Regulations”).  The Company has prepared and filed such amendments thereto, if any, and such amended preliminary prospectuses, if any, as may have been required to the date hereof, and will file such additional amendments thereto and such amended prospectuses as may hereafter be required.  The registration statement has been declared effective under the Securities Act by the Commission.  The registration statement as amended at the time it became effective (including all information deemed (whether by incorporation by reference or otherwise) to be a part of the registration statement at the time it became effective pursuant to Rule 430A(b) of the Securities Act Regulations) is hereinafter called the “Registration Statement,” except that, if the Company files a post-effective amendment to such registration statement which becomes effective prior to the Closing Time (as defined below), “Registration Statement” shall refer to such registration statement as so amended.  Any registration statement filed pursuant to Rule 462(b) of the Securities Act Regulations is hereinafter called the “Rule 462(b) Registration Statement,” and after such filing the term “Registration Statement” shall include the 462(b) Registration Statement.  The preliminary prospectus dated [              ], 2006 relating to the Shares, as filed with the Commission and as amended and supplemented prior to the date of the Prospectus, is hereinafter called the “Preliminary Prospectus.”  The term “‘Prospectus” means the final prospectus, as first filed with the Commission pursuant to Rule 424(b) of the Securities Act Regulations, and any amendments thereof or supplements thereto.  The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus.

The term “Disclosure Package” means (i) the Preliminary Prospectus, as most recently amended or supplemented immediately prior to the Initial Sale Time (as defined herein), (ii) the Issuer Free Writing Prospectuses (as defined below), if any, identified in Schedule III hereto, and (iii) any other Free Writing Prospectus (as defined below) that the parties hereto shall hereafter expressly agree to treat as part of the Disclosure Package.

The term “Issuer Free Writing Prospectus” means any issuer free writing prospectus, as defined in Rule 433 of the Securities Act Regulations.  The term “Free Writing Prospectus” means any free writing prospectus, as defined in Rule 405 of the Securities Act Regulations.

Each Selling Stockholder has executed and delivered a Custody Agreement and a Power of Attorney in the form attached hereto as Exhibit A (collectively, the “Custody Agreement and Power of Attorney”) pursuant to which each Selling Stockholder party thereto has placed the Initial Shares, if any, and Option Shares to be sold by it pursuant to this Agreement in custody and appointed the persons designated therein as a committee (the “Committee”) with the authority to execute and deliver this Agreement on behalf of such Selling Stockholder and to take certain other actions with respect thereto and hereto.

The Company, each of the Selling Stockholders and the Underwriters agree as follows:

 

 

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1.             Sale and Purchase :

(a)           Initial Shares.  Upon the basis of the warranties and representations and other terms and conditions herein set forth, at the purchase price per share of $[             ], the Company agrees to sell to the Underwriters the number of Initial Shares set forth in Schedule I opposite its name and each Selling Stockholder agrees to sell to the Underwriters the number of Initial Shares, if any, set forth in Schedule I opposite such Selling Stockholder’s name, and each Underwriter agrees, severally and not jointly, to purchase from the Company and such Selling Stockholders the number of Initial Shares set forth in Schedule II opposite such Underwriter’s name, plus any additional number of Initial Shares which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof, subject in each case to such adjustments among the Underwriters as the Representative in its sole discretion shall make to eliminate any sales or purchases of fractional shares.

(b)           Option Shares .  In addition, upon the basis of the warranties and representations and other terms and conditions herein set forth, at the purchase price per share set forth in paragraph (a), each Selling Stockholder named in Schedule I hereto, severally and not jointly, hereby grants an option to the Underwriters, acting severally and not jointly, to purchase from such Selling Stockholder all or any part of that number of Option Shares set forth opposite such Selling Stockholder’s name on Schedule I hereto.  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 that may be made in connection with the offering and distribution of the Initial Shares, upon notice by the Representative to the Company and the Committee setting forth the number of Option Shares as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Shares.  Any such time and date of delivery shall be determined by the Representative, but shall not be later than three full business days (or earlier than two full business days, without the consent of the Company) after the exercise of such option, nor in any event prior to the Closing Time, as hereinafter defined.  If the option is exercised as to all or any portion of the Option Shares, (i) with respect to the first [          ] Option Shares purchased, Fred R. Lowe will sell such Option Shares and (ii) with respect to the purchase of the remaining Option Shares, each Selling Stockholder other than Fred R. Lowe will sell that proportion of the total number of such remaining Option Shares then being purchased which the number of Option Shares set forth in Schedule I opposite the name of such Selling Stockholder bears to the total number of such remaining Option Shares, and each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Shares then being purchased that the number of Initial Shares set forth in Schedule II opposite the name of such Underwriter bears to the total number of Initial Shares, plus any additional number of Option Shares which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof, subject in each case to such adjustments among the Underwriters as the Representative in its sole discretion shall make to eliminate any sales or purchases of fractional shares.

