EXHIBIT 1
2,500,000 SHARES
ORCHARD SUPPLY HARDWARE STORES CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
March __, 1996
XXXXXXXXXX SECURITIES
XXXXXX XXXX LLC
As Representatives of the several Underwriters
c/x XXXXXXXXXX SECURITIES
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Dear Sirs:
SECTION 1. Introductory. Orchard Supply Hardware Stores Corporation, a
------------
Delaware corporation (the "Company"), proposes to issue and sell 500,000 shares
of its authorized but unissued Common Stock (the "Common Stock") and the
stockholder of the Company named in Schedule B annexed hereto (the "Selling
Stockholder") proposes to sell an aggregate of 2,000,000 shares of the Company's
issued and outstanding Common Stock to the several underwriters named in
Schedule A annexed hereto (the "Underwriters"), for whom you are acting as
Representatives. Said aggregate of 2,500,000 shares are herein called the "Firm
Common Shares." In addition, the Selling Stockholder proposes to grant to the
Underwriters an option to purchase up to 375,000 additional shares of Common
Stock (the "Optional Common Shares"), as provided in Section 5 hereof. The Firm
Common Shares and, to the extent such option is exercised, the Optional Common
Shares are hereinafter collectively referred to as the "Common Shares."
You have advised the Company and the Selling Stockholder that the
Underwriters propose to make a public offering of their respective portions of
the Common Shares on the effective date of the registration statement
hereinafter referred to, or as soon thereafter as in your judgment is advisable.
-1-
The Company and the Selling Stockholder hereby confirm their respective
agreements with respect to the purchase of the Common Shares by the Underwriters
as follows:
SECTION 2. Representations and Warranties of the Company and the Selling
-------------------------------------------------------------
Stockholder. The Company and the Selling Stockholder represent and warrant to
-----------
the several Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-___) with
respect to the Common Shares has been prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has
been filed with the Commission. The Company has prepared and has filed or
proposes to file prior to the effective date of such registration statement
an amendment or amendments to such registration statement, which amendment
or amendments have been or will be similarly prepared. There have been
delivered to you two signed copies of such registration statement and
amendments, together with two copies of each exhibit filed therewith.
Conformed copies of such registration statement and amendments (but without
exhibits) and of the related preliminary prospectus have been delivered to
you in such reasonable quantities as you have requested for each of the
Underwriters. The Company will next file with the Commission one of the
following: (i) prior to effectiveness of such registration statement, a
further amendment thereto, including the form of final prospectus, (ii) a
final prospectus in accordance with Rules 430A and 424(b) of the Rules and
Regulations or (iii) a term sheet (the "Term Sheet") as described in and in
accordance with Rules 434 and 424(b) of the Rules and Regulations. As
filed, the final prospectus. if one is used, or the Term Sheet and
Preliminary Prospectus, if a final prospectus is not used, shall include
all Rule 430A Information and, except to the extent that you shall agree in
writing to a modification, shall be in all substantive respects in the form
furnished to you prior to the date and time that this Agreement was
executed and delivered by the parties hereto, or, to the extent not
completed at such date and time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company shall have previously advised
you in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall mean such
registration statement at the time such registration statement becomes
effective and, in the event any post-effective amendment thereto becomes
effective prior to the First Closing Date (as hereinafter defined), shall
also mean such registration statement as so amended; provided, however,
that such term shall also include (i) all Rule 430A Information deemed to
be included in such registration statement at the time such registration
statement becomes effective as provided by Rule 430A of the Rules and
Regulations and (ii) any registration statement filed pursuant to 462(b) of
the Rules and Regulations relating to the Common Shares. The term
"Preliminary Prospectus" shall mean any preliminary prospectus referred to
in the preceding
-2-
paragraph and any preliminary prospectus included in the Registration
Statement at the time it becomes effective that omits Rule 430A
Information. The term "Prospectus" as used in this Agreement shall mean
either (i) the prospectus relating to the Common Shares in the form in
which it is first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations or, (ii) if a Term Sheet is not used and no filing
pursuant to Rule 424(b) of the Rules and Regulations is required, shall
mean the form of final prospectus included in the Registration Statement at
the time such registration statement becomes effective or (iii) if a Term
Sheet is used, the Term Sheet in the form in which it is first filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations,
together with the Preliminary Prospectus included in the Registration
Statement at the time it becomes effective. The term "Rule 430A
Information" means information with respect to the Common Shares and the
offering thereof permitted to be omitted from the Registration Statement
when it becomes effective pursuant to Rule 430A of the Rules and
Regulations. Any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Form S-3 under the Act, as of
the date of such Preliminary Prospectus or Prospectus, as the case may be.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus has
conformed in all material respects to the requirements of the Act and the
Rules and Regulations and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and at the time the Registration
Statement becomes effective, and at all times subsequent thereto up to and
including each Closing Date hereinafter mentioned, the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
will contain all material statements and information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, and neither the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto, will include 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;
provided, however, no representation or warranty contained in this
subsection 2(b) shall be applicable to information contained in or omitted
from any Preliminary Prospectus, the Registration Statement, the Prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any
Underwriter, directly or through the Representatives, specifically for use
in the preparation thereof. The documents incorporated by reference in the
Prospectus, when they were filed with the Commission, conformed in all
material respects to the requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations of the
Commission thereunder, and none of such documents contained an 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.
-3-
(c) The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed
in Exhibit 22 to the Annual Report on Form 10-K for the Company's most
recent fiscal year. The Company and each of its subsidiaries have been
duly incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, with
full power and authority (corporate and other) to own and lease their
properties and conduct their respective businesses as described in the
Prospectus; the Company owns all of the outstanding capital stock of its
subsidiaries free and clear of all claims, liens, charges and encumbrances;
the Company and each of its subsidiaries are in possession of and operating
in compliance with all authorizations, licenses, permits, consents,
certificates and orders material to the conduct of their respective
businesses, all of which are valid and in full force and effect; the
Company and each of its subsidiaries are duly qualified to do business and
in good standing as foreign corporations in each jurisdiction in which the
ownership or leasing of properties or the conduct of their respective
businesses requires such qualification, except for jurisdictions in which
the failure to so qualify would not have a material adverse effect upon the
Company or the subsidiary; and no proceeding has been instituted in any
such jurisdiction, revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification.
(d) The Company has an authorized and outstanding capital stock as set
forth under the heading "Capitalization" in the Prospectus; the issued and
outstanding shares of Common Stock (including the Firm Common Shares to be
sold by the Selling Stockholder and the Optional Common Shares to be sold
by the Selling Stockholder) have been duly authorized and validly issued,
are fully paid and nonassessable, are duly listed on the Nasdaq National
Market, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities,
and conform to the description thereof contained in the Prospectus. All
issued and outstanding shares of capital stock of each subsidiary of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable. Except as disclosed in or contemplated by the Prospectus
and the financial statements of the Company, and the related notes thereto,
included in the Prospectus, neither the Company nor any subsidiary has
outstanding any options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares
of its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus
and other stock plans or arrangements, and the options or other rights
granted and exercised thereunder, set forth in the Prospectus accurately
and fairly presents the information required to be shown with respect to
such plans, arrangements, options and rights.
(e) The Common Shares to be sold by the Company have been duly
authorized and, when issued, delivered and paid for in the manner set forth
in this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and
-4-
will conform to the description thereof contained in the Prospectus. No
preemptive rights or other rights to subscribe for or purchase exist with
respect to the issuance and sale of the Common Shares by the Company
pursuant to this Agreement. No stockholder of the Company has any right
which has not been waived to require the Company to register the sale of
any shares owned by such stockholder under the Act in the public offering
contemplated by this Agreement. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for
the transfer and sale of the Common Shares to be sold by the Selling
Stockholder or the issuance and sale of the Common Shares to be sold by the
Company as contemplated herein.
(f) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company
and constitutes a valid and binding obligation of the Company in accordance
with its terms. The making and performance of this Agreement by the
Company and the consummation of the transactions herein contemplated will
not violate any provisions of the certificate of incorporation or bylaws,
or other organizational documents, of the Company or any of its
subsidiaries, and will not conflict with, result in the breach or violation
of, or constitute, either by itself or upon notice or the passage of time
or both, a default under any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries or any of its respective properties may be bound or
affected, any statute or any authorization, judgment, decree, order, rule
or regulation of any court or any regulatory body, administrative agency or
other governmental body applicable to the Company or any of its
subsidiaries or any of its respective properties. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and
delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, except for compliance with the Act, the
Blue Sky laws applicable to the public offering of the Common Shares by the
several Underwriters and the clearance of such offering with the National
Association of Securities Dealers, Inc. (the "NASD").
