EXHIBIT 1.1
[DRAFT]
GUITAR CENTER, INC.
5,400,000 SHARES OF COMMON STOCK, $0.01 PAR VALUE
UNDERWRITING AGREEMENT
(U.S. VERSION)
March __, 1997
Xxxxxxx, Xxxxx & Co.
Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation
Xxxxxxxxxx Securities
Xxxx Xxxxxxxx Incorporated
Chase Securities Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Xxxxx & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Guitar Center, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
5,400,000 shares and, at the election of the Underwriters, up to 810,000
additional shares of Common Stock, $0.01 par value ("Stock"), of the Company.
The aggregate of 5,400,000 shares to be sold by the Company is herein called the
"Firm Shares" and the 810,000 additional shares to be sold by the Company are
herein called the "Optional Shares." The Firm Shares and the Optional Shares
that the Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares."
It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement (the "International Underwriting
Agreement") providing for the sale by the Company of up to a total of 1,552,500
shares of Stock (the "International Shares"), including the overallotment option
thereunder, through arrangements with certain underwriters outside the United
States (the "International Underwriters"), for whom Xxxxxxx Sachs International,
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation, Xxxxxxxxxx Securities, Xxxx
Xxxxxxxx Incorporated and Chase Securities Inc. are acting as representatives.
Anything herein or therein to the contrary notwithstanding, the respective
closings under this
Agreement and the International Agreement are hereby expressly made
conditional on one another. The Underwriters hereunder and the International
Underwriters are simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between Syndicates")
which provides, among other things, for the transfer of shares of Stock
between the two syndicates and for consultation by the representatives
hereunder with Xxxxxxx, Xxxxx & Co. prior to exercising the rights of the
Underwriters under Section 8 hereof. Two forms of prospectus are to be used
in connection with the offering and sale of shares of Stock contemplated by
the foregoing, one relating to the Shares hereunder and the other relating to
the International Shares. The latter form of prospectus will be identical to
the former except for certain substitute pages as included in the
registration statement and amendments thereto as mentioned below. Except as
used in Sections 2, 4, 5, 11 and 13 herein, and except as the context may
otherwise require, references hereinafter to the Shares shall include all the
shares of Stock which may be sold pursuant to either this Agreement or the
International Underwriting Agreement, and references herein to any prospectus
whether in preliminary or final form, and whether as amended or supplemented,
shall include both the U.S. and the international versions thereof.
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-20931) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, for
you and each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became effective upon filing, no other
document with respect to the Initial Registration Statement has heretofore
been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the
Initial Registration Statement or filed with the Commission pursuant to
Rule 424(a) of the rules and regulations of the Commission under the Act,
is hereinafter called a "Preliminary Prospectus"; the various parts of
the Initial Registration Statement and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with Section
6(a) hereof and deemed by virtue of Rule 430A under the Act to be part of
the Initial Registration Statement at the time it was declared effective or
such part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, each as amended at the time such part of the
registration statement became effective, are
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hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under
the Act, is hereinafter called the "Prospectus");
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did 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, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Xxxxxxx, Sachs & Co. expressly for use therein;
(iii) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
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 (with respect to the Prospectus and any amendment or supplement
thereto, in light of the circumstances under which such statements were
made) not misleading; PROVIDED, HOWEVER, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Xxxxxxx, Xxxxx & Co. expressly for use therein;
(iv) The Company has not sustained since the date of the latest audited
financial statements included in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock (except for
immaterial issuances of stock options to employees of the Company pursuant
to existing stock option plans as in effect prior to the date hereof or
except as contemplated and disclosed in the Prospectus) or long-term debt
or material increase in short-term debt other than in the ordinary course
of business and consistent with past practices, of the Company or any
material adverse change, or any development reasonably likely to result in
a prospective material adverse change, in or affecting the business,
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management, financial position, stockholders' equity or results of
operations of the Company, otherwise than as set forth or contemplated in
the Prospectus;
(v) The Company has good and marketable title in fee simple to all real
property owned by it and owns all of the personal property disclosed in the
Prospectus as being owned by it, 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 or such as would not have a material adverse effect on the
business, management, condition (financial or otherwise), stockholders'
equity, results of operations or prospects of the Company, either
individually or in the aggregate (a "Material Adverse Effect"); any real
property and buildings held under lease by the Company is held by it under
valid, currently existing 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 or except where the
failure to have a valid, currently existing and enforceable lease would not
have a Material Adverse Effect; and except for such assets and facilities
as are immaterial in the aggregate to the business of the Company taken as
a whole, all tangible assets and facilities of the Company are reasonably
adequate for the uses to which they are being put or would be put in the
ordinary course of business;
(vi) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the state of Delaware,
