Exhibit 1.1
Up to 8,305,556 Shares
EASTERN INSURANCE HOLDINGS, INC.
(a Pennsylvania corporation)
Common Stock
(no par value per share)
AGENCY AGREEMENT
___________, 2005
K EEFE , B RUYETTE & W OODS
Ladies and Gentlemen:
Eastern Insurance Holdings, Inc., a
Pennsylvania corporation (the “Company”), and Educators
Mutual Life Insurance Company, a Pennsylvania mutual insurance
company (“Educators”) and Eastern Holding Company, Ltd.
(“EHC”), hereby confirm their agreement with Keefe,
Bruyette & Woods (“KBW” or the
“Agent”) with respect to the offer and sale by the
Company of up to 8,305,556 shares of the Company’s Common
Stock, no par value (the “Common Stock”). The shares of
Common Stock to be sold by the Company are hereinafter called the
“Securities.”
The Company is the proposed holding
company for Educators. The Securities are being offered in
connection with the conversion of Educators from mutual to stock
form (the “Conversion”) and the simultaneous
acquisition of the capital stock of Educators by the Company
pursuant to a plan of conversion which has been adopted by the
Board of Directors of Educators (the
“Plan”).
The Securities to be issued in the
Conversion will be offered by the Company at $10.00 per share (the
“Purchase Price”) in a subscription offering (the
“Subscription Offering”) pursuant to nontransferable
subscription rights in the following order of priority:
(i) eligible members under policies of insurance issued by
Educators and in force as of the close of business on
March 17, 2005 (“Eligible Members”), (ii) a
tax-qualified employee stock ownership plan of the Company (the
“ESOP”), and (iii) directors, officers and
employees of Educators as of March 17, 2005 and as of the
closing date of the Subscription Offering; (iv) directors,
officers and
employees of EHC (defined below) as of
March 17, 2005 and as of the closing date of the Subscription
Offering; and (v) shareholders of record of EHC as of the
close of business on March 17, 2005. Subscription rights in
any category will be subordinated to subscription rights in a prior
category.
Concurrently, and subject to the
prior rights of holders of subscription rights, any Securities not
subscribed for in the Subscription Offering may be offered to
members of the general public at the Purchase Price in a direct
community offering (the “Community Offering,” and
together with the Subscription Offering, as each may be extended,
the “Subscription and Community Offering”) to be
commenced concurrently with the Subscription Offering. Preference
will be given in the Community Offering to (i) natural persons
and trusts of natural persons who are permanent residents of
Lancaster County, Pennsylvania, (ii) licensed insurance
agencies and/or brokers that have been appointed by or otherwise
are under contract with Educators or any of the EHC Companies
(defined below) to market and distribute policies of insurance
(iii) named insureds under policies of insurance issued by
Educators after March 17, 2005.
It is currently anticipated by the
Company and Educators that any Securities not subscribed for in the
Subscription and Community Offering will be offered in a syndicated
community offering (the “Syndicated Community
Offering”). The Subscription and Community Offering and the
Syndicated Community Offering are hereinafter referred to
collectively as the “Offerings.”
Immediately following the completion
of the Conversion, the Company will acquire EHC in a merger
transaction (the “Merger”) pursuant to an Agreement and
Plan of Merger (the “Merger Agreement”) dated as of
March 17, 2005. EHC is the direct or indirect holding company
for Eastern Re Ltd. S.P.C., Eastern Services Corporation, Global
Alliance Holdings Ltd., Eastern Alliance Insurance Co., Allied
Eastern Indemnity Co. and Employers Alliance, Inc. (EHC and its
subsidiaries are collectively referred to as the “EHC
Companies”). The Merger will be accomplished in accordance
with the laws of the Commonwealth of Pennsylvania and applicable
regulations of the Pennsylvania Insurance Department (the
“Department”), which laws and regulations are
collectively referred to as the “Merger Regulations,”
and together with the Pennsylvania Insurance Company
Mutual-to-Stock Conversion Act (the “Conversion Act”),
the “Reorganization Regulations.” KBW is serving as
financial advisor to Educators in connection with the Merger.
Pursuant to the terms of the Merger Agreement, upon consummation of
the Merger, each outstanding share of common stock of EHC
(“EHC Common Stock”) will be converted into the right
to receive [$_______] in cash and shares of Company Common Stock
(the “Merger Shares”). The Conversion and the Merger
are separate, distinct transactions, but are collectively referred
to herein as the “Reorganization.” The Reorganization
will not be consummated until all conditions to the consummation of
both the Conversion and the Merger have been satisfied or waived.
The Merger shall be consummated immediately following the
consummation of the Conversion.