(g) Xxxxxx Xxxxxxxx LLP, who have expressed their opinion with respect
to the financial statements filed with the Commission as a part of the
Registration Statement and included in the Prospectus and in the
Registration Statement, are independent accountants as required by the Act
and the Rules and Regulations.
(h) The financial statements of the Company, and the related notes
thereto, included in the Registration Statement and the Prospectus present
fairly the financial position of the Company as of the respective dates of
such financial statements, and the results of operations and changes in
financial position of the Company for the respective periods covered
thereby. Such statements and related notes have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis as certified by the independent accountants
-5-
named in subsection 2(g). No other financial statements or schedules are
required to be included in the Registration Statement. The selected
financial data set forth in the Prospectus under the captions
"Capitalization" and "Selected Consolidated Financial Data" fairly present
the information set forth therein on the basis stated in the Registration
Statement.
(i) Except as disclosed in the Prospectus, and except as to defaults
which individually or in the aggregate would not be material to the
Company, neither the Company nor any of its subsidiaries is in violation or
default of any provision of its certificate of incorporation or bylaws, or
other organizational documents, or is in breach of or default with respect
to any provision of any agreement, judgment, decree, order, mortgage, deed
of trust, lease, franchise, license, indenture, permit or other instrument
to which it is a party or by which it or any of its properties are bound;
and there does not exist any state of facts which constitutes an event of
default on the part of the Company or any such subsidiary as defined in
such documents or which, with notice or lapse of time or both, would
constitute such an event of default.
(j) There are no contracts or other documents required to be described
in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations which
have not been described or filed as required. The contracts so described
in the Prospectus are accurate and complete; all such contracts are in full
force and effect on the date hereof; and neither the Company nor any of its
subsidiaries, nor to the best of the Company's knowledge, any other party
is in breach of or default under any of such contracts.
(k) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened to which the Company or any of its
subsidiaries is or may be a party or of which property owned or leased by
the Company or any of its subsidiaries is or may be the subject, or related
to environmental or discrimination matters, which actions, suits or
proceedings might, individually or in the aggregate, prevent or adversely
affect the transactions contemplated by this Agreement or result in a
material adverse change in the condition (financial or otherwise),
properties, business, results of operations or prospects of the Company and
its subsidiaries; and no labor disturbance by the employees of the Company
or any of its subsidiaries exists or is imminent which might be expected to
affect adversely such condition, properties, business, results of
operations or prospects. Neither the Company nor any of its subsidiaries
is a party or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body, administrative
agency or other governmental body.
(l) The Company or the applicable subsidiary has good and marketable
title to all the properties and assets reflected as owned in the financial
statements hereinabove described (or elsewhere in the Prospectus), subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except (i)
those, if any, reflected in such
-6-
financial statements (or elsewhere in the Prospectus), or (ii) those which
are not material in amount and do not adversely affect the use made and
proposed to be made of such property by the Company and its subsidiaries.
The Company or the applicable subsidiary holds its leased properties under
valid and binding leases, with such exceptions as are not materially
significant in relation to the business of the Company. Except as
disclosed in the Prospectus, the Company owns or leases all such properties
as are necessary to its operations as now conducted or as proposed to be
conducted.
(m) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not incurred any material liabilities or obligations,
indirect, direct or contingent, or entered into any material verbal or
written agreement or other transaction which is not in the ordinary course
of business or which could result in a material reduction in the future
earnings of the Company and its subsidiaries; (ii) the Company and its
subsidiaries have not sustained any material loss or interference with
their respective businesses or properties from fire, flood, windstorm,
accident or other calamity, whether or not covered by insurance; (iii) the
Company has not paid or declared any dividends or other distributions with
respect to its capital stock and the Company and its subsidiaries are not
in default in the payment of principal or interest on any outstanding debt
obligations; (iv) there has not been any change in the capital stock (other
than upon the sale of the Common Shares hereunder or indebtedness material
to the Company and its subsidiaries (other than in the ordinary course of
business); and (v) there has not been any material adverse change in the
condition (financial or otherwise), business, properties, results of
operations or prospects of the Company and its subsidiaries.
(n) Except as disclosed in or specifically contemplated by the
Prospectus, the Company and its subsidiaries have sufficient trademarks,
trade names, patent rights, mask works, copyrights, licenses, approvals and
governmental authorizations to conduct their businesses as now conducted;
the expiration of any trademarks, trade names, patent rights, mask works,
copyrights, licenses, approvals or governmental authorizations would not
have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company or its
subsidiaries; and the Company has no knowledge of any material infringement
by it or its subsidiaries of trademark, trade name rights, patent rights,
mask works, copyrights, licenses, trade secret or other similar rights of
others, and there is no claim being made against the Company or its
subsidiaries regarding trademark, trade name, patent, mask work, copyright,
license, trade secret or other infringement which could have a material
adverse effect on the condition (financial or otherwise), business, results
of operations or prospects of the Company and its subsidiaries.
(o) The Company has not been advised, and has no reason to believe,
that either it or any of its subsidiaries is not conducting business in
compliance with all applicable laws, rules and regulations of the
jurisdictions in which it is conducting
-7-
business, including, without limitation, all applicable local, state and
federal environmental laws and regulations; except where failure to be so
in compliance would not materially adversely affect the condition
(financial or otherwise), business, results of operations or prospects of
the Company and its subsidiaries.
(p) The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns and have paid all taxes
shown as due thereon; and the Company has no knowledge of any tax
deficiency which has been or might be asserted or threatened against the
Company or its subsidiaries which could materially and adversely affect the
business, operations or properties of the Company and its subsidiaries.
(q) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(r) The Company has not distributed and will not distribute prior to
the First Closing Date any offering material in connection with the
offering and sale of the Common Shares other than the Prospectus, the
Registration Statement and the other materials permitted by the Act.
(s) Each of the Company and its subsidiaries maintain insurance of the
types and in the amounts generally deemed adequate for its business,
including, but not limited to, insurance covering real and personal
property owned or leased by the Company and its subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
(t) Neither the Company nor any of its subsidiaries has at any time
during the last five years (i) made any unlawful contribution to any
candidate for foreign office, or failed to disclose fully any contribution
in violation of law, or (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by
the laws of the United States or any jurisdiction thereof.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Common Shares.
SECTION 3. Representations, Warranties and Covenants of the Selling
--------------------------------------------------------
Stockholder.
-----------
(a) The Selling Stockholder represents and warrants to, and agrees
with, the several Underwriters that:
-8-
(i) The Selling Stockholder has, and on the First Closing Date
and the Second Closing Date hereinafter mentioned will have, good and
marketable title to the Common Shares proposed to be sold by the
Selling Stockholder hereunder on such Closing Date and full right,
power and authority to enter into this Agreement and to sell, assign,
transfer and deliver such Common Shares hereunder, free and clear of
all voting trust arrangements, liens, encumbrances, equities, security
interests, restrictions and claims whatsoever; and upon delivery of
and payment for such Common Shares hereunder, the Underwriters will
acquire good and marketable title thereto, free and clear of all
liens, encumbrances, equities, claims, restrictions, security
interests, voting trusts or other defects of title whatsoever.
(ii) The Selling Stockholder has executed and delivered a Power
of Attorney and caused to be executed and delivered on its behalf a
Custody Agreement (hereinafter collectively referred to as the
"Stockholders Agreement") and in connection herewith the Selling
Stockholder further represents, warrants and agrees that the Selling
Stockholder has deposited in custody, under the Stockholders
Agreement, with the agent named therein (the "Agent") as custodian,
certificates in negotiable form for the Common Shares to be sold
hereunder by the Selling Stockholder, for the purpose of further
delivery pursuant to this Agreement. The Selling Stockholder agrees
that the Common Shares to be sold by the Selling Stockholder on
deposit with the Agent are subject to the interests of the Company and
the Underwriters, that the arrangements made for such custody are to
that extent irrevocable, and that the obligations of the Selling
Stockholder hereunder shall not be terminated, except as provided in
this Agreement or in the Stockholders Agreement, by any act of the
Selling Stockholder, by operation of law or by the occurrence of any
other event. If the Selling Stockholder should dissolve or otherwise
terminate its corporate existence, or if any other event should occur,
before the delivery of the Common Shares hereunder, the documents
evidencing Common Shares then on deposit with the Agent shall be
delivered by the Agent in accordance with the terms and conditions of
this Agreement as if such dissolution, termination or other event had
not occurred, regardless of whether or not the Agent shall have
received notice thereof. This Agreement and the Stockholders
Agreement have been duly executed and delivered by or on behalf of the
Selling Stockholder and the form of such Stockholders Agreement has
been delivered to you.
