$65,000,000
6-1/4% Convertible Subordinated Notes due 2003
PENN TREATY AMERICAN CORPORATION
PURCHASE AGREEMENT
November 20, 1996
BEAR, XXXXXXX & CO. INC.
ADVEST, INC.
as the Initial Purchasers named in
Schedule I hereto
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Dear Sirs:
Penn Treaty American Corporation, a Pennsylvania corporation (the
"COMPANY"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several Initial Purchasers named in Schedule I hereto (the
"INITIAL PURCHASERS") an aggregate of $65,000,000 principal amount of its 6-1/4%
Convertible Subordinated Notes due 2003 (the "FIRM NOTES"). In addition, the
Company proposes to grant to the Initial Purchasers an option, for the sole
purpose of covering over allotments in connection with the sale of the Firm
Notes, to purchase up to an additional $9,750,000 principal amount of Notes (the
"OPTIONAL NOTES") as provided in Section 2 below. The Firm Notes and any
Optional Notes purchased by the Initial Purchasers are referred to herein as the
"NOTES".
The Notes are to be issued pursuant to an indenture to be dated as of
November 26, 1996 (the "INDENTURE") between the Company and First Union National
Bank, as trustee (the "TRUSTEE"), and, except as otherwise provided therein and
in the Indenture, will be convertible into shares of the Company's common stock,
par value $.10 per share (the "COMMON STOCK"), on the terms set forth therein.
The holders of the Notes will be entitled to certain registration rights
provided under a Registration Rights Agreement to be dated November 26, 1996
(the "REGISTRATION RIGHTS AGREEMENT") between the Company and the Initial
Purchasers.
The Company has prepared a preliminary offering circular dated
November 8, 1996 (the "PRELIMINARY OFFERING CIRCULAR") and a final offering
circular dated November 20, 1996 (as supplemented from time to time with the
written consent of the Company and Bear, Xxxxxxx & Co. Inc. (as the
representative of the Initial Purchasers, the "REPRESENTATIVE") (the "OFFERING
CIRCULAR") with respect to the offering of the Notes contemplated by this
Agreement (the "OFFERING"). The terms "Preliminary Offering Circular" and
"Offering Circular" as used herein shall include all documents incorporated by
reference therein.
The Notes have not been registered under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), and are being offered and sold in reliance on
exemptions from or in transactions not subject to the registration requirements
of the Securities Act, including sales (i) made in the United States to
"qualified institutional buyers" as defined in, and in reliance on, Rule 144A
under the Securities Act ("RULE 144A") or to institutional "accredited
investors" as defined in Rule 501(a)(1),(2), (3) and (7) of Regulation D under
the Securities Act ("REGULATION D") and (ii) made outside the United States in
reliance on Regulation S under the Securities Act ("REGULATION S").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Initial Purchasers that:
(a) The Offering Circular, as of the date hereof, and as of the
Closing Date (as hereinafter defined) and as of the Additional Closing Date (as
hereinafter defined), if any, is and will be accurate in all material respects,
does not and will not contain an untrue statement of a material fact and does
not and will not omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. No representation and
warranty is made in this Section 1(a), however, with respect to any information
contained in or omitted from the Offering Circular or any amendment thereof or
supplement thereto in reliance upon and in conformity with information furnished
in writing to the Company by either Initial Purchaser expressly for use in
connection with the preparation of the Offering Circular or any amendment
thereof or supplement thereto, as the case may be.
(b) Coopers & Xxxxxxx L.L.P., who have certified certain of the
financial statements and supporting schedules included or incorporated by
reference in the Offering Circular, are independent public accountants as
required by the Securities Act and the rules and regulations promulgated
thereunder (the "REGULATIONS").
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(c) The financial statements, including the notes thereto, and
supporting schedules, included or incorporated by reference in the Offering
Circular present fairly the consolidated financial position of the Company and
its subsidiaries as of the dates indicated and the consolidated results of
operations and changes in financial position of the Company and its subsidiaries
for the periods specified; except as otherwise stated in the Offering Circular,
such financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis; and the supporting
schedules included or incorporated by reference in the Offering Circular present
fairly the information required to be stated therein. The pro forma financial
statements and other pro forma financial information included in the Offering
Circular have been prepared in all material respects in accordance with the
rules and regulations of the Securities and Exchange Commission (the
"COMMISSION") with respect to pro forma financial statements, have been properly
compiled on the pro forma bases described therein, and, in the opinion of the
Company, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein.