The Company has filed with the
Securities and Exchange Commission (the “Commission”) a
registration statement on Form S-1 (No. 333-128913), including a
related prospectus, for the registration of the Securities under
the Securities Act of 1933, as amended (the “Securities
Act”), has filed such amendments thereto and such amended
prospectuses as
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may have been required to the date hereof by the
Commission in order to declare such registration statement
effective, and will file such additional amendments thereto and
such amended prospectuses and prospectus supplements as may
hereafter be required. Such registration statement (as amended to
date, if applicable, and as from time to time amended or
supplemented hereafter) and the prospectuses constituting a part
thereof (including in each case all documents incorporated or
deemed to be incorporated by reference therein and the information,
if any, deemed to be a part thereof pursuant to the rules and
regulations of the Commission under the Securities Act, as from
time to time amended or supplemented pursuant to the Securities Act
or otherwise (the “Securities Act Regulations”)), are
hereinafter referred to as the “Registration Statement”
and the “Prospectus,” respectively, except that if any
revised prospectus shall be used by the Company in connection with
the Subscription and Community Offering or the Syndicated Community
Offering which differs from the Prospectus on file at the
Commission at the time the Registration Statement becomes effective
(whether or not such revised prospectus is required to be filed by
the Company pursuant to Rule 424(b) of the Securities Act
Regulations), the term “Prospectus” shall refer to such
revised prospectus from and after the time it is first provided to
the Agent for such use.
The Company has also filed with the
Commission a registration statement on Form S-4 (No. 333-______),
including a related prospectus, for the registration under the
Securities Act of the shares of Common Stock to be issued in the
Merger, has filed such amendments thereto and such amended
prospectuses as may have been required to the date hereof by the
Commission in order to declare such registration statement
effective, and will file such additional amendments thereto and
such amended prospectuses and prospectus supplements as may
hereafter be required. Such registration statement (as amended to
date, if applicable, and as from time to time amended or
supplemented hereafter) and the prospectuses constituting a part
thereof (including in each case all documents incorporated or
deemed to be incorporated by reference therein and the information,
if any, deemed to be a part thereof pursuant to the Securities Act
Regulations), are hereinafter referred to as the “S-4
Registration Statement” and the “S-4 Prospectus,”
respectively. The Registration Statement and the S-4 Registration
Statement are individually and collectively referred to as the
“Registration Statements,” and the Prospectus and the
S-4 Prospectus are individually and collectively referred to as the
“Prospectuses.”
Concurrently with the execution of
this Agreement, the Company is delivering to the Agent copies of
the Prospectus of the Company to be used in the Subscription and
Community Offering. Such prospectus contains information with
respect to the Company, Educators, the EHC Companies, the
Offerings, the Common Stock and the Merger.
SECTION 1. R EPRESENTATIONS AND W ARRANTIES .
(a) The Company and Educators
jointly and severally represent and warrant to the Agent as of the
date hereof as follows:
(i) The Registration Statements have
been declared effective by the Commission, no stop order has been
issued with respect thereto and no proceedings therefor have been
initiated or, to the knowledge of the Company or Educators,
threatened by the Commission. At the respective times that the
Registration
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Statements became effective and at
the Closing Time referred to in Section 2 hereof, the
Registration Statements complied and will comply in all material
respects with the requirements of the Securities Act and the
Securities Act Regulations and the Conversion Act and did not and
will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading. At the date hereof the
Prospectuses do not and at the Closing Time referred to in
Section 2 hereof, will not include an untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided,
however , that the representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with information with respect to the Agent and the
services to be provided by the Agent furnished to the Company in
writing by the Agent expressly for use in the Registration
Statement or Prospectus (the “Agent Information,” which
the Company and Educators acknowledge appears only in the third
sentence of the second paragraph in the section of the Prospectus
captioned “Market for Eastern Holdings Common Stock,”
and the penultimate paragraph in the section of the Prospectus
captioned “The Offering—Marketing
Arrangements.”
(ii) Pursuant to the Conversion Act,
Educators has filed with the Department an application requesting
approval of the Plan, and has filed such amendments thereto and
supplementary materials as may have been required to the date
hereof (such application, as amended to date, if applicable, and as
from time to time amended or supplemented hereafter, is hereinafter
referred to as the “Conversion Application”), including
copies of Educators’ Notice and Proxy Statement relating to
the Conversion (the “Proxy Statement”). The Department
has, by written order dated ____________, 2006, approved the Plan,
such approval remains in full force and effect and no order has
been issued by the Department suspending or revoking such approval
and no proceedings therefor have been initiated or, to the
knowledge of the Company or Educators, threatened by the
Department. At the date of such approval and at the Closing Time
referred to in Section 2, the Plan complied and will comply in
all material respects with the applicable provisions of the
Conversion Act.
