EXHIBIT 1.1
4,000,000
SOURCE INTERLINK COMPANIES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
[__________], 2004
XXXXXXXXX & COMPANY, INC.
XXXXXXX & COMPANY, INC.
As Representatives of the several Underwriters
c/o JEFFERIES & COMPANY, INC.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
INTRODUCTORY. Source Interlink Companies, Inc., a Missouri
corporation (the "COMPANY"), proposes to issue and sell to the several
underwriters named in Schedule A (the "UNDERWRITERS") an aggregate of 3,000,000
shares of its common stock, par value $0.01 per share (the "SHARES"); and of the
shareholders of the Company named in Schedule B (collectively, the "SELLING
SHAREHOLDERS"), certain of the Selling Shareholders severally propose to sell to
the Underwriters an aggregate of 1,000,000 Shares, with each such Selling
Shareholder selling the amount of Firm Shares (as defined below) set forth
opposite such Selling Shareholder's name in Schedule B, all as provided in
Section 2. The 3,000,000 Shares to be sold by the Company and the 1,000,000
Shares to be sold by such Selling Shareholders are collectively called the "FIRM
SHARES." In addition, certain of the Selling Shareholders have severally granted
to the Underwriters an option to purchase up to an additional 600,000 Shares,
with each such Selling Shareholder selling up to the amount of Optional Shares
(as defined below) set forth opposite such Selling Shareholder's name in
Schedule B, all as provided in Section 2. The additional 600,000 Shares to be
sold by such Selling Shareholders pursuant to such option are collectively
called the "OPTIONAL SHARES." The Firm Shares and, if and to the extent such
option is exercised, the Optional Shares are collectively called the "OFFERED
Shares." Jefferies & Company, Inc. ("JEFFERIES") and Xxxxxxx & Company, Inc.
have agreed to act as representatives of the several Underwriters (in such
capacity, the "REPRESENTATIVES") in connection with the offering and sale of the
Offered Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "COMMISSION") a registration statement on Form S-3 (File No.
333-111711), which contains a form of prospectus to be used in connection with
the public offering and sale of the Offered Shares. Such registration statement,
as amended, including the financial statements, exhibits and
schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (collectively, the "SECURITIES ACT"), including all
documents incorporated or deemed to be incorporated by reference therein and any
information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A under the Securities Act or the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder (collectively, the "EXCHANGE
ACT"), is called the "REGISTRATION STATEMENT." Any registration statement filed
by the Company pursuant to Rule 462(b) under the Securities Act is called the
"RULE 462(B) REGISTRATION STATEMENT," and from and after the date and time of
filing of the Rule 462(b) Registration Statement the term "REGISTRATION
STATEMENT" shall include the Rule 462(b) Registration Statement. Such
prospectus, in the form first used by the Underwriters to confirm sales of the
Offered Shares, is called the "PROSPECTUS." All references in this Agreement to
the Registration Statement, the Rule 462(b) Registration Statement, a
preliminary prospectus or the Prospectus, or any amendments or supplements to
any of the foregoing, shall include any copy thereof filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("XXXXX"). All references in this Agreement to financial statements and
schedules and other information that are "CONTAINED," "INCLUDED" or "STATED" in
the Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information that is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be;
and all references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and include the
filing of any document under the Exchange Act that is or is deemed to be
incorporated by reference in the Registration Statement or the Prospectus, as
the case may be.
The Company and each of the Selling Shareholders hereby confirm
their respective agreements with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES.
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. To the best
knowledge of the Company, the Company has complied to the Commission's
satisfaction with all requests of the Commission for additional or
supplemental information. No stop order suspending the effectiveness of
the Registration Statement or any Rule 462(b) Registration Statement is in
effect and no proceedings for such purpose have been instituted or are
pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied
in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to XXXXX (except as may be permitted by
Regulation S-T under the Securities Act), was identical to the copy
thereof delivered to the Underwriters for use in connection with the offer
and sale of the Offered Shares. Each of the Registration Statement, any
Rule 462(b) Registration Statement and any post-effective amendment
thereto, at the time it became effective and at all subsequent times
through the Prospectus Delivery Period (as defined in Section 3A(a)),
complied and will comply in all material respects with the Securities Act
and did not and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus,
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as amended or supplemented, as of its date and at all subsequent times,
did not and will not contain any 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 representations and warranties set forth in the two
immediately preceding sentences do not apply to statements in or omissions
from the Registration Statement or any Rule 462(b) Registration Statement,
or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in conformity
with information relating to any Underwriter furnished to the Company in
writing by the Representatives expressly for use therein, it being
understood and agreed that the only such information furnished by the
Representatives to the Company consists of the information described in
Section 8(c). There are no contracts or other documents required to be
described in the Prospectus or to be filed as exhibits to the Registration
Statement that have not been described or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to each of the Representatives a complete copy of the signed
Registration Statement and of each consent and certificate of experts
filed as a part thereof, and conformed copies of the Registration
Statement (without exhibits) and preliminary prospectuses and the
Prospectus, as amended or supplemented, in such quantities and at such
places as the Representatives have reasonably requested for each of the
Underwriters.
(c) Distribution of Offering Material By the Company. The Company
has not distributed and will not distribute, prior to the later of (i) the
expiration or termination of the option granted to the several
Underwriters in Section 2 and (ii) the completion of the Underwriters'
distribution of the Offered Shares, any offering material in connection
with the offering and sale of the Offered Shares other than a preliminary
prospectus, the Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms.
(e) Authorization of the Offered Shares. The Offered Shares to be
purchased by the Underwriters from the Company have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement, will be validly
issued, fully paid and nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or
debt securities registered for sale under the Registration Statement or
included in the offering contemplated by this Agreement.
(g) No Material Adverse Change. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is
given in the Prospectus: (i) there has been no material adverse change, or
any development that could reasonably be expected to result in a material
adverse change, in the condition, financial or otherwise, or in the
earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change is called a
"MATERIAL ADVERSE CHANGE"); (ii) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business; and (iii) there has
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been no dividend or distribution of any kind declared, paid or made by the
Company or, except for dividends paid to the Company or other
subsidiaries, any of its subsidiaries on any class of capital stock or
repurchase or redemption by the Company or any of its subsidiaries of any
class of capital stock.
(h) Independent Accountants. BDO Xxxxxxx, LLP, who have expressed
their opinion with respect to the financial statements (which term as used
in this Agreement includes the related notes thereto) and supporting
schedules filed with the Commission as a part of the Registration
Statement and included in the Prospectus, are (i) independent public or
certified public accountants as required by the Securities Act and the
Exchange Act, (ii) in compliance with the applicable requirements relating
to the qualification of accountants under Rule 2-01 of Regulation S-X and
(iii) a registered public accounting firm as defined by the Public Company
Accounting Oversight Board (the "PCAOB") whose registration has not been
suspended or revoked and who has not requested such registration to be
withdrawn.
(i) Preparation of the Financial Statements. The financial
statements filed with the Commission as a part of the Registration
Statement and included in the Prospectus present fairly the consolidated
financial position of the Company and its subsidiaries as of and at the
dates indicated and the results of their operations and cash flows for the
periods specified. Such financial statements have been prepared in
conformity with generally accepted accounting principles as applied in the
United States applied on a consistent basis throughout the periods
involved, except as may be expressly stated in the related notes thereto.
No other financial statements or supporting schedules are required to be
included in the Registration Statement. The financial data set forth in
the Prospectus under the captions "Prospectus Summary -- Summary
Consolidated Financial Data," "Selected Consolidated Financial Data" and
"Capitalization" fairly present the information set forth therein on a
basis consistent with that of the audited financial statements contained
in the Registration Statement. No person who has been suspended or barred
from being associated with a registered public accounting firm, or who has
failed to comply with any sanction pursuant to Rule 5300 promulgated by
the PCAOB, has participated in or otherwise aided the preparation of, or
audited, the financial statements, supporting schedules or other financial
data filed with the Commission as a part of the Registration Statement and
included in the Prospectus.
(j) Company's Accounting System. The Company makes and keeps
accurate books and records and maintains a system of accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles as applied in the United States and to maintain
accountability for assets; (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 existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(k) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation, partnership or
limited liability company, as applicable, in good standing under the laws
of the jurisdiction of its incorporation or organization and has the power
and authority (corporate or other) to own, lease and operate its
properties and to conduct its business as described in the Prospectus and,
in the case of the Company, to enter into and perform its obligations
under this Agreement. Each of the Company and each subsidiary is duly
qualified as a foreign corporation, partnership or limited liability
company, as
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applicable, 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 be so qualified or in good standing would not,
individually or in the aggregate, result in a Material Adverse Change. All
of the issued and outstanding capital stock or other equity or ownership
interest of each subsidiary has been duly authorized and validly issued,
is fully paid and nonassessable and is owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance or adverse claim, except as contemplated by the
Existing Loan Agreements (as defined in Section 1A(n)). The Company does
not own or control, directly or indirectly, any corporation, association
or other entity other than (i) the subsidiaries listed in Exhibit 21 to
the Company's Annual Report on Form 10-K for the fiscal year ended January
31, 2003 and (ii) such other entities omitted from such Exhibit 21 that,
when such omitted entities are considered in the aggregate as a single
subsidiary, would not constitute a "significant subsidiary" within the
meaning of Rule 1-02(w) of Regulation S-X.