2.             Payment and Delivery

(a)           Initial Shares .  The Shares to be purchased by each Underwriter hereunder shall be delivered by or on behalf of the Company and the Selling Stockholders that Schedule I indicates are selling Initial Shares to the Representative, including, at the option of the Representative, through the facilities of The

 

 

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Depository Trust Company (“DTC”) for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified to the Representative by the Company and each of the Selling Stockholders, upon at least forty-eight hours’ prior written notice.  The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on the third (fourth, if pricing occurs after 4:30 p.m., New York City time) business day after the date hereof (unless another time and date shall be agreed to by the Representative and the Company).  The time at which such payment and delivery are actually made is hereinafter sometimes called the “Closing Time.”  The closing shall take place at the offices of LeBoeuf, Lamb, Greene & MacRae LLP, 125 West 55 ^th Street, New York, New York 10019, or such other place as the Company and the Representative may agree.

(b)           Option Shares .  Any Option Shares to be purchased by each Underwriter hereunder shall be delivered by or on behalf of the relevant Selling Stockholders to the Representative, including, at the option of the Representative, through the facilities of DTC for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified to the Representative by each of such Selling Stockholders, upon at least forty-eight hours’ prior written notice.  The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on the date specified by the Representative in the notice given by the Representative to the Company of the Underwriters’ election to purchase such Option Shares or on such other time and date as the Company and the Representative may agree upon in writing (each such date and time, an “Option Closing Time”).

(c)           Manner of Delivery.   Unless the Representative requests otherwise, the Initial Shares and the Option Shares shall be delivered in global form and shall be deposited with, or on behalf of, DTC and registered in the name of DTC’s nominee.  If, at the request of the Representative, the Initial Shares or the Option Shares are delivered in definitive form, certificates for such Shares shall be registered in such names and in such denominations as the Representative shall request upon at least forty-eight hours’ prior written notice to the Company preceding the Closing Time or the Option Closing Time, as the case may be.  The Company will cause the certificates representing the Initial Shares and the Option Shares to be made available for checking and packaging at least twenty-four hours prior to the Closing Time or the relevant Option Closing Time at the office of Friedman, Billings, Ramsey & Co., Inc., 1001 19 ^th Street North, Arlington, Virginia 22209, or at the office of DTC or its designated custodian, as the case may be (the “Designated Office”).

(d)           Directed Shares.   It is understood that approximately [                       ] shares of the Initial Shares (the “Directed Shares”) will be reserved by the Underwriters for offer and sale to employees and persons having business relationships with the Company (the “Directed Share Participants”) upon the terms and conditions set forth in both the Prospectus and the Disclosure Package and in accordance with the rules and regulations of the National Association of Securities Dealers, Inc. (the “NASD”) (the “Directed Share Program”).  Under no circumstances will the Representative or any Underwriter be liable to the Company or to any Directed Share Participant for any action taken or omitted to be taken in good faith in

 

 

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connection with such Directed Share Program.  To the extent that any Directed Shares are not affirmatively reconfirmed for purchase by any Directed Share Participant on or immediately after the date of this Agreement, such Directed Shares may be offered to the public as part of the public offering contemplated herein.

3.             Representations and Warranties of the Company :

The Company represents and warrants to the Underwriters, as of the date hereof, as of the Initial Sale Time (as defined below), as of the Closing Time and as of any Option Closing Time, if applicable, that:

(a)           Authorized Capital.   Upon the effectiveness of the Amended and Restated Certificate of Incorporation of the Company, the Company will have an authorized capitalization as set forth in both the Prospectus and the Disclosure Package; and as of the Closing Time and any Option Closing Time, the Company will have the authorized capital as set forth in both the Prospectus and the Disclosure Package.  The outstanding shares of capital stock of the Company and each subsidiary of the Company, other than the subsidiaries set forth on Schedule IV hereto (each, a “Subsidiary”) have been duly and validly authorized and issued and are fully paid and non-assessable, and all of the outstanding shares of capital stock of the Subsidiaries, except as disclosed in both the Prospectus and the Disclosure Package, are directly or indirectly owned of record and beneficially by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or charges; except as disclosed in both the Prospectus and the Disclosure Package, there are no outstanding (i) securities or obligations of the Company or any of the Subsidiaries convertible into or exchangeable for any capital stock of the Company or any such Subsidiary, (ii) warrants, rights or options to subscribe for or purchase from the Company or any such Subsidiary any such capital stock or any such convertible or exchangeable securities or obligations, or (iii) obligations of the Company or any such Subsidiary to issue any shares of capital stock, any such convertible or exchangeable securities or obligations, or any such warrants, rights or options, including under stock option and stock purchase plans.  None of the shares of issued and outstanding capital stock of the Company have been issued in violation of any preemptive or other similar rights of any stockholder of the Company.  The authorized capital stock of the Company, including the Shares, conforms in all material respects to the description thereof in each of the Registration Statement, the Prospectus and the Disclosure Package.

