Exhibit 1.1
PHILADELPHIA CONSOLIDATED HOLDING CORP.
(a Pennsylvania corporation)
4,000,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated: November 20, 2001
TABLE OF CONTENTS
(1) Representations and Warranties............................................3
(a) Representations and Warranties by the Company......................3
(b) Representations and Warranties by the Selling Shareholder.........10
(c) Officer's Certificates............................................12
(2) Sale and Delivery to Underwriters; Closing...............................12
(a) Initial Securities................................................12
(b) Option Securities.................................................13
(c) Payment...........................................................13
(d) Denominations; Registration.......................................14
(3) Covenants of the Company.................................................14
(a) Compliance with Securities Regulations and Commission Requests....14
(b) Filing of Amendments..............................................14
(c) Delivery of Registration Statements...............................14
(d) Delivery of Prospectuses..........................................15
(e) Continued Compliance with Securities Laws.........................15
(f) Blue Sky Qualifications...........................................15
(g) Rule 158..........................................................16
(h) Use of Proceeds...................................................16
(i) Listing...........................................................16
(j) Restriction on Sale of Securities.................................16
(k) Reporting Requirements............................................16
(4) Payment of Expenses......................................................16
(a) Expenses..........................................................16
(b) Expenses of the Selling Shareholder...............................17
(c) Termination of Agreement..........................................17
(d) Allocation of Expenses............................................17
(5) Conditions of Underwriters' Obligations..................................17
(a) Effectiveness of Registration Statement...........................17
(b) Opinion of Counsel for Company....................................18
(c) Opinion of Counsel for the Selling Shareholder....................18
(d) Opinion of Counsel for Underwriters...............................18
(e) Officers' Certificate.............................................18
(f) Certificate of Selling Shareholder................................19
(g) Accountant's Comfort Letter.......................................19
(h) Bring-down Comfort Letter.........................................19
(i) Approval of Listing...............................................19
(j) No Objection......................................................20
(k) Lock-up Agreements................................................20
(l) Conditions to Purchase of Option Securities.......................20
(m) Additional Documents..............................................21
(n) Termination of Agreement..........................................21
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(6) Indemnification..........................................................21
(a) Indemnification of Underwriters...................................21
(b) Indemnification of Company, Directors and Officers
and Selling Shareholder ..........................................23
(c) Actions against Parties; Notification.............................23
(d) Settlement without Consent if Failure to Reimburse................23
(e) Other Agreements with Respect to Indemnification..................24
(7) Contribution.............................................................24
(8) Representations, Warranties and Agreements to Survive Delivery...........25
(9) Termination of Agreement.................................................25
(a) Termination; General..............................................25
(b) Liabilities.......................................................26
(10) Default by One or More of the Underwriters...............................26
(11) Default by the Selling Shareholder or the Company........................27
(12) Notices..................................................................27
(13) Parties..................................................................27
(14) GOVERNING LAW AND TIME...................................................28
(15) Effect of Headings.......................................................28
SCHEDULES
Schedule A - List of Underwriters.................................Sch A-1
Schedule B - List of Selling Shareholders.........................Sch B-1
Schedule C - Pricing Information..................................Sch C-1
Schedule D - List of Subsidiaries..................................Sch D-1
Schedule E - List of Persons subject to Lock-up....................Sch E-1
EXHIBITS
Exhibit A - Form of Opinion of Company's Counsel........................A-1
Exhibit B - Form of Opinion for the Selling Shareholder.................B-1
Exhibit C - Form of Lock-up Letter......................................C-1
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PHILADELPHIA CONSOLIDATED HOLDING CORP.
(a Pennsylvania corporation)
4,000,000 Shares of Common Stock
(No Par Value)
PURCHASE AGREEMENT
November 20, 2001
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Banc of America Securities LLC
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Philadelphia Consolidated Holding Corp, a Pennsylvania corporation (the
"Company"), and James J. Maguire (the "Selling Shareholder") confirm their
respective agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") 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 Merrill Lynch and Banc of America Securities LLC are acting as
representatives (in such capacity, the "Representatives"), with respect to (i)
the sale by the Company and the Selling Shareholder, acting severally and not
jointly, and the purchase by the Underwriters, acting severally and not jointly,
of the respective numbers of shares of Common Stock, no par value, of the
Company ("Common Stock") set forth in Schedules A and B hereto and (ii) the
grant by the Company to the Underwriters, acting severally and not jointly, of
the option described in Section 2(b) hereof to purchase all or any part of
600,000 additional shares of Common Stock to cover over-allotments, if any. The
aforesaid 4,000,000 shares of Common Stock (the "Initial Securities") to be
purchased by the Underwriters and all or any part of the 600,000 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 Shareholder 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 has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-72722) 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, schedules thereto, if any, and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, 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,
including the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the 1933 Act, 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 November 7, 2001 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 ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of
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1934 (the "1934 Act") which is incorporated by reference in the Registration
Statement, such preliminary prospectus or the Prospectus, as the case may be.
