EXHIBIT 1
DIRECT GENERAL CORPORATION
(a Tennessee corporation)
[ ] Shares of Common Stock
(No Par Value Per Share)
UNDERWRITING AGREEMENT
August [ ], 2003
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc.
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc.
SunTrust Capital Markets, Inc.
as Representatives of the several Underwriters
c/o Keefe, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
4th Floor
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Direct General Corporation, a Tennessee corporation (the "Company"),
and the certain shareholders named in Schedule B hereto (the "Selling
Shareholders"), confirm their respective agreements with ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, Inc. ("KBW"), ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc., U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇,
Inc., SunTrust Capital Markets, Inc. and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom KBW, ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc., U.S. Bancorp ▇▇▇▇▇
▇▇▇▇▇▇▇, Inc. and SunTrust Capital Markets, Inc. are acting as representatives
(in such capacity, the "Representatives"), with respect to (i) the sale by the
Company and the Selling Shareholders, acting severally and not jointly, and the
purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of the [ ] shares of Common Stock, no par value per share,
of the Company ("Common Stock") set forth in Schedules A and B hereto and (ii)
the grant by the certain Selling Shareholders named in Schedule C hereto (the
"Option Securities Selling Shareholders") to the Underwriters, acting severally
and not jointly, of the option described in Section 2(b) hereof to purchase all
or any part of [ ] additional shares of Common Stock to cover over-allotments,
if any. The aforesaid [ ] shares of Common Stock (the "Initial Securities")
to be purchased by the Underwriters and all or any part of the [ ] shares of
Common Stock subject to the option described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities".
The Company and the Selling Shareholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company, the Selling Shareholders and the Underwriters agree that
up to [ ] shares of the Securities to be purchased by the Underwriters (the
"Reserved Securities") shall be reserved for sale by the Underwriters to the
Company's directors, officers, employees, related persons of the foregoing and
certain existing shareholders, as part of the distribution of the Securities by
the Underwriters, subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc. (the "NASD") and all other applicable laws, rules and regulations.
To the extent that such Reserved Securities are not orally confirmed for
purchase by such Company's directors, officers, employees, related persons of
the foregoing and certain existing shareholders by the end of the first business
day after the date of the Agreement, such Reserved Securities may be offered to
the public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-105505) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto, if any, at the
time it became effective and including the Rule 430A Information and the Rule
434 Information, as applicable, is herein called the "Registration Statement."
Any registration statement filed pursuant to Rule 462(b) of the 1933 Act
Regulations is herein referred to as the "Rule 462(b) Registration Statement,"
and after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. The final prospectus, in the form first furnished
to the Underwriters for use in connection with the offering, of the Securities
is herein called the "Prospectus." If Rule 434 is relied on, the term
"Prospectus" shall refer to the preliminary prospectus, dated July 21, 2003,
together with the Term Sheet and all references in this Agreement to the date of
the Prospectus shall mean the date of the Term Sheet. For purposes of this
Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any Term Sheet or any amendment or supplement to
any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("▇▇▇▇▇").
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SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter,
as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities
are purchased, at the Date of Delivery), the Registration Statement,
the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Prospectus, any preliminary prospectus and any supplement thereto or
prospectus wrapper prepared in connection therewith, at their
respective times of issuance and at the Closing Time, complied and will
comply in all material respects with any applicable laws or regulations
of foreign jurisdictions in which the Prospectus and such preliminary
prospectus, as amended or supplemented, if applicable, are distributed.
Neither the Prospectus nor any amendments or supplements thereto
(including any prospectus wrapper), at the time the Prospectus or any
such amendment or supplement was issued and at the Closing Time (and,
if any Option Securities are purchased, at the Date of Delivery),
included or will include an untrue statement of a material fact or
omitted or will omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If Rule 434 is used, the Company
will comply with the requirements of Rule 434 and the Prospectus shall
not be "materially different", as such term is used in Rule 434, from
the prospectus included in the Registration Statement at the time it
became effective. The representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any Underwriter
through KBW expressly for use in the Registration Statement or
Prospectus. With respect to the preceding sentence, the Company
acknowledges that the only information furnished in writing by KBW on
behalf of the Underwriters expressly for use in the Registration
Statement or Prospectus is the following: the concession and
reallowance figures appearing in the fourth paragraph under the caption
"Underwriting" and the information contained in the ninth paragraph,
the first sentence of the eleventh paragraph and the sixteenth
paragraph under the caption "Underwriting".
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Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to ▇▇▇▇▇, except to the extent permitted
by Regulation S-T.
(ii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants with respect
to the Company within the meaning of Rule 2-01 of Regulation S-X under
the 1933 Act, as amended by Section 201 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of
2002, including the applicable rules and regulations promulgated by the
Commission thereunder (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act").
(iii) Financial Statements. The financial statements included
in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position of
the Company and its consolidated Subsidiaries at the dates indicated
and the statement of operations, stockholders' equity and cash flows of
the Company and its consolidated Subsidiaries for the periods
specified; said financial statements have been prepared in conformity
with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial data
included in the Prospectus present fairly the information shown therein
and have been compiled on a basis consistent with that of the audited
financial statements included in the Registration Statement.
(iv) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and the Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of the Subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and the Subsidiaries considered as one
enterprise, (C) there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock, and (D) there has not occurred any other event and there has
arisen no set of circumstances required by the 1933 Act or the 1933 Act
Regulations to be disclosed in the Registration Statement or the
Prospectus that has not been so set forth in the Registration Statement
or the Prospectus as fairly and accurately summarized therein.
(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Tennessee and has full power, corporate
or otherwise, and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus and
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to enter into and perform its obligations under this Agreement; and the
Company is duly qualified as a foreign corporation to transact business
and is in good standing in each other jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not reasonably be
expected to result in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. The Company currently has
20 direct and indirect subsidiaries. They are listed on Schedule E
attached hereto, which is incorporated herein (the "Subsidiaries").
Other than the Subsidiaries, the Company does not own or control,
directly or indirectly, more than 5% of any class of equity security of
any corporation, association or other entity. Each Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be,
has the requisite power, corporate or otherwise, and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would
not reasonably be expected to result in a Material Adverse Effect;
except for the pledge of the capital stock of certain of the Company's
Subsidiaries to First Tennessee Bank National Association, for itself
and as agent on behalf of a group of banks, under that certain Seventh
Amended and Restated Pledge and Security Agreement dated as of October
31, 2002, as amended, in connection with the Company's guaranty of the
obligations of its premium finance subsidiary under that certain Eighth
Amended and Restated Loan Agreement, dated as of October 31, 2002, as
amended, and except as otherwise disclosed in the Registration
Statement, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid
and non-assessable and is owned by the Company, directly or through a
Subsidiary, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.
There are no outstanding subscriptions, options, warrants, convertible
or exchangeable securities or other rights granted to or by the Company
or any Subsidiary to purchase shares of common stock or other
securities of any Subsidiary and there are no commitments, plans or
arrangements to issue any such securities or any security convertible
into or exchangeable for such securities.
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus under
the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to reservations, agreements or employee benefit plans referred
to in the Prospectus or pursuant to the exercise of convertible
securities or options referred to in the Prospectus). The shares of
issued and outstanding capital stock, including the Securities to be
purchased by the Underwriters from the Selling Shareholders, have been
duly authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of capital stock,
including the Securities to be purchased by the Underwriters from the
Selling Shareholders, was issued
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in violation of, or are otherwise subject to, any preemptive or other
similar rights of any securityholder of the Company.
(viii) Authorization of Agreement. All necessary corporate
action has been duly and validly taken by the Company to authorize the
execution, delivery and performance of this Agreement and the issuance
and sale of the Securities by the Company. This Agreement has been duly
authorized, executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as the enforceability
hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles.
(ix) Authorization and Description of Securities. The
Securities to be purchased by the Underwriters from the Company have
been duly authorized for issuance and sale to the Underwriters pursuant
to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued and fully paid and non-assessable;
the certificates evidencing the Common Stock are in due and proper form
under Tennessee law; the authorized capital stock of the Company,
including the Common Stock, conforms to all statements relating thereto
contained in the Prospectus and such description conforms to the rights
set forth in the instruments defining the same; no holder of the
Securities will be subject to personal liability by reason of being
such a holder; and the issuance of the Securities is not subject to the
preemptive or other similar rights. There are no outstanding
subscriptions, options, warrants, convertible or exchangeable
securities or other rights granted to or by the Company to purchase
shares of Common Stock or other securities of the Company and there are
no commitments, plans or arrangements to issue any shares of Common
Stock or any security convertible into or exchangeable for Common
Stock, in each case other than as described in the Prospectus.