(l) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described
in the Prospectus). The Shares (including the Offered Shares) conform in
all material respects to the description thereof contained in the
Prospectus. All of the issued and outstanding Shares (including the Shares
owned by Selling Shareholders) have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in
compliance with federal and state securities laws. None of the outstanding
Shares were issued in violation of any preemptive rights, rights of first
refusal or other similar rights to subscribe for or purchase securities of
the Company. There are no authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable
for, any capital stock of the Company or any of its subsidiaries other
than those accurately described in the Prospectus. The description of the
Company's stock option, stock bonus and other stock plans or arrangements,
and the options or other rights granted thereunder, set forth in the
Prospectus accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and rights.
(m) Stock Exchange Listing. The Shares are registered pursuant to
Section 12(b) or 12(g) of the Exchange Act and are listed on the Nasdaq
National Market, and the Company has taken no action designed to
terminate, or likely to have the effect of terminating, the registration
of the Shares under the Exchange Act or delisting the Shares from the
Nasdaq National Market, nor has the Company received any notification that
the Commission or the Nasdaq National Market is contemplating terminating
such registration or listing.
(n) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default
(or, with the giving of notice or lapse of time, would be in default)
("DEFAULT") under any indenture, mortgage, loan or credit agreement, note,
contract, franchise, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be bound
(including, without limitation, the Loan Agreement dated as of October 30,
2003 among the Company, each of its subsidiaries named therein and Xxxxx
Fargo Foothill, Inc., as the lender, and the Loan Agreement dated as of
October 30, 2003 among the Company, each of its subsidiaries named therein
and Hilco Capital LP, as the lender (collectively, the "EXISTING LOAN
AGREEMENTS")), or to which any
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of the property or assets of the Company or any of its subsidiaries is
subject (each, an "EXISTING INSTRUMENT"), except for such Defaults as
would not, individually or in the aggregate, result in a Material Adverse
Change. The Company's execution, delivery and performance of this
Agreement, consummation of the transactions contemplated hereby and by the
Prospectus and the issuance and sale of the Offered Securities (i) have
been duly authorized by all necessary corporate action and will not result
in any violation of the provisions of the charter or by-laws of the
Company or any of its subsidiaries, (ii) will not conflict with or
constitute a breach of, or a Default or Debt Repayment Triggering Event
(as defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries pursuant to, or require the consent of any other
party to, any Existing Instrument and (iii) will not result in any
violation of any law, administrative regulation or administrative or court
decree applicable to the Company or any of its subsidiaries. No consent,
approval, authorization or other order of, or registration or filing with,
any court or other governmental or regulatory authority or agency, is
required for the Company's execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby and by
the Prospectus, except such as have been obtained or made by the Company
and are in full force and effect under the Securities Act, applicable
state securities or blue sky laws and from the NASD. As used herein, a
"DEBT REPAYMENT TRIGGERING EVENT" means any event or condition that gives,
or with the giving of notice or the lapse of time would give, the holder
of any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any of its subsidiaries, except as contemplated by the Existing
Loan Agreements.
(o) No Material Actions or Proceedings. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or affecting the Company or
any of its subsidiaries, (ii) that has as the subject thereof any officer
or director of, or property owned or leased by, the Company or any of its
subsidiaries or (iii) relating to environmental or discrimination matters,
where in any such case (A) any such action, suit or proceeding, if
determined adversely to the Company, such subsidiary or such officer or
director, would reasonably be expected to result in a Material Adverse
Change or adversely affect the consummation of the transactions
contemplated by this Agreement or (B) any such action, suit or proceeding
is or would be material in the context of the sale of Shares. No material
labor dispute with the employees of the Company or any of its
subsidiaries, or with the employees of any principal supplier of the
Company, exists or, to the best of the Company's knowledge, is threatened
or imminent.
(p) Intellectual Property Rights. The Company and its subsidiaries
own or possess sufficient trademarks, trade names, patent rights,
copyrights, domain names, licenses, approvals, trade secrets and other
similar rights (collectively, "INTELLECTUAL PROPERTY RIGHTS") reasonably
necessary to conduct their businesses as now conducted; and the expected
expiration of any Intellectual Property Rights would not result in a
Material Adverse Change. Neither the Company nor any of its subsidiaries
has received, or has any reason to believe that it will receive, any
notice of infringement or conflict with asserted Intellectual Property
Rights of others, except for any such notices or conflicts that would not,
individually or in the aggregate, result in a Material Adverse Change. The
Company is not a party to or bound by any options, licenses or agreements
with respect to the Intellectual Property Rights of any other person or
entity that are required to be set forth in the Prospectus and are not
described therein. None of the technology employed by the Company has been
obtained or is being used by the Company in violation of any contractual
obligation binding on the
6
Company or, to the Company's knowledge, any of its officers, directors or
employees or otherwise in violation of the rights of any persons.
(q) All Necessary Permits, etc. The Company and each subsidiary
possess such valid and current certificates, authorizations or permits
issued by the appropriate state, federal or foreign regulatory agencies or
bodies necessary to conduct their respective businesses, and neither the
Company nor any subsidiary has received, or has any reason to believe that
it will receive, any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate,
authorization or permit.
(r) Title to Properties. The Company and each of its subsidiaries
has good and marketable title to all of the real and personal property and
other assets reflected as owned in the financial statements referred to in
Section 1(A)(i), in each case free and clear of any security interests,
mortgages, liens, encumbrances, equities, adverse claims and other
defects, except as contemplated or permitted by the Existing Loan
Agreements. The real property, improvements, equipment and personal
property held under lease by the Company or any subsidiary are held under
valid and enforceable leases, with such exceptions as are not material and
do not materially interfere with the use made or proposed to be made of
such real property, improvements, equipment or personal property by the
Company or such subsidiary.
(s) Tax Law Compliance. The Company and its subsidiaries have filed
all necessary federal, state and foreign income and franchise tax returns
and have paid all taxes required to be paid by any of them and, if due and
payable, any related or similar assessment, fine or penalty levied against
any of them. The Company has made adequate charges, accruals and reserves
in the applicable financial statements referred to in Section 1(A)(i) in
respect of all federal, state and foreign income and franchise taxes for
all periods as to which the tax liability of the Company or any of its
subsidiaries has not been finally determined.
(t) Company Not an "Investment Company." The Company has been
advised of the rules and requirements under the Investment Company Act of
1940 (the "INVESTMENT COMPANY ACT"). The Company is not, and after receipt
of payment for the Offered Shares will not be, an "INVESTMENT COMPANY"
within the meaning of the Investment Company Act and will conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(u) Insurance. Each of the Company and its subsidiaries are insured
by recognized, financially sound and reputable institutions with policies
in such amounts and with such deductibles and covering such risks as are
generally deemed adequate and customary for their businesses, including,
without limitation, policies covering real and personal property owned or
leased by the Company and its subsidiaries against theft, damage,
destruction, acts of vandalism and earthquakes. The Company has no reason
to believe that it or any subsidiary will not be able (i) to renew its
existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary
or appropriate to conduct its business as now conducted and at a cost that
would not result in a Material Adverse Change. Neither the Company nor any
subsidiary has been denied any insurance coverage that it has sought or
for which it has applied.
(v) No Price Stabilization or Manipulation; Compliance with
Regulation M. The Company has not taken, directly or indirectly, any
action designed to or that might be reasonably expected to cause or result
in stabilization or manipulation of the price of the
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Shares or any other "REFERENCE SECURITY" (as defined in Rule 100 of
Regulation M under the Exchange Act ("REGULATION M")) whether to
facilitate the sale or resale of the Offered Shares or otherwise, and has
taken no action that would directly or indirectly violate Regulation M.
The Company acknowledges that the Underwriters may engage in passive
market making transactions in the Offered Shares on the Nasdaq National
Market in accordance with Regulation M.
(w) Related Party Transactions. There are no business relationships
or related-party transactions involving the Company or any subsidiary or
any other person required to be described in the Prospectus that have not
been described as required.