(iii) The performance of this Agreement and the Stockholders
Agreement and the consummation of the transactions contemplated hereby
and by the Stockholders Agreement will not result in a breach or
violation by the Selling Stockholder of any of the terms or provisions
of, or constitute a default by the Selling Stockholder under, any
indenture, mortgage, deed of trust, trust (constructive or other),
loan agreement, lease, franchise, license or other agreement or
instrument to which the Selling Stockholder is a party or by which the
Selling Stockholder or any of its properties is bound, any statute,
-9-
or any judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to the Selling Stockholder or
any of its properties.
(iv) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Common Shares.
(v) Each Preliminary Prospectus and the Prospectus, insofar as it
has related to the Selling Stockholder has conformed in all material
respects to the requirements of the Act and the Rules and Regulations
and has not included any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein not misleading in light of the circumstances under which they
were made; and neither the Registration Statement nor the Prospectus,
nor any amendment or supplement thereto, as it relates to the Selling
Stockholder, will include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(vi) The Selling Stockholder is not aware that any of the
representations or warranties set forth in Section 2 above is untrue
or inaccurate in any material respect.
(b) The Selling Stockholder agrees with the Company and the
Underwriters not to, directly or indirectly, sell, offer, contract or grant
any option to sell (including without limitation any short sale), pledge,
transfer, establish an open "put equivalent position" (within the meaning
of Rule 16a-1(h) under the Exchange Act), or otherwise dispose of any
shares of Common Stock, options or warrants to acquire Common Stock or
securities convertible into or exchangeable or exercisable for any shares
of Common Stock, currently or hereafter owned either of record or
beneficially (as defined in Rule 13d-3 under the Exchange Act), or publicly
announce an intention to do any of the foregoing, for a period of 90 days
after the first date that any of the Common Shares are released by you for
sale to the public, without the prior written consent of either Xxxxxxxxxx
Securities or each of the Representatives, which consent may be withheld at
the sole discretion of Xxxxxxxxxx Securities or each of the
Representatives, as the case may be. The Selling Stockholder also agrees
and consents to the entry of stop transfer instructions with the Company's
transfer agent and registrar against the transfer of shares of Common Stock
or securities convertible into or exchangeable or exercisable for Common
Stock held by the Selling Stockholder with the foregoing restrictions.
SECTION 4. Representations and Warranties of the Underwriters. The
--------------------------------------------------
Representatives, on behalf of the several Underwriters, represent and warrant to
the Company and to the Selling Stockholder that the information set forth (i) on
the cover page
-10-
of the Prospectus with respect to price, underwriting discounts and commissions
and terms of offering and (ii) under "Underwriting" in the Prospectus was
furnished to the Company by and on behalf of the Underwriters for use in
connection with the preparation of the Registration Statement and the Prospectus
and is correct in all material respects. The Representatives represent and
warrant that they have been authorized by each of the other Underwriters as the
Representatives to enter into this Agreement on its behalf and to act for it in
the manner herein provided.
SECTION 5. Purchase, Sale and Delivery of Common Shares. The
--------------------------------------------
purchase price per share to be paid by the several Underwriters to the Company
and to the Selling Stockholder, respectively, shall be equal to the initial
price to the public per share less an amount per share equal to the per share
underwriting discount. The initial price to the public, which shall be a fixed
price, and the underwriting discount will be determined by separate agreement
among the Company, the Selling Stockholder and the Representatives in
substantially the form set forth as Schedule C hereto on the basis of the
reported prices or quotations of the Common Stock on the Nasdaq National Market
immediately prior to the determination. Such initial public offering price
shall not be higher than the last sale price of the Common Stock of the Company
on the Nasdaq National Market immediately prior to such determination of the
initial public offering price.
The obligation of each Underwriter to the Company shall be to purchase
from the Company that number of full shares which (as nearly as practicable, as
determined by you) bears to 500,000 the same proportion as the number of shares
set forth opposite the name of such Underwriter in Schedule A hereto bears to
the total number of Firm Common Shares. The obligation of each Underwriter to
the Selling Stockholder shall be to purchase from the Selling Stockholder that
number of full shares which (as nearly as practicable, as determined by you)
bears to 2,000,000 the same proportion as the number of shares set forth
opposite the name of such Underwriter in Schedule A hereto bears to the total
number of Firm Common Shares.
Delivery of certificates for the Firm Common Shares to be purchased by
the Underwriters and payment therefor shall be made at the offices of Xxxxxxxxxx
Securities, 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx (or such other
place as may be agreed upon by the Company and the Representatives) at such time
and date, not later than the third (or if the Firm Common Shares are priced, as
contemplated by Rule 15c6-1(c) under the Securities Exchange Act of 1934, after
4:30 P.M. Washington D.C. time, the fourth) full business day following the
first date that any of the Common Shares are released by you for sale to the
public, as you shall designate by at least 48 hours prior notice to the Company
(or at such other time and date, not later than one week after such fifth full
business day as may be agreed upon by the Company and the Representatives) (the
"First Closing Date"); provided, however, that if the Prospectus is at any time
prior to the First Closing Date recirculated to the public, the First Closing
Date shall occur upon the later of the third or fourth, as the case may be, full
business day following the first date that any of the Common Shares are released
by you for sale to the public or the date that is 48 hours after the date that
the Prospectus has been so recirculated.
-11-
Delivery of certificates for the Firm Common Shares shall be made by
or on behalf of the Company and the Selling Stockholder to you, for the
respective accounts of the Underwriters with respect to the Firm Common Shares
to be sold by the Company and by the Selling Stockholder against payment by you,
for the accounts of the several Underwriters, of the purchase price therefor by
certified or official bank checks payable in next day funds to the order of the
Company and of the Agent in proportion to the number of Firm Common Shares to be
sold by the Company and the Selling Stockholder, respectively. The certificates
for the Firm Common Shares shall be registered in such names and denominations
as you shall have requested at least two full business days prior to the First
Closing Date, and shall be made available for checking and packaging on the
business day preceding the First Closing Date at a location in New York, New
York, as may be designated by you. Time shall be of the essence, and delivery
at the time and place specified in this Agreement is a further condition to the
obligations of the Underwriters.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Selling Stockholder hereby grants an option to the several
Underwriters to purchase, severally and not jointly, up to an aggregate of
375,000 Optional Common Shares at the purchase price per share to be paid for
the Firm Common Shares, for use solely in covering any over-allotments made by
you for the account of the Underwriters in the sale and distribution of the Firm
Common Shares. The option granted hereunder may be exercised at any time (but
not more than once) within 30 days after the first date that any of the Common
Shares are released by you for sale to the public, upon notice by you to the
Selling Stockholder setting forth the aggregate number of Optional Common Shares
as to which the Underwriters are exercising the option, the names and
denominations in which the certificates for such shares are to be registered and
the time and place at which such certificates will be delivered. Such time of
delivery (which may not be earlier than the First Closing Date), being herein
referred to as the "Second Closing Date," shall be determined by you, but if at
any time other than the First Closing Date shall not be earlier than three nor
later than five full business days after delivery of such notice of exercise.
The number of Optional Common Shares to be purchased by each Underwriter shall
be determined by multiplying the number of Optional Common Shares to be sold by
the Selling Stockholder pursuant to such notice of exercise by a fraction, the
numerator of which is the number of Firm Common Shares to be purchased by such
Underwriter as set forth opposite its name in Schedule A and the denominator of
which is 375,000 (subject to such adjustments to eliminate any fractional share
purchases as you in your discretion may make). Certificates for the Optional
Common Shares will be made available for checking and packaging on the business
day preceding the Second Closing Date at a location in New York, New York, as
may be designated by you. The manner of payment for and delivery of the
Optional Common Shares shall be the same as for the Firm Common Shares purchased
from the Selling Stockholder as specified in the two preceding paragraphs. At
any time before lapse of the option, you may cancel such option by giving
written notice of such cancellation to the Selling Stockholder. If the option
is cancelled or expires unexercised in whole or in part, the Company will
deregister under the Act the number of Option Shares as to which the option has
not been exercised.
-12-
You have advised the Company and the Selling Stockholder that each
Underwriter has authorized you to accept delivery of its Common Shares, to make
payment and to receipt therefor. You, individually and not as the
Representatives of the Underwriters, may (but shall not be obligated to) make
payment for any Common Shares to be purchased by any Underwriter whose funds
shall not have been received by you by the First Closing Date or the Second
Closing Date, as the case may be, for the account of such Underwriter, but any
such payment shall not relieve such Underwriter from any of its obligations
under this Agreement.
Subject to the terms and conditions hereof, the Underwriters propose
to make a public offering of their respective portions of the Common Shares as
soon after the effective date of the Registration Statement as in the judgment
of the Representatives is advisable and at the public offering price set forth
on the cover page of and on the terms set forth in the final prospectus, if one
is used, or on the first page of the Term Sheet, if one is used.