(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. The Company
meets the requirements for use of Form S-3 under the 1933 Act. 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, as amended as of any
such time, the Rule 462(b) Registration Statement, as amended
as of any such time, 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. Neither the Prospectus nor any amendments or
supplements thereto, 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. The representations and
warranties in this subsection shall not apply to statements in
or omissions from the Registration Statement, 462(b)
Registration Statement or Prospectus and any amendments or
supplements thereto made in reliance upon and in conformity
with information furnished to the Company in writing by any
Underwriter through Merrill Lynch expressly for use in the
Registration Statement, 462(b) Registration Statement, or
Prospectus.
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
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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 EDGAR, except to the extent permitted
by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectus, when they became effective or at the time they were
or hereafter are filed with the Commission, complied and will comply in
all material respects with the requirements of the 1933 Act and the
1933 Act Regulations or the 1934 Act and the rules and regulations of
the Commission thereunder (the "1934 Act Regulations"), as applicable,
and, when read together with the other information in the Prospectus,
at the time the Registration Statement became effective, at the time
the Prospectus was issued and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), 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.
(iii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iv) 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 statements of operations and comprehensive income, and changes
in 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 generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved. The supporting schedules, if any, 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 information 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; provided, however, that the
Company's insurance operating ratios were computed based upon statutory
accounting principles.
(v) No Material Adverse Change in Business. Since September
30, 2001, except as otherwise stated in the Registration Statement or
the Prospectus, (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 its 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 its subsidiaries,
other than those in the ordinary course of business, which are material
with respect to the Company and its subsidiaries considered as one
4
enterprise, and (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.
(vi) 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 Commonwealth of Pennsylvania and 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 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 result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power 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 result in a
Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock
of each such Subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and is owned by the Company, except for
directors' qualification shares, if any, directly or through
subsidiaries, 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. The only subsidiaries of the Company are (a) the
subsidiaries listed on Schedule D hereto and (b) certain other
subsidiaries which, considered in the aggregate as a single Subsidiary,
do not constitute a "significant subsidiary" as defined in Rule 1-02 of
Regulation S-X.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, 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 Shareholder, 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
Shareholder, was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.
5
(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(x) 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 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 of any securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company
nor any of its subsidiaries is (A) in violation of its charter or
by-laws or (B) 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
its 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 (collectively, "Agreements and Instruments")
except, in the case of clause B, for such defaults that would not
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 have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or 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, the Agreements and Instruments (except for such
Repayment Events, conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor
will such action result in any violation of (A) the provisions of the
charter or by-laws of the Company or any subsidiary or (B) 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 (except, with respect to
this clause B, such violations that would not result in a Material
Adverse Effect). As used herein, a "Repayment Event" means any event or
condition which 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.
(xii) 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
6
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,
manufacturers, customers or contractors, which, in either case, may
reasonably be expected to result in a Material Adverse Effect.
(xiii) 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 to which
the Company or any subsidiary is a party, or to which any property of
the Company or any subsidiary is subject, which is required to be
disclosed in the Registration Statement (other than as disclosed
therein), or which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets of the Company or any of its
Subsidiaries or the consummation of the transactions contemplated in
this Agreement or the performance by the Company of its obligations
hereunder, and, to the knowledge of the Company, no such proceedings
are threatened; the aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of
which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement, the Prospectus or the documents incorporated by reference
therein or to be filed as exhibits thereto which have not been so
described and filed as required.
(xv) Possession of Intellectual Property. The Company and its
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 by them, and neither the Company
nor any of its 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 which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
(xvi) 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 to be made or obtained by the Company
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, except such as have been already obtained or as may be
required under the 1933 Act or the 1933 Act Regulations or state
securities laws.
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(xvii) Possession of Licenses and Permits. The Company and its
subsidiaries possess such 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, except
where the failure to possess the same would not, singly or in the
aggregate, have a Material Adverse Effect; the Company and its
subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, 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
have a Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xviii) Title to Property. The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its 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,
singly or in the aggregate, have a Material Adverse Effect and do not
materially interfere with the use made and proposed to be made of such
property by the Company or any of its subsidiaries; and all of the
leases and subleases material to the business of the Company and its
subsidiaries, considered as one enterprise, and under which the Company
or any of its 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.
(xix) Compliance with Cuba Act. The Company has complied with,
and is and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xx) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated 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").
(xxi) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common
8
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 Materials (collectively, "Environmental
Laws"), (B) the Company and its 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 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 its
subsidiaries and (D) 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
its subsidiaries relating to Hazardous Materials or any Environmental
Laws.