(x) Absence of Defaults and Conflicts. Neither the Company nor
any Subsidiary is in violation of any provision of its charter or
by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Company or any of
the Subsidiaries is a party or by which it or any of them may be bound,
or to which any of the property or assets of the Company or any
Subsidiary is subject, including, without limitation, the agreements
described in paragraph (xiii) below (collectively, the "Agreements and
Instruments") except for such defaults that have been waived or
suspended as described in the Prospectus or that would not reasonably
be expected to, individually or in the aggregate, result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein
and in the Registration Statement (including the issuance and sale of
the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use of
Proceeds") and compliance by the Company with its obligations hereunder
do not and will not, whether with or without the giving of notice or
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passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any Subsidiary pursuant to, any of
the Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not reasonably be
expected to result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or by-laws of
the Company or any Subsidiary or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or any of their assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition that gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any Subsidiary.
Each of the Agreements and Instruments is in full force and effect and
is valid and enforceable by and against the Company or any of the
Subsidiaries, as the case may be, and, to the knowledge of the Company,
the other parties thereto, in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(xi) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any Subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any Subsidiary's principal suppliers or customers, that, in either
case, would reasonably be expected to result in a Material Adverse
Effect.
(xii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened or contemplated, against or
affecting the Company or any Subsidiary, that is required to be
disclosed in the Registration Statement (other than as disclosed
therein), or that, individually or in the aggregate, would reasonably
be expected to result in a Material Adverse Effect, or that,
individually or in the aggregate, would reasonably be expected to
materially and adversely affect the properties or assets thereof or
that would materially and adversely affect the consummation of the
transactions contemplated in this Agreement or the performance by the
Company of its obligations hereunder; all pending legal or governmental
proceedings to which the Company or any Subsidiary is a party or of
which any of their respective properties or assets is the subject that
are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, are, considered in the
aggregate, not material.
(xiii) Accuracy of Contract Descriptions and Exhibits. There
is no contract or other document of a character required to be
described in the Registration Statement or the Prospectus, or to be
filed as an exhibit to the Registration Statement, that is not
described or filed as required by the 1933 Act and the 1933 Act
Regulations. Each
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description of a contract, document or other agreement in the
Registration Statement and the Prospectus accurately reflects the terms
of the underlying contract, document or agreement.
(xiv) Possession of Intellectual Property. The Company and the
Subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated (or contemplated by the
Prospectus to be operated) by them, or presently employed by them, and
neither the Company nor any of the Subsidiaries has received any notice
or is otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any
facts or circumstances that would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any of
the Subsidiaries therein, other than any such infringement or conflict
(if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy that, individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement or the Prospectus, except
(i) such as have been already obtained or as may be required under the
1933 Act, the 1933 Act Regulations, the Securities Exchange Act of
1934, as amended (the "1934 Act"), the rules and regulations of the
Commission under the 1934 Act (the "1934 Act Regulations"), state
insurance laws, state securities laws or applicable banking laws and
(ii) such as have been obtained under the laws and regulations of
jurisdictions outside the United States in which any Securities are
offered.
(xvi) Possession of Licenses and Permits. The Company and the
Subsidiaries possess such certificates, authorities, permits, licenses,
approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state,
local or foreign regulatory agencies or bodies necessary to conduct the
business now operated by them; the Company and the Subsidiaries are in
compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect; all of the Governmental Licenses are valid and in full force
and effect, except when the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and
effect would not reasonably be expected to have a Material Adverse
Effect; and neither the Company nor any of the Subsidiaries has
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses that, individually or in
the aggregate,
8
if the subject of an unfavorable decision, ruling or finding, would
reasonably be expected to result in a Material Adverse Effect.
(xvii) Compliance with Applicable Laws. The Company and the
Subsidiaries have complied and are in compliance with all federal,
state and local statutes, regulations, ordinances and rules as now in
effect and applicable to the ownership and operation of their
properties or the conduct of their businesses as described in the
Prospectus and as currently being conducted, except where the failure
so to comply would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(xviii) Insurance Licenses. Each subsidiary of the Company
that is engaged in the business of insurance or reinsurance
(collectively, the "Insurance Subsidiaries") holds such insurance
licenses, certificates and permits from governmental authorities
(including, without limitation, from the insurance regulatory agencies
of the various jurisdictions where it conducts business (the "Insurance
Licenses")) as are necessary to the conduct of its business as
described in the Prospectus; the Company and each Insurance Subsidiary
have fulfilled and performed all obligations necessary to maintain the
Insurance Licenses; except as disclosed in the Prospectus, there is no
pending or, to the knowledge of the Company, threatened action, suit,
proceeding or investigation that would reasonably be expected to result
in the revocation, termination or suspension of any Insurance License
that would reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect; and except as disclosed in the
Prospectus, no insurance regulatory agency or body has issued, or
commenced any proceeding for the issuance of, any order or decree
impairing, restricting or prohibiting the payment of dividends by any
Insurance Subsidiary to its parent.
(xix) Insurance Reserving Practices. Except as disclosed in
the Prospectus, the Company and its Insurance Subsidiaries have made no
material change in their insurance reserving practices since December
31, 2002.
(xx) Reinsurance Treaties. All reinsurance treaties and
arrangements to which any Insurance Subsidiary is a party are in full
force and effect and no Insurance Subsidiary is in violation of, or in
default in the performance, observance or fulfillment of, any
obligation, agreement, covenant or condition contained therein, except
where the failure to be in full force and effect or where such
violation or default would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect; no Insurance
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
Insurance Subsidiaries, none of the other parties to such treaties or
arrangements will be unable to perform such treaty or arrangement
except to the extent adequately and properly reserved for in the
audited historical financial statements of the Company included in the
Prospectus, except where such nonperformance would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse
Effect.
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(xxi) Statutory Financial Statements. The statutory financial
statements of the Insurance Subsidiaries 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
appropriate Insurance Department of the jurisdiction of domicile of
each Insurance Subsidiary, and such statutory accounting practices have
been applied on a consistent basis throughout the periods involved,
except as may otherwise be indicated therein or in the notes thereto,
and present fairly in all material respects the statutory financial
position of the Insurance Subsidiaries as of the dates thereof, and the
statutory basis results of operations of the Insurance Subsidiaries for
the periods covered thereby.
(xxii) Title to Property. The Company and the Subsidiaries
have good and marketable title to all real property owned by the
Company and the Subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (A) are described in the Prospectus or (B) do not,
individually or in the aggregate, materially affect the value of such
property and do not materially interfere with the use made and proposed
to be made of such property by the Company or any of the Subsidiaries;
and all of the leases and subleases material to the business of the
Company and the Subsidiaries, considered as one enterprise, and under
which the Company or any of the Subsidiaries holds properties described
in the Prospectus, are in full force and effect, and neither the
Company nor any Subsidiary has any notice of any material claim of any
sort that has been asserted by anyone adverse to the rights of the
Company or any Subsidiary under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company
or such Subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xxiii) Investment Company Act. The Company is not, and upon
the issuance and sale of the Securities as contemplated herein and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xxiv) Environmental Laws. Except as described in the
Registration Statement and except as would not reasonably be expected
to, individually or in the aggregate, result in a Material Adverse
Effect, (A) neither the Company nor any of the Subsidiaries is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating
to pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous
10
Materials (collectively, "Environmental Laws"), (B) the Company and the
Subsidiaries have all permits, authorizations and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or, to the knowledge of
the Company, threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, investigation or proceedings relating to any
Environmental Law against the Company or any of the Subsidiaries and
(D) to the knowledge of the Company, there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by
any private party or governmental body or agency, against or affecting
the Company or any of the Subsidiaries relating to Hazardous Materials
or any Environmental Laws.
(xxv) Registration Rights. Except with respect to the Common
Stock purchase warrant issued by the Company to Aries Partners, Inc.
(formerly known as ▇▇▇▇▇ Capital Incorporated) under that certain
Common Stock Purchase Warrant dated as of November 24, 1996 and
expiring on November 25, 2004 and except as otherwise described in the
Prospectus, there are no persons with registration rights or other
similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act.
(xxvi) Tax Matters. The Company and each Subsidiary have filed
all material tax returns required to be filed, which returns are true
and correct in all material respects, and neither the Company nor any
Subsidiary is in default in the payment of any taxes, including
penalties and interest, assessments, fees and other charges, shown
thereon due or otherwise assessed, other than those being contested in
good faith and for which adequate reserves have been provided or those
currently payable without interest which were payable pursuant to said
returns or any assessments with respect thereto, except where the
failure 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.
(xxvii) Insurance. The Company and the Subsidiaries maintain
insurance of the types and in the amounts consistent with insurance
coverage maintained by similar companies and businesses, all of which
insurance is in full force and effect; the Company and the Subsidiaries
are insured by insurers of recognized financial responsibility; all
policies of insurance and fidelity or surety bonds insuring the Company
or any of the Subsidiaries or the Company's or the Subsidiaries'
respective businesses, assets, employees, officers and directors are in
full force and effect; the Company and each of the Subsidiaries are in
compliance with the terms of such policies and instruments in all
material respects; and neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not reasonably be expected to have a
Material Adverse Effect.