with power and authority (corporate and other) to (i) own its properties
and conduct its business as described in the Prospectus, (ii) authorize the
offering of the Shares, (iii) execute, deliver and perform this Agreement,
and (iv) issue, sell and deliver the Shares; and the Company has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, except where the failure to be so qualified, either
individually or in the aggregate, would not have a Material Adverse Effect;
(vii) The Company has an authorized capitalization as set forth in the
Prospectus; all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and
nonassessable and conform to the description thereof contained in the
Prospectus;
(viii) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein and in the International
Underwriting Agreement, will be duly and validly issued and fully paid and
nonassessable and will conform to the description of the Stock contained in
the Prospectus; and the issuance and sale of the Shares by the Company will
not be subject to preemptive or other similar rights;
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(ix) The issue and sale of the Shares to be sold by the Company
hereunder and under the International Underwriting Agreement and the
compliance by the Company with all of the provisions of this Agreement and
the International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party
or by which the Company is bound or to which any of the property or assets
of the Company is subject, nor will such action result in any violation of
any statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
properties, except where such conflict, breach, violation, or default
either individually or in the aggregate, would not have a Material Adverse
Effect, nor will such action result in any violation of the provisions of
the Certificate of Incorporation or By-laws of the Company; and no consent,
approval, authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the issue and
sale of the Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters;
(x) The Company is not in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of its
properties may be bound, except where such default, either individually or
in the aggregate, would not have a Material Adverse Effect, nor is the
Company in violation of its Certificate of Incorporation or By-laws; the
Company is not in violation of or in default in the performance of any
statute, rule or regulation or administrative or court decree applicable to
the Company or any of its properties, except for any such violation or
default which, individually or in the aggregate, would not have a Material
Adverse Effect;
(xi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock," insofar as they purport to constitute a
summary of the terms of the capital stock of the Company, under the
captions "Recapitalization," and "Certain Transactions" and under the
caption "Underwriting" (except, under the caption "Underwriting," for
paragraphs 3 and 6 and the last sentence of paragraph 7 thereof) insofar as
they purport to describe the provisions of the laws and documents referred
to therein, are accurate and fair in all material respects;
(xii) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a party or of
which any property of the Company is the subject which, if determined
adversely to the Company, would,
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individually or in the aggregate, have a Material Adverse Effect and, to
the best of the Company's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others;
(xiii) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be (i) an "investment company" or[, TO THE
KNOWLEDGE OF THE COMPANY,] an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company Act of 1940,
as amended (the "Investment Company Act");
(xiv) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(xv) KPMG Peat Marwick, L.L.P. and Ernst & Young L.L.P., who have
certified certain financial statements of the Company are each independent
public accountants as required by the Act and the rules and regulations of
the Commission thereunder;
(xvi) The financial statements of the Company, together with related
notes, set forth in the Preliminary Prospectus and the Prospectus (and any
amendments or supplements thereto) comply as to form in all material
respects with the requirements of the Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and fairly present the financial
position of the Company at the respective dates indicated and the results
of its operations and its cash flows for the respective periods indicated,
in accordance with generally accepted accounting principles in the United
States of America ("GAAP") consistently applied throughout such periods;
the PRO FORMA financial statements, together with related notes, set forth
under the caption "Unaudited Pro Forma Condensed Financial Data" in the
Preliminary Prospectus and the Prospectus have been prepared on a basis
consistent with such historical statements, except for the PRO FORMA
adjustments specified therein, and give effect to assumptions made on a
reasonable basis and present fairly the transactions reflected thereby as
indicated in the Preliminary Prospectus and the Prospectus and this
Agreement, and comply as to form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X and the
PRO FORMA adjustments have been properly applied to the historical amounts
in the compilation of those statements; and the other financial information
and data included in the Preliminary Prospectus and the Prospectus (and any
amendments or supplements thereto), historical and PRO FORMA, are
accurately presented and prepared on a basis consistent with such financial
statements and the books and records of the Company;
(xvii) The Company has no subsidiaries;
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(xviii) Except as would not, either individually or in the aggregate,
have a Material Adverse Effect or is otherwise disclosed in the Prospectus,
(i) the Company is not in violation of any federal, state or local laws and
regulations relating to pollution or protection of human health or the
environment or the use, treatment, storage, disposal, transport or
handling, emission, discharge, release or threatened release of toxic or
hazardous substances, materials or wastes, or petroleum and petroleum
products ("Materials of Environmental Concern") (collectively,
"Environmental Laws"), including, without limitation, noncompliance with or
lack of any permits or other environmental authorizations, and (ii) (A) the
Company has not received any communication from any person or entity
alleging any violation of or noncompliance with any Environmental Laws,
and, to the knowledge of the Company [AFTER DUE INQUIRY], there are no