(iii) The Company has filed with the
Department the Company’s application for approval of its
acquisition of Educators (the “Educators Application”)
on the appropriate form promulgated under the insurance holding
company provisions of the insurance law of the Commonwealth of
Pennsylvania, as amended (the “PA Insurance Law”) and
the regulations promulgated thereunder. The Company has received
written notice from the Department of its approval of the
acquisition of Educators, such approval remains in full force and
effect and no order has been issued by the Department suspending or
revoking such approval and no proceedings therefor have been
initiated or, to the knowledge of the Company or Educators,
threatened by the Department. At the date of such approval and at
the Closing Time referred to in Section 2, the Educators
Application complied and will comply in all material respects with
the applicable provisions of PA Insurance Law and the regulations
promulgated thereunder.
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(iv) The Company has filed with the
Department Educators’ application for approval of its merger
with EHC (the “PA Merger Application”) on the
appropriate form of application promulgated under the insurance
company merger provisions of the PA Insurance Law and the
regulations promulgated thereunder. Educators has received written
notice from the Department of its approval of the Merger with EHC,
such approval remains in full force and effect and no order has
been issued by the Department suspending or revoking such approval
and no proceedings therefor have been initiated or, to the
knowledge of the Company or Educators, threatened by the
Department. At the date of such approval and at the Closing Time
referred to in Section 2, the PA Merger Application complied
and will comply in all material respects with the applicable
provisions of the PA Insurance Law and the regulations promulgated
thereunder.
(v) At the time of their use, the
Proxy Statement and any other proxy solicitation materials will
comply in all material respects with the applicable provisions of
the Conversion Act and will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company and
Educators will promptly file the Prospectus and any supplemental
sales literature with the Commission and the Department. The
Prospectus and all supplemental sales literature, as of the date
the Registration Statement became effective and at the Closing Time
referred to in Section 2, will have received all required
authorizations for use in final form. The Prospectus and all
supplemental sales literature, as of the date the Registration
Statement became effective and at the Closing Time referred to in
Section 2, complied and will comply in all material respects
with the applicable requirements of the Conversion Act and, at or
prior to the time of their first use, will have received all
required authorizations of the Department for use in final
form.
(vi) Neither the Commission nor the
Department has, by order or otherwise, prevented or suspended the
use of the Prospectus or any supplemental sales literature
authorized by the Company or Educators for use in connection with
the Offerings and no action by or before any such governmental
entity to prevent or suspend the use of the Proxy Statement, the
Prospectus or any supplemental sales literature is pending, or to
the best knowledge of the Company and Educators,
threatened.
(vii) At the Closing Time referred
to in Section 2, the Company and Educators will have completed
the conditions precedent to the Conversion in accordance with the
Plan, the Conversion Act and all other applicable laws,
regulations, decisions and orders, including all material terms,
conditions, requirements and provisions precedent to the Conversion
imposed upon the Company or Educators by any regulatory authority,
other than those which the regulatory authority permits to be
completed after the Conversion.
(viii) At the Closing Time, the
Company, Educators and EHC will have satisfied all their respective
conditions precedent to the Merger in accordance with the Merger
Agreement (other than the delivery of the exchange shares), and all
applicable laws, regulations, decisions and orders, including all
material terms,
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conditions, requirements and
provisions precedent to the Merger imposed upon the Company,
Educators or EHC by the Department or any other regulatory
authority, other than those which the regulatory authority permits
to be completed after the effective time of the Merger (the
“Effective Time”).
(ix) Feldman Financial Advisors,
Inc. (“Feldman”), which prepared the valuation of
Educators as part of the Conversion, has advised the Company and
Educators in writing that it believes it is independent of
Educators. Educators believes that Feldman is a “qualified
expert” within the meaning of the Conversion Act.
(x) The accountants who certified
the consolidated financial statements and supporting schedules of
Educators included in the Registration Statement have advised the
Company and Educators in writing that they are independent public
accountants within the meaning of the Code of Ethics of the
American Institute of Certified Public Accountants (the
“AICPA”), and such accountants are, with respect to the
Company and Educators, independent certified public accountants as
required by the Securities Act and the Securities Act Regulations
and such accountants are not in violation of the auditors
independence requirements of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”). The accountants who certified
the consolidated financial statements and supporting schedules of
EHC included in the Registration Statement have advised the Company
and EHC in writing that they are independent public accountants
within the meaning of the Code of Ethics of the AICPA, and such
accountants are, with respect to the Company and each of the EHC
Companies, independent certified public accountants as required by
the Securities Act and the Securities Act Regulations and such
accountants are not in violation of the auditors independence
requirements of the Sarbanes-Oxley Act of 2002.