(xxviii) Accounting Controls. The books, records and accounts
of the Company and the Subsidiaries accurately and fairly reflect, in
reasonable detail, the
11
transactions in the assets of, and the results of operations of, the
Company and the Subsidiaries. The Company and the Subsidiaries maintain
a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed with
management's general and specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of the Company's
consolidated financial statements in conformity with GAAP and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general and specific authorizations;
and (iv) the reported accountability of the assets of the Company and
the Subsidiaries is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(xxix) Fees. Other than as contemplated by this Agreement and
except as disclosed in the Registration Statement, there is no broker,
finder or other party that is entitled to receive from the Company or
any Subsidiary any brokerage or finder's fee or any other fee,
commission or payment as a result of the transactions contemplated by
this Agreement.
(xxx) Absence of Manipulation. Neither the Company nor, to its
knowledge, any of its officers, directors or affiliates has taken, and
at the Closing Time, neither the Company nor, to its knowledge, any of
its officers, directors or affiliates will have taken, directly or
indirectly, any action that has constituted, or might reasonably be
expected to constitute, the stabilization or manipulation of the price
of sale or resale of the Securities.
(xxxi) No Unauthorized Use of Prospectus. The Company has not
distributed and, prior to the later to occur of (i) the Closing Time
and (ii) completion of the distribution of the Securities, will not
distribute any prospectus (as such term is defined in the 1933 Act and
the 1933 Act Regulations) in connection with the offering and sale of
the Securities other than the Registration Statement, any preliminary
prospectus, the Prospectus or other materials, if any, permitted by the
1933 Act or by the 1933 Act Regulations and approved by the
Representatives.
(xxxii) No Illegal Payments. To the knowledge of the Company,
neither the Company nor any Subsidiary nor any employee or agent of the
Company or any Subsidiary has made any payment of funds of the Company
or any Subsidiary or received or retained any funds in violation of any
law, rule or regulation, which payment, receipt or retention of funds
is of a character required to be disclosed in the Prospectus.
(xxxiii) Sales of Securities. All offers and sales of
securities of the Company prior to the date hereof were at all relevant
times duly registered or exempt from the registration requirements of
the 1933 Act and the 1933 Act Regulations and were duly registered or
subject to an available exemption from the registration requirements of
the applicable state securities or Blue Sky laws.
(xxxiv) Registration and Listing. The Common Stock is
registered pursuant to Section 12(g) of the 1934 Act. The Securities
have been duly authorized for quotation on the Nasdaq National Market,
subject only to official notice of issuance. The
12
Company has taken no action designed to, or likely to have the effect
of, terminating the registration of the Common Stock under the 1934 Act
or delisting the Common Stock from the Nasdaq National Market, nor has
the Company received any notification that the Commission or the Nasdaq
National Market is contemplating terminating such registration or
listing.
(xxxv) No Association with NASD. There are no affiliations
with member firms of the NASD among the Company's officers, directors
or, to the knowledge of the Company, any stockholder of the Company,
except as set forth in the Registration Statement or otherwise
disclosed in writing to the Representatives.
(xxxvi) Related Party Transactions. No transaction has
occurred between or among the Company and any of its officers or
directors or 5% stockholders or any affiliate or affiliates of any such
officer or director or 5% stockholders that is required to be described
in and is not described in the Registration Statement and the
Prospectus.
(xxxvii) Lock-up Letters. Each of the Company's officers and
directors, each of the Selling Shareholders and every holder of the
registration rights referred to in Section 1(a)(xxv) hereof have
executed and delivered lock-up letters as contemplated by Section 5(k)
hereof.
(xxxviii) Compliance with ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The Company is
in compliance in all material respects with all applicable provisions
of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(b) Representations and Warranties by the Selling Shareholders. Each
Selling Shareholder severally represents and warrants to each Underwriter as of
the date hereof, as of the Closing Time and, if the Selling Shareholder is an
Option Securities Selling Shareholder, as of each such Date of Delivery, and
agrees with each Underwriter, as follows:
(i) Accurate Disclosure. To the knowledge of such Selling
Shareholder, the representations and warranties of the Company
contained in Sections 1(a)(i), 1(a)(xiii), 1(a)(xxv), 1(a)(xxx),
1(a)(xxxv), 1(a)(xxxvi) and 1(a)(xxxvii) hereof solely insofar as they
relate to such Selling Shareholder are true and correct as of the date
hereof and will be true and correct at all times through the Closing
Time; such Selling Shareholder is not prompted to sell the Securities
to be sold by such Selling Shareholder hereunder by any information
concerning the Company or any Subsidiary of the Company that is not set
forth in the Prospectus; and all information furnished in writing by or
on behalf of such Selling Shareholder for use in the Registration
Statement and the Prospectus is, and at the Closing Time will be, true,
correct and complete and does not, and at the Closing Time will not,
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
(ii) Authorization of Agreements. Such Selling Shareholder has
the full right, power and authority to enter into this Agreement, the
Irrevocable Power of Attorney of Selling Shareholder in the form of
Exhibit E hereto (the "Power of
13
Attorney"), appointing ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as
attorneys-in-fact (the "Attorneys-in-Fact") and the Stock Custody
Agreement in the form of Exhibit F hereto (the "Stock Custody
Agreement"), appointing Baker, Donelson, Bearman, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
P.C. as custodian (the "Custodian"), and to sell, transfer and deliver
the Securities to be sold by such Selling Shareholder hereunder. The
execution and delivery of this Agreement, the Power of Attorney and the
Stock Custody Agreement and the sale and delivery of the Securities to
be sold by such Selling Shareholder and the consummation of the
transactions contemplated herein and under the Power of Attorney and
the Stock Custody Agreement and compliance by such Selling Shareholder
with its obligations hereunder and under the Power of Attorney and the
Stock Custody Agreement have been duly authorized by such Selling
Shareholder and do not and will not, whether with or without the giving
of notice or passage of time or both, violate or constitute a breach
of, or default under, or result in the creation or imposition of any
tax, lien, charge or encumbrance upon the Securities to be sold by such
Selling Shareholder or any property or assets of such Selling
Shareholder pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which such Selling Shareholder is a party or
by which such Selling Shareholder may be bound, or to which any of the
property or assets of such Selling Shareholder is subject, nor will any
such action result in any violation of the provisions of the charter or
by-laws or other organizational instrument of such Selling Shareholder,
if applicable, or any applicable treaty, law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over such Selling Shareholder or any of its properties.
(iii) Good and Marketable Title. Such Selling Shareholder has
and will at the Closing Time and, if the Selling Shareholder is an
Option Securities Selling Shareholder, as of each such Date of Delivery
have good and marketable title to the Securities to be sold by such
Selling Shareholder hereunder, free and clear of any security interest,
mortgage, pledge, lien, charge, claim, equity or encumbrance of any
kind, other than pursuant to this Agreement; and upon delivery of such
Securities and payment of the purchase price therefor as herein
contemplated, each of the Underwriters will receive good and marketable
title to the Securities purchased by it from such Selling Shareholder,
free and clear of any security interest, mortgage, pledge, lien,
charge, claim, equity or encumbrance of any kind.
(iv) Due Execution of the Power of Attorney and the Stock
Custody Agreement. Such Selling Shareholder has duly executed and
delivered the Power of Attorney and the Stock Custody Agreement; the
Custodian is authorized to deliver the Securities to be sold by such
Selling Shareholder hereunder and to accept payment therefor; and the
Attorneys-in-Fact are authorized to execute and deliver this Agreement
and the certificate referred to in Section 5(g) hereof or that may be
required pursuant to Sections 5(m) and 5(n) hereof on behalf of such
Selling Shareholder, to sell, assign and transfer to the Underwriters
the Securities to be sold by such Selling Shareholder hereunder, to
determine the purchase price to be paid by the Underwriters to such
Selling Shareholder, as provided in Section 2(a) hereof, to authorize
the delivery of the Securities
14
to be sold by such Selling Shareholder hereunder, to accept payment
therefor, and otherwise to act on behalf of such Selling Shareholder in
connection with this Agreement.
(v) Absence of Manipulation. Such Selling Shareholder has not
taken, and will not take, directly or indirectly, any action that is
designed to or that has constituted or that might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.
(vi) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by such Selling
Shareholder of its obligations hereunder or in the Power of Attorney or
the Stock Custody Agreement, or in connection with the offer, sale and
delivery of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement or the Prospectus, except
(i) such as may have previously been made or obtained, contemplated by
this Agreement or the Registration Statement, or as may be required
under the 1933 Act, the 1933 Act Regulations, the 1934 Act, the 1934
Act Regulations or state securities laws and (ii) such as have been
obtained under the laws and regulations of jurisdictions outside the
United States in which any Securities are offered.