(xxii) Insurance Licenses. Without limiting the generality of
subsection (xvii) above, each subsidiary of the Company which 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, except where such failure to hold would not, singly or in
the aggregate, have a Material Adverse Effect; the Company and each
Insurance Subsidiary have fulfilled and performed all obligations
necessary to maintain the Insurance Licenses, except where the failure
to fulfill or perform such obligations or maintain such Insurance
Licenses would not, singly or in the aggregate, have a Material Adverse
Effect; except as disclosed in the Prospectus, there is no pending or,
to the knowledge of the Company, threatened action, suit, proceeding or
investigation that could reasonably be expected to result in the
revocation, termination or suspension of any Insurance License which
would, singly or in the aggregate, have a Material Adverse Effect; and
except as disclosed in the Prospectus, to the knowledge of the Company,
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.
(xxiii) No Change in Insurance Reserving Practices. Except as
is disclosed in the Prospectus, the Company and its Insurance
Subsidiaries have made no material change in their insurance reserving
practices since the most recent audited financial statements included
in the Prospectus.
(xxiv) Reinsurance Treaties and Arrangements. All reinsurance
treaties, agreements, contracts and arrangements to which any Insurance
Subsidiary is a party are
9
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; no
Insurance Subsidiary has received any notice from any of the other
parties to such treaties, agreements, contracts or arrangements that
such other party intends not to perform pursuant thereto and the
Company and the Insurance Subsidiaries have no reasonable basis to
believe that any of the other parties to such treaties, agreements,
contracts or arrangements will be unable to perform pursuant thereto
except to the extent adequately and properly reserved for in the
consolidated financial statements of the Company included in the
Prospectus, except where such violation, default or inability to
perform would not, individually or in the aggregate, have a Material
Adverse Effect.
(xxv) Statutory Financial Statements. The statutory financial
statements of the Insurance Subsidiaries, from which certain ratios and
other statistical data included in the Registration Statement and the
Prospectus 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 (A) as may otherwise be
indicated therein or in the notes thereto and (B) that adjustments
related to Insurance Subsidiaries' adoption of Codification of
Statutory Accounting Principles with respect to the calculation of
statutory surplus were not included in the statutory surplus in the
Company's Forms 8-K filed with the Commission on May 3, 2001 and July
20, 2001, which adjustments caused statutory surplus as incorporated by
reference into the Registration Statement and the Prospectus to be
lower than actual statutory surplus, 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.
(b) Representations and Warranties by the Selling Shareholder.
The Selling Shareholder represents and warrants to each Underwriter as of the
date hereof, and as of the Closing Time, and agrees with each Underwriter, as
follows:
(i) Accurate Disclosure. The Selling Shareholder has reviewed
and is familiar with the Registration Statement and the Prospectus and,
to the best knowledge of the Selling Shareholder, neither the
Prospectus nor any amendments or supplements thereto includes any
untrue statement of a material fact 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; the Selling
Shareholder is not prompted to sell the Securities to be sold by the
Selling Shareholder hereunder by any information concerning the Company
or any subsidiary of the Company which is not set forth in the
Prospectus.
(ii) Authorization of Agreements. The Selling Shareholder has
the full right, power and authority to enter into this Agreement and to
sell, transfer and deliver the Securities to be sold by the Selling
Shareholder hereunder. The execution and delivery of
10
this Agreement and the sale and delivery of the Securities to be sold
by the Selling Shareholder and the consummation of the transactions
contemplated herein and compliance by the Selling Shareholder with his
obligations hereunder have been duly authorized by the Selling
Shareholder and do not and will not, whether with or without the giving
of notice or passage of time or both, conflict with 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
the Selling Shareholder or any property or assets of the 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 the Selling Shareholder is a party or
by which the Selling Shareholder may be bound, or to which any of the
property or assets of the Selling Shareholder is subject, nor will such
action result in any violation by the Selling Shareholder of the
provisions of 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
the Selling Shareholder or any of his properties.
(iii) Good and Marketable Title. The Selling Shareholder has
and will at the Closing Time have good and marketable title to the
Securities to be sold by the 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, assuming each such
Underwriter has no notice of any adverse claim, each of the
Underwriters will receive good and marketable title to the Securities
purchased by it from the Selling Shareholder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.
(iv) Absence of Manipulation. The Selling Shareholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.
(v) 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, required to be made or obtained by the Selling Shareholder is
necessary or required for the performance by the Selling Shareholder of
his obligations hereunder, or in connection with the sale and delivery
of the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except such as may have previously been
made or obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws.