(xi) Educators does not, directly or
indirectly, control any other corporation, limited liability
company, partnership, joint venture, association, trust or other
business organization. Upon consummation of the Reorganization,
Educators and the EHC Companies will be the only subsidiaries of
the Company.
(xii) The consolidated financial
statements and the related notes thereto included in the
Registration Statements and the Prospectuses present fairly the
financial position of each of (i) the Company and Educators
and (ii) the EHC Companies at the respective dates indicated
and the results of operations, retained earnings, equity and cash
flows for the periods specified, and comply as to form in all
material respects with the applicable accounting requirements of
the Securities Act Regulations; except as otherwise stated in the
Registration Statements, said financial statements have been
prepared in conformity with accounting principles generally
accepted in the United States applied on a consistent basis and are
consistent with financial statements and other reports filed by
Educators and EHC with the Department; and the supporting schedules
and tables included in the Registration Statements present fairly
the information required to be stated therein. The other financial,
statistical and pro forma information and related notes included in
the Prospectuses present fairly the information shown therein on a
basis consistent with the audited and unaudited financial
statements included in the Prospectuses, and as to the pro forma
adjustments, the
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adjustments made therein have been
consistently applied on the basis described therein. The
capitalization, liabilities, assets, properties and business of
each of the Company, Educators and EHC conform in all material
respects to the descriptions contained in the Prospectuses and,
neither the Company, Educators nor EHC has any material liabilities
of any kind, contingent or otherwise, except as disclosed in the
Registration Statements or the Prospectuses.
(xiii) Since the respective dates as
of which information is given in the Registration Statements and
the Prospectuses, except as otherwise stated therein (A) there
has been no material adverse change in the financial condition,
results of operations, business affairs or prospects of the Company
and Educators, considered as one enterprise, or of the EHC
Companies, considered as one enterprise, whether or not arising in
the ordinary course of business, consistent with past practice,
(B) except for transactions specifically referred to or
contemplated in the Prospectus, there have been no transactions
entered into by the Company and Educators, other than those in the
ordinary course of business consistent with past practice, which
are material with respect to the Company and Educators, considered
as one enterprise, and (C) except for transactions
specifically referred to or contemplated in the Prospectuses, there
have been no transactions entered into by any of the EHC Companies,
other than those in the ordinary course of business, which are
material with respect to the EHC Companies, considered as one
enterprise.
(xiv) The Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the Commonwealth of Pennsylvania, with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under
this Agreement; the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify in any other
jurisdiction would not have a material adverse effect on the
financial condition, results of operations or business affairs or
prospects of the Company and Educators, considered as one
enterprise, on the one hand, or the financial condition, results of
operations or business affairs of the EHC Companies, considered as
one enterprise, on the other hand.
(xv) Educators is a Pennsylvania
chartered mutual life insurance company, and, upon consummation of
the Conversion, will be a Pennsylvania chartered life insurance
company in stock form, in both instances with full corporate power
and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectuses; each of the
Company and Educators has obtained all licenses, permits and other
governmental authorizations (including, without limitation, from
the insurance regulatory agencies of the various jurisdictions
where it conducts business) currently required for the conduct of
their respective businesses or required for the conduct of their
respective businesses as contemplated by the Prospectuses and,
except where the failure to obtain such licenses, permits or other
governmental authorizations would not have a material adverse
effect on the financial condition, results of operations, business
affairs or prospects of the Company and Educators, considered
as
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one enterprise; all such licenses,
permits and other governmental authorizations are in full force and
effect and the Company and Educators are in all material respects
in compliance therewith; neither the Company nor Educators has
received notice of any proceeding or action relating to the
revocation or modification of any such license, permit or other
governmental authorization which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the financial condition, results
of operations, business affairs or prospects of the Company and
Educators, considered as one enterprise; and Educators is validly
existing and in good standing under the laws of Pennsylvania and is
qualified as a foreign corporation in any jurisdiction in which the
failure to so qualify would have a material adverse effect on the
financial condition, results of operations, business affairs or
prospects of the Company and the Educators, considered as one
enterprise.
