: ( ) ________________ Facsimile: ( ) _________________
▇-▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ of __________________________ )
) ss.
County of _________________________ )
On this the ___ day of _________, 2004 before me personally appeared
_____________________________________, who acknowledged the signing of the
foregoing instrument and that the same is the free act and deed of such person
(and if such person is signing on behalf of a corporation, partnership or trust
that the same is the free act and deed of such corporation, partnership or trust
and that such person is duly authorized to sign the foregoing instrument).
WITNESS my hand and official seal.
------------------------------------
Notary's Signature
A-11
Attachment A
STATEMENT OF RELATIONSHIP WITH A MEMBER OF THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
[___________________], Seller, has the following relationship with a
member of the National Association of Securities Dealers, Inc.:
[____________________].
A-12
APPENDIX A
Definitions of Terms
1. A MEMBER is defined as any broker or dealer admitted to membership
in the NASD or any officer or partner of a member or the executive
representative of a member or the substitute for such a representative.
2. A PERSON ASSOCIATED WITH A MEMBER is defined as every sole
proprietor, partner, officer, director or branch manager of any member, or any
natural person occupying a similar status or performing similar functions, or
any natural person engaged in the investment banking or securities business who
is directly or indirectly controlling or controlled by such member (for example,
any employee), whether or not any such person is registered or exempt from
registration with the NASD.
3. An AFFILIATE of any person (including a partnership, corporation or
other legal entity such as a trust or estate) as defined by the NASD rules is a
person which controls, is controlled by or is under common control with such
person.
13. a person should be presumed to control a member if the
person beneficially owns 10 percent or more of the outstanding voting securities
of a member which is a corporation, or beneficially owns a partnership interest
in 10 percent or more of the distributable profits or losses of a member which
is a partnership;
14. a member should be presumed to control a person if the
member and persons associated with the member beneficially own 10 percent or
more of the outstanding voting securities of a person which is a corporation, or
beneficially own a partnership interest in 10 percent or more of the
distributable profits or losses of a person which is a partnership;
15. a person should be presumed to be under common control
with a member if:
(A) the same person controls both the member and
another person by beneficially owning 10 percent or more of the outstanding
voting securities of a member or person which is a corporation, or by
beneficially owning a partnership interest in 10 percent or more of the
distributable profits or losses of a member or person which is a partnership; or
(B) a person having the power to direct or cause the
direction of the management or policies of the member of such person also has
the power to direct or cause the direction of the management or policies of the
other entity in question.
4. IMMEDIATE FAMILY is defined by the NASD as parents, mother-in-law,
father-in-law, husband or wife, brother or sister, brother-in-law or
sister-in-law, son-in-law or daughter-in-law, and children, or any other person
who is supported, directly or indirectly, to a material extent by an employee
of, or person associated with, a member.
A-13
5. An UNDERWRITER OR RELATED PERSON with respect to a proposed offering
is defined as underwriters, underwriters' counsel, financial consultants and
advisors, finders, members of the selling or distribution group, and any and all
other persons associated with or related to any of such persons.
A-14
STOCK CUSTODY AGREEMENT
This Stock Custody Agreement (this "Agreement") is entered into as of
____________, 2004 by and among Tower Group, Inc., a Delaware corporation (the
"Company"), with its principal office at ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, [ ] (the "Custodian") and the undersigned selling stockholder (the
"Seller").