past, present or reasonably foreseeable circumstances that may lead to any
such violation in the future, (B) there is no pending or, to the knowledge
of the Company [AFTER DUE INQUIRY], threatened claim, action, investigation
or notice by any person or entity against the Company or against any person
or entity for whose acts or omissions the Company is or would reasonably be
expected to be liable, either contractually or by operation of law,
alleging liability for investigatory, cleanup, or governmental response
costs, or natural resources or property damages, or personal injuries,
attorney's fees or penalties relating to any Materials of Environmental
Concern or any violation [OR POTENTIAL VIOLATION], of any Environmental Law
(collectively, "Environmental Claims"), and (C) there are no actions,
activities, circumstances, conditions, events or incidents that would
reasonably be expected to form the basis of any such Environmental Claim;
(xix) The Company is not in violation of any Federal, state or local
law relating to employment and employment practices, discrimination in the
hiring, promotion or pay of employees nor any applicable wage or hour laws,
nor any provisions of ERISA or the rules and regulations promulgated
thereunder, except for any such violation which, individually or in the
aggregate, would not result in a Material Adverse Effect or otherwise would
not be required to be disclosed in the Prospectus; there is (A) no
significant unfair labor practice complaint pending or, to the knowledge of
the Company, threatened against the Company before the National Labor
Relations Board or any state or local labor relations board, and no
significant grievance or significant arbitration proceeding arising out of
or under any collective bargaining agreement is pending or, to the
knowledge of the Company, threatened against the Company, (B) no labor
strike, dispute, slowdown or stoppage ("Labor Dispute") in which the
Company is involved other than routine disciplinary and grievance matters,
the Company is not aware of any existing Labor Dispute by the employees of
any of its principal suppliers and (C) no question concerning union
representation within the meaning of the National Labor Relations Act
existing with respect to the employees of the Company and, to the knowledge
of the Company, no union organizing activities are taking place, except
(with respect to any matter specified in clause (A), (B) or (C) above,
singly or in the aggregate) such as would not have a Material Adverse
Effect; and except for the Company's Profit Sharing Plan, the Company is
not a "party in
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interest" or a "disqualified person" (as such terms are defined in
Section 3(14) of ERISA or Section 4975 of the Code, respectively)
with respect to any employee benefit plan (as defined in Section 3(3)
of ERISA) or any plan (as defined in Section 4975 of the Code);
(xx) The Company maintains reasonable levels of insurance in accordance
with retail industry standards covering its properties, operations,
personnel and business; the Company has not received written notice from
any insurer or agent of such insurer that substantial capital improvements
or other similar expenditures will have to be made in order to continue
such insurance; and all such insurance is outstanding and in full force and
effect on the date hereof and will be outstanding and in full force and
effect on each Time of Delivery;
(xxi) All (A) (x) Federal, state and local income and Franchise Tax
returns required to be filed by the Company in any jurisdiction have been
filed and (y) material Tax returns required to be filed by the Company in
any jurisdiction have been filed, and (B) material Taxes due or claimed to
be due from such entities have been paid, other than those being contested
in good faith and by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP on the books and
records of the Company or those currently payable without penalty or
interest; "TAXES" shall mean all Federal, state, local and foreign taxes,
and other assessments of a similar nature (whether imposed directly or
through withholding), including any interest, additions to tax, or
penalties applicable thereto;
(xxii) The Company possesses such licenses, certificates,
authorizations, exemptions, consents, approvals, franchises, permits and
other rights issued by local, state, Federal or foreign regulatory agencies
or bodies or other governmental authorities or self-regulatory
organizations (collectively, "Permits") as are necessary to own, lease and
operate its properties and to conduct its business now conducted by it
except where the failure to possess any such Permit would not have a
Material Adverse Effect; the Company has fulfilled and performed all of its
material obligations with respect to such Permits; the Company is in
compliance with the terms and conditions of all such Permits and with the
rules and regulations of the regulatory authorities and governing bodies
having jurisdiction with respect thereto, except to the extent that would
not, individually or in the aggregate, have a Material Adverse Effect; and
the Company has not received any notice of proceedings relating to the
revocation or modification of any such Permit that would have a Material
Adverse Effect and no such Permits contain any restrictions that would
result in a Material Adverse Effect;
(xxiii) The Company owns or possesses all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade
names (collectively, the "Intellectual Property") presently employed by it
in connection with the business now operated by it, except where
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the failure so to own or possess would not, individually or in the
aggregate, have a Material Adverse Effect, and the Company has not
received any notice of infringement of or conflict with asserted rights
of others with respect to any of the foregoing, except where such
infringement or conflict would not individually, or in the aggregate,
have a Material Adverse Effect; and, to the Company's knowledge, the
use of the Intellectual Property in connection with the business and
operations of the Company does not infringe on the rights of any person,
except where such infringement would not individually or in the aggregate
have a Material Adverse Effect;
(xxiv) The Company maintains 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 GAAP 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;
(xxv) On October 11, 1996, Guitar Center Management Company, Inc., a
California corporation, was merged with and into the Company in accordance
with California, Delaware and all other applicable law (the
"Reincorporation").
