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EXHIBIT 1.1
_______________ SHARES
PROSOURCE, INC.
CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE
UNDERWRITING AGREEMENT
__________, 1996
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_____________, 1996
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
Xxxxx Xxxxxx Inc.
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs and Mesdames:
ProSource, Inc., a Delaware corporation (the "COMPANY"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS") ______________ shares of its Class A Common Stock, par value
$.01 per share (the "FIRM SHARES"). The Company also proposes to issue and sell
to the several Underwriters not more than an additional ______________ shares of
its Class A Common Stock, par value $.01 per share (the "ADDITIONAL SHARES") if
and to the extent that you, as Managers of the offering, shall have determined
to exercise, on behalf of the Underwriters, the right to purchase such shares of
common stock granted to the Underwriters in Section 2 hereof. The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"SHARES." The shares of Class A Common Stock, par value $.01 per share and the
shares of Class B Common Stock, par value $.01 per share of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "COMMON STOCK."
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462
Registration Statement.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to and agrees with each of the Underwriters that:
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(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did not
contain and, as amended or supplemented, if applicable, 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,
(ii) the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder and (iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph 1(b)
do not apply to statements or omissions in the Registration Statement or the
Prospectus based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
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(e) This Agreement has been duly authorized, executed and delivered by
the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid and
non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will not
be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene any
provision of applicable law or the certificate of incorporation or by-laws of
the Company or any agreement or other instrument binding upon the Company or any
of its subsidiaries that is material to the Company and its subsidiaries, taken
as a whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be required and have been obtained
under the Federal securities laws or such as may be required by the securities
or Blue Sky laws of the various states in connection with the offer and sale of
the Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
(k) There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company or any of its subsidiaries
is a party or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the Registration
Statement or the Prospectus and are not so described or any statutes,
regulations, contracts or other documents that are required to be described in
the Registration
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Statement or the Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required.
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus, will not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(o) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business, operations
and properties of the Company and its subsidiaries, in the course of which it
identifies and evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities would not,
singly or in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(p) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
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securities of the Company or to require the Company to include such securities
with the Shares registered pursuant to the Registration Statement, except in
each case, as described in the Prospectus. The Company has received waivers of
any such rights exercisable in connection with the Offering.
(q) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba.
(r) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (1) the Company and its
subsidiaries have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business; (2) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock; and (3) there has not been any material change in the
capital stock, short-term debt or long-term debt of the Company and its
consolidated subsidiaries, except in each case as described in or contemplated
by the Prospectus (exclusive of any amendments or supplements thereto subsequent
to the date of this Agreement).
(s) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in the Prospectus or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries; and
any real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries, in each case except as described in or contemplated by the
Prospectus.
(t) No material labor dispute with the employees of the Company or any
of its subsidiaries exists, except as described in or contemplated by the
Prospectus, or, to the knowledge of the Company, is imminent.
(u) The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither the Company nor any such subsidiary has been refused any
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insurance coverage applied for; and neither the Company nor any such subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not materially and adversely affect the condition, financial or
otherwise, or the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, except as described in or contemplated by the
Prospectus.
(v) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material adverse
change in the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, except as
described in or contemplated by the Prospectus.
(w) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or specific
authorizations; (2) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (3) access to assets is
permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(x) The Company and its subsidiaries own or possess, license, or can
acquire on reasonable terms, all material intellectual property and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names currently employed by them in connection with the business now
operated by them, and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would result in
any material adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken as a
whole.
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2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to sell
to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $______ a share (the "PURCHASE PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to _______________
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the Underwriters and the date
on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Xxxxxx Xxxxxxx & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder, (B) the issuance by the Company of
shares of Common Stock (i) upon the exercise of an option or warrant or the
conversion of a security described in the Prospectus or (ii) to Onex Corporation
or an affiliate thereof ("ONEX") in
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consideration for the agreement by Onex to relinquish its rights under a
management agreement as described in the Prospectus, or (C) the issuance by the
Company in the ordinary course of business of options to purchase Common Stock
pursuant to employee benefit plans described in the Prospectus.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$_____________ a share (the "PUBLIC OFFERING PRICE") and to certain dealers
selected by you at a price that represents a concession not in excess of $______
a share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of $_____ a share, to any
Underwriter or to certain other dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on __________, 1996, or at such
other time on the same or such other date, not later than _________, 1996, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE."
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on the date specified in the
notice described in Section 2 or at such other time on the same or on such other
date, in any event not later than _______, 1996, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "OPTION CLOSING DATE."