(d) Other than Penn Treaty Life Insurance Company, Network America
Life Insurance Company, American Network Insurance Company and Senior Financial
Consultants Company (each, a "SIGNIFICANT SUBSIDIARY" and together, the
"SIGNIFICANT SUBSIDIARIES"), the Company does not own or control, directly or
indirectly, any corporation, association or other entity that would constitute a
"significant subsidiary" within the meaning of Rule 1-02(w) of Regulation S-X
under the Securities Act.
(e) Subsequent to the respective dates as of which information is
given in the Offering Circular, except as set forth in the Offering Circular,
there has been no material adverse change in the business, properties,
operations, condition (financial or otherwise) or results of operations of the
Company and its subsidiaries taken as a whole, whether or not arising from
transactions in the ordinary course of business, and since the date of the
latest balance sheet presented in the Offering Circular, neither the Company nor
any of the Significant Subsidiaries has incurred or undertaken any liabilities
or obligations, direct or contingent, that are material to the Company and its
subsidiaries taken as a whole, except for liabilities or obligations that are
disclosed in the Offering Circular.
(f) Each of the Company and the Significant Subsidiaries (i) has been
duly incorporated and is validly subsisting under the laws of its jurisdiction
of incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
properties (owned, leased or
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licensed) or the nature or conduct of its business makes such qualification
necessary, except for those failures to be so qualified or in good standing
that will not in the aggregate have a material adverse effect on the Company
and its subsidiaries taken as a whole, and (iii) has all requisite power and
authority, and all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses and permits of and from all public,
regulatory or governmental agencies and bodies (including without limitation
all licenses from the insurance departments of the various states in which
subsidiaries of the Company write business), to own, lease and operate its
properties and conduct its business as now being conducted and as described
in the Offering Circular. Each subsidiary of the Company engaged in
underwriting insurance has fulfilled and performed all of its material
obligations under, and is in compliance with all material requirements and
conditions of, all licenses from the insurance departments of the various
states in which it currently underwrites insurance and no event has occurred
that allows or, after notice or lapse of time, would allow or result in the
revocation or termination of, or any material impairment of the rights and
privileges of such subsidiary under, any such license.
(g) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Indenture, the Notes and the Registration Rights Agreement (collectively, the
"TRANSACTION AGREEMENTS"), and to consummate the transactions contemplated
hereby and thereby, including (without limitation) (i) the issuance, sale and
delivery of the Notes hereunder and (ii) the filing of any Registration
Statement under and as defined in the Registration Rights Agreement.
(h) The execution, delivery, and performance of this Agreement and
the other Transaction Agreements and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or result
in a breach of any of the terms and provisions of, or constitute a default (or
an event which with notice or lapse of time, or both, would constitute a
default) under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the Significant
Subsidiaries (other than as disclosed in the Offering Circular) pursuant to, any
agreement, instrument, franchise, license or permit to which the Company or any
of the Significant Subsidiaries is a party or by which any of such corporations
or their respective properties or assets is bound, except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not have a
material adverse effect on the condition (financial or otherwise), earnings or
business affairs of the Company and its subsidiaries, taken as a whole, (ii)
violate or conflict with any provision of the articles of incorporation or
bylaws of the Company or any of the Significant Subsidiaries or any judgment,
decree, order, statute, rule or regulation of any
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court or any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of the Significant Subsidiaries or any
of their respective properties or assets, except for such violations or
conflicts that would not have a material adverse effect on the condition
(financial or otherwise), earnings or business affairs of the Company and
its subsidiaries, taken as a whole, or (iii) require any consent, approval,
authorization, order, registration, filing, qualification, license or permit
of or with any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or any of the Significant Subsidiaries
or any of their respective properties or assets, except (in the case of
clause (iii) above) as disclosed in the Offering Circular and except for any
such consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as have been made or obtained or as may
be required under state securities or Blue Sky laws or the securities laws of
any jurisdiction outside the United States in connection with the purchase
and distribution of the Notes by the Initial Purchasers, and except where the
failure to obtain or make any such consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses and permits would
not have a material adverse effect on the condition (financial or otherwise),
earnings or business affairs of the Company and its subsidiaries, taken as a
whole.