(vii) Restriction on Sale of Securities. During a period of
180 days from the date of the Prospectus, such Selling Shareholder will
not, without the prior written consent of KBW, on behalf of the
Underwriters, directly or indirectly, (i) offer, sell, offer to sell,
contract to sell, hedge, pledge, grant any option to purchase or
otherwise transfer or dispose (or announce any offer, sale, offer of
sale, contract of sale, hedge, pledge, grant of any option to purchase
or other transfer or disposition) of any shares of Common Stock,
securities substantially similar to the Common Stock ("Other
Securities"), or any other securities convertible into, or exercisable
or exchangeable for, shares of Common Stock or such Other Securities,
beneficially owned (within the meaning of Rule 13d-3 under the ▇▇▇▇
▇▇▇) by the undersigned on the date hereof or hereafter acquired or
(ii) enter into any swap or other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock or Other Securities, or
any other securities convertible into, or exercisable or exchangeable
for, shares of Common Stock or such Other Securities, whether any such
swap or transaction is to be settled by delivery of Common Stock or
Other Securities, or any other securities convertible into, or
exercisable or exchangeable for, shares of Common Stock or such Other
Securities, in cash or otherwise.
(viii) No Association with NASD. Neither such Selling
Shareholder nor any of its affiliates directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, or has any other association with (within the
meaning of paragraph (dd) of Article I of the By-laws of the NASD), any
member firm of the NASD.
15
(ix) Power and Authority. If such Selling Shareholder is a
corporation, partnership, limited partnership, limited liability
company or trust, such Selling Shareholder has been duly organized or
incorporated and is validly existing as a corporation, partnership,
limited partnership, limited liability company or trust in good
standing under the laws of its jurisdiction of incorporation or
organization, as applicable, and has the power and authority to own its
property.
(x) Fees. Other than as contemplated by this Agreement and
except as disclosed in the Registration Statement, there is no broker,
finder or other party that is entitled to receive from such Selling
Shareholder any brokerage or finder's fee or any other fee, commission
or payment as a result of the transactions contemplated by this
Agreement.
(c) Officer's Certificates. Any certificate signed by any officer of
the Company or any of the Subsidiaries delivered to the Representatives or to
counsel for the Underwriters pursuant to the terms of this Agreement shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby; and any certificate signed by or on behalf of the
Selling Shareholders as such and delivered to the Representatives or to counsel
for the Underwriters pursuant to the terms of this Agreement shall be deemed a
representation and warranty by the Selling Shareholders to the Underwriters as
to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, each of the Company and each Selling Shareholder, severally and not
jointly, agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company and
each Selling Shareholder, at the price per share set forth in Schedule D, that
proportion of the number of Initial Securities set forth in Schedule B opposite
the name of the Company or such Selling Shareholder, as the case may be, which
the number of Initial Securities set forth in Schedule A opposite the name of
such Underwriter, plus any additional number of Initial Securities that such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, bears to the total number of Initial Securities, 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 securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, each Option Securities Selling Shareholder hereby grants an option to
the Underwriters, severally and not jointly, to purchase, in addition to the
Initial Securities, up to the amount of Option Securities set forth opposite the
name of such Option Securities Selling Shareholder on Schedule C at the price
per share set forth in Schedule D. 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 Securities upon notice by the
Representatives to the Attorneys-in-Fact setting forth the aggregate number of
Option Securities as to which the several Underwriters are then exercising
16
the option and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall be
determined by the Representatives, but shall not be later than seven full
business days after the exercise of said 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 Securities, then each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
Option Securities then being purchased which the number of Initial Securities
set forth in Schedule A opposite the name of such Underwriter bears to the total
number of Initial Securities, subject, in each case, to such adjustments as the
Representatives in their discretion shall make to eliminate any sales or
purchases of fractional shares. If the option is exercised for a portion, but
not all, of the Option Securities, each Option Securities Selling Shareholder
will sell that proportion of the total number of Option Securities then being
purchased which the number of Option Securities set forth opposite the name of
such Option Securities Selling Shareholder bears to the total number of Option
Securities.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, or at such other place as shall be agreed upon by the Representatives and
the Company and the Selling Shareholders, at 9:00 A.M. (Eastern time) on the
third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given
day) business day after the date hereof (unless postponed in accordance with the
provisions of Section 10), or such other time not later than ten business days
after such date as shall be agreed upon by the Representatives and the Company
and the Selling Shareholders (such time and date of payment and delivery being
herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Option Securities Selling Shareholders on each Date of Delivery as
specified in the notice from the Representatives to the Attorneys-in-Fact.
Payment shall be made to the Company and the Selling Shareholders by
wire transfer of immediately available funds to bank accounts designated by the
Company and the Custodian pursuant to the Power of Attorney and the Stock
Custody Agreement, as the case may be, against delivery to the Representatives
for the respective accounts of the Underwriters of certificates for the
Securities to be purchased by them. It is understood that each Underwriter has
authorized the Representatives, for its account, to accept delivery of, receipt
for, and make payment of the purchase price for, the Initial Securities and the
Option Securities, if any, that it has agreed to purchase. KBW, individually and
not as representative of the Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial Securities or the Option
Securities, if any, to be purchased by any Underwriter whose funds have not been
received by the Closing Time or the relevant Date of Delivery, as the case may
be, but such payment shall not relieve such Underwriter from its obligations
hereunder.
(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or
17
the relevant Date of Delivery, as the case may be. The certificates for the
Initial Securities and the Option Securities, if any, will be made available for
examination and packaging by the Representatives in The City of New York not
later than 10:00 A.M. (Eastern time) on the business day prior to the Closing
Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Representatives immediately, and
confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information, and (iv) of 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 of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will use its best efforts to
cause the Registration Statement, if not effective at the time of execution of
this Agreement, and any amendments thereto, to become effective as promptly as
possible. The Company will promptly effect the filings necessary pursuant to
Rule 424(b) and will take such steps as shall be necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule 424(b) was
received for filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Company will make every reasonable effort to
prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus,
whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the
Representatives with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Representatives or counsel for the
Underwriters shall reasonably object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters, without
charge, signed or conformed copies of the Registration Statement as originally
filed and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated or deemed to be
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Representatives, without
charge, a conformed copy of the Registration Statement as originally filed and
of each amendment thereto (without exhibits) for each of the Underwriters. The
copies of the Registration Statement and each amendment thereto furnished to the
Underwriters pursuant to this Section 3(c) will be
18
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such
number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request. The Prospectus and any amendments or
supplements thereto furnished to the Underwriters pursuant to this Section 3(d)
will be identical to the electronically transmitted copies thereof filed with
the Commission pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation
S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Securities
as contemplated in this Agreement and in the Prospectus. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales
of the Securities any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the Underwriters or for the
Company, to amend the Registration Statement or amend or supplement the
Prospectus in order that the Prospectus will not include any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances existing at
the time it is delivered to a purchaser, or if it shall be necessary, in the
opinion of such counsel, at any such time to amend the Registration Statement or
amend or supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and
file with the Commission, subject to Section 3(b), such amendment or supplement
as may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements, and the
Company will furnish to the Underwriters such number of copies of such amendment
or supplement as the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
(domestic or foreign) as the Representatives may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
19
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectus
under the caption "Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Securities on the Nasdaq National Market and will
file with the Nasdaq National Market all documents and notices required by the
Nasdaq National Market of companies that have securities that are traded in the
over-the-counter market and quotations for which are reported by the Nasdaq
National Market.
(j) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectus, the Company will not, without the prior written
consent of KBW, on behalf of the Underwriters, directly or indirectly (i) offer,
sell, offer to sell, contract to sell, hedge, pledge, grant any option to
purchase or otherwise transfer or dispose (or announce any offer, sale, offer of
sale, contract of sale, hedge, pledge, grant of any option to purchase or other
transfer or disposition) of any shares of Common Stock or Other Securities, or
any other securities convertible into, or exercisable or exchangeable for,
shares of Common Stock or Other Securities, (ii) file any registration statement
under the 1933 Act with respect to any of the foregoing (other than on Form S-8)
or (iii) enter into any swap or other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic consequence
of ownership of the Common Stock or Other Securities, or any other securities
convertible into, or exercisable or exchangeable for, shares of Common Stock or
such Other Securities, whether any such swap or transaction is to be settled by
delivery of Common Stock or Other Securities, or any other securities
convertible into, or exercisable or exchangeable for, shares of Common Stock or
such Other Securities, in cash or otherwise. The foregoing shall not apply to
(A) the Securities to be sold hereunder, (B) any shares of Common Stock issued
by the Company pursuant to the exercise of an option or warrant or the
conversion of a security, in each case outstanding on the date hereof and
referred to in the Prospectus or (C) any options to purchase Common Stock
granted pursuant to the terms of existing employee benefit plans of the Company
referred to in the Prospectus, so long as such options are not exercisable
within the 180-day period.
(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.
(l) Lock-up Agreements. The Company has furnished or will furnish to
the Representatives an agreement substantially in the form of Exhibit D hereto
signed by the persons listed on Schedule F hereto.
20
(m) Financial Statements. Prior to the Closing Time, the Company shall
furnish to the Underwriters as soon as they have been prepared, copies of any
unaudited interim consolidated financial statements of the Company and the
Subsidiaries, for any periods subsequent to the periods covered by the financial
statements appearing in the Registration Statement and the Prospectus.