WHEREAS, the board of directors of the Company has authorized the
initial public offering (the "IPO") of up to $[_____________] of the Company's
common stock, $.01 par value per share (the "Common Stock");
WHEREAS, the Company has agreed to allow the Seller and certain of its
other existing stockholders (such holders and the Seller being hereinafter
sometimes collectively referred to as the "Selling Stockholders") to participate
in the IPO;
WHEREAS, the Selling Stockholders intend to execute and deliver no
later than [ ], 2004 an underwriting agreement (the "Underwriting Agreement") by
and among the Company, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., Inc., ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. and ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Co. as representatives (the
"Representatives") of the underwriters named in the Underwriting Agreement (the
"Underwriters") and the Selling Stockholders;
WHEREAS, concurrent with the execution and delivery of this Agreement,
the Seller will execute an irrevocable Power of Attorney (the "Power of
Attorney"), attached to this Agreement as Annex A, authorizing [ ] (the
"Attorneys"), each with full power and authority to act alone, including full
power of substitution, to sell the shares of Common Stock indicated below the
signature of the Seller at the end of this Agreement, or, with respect to such
shares, such lesser number as the Attorneys, or any of them acting alone, may
determine, and for that purpose to enter into and perform the Underwriting
Agreement on behalf of the Seller. The Attorneys shall act on behalf of the
Seller under the terms set forth in the Power of Attorney;
WHEREAS, the Seller desires to appoint the Custodian as custodian,
paying agent and liquidating agent and the Custodian has indicated its
willingness to so serve;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
SECTION 1. DEPOSIT OF SHARES. The Seller shall deliver to the Custodian
certificates in negotiable form representing the shares of Common Stock to be
sold by the Seller in the IPO (or securities exercisable or exchangeable for or
convertible into such shares) as specified on Attachment A to this Agreement
(the "Escrow Stock"). The certificates representing the Escrow Stock shall be
duly endorsed in blank by the Seller or, with appropriate stock powers, duly
executed by the Seller, attached thereto. Any certificates or stock powers
executed by the Seller shall be executed in blank and shall have signatures
guaranteed by an eligible guarantor institution meeting the requirements of the
Custodian, all in accordance with the Securities Exchange Act of 1934, as
amended.
A-15
SECTION 2. ESCROW FUND. The Custodian shall accept delivery of the
Escrow Stock and shall hold the Escrow Stock in an escrow fund (the "Escrow
Fund") until distributed pursuant to the terms of this Agreement. The Custodian
shall also hold in the Escrow Fund all securities into which the Escrow Stock or
other securities held in the Escrow Fund may be changed, subdivided or combined,
together with all stock or liquidating dividends and other distributions
(whether payable in securities, cash or other property) which are paid or made
on or in respect of the Escrow Stock or other securities held in the Escrow
Fund; provided, however, that cash dividends declared by the Company and payable
to the Seller shall be delivered to the Seller and not held as part of the
Escrow Fund, but rather held by the Custodian as paying agent hereunder.
SECTION 3. ACTIONS TO BE TAKEN WITH RESPECT TO THE ESCROW FUND.
The Custodian is hereby authorized and directed, subject to the
instructions of the Attorneys, or any of them acting alone, to take all
necessary or appropriate action to (i) cause the number of shares of Common
Stock that are to be sold by the Seller pursuant to the Underwriting Agreement
(up to the maximum number indicated on the signature page hereto) to be
transferred on the books of the Company into such registrations as the
Representatives, on behalf of the several Underwriters, shall have instructed
the Custodian in writing; (ii) deliver such shares of Common Stock to be sold by
the Seller to, or at the written direction of, the Attorneys, or any of them
acting alone; (iii) obtain from the Company's transfer agent, against surrender
of the Common Stock to be sold by the Seller, new certificates representing
Common Stock registered in such names and in such denominations as the
Attorneys, or any of them acting alone, shall have instructed the Custodian in
writing; (iv) upon the written instructions of the Attorneys, or any of them
acting alone, deliver such new certificates representing Common Stock equivalent
to the number of shares of Common Stock being sold by the Seller to the
Underwriters for their several accounts to the Attorneys, or any of them, on
behalf of the Seller who shall then deliver such certificates to or at the
direction of the Representatives, against payment for such shares of Common
Stock in accordance with the Underwriting Agreement; (v) execute a receipt for
payment and deliver the same to the Underwriters; (vi) upon written instructions
from the Attorneys, or any of them acting alone, remit to the Seller the
proceeds (net of any expenses of the offering that the Attorneys, or any of them
acting alone, shall advise are being borne by the Seller in accordance with the
Underwriting Agreement) received by the Custodian as payment for the shares of
Common Stock so sold by the Seller; (vii) return to the Seller at the written
direction of the Seller or of the Attorneys, or any of them acting alone, that
portion of the Escrow Stock representing shares of the Company's Common Stock
that are in excess of the number of shares of Common Stock purchased by the
Underwriters from the Seller.
(a) The Custodian is hereby authorized and directed to take all
necessary or appropriate actions to (i) execute a receipt for payment and
deliver the same to the Underwriters; and (ii) upon written instructions from
the Attorneys, or any of them acting alone, remit to the Seller the proceeds
(net of any expenses of the offering that the Attorneys, or any of them acting
alone, shall advise are being borne by the Seller in accordance with the
Underwriting Agreement) received by the Custodian as payment for the shares of
Common Stock so sold by the Seller.