(x) Exchange Act Compliance. The documents incorporated or deemed to
be incorporated by reference in the Prospectus, at the time they were or
hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the Exchange Act, and, when
read together with the other information in the Prospectus, at the time
the Registration Statement and any amendments thereto become effective and
at the First Closing Date and the applicable Option Closing Date (each as
defined in Section 3(c)), as the case may be, 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 or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(y) No Unlawful Contributions or Other Payments. Neither the Company
nor any of its subsidiaries nor, to the best of the Company's knowledge,
any employee or agent of the Company or any subsidiary, has made any
contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the
character required to be disclosed in the Prospectus.
(z) Disclosure Controls and Procedures; Deficiencies in or Changes
to Internal Control Over Financial Reporting. The Company has established
and maintains disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) that (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 a date within 90 days prior to the
earlier of the date that the Company filed its most recent annual or
quarterly report with the Commission and the date of the Prospectus; and
(iii) are effective in all material respects to perform the functions for
which they were established. Based on the most recent evaluation of its
disclosure controls and procedures, the Company is not aware of (A) any
significant deficiencies or material weaknesses in the design or operation
of internal control over financial reporting that are reasonably likely to
adversely affect the registrant's ability to record, process, summarize
and report financial information or (B) any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant's internal control over financial
reporting. The Company is not aware of any change in its internal control
over financial reporting that has occurred during its most recent fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial
reporting.
(aa) Compliance with Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse
8
Change, (i) neither the Company nor any of its subsidiaries is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "HAZARDOUS MATERIALS") or
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"ENVIRONMENTAL LAWS"), (ii) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(iii) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices
of noncompliance or violation, investigation or proceedings relating to
any Environmental Law against the Company or any of its subsidiaries and
(iv) there are no events or circumstances that might reasonably be
expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or
agency, against or affecting the Company or any of its subsidiaries
relating to Hazardous Materials or any Environmental Laws.
(bb) ERISA Compliance. The Company and its subsidiaries and any
"EMPLOYEE BENEFIT PLAN" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or
maintained by the Company, its subsidiaries or their "ERISA AFFILIATES"
(as defined below) are in compliance in all material respects with ERISA.
"ERISA AFFILIATE" means, with respect to the Company or a subsidiary, any
member of any group of organizations described in Sections 414(b), (c),
(m) or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereunder (the "CODE") of which
the Company or such subsidiary is a member. No "REPORTABLE EVENT" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "EMPLOYEE BENEFIT PLAN" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates. No "EMPLOYEE
BENEFIT PLAN" established or maintained by the Company, its subsidiaries
or any of their ERISA Affiliates, if such "EMPLOYEE BENEFIT PLAN" were
terminated, would have any "AMOUNT OF UNFUNDED BENEFIT LIABILITIES" (as
defined under ERISA). Neither the Company, its subsidiaries nor any of
their ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "EMPLOYEE BENEFIT PLAN" or (ii) Sections 412, 4971,
4975 or 4980B of the Code. Each "EMPLOYEE BENEFIT PLAN" established or
maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or
failure to act, that would cause the loss of such qualification.
(cc) Brokers. Except as otherwise disclosed in the Prospectus, there
is no broker, finder or other party that is entitled to receive from the
Company any brokerage or finder's fee or other fee or commission as a
result of any transactions contemplated by this Agreement.
(dd) No Outstanding Loans or Other Extensions of Credit. Neither the
Company nor any of its subsidiaries has extended or maintained credit,
arranged for the extension of credit, or renewed any extension of credit,
in the form of a personal loan, to or for any director or executive
officer (or equivalent thereof) of the Company or such subsidiary except
for such
9
extensions of credit as are (i) expressly permitted by Section 13(k) of
the Exchange Act or (ii) fully repaid, discharged, forgiven or otherwise
no longer outstanding or owing in any way on the date of this Agreement.
(ee) Compliance with Laws. The Company has not been advised, and has
no reason to believe, that it and each of its subsidiaries are not
conducting business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which it is conducting business,
except where failure to be so in compliance would not result in a Material
Adverse Change.
The Company acknowledges that the Underwriters and, for purposes of
the opinions to be delivered pursuant to Section 5, counsel to the Company
and counsel to the Underwriters, will rely upon the accuracy and
truthfulness of the foregoing representations and hereby consents to such
reliance.
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
Selling Shareholder represents, warrants and covenants to each Underwriter as
follows:
(a) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by or on behalf of such Selling
Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms.
(b) The Custody Agreement and Power of Attorney. Each of (i) the
Custody Agreement signed by such Selling Shareholder and Mellon Investor
Services, L.L.C., as custodian (the "CUSTODIAN"), relating to the deposit
of the Offered Shares to be sold by such Selling Shareholder (the "CUSTODY
AGREEMENT") and (ii) the Power of Attorney appointing certain individuals
named therein as such Selling Shareholder's attorneys-in-fact (each, an
"ATTORNEY-IN-FACT"), to the extent set forth therein relating to the
transactions contemplated hereby and by the Prospectus (the "POWER OF
ATTORNEY"), of such Selling Shareholder has been duly authorized, executed
and delivered by such Selling Shareholder and is a valid and binding
agreement of such Selling Shareholder, enforceable in accordance with its
terms.
(c) Title to Offered Shares to be Sold. Such Selling Shareholder has
(or has the right to acquire), and on the First Closing Date and each
applicable Option Closing Date will have, good and valid title to all of
the Offered Shares that may be sold by such Selling Shareholder pursuant
to this Agreement on such date and the legal right and power to sell,
transfer and deliver all of the Offered Shares that may be sold by such
Selling Shareholder pursuant to this Agreement and to comply with its
other obligations hereunder and thereunder.
(d) Delivery of the Offered Shares to be Sold. Delivery of the
Offered Shares that are sold by such Selling Shareholder pursuant to this
Agreement will pass good and valid title to such Offered Shares, free and
clear of any security interest, mortgage, pledge, lien, encumbrance or
other adverse claim.
(e) Non-Contravention; No Further Authorizations or Approvals
Required. The execution and delivery by such Selling Shareholder of, and
the performance by such Selling Shareholder of its obligations under, this
Agreement, the Custody Agreement and the Power of Attorney will not
contravene or conflict with, result in a breach of, or constitute a
Default under, or require the consent of any other party to, the charter
or by-laws, partnership agreement, trust agreement or other organizational
documents of such Selling Shareholder or any other agreement or instrument
to which such Selling Shareholder is a party or by which it is bound or
under which it is entitled to any right or benefit, any provision of
applicable law
10
or any judgment, order, decree or regulation applicable to such Selling
Shareholder of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over such Selling
Shareholder. No consent, approval, authorization or other order of, or
registration or filing with, any court or other governmental authority or
agency, is required for the consummation by such Selling Shareholder of
the transactions contemplated in this Agreement, except such as have been
obtained or made and are in full force and effect under the Securities
Act, applicable state securities or blue sky laws and from the NASD.
(f) No Registration, Pre-emptive, Co-Sale or Other Similar Rights.
Such Selling Shareholder (i) does not have any registration or other
similar rights to have any equity or debt securities registered for sale
by the Company under the Registration Statement or included in the
offering contemplated by this Agreement, (ii) does not have any preemptive
right, co-sale right or right of first refusal or other similar right to
purchase any of the Offered Shares that are to be sold by the Company or
any of the other Selling Shareholders to the Underwriters pursuant to this
Agreement and (iii) does not own any warrants, options or similar rights
to acquire, and does not have any right or arrangement to acquire, any
capital stock, right, warrants, options or other securities from the
Company, other than those described in the Registration Statement and the
Prospectus.
(g) No Further Consents, etc. Except for such consents, approvals
and waivers that have been obtained by such Selling Shareholder on or
prior to the date of this Agreement, no consent, approval or waiver is
required under any instrument or agreement to which such Selling
Shareholder is a party or by which it is bound or under which it is
entitled to any right or benefit in connection with the offering, sale or
purchase by the Underwriters of any of the Offered Shares that may be sold
by such Selling Shareholder under this Agreement or the consummation by
such Selling Shareholder of any of the other transactions contemplated
hereby.
(h) Disclosure Made by Such Selling Shareholder in the Prospectus.
All information furnished by or on behalf of such Selling Shareholder in
writing expressly for use in the Registration Statement and the Prospectus
is, and on the First Closing Date and the applicable Option Closing Date
will be, true, correct and complete in all material respects, and does
not, and on the First Closing Date and the applicable Option Closing Date
will not, contain any untrue statement of a material fact or omit to state
any material fact necessary to make such information not misleading. Such
Selling Shareholder confirms as accurate the number of Shares set forth
opposite such Selling Shareholder's name in the Prospectus under the
caption "Security Ownership of Directors, Executive Officers and Principal
Shareholders" (both prior to and after giving effect to the sale of the
Offered Shares).