(n) Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the NASD
or the NASD rules from sale, transfer, assignment, pledge or hypothecation for
such period following the date of this Agreement as is required by the NASD or
the NASD rules. The Underwriters will notify the Company as to which persons
will need to be so restricted. At the request of the Underwriters, the Company
will direct the transfer agent to place a stop transfer restriction upon such
securities for such period of time. Should the Company release, or seek to
release, from such restrictions any of the Reserved Securities prior to the
expiration of any such restrictions, the Company agrees to reimburse the
Underwriters for any reasonable expenses (including, without limitation, legal
expenses) they incur in connection with such release.
(o) Compliance with ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The Company will take
reasonable efforts to try to remain in compliance in all material respects with
all applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act as in effect from time to
time.
(p) Disclosure Controls and Procedures. The Company and its
subsidiaries have in place and will maintain effective "disclosure controls and
procedures" (as defined in the 1934 Act Regulations).
(q) Internal Control Over Financial Reporting. The Company and its
subsidiaries have in place and will maintain a process to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures that:
(i) Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
Company; (ii) Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management
and directors of the Company; and (iii) Provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Company's assets that could have a material effect on the financial
statements.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay or cause to be paid all expenses
incident to the performance of its obligations under this Agreement, including
(i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the
21
Underwriters, including any stock or other transfer taxes and any stamp or other
duties payable upon the sale, issuance or delivery of the Securities to the
Underwriters, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the preparation of
the Blue Sky Survey and any supplement thereto, (vi) the printing and delivery
to the Underwriters of copies of each preliminary prospectus, any Term Sheet and
of the Prospectus and any amendments or supplements thereto, (vii) the
preparation, printing and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (viii) the fees and expenses of any transfer
agent, registrar or custodian for the Securities, (ix) the filing fees incident
to, and the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the NASD of the terms of the sale of the
Securities, (x) the fees and expenses incurred in connection with the inclusion
of the Securities in the Nasdaq National Market, (xi) the costs and expenses
relating to investor presentations on any "road show" undertaken in connection
with the marketing of the offering of the Securities, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any such
consultant, including the cost of any aircraft chartered in connection with the
road show and (xii) all other costs and expenses incident to the performance of
the obligations of the Company hereunder for which provision is not otherwise
made in this Section.
(b) Expenses of the Selling Shareholders. Each Selling Shareholder,
severally, will pay the following expenses incident to the performance of its
obligations under, and the consummation of the transactions contemplated by,
this Agreement: (i) if applicable, any stock or other transfer taxes and any
stamp, capital or other duties, taxes or charges payable upon the sale or
delivery of its Securities to the Underwriters, and (ii) underwriting discounts
and commissions with respect to the Securities sold by it to the Underwriters.
(c) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Company shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Shareholders shall have
made or may make for the sharing of such costs and expenses.
22
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Shareholders
contained in Section 1 hereof or in certificates of any officer of the Company
or any Subsidiary of the Company or on behalf of the Selling Shareholders
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Baker, Donelson, Bearman, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PC, counsel for the
Company, in form and substance satisfactory to counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the Underwriters may reasonably request.
(c) Opinion of General Counsel of Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, General Counsel and Secretary of the Company, in form
and substance satisfactory to counsel for the Underwriters together with signed
or reproduced copies of such letter for each of the other Underwriters to the
effect set forth in Exhibit B hereto and to such further effect as counsel to
the Underwriters may reasonably request.
(d) Opinion of Counsel for the Selling Shareholders. At Closing Time,
the Representatives shall have received the favorable opinions, dated as of
Closing Time, of Baker, Donelson, Bearman, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PC, counsel for
certain of the Selling Shareholders, of Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC, counsel for SSM
Venture Partners, L.P. ("SSM") and of Becker, Glynn, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
counsel to Aries Partners, Inc., Aries Partners, L.P. and Aries Partners
(International), L.P. (the "Aries Entities"), in form and substance satisfactory
to counsel for the Underwriters, together with signed or reproduced copies of
such letter for each of the other Underwriters to the effect set forth in
Exhibit C hereto and to such further effect as counsel to the Underwriters may
reasonably request.
(e) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel for the Underwriters,
together with signed or
23
reproduced copies of such letter for each of the other Underwriters in form and
substance satisfactory to the Underwriters.
(f) Officers' Certificate. At Closing Time, the Representatives shall
have received a certificate of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the Company, dated as
of Closing Time, to the effect that (i) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (ii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iii) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or, to the knowledge of
such officers, are contemplated by the Commission.
(g) Certificate of Selling Shareholders. At Closing Time, the
Representatives shall have received a certificate of the Attorneys-in-Fact on
behalf of the Selling Shareholders, dated as of Closing Time, to the effect that
(i) the representations and warranties of the Selling Shareholders contained in
Section 1(b) hereof are true and correct in all respects with the same force and
effect as though expressly made at and as of Closing Time and (ii) the Selling
Shareholders have complied in all material respects with all agreements and all
conditions on their part to be performed under this Agreement at or prior to
Closing Time.
(h) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from Ernst & Young LLP a
letter, dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the consolidated financial statements and certain financial
information contained in the Registration Statement and the Prospectus.
(i) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from Ernst & Young LLP a letter, dated as of Closing Time,
to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (h) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.
(j) Approval of Listing. At Closing Time, the Securities shall have
been approved for inclusion in the Nasdaq National Market, subject only to
official notice of issuance.
(k) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit D hereto signed by the persons listed on Schedule F hereto.
(l) Form W-8 BEN or W-9. At the date of this Agreement, the
Representatives shall have received Forms W-8 BEN or W-9 (or other applicable
form or statement specified by Treasury Department regulations in lieu thereof),
signed by each Selling Shareholder.
24
(m) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Company and the Option Securities Selling Shareholders contained herein
and the statements in any certificates furnished by the Company and any
Subsidiary and the Option Securities Selling Shareholders hereunder shall be
true and correct as of each Date of Delivery and, at the relevant Date of
Delivery, the Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(f) hereof remains true and correct as of such Date of
Delivery.
(ii) Certificate of Option Securities Selling Shareholders. A
certificate, dated such Date of Delivery, by or on behalf of each
Option Securities Selling Shareholder confirming that the certificate
delivered at the Closing Time pursuant to Section 5(g) remains true and
correct as of such Date of Delivery.
(iii) Opinions of Counsel for Company and Certain Selling
Shareholders. The favorable opinions of Baker, Donelson, Bearman,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PC, counsel for the Company and certain of the
Selling Shareholders, in form and substance satisfactory to counsel for
the Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinions required by Sections 5(b) and 5(d)
hereof.
(iv) Opinion of General Counsel of the Company. The favorable
opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, General Counsel and Secretary of the
Company, in form and substance satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Sections 5(c) hereof.
(v) Opinions of Counsel for SSM and the Aries Entities. The
favorable opinions of Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC, counsel for SSM and of
Becker, Glynn, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the Aries Entities, in
form and substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as
the opinions required by Section 5(d) hereof.
(vi) Opinion of Counsel for Underwriters. The favorable
opinion of LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(e) hereof.
(vii) Bring-down Comfort Letter. A letter from Ernst & Young
LLP, in form and substance satisfactory to the Representatives and
dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the
25
Representatives pursuant to Section 5(h) hereof, except that the
"specified date" in the letter furnished pursuant to this paragraph
shall be a date not more than two days prior to such Date of Delivery.
(n) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the representations
or warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company and the Selling Shareholders in
connection with the issuance and sale of the Securities as herein contemplated
shall be reasonably satisfactory in form and substance to the Representatives
and counsel for the Underwriters.
(o) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as provided in this Agreement,
this Agreement, or, in the case of any condition to the purchase of Option
Securities on a Date of Delivery that is after the Closing Time, the obligations
of the several Underwriters to purchase the relevant Option Securities, may be
terminated by the Representatives by notice to the Company at any time at or
prior to Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party except as
provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any
such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters by the Company. The Company agrees
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of (A) the violation of
any applicable laws or regulations of foreign jurisdictions where
Reserved Securities have been offered and (B) any untrue statement or
alleged untrue statement of a material fact included in the supplement
or prospectus wrapper material distributed in connection with the
reservation and sale of the Reserved Securities to the Company's
directors, officers, employees, related persons of the foregoing and
certain existing shareholders or the omission or
26
alleged omission therefrom of a material fact necessary to make the
statements therein, when considered in conjunction with the Prospectus
or preliminary prospectus, not misleading;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission or in
connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof; provided that (subject to Section 6(d) below) any
such settlement is effected with the written consent of the Company;
and
(iv) against any and all expense whatsoever, as incurred
(including the reasonable fees and disbursements of counsel chosen by
KBW), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission or in
connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i), (ii) or
(iii) above;
provided, however, that the foregoing indemnity agreement (i) shall not apply to
any loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through KBW expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and (ii) with respect to
any preliminary prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any loss, liability, claim, damage or expense
purchased Securities, 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 Securities
to such person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such losses, liabilities, claims, damages or
expenses, unless such failure is the result of noncompliance by the Company with
Section 3(d) hereof. This indemnity agreement will be in addition to any
liability that the Company may otherwise have.