(i) This Agreement and the transactions contemplated hereby have been
duly and validly authorized by the Company. This Agreement has been duly and
validly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement may be subject to or
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, or general equitable principles (whether considered in a proceeding
in equity or at law), and except as the enforceability thereof may be limited by
considerations of public policy.
(j) The Indenture has been duly and validly authorized by the Company
and, when executed and delivered by the Company and the Trustee, will have been
duly and validly executed and delivered by the Company and will constitute the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforcement may be subject
to or limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, or general equitable principles (whether considered in a proceeding
in equity or at law). The Indenture conforms in all material respects to the
description thereof contained in the Offering Circular.
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(k) The Notes have been duly and validly authorized by the Company
and, when authenticated by the Trustee and issued, sold and delivered in
accordance with this Agreement and the Indenture, will have been duly and
validly executed, authenticated, issued and delivered and will constitute the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits of the
Indenture, except as such enforcement may be subject to or limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, or
general equitable principles (whether considered in a proceeding in equity or at
law). The Notes conform in all material respects to the description thereof
contained in the Offering Circular.
(l) The Registration Rights Agreement and the transactions
contemplated therein have been duly and validly authorized by the Company. The
Registration Rights Agreement, when executed and delivered by the Company and
the Initial Purchasers, will have been duly and validly executed and delivered
by the Company and will constitute the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as such enforcement may be subject to or limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, or general equitable
principles (whether considered in a proceeding in equity or at law), and except
as the enforceability thereof may be limited by considerations of public policy.
The Registration Rights Agreement conforms in all material respects to the
description thereof contained in the Offering Circular.
(m) Except as described in the Offering Circular, there is no
litigation or governmental proceeding to which the Company or any Significant
Subsidiary is a party or to which any property of the Company or any Significant
Subsidiary is subject or which is pending or, to the knowledge of the Company,
contemplated against the Company or any Significant Subsidiary that could
reasonably be expected to result in any material adverse change or any
development involving a material adverse change in the business, properties,
operations, condition (financial or otherwise) or results of operations of the
Company and its subsidiaries taken as a whole.
(n) Each of the Company and the Significant Subsidiaries is
conducting its business in compliance with all applicable local, state, federal
and foreign laws, rules and regulations in the jurisdictions in which it is
conducting business, except to the extent that such failure to comply would not
have a material adverse effect on the condition (financial or otherwise),
earnings or business affairs of the Company and its subsidiaries, taken as a
whole.
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(o) The Company had, at September 30, 1996, an authorized and
outstanding capitalization as set forth in the Offering Circular. All of the
outstanding shares of capital stock of the Company have been duly and validly
authorized and issued, are fully paid and nonassessable and were not issued in
violation of or subject to any preemptive rights. Except as otherwise disclosed
in the Offering Circular, all of the outstanding shares of capital stock of each
Significant Subsidiary have been duly and validly authorized and issued, are
fully paid and nonassessable, were not issued in violation of or subject to any
preemptive rights and all such shares owned by the Company are owned, directly
or indirectly, free and clear of any lien, claim, encumbrance, security
interest, restriction on transfer, shareholders' agreement, voting trust or
other preferential arrangement or defect of title whatsoever. The capital stock
of the Company conforms to the descriptions thereof contained in the Offering
Circular.
(p) As of the date hereof, no event has occurred nor has any
circumstance arisen which, had the Notes been issued on the date hereof, would
constitute a default or Event of Default (as such terms are defined in the
Indenture).
(q) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes or
that might reasonably be expected to constitute, the stabilization or
manipulation of the price of the Notes to facilitate the sale or resale of the
Notes.