(b)           Good Standing of the Company.   The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in each of the Prospectus and the Disclosure Package and to execute and deliver this Agreement and to consummate the transactions contemplated herein; and the Company is duly qualified or licensed as a foreign corporation to transact business and is in good standing in each jurisdiction in which it conducts its business or in which it owns or leases real property or otherwise maintains an office and in which the failure to be so qualified or licensed would reasonably be expected to have, individually or in the aggregate,

 

 

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a material adverse effect on the ability of the Company to perform its obligations hereunder or to consummate the transactions contemplated hereby or on the assets, business, prospects, operations, earnings, properties or condition (financial or otherwise) of the Company and the Subsidiaries taken as a whole (any such effect or change, where the context so requires, is hereinafter called a “Material Adverse Effect” or “Material Adverse Change”).  Other than as disclosed in the Prospectus and the Disclosure Package, the Company does not own, directly or indirectly, any capital stock or other equity securities of any other corporation or any material ownership interest in any partnership, joint venture or other association.

(c)           Good Standing of the Subsidiaries.   All of the Subsidiaries of the Company are named in Exhibit 21 to the Registration Statement.  Each of the Subsidiaries is duly organized and validly existing in good standing in its jurisdiction of incorporation or organization, duly qualified or licensed and is in good standing in each jurisdiction in which it conducts its businesses or in which it owns or leases real property or otherwise maintains an office and in which the failure, individually or in the aggregate, to be so qualified or licensed would not reasonably be expected to have a Material Adverse Effect; except as disclosed in both the Prospectus and the Disclosure Package, no Subsidiary is prohibited or restricted, directly or indirectly, from paying dividends to the Company, or from making any other distribution with respect to such Subsidiary’s capital stock or from repaying to the Company or any other Subsidiary any amounts that may from time to time become due under any loans or advances to such Subsidiary from the Company or such other Subsidiary, or from transferring any such Subsidiary’s property or assets to the Company or to any other Subsidiary.  The subsidiaries of the Company listed on Schedule IV attached hereto have no assets and do not conduct any operations.

(d)           Compliance with Applicable Laws.   The Company and the Subsidiaries have complied and are in compliance with all applicable federal, state and local laws, statutes, rules, regulations, ordinances, orders, decrees and judgments, including those relating to transactions with affiliates, except for such instances of non-compliance that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(e)           Absence of Defaults and Conflicts.   Neither the Company nor any Subsidiary is in breach of or in default (nor has any event occurred which with notice, lapse of time, or both would constitute a breach of or default) (x) under its respective organizational documents, or (y) in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, license, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any Subsidiary is a party or by which any of them or their respective properties is bound, except in the case of clause (y) for such breaches or defaults that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  The execution, delivery and performance of this Agreement, the consummation of the transactions contemplated herein and in the Prospectus and the Disclosure Package (including the issuance and sale of the Shares to be sold by the Company) and the compliance by the Company with its obligations hereunder do not and will not (A) conflict with, or result in any breach of, or constitute a default under (nor constitute any event which with notice, lapse of time, or both

 

 

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would constitute a breach of, or default under) (i) any provision of the organizational documents of the Company or any Subsidiary, or (ii) any provision of any contract, license, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any Subsidiary is a party or by which any of them or their respective properties or assets may be bound or affected, or (iii) any federal, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to the Company or any Subsidiary, except in the case of clauses (ii) and (iii) for such breaches or defaults that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; or (B) result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or asset of the Company or any Subsidiary.

(f)            Authorization of Agreement.   This Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding agreement of the Company enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, and by general equitable principles, and except to the extent that the indemnification and contribution provisions of Section 11 hereof may be limited by federal or state securities laws and public policy considerations in respect thereof.