A-16
(b) Notwithstanding any other provision of this Agreement to the
contrary, if the Underwriting Agreement shall not have been executed and
delivered on or before November 30, 2004, or if the Underwriting Agreement shall
have been terminated pursuant to its provisions, or if the shares of Common
Stock to be sold by the Seller are not purchased and paid for by the
Underwriters in accordance with the terms of the Underwriting Agreement, the
Custodian shall, upon receipt of written notice thereof by the Attorneys, or any
of them acting alone, or the Company, return to the Seller its shares of the
Escrow Stock that have been deposited with the Custodian, at which time this
Agreement shall terminate.
(c) This Agreement shall not be terminated by operation of law, whether
by the death, disability, incapacity or liquidation of the Seller or the
occurrence of any other event. If this Agreement is executed on behalf of a
trust or other fiduciary estate, it shall not be terminated by the death or
incapacity of any executor or trustee, the termination of such trust, any act or
event requiring a distribution of the assets of such estate to any person, or
the occurrence of any other event. If this Agreement is executed on behalf of a
corporation, partnership or other entity, it shall not be terminated by
liquidation, dissolution, winding up or other event affecting the legal life of
such entity. If any such event shall occur prior to the completion of the
transactions contemplated hereby, the Custodian is, nevertheless, authorized and
directed to administer and deliver the shares of the Seller's Common Stock
purchased pursuant to the Underwriting Agreement or the Escrow Stock previously
deposited with the Custodian in accordance with the terms and conditions hereof
as if such event had not occurred, regardless of whether or not the Custodian
shall have received notice thereof.
(d) Until the shares of the Common Stock to be sold by the Seller have
been delivered to the Underwriters against payment of the purchase price for
such shares in accordance with the Underwriting Agreement, the Seller shall
retain all rights of ownership with respect to such shares, including the right
to vote such shares and all other Common Stock, if any, represented by the
Escrow Stock, and to receive all dividends and distributions thereunder.
(e) By executing this Agreement, the Seller represents that it (i) has
the authority to execute and deliver this Agreement; (ii) has the authority to
sell the Escrow Stock; and (iii) has valid and unencumbered title to the shares
of Common Stock to be sold by the Seller, free and clear of all liens,
encumbrances, equities, security interests and claims whatsoever, and such
shares will be transferred to the Underwriters pursuant to the Underwriting
Agreement, assuming the Underwriters purchase such shares for value in good
faith and without notice of any such lien, encumbrance, equity or other adverse
claim within the meaning of the Uniform Commercial Code, free and clear of all
liens, encumbrances, equities, security interests and claims whatsoever. The
representations, warranties and agreements of the Seller in this Agreement are
made for the benefit of, and may be relied upon by, the Company, the Custodian
and the Underwriters, and their respective representatives, agents and counsel.
A-17
SECTION 4. CONCERNING THE CUSTODIAN.
(a) The Custodian shall exercise the same degree of care toward the Escrow Stock
as it exercises toward its own similar property and shall not be held to any
higher standard of care under this Agreement.
(b) The Company and the Seller acknowledge and agree that the Custodian (i)
shall not be responsible for any of the agreements referred to herein but shall
be obligated only for the performance of such duties as are specifically set
forth in this Agreement; (ii) shall not be obligated to take any legal or other
action hereunder that might in its judgment involve any expense or liability
unless it shall have been furnished with acceptable indemnification; (iii) may
rely on and shall be protected in acting or refraining from acting upon any
written notice, instruction, instrument, statement, request or document
furnished to it hereunder and believed by it to be genuine and to have been
signed or presented by the proper person, and shall have no responsibility for
determining the accuracy thereof; (iv) may rely upon and shall be protected in
acting or refraining from acting upon any written instructions from the Company
or the Attorneys, or any of them acting alone, with respect to any matter
covered by this Agreement; and (v) at the reasonable expense of the Company, may
consult counsel satisfactory to it, including counsel to the Company, and the
opinion of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with the opinion of such counsel. The obligations in
this paragraph shall survive termination of this Agreement.