(i) No Price Stabilization or Manipulation; Compliance with
Regulation M. Such Selling Shareholder has not taken, directly or
indirectly, any action designed to or that might be reasonably expected to
cause or result in stabilization or manipulation of the price of the
Shares or any other reference security, whether to facilitate the sale or
resale of the Offered Shares or otherwise, and has taken no action that
would directly or indirectly violate any provision of Regulation M.
(j) No Transfer Taxes or Other Fees. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state,
or any political subdivision thereof, required to be paid in connection
with the execution and delivery of this Agreement or the sale by the
Selling Shareholders of the Offered Shares.
11
(k) Distribution of Offering Materials by the Selling Shareholders.
The Selling Shareholders have not distributed and will not distribute,
prior to the later of (i) the expiration or termination of the option
granted to the several Underwriters under Section 2 and (ii) the
completion of the Underwriters' distribution of the Offered Shares, any
offering material in connection with the offering and sale of the Offered
Shares other than a preliminary prospectus, the Prospectus or the
Registration Statement.
Such Selling Shareholder acknowledges that the Underwriters and, for
purposes of the opinion to be delivered pursuant to Section 5, counsel to
the Selling Shareholder and counsel to the Underwriters, will rely upon
the accuracy and truthfulness of the foregoing representations and hereby
consents to such reliance.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE OFFERED SHARES.
(a) The Firm Shares. Upon the terms herein set forth, (i) the Company
agrees to issue and sell to the several Underwriters an aggregate of 3,000,000
Firm Shares and (ii) each of the Selling Shareholders that has a number of Firm
Shares opposite its name on Schedule B agrees to sell to the several
Underwriters such number of Firm Shares. On the basis of the representations,
warranties and agreements herein contained, and upon the terms but subject to
the conditions herein set forth, the Underwriters agree, severally and not
jointly, to purchase from the Company and such Selling Shareholders the
respective number of Firm Shares set forth opposite their names on Schedule A.
The purchase price per Firm Share to be paid by the several Underwriters to the
Company and such Selling Shareholders shall be $[___] per share.
(b) The First Closing Date. Delivery of certificates for the Firm Shares
to be purchased by the Underwriters and payment therefor shall be made at the
offices of Pillsbury Winthrop LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx (or such
other place as may be agreed to by the Company and the Representatives) at 9:00
a.m. New York time, on [___], or such other time and date not later than 1:30
p.m. New York time, on [___] as the Representatives shall designate by notice to
the Company (the time and date of such closing are called the "FIRST CLOSING
DATE"). The Company hereby acknowledges that circumstances under which the
Representatives may provide notice to postpone the First Closing Date as
originally scheduled include, without limitation, any determination by the
Company or the Representatives to recirculate to the public copies of an amended
or supplemented Prospectus or a delay as contemplated by the provisions of
Section 10.
(c) The Optional Shares; Option Closing Date. In addition, on the basis of
the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Selling Shareholders
that have a number of Optional Shares opposite their names on Schedule B hereby
grant an option to the several Underwriters to purchase, severally and not
jointly, up to an aggregate of 600,000 Optional Shares from such Selling
Shareholders at the purchase price per share to be paid by the Underwriters for
the Firm Shares. The option granted hereunder is for use by the Underwriters
solely in covering any over-allotments in connection with the sale and
distribution of the Firm Shares. The option granted hereunder may be exercised
at any time and from time to time in whole or in part upon notice by the
Representatives to such Selling Shareholders, which notice may be given at any
time within 30 days from the date of this Agreement. Such notice shall set forth
(i) the aggregate number of Optional Shares as to which the Underwriters are
exercising the option, (ii) the names and denominations in which the
certificates for the Optional Shares are to be registered and (iii) the time,
date and place at which such certificates will be delivered (which time and date
may be simultaneous with, but not earlier than, the First Closing Date; and in
such case the term "FIRST CLOSING DATE" shall refer to the time and date of
delivery of certificates for the Firm Shares and
12
such Optional Shares). Such time and date of delivery, if subsequent to the
First Closing Date, is called an "OPTION CLOSING DATE" and shall be determined
by the Representatives and shall not be earlier than three nor later than five
full business days after delivery of such notice of exercise. If any Optional
Shares are to be purchased, (A) each Underwriter agrees, severally and not
jointly, to purchase the number of Optional Shares (subject to such adjustments
to eliminate fractional shares as the Representatives may determine) that bears
the same proportion to the total number of Optional Shares to be purchased as
the number of Firm Shares set forth on Schedule A opposite the name of such
Underwriter bears to the total number of Firm Shares and (B) each Selling
Shareholder agrees, severally and not jointly, to sell the number of Optional
Shares (subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Optional Shares to be sold as the number of Optional Shares set forth
in Schedule B opposite the name of such Selling Shareholder bears to the total
number of Optional Shares. The Representatives may cancel the option at any time
prior to its expiration by giving written notice of such cancellation to such
Selling Shareholders.
(d) Public Offering of the Offered Shares. The Representatives hereby
advise the Company and the Selling Shareholders that the Underwriters intend to
offer for sale to the public, initially on the terms set forth in the
Prospectus, their respective portions of the Offered Shares as soon after this
Agreement has been executed and the Registration Statement has been declared
effective as the Representatives, in their sole judgment, has determined is
advisable and practicable.
(e) Payment for the Offered Shares. Payment for the Offered Shares to be
sold by the Company shall be made at the First Closing Date (and, if applicable,
at each Option Closing Date) by wire transfer of immediately available funds to
the order of the Company. Payment for the Offered Shares to be sold by the
Selling Shareholders shall be made at the First Closing Date (and, if
applicable, at each Option Closing Date) by wire transfer of immediately
available funds to the order of the Custodian.
It is understood that the Representatives have been authorized, for
their own accounts and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Optional Shares the Underwriters have agreed to purchase.
Jefferies, individually and not as a Representative of the Underwriters, may
(but shall not be obligated to) make payment for any Offered Shares to be
purchased by any Underwriter whose funds shall not have been received by the
Representatives by the First Closing Date or the applicable Option Closing Date,
as the case may be, for the account of such Underwriter, but any such payment
shall not relieve such Underwriter from any of its obligations under this
Agreement.
Each Selling Shareholder hereby agrees that (i) it will pay all
stock transfer taxes, stamp duties and other similar taxes, if any, payable upon
the sale or delivery of the Offered Shares to be sold by such Selling
Shareholder to the several Underwriters or otherwise in connection with the
performance of such Selling Shareholder's obligations hereunder and (ii) the
Custodian is authorized to deduct for such payment any such amounts from the
proceeds to such Selling Shareholder hereunder and to hold such amounts for the
account of such Selling Shareholder with the Custodian under the Custody
Agreement.
(f) Delivery of the Offered Shares. The Company and the Selling
Shareholders shall deliver, or cause to be delivered, to the Representatives for
the accounts of the several Underwriters certificates for the Firm Shares to be
sold by them at the First Closing Date, against the irrevocable release of a
wire transfer of immediately available funds for the amount of the
13
purchase price therefor. The Selling Shareholders shall also deliver, or cause
to be delivered, to the Representatives for the accounts of the several
Underwriters, certificates for the Optional Shares the Underwriters have agreed
to purchase from them at the First Closing Date or the applicable Option Closing
Date, as the case may be, against the irrevocable release of a wire transfer of
immediately available funds for the amount of the purchase price therefor. The
certificates for the Offered Shares shall be in certificated form (whether or
not in global form) and registered in such names and denominations as the
Representatives shall have requested at least two full business days prior to
the First Closing Date (or the applicable Option Closing Date, as the case may
be) and shall be made available for inspection on the business day preceding the
First Closing Date (or the applicable Option Closing Date, as the case may be)
at a location in New York City as the Representatives may designate. Time shall
be of the essence, and delivery at the time and place specified in this
Agreement is a further condition to the obligations of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00 p.m.
on the second business day following the date the Offered Shares are first
released by the Underwriters for sale to the public, the Company shall deliver
or cause to be delivered, copies of the Prospectus in such quantities and at
such places as the Representatives shall request.
SECTION 3. ADDITIONAL COVENANTS.
A. COVENANTS OF THE COMPANY. The Company further covenants and
agrees with each Underwriter as follows:
(a) Representatives's Review of Proposed Amendments and Supplements.
During the period beginning on the date hereof and ending on the later of the
First Closing Date and such date, as in the opinion of counsel for the
Underwriters, the Prospectus is no longer required by law to be delivered in
connection with sales by an Underwriter or dealer (the "PROSPECTUS DELIVERY
PERIOD"), prior to amending or supplementing the Registration Statement
(including any registration statement filed under Rule 462(b) under the
Securities Act) or the Prospectus (including any amendment or supplement through
incorporation by reference of any report filed under the Exchange Act), the
Company shall furnish to the Representatives for review a copy of each such
proposed amendment or supplement, and the Company shall not file any such
proposed amendment or supplement without the Representatives' consent (such
consent not to be unreasonably withheld or delayed).