(r) (i) None of the Company or any of its affiliates (as defined in
Rule 501(b) under the Securities Act) or any person acting on behalf of any such
person (excluding the Initial Purchasers and their respective affiliates, as to
whom this representation shall not apply) has engaged in any directed selling
efforts (as such term is defined in Regulation S) in the United States with
respect to the Notes, and (ii) each of the Company, its affiliates and each
person acting on behalf of any of them (other than the Initial Purchasers and
their respective affiliates, as to which no representation made) has complied
with the offering restrictions requirement of Regulation S.
(s) None of the Company or any of its affiliates or any person acting
on behalf of any of them (excluding the Initial Purchasers and their respective
affiliates, as to whom this representation shall not apply) has sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of any
security (as such term is defined in the Securities Act) that is or may be
integrated with the sale of the Notes in a manner that would require
registration under the Securities Act.
(t) The Notes are eligible for resale pursuant to Rule 144A and, when
issued, will not be of the same class as any securities listed on a national
securities
7
exchange registered under section 6 of the Exchange Act (as hereinafter
defined) or quoted in a U.S. automated inter-dealer quotation system.
(u) The Company is subject to section 13 or 15(d) of the Exchange Act
and is in compliance in all material respects with the provisions of such
section.
(v) Subject to: (i) compliance by the Initial Purchasers with the
procedures set forth in Section 3 hereof, (ii) the accuracy of the
representations and warranties of the Initial Purchasers in Section 3 hereof,
(iii) the accuracy of the representations and warranties made in accordance with
this Agreement and the Offering Circular by purchasers to whom the Initial
Purchasers initially resell Notes, and (iv) receipt by the purchasers to whom
the Initial Purchasers initially resell Notes of a copy of the Offering Circular
prior to such resale, it is not necessary, in connection with the offer, sale
and delivery of the Notes to the Initial Purchasers in the manner contemplated
by this Agreement and the Offering Circular, to register the Notes under the
Securities Act or to qualify the Indenture under the Trust Indenture Act of
1939, as amended.
(w) Except to the extent set forth in the Offering Circular, the
shares of Common Stock issuable upon conversion of the Notes have been duly
authorized and, when issued in accordance with the terms of the Notes and the
Indenture, will be validly issued, fully paid and nonassessable and will conform
in all material respects to the description thereof contained in the Offering
Circular. The shares of Common Stock issuable on conversion of the Notes at the
initial conversion price set forth in the Indenture, to the extent authorized
and available for issuance for such purpose, have been reserved for issuance
and, except as set forth in the Offering Circular, no further approval or
authority of the shareholders or the Board of Directors of the Company will be
required for such issuance of Common Stock.
(x) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940, as amended.
2. PURCHASE, SALE AND DELIVERY OF THE NOTES.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Initial Purchasers, and the Initial
Purchasers, severally and not jointly, agree to purchase from the Company, the
principal amount of the Firm Notes set forth opposite their respective names in
Schedule I hereto at a purchase price equal to 100% of such principal amount
LESS an underwriting discount of 3% of such
8
principal amount. Payment of the purchase price for, and delivery of, the
Firm Notes will be made at the offices of Bear Xxxxxxx & Co. Inc. (the
"Representative") at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m. (New
York City time) on November 26, 1996, unless postponed in accordance with
Section 9 hereof, or at such other place, time and date as may be mutually
agreed in writing between you and the Company (the time and date of such
payment and delivery being herein called the "CLOSING DATE").