(c) Neither the Custodian nor any of its partners or employees shall be liable
to anyone for any action taken or omitted to be taken by it or any of its
partners or employees hereunder except in the case of gross negligence or
willful misconduct. The Company and the Seller, jointly and severally, covenant
and agree to indemnify the Custodian and hold it harmless without limitation
from and against any loss, liability or expense of any nature incurred by the
Custodian arising out of or in connection with this Agreement or with the
administration of its duties hereunder, including but not limited to legal fees
and other costs and expenses of defending or preparing to defend against any
claim or liability in the premises, unless such loss, liability or expense shall
be caused by the Custodian's willful misconduct or gross negligence. In no event
shall the Custodian be liable for indirect, punitive, incidental, special or
consequential damages. The obligations in this paragraph shall survive
termination of this Agreement.
(d) The Company and the Seller, jointly and severally, agree to assume any and
all obligations imposed now or hereafter by any applicable tax law with respect
to the payment of Escrow Funds under this Agreement, and to indemnify and hold
the Custodian harmless from and against any taxes, additions for late payment,
interest, penalties and other expenses, that may be assessed against the
Custodian on any such payment or other activities under this Agreement. The
Company undertakes to instruct the Custodian in writing with respect to the
Custodian's responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting in connection
with its acting as Custodian under this Agreement. The Company and the Seller,
jointly and severally, agree to indemnify and hold the Custodian harmless from
any liability on account of taxes, assessments or other governmental charges,
including without limitation the withholding or deduction or the failure to
withhold or deduct same, and any liability for failure to obtain proper
certifications or to properly report to governmental authorities, to which the
Custodian may be or become subject in connection with or that arises out of this
Agreement, including costs and expenses (including reasonable legal fees),
interest and penalties. Notwithstanding the foregoing, no distributions will be
made unless the Custodian is supplied with an original, signed W-9 or W-8BEN
form or its equivalent prior to distribution.
A-18
(e) The Company agrees to pay or reimburse the Custodian for any reasonable
legal fees incurred in connection with the preparation, interpretation and
enforcement of this Agreement and to pay the Custodian's reasonable compensation
for its services. The Custodian shall be entitled to reimbursement on demand for
all expenses incurred in connection with the administration of this Agreement,
including without limitation, payment of any reasonable legal fees incurred by
the Custodian in connection with resolution of any claim by any party hereunder.
(f) The Custodian may at any time resign as Custodian hereunder by giving thirty
(30) days' prior written notice of resignation to the Company and to the
Attorneys. Prior to the effective date of the resignation as specified in such
notice, the Attorneys, or any of them acting alone, will issue to the Custodian
a written instruction authorizing redelivery of the Escrow Fund to a bank or
trust company that it selects subject to the reasonable consent of the Company.
If, however, the Attorneys, or any of them acting alone, shall fail to name such
a successor custodian within twenty (20) days after the notice of resignation
from the Custodian, the Company shall be entitled to name such successor
custodian. If no successor custodian is named by the Company or the Seller, the
Custodian may at the expense of the Company apply to a court of competent
jurisdiction for appointment of a successor custodian.
(g) From time to time and after the date hereof, the Company, the Attorneys or
the Seller shall deliver or cause to be delivered to the Custodian such further
documents and instruments and shall do and cause to be done such further acts as
the Custodian shall reasonably request (it being understood that the Custodian
shall have no obligation to make any such request) to carry out more effectively
the provisions and purposes of this Agreement, to evidence compliance herewith
or to assure itself that it is protected in acting hereunder.
(h) The Custodian makes no representation as to the validity, value, genuineness
or collectibility of any security or other document or instrument held by or
delivered to it. The Custodian shall not be called upon to advise any party as
to selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
A-19
SECTION 5. DISPUTE RESOLUTION. It is understood and agreed that should
any dispute arise with respect to the delivery, ownership, right of possession,
and/or disposition of the Escrow Fund, or should any claim be made upon such
Escrow Fund by a third party, the Custodian upon receipt of written notice of
such dispute or claim by the parties hereto or by a third party, is authorized
and directed to retain in its possession without liability to anyone, all or any
of said Escrow Fund until such dispute shall have been settled either by the
mutual agreement of the parties involved or by a final order, decree or judgment
of a court of competent jurisdiction, the time for perfection of an appeal of
such order, decree or judgment having expired. The Custodian may, but shall be
under no duty whatsoever to, institute or defend any legal proceedings that
relate to the Escrow Fund.