(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Representatives in writing of (i) the receipt
of any comments of, or requests for additional or supplemental information from,
the Commission, (ii) the time and date of any filing of any post-effective
amendment to the Registration Statement or any amendment or supplement to any
preliminary prospectus or the Prospectus, (iii) the time and date that any
post-effective amendment to the Registration Statement becomes effective and
(iv) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereto or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Shares from any securities exchange upon
which it is listed for trading or included or designated for quotation, or of
the threatening or initiation of any proceedings for any of such purposes. If
the Commission shall enter any such stop order at any time, the Company will use
its reasonable best efforts to obtain the lifting of such order at the earliest
possible moment. Additionally, the Company agrees that it shall comply with the
provisions of Rules 424(b) and 430A under the Securities Act and will use its
reasonable efforts
14
to confirm that any filings made by the Company under such Rule 424(b) were
received in a timely manner by the Commission.
(c) Amendments and Supplements to the Prospectus and Other Securities Act
Matters. If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if in the opinion of the Representatives or counsel for the Underwriters it
is otherwise necessary to amend or supplement the Prospectus to comply with law,
the Company agrees to promptly prepare (subject to Section 3(A)(a)), file with
the Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Prospectus so that the statements in
the Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
Neither the Representatives' consent to, or delivery of, any such amendment or
supplement shall constitute a waiver of any of the Company's obligations under
this Section 3A(c).
(d) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the
Prospectus Delivery Period, as many copies of the Prospectus and any amendments
and supplements thereto (including any documents incorporated or deemed
incorporated by reference therein) as the Representatives may request.
(e) Blue Sky Compliance. The Company shall cooperate with the
Representatives and counsel for the Underwriters to qualify or register the
Offered Shares for sale under (or obtain exemptions from the application of) the
state securities or blue sky laws or Canadian provincial securities laws of
those jurisdictions designated by the Representatives, shall comply with such
laws and shall continue such qualifications, registrations and exemptions in
effect so long as required for the distribution of the Offered Shares. The
Company shall not be required to qualify as a foreign corporation or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not presently qualified or where it would be subject to
taxation as a foreign corporation. The Company will advise the Representatives
promptly of the suspension of the qualification or registration of (or any such
exemption relating to) the Offered Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such purpose,
and in the event of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its reasonable best efforts to
obtain the withdrawal thereof at the earliest possible moment.
(f) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Offered Shares sold by it in the manner described under the caption
"Use of Proceeds" in the Prospectus.
(g) Transfer Agent. The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Shares.
(h) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earning statement (which need not be audited) covering the twelve-month period
ending April 30, 2005 that satisfies the provisions of Section 11(a) of the
Securities Act.
15
(i) Periodic Reporting Obligations. During the Prospectus Delivery Period
the Company shall file, on a timely basis, with the Commission and the Nasdaq
National Market all reports and documents required to be filed under the
Exchange Act.
(j) Listing. The Company will use its reasonable best efforts to effect
and maintain the inclusion and quotation of the Offered Shares on the Nasdaq
National Market.
(k) Agreement Not to Offer or Sell Additional Shares. During the period
commencing on the date hereof and ending on the 120th day following the date of
the Prospectus (the "LOCK-UP PERIOD"), the Company will not, without the prior
written consent of Jefferies (which consent may be withheld at the sole
discretion of Jefferies), directly or indirectly, sell, offer, contract or grant
any option to sell, pledge, transfer or establish an open "put equivalent
position" within the meaning of Rule 16a-1(h) under the Exchange Act, or
otherwise dispose of or transfer, or announce the offering of, or file any
registration statement under the Securities Act in respect of, any Shares,
options or warrants to acquire Shares or securities exchangeable or exercisable
for or convertible into Shares (other than as contemplated by this Agreement
with respect to the Offered Shares); provided, however, that the Company may
issue Shares or options to purchase Shares, or Shares upon exercise of options,
pursuant to any stock option, stock bonus or other stock plan or arrangement
described in the Prospectus, but only if the aggregate number of such Shares
shall not exceed 359,834 Shares, unless the holders thereof agree in writing
not to sell, offer, dispose of or otherwise transfer any such Shares or options
during such Lock-up Period without the prior written consent of Jefferies (which
consent may be withheld at the sole discretion of the Jefferies).
(l) Exchange Act Compliance. During the Prospectus Delivery Period, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.
(m) Future Reports to the Representatives. During the period of five years
hereafter (unless otherwise available on XXXXX), the Company will furnish to the
Representatives at 000 Xxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx Attention:
Xxxxxx Xxxxx: (i) as soon as practicable after the end of each fiscal year,
copies of the Annual Report of the Company containing the balance sheet of the
Company as of the close of such fiscal year and statements of income,
shareholders' equity and cash flows for the year then ended and the opinion
thereon of the Company's independent public or certified public accountants;
(ii) as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K or other report filed by the Company with the Commission, the
NASD or any securities exchange; and (iii) as soon as available, copies of any
report or communication of the Company mailed generally to holders of its
capital stock.
(n) Investment Limitation. The Company shall not invest or otherwise use
the proceeds received by the Company from its sale of the Offered Shares in such
a manner as would require the Company or any of its subsidiaries to register as
an investment company under the Investment Company Act.
(o) No Stabilization or Manipulation; Compliance with Regulation M. The
Company will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or manipulation
of the price of the Shares or any other reference security, whether to
facilitate the sale or resale of the Offered Shares or otherwise, and the
Company will, and shall cause each of its subsidiaries and use its reasonable
best efforts to cause
16
each of its other affiliates to, comply with all applicable provisions of
Regulation M. If the limitations of Rule 102 of Regulation M ("RULE 102") do not
apply with respect to the Offered Shares or any other reference security
pursuant to any exception set forth in Section (d) of Rule 102, then promptly
upon notice from the Representatives (or, if later, at the time stated in the
notice), the Company will, and shall cause each of its subsidiaries and use its
reasonable best efforts to cause each of its other affiliates to, comply with
Rule 102 as though such exception were not available but the other provisions of
Rule 102 (as interpreted by the Commission) did apply.
(p) Existing Lock-Up Agreement. The Company will enforce all
existing agreements, if any, between the Company and any of its security holders
that prohibit the sale, transfer, assignment, pledge or hypothecation of any of
the Company's securities. In addition, the Company will direct the transfer
agent to place stop transfer restrictions upon any such securities of the
Company that are bound by such existing "lock-up" agreements for the duration of
the periods contemplated in such agreements.
B. COVENANTS OF THE SELLING SHAREHOLDERS. Each Selling Shareholder
further covenants and agrees with each Underwriter:
(a) Agreement Not to Offer or Sell Additional Shares. Such Selling
Shareholder will not, without the prior written consent of Jefferies (which
consent may be withheld in its sole discretion), directly or indirectly, sell,
offer, contract or grant any option to sell (including, without limitation, any
short sale), pledge, transfer, establish an open "put equivalent position"
within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose
of any Shares, options or warrants to acquire Shares, or securities exchangeable
or exercisable for or convertible into Shares currently or hereafter owned
either of record or beneficially (as defined in Rule 13d-3 under the Exchange
Act) by such Selling Shareholder, or publicly announce such Selling
Shareholder's intention to do any of the foregoing, for a period commencing on
the date hereof and continuing through the close of trading on the last day of
the Lock-up Period.
(b) No Stabilization or Manipulation; Compliance with Regulation M.
Such Selling Shareholder will not take, directly or indirectly, any action
designed to or that might be reasonably expected to cause or result in
stabilization or manipulation of the price of the Shares or any other reference
security, whether to facilitate the sale or resale of the Offered Shares or
otherwise, and such Selling Shareholder will, and shall use its reasonable best
efforts to cause each of its affiliates to, comply with all applicable
provisions of Regulation M. If the limitations of Rule 102 do not apply with
respect to the Offered Shares or any other reference security pursuant to any
exception set forth in Section (d) of Rule 102, then promptly upon notice from
the Representatives (or, if later, at the time stated in the notice), such
Selling Shareholder will, and shall use its reasonable best efforts to cause
each of its affiliates to, comply with Rule 102 as though such exception were
not available but the other provisions of Rule 102 (as interpreted by the
Commission) did apply.
(c) Delivery of Forms W-8 and W-9. To deliver to the Representatives
prior to the First Closing Date a properly completed and executed United States
Treasury Department Form W-8 (if the Selling Shareholder is a non-United States
person) or Form W-9 (if the Selling Shareholder is a United States Person).
X. Xxxxxxxxx, on behalf of the several Underwriters, may, in its sole
discretion, waive in writing the performance by the Company or any Selling
Shareholder of any one or more of the foregoing covenants or extend the time for
their performance.