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants to the Initial Purchasers
the option to purchase, severally and not jointly, up to U.S. $9,750,000
aggregate principal amount of Optional Notes, for the sole purpose of covering
over-allotments in the sale of Firm Notes by the Initial Purchasers, at the same
purchase price to be paid by the Initial Purchasers to the Company for the Firm
Notes as set forth in Section 2(a). This option may be exercised, in whole or
in part, on one occasion only at any time on or before the 30th day following
the date of the Offering Circular, by written notice to the Company by the
Representative on behalf of the Initial Purchasers. Such notice shall set forth
the aggregate principal amount of Optional Notes to be purchased pursuant to
such exercise of the option and the date and time, as reasonably determined by
the Representative, when the Optional Notes are to be delivered (such date and
time being herein sometimes referred to as the "ADDITIONAL CLOSING DATE");
PROVIDED that the Additional Closing Date shall not be earlier than (x) the
Closing Date or (y) the second full business day after the date on which the
option shall have been exercised, nor later than the eighth full business day
after the date on which the option shall have been exercised (unless such date
and time are postponed in accordance with Section 9 hereof). The principal
amount of the Optional Notes to be purchased by each Initial Purchaser upon such
exercise shall bear the same ratio to the aggregate principal amount of Optional
Notes being purchased upon such exercise as the principal amount of Firm Notes
set forth opposite the name of such Initial Purchaser in Schedule I hereto (or
such number increased as set forth in Section 9 hereof) bears to the aggregate
principal amount of Firm Notes, subject to such adjustments to eliminate
fractional amounts as the Representative in its sole discretion may make.
(c) At or prior to the Closing Date and the Additional Closing Date
(if any) hereunder, the Company shall execute and deliver for authentication the
Notes to be purchased and sold on such date and shall deposit such Notes (except
for those purchased by "institutional accredited investors" which shall be in
definitive form) with The Depositary Trust Company ("DTC") for the account or
accounts of participants in DTC (including Euroclear and CEDEL, as the case may
be) purchasing beneficial interests therein. The Initial Purchasers shall pay
or cause the purchase price for such
9
Notes to be paid to or upon the order of the Company by wire transfer of same
day funds against delivery of such Notes to or for the respective accounts of
the Initial Purchasers. Certificates evidencing the Notes shall be
registered in the name of Cede & Co. as nominee for DTC or such other name or
names and in such authorized denominations as the Representative may request
in writing at least two full business days prior to the Closing Date or the
Additional Closing Date, as the case may be. The Company will permit the
Representative to inspect such certificates at the offices of the
Representative at least one full business day prior to the Closing Date and
the Additional Closing Date (if any).
3. SUBSEQUENT OFFERS AND RESALES OF THE NOTES. The Initial
Purchasers and the Company hereby establish and agree to observe the following
procedures in connection with the offer and sale of the Notes:
(a) Each Initial Purchaser has advised the Company and the
Representative that it will offer the Notes for resale only upon the terms and
conditions set forth in this Agreement and the Offering Circular. The Notes have
not been and will not be registered under the Securities Act. Each Initial
Purchaser agrees that it will not take, and acknowledges that the Company has
not taken, any action that would constitute a public offering of the Notes in
any jurisdiction and further agrees that, with respect to the offer or sale of
any Notes or the delivery or distribution of any Offering Circular, it will
comply with applicable laws and regulations in such jurisdictions or to which it
is otherwise subject.
(b) Each Initial Purchaser represents and warrants that (i) it is a
"qualified institutional buyer" within the meaning of Rule 144A or an
institution that is an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act and (ii) that neither it nor
any of its affiliates nor any person acting on behalf of it or any such
affiliate has engaged in any general solicitation or general advertising, as
such terms are defined in Rule 502(c) under the Securities Act, in connection
with the offer or sale of the Notes.
(c) In connection with sales outside the United States, each Initial
Purchaser agrees that it will not offer, sell or deliver Notes (i) as part of
the distribution thereof at any time or (ii) otherwise until 40 days after
completion of the distribution, as determined by the Representative, to or for
the account or benefit of U.S. Persons (as defined in Regulation S). Each
Initial Purchaser confirms that neither it nor any of its affiliates nor any
person acting on behalf of it or any such affiliate has engaged in any "directed
selling efforts" (as such term is defined in Regulation S) with respect to the
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Notes and that it, its affiliates and each such other person has complied with
the offering restrictions required by Regulation S with respect to the Notes.
(d) Each of the Initial Purchasers acknowledges and agrees that it
has not and will not offer, sell or deliver the Notes in the United States or to
or for the account of any U.S. Person other than (i) distributors (as defined in
Regulation S), (ii) institutional buyers that are reasonably believed to be
"qualified institutional buyers" (as defined in Rule 144A) and (iii)
institutional purchasers that are reasonably believed by the Initial Purchasers
to be "accredited investors" (as defined in Rule 501(a) (1), (2), (3) or (7)
under the Securities Act) and that have executed and delivered to the
Representative a letter in the form of Annex A to the Offering Circular.