SECTION 6. Covenants of the Company. The Company covenants and
------------------------
agrees that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date
that this Agreement is executed and delivered by the parties hereto, to
become effective. If the Registration Statement has become or becomes
effective pursuant to Rule 430A of the Rules and Regulations, or the filing
of the Prospectus is otherwise required under Rule 424(b) of the Rules and
Regulations, the Company will file the Prospectus, properly completed,
pursuant to the applicable paragraph of Rule 424(b) of the Rules and
Regulations within the time period prescribed and will provide evidence
satisfactory to you of such timely filing. The Company will promptly
advise you in writing (i) of the receipt of any comments of the Commission,
(ii) of any request of the Commission for amendment of or supplement to the
Registration Statement (either before or after it becomes effective), any
Preliminary Prospectus or the Prospectus or for additional information,
(iii) when the Registration Statement shall have become effective, and (iv)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of any
proceedings for that purpose. If the Commission shall enter any such stop
order at any time, the Company will use its best efforts to obtain the
lifting of such order at the earliest possible moment. The Company will
not file any amendment or supplement to the Registration Statement (either
before or after it becomes effective), any Preliminary Prospectus or the
Prospectus of which you have not been furnished with a copy a reasonable
time prior to such filing or to which you reasonably object or which is not
in compliance with the Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the Registration
Statement or the Prospectus which in your judgment may be necessary or
advisable to enable
-13-
the several Underwriters to continue the distribution of the Common Shares
and will use its best efforts to cause the same to become effective as
promptly as possible. The Company will fully and completely comply with
the provisions of Rule 430A of the Rules and Regulations with respect to
information omitted from the Registration Statement in reliance upon such
Rule.
(c) If at any time within the nine-month period referred to in Section
10(a)(3) of the Act during which a prospectus relating to the Common Shares
is required to be delivered under the Act any event occurs, as a result of
which the Prospectus, including any amendments or supplements, would
include an untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, or if it is necessary at any time to
amend the Prospectus, including any amendments or supplements, to comply
with the Act or the Rules and Regulations, the Company will promptly advise
you thereof and will promptly prepare and file with the Commission, at its
own expense, an amendment or supplement which will correct such statement
or omission or an amendment or supplement which will effect such compliance
and will use its best efforts to cause the same to become effective as soon
as possible; and, in case any Underwriter is required to deliver a
prospectus after such nine-month period, the Company upon request, but at
the expense of such Underwriter, will promptly prepare such amendment or
amendments to the Registration Statement and such Prospectus or
Prospectuses as may be necessary to permit compliance with the requirements
of Section 10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days after the end
of the first quarter ending after one year following the "effective date of
the Registration Statement" (as defined in Rule 158(c) of the Rules and
Regulations), the Company will make generally available to its security
holders an earnings statement (which need not be audited) covering a period
of 12 consecutive months beginning after the effective date of the
Registration Statement which will satisfy the provisions of the last
paragraph of Section 11(a) of the Act.
(e) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the
Company, at its expense, but only for the nine-month period referred to in
Section 10(a)(3) of the Act, will furnish to you and the Selling
Stockholder or mail to your order copies of the Registration Statement, the
Prospectus, the Preliminary Prospectus and all amendments and supplements
to any such documents in each case as soon as available and in such
quantities as you and the Selling Stockholder may request, for the purposes
contemplated by the Act.
(f) The Company shall cooperate with you and your counsel in order to
qualify or register the Common Shares for sale under (or obtain exemptions
from the application of) the Blue Sky laws of such jurisdictions as you
designate, will comply with such laws and will continue such
qualifications, registrations and exemptions in effect so long as
reasonably required for the distribution of the Common Shares.
-14-
The Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any such jurisdiction where
it is not presently qualified or where it would be subject to taxation as a
foreign corporation. The Company will advise you promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company, with your
cooperation, will use its best efforts to obtain the withdrawal thereof.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request of the Representatives, to
each of the other Underwriters: (i) as soon as practicable after the end
of each fiscal year, copies of the Annual Report of the Company containing
the balance sheet of the Company as of the close of such fiscal year and
statements of income, stockholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public
accountants; (ii) as soon as practicable after the filing thereof, copies
of each proxy statement, Annual Report on Form 10-K, Quarterly Report on
Form 10-Q, Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its Common Stock.
(h) During the period of 90 days after the first date that any of the
Common Shares are released by you for sale to the public, without the prior
written consent of either Xxxxxxxxxx Securities or each of the
Representatives (which consent may be withheld at the sole discretion of
the Xxxxxxxxxx Securities or the Representatives, as the case may be), the
Company will not other than pursuant to outstanding stock options and
warrants disclosed in the Prospectus issue, offer, sell, grant options to
purchase or otherwise dispose of any of the Company's equity securities or
any other securities convertible into or exchangeable with its Common Stock
or other equity security.
(i) The Company will apply the net proceeds of the sale of the Common
Shares sold by it substantially in accordance with its statements under the
caption "Use of Proceeds" in the Prospectus.
(j) The Company will use its best efforts to qualify or register its
Common Stock for sale in non-issuer transactions under (or obtain
exemptions from the application of) the Blue Sky laws of the State of
California (and thereby permit market making transactions and secondary
trading in the Company's Common Stock in California), will comply with such
Blue Sky laws and will continue such qualifications, registrations and
exemptions in effect for a period of five years after the date hereof.
-15-
(k) The Company will use its best efforts to list, subject to official
notice of issuance, on the Nasdaq National Market and subsequently on the
New York Stock Exchange, the Common Stock to be issued and sold by the
Company.
You, on behalf of the Underwriters, may, in your sole discretion,
waive in writing the performance by the Company of any one or more of the
foregoing covenants or extend the time for their performance.
SECTION 7. Payment of Expenses. Whether or not the transactions
-------------------
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company and, unless otherwise paid by the Company, the Selling
Stockholder agrees to pay in such proportions as they may agree upon among
themselves all costs, fees and expenses incurred in connection with the
performance of their obligations hereunder and in connection with the
transactions contemplated hereby, including without limiting the generality of
the foregoing, (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Common Shares to the Underwriters, (iv) all fees and expenses of
the Company's counsel and the Company's independent accountants, (v) all costs
and expenses incurred in connection with the preparation, printing, filing,
shipping and distribution of the Registration Statement, each Preliminary
Prospectus and the Prospectus (including all exhibits and financial statements)
and all amendments and supplements provided for herein, this Agreement, the
Agreement Among Underwriters, the Selected Dealers Agreement, the Underwriters'
Questionnaire, the Underwriters' Power of Attorney and the Blue Sky memorandum,
(vi) all filing fees, attorneys' fees and expenses incurred by the Company or
the Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Common Shares for offer and sale under the Blue Sky laws, (vii) the filing fee
of the National Association of Securities Dealers, Inc., and (viii) all other
fees, costs and expenses referred to in Item 14 of the Registration Statement.
The Underwriters may deem the Company to be the primary obligor with respect to
all costs, fees and expenses to be paid by the Company and by the Selling
Stockholder. Except as provided in this Section 7, Section 9 and Section 11
hereof, the Underwriters shall pay all of their own expenses, including the fees
and disbursements of their counsel (excluding those relating to qualification,
registration or exemption under the Blue Sky laws and the Blue Sky memorandum
referred to above). This Section 7 shall not affect any agreements relating to
the payment of expenses between the Company and the Selling Stockholder.
The Selling Stockholder will pay (directly or by reimbursement) all
fees and expenses incident to the performance of their obligations under this
Agreement which are not otherwise specifically provided for herein, including
but not limited to (i) any fees and expenses of counsel for the Selling
Stockholder; (ii) any fees and expenses of the Agent; and (iii) all expenses and
taxes incident to the sale and delivery of the Common Shares to be sold by the
Selling Stockholder to the Underwriters hereunder.
-16-
The Company and the Selling Stockholder will pay the premium or
premiums on the policy of insurance referred to in Section 11(f) below.
SECTION 8. Conditions of the Obligations of the Underwriters. The
-------------------------------------------------
obligations of the several Underwriters to purchase and pay for the Firm Common
Shares on the First Closing Date and the Optional Common Shares on the Second
Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholder herein set
forth as of the date hereof and as of the First Closing Date or the Second
Closing Date, as the case may be, to the accuracy of the statements of Company
officers and the Selling Stockholder made pursuant to the provisions hereof, to
the performance by the Company and the Selling Stockholder of their respective
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 5:00 P.M. (or, in the case of a registration statement filed pursuant
to Rule 462(b) of the Rules and Regulations relating to the Common Shares,
not later than 10 P.M.), Washington, D.C. time, on the date of this
Agreement, or at such later time as shall have been consented to by you; if
the filing of the Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b) of the Rules and Regulations, the Prospectus shall
have been filed in the manner and within the time period required by Rule
424(b) of the Rules and Regulations; and prior to such Closing Date, no
stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Company, the
Selling Stockholder or you, shall be contemplated by the Commission; and
any request of the Commission for inclusion of additional information in
the Registration Statement, or otherwise, shall have been complied with to
your satisfaction.