17
SECTION 4. PAYMENT OF EXPENSES. The Company and the Selling Shareholders,
jointly and severally, agree to pay in such proportions as they may agree upon
among themselves all costs, fees and expenses incurred in connection with the
performance of their obligations hereunder and in connection with the
transactions contemplated hereby, including, without limitation, (i) all
expenses incident to the issuance and delivery of the Offered Shares (including
all printing and engraving costs), (ii) all fees and expenses of the registrar
and transfer agent of the Shares, (iii) all necessary issue, transfer and other
stamp taxes in connection with the issuance and sale of the Offered Shares to
the Underwriters, (iv) all fees and expenses of the Company's counsel,
independent public or certified public accountants and other advisors, (v) all
costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement (including
financial statements, exhibits, schedules, consents and certificates of
experts), each preliminary prospectus and the Prospectus, and all amendments and
supplements thereto, and this Agreement, (vi) all filing fees, attorneys' fees
and expenses incurred by the Company or the Underwriters in connection with
qualifying or registering (or obtaining exemptions from the qualification or
registration of) all or any part of the Offered Shares for offer and sale under
the state securities or blue sky laws or the provincial securities laws of
Canada, and, if requested by the Representatives, preparing and printing a "BLUE
SKY SURVEY" or memorandum, and any supplements thereto, advising the
Underwriters of such qualifications, registrations, determinations and
exemptions, (vii) the filing fees incident to, and the reasonable fees and
expenses of counsel for the Underwriters in connection with, the NASD's review
and approval of the Underwriters' participation in the offering and distribution
of the Offered Shares, (viii) the fees and expenses associated with including
the Offered Shares on the Nasdaq National Market, (ix) the costs and expenses
relating to investor presentations on any "road show" undertaken in connection
with the marketing of the offering of the Offered Shares (including the
reasonable costs and expenses of the Underwriters), including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and the
Underwriters and any such consultants, and the cost of any aircraft chartered in
connection with the road show and (x) all other fees, costs and expenses
referred to in Item 14 of Part II of the Registration Statement. Except as
provided in this Section 4 and in Sections 6, 8 and 9, the Underwriters shall
pay their own expenses, including the fees and disbursements of their counsel.
The Selling Shareholders further agree with each Underwriter to pay
(directly or by reimbursement) all fees and expenses incident to the performance
of their obligations under this Agreement that are not otherwise specifically
provided for herein, including, without limitation, (i) fees and expenses of
counsel and other advisors for such Selling Shareholders, (ii) fees and expenses
of the Custodian and (iii) expenses and taxes incident to the sale and delivery
of the Offered Shares to be sold by such Selling Shareholders to the
Underwriters hereunder (which taxes, if any, may be deducted by the Custodian
under the provisions of Section 2).
This Section 4 shall not affect or modify any separate, valid agreement
relating to the allocation of payment of expenses between the Company, on the
one hand, and the Selling Shareholders, on the other hand.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Offered
Shares as provided herein on the First Closing Date and, with respect to the
Optional Shares, each Option Closing Date, if applicable, shall be subject to
the accuracy of the representations and warranties on the part of the Company
and the Selling Shareholders set forth in Section 1 as of the date hereof and as
of the First Closing
18
Date as though then made and, with respect to the Optional Shares, as of each
Option Closing Date as though then made, to the timely performance by the
Company and the Selling Shareholders of their respective covenants and other
obligations hereunder, and to each of the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Representatives
shall have each received from BDO Xxxxxxx, LLP, independent public or certified
public accountants for the Company, (i) a letter dated the date hereof addressed
to the Underwriters, in form and substance reasonably satisfactory to the
Representatives, containing statements and information of the type ordinarily
included in accountant's "comfort letters" to underwriters, delivered according
to Statement of Auditing Standards No. 72 (or any successor bulletin), with
respect to the audited and unaudited financial statements and certain financial
information contained in the Registration Statement and the Prospectus (and the
Representatives shall have received a conformed copy of such accountants' letter
for each of the other several Underwriters) and (ii) confirming that they are
(A) independent public or certified public accountants as required by the
Securities Act and the Exchange Act and (B) in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01 of
Regulation S-X.
(b) Compliance with Registration Requirements; No Stop Order; No Objection
from NASD. For the period from and after effectiveness of this Agreement and
prior to the First Closing Date and, with respect to the Optional Shares, each
Option Closing Date:
(i) the Company shall have filed the Prospectus with the Commission
(including the information required by Rule 430A under the Securities Act)
in the manner and within the time period required by Rule 424(b) under the
Securities Act; or the Company shall have filed a post-effective amendment
to the Registration Statement containing the information required by such
Rule 430A, and such post-effective amendment shall have become effective;
(ii) no stop order suspending the effectiveness of the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment to the Registration Statement, shall be in effect and no
proceedings for such purpose shall have been instituted or threatened by
the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change. For the period from and after the date of
this Agreement and prior to the First Closing Date and, with respect to the
Optional Shares, each Option Closing Date, in the judgment of the
Representatives there shall not have occurred any Material Adverse Change.
(d) Opinions of Counsel for the Company. On each of the First Closing Date
and each Option Closing Date, the Representatives shall have each received (i)
the opinion of Xxxxxxx X. Xxxxx, Esq., General Counsel of the Company, dated as
of such Closing Date, the form of which is attached as Exhibit A-1 and (ii) the
opinion of Xxxxxxxxx Xxxxxxxx LLP, counsel for the Company, dated as of such
Closing Date, the form of which is attached as Exhibit A-2 (and the
Representatives shall have received a conformed copy of each such counsel's
legal opinion for each of the other several Underwriters).
19
(e) Opinion of Counsel for the Underwriters. On each of the First Closing
Date and each Option Closing Date, the Representatives shall have each received
the opinion of Pillsbury Winthrop LLP, counsel for the Underwriters, in form and
substance satisfactory to the Underwriters, dated as of such Closing Date.
(f) Officers' Certificate. On each of the First Closing Date and each
Option Closing Date, the Representatives shall have each received a written
certificate executed by the Chairman of the Board, Chief Executive Officer or
President of the Company and the Chief Financial Officer or Chief Accounting
Officer of the Company, dated as of such Closing Date, to the effect set forth
in Section 5(b)(ii), and further to the effect that:
(i) for the period from and after the date of this Agreement and
prior to such Closing Date, there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the Company
set forth in Section 1(A) are true and correct with the same force and
effect as though expressly made on and as of such Closing Date; and
(iii) the Company has complied with all the agreements hereunder and
satisfied all the conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date.
(g) Bring-down Comfort Letter. On each of the First Closing Date and each
Option Closing Date, the Representatives shall have each received from BDO
Xxxxxxx, LLP, independent public or certified public accountants for the
Company, a letter dated such date, in form and substance satisfactory to the
Representatives, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to Section 5(a), except that the specified
date referred to therein for the carrying out of procedures shall be no more
than three business days prior to the First Closing Date or the applicable
Option Closing Date, as the case may be (and the Representatives shall have
received a conformed copy of such accountants' letter for each of the other
several Underwriters).
(h) Opinion of Counsel for the Selling Shareholders. On each of the First
Closing Date and each Option Closing Date, the Representatives shall have each
received the opinion of Xxxxxxxxx Xxxxxxxx LLP, counsel for the Selling
Shareholders, dated as of such Closing Date, the form of which is attached as
Exhibit B (and the Representatives shall have received a conformed copy of such
counsel's legal opinion for each of the other several Underwriters).
(i) Selling Shareholders' Certificate. On each of the First Closing Date
and each Option Closing Date, the Representatives shall have each received a
written certificate executed by the Attorney-in-Fact of each Selling
Shareholder, dated as of such Closing Date, to the effect that:
(i) the representations, warranties and covenants of such Selling
Shareholder set forth in Section 1(B) are true and correct with the same
force and effect as though expressly made by such Selling Shareholder on
and as of such Closing Date; and
(ii) such Selling Shareholder has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied
at or prior to such Closing Date.
20
(j) Selling Shareholders' Documents. On the date hereof, the Company and
the Selling Shareholders shall have furnished for review by the Representatives
copies of the Powers of Attorney and Custody Agreements executed by each of the
Selling Shareholders and such further information, certificates and documents as
the Representatives may reasonably request.
(k) Lock-Up Agreement from Certain Shareholders of the Company. On or
prior to the date hereof, the Company shall have furnished to the
Representatives an agreement in the form of Exhibit C from each of the
shareholders of the Company listed in Exhibit D and such agreement shall be in
full force and effect on each of the First Closing Date and each Option Closing
Date.