(vi) Restriction on Sale of Securities. During a period of 90
days from the date of the Prospectus, the Selling Shareholder will not,
without the prior written consent of Merrill Lynch, (A) offer, pledge,
sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common
11
Stock or file any registration statement under the 1933 Act with
respect to any of the foregoing or (B) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause
(A) or (B) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall
not apply to (A) the Securities to be sold hereunder; (B) transfers of
Common Stock, or rights to acquire or other rights with respect to
Common Stock, by the Selling Shareholder as a bona fide gift, provided
that the person receiving the transfer shall agree to be bound by the
provisions of the foregoing sentence; (C) transfers of Common Stock, or
rights to acquire or other rights with respect to Common Stock, for
estate planning purposes, to members of the Selling Shareholder's
family or to trusts or other entities for the benefit of such family
members, providing that the person receiving any such transfer agrees
to be bound by the provisions of the foregoing sentence; and (D)
dispositions of Common Stock by the Selling Shareholder by delivery of
shares to the Company as payment for some or all of (i) the exercise
price of any option to purchase Common Stock granted by the Company and
(ii) the Selling Shareholder's income tax withholding obligation in
connection with any such option.
(vii) Certificates Suitable for Transfer. Certificates for all
of the Securities to be sold by the Selling Shareholder pursuant to
this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, shall be delivered to the
Underwriters pursuant to this Agreement.
(viii) No Association with NASD. Neither the Selling
Stockholder nor any of his 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 Article I, Section 1(m) of the By-laws of the National
Association of Securities Dealers, Inc.), any member firm of the
National Association of Securities Dealers, Inc.
(c) Certificates. Any certificate signed on behalf of the
Company by any officer of the Company or any of its subsidiaries delivered to
the Representatives or to counsel for the Underwriters 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
Shareholder 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 Shareholder to the Underwriters as to
the matters covered thereby.
(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, the Company and the Selling Shareholder, severally and not jointly,
agree to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company and
the Selling Shareholder, at the price per share set forth in Schedule C, that
proportion of the
12
number of Initial Securities set forth in Schedule B opposite the name of the
Company or the 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 which 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, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional 600,000
shares of Common Stock, as set forth in Schedule B, at the price per share set
forth in Schedule C, less 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. 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 Company setting forth the number of Option
Securities as to which the several Underwriters are then exercising 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, 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.
(c) Payment. Payment of the purchase price for, and delivery
of certificates for, the Initial Securities shall be made at the offices of
Dewey Ballantine LLP, or at such other place as shall be agreed upon by the
Representatives and the Company and the Selling Shareholder, 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 Shareholder (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 Company and the Selling Shareholder, on each Date of Delivery as
specified in the notice from the Representatives to the Company and the Selling
Shareholder.
Payment shall be made to the Company and the Selling Shareholder by wire
transfer of immediately available funds to bank accounts designated by the
Company and the Selling Shareholder against delivery to the Representatives for
the respective accounts of the
13
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, which it
has agreed to purchase. Merrill Lynch, 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 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.
(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 promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems 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 copies of
14
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 will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, 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 will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, 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 statements 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
commercially reasonable 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 reasonably 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
15
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.
(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 "Use of Proceeds".
(i) Listing. The Company will use its commercially reasonable
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 90
days from the date of the Prospectus, the Company will not, without the prior
written consent of Merrill Lynch, (i) directly or indirectly, offer, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (i)
the Securities to be sold hereunder, (ii) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof of which the Underwriters have been
advised in writing, (iii) any options to purchase Common Stock granted pursuant
to existing stock option plans, provided that such options are not exercisable
during the 90 day period referred to in the foregoing sentence, (iv) any shares
of Common Stock issued pursuant to any non-employee director stock plan and (v)
any shares of Common Stock issued or options to purchase Common Stock granted
pursuant to the Company's employee, director and preferred agent stock purchase
plans.
(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.
(4) Payment of Expenses.
(a) Expenses. The Company will pay or cause to be paid all
expenses incurred by it 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, issuance
and delivery of the certificates for the Securities to the Underwriters,
including any stock or other
16
transfer taxes and any stamp or other duties payable upon the sale, issuance or
delivery of the Securities to the Underwriters, (iii) the fees and disbursements
of the Company's counsel, accountants and other advisors, (iv) the qualification
of the Securities under securities laws in accordance with the provisions of
Section 3(f) hereof, (v) the printing and delivery to the Underwriters of copies
of each preliminary prospectus, any Term Sheets and of the Prospectus and any
amendments or supplements thereto, (vi) the fees and expenses of any transfer
agent or registrar for the Securities, (vii) the filing fees incident to the
review by the National Association of Securities Dealers, Inc. (the "NASD") of
the terms of the sale of the Securities and (viii) the fees and expenses
incurred in connection with the inclusion of the Securities in the Nasdaq
National Market; provided, however, that the Company shall not be required to
pay any expenses of the Underwriters or to reimburse the Underwriters for any
disbursements by the Underwriters, except to the extent specifically provided in
this Section 4(a) and in Section 4(b).