(xxvi) Except as disclosed in the Preliminary Prospectus and the
Prospectus or except for which valid waivers of such rights as have been
obtained, no holder of any security of the Company has any right to require
registration of any security of the Company; and
(xxvii) There are no material business arrangements or related party
transactions which are not disclosed in the Preliminary Prospectus and the
Prospectus (or any amendments or supplements thereto) which would be
required to be disclosed by Item 404 of Regulation S-K of the Commission.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to sell to each of the Underwriters and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company, at a purchase
price per share of $[ ], the number of Firm Shares (to be adjusted by you so
as to eliminate fractional shares) determined by multiplying the aggregate
number of Shares to be sold by the Company by a fraction, the numerator of which
is the aggregate number of Firm Shares to be purchased by such Underwriter as
set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all of the Underwriters from the Company hereunder, and (b) in the event and to
the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at the purchase price per share set forth in clause
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(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 810,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from Xxxxxxx, Xxxxx &
Co. to the Company, given within a period of 30 calendar days after the date of
this Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 5 hereof) or, unless you and the Company otherwise agree in
writing, earlier than two or later than ten business days after the date of such
notice.
3. The Company hereby confirms its engagement of Xxxxxxx, Sachs & Co.
as, and Xxxxxxx, Xxxxx & Co. hereby confirms its agreement with the Company to
render services as, a "qualified independent underwriter" within the meaning of
Rule 2720 of the National Association of Securities Dealers, Inc. (the "NASD")
with respect to the offering and sale of the Shares. Xxxxxxx, Sachs & Co., in
its capacity as qualified independent underwriter and not otherwise, is referred
to herein as the "QIU". As compensation for the services of the QIU hereunder,
the Company agrees to pay the QIU $10,000 on the Closing Date.
4. Upon the authorization by you of the release of the Firm Shares,
the several Underwriters propose to offer the Firm Shares for sale upon the
terms and conditions set forth in the Prospectus.
5. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Xxxxxxx, Xxxxx & Co. may request upon at least forty-eight hours' prior
notice to the Company shall be delivered by or on behalf of the Company to
Xxxxxxx, Sachs & Co., through the facilities of the Depository Trust Company
("DTC"), for the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by wire transfer of federal
(same-day) funds, payable to the Company. The Company will cause the
certificates representing the Shares to be made available for checking and
packaging at least twenty-four hours prior to the Time of Delivery (as defined
below) with respect thereto at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York time, on [
], 1997 or such other time and date as Xxxxxxx, Xxxxx & Co. and the Company may
agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m.,
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New York time, on the date specified by Xxxxxxx, Sachs & Co. in the written
notice given by Xxxxxxx, Xxxxx & Co. of the Underwriters' election to
purchase such Optional Shares, or such other time and date as Xxxxxxx, Sachs
& Co. and the Company may agree upon in writing. Such time and date for
delivery of the Firm Shares is herein called the "First Time of Delivery,"
such time and date for delivery of the Optional Shares, if not the First Time
of Delivery, is herein called the "Second Time of Delivery," and each such
time and date for delivery is herein called a "Time of Delivery."
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 8 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 8(k) hereof, will be delivered at the offices of Skadden,
Arps, Slate, Xxxxxxx & Xxxx, 000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000 (the "Closing Location"), and the Shares will be delivered at
the Designated Office, all at such Time of Delivery. A meeting will be held at
the Closing Location at [ ] p.m., New York City time, on the New York Business
Day next preceding such Time of Delivery, at which meeting the final drafts of
the documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of this Section 5,
"New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
6. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof; to advise
you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;
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(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any events shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus in order
to comply with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in securities
as many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the time of issue
of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may reasonably request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder and under the International Underwriting Agreement, any
securities of the Company that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee stock
option
12
plans existing on, or upon the conversion or exchange of convertible
or exchangeable securities outstanding as of, the date of this Agreement),
without the prior written consent of Xxxxxxx, Sachs & Co.;
(f) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement and the International Underwriting Agreement in
the manner specified in the Prospectus under the caption "Use of Proceeds";
(i) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market ("NASDAQ");
(j) To file with the Commission such reports on Form SR as may be
required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
11(b) under the Act.
7. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under
13
the Act and all other expenses in connection with the preparation, printing
and filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost
of printing or producing any Agreement among Underwriters, this Agreement,
the International Underwriting Agreement, the Agreement between Syndicates,
the Selling Agreement, the Blue Sky Memorandum, closing documents (including
any compilations thereof) and any other documents in connection with the
offering, purchase, sale and delivery of the Shares; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 6(b) hereof, including the
reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey
(not to exceed $10,000) (iv) all fees and expenses in connection with listing
the Shares on the NASDAQ; (v) the filing fees incident to, [AND THE FEES
AND DISBURSEMENTS OF COUNSEL FOR THE UNDERWRITERS IN CONNECTION WITH,]
securing any required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Shares; (vi) the fees
associated with the use of a QIU, (vii) the cost of preparing stock
certificates; (viii) the cost and charges of any transfer agent or registrar
and (ix) all other costs and expenses incident to the performance of the
Company's obligations hereunder which are not otherwise specifically provided
for in this Section 7. It is understood, however, that the Company shall
bear the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as
provided in this Section 7, and Sections 9 and 13 hereof, the Underwriters
will pay all of their own costs and expenses, including the fees of their
counsel, stock transfer taxes on resale of any of the Shares by them, and any
advertising expenses connected with any offers they may make.
8. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
6(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 p.m.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
14
(b) Skadden, Arps, Slate, Xxxxxxx & Xxxx, counsel for the Underwriters,
shall have furnished to you such opinion or opinions (a draft of each such
opinion is attached as Annex II(a) hereto), dated such Time of Delivery,
with respect to the matters covered in paragraphs (i), (iv) and (xi) of
subsection (c) below as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) Xxxxxx & Xxxxxxx, counsel for the Company, shall have furnished to
you their written opinion, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing in good standing under the laws of the State of Delaware,
with corporate power and authority to own, lease and operate its
properties and to conduct its business described in the Prospectus.
Based solely on certificates from public officials, such counsel will
confirm that the Company is qualified to do business in the States
listed on Annex A hereto;
(ii) The authorized capital stock of the Company consists solely
of ________ shares of Common Stock, $.01 par value per share, and
________ shares of Preferred Stock, $.01 par value per share. All of
the outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable;
(iii) The Shares to be issued and sold by the Company pursuant
to the Underwriting Agreement have been duly authorized and, when
issued to and paid for by the Underwriters in accordance with the
terms of the Underwriting Agreement, will be validly issued, fully
paid and non-assessable;
(iv) This Underwriting Agreement and the International
Underwriting Agreement have been duly authorized, executed and
delivered by the Company;
(v) The issuance and sale of the Shares to be sold by the
Company pursuant to this Underwriting Agreement and the International
Underwriting Agreement will not result in the violation by the Company
of its Certificate of Incorporation or Bylaws or the violation by the
Company of any federal, California or Delaware statute, rule or
regulation known by such counsel to be applicable to the Company
(other than federal, California or Delaware securities laws as to
which no opinion need be expressed in this paragraph) or in the breach
of or a default under any agreement or instrument filed as an "Exhibit
4" or "Exhibit 10" exhibit to the Registration Statement. No consent,
approval, authorization or order of, or filing with, any federal,
15
California or Delaware court or governmental agency or body known by
such counsel to be applicable to the Company is required for the
consummation of the issuance and sale of the Shares to be sold by the
Company, except for the filing of the Company's Certificate of
Amendment to the Certificate of Incorporation filed as Exhibit ___ to
the Registration Statement and except such as have been obtained under
the Act and such as may be required under California and Delaware
securities laws in connection with the purchase and distribution of
Shares by the Underwriters (such opinion to be based upon such
counsel's consideration of only those statutes, rules and regulations
which, in such counsel's experience, are normally applicable to
transactions of the type contemplated by Underwriting Agreements, and
no opinion need be expressed as to the application of any antifraud,
antitrust or trade regulation laws);
(vi) The Registration Statement has become effective under the
Act, and no stop order suspending the effectiveness of the
Registration Statement has been issued under the Act and no
proceedings therefor, to the best of such counsel's knowledge, have
been initiated by the Commission;
(vii) The Registration Statement and the Prospectus comply as to
form in all material respects with the requirements for registration
statements on Form S-1 under the Act and the rules and regulations of
the Commission thereunder; it being understood, however, that such
counsel need express no opinion with respect to the financial
statements, schedules and other financial data included in the
Registration Statement or the Prospectus. In passing upon the
compliance as to the form of Registration Statement and Prospectus,
such counsel may assume that the statements made therein are correct
and complete;
(viii) The statements set forth in the Prospectus under the
heading "Description of Capital Stock," ["THE RECAPITALIZATION," AND
"CERTAIN TRANSACTIONS"] insofar as such statements constitute a
summary of the terms of the Company's capital stock, legal matters or
documents referred to therein, are accurate in all material respects;