(g)           Absence of Further Requirements.   No approval, authorization, consent or order, registration, qualification or decree of or filing with any court, federal, state or local governmental or regulatory commission, board, body, authority or agency is necessary or required to be obtained or made by the Company or any of its Subsidiaries in connection with the Company’s execution, delivery and performance of this Agreement, its consummation of the transactions contemplated herein, and its sale and delivery of the Shares, other than (A) such as have been obtained, or will have been obtained at the Closing Time or the relevant Option Closing Time, as the case may be, under the Securities Act, the Securities Act Regulations or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations thereunder (the “Exchange Act Regulations”), (B) such approvals as have been obtained in connection with the approval for the listing of the Shares on the Nasdaq National Market and (C) any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Shares are being offered by the Underwriters.

(h)           Possession of Licenses and Permits.   Each of the Company and the Subsidiaries has all necessary licenses, certificates, permits, orders, authorizations, consents and approvals from governmental authorities, including, without limitation, from the insurance regulatory agencies of the various jurisdictions where it conducts business (the “Permits”), and has made all necessary filings required under any federal, state or local law, regulation or rule and has obtained all necessary authorizations, consents and approvals from other persons, required in order to conduct their respective businesses as described in both the Prospectus and the Disclosure Package, except where the failure to hold any such Permit, or make any such filings required under any federal, state or local law, regulation or rule, or obtain any such authorizations, consents or approvals from other persons would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; each such Permit is valid and in full force and effect, except where the invalidity of such

 

 

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Permits or the failure of such Permits to be in full force and effect would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; neither the Company nor any of the Subsidiaries, other than those violations, defaults or revocations is in violation of, in default under, or has received any notice regarding or alleging a possible violation, default or revocation of any such Permit or any federal, state, local or foreign law, regulation or rule or any decree, order or judgment applicable to the Company or any of the Subsidiaries the effect of which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Change; except as disclosed in both the Prospectus and the Disclosure Package, the authority of each Subsidiary to write the classes and lines of insurance authorized by such Permit is unrestricted; except as disclosed in both the Prospectus and the Disclosure Package, (i) neither the Company nor any of the Subsidiaries is a party to any agreement, formal or informal, with any regulatory official or other person limiting the ability of the Company or any Subsidiary of the Company from making full use of the Permits issued to it and (ii) 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 Subsidiary to the Company.

(i)            Compliance with Registration Requirements.   The Registration Statement, including any Rule 462(b) Registration Statement, has become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are threatened by the Commission, and the Company has complied to the Commission’s satisfaction with any request on the part of the Commission for additional information.

The Preliminary Prospectus when filed and the Registration Statement, as of its effective date and as of the date hereof complied or will comply, and the Prospectus and any further amendments or supplements to the Preliminary Prospectus, Registration Statement and the Prospectus, when they have become effective or are filed with the Commission, as the case may be, will comply in all material respects with the requirements of the Securities Act and the Securities Act Regulations.  The Registration Statement did not, and any amendment thereto will not, in each case as of the applicable effective date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and the Preliminary Prospectus does not, and the Prospectus or any amendment or supplement thereto will not, as of the applicable filing date and at the Initial Sale Time, the Closing Time and each Option Closing Time, as applicable, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no warranty or representation with respect to any statement contained in or omitted from the Registration Statement, the Preliminary Prospectus or the Prospectus in reliance upon and in conformity with the information concerning (i) the Underwriters and furnished in writing by or on behalf of the Underwriters through the Representative to the Company expressly for use in the Registration Statement or the Prospectus (that information being limited to that

 

 

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described in the final sentence of the first paragraph of Section 11(c) hereof) or (ii) any Selling Stockholder and furnished in writing by or on behalf of such Selling Stockholder to the Company expressly for use in the Registration Statement, the Preliminary Prospectus or the Prospectus.

The Preliminary Prospectus, the Prospectus and any Issuer Free Writing Prospectuses (to the extent any such Issuer Free Writing Prospectus was required to be filed with the Commission) delivered to the Underwriters for use in connection with this offering have been and will be identical to the versions of such documents transmitted to the Commission for filing via the Electronic Data Gathering Analysis and Retrieval System (“EDGAR”), except to the extent permitted by Regulation S-T or Rule 424 of the Securities Act Regulations.

(j)            Initial Sale Time.   As of [       ] [am][pm] (Eastern time) [on the date of this Agreement] (the “Initial Sale Time”), the Disclosure Package did not, and at the time of each sale of Shares and at the Closing Time and each Option Closing Time, the Disclosure Package will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no warranty or representation with respect to any statement contained in or omitted from the Disclosure Package in reliance upon and in conformity with the information concerning (i) the Underwriters and furnished in writing by or on behalf of the Underwriters through the Representative to the Company expressly for use therein (that information being limited to that described in the last sentence of the first paragraph of Section 11(c) hereof) or (ii) any Selling Stockholder and furnished in writing by or on behalf of such Selling Stockholder to the Company expressly for use in the Registration Statement, the Preliminary Prospectus or the Prospectus.