(e) Each of the Initial Purchasers has advised the Company and the
Representative that, prior to the confirmation of sale of any Notes, it will
have sent to each dealer, distributor or person that purchases any Notes from it
during the restricted period and receives a selling concession, fee or other
remuneration in connection therewith a confirmation or notice substantially to
the following effect:
"The Notes have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), and may not be offered
and sold within the United States or to, or for the account or
benefit of U.S. persons (i) as part of the initial distribution
thereof at any time or (ii) otherwise until 40 days after the
later of the completion of the distribution of the Notes, as
determined by Bear Xxxxxxx & Co. Inc., except in accordance with
Regulation S or Rule 144A under the Securities Act."
(f) Each Initial Purchaser represents, warrants and agrees that (i)
it has not offered or sold and will not offer or sell Notes in the United
Kingdom, other than to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (whether as principal
or agent) for the purposes of their businesses or otherwise in circumstances
that will not result in an offer to the public within the meaning of the Public
Offers of Securities Regulations 1995, (ii) it has complied and will comply with
all applicable provisions of the Public Offers of Securities Regulations 1995
and the Financial Services Act of 1986 with respect to anything done by it in
relation to the Notes in, from or otherwise involving the United Kingdom, and
(iii) it has only issued or passed on, and will only issue or pass on, to any
person in the United Kingdom any documents received by it in connection with the
issue of the Notes if the person is of a kind described in Article 11(c) of the
Financial Services Act of 1986 (Investment Advertisements) (Exemptions) Order
1988 or is a
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person to whom the documents may lawfully be issued or passed on. Each
Initial Purchaser further agrees that it will not offer or sell any Notes
directly or indirectly in Japan or to any resident of Japan except (A)
pursuant to an exemption from the registration requirements of the Securities
and Exchange Law of Japan and (B) in compliance with any applicable
requirements of Japanese law. Each Initial Purchaser further agrees that it
will not offer or sell any Notes directly or indirectly in any province of
Canada except in compliance with all requirements of applicable securities
laws and that it will not offer or sell any Notes in the Republic of France.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Initial Purchasers that:
(a) If at any time prior to the Closing Date or the Additional
Closing Date (if any) any event shall have occurred as a result of which the
Offering Circular as then amended or supplemented would in the reasonable
judgment of the Initial Purchasers or the Company 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, in the light of the circumstances
under which they were made, not misleading, the Company will notify the
Representative promptly and prepare and deliver to the Representative on behalf
of the Initial Purchasers an amendment or supplement (in form and substance
satisfactory to you) which will correct such statement or omission.
(b) The Company will promptly deliver to the Initial Purchasers such
number of copies of the Offering Circular and all amendments thereof and
supplements thereto as the Representative reasonably may request.
(c) The Company will apply the proceeds from the sale of the Notes as
set forth under "Use of Proceeds" in the Offering Circular.
(d) The Company will cooperate with the Initial Purchasers in
arranging for the Notes to be designated Private Offerings, Resales and Trading
through Automated Linkage ("PORTAL") market securities in accordance with the
rules and regulations of the National Association of Securities Dealers, Inc.,
relating to trading in the PORTAL market.
(e) For a period of ninety (90) days from the date of the Offering
Circular, the Company will not, without the prior written consent of the
Representative, offer to sell, sell, contract to sell, grant any option for the
sale of, or otherwise dispose of, directly or indirectly, any shares of Common
Stock or any rights to acquire Common Stock, other than the Notes and other than
Common Stock or options issued or granted
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pursuant to existing stock option and other compensation plans. In addition,
the Company will obtain and deliver to the Representative a letter from each
of its executive officers and directors confirming the agreement of such
person not to engage in any of the aforementioned transactions on his or her
own behalf during such ninety (90)-day period.