(xvi) EHC is a Cayman Islands
holding company with full corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectuses; each of the EHC Companies has
obtained all licenses, permits and other governmental
authorizations (including, as applicable, from the insurance
regulatory agencies of the various jurisdictions where it conducts
insurance business) currently required for the conduct of their
respective businesses or required for the conduct of their
respective businesses as contemplated by the Prospectuses and,
except where the failure to obtain such licenses, permits or other
governmental authorizations would not have a material adverse
effect on the financial condition, results of operations, business
affairs or prospects of the EHC Companies, considered as one
enterprise; all such licenses, permits and other governmental
authorizations are in full force and effect and the EHC Companies
are in all material respects in compliance therewith; none of the
EHC Companies has received notice of any proceeding or action
relating to the revocation or modification of any such license,
permit or other governmental authorization which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a material adverse effect on the financial
condition, results of operations, business affairs or prospects of
the EHC Companies, considered as one enterprise; and each of the
EHC Companies is qualified as a foreign corporation in any
jurisdiction in which the failure to so qualify would have a
material adverse effect on the financial condition, results of
operations, business affairs or prospects of the EHC Companies,
considered as one enterprise.
(xvii) Except as disclosed in the
Prospectuses, the authority of Educators or any of the EHC
Companies that are insurance companies to write the classes and
lines of insurance authorized by such licenses, certificates,
permits and other authorizations as described in the Prospectuses
is unrestricted and neither Educators nor any of such EHC Companies
is a party to any agreement, formal or informal, with any
regulatory official or other person limiting the ability of such
company from making full use of the licenses, certificates, permits
and other authorizations issued to it or requiring any such company
to comply with regulatory standards or procedures or requirements
different from those applicable to companies with comparable or
similar licenses, certificates, permits and other
authorizations.
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(xviii) Each of the Company,
Educators and the EHC Companies conducts its business in compliance
in all material respects with applicable federal, state, local and
foreign laws and regulations (including, without limitation, all
regulation, directive and orders of the Department or any other
regulatory authority), except where the failure to be in compliance
would not have a material adverse effect on the financial
condition, results of operations or business affairs of the Company
and Educators, considered as one enterprise, or of the EHC
Companies, considered as one enterprise.
(xix) Upon consummation of the
Conversion and the Merger and issuance of the Merger Shares, the
authorized, issued and outstanding capital stock of the Company
will be within the ranges set forth in the Prospectus under
“Capitalization” (except for subsequent issuances, if
any, pursuant to reservations, agreements or employee benefit plans
referred to in the Prospectus); no shares of Common Stock have been
or will be issued and outstanding prior to the Closing Time
referred to in Section 2; at the time of Conversion, the
Securities will have been duly authorized for issuance and, when
issued and delivered by the Company pursuant to the Plan against
payment of the consideration calculated as set forth in the Plan
and stated on the cover page of the Prospectus, will be duly and
validly issued and fully paid and non-assessable; at the time of
Merger, the Merger Shares will have been duly authorized for
issuance and, when issued and delivered by the Company pursuant to
the Merger Agreement against payment of the consideration
calculated as set forth in the Merger Agreement, will be duly and
validly issued and fully paid and non-assessable; the terms and
provisions of the Common Stock and the capital stock of the Company
conform to all statements relating thereto contained in the
Prospectuses; the certificates representing the shares of Common
Stock conform to the requirements of applicable law and
regulations; and the issuance of the Securities and the Merger
Shares is not subject to preemptive or other similar rights. There
are no options, agreements, contracts or other rights in existence
to acquire from the Company any shares of Common Stock, except as
set forth in the Prospectus.
(xx) Upon consummation of the
Conversion, the authorized capital stock of Educators will be
150,000 shares of common stock, par value $10.00 per share (the
“Educators Common Stock”), and no shares of Educators
Common Stock have been or will be issued prior to the Closing time
referred to in Section 2. The shares of Educators Common Stock
to be issued to the Company will have been duly authorized for
issuance and, when issued and delivered by Educators pursuant to
the Plan against payment of the consideration calculated as set
forth in the Plan and as described in the Prospectus, will be duly
and validly issued and fully paid and nonassessable, and all such
Educators Common Stock will be owned beneficially and of record by
the Company free and clear of any security interest, mortgage,
pledge, lien, encumbrance or legal or equitable claim; the
certificates representing the shares of Educators Common Stock will
conform with the requirements of applicable laws and regulations;
and the issuance of Educators Common Stock is not subject to
preemptive or similar rights. Upon consummation of the transactions
contemplated by the Merger Agreement, there will be no issued and
outstanding shares of capital stock of EHC and the separate
corporate existence of EHC shall have ceased.
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(xxi) Upon completion of the
Reorganization, the issuance of the Securities and the Merger
Shares will be in compliance with all conditions imposed upon the
Company under the terms of their written approval or notice of
intention not to object, as applicable, of the Conversion
Application, the Educators Application and the PA Merger
Application (collectively, the “Reorganization
Applications”).
(xxii) The Company and Educators
have the corporate power to enter into and to perform this
Agreement and have taken all corporate action necessary for them to
execute, deliver and perform this Agreement, and this Agreement has
been duly executed and delivered by, and is the valid and binding
agreement of, the Company and Educators, enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency
or other laws affecting the enforceability of the rights of
creditors generally and judicial limitations on the right of
specific performance and except as the enforceability of
indemnification and contribution provisions may be limited by
applicable securities laws.