(b) Expenses of the Selling Shareholder. The Company will pay
all expenses incident to the performance of the Selling Shareholder's
obligations under, and the consummation of the transactions contemplated by,
this Agreement (other than any underwriting discount), including any stamp
duties and stock transfer taxes, if any, payable upon the sale of the Securities
to the Underwriters, and their transfer between the Underwriters pursuant to an
agreement between such Underwriters; provided, however, that the Company shall
not be required to pay any expenses of the Underwriters or to reimburse the
Underwriters for any disbursements, except to the extent specifically provided
in this Section 4(b) and in Section 4(a).
(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 and the Selling Shareholder 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 Shareholder may
make for the sharing of such costs and expenses as among themselves.
(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 Shareholder
contained in Section 1 hereof or in certificates of the Company or any
subsidiary of the Company or the Selling Shareholder 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
17
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 Wolf, Block, Schorr and Solis-Cohen LLP, counsel for the Company,
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. Such counsel shall
state in such opinion that Dewey Ballantine LLP may rely thereon as to matters
of Pennsylvania law in rendering its opinion pursuant to subsection 5(d) below.
In giving such opinion, such counsel for the Company may rely, as to all matters
governed by the laws of jurisdictions other than the law of the Commonwealth of
Pennsylvania and the federal law of the United States, upon the opinions of
counsel reasonably satisfactory to the Representatives. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the Company and
its subsidiaries and certificates of public officials.
(c) Opinion of Counsel for the Selling Shareholder. At Closing
Time, the Representatives shall have received the favorable opinion, dated as of
Closing Time, of Wolf, Block, Schorr and Solis-Cohen LLP, counsel for the
Selling Shareholder, 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. Such counsel shall state in such opinion that Dewey Ballantine LLP may
rely thereon as to matters of Pennsylvania law in rendering its opinion pursuant
to subsection 5(d) below. In giving such opinion, such counsel for the Selling
Shareholder may rely, as to all matters governed by the laws of jurisdictions
other than the law of the Commonwealth of Pennsylvania and the federal law of
the United States, upon the opinions of counsel reasonably satisfactory to the
Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials.
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Dewey Ballantine LLP, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in clauses 1, 2, 7, 8 (solely as to
preemptive or other similar rights arising by operation of law or under the
charter or by-laws of the Company), 9, 11 (solely as to the information in the
Company's Form 8-A/A dated September 13, 1993 as to the description of Common
Stock therein), 13, 19, 20 and the penultimate paragraph of Exhibit A hereto. In
giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York, the federal
law of the United States and the General Corporation Law of the State of
Delaware, upon the opinions of counsel satisfactory to the Representatives. Such
counsel may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon certificates of officers
of the Company and its subsidiaries and certificates of public officials.
(e) Officers' Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, (i) any material adverse change in the
condition, financial or otherwise, or in the earnings, business
18
affairs or business prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of business, or
(ii) any downgrading in the rating of any debt securities or claims paying
ability (or similar) rating of the Company or any Subsidiary by any "nationally
recognized statistical rating organization" (as defined for purposes of Rule
436(g) under the 1933 Act) or by A.M. Best Company of its rating of any
Insurance Subsidiary, or any public announcement that any such organization has
under surveillance or review its rating of any debt securities or claims paying
ability (or similar) rating of the Company or any Subsidiary or insurance rating
of any Insurance Subsidiary (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating), the effect of which, in any such case described in
clause (i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the offering
or the delivery of the Securities on the terms and in the manner contemplated in
the Prospectus. Additionally, the Representatives shall have received a
certificate of the Company signed on the Company's behalf by the President or a
Vice President of the Company and the chief financial or chief accounting
officer of the Company, dated as of Closing Time, to the effect that (i) there
has been no such material adverse change, downgrading or public announcement,
(ii) 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, (iii) 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 (iv) 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 are contemplated by the Commission.
(f) Certificate of Selling Shareholder. At Closing Time, the
Representatives shall have received a certificate of the Selling Shareholder,
dated as of Closing Time, to the effect that (i) the representations and
warranties of the Selling Shareholder 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 Shareholder has complied in
all material respects with all agreements and all conditions on his part to be
performed under this Agreement at or prior to Closing Time.
(g) Accountant's Comfort Letter. At the time of the execution
of this Agreement, the Representatives shall have received from
PricewaterhouseCoopers 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 financial statements and certain financial
information contained in the Registration Statement and the Prospectus.
(h) Bring-down Comfort Letter. At Closing Time, the
Representatives shall have received from PricewaterhouseCoopers LLP a letter,
dated as of Closing Time, to the effect that they reaffirm the statements made
in the letter furnished pursuant to subsection (g) of this Section, except that
the specified date referred to shall be a date not more than three business days
prior to Closing Time.
(i) 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.
19
(j) No Objection. The NASD has confirmed that it has not
raised any objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.