(f) So long as any of the Notes are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, the Company will provide
to any holder of the Notes or to any prospective purchaser of the Notes
designated by any holder, upon request of such holder or prospective purchaser,
information required to be provided by Rule 144A(d)(4) of the Securities Act if
at the time of such request, the Company is not subject to the reporting
requirements under Section 13 or 15(d) of the Exchange Act.
(g) None of the Company, its subsidiaries, its affiliates or any
person acting on behalf of any of them (other than the Initial Purchasers and
their respective affiliates, as to whom this undertaking by the Company shall
not be deemed to apply) will solicit any offer to buy or offer or sell the Notes
by means of any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of the Securities Act.
(h) None of the Company, its subsidiaries, its affiliates or any
person acting on behalf of any of them (other than the Initial Purchasers and
their respective affiliates, as to whom this undertaking by the Company shall
not be deemed to apply) will offer to sell, sell or solicit offers to buy or
otherwise negotiate in respect of the sale of any security (as defined in the
Securities Act) that would be integrated with the sale of the Notes so as to
require the registration of the Notes under the Securities Act.
(i) During the period of three (3) years from and after the Closing
Date, none of the Company, its subsidiaries or its or their affiliates will
resell any Notes that may have been purchased or otherwise acquired by them,
except in a transaction registered or exempt from registration under the
Securities Act.
(j) None of the Company, its subsidiaries, its affiliates or any
person acting on behalf of any of them (other than the Initial Purchasers and
their respective affiliates, as to whom this undertaking shall not be deemed to
apply) will engage in any directed selling efforts (as that term is defined in
Regulation S) with respect to the Notes offered and sold pursuant to Regulation
S, and the Company, its subsidiaries, its affiliates and each person acting on
behalf of any of them (other than the Initial Purchasers
13
and their respective affiliates, as to whom this undertaking by the Company
shall not be deemed to apply) will comply with the offering restrictions of
Regulation S with respect to those Notes offered and sold pursuant thereto.
(k) The Company will cooperate with the Initial Purchasers in
arranging for the Notes to be accepted for clearance and settlement through
Euroclear, CEDEL and The Depository Trust Company.
(l) Each of the Notes will bear, to the extent applicable, the legend
contained under the heading "Transfer Restrictions" in the Offering Circular for
the time period and upon the other terms stated therein, except after the Notes
are resold in a transaction registered under the Securities Act.
(m) The Company will use its reasonable commercial efforts to obtain
a rating of the Notes by Standard & Poor's Corporation and will provide to such
organization such information as such organization reasonably shall require in
order to issue a rating of the Notes.
5. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is terminated,
the Company agrees to pay all costs and expenses incident to the performance of
its obligations hereunder, including those in connection with (i) preparing,
printing, duplicating, filing and distributing the Offering Circular and any
amendments or supplements thereto (including, without limitation, fees and
expenses of the Company's accountants and counsel), and all other documents
related to the offering of the Notes (including those supplied to the Initial
Purchasers in quantities provided for herein), in each case excluding any fees
of counsel to the Initial Purchasers, (ii) the issuance, transfer and delivery
of the Notes to the Initial Purchasers, including any transfer or other taxes
payable thereon, (iii) the cost of printing the Notes, (iv) the cost and charges
of any transfer agent, registrar, Trustee (or successor trustee) or fiscal
paying agent and conversion agent and (v) the costs and charges of DTC,
Euroclear and CEDEL.
6. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations
of the Initial Purchasers to purchase and pay for the Firm Notes and the
Optional Notes, as provided herein, shall be subject to the accuracy in all
material respects of the representations and warranties of the Company herein
contained, as of the date hereof and as of the Closing Date (for purposes of
this Section 6 "Closing Date" shall refer to the Closing Date and the Additional
Closing Date, if different), to the absence from any certificates, opinions,
written statements or letters furnished to you pursuant to this
14
Section 6 of any material misstatement or omission, to the performance by the
Company of its obligations hereunder, and to the following additional
conditions:
(a) At the Closing Date you shall have received the opinion of
Xxxxxxx Xxxxx Xxxxxxx and Xxxxxxxxx, counsel for the Company, dated the Closing
Date, addressed to the Initial Purchasers and in form and scope reasonably
satisfactory to Weil, Gotshal & Xxxxxx LLP ("Counsel for the Initial
Purchasers"), to the effect that:
(i) The Company and each Significant Subsidiary has
been duly incorporated and is validly existing and in good standing
as a corporation under the laws of the jurisdiction of its
incorporation and has full corporate power and authority to own,
lease and operate its properties and conduct its business as
described in the Offering Circular.