(xxiii) Subsequent to the respective
dates as of which information is given in the Registration
Statements and the Prospectuses and prior to the Closing Time,
except as otherwise may be indicated or contemplated therein, none
of the Company, Educators or any of the EHC Companies will have
(A) issued any securities or incurred any liability or
obligation, direct or contingent, or borrowed money, except
liabilities, obligations and borrowings in the ordinary course of
business consistent with past practices or as indicated in the
Prospectuses, or (B) entered into any transaction or series of
transactions which is material in light of the business of the
Company and Educators, considered as one enterprise, on the one
hand, or in light of the business of EHC and its subsidiaries,
considered as one enterprise, on the other hand.
(xxiv) No approval of any regulatory
or supervisory or other public authority is required in connection
with the execution and delivery of this Agreement or the issuance
of the Securities and the Merger Shares that has not been obtained
and a copy of which has been delivered to the Agent, except as may
be required under the “blue sky” or state securities
laws of various jurisdictions.
(xxv) None of the Company,
Educators, nor any of the EHC Companies is in violation of its
certificate of incorporation, organization certificate, articles of
incorporation or charter, as the case may be, or bylaws (and
Educators will not be in violation of its charter or bylaws upon
consummation of the Conversion); and none of the Company,
Educators, nor any of the EHC Companies is in default (nor has any
event occurred which, with notice or lapse of time or both, would
constitute a default) in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Company, Educators, or any of the EHC
Companies is a party or by which it or any of them may be bound, or
to which any of the property or assets of the Company, Educators,
or any of the EHC Companies is subject, except for such defaults
that would not, individually or in the aggregate, have a material
adverse effect on the financial condition, results of operations or
business of the Company and Educators, considered as one
enterprise, on the one hand, or the financial condition, results
of
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operations, business affairs or
prospects of the EHC Companies, considered as one enterprise, on
the other hand; and there are no contracts or documents of the
Company or Educators which are required to be filed as exhibits to
the Registration Statements or the Conversion Application which
have not been so filed.
(xxvi) The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated herein do not and will not conflict with
or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or Educators pursuant to any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Company or Educators is a party or by which
either of them may be bound, or to which any of the property or
assets of the Company or Educators is subject, except for such
defaults that would not, individually or in the aggregate, have a
material adverse effect on the financial condition, results of
operations or business affairs of the Company and Educators,
considered as one enterprise; nor will such action result in any
violation of the provisions of certificate of incorporation,
organization certificate, articles of incorporation or charter or
by-laws of the Company or Educators, or any applicable law,
administrative regulation or administrative or court
decree.
(xxvii) No labor dispute with the
employees of the Company, Educators or of any of the EHC Companies
exists or, to the knowledge of the Company or Educators, is
imminent or threatened; and the Company and Educators are not aware
of any existing or threatened labor disturbance by the employees of
any of Educators or any of the EHC Companies principal suppliers or
contractors which might be expected to result in any material
adverse change in the financial condition, results of operations or
business affairs of the Company and Educators, considered as one
enterprise, or of the EHC Companies, considered as one
enterprise.
(xxviii) Each of the Company and
Educators has good and marketable title to all properties and
assets for which ownership is material to the business of the
Company or Educators and to those properties and assets described
in the Prospectus as owned by them, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described
in the Prospectus or are not material in relation to the business
of the Company and Educators, considered as one enterprise; and all
of the leases and subleases material to the business of the Company
or Educators under which the Company or Educators hold properties,
including those described in the Prospectuses, are valid and
binding agreements of the Company and Educators, in full force and
effect, enforceable in accordance with their terms.
(xxix) Each of the EHC Companies has
good and marketable title to all properties and assets for which
ownership is material to their respective businesses and to those
properties and assets described in the Prospectus as owned by them,
free and clear of all liens, charges, encumbrances or restrictions,
except such as are described in the Prospectuses or are not
material in relation to their respective businesses, considered as
one enterprise; and all of the leases and subleases material to the
business of the EHC Companies under which any of the EHC Companies
hold properties,
11
including those described in the
Prospectuses, are valid and binding agreements of the EHC
Companies, in full force and effect, enforceable in accordance with
their terms.
(xxx) Neither the Company, Educators
nor any of the EHC Companies is in violation of any directive from
the Department or any other regulatory authority to make any
material change in the method of conducting their respective
businesses.