(k)           Issuer Free Writing Prospectuses.   Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through completion of the public offer and sale of the Shares did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, including any document incorporated by reference therein that has not been superseded or modified. Except for the Issuer Free Writing Prospectuses identified in Schedule III hereto, and any electronic road show relating to the public offering of shares contemplated herein, the Company has not prepared, used or referred to, and will not, without the prior written consent of the Representative, prepare, use or refer to, any Issuer Free Writing Prospectus.

The Company filed the Registration Statement with the Commission before using any Issuer Free Writing Prospectus; and each Issuer Free Writing Prospectus was preceded or accompanied by the most recent Preliminary Prospectus satisfying the requirements of Section 10 under the Securities Act, which Preliminary Prospectus included an estimated price range.

 

 

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(l)            Free Writing Prospectuses.   The Company is eligible to use Free Writing Prospectuses in connection with this offering pursuant to Rules 164 and 433 under the Securities Act; any Free Writing Prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act Regulations has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the Securities Act Regulations; and each Free Writing Prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act Regulations or that was prepared by or on behalf of or used by the Company complies or will comply in all material respects with the requirements of the Securities Act and the Securities Act Regulations.

(m)          Absence of Proceedings.   Except as disclosed in both the Prospectus and the Disclosure Package, there are no actions, suits, proceedings, inquiries or investigations pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary or any of their respective officers and directors or to which the properties, assets or rights of any such entity are subject, at law or in equity, before or by any court, federal, state, local or foreign governmental or regulatory commission, board, body, authority, arbitral panel or agency, other than those that would not reasonably be expected to, individually or in the aggregate, result in a judgment, decree, award or order having a Material Adverse Effect.

(n)           Financial Statements.   The consolidated financial statements of the Company and its Subsidiaries, including the notes thereto, included in each of the Registration Statement, the Prospectus and the Disclosure Package present fairly in all material respects the consolidated financial position of the Company and its Subsidiaries as of the dates indicated and the consolidated results of operations and changes in financial position and cash flows of the Company and its Subsidiaries for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles as applied in the United States (“GAAP”) and on a consistent basis during the periods involved and in accordance with Regulation S-X, as promulgated by the Commission; the financial statement schedules included in the Registration Statement and the amounts in both the Prospectus and the Disclosure Package under the captions “Prospectus Summary - Summary Historical Consolidated Financial Data” and “Selected Historical Consolidated Financial Data” fairly present the information shown therein and have been compiled on a basis consistent with the financial statements included in each of the Registration Statement, the Prospectus and the Disclosure Package; no other financial statements or supporting schedules are required to be included in the Registration Statement, the Prospectus or the Disclosure Package.

(o)           Statutory Financial Statements.   The statutory financial statements of AmCOMP Preferred Insurance Company and AmCOMP Assurance Corporation from which certain ratios and other statistical data filed as part of the Registration Statement have been derived were prepared for each relevant period [in all material respects] in conformity with statutory accounting principles or practices required or permitted by the National Association of Insurance Commissioners and by the Florida Office of Insurance Regulation, and such statutory accounting practices have been applied on a consistent basis throughout the periods involved, except as may otherwise be indicated therein or in the notes thereto, and present

 

 

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fairly in all material respects the statutory financial position of the Subsidiaries as of the dates thereof, and the statutory basis results of operations of the Subsidiaries for the periods covered thereby.

(p)           Independent Accountants.   Deloitte & Touche LLP, whose reports on the consolidated financial statements of the Company and the Subsidiaries are filed with the Commission as part of each of the Registration Statement, the Prospectus and the Disclosure Package, are and were during the periods covered by their reports, independent public accountants as required by the Securities Act and the Securities Act Regulations, as amended by the Sarbanes-Oxley Act of 2002, including the rules and regulations promulgated by the Commission thereunder (the “Sarbanes-Oxley Act”), their appointment has been ratified by the Audit Committee of the Company’s Board of Directors and they are registered with the Public Company Accounting Oversight Board.

(q)           No Material Adverse Change in Business.   Subsequent to the respective dates as of which information is given in each of the Registration Statement, the Prospectus and the Disclosure Package, and except as may be otherwise stated in such documents, there has not been (i) any Material Adverse Change or any development that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Change, whether or not arising in the ordinary course of business, (ii) any event, transaction or agreement that is material to the Company and the Subsidiaries taken as a whole, contemplated or entered into by the Company or any of the Subsidiaries, (iii) any obligation, contingent or otherwise, directly or indirectly incurred by the Company or any Subsidiary that is material to the Company and Subsidiaries taken as a whole or (iv) any dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.