(ix) To the best of such counsel's knowledge, there are no legal
or governmental proceedings required to be described in the Prospectus
that are not described as required [ ,WHICH, IF DETERMINED ADVERSELY
TO THE COMPANY, WOULD INDIVIDUALLY OR IN THE AGGREGATE HAVE A MATERIAL
ADVERSE EFFECT ON THE CURRENT OR FUTURE CONSOLIDATED FINANCIAL
POSITION, STOCKHOLDERS' EQUITY OR RESULTS OF OPERATIONS OF THE COMPANY
AND ITS SUBSIDIARIES; AND, TO THE BEST OF SUCH COUNSEL'S KNOWLEDGE, NO
SUCH PROCEEDINGS ARE THREATENED OR CONTEMPLATED BY GOVERNMENTAL
AUTHORITIES OR THREATENED BY OTHERS], or contracts or documents of a
character required to be described in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration Statement
that are not described and filed as required;
16
(x) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(xi) Such counsel has participated in conferences with officers
and other representatives of the Company, representatives of the
independent accountants for the Company, and representatives of the
Underwriters, at which the contents of the Registration Statement and
the Prospectus and related matters were discussed and, although such
counsel need not pass upon, and need not assume any responsibility
for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus and need
not make any independent check or verification thereof (except as set
forth in paragraph (viii) above) during the course of such
participation (relying as to materiality to the extent such counsel
has deemed appropriate upon the statements of officers and other
representatives of the Company), no facts came to such counsels
attention that caused them to believe that the Registration Statement,
at the time it 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 statements therein not misleading,
or that the Prospectus, as of its date and as of the Closing Date,
contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; it being
understood that such counsel need not express any belief with respect
to the financial statements, schedules and other financial data
included in the Registration Statement or the Prospectus;
(d) Xxxxx X. Xxxxxxx, the Company's General Counsel, shall have
furnished to you his written opinion, dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) Any real property and buildings held under lease by the
Company is held by it 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 (in giving the opinion in this clause, such counsel may state
that no examination of record titles for the purpose of such opinion
has been made, and that they are relying upon a general review of the
titles of the Company, upon abstracts, reports and policies of title
companies rendered or issued at or subsequent to the time of
acquisition of such property by the Company, upon opinions of counsel
to the lessors of such property and, in respect of matters of fact,
upon certificates of officers of the Company, provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such opinions, abstracts, reports, policies
and certificates);
17
[(ii) THE COMPANY IS NOT IN VIOLATION OF ITS CERTIFICATE OF
INCORPORATION OR BY-LAWS OR IN DEFAULT IN THE PERFORMANCE OR
OBSERVANCE OF ANY MATERIAL OBLIGATION, AGREEMENT, COVENANT OR
CONDITION CONTAINED IN ANY INDENTURE, MORTGAGE, DEED OF TRUST, LOAN
AGREEMENT, OR LEASE OR AGREEMENT OR OTHER INSTRUMENT TO WHICH IT IS A
PARTY OR BY WHICH IT OR ANY OF ITS PROPERTIES MAY BE BOUND;]
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery, KPMG Peat
Marwick, L.L.P. and Ernst & Young, L.L.P. shall have furnished to you a
letter or letters, dated the respective dates of delivery thereof, in form
and substance satisfactory to you, to the effect set forth in Annex I
hereto (the executed copy of the letter delivered prior to the execution of
this Agreement is attached as Annex I(A) hereto and a draft of the form of
letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(B) hereto);
(f)(i) The Company shall not have sustained since the date of the
latest audited financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been
any change in the capital stock (except for immaterial issuances of stock
options to employees of the Company pursuant to existing stock option plans
as in effect prior to the date hereof or except as contemplated and
disclosed in the Prospectus) or long-term debt or material increase in
short-term debt other than in the ordinary course of business and
consistent with past practices, of the Company or any change, or any
development involving a prospective change, in or affecting the business,
management, financial position, stockholders' equity or results of
operations of the Company, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described in Clause
(i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such Time
of Delivery on the terms and in the manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization," as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced
18
that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities;
(h) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on NASDAQ; (ii) a
suspension or material limitation in trading in the Company's securities on
NASDAQ; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York or California State authorities; or
(iv) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if
the effect of any such event specified in this Clause (iv) in the judgment
of the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being delivered at
such Time of Delivery on the terms and in the manner contemplated in the
Prospectus;
(i) The Shares at such Time of Delivery shall have been duly listed
for quotation on NASDAQ;
(j) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each of [TO COME], substantially to
the effect set forth in Subsection 1(b)(iv) hereof in form and substance
satisfactory to you;
(k) The Company shall have furnished or caused to be furnished to you
at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as to
the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, and as to such other
matters as you may reasonably request, and the Company shall have furnished
or caused to be furnished certificates as to the matters set forth in
subsections (a) and (e) of this Section 8; and
(l) The Company shall have complied with the provisions of Section
6(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement.
9. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are 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 (with respect to the Prospectus and any amendment or supplement thereto,
in light of the circumstances under
19
which such statements were made) not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; PROVIDED, HOWEVER, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Xxxxxxx,
Xxxxx & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are 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 any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Xxxxxxx, Sachs & Co.
expressly for use therein; and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in
20
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability arising
out of such action or claim and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section 9 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
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 from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), 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 shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bears to the total underwriting discounts and commissions received by the
Underwriters with respect to the shares purchased under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus relating to
such Shares. The relative fault 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 on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by PRO RATA allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include 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 subsection (d), 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 which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue
21
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this
subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section 9 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 9 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
10. (a) The Company will indemnify and hold harmless Xxxxxxx, Xxxxx & Co.,
in its capacity as QIU, against any losses, claims, damages or liabilities,
joint or several, to which the QIU may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are 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 (with respect to the Prospectus and any amendment or
supplement thereto, in light of the circumstances under which such statements
were made) not misleading, and will reimburse the QIU for any legal or other
expenses reasonably incurred by the QIU in connection with investigating or
defending any such action or claim as such expenses are incurred.
(b) Promptly after receipt by the QIU under Subsection 10(a) above of
notice of the commencement of any action, the QIU shall, if a claim in respect
thereof is to be made against the Company under such subsection, notify the
Company in writing of the commencement thereof; but the omission so to notify
the Company shall not relieve it from any liability which it may have to the QIU
otherwise than under such subsection. In case any such action shall be brought
against the QIU and it shall notify the Company of the commencement thereof, the
Company shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to the QIU (who shall not,
except with the consent of the QIU, be counsel to the Company), and, after
notice from the indemnifying party to the QIU of its election so to assume the
defense thereof, the indemnifying party shall not be liable to the QIU under
such subsection for any legal expenses of other counsel or any other expenses,
in each case subsequently incurred by the QIU, in connection with the defense
thereof other than reasonable costs of investigation. The Company shall not,
without the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not
22
the QIU is an actual or potential party to such action or claim) unless such
settlement, compromise or judgment (i) includes an unconditional release of
the QIU from all liability arising out of such action or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of the QIU.
(c) If the indemnification provided for in this Section 10 is
unavailable to or insufficient to hold harmless Xxxxxxx, Sachs & Co., in its
capacity as QIU, under Subsection 10(a) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then the Company shall contribute to the amount paid or payable by
the QIU as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the QIU on
the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the QIU failed to give the notice required under subsection (b)
above, then the Company shall contribute to such amount paid or payable by
the QIU in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand
and the QIU on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the QIU on
the other shall be deemed to be in the same proportion as the total net
proceeds from the sale of the Shares (before deducting expenses) received by
the Company, as set forth in the table on the cover page of the Prospectus,
bear to the fee payable to the QIU pursuant to Section 3 hereof. The
relative fault 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 on the one hand or the QIU on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the QIU agree
that it would not be just and equitable if contributions pursuant to this
subsection (c) were determined by PRO RATA allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this subsection (c). The amount paid or payable by the
QIU as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (c) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(d) The obligations of the Company under this Section 10 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the QIU
within the meaning of the Act.
11. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange
23
for you or another party or other parties to purchase such Shares on the
terms contained herein. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Shares, then the
Company shall be entitled to a further period of thirty-six hours within
which to procure another party or other parties satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that they have so
arranged for the purchase of such Shares, you or the Company shall have the
right to postpone a Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in
the Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall
include any person substituted under this Section 11 with like effect as if
such person had originally been a party to this Agreement with respect to
such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all of the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 7 hereof and the
indemnity and contribution agreements in Section 9 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
12. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full
24
force and effect, regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of any Underwriter or any controlling
person of any Underwriter, or the Company, or any officer or director or
controlling person of the Company, and shall survive delivery of and payment
for the Shares.