(b) You shall be satisfied that since the respective dates as of which
information is given in the Registration Statement and Prospectus, (i)
there shall not have been any change in the capital stock other than
pursuant to the exercise of outstanding options and warrants disclosed in
the Prospectus of the Company or any of its subsidiaries or any material
change in the indebtedness (other than in the ordinary course of business)
of the Company or any of its subsidiaries, (ii) except as set forth or
contemplated by the Registration Statement or the Prospectus, no material
verbal or written agreement or other transaction shall have been entered
into by the Company or any of its subsidiaries, which is not in the
ordinary course of business or which could result in a material reduction
in the future earnings of the Company and its subsidiaries, (iii) no loss
or damage (whether or not insured) to the property of the Company or any of
its subsidiaries shall have been sustained which materially and adversely
affects the condition (financial or otherwise), business, results of
operations or prospects of the Company and its subsidiaries, (iv) no legal
or governmental action, suit or proceeding affecting the Company or any of
its subsidiaries which is material to the Company and its subsidiaries or
which affects or may affect the transactions contemplated by this Agreement
shall have been instituted or threatened, and (v) there shall not have been
any material change in the
-17-
condition (financial or otherwise), business, management, results of
operations or prospects of the Company and its subsidiaries which makes it
impractical or inadvisable in the judgment of the Representatives to
proceed with the public offering or purchase the Common Shares as
contemplated hereby.
(c) There shall have been furnished to you, as Representatives of the
Underwriters, on each Closing Date, in form and substance satisfactory to
you, except as otherwise expressly provided below:
(i) An opinion of Xxxxxxx & XxXxxxxx, counsel for the Company
and the Selling Stockholder, addressed to the Underwriters and dated
the First Closing Date, or the Second Closing Date (in the latter case
with respect to the Selling Stockholder only), as the case may be, to
the effect that:
(1) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, is
duly qualified to do business as a foreign corporation and is in
good standing as a foreign corporation in each jurisdiction in
which its ownership or lease of property or the conduct of its
business 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, and each has all the corporate
power and authority necessary to own or hold its properties and
conduct the businesses as described in the Prospectus;
(2) The Company's authorized capital stock is as set forth
under the heading "Capitalization" in the Prospectus and all
outstanding shares of such capital stock (including the Firm
Common Shares to be sold by the Selling Stockholder and the
Optional Common Shares to be sold by the Selling Stockholder)
have been duly and validly issued, are fully paid and
nonassessable, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase
any securities and conform in all material respects to the
description thereof contained in the Prospectus;
(3) All of the issued and outstanding shares of the
Company's subsidiaries have been duly and validly authorized and
issued, are fully paid, nonassessable and owned of record by the
Company, to the best of such counsel's knowledge, free and clear
of all liens, encumbrances, equities or claims;
(4) The certificates evidencing the Common Shares to be sold
and delivered by the Company hereunder are in due and proper form
under Delaware law, and when duly countersigned by the Company's
transfer agent and registrar, and delivered to you or upon
-18-
your order against payment of the agreed consideration therefor
in accordance with the provisions of this Agreement, the Common
Shares represented thereby will be duly authorized and validly
issued, fully paid and nonassessable, will not have been issued
in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities and will conform
in all respects to the description thereof contained in the
Prospectus;
(5) Except as disclosed in or specifically contemplated by
the Prospectus, to the best of such counsel's knowledge, there
are no outstanding options, warrants or other rights calling for
the issuance of, and no commitments, plans or arrangements to
issue, any shares of capital stock of the Company or any security
convertible into or exchangeable for capital stock of the
Company;
(6)
(A) The Registration Statement has been declared
effective under the Act, and, to the knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and, to the knowledge
of such counsel, no proceeding for that purpose is pending
or threatened by the Commission; any required filing of the
Prospectus and any supplement thereto pursuant to Rule
424(b) of the Rules and Regulations has been made in the
manner and within the time period required by such Rule
424(b);
(B) The Registration Statement, the Prospectus and any
amendments or supplements thereto (other than the financial
statements, schedules and other financial and statistical
information included therein, as to which such counsel need
express no opinion) comply as to form in all material
respects with the requirements of the Act and the Rules and
Regulations;
(C) To the best of such counsel's knowledge there are
no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which
any property of the Company or any of its subsidiaries is
subject which, if determined adversely to the Company or any
of its subsidiaries, would have a material adverse effect on
the consolidated financial position, stockholders' equity,
results of operations or business of the Company and its
subsidiaries, taken as a whole. To the best of such
counsel's knowledge, no such proceedings are threatened or
contemplated by any governmental authority or threatened by
others. To the best of such counsel's knowledge, there is
no franchise, contract or
-19-
other document of a character required to be described in
the Registration Statement or the Prospectus, or to be filed
as an exhibit to the Registration Statement, which is not
described or filed as required, and the statements included
in the Prospectus describing any legal proceedings or
material contracts or agreements relating to the Company
fairly summarize such matters.
(D) The documents incorporated by reference in the
Prospectus (other than any financial statements, schedules
and other financial and statistical information included in
such documents, as to which such counsel need express no
opinion), when they were filed with the Commission, complied
as to form in all material respects with the requirements of
the Exchange Act and the rules and regulations of the
Commission thereunder; and such counsel has no reason to
believe that any of such documents (other than any financial
statements, schedules and other financial and statistical
information included in such documents, as to which such
counsel need express no opinion), when they were so filed,
contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made when such documents were so filed, not
misleading;
(7) The Company has corporate power and corporate authority
to enter into this Agreement, to issue, sell and deliver the
Common Shares to be sold by it to the several Underwriters, and
to carry out all of the terms and provisions of this Agreement to
be carried out by it; the execution and delivery of this
Agreement has been duly authorized by all necessary corporate
action of the Company and this Agreement has been duly executed
and delivered by the Company; this Agreement is a valid and
binding agreement of the Company in accordance with its terms,
except as enforceability may be limited by general equitable
principles, bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally and except as to
those provisions relating to indemnity or contribution for
liabilities arising under the Act as to which no opinion need be
expressed;
(8) Neither the issue and sale of the Common Shares to be
sold by the Company, nor the consummation of any other of the
transactions contemplated by this Agreement will conflict with or
result in a breach or violation of any of the terms or provisions
of, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, any
indenture, mortgage, deed
-20-
of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its
subsidiaries is subject, which conflict, breach or violation
would have a material adverse effect on the properties, business,
results of operations or conditions (financial or otherwise) of
the Company and its subsidiaries, taken as a whole, nor will such
actions result in any violation of the provisions of the charter
or bylaws of the Company or any of its subsidiaries or 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 subsidiaries or any of their respective properties,
which violation would have a material adverse effect on the
business, properties, conditions or results of operations of the
Company and its subsidiaries, taken as a whole. Except for the
registration of the Common Shares to be sold by the Company under
the Securities Act, such consents, approvals, authorizations,
registrations or qualifications as may be required under the
Exchange Act and applicable state securities laws in connection
with the purchase and distribution of the Common Shares to be
sold by the Company by the Underwriters and the approval of the
underwriting arrangements by the NASD, no consent (other than
consents which have been waived or satisfied), approval,
authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement or such
Common Shares by the Company and the consummation of the
transactions contemplated thereby;
(9) To the best of such counsel's knowledge, no holders of
securities of the Company have rights which have not been waived
to the registration of shares of Common Stock or other
securities, because of the filing of the Registration Statement
by the Company or the offering contemplated hereby;
(10) The execution and delivery of this Agreement and the
Stockholders Agreement have been duly authorized by all necessary
partnership action of the Selling Stockholder and this Agreement
and the Stockholders Agreement have been duly executed and
delivered by the Selling Stockholder; the Agent has been duly and
validly authorized to act as the custodian of the Common Shares
to be sold by the Selling Stockholder; and neither the sale of
the Common Shares to be sold by the Selling Stockholder, nor the
consummation of any other of the transactions contemplated by
this Agreement will conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default (or an event that with notice or lapse of time or both
would become a default) under, any indenture, mortgage, deed
-21-
of trust, loan agreement or other agreement or instrument to
which the Selling Stockholder is a party or by which the Selling
Stockholder is bound or to which any of the property or assets of
the Selling Stockholder is subject, nor will such actions result
in any violation of the provisions of the partnership agreement
or similar documents of the Selling Stockholder or any statute or
any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Selling Stockholder or any
of its properties. Except for the registration of the Common
Shares to be sold by the Selling Stockholder under the Act, such
consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and
applicable state securities laws in connection with the purchase
and distribution of the Common Shares to be sold by the Selling
Stockholder by the Underwriters and the approval of the
underwriting arrangements by the NASD, no consent (other than
consents which have been waived or satisfied), approval,
authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement or such
Common Shares by the Selling Stockholder and the consummation of
the transaction contemplated thereby;
(11) The Selling Stockholder has partnership power and
partnership authority to enter into this Agreement and the
Stockholders Agreement, to sell, transfer and deliver the Common
Shares to be sold by the Selling Stockholder hereunder, to carry
out all of the terms and provisions of this Agreement to be
carried out by it, and good and marketable title to such Common
Shares so sold, free and clear of all liens, encumbrances,
equities, claims, restrictions, security interests, voting
trusts, or other defects of title whatsoever, has been
transferred to the Underwriters (whom counsel may assume to be
bona fide purchasers) who have purchased such Common Shares
hereunder;
(12) To the best of such counsel's knowledge, this Agreement
and the Stockholders Agreement are valid and binding agreements
of the Selling Stockholder in accordance with their terms except
as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and except with respect to
those provisions relating to indemnities or contributions for
liabilities under the Act, as to which no opinion need be
expressed; and
(13) No transfer taxes are required to be paid in connection
with the sale and delivery of the Common Shares to the
Underwriters hereunder.