SECTION 6. CONSENT TO JURISDICTION AND SERVICE. The Company, the
Custodian and the Seller hereby absolutely and irrevocably consent and submit to
the jurisdiction of the courts of the State of New York and of any Federal court
located in said state in connection with any actions or proceedings arising out
of or relating to this Agreement. In any such action or proceeding, the Company,
the Custodian and the Seller hereby absolutely and irrevocably waive personal
service of any summons, complaint, declaration or other process and hereby
absolutely and irrevocably agree that the service thereof may be made by
certified or registered first-class mail directed to the Company, the Custodian
and the Seller, as the case may be, at their respective addresses in accordance
with Section 8 hereof.
SECTION 7. FORCE MAJEURE. Neither the Company nor the Seller nor the
Custodian shall be responsible for delays or failures in performance resulting
from acts beyond its or their control. Such acts shall include but not be
limited to acts of God, strikes, lockouts, riots, acts of war, epidemics,
governmental regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other disasters.
SECTION 8. NOTICES. Any notice permitted or required hereunder shall be
deemed to have been duly given if delivered personally or if mailed certified or
registered mail, postage prepaid, to the parties at their address set forth
below or to such other address as they may hereafter designate.
If to the Company:
Tower Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Custodian:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Escrow Department
A-20
If to the Seller:
[ ]
[ ]
[ ]
Attention: [ ]
SECTION 9. BINDING EFFECT. This Agreement shall be binding upon the
respective parties hereto and their heirs, executors, successors and assigns.
SECTION 10. MODIFICATIONS. This Agreement may not be altered or
modified without a writing signed by all the parties hereto. Conduct or lack of
conduct shall not constitute a waiver of any of the terms and conditions of this
Agreement, and no waiver shall be valid unless such waiver is specified in
writing, and then only to the extent so specified. A waiver of any of the terms
and conditions of this Agreement on one occasion shall not constitute a waiver
of the other terms of this Agreement, or of such terms and conditions on any
other occasion.
SECTION 11. GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of New York without giving effect to the
conflict of laws provisions of the laws of said state.
SECTION 12. REPRODUCTION OF DOCUMENTS. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications that may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
SECTION 13. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 14. NO THIRD PARTY BENEFICIARIES. This Agreement does not
constitute an agreement for a partnership or joint venture between the
Custodian, the Company or the Seller. None of the parties shall make any
commitments with third parties that are binding on the other parties without the
prior written consent of such other parties.
SECTION 15. SEVERABILITY. If any provision of this Agreement shall be
held invalid, unlawful or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
A-21
SECTION 16. MERGER OF AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto and supercedes any prior agreement with
respect to the subject matter hereof whether oral or written.
SECTION 17. ASSIGNMENT. Neither this Agreement nor any rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties. Except as explicitly stated elsewhere in this
Agreement, nothing under this Agreement shall be construed to give any rights or
benefits in this Agreement to anyone other than the Custodian, the Company and
the Seller, and the duties and responsibilities undertaken pursuant to this
Agreement shall be for the sole and exclusive benefit of the parties hereto.
A-22
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective authorized persons, hereunto duly
authorized, as of the day and year first above written.
THE CUSTODIAN TOWER GROUP, INC.
[ ] By:___________________________
By:______________________________ Name:
Name: Title:
Title:
SELLER
By:___________________________
Name:
Title:
TIN:__________________________
[To be signed in exactly the
same manner as appears on the
certificate delivered
hereunder. If the holder is a
corporation or other entity,
indicate title. If shares are
owned jointly, each owner
should sign.]
Maximum number of shares to be
sold pursuant to the
Underwriting Agreement:
__________________ Shares
A-23
ATTACHMENT A
CERTIFICATES DELIVERED
Stock Number of shares of Common Stock Number of shares of Common Stock
Certificate represented by each certificate to be sold if less than all
Number shares represented thereby are to
be sold (1)
-------------------- -------------------- --------------------
-------------------- -------------------- --------------------
-------------------- -------------------- --------------------
(1) Designation is for income tax purposes. Add tax ID numbers of distributees
under the signature lines.
A-24
PAYMENT AUTHORIZATION
TO: [ ]
In connection with the sale by the undersigned of Common Stock
of Tower Group, Inc. in its public offering, the undersigned hereby authorizes
[ ] as custodian (the "Custodian") to pay the undersigned the
proceeds from such sale, in the following manner.