(l) Additional Documents. On or before each of the First Closing Date and
each Option Closing Date, the Representatives and counsel for the Underwriters
shall have received such information, documents and opinions as they may
reasonably require for the purposes of enabling them to pass upon the issuance
and sale of the Offered Shares as contemplated herein, or in order to evidence
the accuracy of any of the representations and warranties, or the satisfaction
of any of the conditions or agreements, herein contained.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES
If this Agreement is terminated by the Representatives pursuant to
Sections 5, 7, 10 or 11, or if the sale to the Underwriters of the Offered
Shares on the First Closing Date is not consummated because of any refusal,
inability or failure on the part of the Company or the Selling Shareholders to
perform any agreement herein or to comply with any provision hereof, the Company
agrees to reimburse the Representatives and the other Underwriters (or such
Underwriters as have terminated this Agreement with respect to themselves),
severally, upon demand for all out-of-pocket expenses that shall have been
reasonably incurred by the Representatives and the Underwriters in connection
with the proposed purchase and the offering and sale of the Offered Shares,
including, without limitation, fees and disbursements of counsel, printing
expenses, travel expenses, postage, facsimile and telephone charges.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT
This Agreement shall not become effective until the later of (a) the
execution of this Agreement by the parties hereto and (b) notification by the
Commission to the Company and the Representatives of the effectiveness of the
Registration Statement under the Securities Act. Prior to such effectiveness,
this Agreement may be terminated by any party by notice to each of the other
parties hereto, and any such termination shall be without liability on the part
of (i) the Company or the Selling Shareholders to any Underwriter, except that
the Company and the Selling Shareholders shall be obligated to reimburse the
expenses of the Representatives and the Underwriters pursuant to Sections 4 and
6, (ii) any Underwriter to the Company or the Selling Shareholders or (c) any
party hereto to any other party, except that the provisions of Sections 8 and 9
shall at all times be effective and shall survive such termination.
SECTION 8. INDEMNIFICATION
(a) Indemnification of the Underwriters by the Company and the Selling
Shareholders II. Each of the Company and the Selling Shareholders named under
the caption "Category II" in Schedule B (the "SELLING SHAREHOLDERS II") agrees
to indemnify and hold harmless each Underwriter, its officers and employees, and
each person, if any, who controls any Underwriter within the meaning of the
Securities Act and the Exchange Act against any loss, claim, damage, liability
or expense, as incurred, to which such Underwriter or such controlling person
may
21
become subject, under the Securities Act, the Exchange Act or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based (i) upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, or any amendment thereto,
including any information deemed to be a part thereof pursuant to Rule 430A
under the Securities Act, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading; or (ii) upon any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (iii) any act or failure to act or any alleged act or failure to
act by any Underwriter in connection with, or relating in any manner to, the
Shares or the offering contemplated hereby, and that is included as part of or
referred to in any loss, claim, damage, liability or action arising out of or
based upon any matter covered by clause (i) or (ii) above, provided that none of
the Company and the Selling Shareholders II shall be liable under this clause
(iii) to the extent that a court of competent jurisdiction shall have determined
by a final judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its bad faith or willful misconduct; and to
reimburse each Underwriter and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by Jefferies)
as such expenses are reasonably incurred by such Underwriter or such controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that the foregoing indemnity agreement shall not apply to any loss,
claim, damage, liability or expense to the extent, but only to the extent,
arising out of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by the Representatives expressly
for use in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), it being understood and
agreed that the only such information furnished by the Representatives to the
Company consists of the information described in Section 8(c); and provided,
further, that the liability of each Selling Shareholder II under the foregoing
indemnity agreement shall be limited to an amount equal to the initial public
offering price of the Offered Shares sold by such Selling Shareholder II, less
the underwriting discount, as set forth on the front cover page of the
Prospectus. The indemnity agreement set forth in this Section 8(a) shall be in
addition to any liabilities that the Company and the Selling Shareholders II may
otherwise have.
(b) Indemnification of the Underwriters by the Selling Shareholder I
. The Selling Shareholder named under the caption "Category I" in Schedule
B (the "SELLING SHAREHOLDER I") agrees, severally and not jointly, to indemnify
and hold harmless each Underwriter, its officers and employees, and each person,
if any, who controls any Underwriter within the meaning of the Securities Act
and the Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Underwriter or such controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any preliminary prospectus or the
Prospectus (or any
22
amendment or supplement thereto), or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company and the Underwriters by the Selling Shareholder I
expressly for use therein; and to reimburse each Underwriter and each such
controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by Jefferies) as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; and provided, further, that the liability
of the Selling Shareholder I under the foregoing indemnity agreement shall be
limited to an amount equal to the initial public offering price of the Offered
Shares sold by the Selling Shareholder I, less the underwriting discount, as set
forth on the front cover page of the Prospectus. The indemnity agreement set
forth in this Section 8(b) shall be in addition to any liabilities that the
Selling Shareholder I may otherwise have.
(c) Indemnification of the Company, its Directors and Officers and the
Selling Shareholders. Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement, the Selling Shareholders and
each person, if any, who controls the Company or any Selling Shareholder within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer, Selling Shareholder or controlling person may become subject,
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company and the Selling Shareholders by the Representatives
expressly for use therein; and to reimburse the Company, or any such director,
officer, Selling Shareholder or controlling person for any legal and other
expense reasonably incurred by the Company, or any such director, officer,
Selling Shareholder or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action. Each of the Company and the Selling Shareholders
hereby acknowledges that the only information that the Underwriters have
furnished to the Company and the Selling Shareholders expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) are the statements set forth in the third
paragraph under the first table and in the fifth through ninth paragraphs under
the second table in each case under the caption "Underwriting" in the
Prospectus. The indemnity agreement set forth in this Section 8(c) shall be in
addition to any liabilities that each Underwriter may otherwise have.
(d) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such
23
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability that it may have to
any indemnified party for contribution or otherwise than under the indemnity
agreement contained in this Section 8 or to the extent it is not prejudiced as a
proximate result of such failure. In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek indemnity
from an indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it shall elect, jointly with all other
indemnifying parties similarly notified, by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that a conflict may
arise between the positions of the indemnifying party and the indemnified party
in conducting the defense of any such action or that there may be legal defenses
available to it or other indemnified parties that are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of such indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with local counsel), approved by the indemnifying
party, representing the indemnified parties who are parties to such action) or
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.
(e) Settlements. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(d), the indemnifying party agrees that it shall be liable for any settlement
of any proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement, compromise or consent to the entry
of judgment in any pending or threatened action, suit or proceeding in respect
of which any indemnified party is or could have been a party and indemnity was
or could have been sought hereunder by such indemnified party, unless such
settlement, compromise or consent includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
SECTION 9. CONTRIBUTION. If the indemnification provided for in Section 8
is for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party in
24
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
paid or payable by such indemnified party, as incurred, as a result of any
losses, claims, damages, liabilities or expenses referred to therein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Shareholders, on the one hand, and the Underwriters, on
the other hand, from the offering of the Offered Shares pursuant to this
Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Selling Shareholders, on the one hand, and the
Underwriters, on the other hand, in connection with the statements or omissions
that resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Selling Shareholders, on the one hand, and the
Underwriters, on the other hand, in connection with the offering of the Offered
Shares pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Offered Shares
pursuant to this Agreement (before deducting expenses) received by the Company
and the Selling Shareholders, and the total underwriting discount received by
the Underwriters, in each case as set forth on the front cover page of the
Prospectus bear to the aggregate initial public offering price of the Offered
Shares as set forth on such cover. The relative fault of the Company and the
Selling Shareholders (relative as to each other), on the one hand, and the
Underwriters, on the other hand, shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company and the Selling Shareholders (relative as to
each other), on the one hand, or the Underwriters, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(d), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 8(d) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8(d) for purposes of indemnification.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Offered Shares underwritten
by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several, and not joint, in proportion to their
respective underwriting commitments as set forth opposite their names in
Schedule A. For purposes of this Section 9, each officer and employee of an
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the
25
Registration Statement, and each person, if any, who controls the Company with
the meaning of the Securities Act and the Exchange Act shall have the same
rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on the
First Closing Date or the applicable Option Closing Date, as the case may be,
any one or more of the several Underwriters shall fail or refuse to purchase
Offered Shares that it or they have agreed to purchase hereunder on such date,
and the aggregate number of Offered Shares that such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Offered Shares to be purchased on such date, the
Representatives may make arrangements satisfactory to the Company for the
purchase of such Offered Shares by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
other Underwriters shall be obligated, severally, in the proportions that the
number of Firm Shares set forth opposite their respective names on Schedule A
bears to the aggregate number of Firm Shares set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as may be
specified by the Representatives with the consent of the non-defaulting
Underwriters, to purchase the Offered Shares that such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on the
First Closing Date or the applicable Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Offered
Shares and the aggregate number of Offered Shares with respect to which such
default occurs exceeds 10% of the aggregate number of Offered Shares to be
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Offered Shares are not made within 48 hours
after such default, this Agreement shall terminate without liability of any
party to any other party except that the provisions of Sections 4, 6, 8 and 9
shall at all times be effective and shall survive such termination. In any such
case either the Representatives or the Company shall have the right to postpone
the First Closing Date or the applicable Option Closing Date, as the case may
be, but in no event for longer than seven days in order that the required
changes, if any, to the Registration Statement and the Prospectus or any other
documents or arrangements may be effected.