-22-
In rendering such opinion, such counsel may rely as to the matters set
forth in paragraphs (10), (11) and (12), on opinions of other counsel
retained by the Selling Stockholder, as to matters of local law, on
opinions of local counsel, and as to matters of fact, on certificates of
the Selling Stockholder and of officers of the Company and of governmental
officials, in which case their opinion is to state that they are so doing
and that the Underwriters are justified in relying on such opinions or
certificates and copies of said opinions or certificates are to be attached
to the opinion. Such counsel shall also include a statement to the effect
that such counsel does not believe that (A) the Registration Statement
(other than financial statements, schedules and other financial and
statistical information included therein, as to which such counsel need
express any belief), at the time such Registration Statement became
effective, contained an 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; and (B) the Prospectus (except for
the financial statements, schedules and other financial and statistical
information included therein, as to which such counsel need not express any
belief) as of its date and as of the date of the opinion, contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(iii) Such opinion or opinions of O'Melveny & Xxxxx, counsel for
the Underwriters dated the First Closing Date or the Second Closing
Date, as the case may be, with respect to the incorporation of the
Company, the sufficiency of all corporate proceedings and other legal
matters relating to this Agreement, the validity of the Common Shares,
the Registration Statement and the Prospectus and other related
matters as you may reasonably require, and the Company and the Selling
Stockholder shall have furnished to such counsel such documents and
shall have exhibited to them such papers and records as they may
reasonably request for the purpose of enabling them to pass upon such
matters. In connection with such opinions, such counsel may rely on
representations or certificates of officers of the Company and
governmental officials.
(iv) A certificate of the Company executed by the President and
the Chief Financial Officer of the Company, dated the First Closing
Date or the Second Closing Date, as the case may be, to the effect
that:
(1) The representations and warranties of the Company set
forth in Section 2 of this Agreement are true and correct as of
the date of this Agreement and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied on or prior to such
Closing Date;
(2) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary
Prospectus
-23-
filed as a part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness of the
Registration Statement has been issued; and to the best of the
knowledge of the respective signers, no proceedings for that
purpose have been instituted or are pending or contemplated under
the Act;
(3) Each of the respective signers of the certificate has
carefully examined the Registration Statement and the Prospectus;
in his opinion and to the best of his knowledge, the Registration
Statement and the Prospectus and any amendments or supplements
thereto contain all statements required to be stated therein
regarding the Company and its subsidiaries; and neither the
Registration Statement nor the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading;
(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral, transaction
or event has occurred which should have been set forth in an
amendment to the Registration Statement or in a supplement to or
amendment of any prospectus which has not been disclosed in such
a supplement or amendment;
(5) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and
except as disclosed in or contemplated by the Prospectus, there
has not been any material adverse change or a development
involving a material adverse change in the condition (financial
or otherwise), business, properties, results of operations,
management or prospects of the Company and its subsidiaries; and
no legal or governmental action, suit or proceeding is pending or
threatened against the Company or any of its subsidiaries which
is material to the Company and its subsidiaries, whether or not
arising from transactions in the ordinary course of business, or
which may adversely affect the transactions contemplated by this
Agreement; since such dates and except as so disclosed, neither
the Company nor any of its subsidiaries has entered into any
verbal or written agreement or other transaction which is not in
the ordinary course of business or which could result in a
material reduction in the future earnings of the Company or
incurred any material liability or obligation, direct, contingent
or indirect, made any change in its capital stock, made any
material change in its short-term debt or funded debt or
repurchased or otherwise acquired any of the Company's capital
stock; and the Company has not declared or paid any dividend, or
made any other distribution, upon its outstanding capital stock
payable to stockholders
-24-
of record on a date prior to the First Closing Date or Second
Closing Date; and
(6) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and except
as disclosed in or contemplated by the Prospectus, the Company
and its subsidiaries have not sustained a material loss or damage
by strike, fire, flood, windstorm, accident or other calamity
(whether or not insured).
(v) On the First Closing Date or the Second Closing Date, as the
case may be, a certificate, dated such Closing Date and addressed to
you, signed by or on behalf of the Selling Stockholder to the effect
that the representations and warranties of the Selling Stockholder in
this Agreement are true and correct, as if made at and as of the First
Closing Date or the Second Closing Date, as the case may be, and the
Selling Stockholder has complied with all the agreements and satisfied
all the conditions on his part to be performed or satisfied prior to
the First Closing Date or the Second Closing Date, as the case may be.
(vi) On the date before this Agreement is executed and also on
the First Closing Date and the Second Closing Date a letter addressed
to you, as Representatives of the Underwriters, from Xxxxxx Xxxxxxxx &
Co., independent accountants, the first one to be dated the day before
the date of this Agreement, the second one to be dated the First
Closing Date and the third one (in the event of a Second Closing) to
be dated the Second Closing Date, in form and substance satisfactory
to you.
(vii) On or before the First Closing Date, letters from FS
Equity Partners III, L.P., FS Equity Partners International, L.P. and
each director and officer of the Company, in form and substance
satisfactory to you, confirming that for a period of 90 days after the
first date that any of the Common Shares are released by you for sale
to the public, such person will not, directly or indirectly, sell,
offer, contract or grant any option to sell (including without
limitation any short sale), pledge, transfer, establish an open "put
equivalent position" (within the meaning of Rule 16a-1(h) under the
Exchange Act), or otherwise dispose of any shares of Common Stock,
options or warrants to acquire Common Stock or securities convertible
into or exchangeable or exercisable for any shares of Common Stock,
currently or hereafter owned either of record or beneficially (as
defined in Rule 13d-3 under the Exchange Act), or publicly announce an
intention to do any of the foregoing, without the prior written
consent of either Xxxxxxxxxx Securities or each of the
Representatives, which consent may be withheld at the sole discretion
of Xxxxxxxxxx Securities or each of the Representatives, as the case
may be, and containing the agreement and consent of such person to the
entry of stop transfer instructions with the Company's transfer agent
and registrar against
-25-
the transfer of shares of Common Stock or securities convertible into
or exchangeable or exercisable for Common Stock held by such person
with the foregoing restrictions.
All such opinions, certificates, letters and documents shall be in compliance
with the provisions hereof only if they are satisfactory to you and to O'Melveny
& Xxxxx, counsel for the Underwriters. The Company shall furnish you with such
manually signed or conformed copies of such opinions, certificates, letters and
documents as you request. Any certificate signed by any officer of the Company
and delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to the Underwriters as
to the statements made therein.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification by you as
Representatives to the Company and the Selling Stockholder without liability on
the part of any Underwriter, the Company or the Selling Stockholder except for
the expenses to be paid or reimbursed by the Company and by the Selling
Stockholder pursuant to Sections 7 and 9 hereof and except to the extent
provided in Section 11 hereof.
SECTION 9. Reimbursement of Underwriters' Expenses. Notwithstanding
---------------------------------------
any other provisions hereof, if this Agreement shall be terminated by you
pursuant to Section 8, or if the sale to the Underwriters of the Common Shares
at the First Closing is not consummated because of any refusal, inability or
failure on the part of the Company or the Selling Stockholder to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse you and the other Underwriters upon demand for all out-of-pocket
expenses that shall have been reasonably incurred by you and them in connection
with the proposed purchase and the sale of the Common Shares, including but not
limited to fees and disbursements of counsel, printing expenses, travel
expenses, postage, telegraph charges and telephone charges relating directly to
the offering contemplated by the Prospectus. Any such termination shall be
without liability of any party to any other party except that the provisions of
this Section, Section 7 and Section 11 shall at all times be effective and shall
apply.