(b) Indemnification of Underwriters by the Selling Shareholders. Each
Selling Shareholder agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act, from and against any loss,
liability, claim, damage and expense described in the indemnity contained in
subsections (a)(i), (a)(iii) and (a)(iv) (except as they relate to violations of
the nature referred to in Section 6(a)(ii)(A) hereof) of this section, as
incurred; provided, however, that such Selling Shareholder shall be liable in
any such case only
27
to the extent that any such loss, claim, damage, liability or expense arises out
of, or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus, the
Registration Statement or the Prospectus or in any such amendment or supplement
in reliance upon and in conformity with written information concerning such
Selling Shareholder furnished to the Company in writing by such Selling
Shareholder specifically for inclusion therein; provided further, however, that
the foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter from whom the person asserting
any loss, liability, claim, damage or expense purchased Securities, 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 Securities to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such losses, liabilities, claims, damages or expenses, unless such
failure is the result of noncompliance by the Company with Section 3(d) hereof;
provided, further, that the aggregate amount of each Selling Shareholder's
indemnity and contribution obligations under this Section 6(b) shall not exceed
the net proceeds received by such Selling Shareholder from its sale of
Securities hereunder.
(c) Indemnification of the Company, Directors and Officers and Selling
Shareholders. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and each Selling
Shareholder and each person, if any, who controls such Selling Shareholder
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information and the Rule 434 Information, if applicable,
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such Underwriter through KBW expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).
(d) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party, and any delay in such
notification, shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability that it may have otherwise
than on account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) or 6(b) above, counsel to the indemnified parties shall
be selected by KBW, and, in the case of parties indemnified pursuant to Section
6(c) above, counsel to the indemnified parties shall be selected by the Company.
An indemnifying party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party.
28
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(e) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iii) effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(f) Indemnification for Reserved Securities. In connection with the
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of the Company's directors, officers,
employees, related persons of the foregoing and certain existing shareholders to
pay for and accept delivery of Reserved Securities which, by the end of the
first business day following the date of this Agreement, were subject to a
properly confirmed agreement to purchase.
(g) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Shareholders with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and such
Selling Shareholder on the one hand and the Underwriters on the other hand from
the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and such
Selling
29
Shareholder on the one hand and of the Underwriters on the other hand in
connection with the statements or omissions, or in connection with any violation
of the nature referred to in Section 6(a)(ii)(A) hereof, which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and such Selling Shareholder and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus, or, if Rule 434 is used, the corresponding location
on the Term Sheet, bear to the aggregate initial public offering price of the
Securities as set forth on such cover.
The relative fault of the Company and each of the Selling Shareholders
on the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or such Selling Shareholder
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission or
any violation of the nature referred to in Section 6(a)(ii)(A) hereof.
The Company, each of the Selling Shareholders and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 7 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
that does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls
30
the Company or any Selling Shareholder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Company or any Selling Shareholder, as the case may be. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial Securities set forth opposite
their respective names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and any of the Selling Shareholders with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of the
Subsidiaries or the Selling Shareholders submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or controlling person, or by or on behalf of the
Company or the Selling Shareholders, and shall survive delivery of the
Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Shareholders, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus (exclusive of any amendments thereto), any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and the Subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the financial markets
in the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Representatives, impracticable or
inadvisable to market the Securities or to enforce contracts for the sale of the
Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the Nasdaq National Market,
or if trading generally on the American Stock Exchange or the New York Stock
Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the NASD or any other governmental authority, or
if a material disruption has occurred in commercial banking or securities
settlement or clearance services in the United States, or (iv) if a banking
moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the
31
Underwriters shall fail at Closing Time or a Date of Delivery to purchase the
Securities that it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the Representatives shall have the right, within 24
hours thereafter, 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 Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to any
Date of Delivery that occurs after the Closing Time, the obligation of the
Underwriters to purchase and of the Option Securities Selling Shareholders to
sell the Option Securities to be purchased and sold on such Date of Delivery
shall terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default that does not result in a termination
of this Agreement or, in the case of a Date of Delivery that is after the
Closing Time, that does not result in a termination of the obligation of the
Underwriters to purchase and the Option Securities Selling Shareholders to sell
the relevant Option Securities, as the case may be, either (i) the
Representatives or (ii) the Company and any Selling Shareholder shall have the
right to postpone Closing Time or the relevant Date of Delivery, as the case may
be, for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10.
SECTION 11. Default by One or More of the Selling Shareholders or the
Company.
(a) If a Selling Shareholder shall fail at Closing Time or at a Date of
Delivery to sell and deliver the number of Securities that such Selling
Shareholder is obligated to sell hereunder, and the remaining Selling
Shareholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number to be sold by all Selling Shareholders as set forth in Schedule B hereto,
then the Underwriters may, at the option of the Representatives, by notice from
the Representatives to the Company and the non-defaulting Selling Shareholders,
either (a) terminate this Agreement without any liability on the fault of any
non-defaulting party except that the provisions of Sections 1, 4, 6, 7 and 8
shall remain in full force and effect or (b) elect to purchase the Securities
that the Company and the non-defaulting Selling Shareholders have agreed to sell
32
hereunder. No action taken pursuant to this Section 11 shall relieve any Selling
Shareholder so defaulting from liability, if any, in respect of such default.
In the event of a default by any Selling Shareholder as referred to in
this Section 11, each of the Representatives, the non-defaulting Selling
Shareholders and the Company shall have the right to postpone Closing Time or
Date of Delivery for a period not exceeding seven days in order to effect any
required change in the Registration Statement or Prospectus or in any other
documents or arrangements.
(b) If the Company shall fail at Closing Time to sell the number of
Securities that it is obligated to sell hereunder, then this Agreement shall
terminate without any liability on the part of any non-defaulting party;
provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain
in full force and effect. No action taken pursuant to this Section shall relieve
the Company from liability, if any, in respect of such default.
33
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at c/o Keefe, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, attention
of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, General Counsel; notices to the Company shall be directed
to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇-▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Secretary, with copies to Direct General Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Senior Vice President and Baker, Donelson, Bearman, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, PC, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
attention ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; and notices to the Selling Shareholders shall be
directed to Baker, Donelson, Bearman, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PC, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; SSM
Venture Partners, L.P., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
with a copy to Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, attention ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ III; and
Aries Entities c/o Aries Partners, Inc., ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to Becker, Glynn, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
SECTION 13. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters, the Company and the Selling Shareholders
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Shareholders and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and the Selling Shareholders
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
[Signatures On Following Page]
34
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorneys-in-Fact for
the Selling Shareholders a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the Underwriters,
the Company and the Selling Shareholders in accordance with its terms.
Very truly yours,
DIRECT GENERAL CORPORATION
By:
-----------------------------------
Name:
Title:
The Selling Shareholders
named in Schedule B hereto
By:
-----------------------------------
As Attorney-in-Fact
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, INC.
▇▇▇▇▇▇ ▇▇▇▇▇▇ & COMPANY, INC.
U.S. BANCORP ▇▇▇▇▇ ▇▇▇▇▇▇▇, INC.
SUNTRUST CAPITAL MARKETS, INC.
For themselves and as Representatives of the
other Underwriters named in Schedule A hereto.
By: ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, INC.
By:
----------------------------------
Name:
Title:
35
SCHEDULE A
Number of
Initial
Name of Underwriter Securities
--------------------------------------------------------------- ----------
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc...................................
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc...................................
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc................................
SunTrust Capital Markets, Inc..................................
----------
Total..........................................................
==========
Sch. A-1
SCHEDULE B
Number of Initial
Securities to be
Sold
-----------------
Direct General Corporation............................... 3,750,000
Aries Partners, Inc...................................... 195,060
Aries Partners, L.P...................................... 560,271
Aries Partners (International), L.P...................... 682,169
Noro-▇▇▇▇▇▇▇ Partners II, L.P............................ 712,134
SSM Venture Partners, L.P................................ 489,624
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.................... 2,400
▇▇▇▇ ▇. ▇▇▇▇▇▇........................................... 14,400
▇▇▇▇ ▇▇▇▇▇▇▇▇▇........................................... 12,000
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇................................ 36,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.................... 24,000
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇...................................... 3,552
▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇........................................ 3,552
▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇....................................... 3,552
▇▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇....................................... 23,004
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇......................... 3,552
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇................................ 1,008
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇............................. 3,552
▇▇▇▇ ▇▇▇▇▇............................................... 26,940
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇........................................ 50,940
▇▇▇▇▇ ▇. ▇▇▇▇▇▇.......................................... 3,552
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇......................................... 6,048
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇..................................... 3,600
▇▇▇▇ ▇. and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.............................. 108,984
▇▇▇▇▇ ▇. ▇▇▇▇▇▇.......................................... 170,796
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇...................................... 41,724
Total.................................................... 6,932,414
Sch. B-1
SCHEDULE C
Maximum Number
of Option
Securities to be
Option Securities Selling Shareholder Sold
------------------------------------- ----------------
Aries Partners, L.P......................................... 220,177
Aries Partners (International), L.P......................... 92,323
Noro-▇▇▇▇▇▇▇ Partners II, L.P............................... 727,362
Total....................................................... 1,039,862
Sch. C-1
SCHEDULE D
DIRECT GENERAL CORPORATION
[ ] Shares of Common Stock
(No Par Value Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $[ ].