(r)            Registration Rights.   There are no persons with registration or other similar rights to have any equity or debt securities, including securities that are convertible into or exchangeable for equity securities, registered pursuant to the Registration Statement or otherwise registered by the Company under the Securities Act, (i) except for certain of the Selling Stockholders, to the extent of the equity securities to be offered and sold by such Selling Stockholders as contemplated by this Agreement, and (ii) except for those registration or similar rights that have been waived with respect to the offering contemplated by this Agreement, all of which registration or similar rights described in clauses (i) and (ii) are fairly summarized in both the Prospectus and the Disclosure Package.

(s)           Authorization of Shares.   The Shares to be sold by the Selling Stockholders have been duly authorized, validly issued and are fully paid and non-assessable.  The Shares to be sold by the Company have been duly authorized and, when issued and duly delivered against payment therefor as contemplated by this Agreement, will be validly issued, fully paid and non-assessable, free and clear of any pledge, lien, encumbrance, security interest or other claim, and the issuance and sale of the Shares by the Company is not subject to preemptive or other similar rights arising by operation of law, under the organizational documents of the Company or under any agreement to which the Company or any Subsidiary is a party or otherwise; and no further approval or authority of the stockholders or the board

 

 

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of directors of the Company will be required for the issuance and sale of the Shares to be sold by the Company as contemplated herein.

(t)            Registration and Listing.   The Common Stock is registered pursuant to Section 12(g) of the Exchange Act.  The Shares have been approved for listing on the Nasdaq National Market, subject only to official notice of issuance, and the Company is in compliance in all material respects with all applicable listing standards of the Nasdaq National Market.  The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act.

(u)           Absence of Manipulation.   Neither the Company nor any of its officers, directors or affiliates acting on behalf of the Company has taken, and at the Closing Time, neither the Company nor any of its officers, directors or affiliates acting on behalf of the Company will have taken, directly or indirectly, any action that is designed to or that has constituted or that might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares.

(v)           No Association with the NASD.   Except as disclosed in the Preliminary Prospectus and the Prospectus, neither the Company nor any of its affiliates (i) is required to register as a “broker” or “dealer” in accordance with the provisions of the Exchange Act, or the rules and regulations thereunder (the “Exchange Act Regulations”), or (ii) directly, or indirectly through one or more intermediaries, controls or has any other association with (within the meaning of Article I of the By-laws of the NASD) any member firm of the NASD.

(w)          No Reliance on Representative.   The Company has not relied upon the Representative or legal counsel for the Underwriters for any legal, tax or accounting advice in connection with the offering and sale of the Shares.

(x)            Form of Stock Certificate.   The form of certificate used to evidence the Common Stock complies in all material respects with all applicable statutory requirements, with any applicable requirements of the organizational documents of the Company and the requirements of the Nasdaq National Market.

(y)           Title to Property.   The Company and the Subsidiaries have good and marketable title in fee simple to all real property, if any, and good title to all personal property owned by them, in each case, free and clear of all liens, security interests, pledges, claims, charges, encumbrances, mortgages, defects or restrictions of any kind, except such as are disclosed in both the Prospectus and the Disclosure Package or such as do not materially and adversely affect the value of such property and do not interfere with the use made or proposed to be made of such property by the Company and the Subsidiaries; and any real property and buildings held under lease or sublease by the Company or any Subsidiary are held under valid, existing and enforceable leases in full force and effect, with such exceptions as are disclosed in both the Prospectus and the Disclosure Package or are not material and do

 

 

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not interfere with the use made or proposed to be made of such property and buildings by the Company or such Subsidiary[, 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 properties under any such lease or sublease].

(z)            Accuracy of Descriptions and Exhibits.   The descriptions in each of the Registration Statement, the Prospectus and the Disclosure Package of the legal or governmental proceedings, contracts, leases and other legal documents therein described present fairly the information required to be described by the Securities Act or by the Securities Act Regulations, and there are no legal or governmental proceedings, contracts, leases, or other documents of a character required to be described in the Registration Statement, the Prospectus or the Disclosure Package or to be filed as exhibits to the Registration Statement that are not described or filed as required; each description of a contract, document or other agreement in the Registration Statement, the Prospectus and the Disclosure Package accurately reflects the terms of the underlying contract, document or agreement; all agreements between the Company or any of the Subsidiaries and third parties expressly referenced in both the Prospectus and the Disclosure Package are legal, valid and binding obligations of the Company and the applicable Subsidiaries, enforceable in accordance with their respective terms, except to the extent enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles; such contracts are in full force and effect on the date hereof, except where the failure of any such agreement to be legal, valid, binding and enforceable and in full force and effect would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any other party thereto, is in breach of or default under any of such contracts, except for such breaches or defaults that would not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Change.