SECTION 10. Effectiveness of Registration Statement. You and the
---------------------------------------
Company and the Selling Stockholder will use your and its best efforts to cause
the Registration Statement to become effective, to prevent the issuance of any
stop order suspending the effectiveness of the Registration Statement and, if
such stop order be issued, to obtain as soon as possible the lifting thereof.
SECTION 11. Indemnification.
---------------
(a) The Company and the Selling Stockholder, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of the Act against any
losses, claims, damages, liabilities or expenses, joint or several, to
which such Underwriter or such
-26-
controlling person may become subject, under the Act, the Exchange Act, or
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state in any of them a material fact required to be
stated therein or necessary to make the statements in any of them not
misleading, or arise out of or are based in whole or in part on any
inaccuracy in the representations and warranties of the Company or the
Selling Stockholder contained herein or any failure of the Company or the
Selling Stockholder to perform their respective obligations hereunder or
under law; and will reimburse each Underwriter and each such controlling
person for any legal and other expenses as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that
neither the Company nor the Selling Stockholder will be liable in any such
case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto in reliance upon and in conformity with the information
furnished to the Company pursuant to Section 4 hereof. The Company and the
Selling Stockholder may agree, as among themselves and without limiting the
rights of the Underwriters under this Agreement, as to the respective
amounts of such liability for which they each shall be responsible. In
addition to its other obligations under this Section 11(a), the Company and
the Selling Stockholder agree that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged
statement or omission, or any inaccuracy in the representations and
warranties of the Company or the Selling Stockholder herein or failure to
perform its obligations hereunder, all as described in this Section 11(a),
it will reimburse each Underwriter on a quarterly basis for all reasonable
legal or other expenses incurred in connection with investigating or
defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Company's or the Selling
Stockholder's obligation to reimburse each Underwriter for such expenses
and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, each
Underwriter shall promptly return it to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
announced from time to time by Bank of America NT&SA, San Francisco,
California (the "Prime Rate"). Any such interim reimbursement payments
which are not made to an Underwriter within 30 days of a request for
reimbursement, shall bear interest
-27-
at the Prime Rate from the date of such request. This indemnity agreement
will be in addition to any liability which the Company or the Selling
Stockholder may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, the Selling Stockholder and each of the Company's directors, each
of the Company's officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages, liabilities or expenses to which the
Company, the Selling Stockholder or any such director, officer or
controlling person may become subject, under the Act, the Exchange Act, or
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, 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 the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with
the information furnished to the Company pursuant to Section 4 hereof; and
will reimburse the Company, the Selling Stockholder or any such director,
officer or controlling person for any legal and other expense reasonably
incurred by the Company, the Selling Stockholder or any such director,
officer or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action. In addition to its other obligations under this Section
11(b), each Underwriter severally agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 11(b) which
relates to information furnished to the Company pursuant to Section 4
hereof, it will reimburse the Company (and, to the extent applicable, the
Selling Stockholder and each officer, director or controlling person) on a
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of
a judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, the Selling Stockholder and each officer, director or
controlling person) for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is
so held to have been improper, the Company (and, to the extent applicable,
the Selling Stockholder and each officer, director or controlling person)
shall promptly return it to the Underwriters together with interest,
compounded daily, determined on the
-28-
basis of the Prime Rate. Any such interim reimbursement payments which are
not made to the Company within 30 days of a request for reimbursement,
shall bear interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying party
under this Section, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party for contribution or otherwise than under the indemnity agreement
contained in this Section or to the extent it is not prejudiced as a
proximate result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or intends
to seek indemnity from an indemnifying party, the indemnifying party will
be entitled to participate in, and, to the extent that it may wish, jointly
with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified
party; provided, however, if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be a conflict between the
positions of the indemnifying party and the indemnified party in conducting
the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from
or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of
notice from the indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed such
counsel in connection with the assumption of legal defenses in accordance
with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses
of more than one separate counsel, approved by the Representatives in the
case of paragraph (a), representing the indemnified parties who are parties
to such action) or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel shall
be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 11 is required
by its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a),
(b) or (c) in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such
-29-
indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, the Selling
Stockholder and the Underwriters from the offering of the Common 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, the Selling Stockholder and the Underwriters in
connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company, the Selling Stockholder and the Underwriters shall be deemed to be
in the same proportion, in the case of the Company and the Selling
Stockholder as the total price paid to the Company and to the Selling
Stockholder, respectively, for the Common Shares sold by them to the
Underwriters (net of underwriting commissions but before deducting
expenses) bears to the total price to the public set forth on the cover of
the Prospectus, and in the case of the Underwriters as the underwriting
commissions received by them bears to the total price to the public set
forth on the cover of the Prospectus. The relative fault of the Company,
the Selling Stockholder and the Underwriters 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 or the inaccurate or the alleged inaccurate representation
and/or warranty relates to information supplied by the Company, the Selling
Stockholder or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
subparagraph (c) of this Section 11, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in subparagraph
(c) of this Section 11 with respect to notice of commencement of any action
shall apply if a claim for contribution is to be made under this
subparagraph (d); provided, however, that no additional notice shall be
required with respect to any action for which notice has been given under
subparagraph (c) for purposes of indemnification. The Company, the Selling
Stockholder and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 11 were determined
solely 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 in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section 11, no Underwriter shall be required to contribute any amount in
excess of the amount of the total underwriting commissions received by such
Underwriter in connection with the Common Shares underwritten by it and
distributed to the public. 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'
-30-
obligations to contribute pursuant to this Section 11 are several in
proportion to their respective underwriting commitments and not joint.
(e) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 11(a) and
11(b) hereof, including the amounts of any requested reimbursement payments
and the method of determining such amounts, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board
of Governors of the New York Stock Exchange, Inc. or pursuant to the Code
of Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or written notice
of intention to arbitrate, therein electing the arbitration tribunal. In
the event the party demanding arbitration does not make such designation of
an arbitration tribunal in such demand or notice, then the party responding
to said demand or notice is authorized to do so. Such an arbitration would
be limited to the operation of the interim reimbursement provisions
contained in Sections 11(a) and 11(b) hereof and would not resolve the
ultimate propriety or enforceability of the obligation to reimburse
expenses which is created by the provisions of such Sections 11(a) and
11(b) hereof.
SECTION 12. Default of Underwriters. It shall be a condition to this
-----------------------
Agreement and the obligation of the Company and the Selling Stockholder to sell
and deliver the Common Shares hereunder, and of each Underwriter to purchase the
Common Shares in the manner as described herein, that, except as hereinafter in
this paragraph provided, each of the Underwriters shall purchase and pay for all
the Common Shares agreed to be purchased by such Underwriter hereunder upon
tender to the Representatives of all such shares in accordance with the terms
hereof. If any Underwriter or Underwriters default in their obligations to
purchase Common Shares hereunder on either the First or Second Closing Date and
the aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase on such Closing Date does not exceed
10% of the total number of Common Shares which the Underwriters are obligated to
purchase on such Closing Date, the non-defaulting Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the Common Shares which such defaulting Underwriters agreed but failed
to purchase on such Closing Date. If any Underwriter or Underwriters so default
and the aggregate number of Common Shares with respect to which such default
occurs is more than the above percentage and arrangements satisfactory to the
Representatives and the Company for the purchase of such Common Shares by other
persons are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company or the Selling Stockholder except for the expenses to be paid by the
Company and the Selling Stockholder pursuant to Section 7 hereof and except to
the extent provided in Section 11 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First or
Second Closing Date, as the case may be, for not more than five business days in
order that the
-31-
necessary changes in the Registration Statement, Prospectus and any other
documents, as well as any other arrangements, may be effected. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 13. Effective Date. This Agreement shall become effective
--------------
immediately as to Sections 7, 9, 11, 14 and 16 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement has
not become effective, at 2:00 P.M., California time, on the first full business
day following the effectiveness of the Registration Statement, or (ii) if at the
time of execution of this Agreement the Registration Statement has been declared
effective, at 2:00 P.M., California time, on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time after the Registration
Statement becomes effective as you may determine on and by notice to the Company
or by release of any of the Common Shares for sale to the public. For the
purposes of this Section 13, the Common Shares shall be deemed to have been so
released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams (I)
advising Underwriters that the Common Shares are released for public offering,
or (II) offering the Common Shares for sale to securities dealers, whichever may
occur first.