13. If this Agreement shall be terminated pursuant to Section 11 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 7 and 9 hereof; but, if for any other reason any Shares are
not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all reasonable out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered, but the Company
shall then be under no further liability to any Underwriter in respect of the
Shares not so delivered except as provided in Sections 7 and 9 hereof.
14. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Xxxxxxx, Xxxxx & Co. on behalf of you as the
representatives of the Underwriters.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Xxxxxxx, Sachs &
Co., 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 9(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company by you on request.
Any such statements, requests, notices or agreements shall take effect upon
receipt thereof.
15. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters and the Company and, to the extent provided in Sections 9
and 12 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
16. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
25
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
26
If the foregoing is in accordance with your understanding, please sign and
return to us eight counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters (U.S. Version), the form of which shall be
submitted to the Company for examination, upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
GUITAR CENTER, INC.
By: __________________________
Name:
Title:
Accepted as of the date hereof
Xxxxxxx, Xxxxx & Co.
Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation
Xxxxxxxxxx Securities
Xxxx Xxxxxxxx Incorporated
Chase Securities Inc.
By: ___________________________
(Xxxxxxx, Xxxxx & Co.)
On behalf of each of the Underwriters
27
SCHEDULE I
Number of
Optional
Total Shares
Number of to be
Firm Purchased
Shares if Maximum
to be Option
Underwriter Purchased Exercised
----------- --------- ----------
Xxxxxxx, Sachs & Co.. . . . . .
Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities
Corporation . . . . . . . .
Xxxxxxxxxx Securities . . . . .
Xxxx Xxxxxxxx Incorporated . .
Chase Securities Inc. . . . .
---------
Total . . . . . . . . . . 5,400,000
=========
28
ANNEX I
Pursuant to Section 8(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company within the meaning of the Act and the applicable published
rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and, if
applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, copies of which have been
separately furnished to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed statements of income, balance sheets and statements of cash flows
included in the Prospectus as indicated in their reports thereon copies of
which have been separately furnished to the Representatives and on the
basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed financial statements referred to
in paragraph (vi)(A)(i) below comply as to form in all material respects
with the applicable accounting requirements of the Act and the related
published rules and regulations, nothing came to their attention that
caused them to believe that the unaudited condensed financial statements do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
1
(iv) The unaudited selected financial information with respect to the
results of operations and financial position of the Company for the five
most recent fiscal years included in the Prospectus agrees with the
corresponding amounts (after restatements where applicable) in the audited
financial statements for such five fiscal years;
(v) On the basis of limited procedures, not constituting an examination
in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company, inspection of the minute books of the Company
since the date of the latest audited financial statements included in the
Prospectus, inquiries of officials of the Company responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) (i) the unaudited statements of income, balance sheets and
statements of cash flows included in the Prospectus do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations,
or (ii) any material modifications should be made to the unaudited
condensed statements of income, balance sheets and statements of cash
flows included in the Prospectus for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet items
included in the Prospectus do not agree with the corresponding items in
the unaudited financial statements from which such data and items were
derived, and any such unaudited data and items were not determined on a
basis substantially consistent with the basis for the corresponding
amounts in the audited financial statements included in the Prospectus;
(C) the unaudited financial statements which were not included in the
Prospectus but from which were derived any unaudited condensed financial
statements referred to in Clause (A) and any unaudited income statement
data and balance sheet items included in the Prospectus and referred to
in Clause (B) were not determined on a
2
basis substantially consistent with the basis for the audited financial
statements included in the Prospectus;
(D) any unaudited pro forma condensed financial statements included
in the Prospectus do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the published
rules and regulations thereunder or the pro forma adjustments have not
been properly applied to the historical amounts in the compilation of
those statements;
(E) as of a specified date not more than five days prior to the date
of such letter, there have been any changes in the capital stock (other
than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were
outstanding on the date of the latest financial statements included in
the Prospectus) or any increase in the long-term debt of the Company, or
any decreases in net current assets or stockholder's equity or other
items specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with amounts
shown in the latest balance sheet included in the Prospectus, except in
each case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in such
letter; and
(F) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in Clause
(E) there were any decreases in net revenues or operating profit or the
total or per share amounts of net income or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period of
the preceding year and with any other period of corresponding length
specified by the Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
(vi) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(v) above, they have carried out certain specified procedures, not
3
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company, which appear in the Prospectus,
or in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain of
such amounts, percentages and financial information with the accounting
records of the Company and have found them to be in agreement.
4