(k) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit C hereto signed by the persons listed on Schedule E hereto.
(l) 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 Selling Shareholder contained herein and the
statements in any certificates furnished by the Company, any subsidiary of the
Company and the Selling Shareholder 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 Company signed on the Company's behalf by the
President or a Vice President of the Company and the chief financial or
chief accounting officer of the Company confirming that the certificate
delivered at the Closing Time pursuant to Section 5(e) hereof remains
true and correct as of such Date of Delivery.
(ii) Certificate of Selling Shareholder. A certificate, dated
such Date of Delivery, of the Selling Shareholder confirming that the
certificate delivered at Closing Time pursuant to Section 5(f) remains
true and correct as of such Date of Delivery.
(iii) Opinion of Counsel for Company. The favorable opinion of
Wolf, Block, Schorr and Solis-Cohen LLP, counsel for the Company, in
form reasonably 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 Section 5(b) hereof and to such further effect
as counsel to the Underwriters may reasonably request. In giving such
opinion, such counsel for the Company may rely, as to all matters
governed by the laws of jurisdictions other than the law of the
Commonwealth of Pennsylvania and the federal law of the United States,
upon the opinions of counsel reasonably satisfactory to the
Representatives. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they
deem proper, upon certificates of officers of the Company and its
subsidiaries and certificates of public officials.
(iv) Opinion of Counsel for the Selling Shareholder. The
favorable opinion of Wolf, Block, Schorr and Solis-Cohen LLP, counsel
for the Selling Shareholder, in form reasonably satisfactory to counsel
for the Underwriters, dated such Date of Delivery, to the same effect
as the opinion required by Section 5(c) hereof and to such further
effect as counsel to the Underwriters may reasonably request, except
that counsel to the Selling Shareholder in its capacity as such need
express no opinion as to the Option Securities to be purchased on such
Date of Delivery. In giving such opinion, such counsel for the Selling
Shareholder may rely, as to all matters governed by the laws of
jurisdictions other than the law of the Commonwealth of Pennsylvania
and the federal law of the United States, upon the opinions of counsel
reasonably satisfactory to the Representatives. Such counsel may also
state that, insofar as such opinion involves factual matters, they have
20
relied, to the extent they deem proper, upon certificates of officers
of the Company and its subsidiaries and certificates of public
officials.
(v) Opinion of Counsel for Underwriters. The favorable opinion of Dewey
Ballantine LLP, 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(d)
hereof.
(vi) Bring-down Comfort Letter. A letter from PricewaterhouseCoopers
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 Representatives pursuant to Section 5(g) hereof,
except that the "specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than three days prior to such Date of
Delivery.
(m) Additional Documents. At Closing Time and at each Date of Delivery
counsel for the Underwriters shall have been furnished with such documents 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 Shareholder 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.
(n) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option Securities
on a Date of Delivery which 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, 3 (with respect to any
obligations of the Company with respect to any Initial Securities or Option
Securities previously purchased by the Underwriters), 6, 7 and 8 shall survive
any such termination and remain in full force and effect.
(6) Indemnification.
(a) Indemnification of Underwriters. The Company and the Selling
Shareholder, jointly and severally, agree 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 to the
extent and in the manner set forth in clauses (i), (ii) and (iii) below.
(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
21
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, 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; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Company and the Selling Shareholder; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), 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 any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or 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 Merrill Lynch 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); provided
further, that the Company and the Selling Shareholder shall not be liable under
this Section 6(a) with respect to any preliminary prospectus to the extent that
a court of competent jurisdiction has found by final and nonappealable order
that any such loss, claim, damage or liability results from the fact that any
Underwriter sold securities to a person to whom there was not sent or given, at
or prior to the written confirmation of such sale, a copy of the Prospectus as
then amended or supplemented (it being understood that if at the time of any
such claim the subject Underwriter shall certify that it has sent or given the
Prospectus as then amended or supplemented to any person making such claim at or
prior to the written confirmation of such sale, it shall be presumed that such
Prospectus has been so sent or given unless the Company or the Selling
Shareholder shall have sustained the burden of proving, in a court of competent
jurisdiction by a final and nonappealable order, that the facts are otherwise),
if (i) such delivery to such person is required by Section 5 of the Act, (ii)
the Company has furnished copies of such Prospectus as amended or supplemented
to the Representatives a reasonable period of time prior to the Underwriters
being required to so deliver such Prospectus as amended or supplemented and
(iii) the untrue or alleged untrue statement or omission or alleged omission of
material fact contained in such preliminary prospectus was corrected by such
Prospectus as amended or supplemented; and provided further, that the Selling
Shareholder's aggregate liability under this Section 6(a) and under Section 7
shall be limited to an amount equal to the net proceeds (after deducting the
underwriting discount but before deducting expenses) received by such Selling
Shareholder from the sale of Securities pursuant to this Agreement.