SECTION 14. Termination. Without limiting the right to terminate
-----------
this Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to you
and the Selling Stockholder or by you by notice to the Company and the
Selling Stockholder at any time prior to the time this Agreement shall
become effective as to all its provisions, and any such termination shall
be without liability on the part of the Company or the Selling Stockholder
to any Underwriter (except for the expenses to be paid or reimbursed by the
Company and the Selling Stockholder pursuant to Sections 7 and 9 hereof and
except to the extent provided in Section 11 hereof) or of any Underwriter
to the Company or the Selling Stockholder (except to the extent provided in
Section 11 hereof).
(b) This Agreement may also be terminated by you prior to the First
Closing Date by notice to the Company (i) if additional material
governmental restrictions, not in force and effect on the date hereof,
shall have been imposed upon trading in securities generally or minimum or
maximum prices shall have been generally established on the New York Stock
Exchange or on the American Stock Exchange or in the over the counter
market by the NASD, or trading in securities generally shall have been
suspended on either such Exchange or in the over the counter market by the
NASD, or a general banking moratorium shall have been established by
federal, New York or California authorities, (ii) if an outbreak of major
hostilities or other national or international calamity or any substantial
change in political, financial or economic conditions shall have occurred
or shall have accelerated or escalated to such an extent, as, in the
judgment of the
-32-
Representatives, to affect adversely the marketability of the Common
Shares, (iii) if any adverse event shall have occurred or shall exist which
makes untrue or incorrect in any material respect any statement or
information contained in the Registration Statement or Prospectus or which
is not reflected in the Registration Statement or Prospectus but should be
reflected therein in order to make the statements or information contained
therein not misleading in any material respect, or (iv) if there shall be
any action, suit or proceeding pending or threatened, or there shall have
been any development or prospective development involving particularly the
business or properties or securities of the Company or any of its
subsidiaries or the transactions contemplated by this Agreement, which, in
the reasonable judgment of the Representatives, may materially and
adversely affect the Company's business or earnings and makes it
impracticable or inadvisable to offer or sell the Common Shares. Any
termination pursuant to this subsection (b) shall without liability on the
part of any Underwriter to the Company or the Selling Stockholder or on the
part of the Company or the Selling Stockholder to any Underwriter (except
for expenses to be paid or reimbursed by the Company and the Selling
Stockholder pursuant to Sections 7 and 9 hereof and except to the extent
provided in Section 11 hereof.
(c) This Agreement shall also terminate at 5:00 P.M., California time,
on the tenth full business day after the Registration Statement shall have
become effective if the initial public offering price of the Common Shares
shall not then as yet have been determined as provided in Section 5 hereof.
Any termination pursuant to this subsection (c) shall without liability on
the part of any Underwriter to the Company or the Selling Stockholder or on
the part of the Company or the Selling Stockholder to any Underwriter
(except for expenses to be paid or reimbursed by the Company and the
Selling Stockholder pursuant to Sections 7 and 9 hereof and except to the
extent provided in Section 11 hereof.
SECTION 15. Failure of the Selling Stockholder to Sell and Deliver.
------------------------------------------------------
If the Selling Stockholder shall fail to sell and deliver to the Underwriters
any of the Common Shares to be sold and delivered by the Selling Stockholder at
the First Closing Date under the terms of this Agreement, then the Underwriters
may at their option, by written notice from you to the Company and the Selling
Stockholder, either (i) terminate this Agreement without any liability on the
part of any Underwriter or, except as provided in Sections 7, 9 and 11 hereof,
the Company or the Selling Stockholder, or (ii) purchase the shares which the
Company and the Selling Stockholder have agreed to sell and deliver in
accordance with the terms hereof. In the event of a failure by the Selling
Stockholder to sell and deliver as referred to in this Section, either you or
the Company shall have the right to postpone the Closing Date for a period not
exceeding seven business days in order that the necessary changes in the
Registration Statement, Prospectus and any other documents, as well as any other
arrangements, may be effected.
SECTION 16. Representations and Indemnities to Survive Delivery. The
---------------------------------------------------
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Stockholder and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any
-33-
investigation made by or on behalf of any Underwriter or the Company or any of
its or their partners, officers or directors or any controlling person, or the
Selling Stockholder, as the case may be, and will survive delivery of and
payment for the Common Shares sold hereunder and any termination of this
Agreement.
SECTION 17. Notices. All communications hereunder shall be in
-------
writing and, if sent to the Representatives shall be mailed, delivered or
telegraphed and confirmed to you at 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000, Attention: __________, with a copy to O'Melveny & Xxxxx, 000
Xxxxx Xxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention Xxxxxxx X. Xxxxxxx,
Esq.; and if sent to the Company or the Selling Stockholder shall be mailed,
delivered or telegraphed and confirmed to the Company at Orchard Supply Hardware
Stores Corporation, 0000 Xxx Xxx Xxx, Xxx Xxxx, Xxxxxxxxxx 00000, Attention:
Xxxxxxx X. Xxxxxxx, with a copy to Xxxxxxx & XxXxxxxx, 000 Xxxxx Xxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxxxxx, Esq.
The Company, the Selling Stockholder or you may change the address for receipt
of communications hereunder by giving notice to the others.
SECTION 18. Successors. This Agreement will inure to the benefit of
----------
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 12 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 11, and in each case their
respective successors, personal representatives and assigns, and no other person
will have any right or obligation hereunder. No such assignment shall relieve
any party of its obligations hereunder. The term "successors" shall not include
any purchaser of the Common Shares as such from any of the Underwriters merely
by reason of such purchase.
SECTION 19. Representation of Underwriters. You will act as
------------------------------
Representatives for the several Underwriters in connection with all dealings
hereunder, and any action under or in respect of this Agreement taken by you
jointly or by Xxxxxxxxxx Securities, as Representatives, will be binding upon
all the Underwriters.
SECTION 20. Partial Unenforceability. The invalidity or
------------------------
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 21. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
SECTION 22. General. This Agreement constitutes the entire agreement
-------
of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with
respect to the
-34-
subject matter hereof. This Agreement may be executed in several counterparts,
each one of which shall be an original, and all of which shall constitute one
and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company, the Selling Stockholder and you.
Any person executing and delivering this Agreement as Attorney-in-fact
for the Selling Stockholder represents by so doing that he has been duly
appointed as Attorney-in-fact by the Selling Stockholder pursuant to a validly
existing and binding Power of Attorney which authorizes such Attorney-in-fact to
take such action. Any action taken under this Agreement by any of the
Attorneys-in-fact will be binding on the Selling Stockholder.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement among the Company, the Selling Stockholder and
the several Underwriters including you, all in accordance with its terms.
Very truly yours,
ORCHARD SUPPLY HARDWARE STORES
CORPORATION
By:__________________________
Name:
Title:
FS EQUITY PARTNERS II, L.P.
By: XXXXXXX, SPOGLI & CO.
(General Partner)
By:__________________________
Name:
Title:
-35-
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in San Francisco, California as of
the date first above written.
XXXXXXXXXX SECURITIES
XXXXXX XXXX LLC
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By: XXXXXXXXXX SECURITIES
By:__________________________
Name:
Title: Partner
-36-
SCHEDULE A
Number of Firm
Common Shares
Name of Underwriter to be Purchased
------------------- ---------------
Xxxxxxxxxx Securities...
Xxxxxx Xxxx LLC.........
---------
TOTAL......... 2,500,000
=========
-37-
SCHEDULE B
Number of Firm
Common Shares to
be Sold by
Name of Selling Stockholder Selling Stockholder
--------------------------- -------------------
FS Equity Partners II, L.P. 2,000,000
---------
TOTAL............... 2,000,000
=========
-38-
SCHEDULE C
March __, 1996
PRICE DETERMINATION AGREEMENT
Referring to Section 5 of the Underwriting Agreement dated March __,
1996, among the Company, the Selling Stockholder and the Underwriters as therein
defined with respect to the purchase and sale of the Common Shares, we hereby
confirm our agreement that the initial public offering price of the Common
Shares shall be $_____ per share; that the underwriting discount shall be $_____
per share; and that the purchase price to be paid by the several Underwriters
for the Common Shares to be purchased from the Company and the Selling
Stockholder shall be $_____ per share.
This Agreement may be executed in various counterparts which together
shall constitute one and the same Agreement.
XXXXXXXXXX SECURITIES
XXXXXX XXXX LLC
By: XXXXXXXXXX SECURITIES
By:________________________________
Name:
Title: Partner
ORCHARD SUPPLY HARDWARE STORES
CORPORATION
By:__________________________
Name:
Title:
FS EQUITY PARTNERS II, L.P.
By: XXXXXXX, SPOGLI & CO.
(General Partner)
By:__________________________
Name:
Title:
-39-