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $[ ], being an amount equal to the initial
public offering price set forth above less $[ ] per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the over-allotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the Company
and payable on the Initial Securities but not payable on the Option Securities.
Sch. D-1
SCHEDULE E
LIST OF SUBSIDIARIES
Name of Subsidiary Jurisdiction of Organization
------------------------------------------------------ -----------------------------
Direct Insurance Company Tennessee
Direct General Insurance Company of Louisiana Louisiana
Direct General Insurance Company South Carolina
Direct Life Insurance Company Georgia
Direct General Insurance Company of Mississippi Mississippi
Direct General Insurance Agency, Inc. Tennessee
Direct General Insurance Agency, Inc. Arkansas
Direct General Insurance Agency, Inc. Mississippi
Direct General Agency of Kentucky, Inc. Kentucky
Direct General Insurance Agency of Louisiana, Inc. Louisiana
Direct General Insurance Agency, Inc. Texas
Direct Insurance Agency Midwest, Inc. Minnesota
Direct General Financial Services, Inc. Tennessee
DGFS Funding Corporation Delaware
Direct Administration, Inc. Tennessee
Direct Adjusting, Company Tennessee
Direct General Consumer Products, Inc. Tennessee
Direct General Finance Company of Mississippi Mississippi
Direct General Premium Finance Company Tennessee
Direct General Insurance Agency of North Carolina, Inc. North Carolina
Sch. E-1
SCHEDULE F
LIST OF PERSONS AND ENTITIES SUBJECT TO LOCK-UP
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
First Tennessee Bank, as pledgee for ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
CPT, Inc.
First Tennessee Bank, as pledgee for CPT, Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇'▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Sch. F-1
▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Trust
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Enterprise National Bank, as pledgee for ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Enterprise National Bank, as pledgee for ▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
SSM Venture Partners, L.P.
Noro-▇▇▇▇▇▇▇ Partners II, L.P.
▇▇▇▇▇ ▇▇▇▇▇▇
Aries Partners, L.P.
Aries Partners (International), L.P.
Aries Partners, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
J. ▇▇▇▇ ▇▇▇▇▇▇
Sch. F-2
EXHIBIT A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Tennessee. Other
than the subsidiaries set forth on Schedule D to the Underwriting Agreement
(each, a "Subsidiary" and collectively, the "Subsidiaries"), to our knowledge,
the Company does not own or control, directly or indirectly, more than 5% of any
class of equity security of any corporation, association or other entity.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Underwriting
Agreement.
(iii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption "Capitalization"
(except for subsequent issuances, if any, pursuant to the Underwriting Agreement
and subsequent issuances or purchases pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectus or pursuant to the exercise
of convertible securities or options referred to in the Prospectus). The shares
of issued and outstanding capital stock, including the Securities to be
purchased by the Underwriters from the Selling Shareholders, have been duly
authorized and validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock, including the Securities to be purchased by
the Underwriters from the Selling Shareholders, was issued in violation of or
are otherwise subject to any preemptive or other similar rights of any
securityholder of the Company.
(iv) The Securities to be purchased by the Underwriters from the
Company have been duly authorized for issuance and sale to the Underwriters
pursuant to the Underwriting Agreement and, when issued and delivered by the
Company pursuant to the Underwriting Agreement against payment of the
consideration set forth therein, will be validly issued and fully paid and
non-assessable. To our knowledge, there are no outstanding subscriptions,
options, warrants, convertible or exchangeable securities or other rights
granted to or by the Company to purchase shares of Common Stock or other
securities of the Company and, to our knowledge, there are no commitments, plans
or arrangements to issue any shares of Common Stock or any security convertible
into or exchangeable for Common Stock, in each case other than as described in
the Prospectus.
(v) The issuance and sale of the Securities by the Company and the sale
of the Securities by the Selling Shareholders is not subject to the preemptive
or other similar rights of any securityholder of the Company other than those
described in the Prospectus that have been waived.
A-1
(vi) Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization, as the case may be, has the corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Prospectus; except as otherwise disclosed in the Registration Statement, all of
the issued and outstanding capital stock of each Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and, to our
knowledge, is owned by the Company, directly or through a Subsidiary, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity (except that the shares of capital stock of each subsidiary has been
pledged to secure the indebtedness described in the Registration Statement);
none of the outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of such
Subsidiary.
(vii) All necessary corporate action has been duly and validly taken by
the Company to authorize the execution, delivery and performance of the
Underwriting Agreement and the issuance and sale of the Securities by the
Company. The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(viii) Counsel has been advised by the Commission that the Registration
Statement, including any Rule 462(b) Registration Statement, has been declared
effective under the 1933 Act; any required filing of the Prospectus pursuant to
Rule 424(b) has been made in the manner and within the time period required by
Rule 424(b); and, to our knowledge, no stop order suspending the effectiveness
of the Registration Statement or any Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or contemplated by the Commission.
(ix) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information, the Rule 434 Information, as applicable,
the Prospectus, excluding the documents incorporated by reference therein, and
each amendment or supplement to the Registration Statement and Prospectus,
excluding the documents incorporated by reference therein, as of their
respective effective or issue dates (other than the financial statements and
supporting schedules and other financial, statistical and operating data
included therein or omitted therefrom, as to which we need express no opinion)
complied as to form in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations.
(x) The form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Company and the
requirements of the Nasdaq National Market.
(xi) The information in the Prospectus under "Description of Capital
Stock," "Management - Board of Directors," "Management - Committees of the Board
of Directors," "Common Stock Eligible for Future Sale," "Risk Factors - Risks
Related to Our Business - We are subject to comprehensive regulation that may
restrict our
A-2
ability to earn profits," "Risk Factors - Risks Related to This Offering -
Provisions contained in our organizational documents and in laws of the state of
Tennessee and other states in which we conduct business could impede an attempt
to replace or remove our management or prevent the sale of our company, which
could diminish the value of our common stock," "Business - Regulatory
Environment," and "Business - Legal Proceedings" and under Item 14 in Part II of
the Registration Statement, insofar as it purports to describe statutes, legal
and governmental proceedings, the Company's charter and bylaws, legal
conclusions, is accurate in all material respects and fairly presents the
information required to be shown.
(xii) To our knowledge, there are no statutes or regulations that are
required to be described in the Prospectus that are not described as required.
(xiii) All descriptions in the Registration Statement of contracts and
other documents to which the Company or the Subsidiaries are a party are
accurate in all material respects; there are no franchises, contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments,
known to us, required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed as exhibits thereto, and the descriptions thereof
or references thereto are correct in all material respects.
(xiv) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act, the
1933 Act Regulations, the 1934 Act or the 1934 Act Regulations, which have been
obtained, or as may be required under the state securities or insurance
securities laws of the various states, as to which we express no opinion) is
necessary or required in connection with the due authorization, execution and
delivery of the Underwriting Agreement or for the offering, issuance, sale or
delivery of the Securities.
(xv) The execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions contemplated in the
Underwriting Agreement and in the Registration Statement (including the issuance
and sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use of Proceeds")
and compliance by the Company with its obligations under the Underwriting
Agreement do not and will not, whether with or without the giving of notice or
lapse of time or both, conflict with or constitute a breach of, or default or
Repayment Event (as defined in Section 1(a)(x) of the Underwriting Agreement)
under or result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any Subsidiary pursuant to any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or any other agreement or instrument, known to us, to which the Company or
any Subsidiary is a party or by which it or any of them may be bound, or to
which any of the property or assets of the Company or any Subsidiary is subject
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not reasonably be expected to have a Material Adverse
Effect), nor will such action result in any violation of the provisions of the
charter or by-laws of the Company or any Subsidiary, or any
A-3
applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any Subsidiary or any of their
respective properties, assets or operations.
(xvi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the ▇▇▇▇
▇▇▇.
(xvii) The capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus under the
caption "Description of Capital Stock."
(xviii) To the best of our knowledge, no holder of any security of the
Company has the right to have any security owned by such holder included in the
Registration Statement or to demand registration of any security owned by such
holder during the period ending 180 days after the date of this Agreement, which
right has not been waived.
Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (except for financial statements and
schedules and other financial data included or incorporated by reference therein
or omitted therefrom, as to which we make no statement), at the time such
Registration Statement or any such amendment became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that the Prospectus or any amendment or supplement thereto (except for
financial statements and schedules and other financial data included or
incorporated by reference therein or omitted therefrom, as to which we make no
statement), at the time the Prospectus was issued, at the time any such amended
or supplemented prospectus was issued or at the Closing Time, included or
includes an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
Wherever we indicate that our opinion with respect to the existence or
absence of facts is, to our knowledge, our opinion is based solely on the actual
conscious knowledge of the attorneys in this firm who have been involved in
representing the Company.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991). Nothing contained in the preceding sentence
shall prevent counsel from making assumptions, exceptions and qualifications
that are customary in transactions of this type.