22
(b) Indemnification of Company, Directors and Officers and Selling
Shareholder. 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 the Selling
Shareholder against any and all loss, liability, claim, damage and expense
described in the indemnity contained in Section 6(a) above, 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 Merrill Lynch expressly for
use in the Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
(c) 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 or any claim or investigation in respect of
which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) above, counsel to the indemnified parties shall be
selected by Merrill Lynch, and, in the case of parties indemnified pursuant to
Section 6(b) 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. 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.
(d) 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)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 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
23
party shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.
(e) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Shareholder as among themselves with respect to indemnification.
(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 the
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 the
Selling Shareholder on the one hand and of the Underwriters on the other hand in
connection with the statements or omissions 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 Shareholder 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 the 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 the Selling Shareholder 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 the 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.
The Company, the Selling Shareholder 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 which 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.
24
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 which 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 1933 Act) 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 the Company 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. 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 the Selling Shareholder with respect to contribution.
(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 its subsidiaries or the
Selling Shareholder 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 Shareholder, and shall survive delivery of the Securities to the
Underwriters.
(9) Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Shareholder, 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, (A) any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (B) any downgrading in the rating
of any debt securities or claims paying ability (or similar) rating of the
Company or any Subsidiary by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the 1933 Act) or by
A.M. Best Company of its rating of any Insurance Subsidiary, or any public
announcement that any such organization has under surveillance or review its
rating of any debt securities or claims paying ability (or similar) rating of
the Company or any Subsidiary or insurance rating of any Insurance Subsidiary
(other than an announcement with positive implications of a possible upgrading,
and no implication of a possible downgrading, of such rating), the effect of
which, in any such case described in clause (A) or (B), is in the judgment of
the Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities on
the terms and in the manner contemplated in the Prospectus; (ii) if there has
25
occurred any material adverse change in the financial markets in the United
States or the international financial markets, any terrorist attack, 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 to
market the Securities or to enforce contracts for the sale of the Securities;
(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 National Association of Securities Dealers, Inc. or
any other governmental authority; 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, 3 (with respect to any obligations of the Company with respect to any Initial
Securities or Option Securities previously purchased by the Underwriters), 6, 7
and 8 shall survive such termination and remain in full force and effect.
(10) Default by One or More of the Underwriters. If one or more of the
Underwriters shall fail at Closing Time or a Date of Delivery to purchase the
Securities which 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 which occurs after the Closing Time, the obligation of the
Underwriters to purchase and of the Company 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 which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either (i) the Representatives or (ii) the Company and the
Selling Shareholder shall have the right to postpone Closing Time or the
relevant Date of
26
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.
(11) Default by the Selling Shareholder or the Company. (a) If the Selling
Shareholder shall fail at Closing Time to sell and deliver the number of
Securities which the Selling Shareholder is obligated to sell hereunder, then
the Underwriters may, at the option of the Representatives, by notice from the
Representatives to the Company, either (i) terminate this Agreement without any
liability on the part of any non-defaulting party except that the provisions of
Sections 1, 3 (with respect to any obligations of the Company with respect to
any Initial Securities or Option Securities previously purchased by the
Underwriters), 4, 6, 7 and 8 shall remain in full force and effect or (ii) elect
to purchase the Securities which the Company has agreed to sell hereunder. No
action taken pursuant to this Section 11 shall relieve the Selling Shareholder
so defaulting from liability, if any, in respect of such default.
In the event of a default by the Selling Shareholder as referred to in this
Section 11, each of the Representatives and the Company shall have the right to
postpone the Closing Time or the 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 or at the Date of
Delivery 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 nondefaulting party; provided, however, that the provisions of Sections
1, 3 (with respect to any obligations of the Company with respect to any Initial
Securities or Option Securities previously purchased by the Underwriters), 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.
(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 North Tower, World Financial Center, New
York, New York 10281-1201, attention of Stephan Kiratsous; notices to the
Company shall be directed to it at One Bala Plaza, Suite 100, Bala Cynwyd, PA
19004, attention of James J. Maguire and James J. Maguire, Jr.; and notices to
the Selling Shareholder shall be directed to One Bala Plaza, Suite 100, Bala
Cynwyd, PA 19004, attention of James J. Maguire.
(13) Parties. This Agreement shall each inure to the benefit of and be
binding upon the Underwriters, the Company and the Selling Shareholder 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 Shareholder 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 Shareholder and their respective
successors, and said controlling persons and officers and directors and their
heirs and
27
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.
(14) GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICTS OF LAWS RULES OF SUCH STATE. SPECIFIED TIMES OF DAY REFER TO
NEW YORK CITY TIME.
(15) Effect of Headings. The Article and Section headings herein and the
Table of Contents are for convenience only and shall not affect the construction
hereof.