The Firm Shares and Additional Shares shall be registered in such
names and in such denominations as you shall request in writing not later than
one full business day prior to the Closing Date or the Option Closing Date, as
the case may be. The Firm Shares and Additional Shares shall be delivered to you
on the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
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5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 10:00 a.m. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and that makes it, in
your judgment, impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in clause (a)(i) above and to the effect that
the representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has complied
with all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Xxxx, Scholer, Fierman, Xxxx & Handler, LLP, outside counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus and
is duly qualified to transact business and is in good standing in
Florida;
(ii) each of ProSource Services Corporation, BroMar Services, Inc.,
ProSource Investments, Inc. and PSC Services of Florida, Inc. has
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been duly incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
the corporate power and authority to own its property and to conduct
its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in the respective states set
forth on Appendix A hereto;
(iii) the authorized capital stock of the Company conforms as to legal
matters to the description thereof contained under the caption
"Description of Capital Stock" in the Prospectus;
(iv) the shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid
and non-assessable;
(v) the Shares have been duly authorized and, when issued and delivered
in accordance with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, and the issuance of such Shares will not
be subject to any preemptive or similar rights;
(vi) this Agreement has been duly authorized, executed and delivered by
the Company;
(vii) (A) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of (1) applicable law or the
certificate of incorporation or by-laws of the Company, (2) any
agreement or other instrument binding upon the Company or any of its
subsidiaries that is filed as an exhibit to the Registration Statement
or listed on the attached officer's certificate or (3) any judgment,
order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary known to such counsel,
and (B) no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement,
except such as may be required and have been obtained under the Federal
securities laws or such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of
the Shares;
(viii) the statements (A) in the Prospectus under the captions "Certain
Transactions," "Description of Capital Stock", and "Shares Available
for Future Sale" and (B) in the Registration Statement in Items
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14 and 15, in each case insofar as such statements constitute summaries
of the legal matters, documents or proceedings referred to therein,
fairly present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the matters
referred to therein in all material respects;
(ix) (A) to the best of such counsel's knowledge, after due inquiry
solely of the Chairman of the Board, Chief Financial Officer and
Treasurer of the Company, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties of
the Company or any of its subsidiaries is subject that are required to
be described in the Registration Statement or the Prospectus and are
not so described and such counsel does not know of any statutes or
regulations that are required to be described in the Registration
Statement or the Prospectus and are not so described and (B) to the
knowledge of such counsel, there are no contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required;
(x) the Company is not and, immediately after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended;
(xi) (A) such counsel is of the opinion that the Registration Statement
and Prospectus (except for financial statements and schedules and other
financial and statistical data included therein as to which such
counsel need not express any opinion) comply as to form in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder, and (B) nothing has come to
such counsel's attention that causes it to believe that (except for
financial statements and schedules and other financial and statistical
data as to which such counsel need not express any belief) the
Registration Statement and the prospectus included therein at the time
the Registration Statement became effective contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the Prospectus contains any untrue
statement of a material fact or omits to state a material fact
necessary in
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order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) The Underwriters shall have received on the Closing Date an
opinion of Xxxxx Xxxx & Xxxxxxxx, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in subparagraphs (v), (vi),
(viii) (but only as to the statements in the Prospectus under "Description of
Capital Stock" and "Underwriters") and (xi) of paragraph (c) above.
With respect to subparagraph (xi) of paragraph (c) above, Xxxx,
Scholer, Fierman, Xxxx & Handler, LLP and Xxxxx Xxxx & Xxxxxxxx may state that
their opinion and belief are based upon their participation in the preparation
of the Registration Statement and Prospectus and any amendments or supplements
thereto and review and discussion of the contents thereof, but are without
independent check or verification, except as specified.
The opinion of Xxxx, Scholer, Fierman, Xxxx & Handler, LLP described
in paragraph (c) above shall be rendered to the Underwriters at the request of
the Company and shall so state therein.
(e) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to the Underwriters, from KPMG
Peat Marwick LLP, independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus; provided
that the letter delivered on the Closing Date shall use a "cut-off date" not
earlier than the date hereof.
(f) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you on the one hand, and each of the shareholders of
the Company and Xxxxxx Products, Inc. on the other hand, relating to sales and
certain other dispositions of shares of Common Stock or certain other
securities, delivered to you on or before the date hereof, shall be in full
force and effect on the Closing Date.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
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6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, three signed copies of the
Registration Statement (including exhibits thereto) and for delivery to each
other Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and to furnish to you in New York City, without charge, prior
to 10:00 A.M. New York City time on the business day next succeeding the date of
this Agreement and during the period mentioned in paragraph (c) below, as many
copies of the Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public offering
of the Shares as in the opinion of counsel for the Underwriters the Prospectus
is required by law to be delivered in connection with sales by an Underwriter or
dealer, 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 counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to comply
with applicable law, forthwith to prepare, file with the Commission and furnish,
at its own expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have been sold by
you on behalf of the Underwriters and to any other dealers upon request, either
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.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-month
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period ending ________, 1997 that satisfies the provisions of Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder.
(f) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Shares under the Securities Act and, subject to the last sentence of this
paragraph (f), all other fees or expenses in connection with the preparation and
filing of the Registration Statement, any preliminary prospectus, the Prospectus
and amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies thereof to
the Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky memorandum in connection with the
offer and sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale under state
securities laws as provided in Section 6(d) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky
memorandum, (iv) all filing fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification of the
offering of the Shares by the National Association of Securities Dealers, Inc.,
(v) all fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A relating to the Common Stock and all costs
and expenses incident to listing the Shares on the Nasdaq National Market, (vi)
the cost of printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent or registrar , (viii) the costs and expenses of
the Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show with the prior approval of the Company, and (ix) all other costs and
expenses incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section. It is understood,
however, that except as provided in this Section, Section 7 entitled "Indemnity
and Contribution", and the last paragraph of Section 9 below, the Underwriters
will pay all of their costs and expenses, including fees and
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disbursements of their counsel, stock transfer taxes payable on resale of any of
the Shares by them and any advertising expenses connected with any offers they
may make.
7. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein; provided, however, that
the foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter from whom the person asserting
any such losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 6(a) hereof.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
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(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraph (a) or (b) of this Section 7, such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Xxxxxx Xxxxxxx & Co. Incorporated, in the case of
parties indemnified pursuant to paragraph (a) of this Section 7, and by the
Company, in the case of parties indemnified pursuant to paragraph (b) of this
Section 7. The indemnifying party 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 from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a) or
(b) of this Section 7 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
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such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares 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 on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand in connection
with the offering of the Shares shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Shares (before
deducting expenses) received by the Company and the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in the
table on the cover of the Prospectus, bear to the aggregate Public Offering
Price of the Shares. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Underwriters' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the respective number of
Shares they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (d) of this Section 7. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was
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not guilty of such fraudulent misrepresentation. The remedies provided for in
this Section 7 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Shares.
8. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
9. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I 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 you may specify, to
purchase the Shares which
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such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the number of Shares that
any Underwriter has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such number of
Shares without the written consent of such Underwriter. If, on the Closing Date,
any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and
the aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. If, on the
Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting Underwriters would have been obligated to purchase in
the absence of such default. No provision of, or any action taken under, this
paragraph shall relieve any defaulting Underwriter from liability in respect of
any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
10. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
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12. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
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Very truly yours,
PROSOURCE, INC.
By:
------------------------------
Name:
Title:
Accepted as of the date hereof
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxxxx Lynch, Pierce, Xxxxxx
& Xxxxx Incorporated
Xxxxx Xxxxxx Inc.
Acting severally on behalf of themselves and
the several Underwriters named herein.
By Xxxxxx Xxxxxxx & Co. Incorporated
By:
----------------------------------
Name:
Title:
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SCHEDULE I
Number of Firm
Shares to Be
Underwriter Purchased
----------------------------------------------------- -------------------
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
Xxxxx Xxxxxx Inc.
-------------------
Total..................................... ===================
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EXHIBIT A
[FORM OF LOCK-UP CONTRACT]
____________, 1996
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxxxx Lynch, Pierce, Xxxxxx
& Xxxxx Incorporated
Xxxxx Xxxxxx Inc.
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Dear Sirs and Mesdames:
The undersigned understands that you, as Representatives of the
several Underwriters, propose to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with ProSource, Inc., a Delaware corporation (the
"COMPANY") providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including yourselves, of ___ shares (the "SHARES") of
Class A Common Stock, par value $.01 per share of the Company (collectively with
the Class B Common Stock, par value $[____] per share of the Company, the
"COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Xxxxxx
Xxxxxxx & Co. Incorporated on behalf of the Underwriters, it will not, during
the period commencing on the date hereof and ending 180 days after the date of
the final prospectus relating to the Public Offering (the "PROSPECTUS"), (1)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (whether such shares or any such securities are
now owned by the undersigned or are hereafter acquired), or (2) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of
Common Stock or such other
25
securities, in cash or otherwise. The foregoing sentence shall not apply to the
sale of any Shares to the Underwriters pursuant to the Underwriting Agreement or
to any Permitted Transferee (as defined below). In addition, the undersigned
agrees that, without the prior written consent of Xxxxxx Xxxxxxx & Co.
Incorporated on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock. "Permitted Transferee" shall mean
(i) any pledgee of Common Stock as security for indebtedness existing on the
date hereof incurred in connection with financing the purchase of such Common
Stock, and any pledgee of such Common Stock in connection with any refinancing
of such indebtedness and (ii) in the case of Onex Corporation or an affiliate of
Onex Corporation, any entity controlling, controlled by or under common control
with Onex Corporation or such affiliate, provided that such other entity agrees
to be bound by the terms of this agreement.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
----------------------------------
(Name)
----------------------------------
(Address)
Accepted as of the date first set forth above:
XXXXXX XXXXXXX & CO. INCORPORATED
By:
----------------------------------------
A-2
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APPENDIX A
STATE OF
NAME OF CORPORATION INCORPORATION STATES IN WHICH QUALIFIED TO DO BUSINESS
------------------------------- ------------- ----------------------------------------------
ProSource Services Corporation Delaware Alabama Iowa New Mexico
Alaska Kansas New York
Arizona Kentucky North Carolina
Arkansas Louisiana North Dakota
California Massachusetts Ohio
Colorado Michigan Oklahoma
Delaware Minnesota Oregon
Florida Mississippi South Carolina
Georgia Missouri Tennessee
Illinois Nebraska Texas
Indiana Nevada Utah
New Jersey Xxxxxxxx
XxxXxx Services, Inc. Delaware Illinois
ProSource Investments, Inc. Delaware Delaware
PSC Services of Florida, Inc. Delaware Illinois
Ohio