(aa)         Possession of Intellectual Property.   The Company and each Subsidiary owns or possesses, or can acquire on reasonable terms, adequate licenses, patents, patent  rights, inventions, trademarks, service marks, trade names, copyrights, software and design licenses, trade secrets, manufacturing processes, other intangible property rights and know-how (collectively “Intangibles”) necessary to entitle the Company and each Subsidiary to conduct its business as described in both the Prospectus and the Disclosure Package, and neither the Company nor any Subsidiary has received notice of infringement of or conflict with (and the Company knows of no such infringement of or conflict with) asserted rights of others with respect to any Intangibles or of any circumstances that would render any Intangibles invalid or inadequate to protect the interests of the Company or any of the Subsidiaries therein that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

 

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(bb)         Disclosure Controls and Procedures.   The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act), which (i) are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared, (ii) have been evaluated for effectiveness as of the end of the last fiscal period covered by the Registration Statement, and (iii) are effective in all material respects to perform the functions for which they were established; and the Company shall maintain a system of information disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in its periodic filings with the Commission is recorded, processed, summarized and reported within the time periods specified by the Commission.

(cc)         Internal Control over Financial Reporting.   There has been no change in the Company’s internal control over financial reporting since [September 30, 2005] that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and the Company is not aware of: (i) any significant deficiency or material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information, or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

(dd)         Accounting Controls.   The books, records and accounts of the Company and the Subsidiaries, in reasonable detail, accurately and fairly reflect the transactions in the assets of, and the results of operations of, the Company and the Subsidiaries.  The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(ee)         Tax Matters.   Each of the Company and the Subsidiaries has filed on a timely basis all necessary federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof, which tax returns are correct in all material respects, and have paid all taxes shown as due thereon; and no tax deficiency has been asserted against the Company or any Subsidiary, nor does the Company or any Subsidiary know of any such tax deficiency, which, if determined adversely to any such entity, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; all known tax liabilities are adequately provided for on the respective books of such entities.

 

 

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(ff)           Insurance.   Each of the Company and the Subsidiaries maintains insurance (issued by insurers of recognized financial responsibility) of the types and in the amounts generally deemed adequate for their respective businesses and consistent with insurance coverage maintained by similar publicly traded companies in similar businesses, including, but not limited to, insurance covering real and personal property owned or leased by the Company and the Subsidiaries against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance is in full force and effect; the Company and each of the Subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a reasonable cost, provided, that the foregoing representation and warranty shall not apply to reinsurance treaties from time to time in effect with respect to the operations of the Subsidiaries.

(gg)         Insurance Reserving Practices.   Except as disclosed in the Preliminary Prospectus or the Prospectus, the Company and its Insurance Subsidiaries have made no material change in their insurance reserving practices since December 31, 2002.

(hh)         Reinsurance Treaties.   All reinsurance treaties and arrangements to which any Subsidiary is a party are in full force and effect and no Subsidiary is in violation of, or in default in the performance, observance or fulfillment of, any obligation, agreement, covenant or condition contained therein, except where the failure to be in full force and effect or where such violation or default would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect; no Subsidiary has received any notice from any of the other parties to such treaties, contracts or agreements that such other party intends not to perform such treaty and, to the knowledge of the Company and the Subsidiaries, none of the other parties to such treaties or arrangements will be unable to perform such treaty or arrangement except to the extent adequately and properly reserved for in the audited historical financial statements of the Company included in the Preliminary Prospectus or the Prospectus, except where such nonperformance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; the Company is not, and has not been, a party to a contract of financial reinsurance, finite risk insurance or reinsurance wherein the amount of risk or potential risk transferred to or from the Company is insufficient to permit the Company to classify properly the contract or other arrangement as an “insurance contract,” or where such contract or other arrangement may need to be subsequently reclassified so as to change the accounting treatment thereof; the Company is not, and has not been, a party to any separate written or oral agreements with reinsurers that would under any circumstances reduce, limit, mitigate or otherwise affect any actual or potential loss to the parties under a reinsurance contract, other than the inuring contracts that are explicitly defined in such reinsurance contract.