28
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Selling Shareholder a
counterpart hereof, whereupon this instrument, along with all counterparts, will
become a binding agreement among the Underwriters, the Company and the selling
Shareholder in accordance with its terms.
Very truly yours,
PHILADELPHIA CONSOLIDATED
HOLDING CORP.
By: /s/ Craig P. Keller
---------------------------------
Title: Senior Vice President,
Secretary, Treasurer and
Chief Financial Officer
/s/ James J. Maguire
------------------------------------
James J. Maguire
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
BANC OF AMERICA SECURITIES LLC
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Stephan Kiratsous
----------------------------------
Authorized Signatory
For themselves and as Representative of the other Underwriters named in
Schedule A hereto.
29
SCHEDULE A
Name of Underwriter Number
------------------- of
Initial
Securities
----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................ 1,675,000
Banc of America Securities LLC.............................. 1,675,000
A.G. Edwards & Sons, Inc.................................... 100,000
Ferris, Baker Watts, Incorporated........................... 100,000
First Union Securities, Inc................................. 100,000
Morgan Stanley & Co. Incorporated........................... 100,000
Sandler O'Neill & Partners, L.P............................. 100,000
Cochran, Caronia Securities LLC............................. 50,000
Dowling & Partners Securities L.L.C......................... 50,000
Keefe, Bruyette & Woods, Inc................................ 50,000
Total....................................................... 4,000,000
=========
Sch A-1
SCHEDULE B
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
--------------------- ---------------------
PHILADELPHIA
CONSOLIDATED
HOLDING CORP............ 3,000,000 600,000
James J. Maguire........ 1,000,000 0
Total................... 4,000,000 600,000
Sch B-1
SCHEDULE C
PHILADELPHIA CONSOLIDATED HOLDING CORP.
4,000,000 Shares of Common Stock
(No Par Value)
1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be
$33.50.
2. The purchase price per share for the Securities to be paid
by the several Underwriters shall be $31.91, being an amount equal
to the initial public offering price set forth above less $1.59 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.
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SCHEDULE D
[List of subsidiaries]
Philadelphia Indemnity Insurance Company
Philadelphia Insurance Company
Maguire Insurance Agency, Inc.
PCHC Investment Corp.
Liberty American Insurance Group, Inc.
Mobile USA Insurance Company
Liberty American Insurance Company
Mobile Homeowners' Insurance Agencies, Inc.
Liberty American Premium Finance Company
Sch D-1
SCHEDULE E
[List of persons and entities
subject to lock-up]
James J. Maguire, Jr.
Craig P. Keller
Sean S. Sweeney
Elizabeth H. Gemmill
William J. Henrich, Jr.
Paul R. Hertel, Jr.
Thomas J. McHugh
Michael J. Morris
Dirk A. Stuurop
J. Eustace Wolfington
James Zech
Sch E-1
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER STOCKHOLDERS PURSUANT TO
SECTION 5(k)]
Exhibit C
November ___, 2001
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Banc of America Securities LLC
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by Philadelphia Consolidated Holding Corp.
Dear Sirs:
The undersigned, a stockholder and an officer and/or director of
Philadelphia Consolidated Holding Corp., a Pennsylvania corporation (the
"Company"), understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch") and Banc of America Securities LLC
propose to enter into a Purchase Agreement (the "Purchase Agreement") with the
Company and James J. Maguire providing for the public offering of shares (the
"Securities") of the Company's common stock, no par value (the "Common Stock").
In recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder and an officer and/or director of the Company, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned agrees with each underwriter to be
named in the Purchase Agreement that, during a period of 90 days from the date
of the Purchase Agreement, the undersigned will not, without the prior written
consent of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of, lend or
otherwise dispose of or transfer any shares of the Company's Common Stock or any
securities convertible into or exchangeable or exercisable for or repayable with
Common Stock, whether now owned or hereafter acquired by the undersigned or with
respect to which the undersigned has or hereafter acquires the power of
disposition, or file any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise. Notwithstanding the
foregoing, the undersigned shall be free to (A) dispose of shares of Common
Stock by delivering such shares to the Company as payment
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for some or all of (i) the exercise price of any option to purchase Common Stock
granted by the Company to the undersigned and (ii) the undersigned's income tax
withholding obligation in connection with any such option, (B) transfer shares
of Common Stock or rights to acquire or other rights with respect to Common
Stock to another person as a bona fide gift, provided that the person receiving
the transfer agrees to be bound by the transfer restrictions herein and (C)
transfer shares of Common Stock or rights to acquire or other rights with
respect to Common Stock, for estate planning purposes, to family members of the
undersigned or to trusts or other entities for the benefit of family members of
the undersigned, provided that the person receiving the transfer agrees to be
bound by the transfer restrictions herein.
Very truly yours,
Signature:
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Print Name:
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