A-4
EXHIBIT B
FORM OF OPINION OF GENERAL COUNSEL OF COMPANY
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not reasonably be expected to result in a Material
Adverse Effect.
(ii) Each subsidiary is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not reasonably be expected to result in a Material
Adverse Effect.
(iii) To the best of my knowledge and other than as described in the
Prospectus, there is not pending or threatened any action, suit, proceeding,
inquiry or investigation, to which the Company or any Subsidiary is a party, or
to which the property of the Company or any Subsidiary is subject, before or
brought by any court or governmental agency or body, domestic or foreign, that
would reasonably be expected to result in a Material Adverse Effect, or that
would reasonably be expected to materially and adversely affect the properties
or assets thereof or the consummation of the transactions contemplated in the
Underwriting Agreement or the performance by the Company of its obligations
under the Underwriting Agreement.
(iv) To the best of my knowledge, neither the Company nor any
Subsidiary is in violation of any provision of its charter or by-laws.
(v) Each Subsidiary has the appropriate licenses or authorizations to
conduct its insurance and premium finance businesses as described in the
Prospectus.
Nothing has come to my attention that would lead me to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (except for financial statements and
schedules and other financial data included or incorporated by reference therein
or omitted therefrom, as to which I make no statement), at the time such
Registration Statement or any such amendment became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that the Prospectus or any amendment or supplement thereto (except for
financial statements and schedules and other financial data included or
incorporated by reference therein or omitted therefrom, as to which I make no
statement), at the time the Prospectus was issued, at the time any such amended
or supplemented prospectus was issued or at the Closing Time, included or
includes an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
B-1
EXHIBIT C
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(d)
(i) No filing with, or consent, approval, authorization, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, (other than the issuance of the order
of the Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state securities
laws, as to which we need express no opinion) is necessary or required to be
obtained by the Selling Shareholders for the performance by the Selling
Shareholders of their obligations under the Underwriting Agreement or in the
Power of Attorney and the Stock Custody Agreement, or in connection with the
offer, sale or delivery of the Securities.
(ii) The Power of Attorney and the Stock Custody Agreement have been
duly executed and delivered by the Selling Shareholders and constitutes the
legal, valid, binding and enforceable agreement of the Selling Shareholders.
(iii) The Underwriting Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Shareholders.
(iv) The Attorneys-in-Fact have been duly authorized by the Selling
Shareholders to deliver the Securities on behalf of the Selling Shareholders in
accordance with the terms of the Underwriting Agreement.
(v) The execution, delivery and performance of the Underwriting
Agreement, the Power of Attorney and the Stock Custody Agreement and the sale
and delivery of the Securities and the consummation of the transactions
contemplated in the Underwriting Agreement and in the Registration Statement and
compliance by the Selling Shareholders with their obligations under the
Underwriting Agreement have been duly authorized by all necessary action on the
part of the Selling Shareholders and such actions will not result in any
violation of the provisions of the charter or by-laws of any Selling
Shareholder, if applicable.
(vi) To our knowledge, each Selling Shareholder is the registered
holder of the Securities to be sold by such Selling Shareholder 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. Upon payment for the Securities to be sold by each
Selling Shareholder pursuant to the Underwriting Agreement, delivery of such
Securities, as directed by the Underwriters, to Cede & Co. or such other nominee
as may be designated by DTC, registration of such Securities in the name of Cede
& Co. or such other nominee and the crediting of such Securities on the records
of DTC to securities accounts of the respective Underwriters, (A) DTC will be a
"protected purchaser" of such Securities within the meaning of Section 8-303 of
the UCC if it has no notice of any adverse claim with respect to such Securities
C-1
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; in rendering such opinion, counsel for each Selling
Shareholder may assume that when such payment, delivery and crediting, as the
case may be, occur, (x) such Securities will have been registered in the name of
Cede & Co. or another nominee designated by DTC, in each case on the Company's
share registry in accordance with its certificate of incorporation, bylaws and
applicable law, (y) DTC is a "clearing corporation" within the meaning of
Section 8-102 of the UCC and (z) security entitlements with respect to such
Securities will have been appropriately credited to the securities accounts of
the respective Underwriters on the records of DTC.
C-2
EXHIBIT D
FORM OF LOCK-UP LETTER
[ ], 2003
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, INC.
▇▇▇▇▇▇ ▇▇▇▇▇▇ & COMPANY, INC.
U.S. BANCORP ▇▇▇▇▇ ▇▇▇▇▇▇▇, INC.
SUNTRUST CAPITAL MARKETS, INC.
as Representatives of the several
Underwriters to be named in the
within-mentioned Underwriting Agreement
c/o Keefe, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc.
4th Floor
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Proposed Public Offering by Direct General Corporation
Ladies and Gentlemen:
The undersigned is the beneficial owner of the common stock, no par
value per share (the "Common Stock"), securities substantially similar to the
Common Stock ("Other Securities"), or securities convertible into or exercisable
or exchangeable for the Common Stock or Other Securities, of Direct General
Corporation, a Tennessee corporation (the "Company"), set forth below. The
undersigned understands that the Company has filed a Registration Statement on
Form S-1 (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") in connection with the initial public offering of
the Company's Common Stock (the "Offering"). The undersigned also understands
that ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. ("KBW"), ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc., U.S.
Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇, Inc. and SunTrust Capital Markets, Inc., as
Representatives of the several Underwriters, propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") with the Company in
connection with the Offering. All terms not otherwise defined herein shall have
the same meanings as in the Underwriting Agreement.
In recognition of the benefit that the Offering will confer upon the
undersigned as a shareholder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned
agrees, for the benefit of the Company, KBW and each Underwriter to be named in
the Underwriting Agreement, that, during the period ending 180 days after the
date of the final Prospectus filed with the Commission pursuant to Rule 424(b)
of the Securities Act of 1933, as amended (the "Act"), promulgated by the
Commission, or if no filing under Rule 424(b) is made, the date of the final
Prospectus included in the Registration Statement when declared effective under
the Act, the undersigned will not, without the prior written consent of KBW, on
behalf of the Underwriters, directly or indirectly, (i) offer, sell, offer
D-1
to sell, contract to sell, hedge, pledge, grant any option to purchase or
otherwise transfer or dispose (or announce any offer, sale, offer of sale,
contract of sale, hedge, pledge, grant of any option to purchase or other sale
or disposition) of any shares of Common Stock or Other Securities, or any other
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock or such Other Securities, beneficially owned (within the meaning of
Rule 13d-3 under the ▇▇▇▇ ▇▇▇) by the undersigned on the date hereof or
hereafter acquired or (ii) enter into any swap or other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock or Other Securities, or
any other securities convertible into, or exercisable or exchangeable for,
shares of Common Stock or such Other Securities, whether any such swap or
transaction is to be settled by delivery of Common Stock or Other Securities, or
any other securities convertible into, or exercisable or exchangeable for,
shares of Common Stock or such Other Securities, in cash or otherwise.
Further, the undersigned agrees that at any time prior to the effective
date of the Registration Statement, the undersigned will not, without the prior
written consent of KBW, on behalf of the Underwriters, directly or indirectly,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, contract of sale, pledge, grant of any option to purchase or other sale or
disposition) of any shares of Common Stock, Other Securities, or any other
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock or such Other Securities, beneficially owned (within the meaning of
Rule 13d-3 under the ▇▇▇▇ ▇▇▇) by the undersigned on the date hereof or
hereafter acquired without first requiring any such offering or acquiring
parties execute and deliver to KBW an agreement of substantially the tenor
hereof.
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 agreement. For purposes
hereof, "immediate family" shall mean any relationship by blood, marriage or
adoption, not more remote than first cousin.
D-2
The undersigned hereby confirms that he, she or it understands that the
Underwriters and the Company will rely upon the representations set forth in
this agreement in proceeding with the Offering. This agreement shall be binding
on the undersigned and his, her or its respective successors, heirs, personal
representatives and assigns.
Very truly yours,
Signature:
-----------------------------
Print Name:
----------------------------
The foregoing is accepted and agreed to as of the date first written above:
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, INC.
By:
-------------------------------
Name:
Title:
OWNERSHIP OF COMMON STOCK AND OTHER SECURITIES:
Type of Security Number of Shares*
--------------------------------------------------- -----------------
Common Stock.......................................
Options............................................
Warrants...........................................
Convertible Securities.............................
Other (please describe):
* For securities other than Common Stock, indicate the aggregate number of
shares of Common Stock into which or for which such securities are convertible,
exchangeable or exercisable.
D-3
EXHIBIT E
[FORM OF IRREVOCABLE POWER OF ATTORNEY
OF SELLING SHAREHOLDER]
E-1
EXHIBIT F
[FORM OF STOCK CUSTODY AGREEMENT]
F-1