(ii)           Environmental Laws.   Neither the Company nor any of the Subsidiaries is in violation of, nor has the Company or any Subsidiary received notice of, any violation with respect to, any applicable federal, state, local or foreign statute, law, rule, regulation,

 

 

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ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to pollution or protection of human health, safety, the environment or wildlife, or any similar law applicable to the business of the Company or any of the Subsidiaries (collectively, “Environmental Laws”), except where such violation or liability would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; the Company and the Subsidiaries have received all permits, authorizations, licenses or other approvals required of them under applicable federal and state occupational safety and health and environmental laws and regulations to conduct their respective businesses, and are in compliance with their requirements, except where such non-receipt or noncompliance would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; there are no pending or, to the knowledge of the Company, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Laws against the Company or any of the Subsidiaries, other than those which would not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Change.

(jj)           Equal Employment.   Neither the Company nor any Subsidiary is in violation of, nor has the Company or any Subsidiary received notice of any violation with respect to, any federal or state law relating to discrimination in the hiring, promotion or pay of employees, nor any applicable federal or state wages and hours law, the violation of any of which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(kk)         ERISA Compliance.   The Company and each of the Subsidiaries are in compliance with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”), except for such non-compliance which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; no “reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Company or any of the Subsidiaries would have any liability; the Company and each of the Subsidiaries have not incurred and do not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan” or (ii) Section 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (“Code”); and each “pension plan” for which the Company and each of its Subsidiaries 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.

(ll)           No Illegal Payments.   Neither the Company nor any of the Subsidiaries nor any officer, director, agent or employee purporting to act on behalf of the Company or any of the Subsidiaries has at any time (i) made any contributions to any candidate for political office, or failed to disclose fully any such contributions, in violation of law, (ii) made any payment to any state, federal or foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or allowed by applicable

 

 

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law, (iii) engaged in any transactions, maintained any bank account or used any corporate funds except for transactions, bank accounts and funds which have been and are reflected in the normally maintained books and records of the Company and the Subsidiaries, or (iv) made any payment of funds of the Company or of any Subsidiary or received or retained any funds in violation of any law, rule or regulation, or of a character required to be disclosed in the Prospectus or the Disclosure Package that is not so disclosed.

(mm)       Related Party Transactions.   There are no outstanding loans, extensions of credit, advances or guarantees of indebtedness by the Company or any of the Subsidiaries to or for the benefit of any of the officers or directors of the Company or any of the Subsidiaries or any of the members of the families of any of them.  No relationship, direct or indirect, exists and no transaction has occurred between or among the Company or any of the Subsidiaries on the one hand, and the directors, officers, stockholders or affiliates of the Company or any of the Subsidiaries on the other hand, which is required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Prospectus and the Disclosure Package and which is not so described.

(nn)         Sale of Shares.   All securities issued by the Company, any of the Subsidiaries or any trusts established by the Company or any Subsidiary have been issued and sold in compliance with (i) all applicable federal and state securities laws, (ii) the laws of the applicable jurisdiction of incorporation of the issuing entity and, (iii) to the extent applicable to the issuing entity, the requirements of the Nasdaq National Market.

(oo)         No Unauthorized Use of Prospectus.   In connection with this offering, the Company has not offered and will not offer its Common Stock or any other securities convertible into or exchangeable or exercisable for Common Stock in a manner in violation of the Securities Act or the Securities Act Regulations; the Company has not distributed and will not distribute any offering material other than the Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus reviewed and consented to by the Representative or the Registration Statement in connection with the offer and sale of the Shares.

(pp)         Fees.   Except as contemplated by this Agreement, the Company has not incurred any liability for any finder’s fees, broker’s fees or similar fees, commissions or payments in connection with the transactions herein contemplated.

(qq)         Investment Company Act.   Neither the Company nor any of the Subsidiaries is and, after giving effect to the offering and sale of the Shares as contemplated herein, will be an “investment company” or an entity “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).

(rr)           Absence of Labor Disputes.   There are no existing or, to the knowledge of the Company, threatened labor disputes with the employees of the Company or any of the

 

 

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Subsidiaries that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(ss)         Compliance with Sarbanes-Oxley Act.   The Company is in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act and the related rules and regulations of the Commission in effect and is actively taking steps intended to comply with other applicable provisions of the Sarbanes-Oxley Act and the related rules and regulations of the Commission not currently applicable to the Company, including the Commission's internal control over financial reporting requirements implemented pursuant to Section 404 of the Sarbanes-Oxley Act, upon and at all times after such provisions become applicable to the Company.

(tt)           Directed Share Program.   No consent, approval, authorization or order o