(xxxi) Except as disclosed in the
Prospectus, there is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Company or Educators,
threatened, against or affecting the Company, Educators or any of
the EHC Companies which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might result in any material adverse change in the financial
condition, results of operations or business affairs of the Company
and Educators, considered as one enterprise, or of the EHC
Companies, considered as one enterprise, which might materially and
adversely affect the properties or assets thereof or which might
materially and adversely affect the consummation of the Conversion,
the Merger or the performance of this Agreement; and all pending
legal or governmental proceedings to which the Company or Educators
is a party or of which any of their respective property or assets
is the subject which are not described in the Registration
Statements, including ordinary routine litigation incidental to the
business, are considered in the aggregate not material.
(xxxii) The Company has obtained an
opinion of its counsel, Stevens and Lee, with respect to the
legality of the Securities and the Merger Shares to be issued, a
copy of which is filed as an exhibit to the Registration Statement.
The Company has obtained from the Internal Revenue Service a
private letter ruling (the “PLR”), concerning the
material tax effects of the Conversion and the Subscription
Offering to Educators, Eligible Policyholders, and certain other
participants in the Subscription Offering. All material aspects of
the aforesaid opinion and PLR are accurately summarized in the
Prospectuses; the facts and representations upon which such opinion
and PLR are based are truthful, accurate and complete in all
material respects; and neither Educators nor the Company has taken
or will take any action inconsistent therewith.
(xxxiii) The Company is not, and
upon completion of the Conversion, the Merger and the Offerings and
sale of the Common Stock and the application of the net proceeds
therefrom, will not be, required to be registered under the
Investment Company Act of 1940, as amended.
(xxxiv) To the knowledge of the
Company and Educators, with the exception of the intended loan to
Educators’ ESOP by the Company to enable the ESOP to purchase
shares of Common Stock in an amount of up to 10% of the Common
Stock issued in the Conversion, none of the Company, Educators or
employees of Educators has made any payment of funds of the Company
or Educators as a loan for the purchase of the Common Stock or made
any other payment of funds prohibited by law, and no funds have
been set aside to be used for any payment prohibited by
law.
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(xxxv) Neither the Company,
Educators nor any of the EHC Companies nor any properties owned or
operated by any such company is in violation of or liable under any
Environmental Law (as defined below), except for such violations or
liabilities that, individually or in the aggregate, would not have
a material adverse effect on the financial condition, results of
operations or business affairs of the Company and Educators,
considered as one enterprise, or of any of the EHC Companies,
considered as one enterprise. There are no actions, suits or
proceedings, or demands, claims, notices or investigations
(including, without limitation, notices, demand letters or requests
for information from any environmental agency) instituted or
pending, or to the knowledge of the Company or Educators
threatened, relating to the liability of any property owned or
operated by the Company, Educators or any of the EHC Companies
under any Environmental Law. For purposes of this subsection, the
term “Environmental Law” means any federal, state,
local or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any regulatory authority
relating to (i) the protection, preservation or restoration of
the environment (including, without limitation, air, water, vapor,
surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural
resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive
or dangerous, or otherwise regulated, whether by type or by
quantity, including any material containing any such substance as a
component.
(xxxvi) The Company, Educators and
each of the EHC Companies has filed all federal income and state
and local franchise tax returns required to be filed and have made
timely payments of all taxes shown as due and payable in respect of
such returns, and no deficiency has been asserted with respect
thereto by any taxing authority.
(xxxvii) The Company has received
approval, subject to completion of the Conversion, to have the
Securities quoted on the National Market Tier of the Nasdaq Stock
Market (“Nasdaq Stock Market”) effective as of the
Closing Time referred to in Section 2 hereof.
(xxxviii) The Company has filed a
registration statement on Form 8-A to register the Common Stock
under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and has requested that
such registration statement be effective concurrent with the
effectiveness of the Registration Statement.
(xxxix) There is no contract or
other document of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement or the Conversion Application
which is not described or filed as required.
(xl) The Company, Educators and each
of the EHC Companies maintain a system of internal accounting
controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with
management’s
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general or specific authorizations,
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets, (iii) access to cash and other liquid assets is
permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded ledger assets
are compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
(xli) Except as described in the
Prospectuses, (i) there are no contractual encumbrances or
contractual restrictions on the ability of the Company to pay
dividends or make any other distributions on the Company’s
capital stock and (ii) none of Educators or any of the EHC
Companies are prohibited or restricted, directly or indirectly,
from paying dividends to the Company, or from making any other
distribution with respect to any of their respective capital stock
or from repaying to the Company any amounts which may from time to
time become due under any loans or advances made by the Company, or
from transferring any of their respective property or assets to the
Company or otherwise.
(xlii) To the knowledge of the
Company, there are no affiliations or associations (as such terms
are defined by the National Association of Securities Dealers, Inc.