PLEASE CHECK DESIRED MANNER OF PAYMENT
AND COMPLETE ALL INFORMATION
( ) Cashier's check made payable to:
-------------------------------------------------------------
Address:
------------------------------------------------
------------------------------------------------
Telephone:
------------------------------------------------
( ) Wire transfer of funds to the following account:
Bank:
------------------------------------------------
Address:
------------------------------------------------
------------------------------------------------
ABA#
------------------------------------------------
Account #:
------------------------------------------------
Account Name:
------------------------------------------------
For Further Credit to Account #:
-----------------------------
For Further Credit to Account Name:
--------------------------
A-25
By:
---------------------------------
(Signature)
Name:
-------------------------------
(Please Print)
Title:
------------------------------
Date:
-------------------------------
A-26
EXHIBIT B
FORM OF LOCK-UP LETTER
______________, 2004
FRIEDMAN, BILLINGS, ▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, INC.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & CO.
as Representatives of the several Underwriters
c/o Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
The undersigned understands that Friedman, Billings, ▇▇▇▇▇▇ & Co.,
Inc., ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. and ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Co. (the
"Representatives") propose to enter into an Underwriting Agreement (the
"Underwriting Agreement"), as Representatives of several underwriters (the
"Underwriters"), with Tower Group, Inc., a Delaware corporation (the "Company"),
providing for the public offering (the "Public Offering") by the Underwriters of
shares (the "Shares") of Common Stock of the Company (the "Common Stock").
To induce the Underwriters to continue their efforts in connection with
the Public Offering, the undersigned hereby irrevocably agrees that, without the
prior written consent of the Representatives, it will not, during the period
commencing on the date hereof and ending on the 180-day anniversary of the date
of the final prospectus relating to the Public Offering (the "Prospectus"), (1)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for any shares of Common Stock ("Other Securities") (whether such
shares or any such securities are now owned by the undersigned or are hereafter
acquired), or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such Other Securities, in
cash or otherwise, excluding any Shares to be sold under the Underwriting
Agreement. In addition, the undersigned agrees that, without prior written
consent of the Representatives, it will not, during the period commencing on the
date hereof and ending on the 180-day anniversary of the date of the Prospectus,
make any demand for or exercise any right with respect to, the registration
under the Securities Act of 1933, as amended (the "Securities Act"), of any
shares of Common Stock or any Other Securities.
B-1
In furtherance of the foregoing, the Company and its transfer agent are
hereby authorized to decline to make any transfer of securities if such transfer
would constitute a violation or breach of this Lock-Up Letter Agreement.
Notwithstanding the foregoing, the undersigned may transfer Common
Stock or Other Securities of the Company (i) as a bona fide gift or gifts,
provided that prior to such transfer the donee or donees thereof agree in
writing to be bound by the restrictions set forth herein, (ii) to any trust,
partnership, corporation or other entity formed for the direct or indirect
benefit of the undersigned or the immediate family of the undersigned, provided
that prior to such transfer a duly authorized officer, representative or trustee
of such transferee agrees in writing to be bound by the restrictions set forth
herein, and provided further that any such transfer shall not involve a
disposition for value or (iii) if such transfer occurs by operation of law, such
as rules of descent and distribution, statutes governing the effects of a merger
or a qualified domestic order, provided that prior to such transfer the
transferee executes an agreement stating that the transferee is receiving and
holding the shares subject to the provisions of this Lock-Up Letter Agreement.
For purposes hereof, "immediate family" shall mean any relationship by blood,
marriage or adoption, not more remote than first cousin.
The undersigned understands that the Company and the Underwriters will
proceed with the Public Offering in reliance on this Lock-Up Letter Agreement.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
agreement between the Company and the Representatives. The terms of this Lock-Up
Letter Agreement shall expire in the event the Public Offering of the firm
Shares is not consummated on or before November 30, 2004.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Lock-Up Letter Agreement and that,
upon request, the undersigned will execute any additional documents necessary in
connection with the enforcement hereof. Any obligations of the undersigned shall
be binding upon the heirs, personal representatives, successors and assigns of
the undersigned.
Very truly yours,
Dated: _____________________
-------------------------------
(Signature)
-------------------------------
(Printed or Typed Name)
B-2
EXHIBIT C
WARRANT AGREEMENT
EXHIBIT D
FORM OF OPINION OF
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
EXHIBIT E
FORM OF OPINION OF
LEBOEUF, LAMB, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
EXHIBIT F
FORM OF OPINION OF
COUNSEL FOR THE SELLING STOCKHOLDERS