As used in this Agreement, the term "UNDERWRITER" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
10. Any action taken under this Section 10 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First Closing Date
this Agreement may be terminated by the Representatives by notice given to the
Company and the Selling Shareholders if at any time (a) trading or quotation in
any of the Company's securities shall have been suspended or limited by the
Commission or by the Nasdaq National Market, or trading in securities generally
on either the Nasdaq Stock Market or the New York Stock Exchange shall have been
suspended or limited, or minimum or maximum prices shall have been generally
established on either the Nasdaq Stock Market or the New York Stock Exchange by
the Commission or the NASD; (b) a general banking moratorium shall have been
declared by any of federal, New York, Delaware or California authorities; (c)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective substantial change in United States' or
international political, financial or economic conditions, as in the judgment of
the Representatives is material and adverse and makes it impracticable to market
the Offered Shares in the manner and on the terms described in the Prospectus or
to enforce contracts for the sale of securities; (d) in the judgment of the
26
Representatives there shall have occurred any Material Adverse Change; or (e)
the Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the judgment of the
Representatives may interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have been
insured. Any termination pursuant to this Section 11 shall be without liability
on the part of (i) the Company or the Selling Shareholders to any Underwriter,
except that the Company and the Selling Shareholders shall be obligated to
reimburse the expenses of the Representatives and the Underwriters pursuant to
Sections 4 and 6, (ii) any Underwriter to the Company or the Selling
Shareholders or (iii) of any party hereto to any other party, except that the
provisions of Sections 8 and 9 shall at all times be effective and shall survive
such termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Shareholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Shareholders, as
the case may be, and will survive delivery of and payment for the Offered Shares
sold hereunder and any termination of this Agreement.
SECTION 13. NOTICES. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
Xxxxxxxxx & Company, Inc.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 0000000
Attention: General Counsel
with a copy to:
Pillsbury Winthrop LLP
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
If to the Company:
Source Interlink Companies, Inc.
00000 Xxxxxxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxx Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq., General Counsel
with a copy to:
Xxxxxxxxx Xxxxxxxx XXX
Xxx Xxxxxxxxxxxx Xxxxxx, Xxxxx 0000
000 Xxxxx Xxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
27
If to the Selling Shareholders:
Mellon Investor Services, L.L.C.
000 Xxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxx
Any party hereto may change the address for receipt of communications by
giving written notice to the others.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Underwriters pursuant
to Section 10, and to the benefit of the employees, officers and directors and
controlling persons referred to in Sections 8 and 9, and in each case their
respective successors and personal representatives, and no other person will
have any right or obligation hereunder. The term "SUCCESSORS" shall not include
any purchaser of the Offered Shares as such from any of the Underwriters merely
by reason of such purchase.
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
SECTION 16. GOVERNING LAW PROVISIONS. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed in such state. Any legal suit,
action or proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby ("RELATED PROCEEDINGS") may be instituted in
the federal courts of the United States of America located in the Borough of
Manhattan in the City of New York or the courts of the State of New York in each
case located in the Borough of Manhattan in the City of New York (collectively,
the "SPECIFIED COURTS"), and each party irrevocably submits to the exclusive
jurisdiction (except for proceedings instituted in regard to the enforcement of
a judgment of any such court (a "RELATED JUDGMENT"), as to which such
jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail to such
party's address set forth above shall be effective service of process for any
suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the Specified Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such suit, action or other proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 17. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Section headings herein are for the convenience of the parties only and
shall not affect the construction or interpretation of this Agreement.
28
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding these provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 fairly
allocate the risks in light of the ability of the parties to investigate the
Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
29
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company and the Custodian the enclosed
copies hereof, whereupon this instrument, along with all counterparts hereof,
shall become a binding agreement in accordance with its terms.
Very truly yours,
SOURCE INTERLINK COMPANIES, INC.
By:__________________________
Name
Title
THE SELLING SHAREHOLDERS,
NAMED IN SCHEDULE B,
ACTING SEVERALLY
By:__________________________
Attorney-in-fact
The foregoing Underwriting Agreement is hereby confirmed and accepted by the
Representatives in New York, New York as of the date first above written.
XXXXXXXXX & COMPANY, INC.
XXXXXXX & COMPANY, INC.
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By XXXXXXXXX & COMPANY, INC.
By: __________________________
Name
Title
30
SCHEDULE A
NUMBER OF
FIRM SHARES
UNDERWRITERS TO BE
PURCHASED
Xxxxxxxxx & Company, Inc. .............. [___]
Xxxxxxx & Company, Inc. ................ [___]
[___] .................................. [___]
[___] .................................. [___]
[___] .................................. [___]
Total............................. 4,000,000
SCHEDULE B
NUMBER OF MAXIMUM NUMBER
SELLING SHAREHOLDER FIRM SHARES OF OPTIONAL
TO BE SOLD SHARES
TO BE SOLD
CATEGORY I:
Xxxxxxxx X. Xxxxxxx 800,000 --
Xxxxx Xxxxxx -- 95,000
Xxxxx X. Xxxxx -- 140,000
Xxxx Xxxxxxx -- 30,000
Xxxxx X. Franc, III -- 30,000
Xxxxxx X. Xxxxx -- 20,000
CATEGORY II:
S. Xxxxxx Xxxxxx 200,000 125,000
Xxxxx X. Xxxxxx -- 90,000
Xxxxx X. Xxxxxx -- 50,000
Xxxx Xxxxxxx -- 20,000
Total:............................ 1,000,000 600,000
=======
EXHIBIT A-1
[Legal Opinion of the Company's General Counsel]
A-1
EXHIBIT A-2
[Legal Opinion of Xxxxxxxxx Xxxxxxxx LLP for Company]
A-2
EXHIBIT B
[Legal Opinion of Xxxxxxxxx Xxxxxxxx LLP for Selling Shareholders]
B-1
EXHIBIT C
[Date]
Xxxxxxxxx & Company, Inc.
Xxxxxxx & Company, Inc.
As Representatives of the Several Underwriters
c/x Xxxxxxxxx & Company, Inc.
000 Xxxxxxx Xxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
RE: Source Interlink Companies, Inc. (the "COMPANY")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
common stock, par value $0.01 per share, of the Company ("SHARES") or securities
convertible into or exchangeable or exercisable for Shares. The Company proposes
to carry out a public offering of Shares (the "OFFERING") for which you will act
as the representatives of the underwriters. The undersigned recognizes that the
Offering will be of benefit to the undersigned and will benefit the Company by,
among other things, raising additional capital for its operations. The
undersigned acknowledges that you and the other underwriters are relying on the
representations and agreements of the undersigned contained in this letter in
carrying out the Offering and in entering into underwriting arrangements with
the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not (and will cause any spouse or immediate family member of
the spouse or the undersigned living in the undersigned's household not to),
without the prior written consent of Xxxxxxxxx & Company, Inc. (which consent
may be withheld in its sole discretion), directly or indirectly, sell, offer,
contract or grant any option to sell (including, without limitation, any short
sale), pledge, transfer, establish an open "put equivalent position" within the
meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934 or otherwise
dispose of any Shares, options or warrants to acquire Shares, or securities
exchangeable or exercisable for or convertible into Shares, currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934) by the undersigned (or such spouse or
family member), or publicly announce an intention to do any of the foregoing,
for a period commencing on the date hereof and continuing through the close of
trading on the date [___] days after the date of the Company's prospectus
relating to the Offering. The undersigned also agrees and consents to the entry
of stop transfer instructions with the Company's transfer agent and registrar
against the transfer of Shares or securities convertible into or exchangeable or
exercisable for Shares held by the undersigned except in compliance with the
foregoing restrictions.
With respect to the Offering only, the undersigned waives any registration
rights relating to registration under the Securities Act of any Shares owned
either of record or beneficially by the undersigned, including any rights to
receive notice of the Offering.
C-1
This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned.
-------------------------------------------
Printed Name of Holder
By:
---------------------------------
Signature
-------------------------------------------
Printed Name of Person Signing
(and indicate capacity of person signing if
signing as custodian, trustee, or on behalf
of an entity)
EXHIBIT D
Xxxxxxxx X. Xxxxxxx
S. Xxxxxx Xxxxxx
Xxxxx X. Xxxxxx
Xxxxx Xxxxxx
Xxxxx X. Xxxxx
Xxxx Xxxxxxx
Xxxxx X. Xxxxxx
Xxxxx X. Franc, III
Xxxxxx X. Xxxxx
Xxxx Xxxxxxx