(“NASD”)) between any member of the NASD and any of the
Company’s officers or directors.
(xliii) The Company and Educators
carry, or are covered by, insurance in such amounts and covering
such risks as is adequate for the conduct of their respective
businesses and the value for their respective properties as is
customary for companies engaged in similar industries.
(xliv) The Company, Educators and
each of the EHC Companies are in compliance in all material
respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder
(“ERISA”); no “reportable event” (as
defined in ERISA) has occurred with respect to any “pension
plan” (as defined in ERISA) for which the Company, Educators
or any of the EHC Companies would have any liability; each of the
Company, Educators and each of the EHC Companies has not incurred
and does not expect to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any
“pension plan” or (ii) Sections 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the
“Code”); and each “pension plan” for which
the Company, Educators or any of the EHC Companies would have any
liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure
to act, which would cause the loss of such
qualification.
(xlv) To the knowledge of the
Company, there are no actions, suits, proceedings or investigations
of any nature pending or threatened that challenge the validity or
legality of the transactions contemplated by the Merger Agreement
that seek or threaten to restrain, enjoin or prohibit (or obtain
substantial damages in connection with) the consummation of such
transactions.
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(xlvi) The Merger Agreement has been
duly authorized, executed and delivered by each of Educators and
the Company, and the Merger Agreement constitutes the valid and
binding obligation of each of Educators and the Company enforceable
in accordance with its terms subject to applicable bankruptcy,
insolvency and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general
principles of equity, whether applied in a court of law or a court
of equity. Other than approval by EHC’s shareholders, no
further corporate, shareholder or regulatory approval is required
in order to consummate the Merger pursuant to the Merger
Agreement.
(b) Any certificate signed by any
officer of the Company or Educators and delivered to either of the
Agent or to counsel for the Agent shall be deemed a representation
and warranty by the Company or Educators to the Agent as to the
matters covered thereby.
SECTION 2. A PPOINTMENT OF KBW; S ALE AND D ELIVERY OF THE S ECURITIES ; C LOSING .
On the basis of the representations
and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby appoints KBW as its
Agent to consult with and advise the Company, and to assist the
Company with the solicitation of subscriptions and purchase orders
for Securities, in connection with the Company’s sale of
Common Stock in the Subscription and Community Offering and the
Syndicated Community Offering. On the basis of the representations
and warranties herein contained, and subject to the terms and
conditions herein set forth, KBW accepts such appointment and
agrees to use its best efforts to assist the Company with the
solicitation of subscriptions and purchase orders for Securities in
accordance with this Agreement; provided, however , that the
Agent shall not be obligated to take any action which is
inconsistent with any applicable laws or regulations, or decisions
or orders of any governmental department, private or public
arbitral tribunal, court, governmental commission, governmental
agency or other governmental entity or authority. The services to
be rendered by KBW pursuant to this appointment include the
following: (i) consulting as to the securities marketing
implications of any aspect of the Plan or related corporate
documents; (ii) reviewing with the Board of Directors the
independent appraiser’s appraisal of the Common Stock;
(iii) reviewing all offering documents, including the
Prospectus, stock order form and related offering materials (it
being understood that such documents are the sole responsibility of
the Company and Educators); (iv) assisting in the design and
implementation of a marketing strategy for the Offerings;
(v) assisting the Company and Educators in obtaining all
requisite regulatory approvals; (vi) assisting management in
preparing for meetings with potential investors and broker-dealers;
and (vii) providing such other general advice and assistance
as may be requested to promote the successful completion of the
Offerings.
The appointment of the Agent
hereunder shall terminate upon the earlier to occur of
(a) forty-five (45) days after the last day of the
Subscription and Community Offering, unless the Company and the
Agent agree in writing to extend such period, or (b) the
receipt and acceptance of subscriptions and purchase orders for all
of the Securities, or (c) the completion of the Syndicated
Community Offering.
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If any of the Securities remain
available after the expiration of the Subscription and Community
Offering, at the request of the Company and Educators, KBW will
seek to form a syndicate of registered brokers or dealers
(“Selected Dealers”) to assist in the solicitation of
purchase orders of such Securities on a best efforts basis, subject
to the terms and conditions set forth in a selected dealers’
agreement (the “Selected Dealers’ Agreement”),
substantially in the form set forth in Exhibit A to this Agreement.
KBW will be paid a fee not to exceed 5.5% of the aggregate Purchase
Price of the shares of Common Stock sold by them. From this fee,
KBW will pass onto selected broker-dealers, who assist in the
syndicated community offering, an amount competitive with gross
underwriting discounts charged at such time for comparable amounts
of stock sold at a comparable price per share in a