(ii) The Indenture has been duly authorized,
executed and delivered by the Company and, assuming due
authorization, execution and delivery thereof by the Trustee,
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent
conveyance, fraudulent transfer, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(iii) The Notes have been duly authorized, executed
and issued by the Company and, assuming due authentication thereof
by the Trustee, upon payment therefor and delivery thereof in
accordance with this Agreement and the Indenture, will constitute
the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their terms and will be
entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability,
to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(iv) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery thereof by the Initial
Purchasers, constitutes the legal,
15
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability,
to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding in equity or at law) and
except as the enforceability of rights to indemnification
thereunder may be limited by federal or state securities laws or
public policy relating thereto.
(v) This Agreement has been duly authorized, executed
and delivered by the Company.
(vi) The statements made in the Offering Circular
under the caption "Description of the Notes," insofar as they
purport to constitute summaries of certain terms of documents
referred to therein, constitute accurate summaries of the terms of
such documents in all material respects.
(vii) The issue and sale of the Notes by the Company
and the compliance by the Company with all of the provisions of
this Agreement and the Registration Rights Agreement will not
conflict with, violate the terms of or result in a default under
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument filed or incorporated by reference as an
exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (the "1995 FORM 10-K"), or its Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1996, June
30, 1996 and September 30, 1996 or any material agreement entered
into by the Company subsequent to September 30, 1996 of which such
counsel has knowledge, nor will such action violate the articles of
incorporation or by-laws of the Company or any federal or
Pennsylvania statute, rule or regulation applicable to the Company
or any order known to such counsel issued by any governmental
agency or body or court having jurisdiction over the Company or any
of its subsidiaries or any of its or their respective properties.
(viii) No consent, approval, authorization, order,
registration or qualification of or with any federal or
Pennsylvania governmental agency or body is required for the issue
and sale of the Notes by the Company and compliance by the Company
with the provisions of this Agreement and the Registration Rights
Agreement, except for the registration of the Notes under the
Securities Act (as to which no opinion is expressed in this
paragraph), and such
16
consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue
Sky laws or the securities laws of any jurisdiction outside the
United States in connection with the purchase and resale of the
Notes by the Initial Purchasers (as to which no opinion is
expressed).
(ix) The statements made in the Offering Circular
under the heading "Certain Tax Considerations," insofar as they
purport to constitute summaries of matters of United States federal
tax law and regulations or legal conclusions with respect thereto,
constitute accurate summaries of the matters described therein in
all material respects.
(x) No registration under the Securities Act of the
Notes or the shares of Common Stock issuable upon conversion of the
Notes in accordance with the Indenture, and no qualification of the
Indenture under the Trust Indenture Act of 1939, as amended, is
required for the offer and sale of the Notes by the Company to the
Initial Purchasers or the initial reoffer and resale of the Notes
by the Initial Purchasers solely in the manner contemplated by the
Offering Circular and this Agreement.
(xi) The authorized capital stock of the Company
conforms as to legal matters to the description thereof contained
in the Offering Circular under the heading "Description of Capital
Stock." The outstanding shares of the Company's Common Stock have
been duly authorized and validly issued and are fully paid and
nonassessable. The shares of Common Stock initially issuable upon
conversion of the Notes have been duly authorized and reserved for
issuance upon such conversion, except for and subject to the
limitations described in the Offering Circular on the number of
such shares available for that purpose, and, when issued and
delivered upon such conversion in accordance with the provisions of
the Indenture (assuming payment for and delivery of the Notes in
accordance with this Agreement), will be validly issued, fully paid
and nonassessable and no further approval or authority of the
shareholders or the Board of Directors of the Company will be
required for such issuance.
(xii) There are no preemptive rights to subscribe for
or purchase shares of the Company's Common Stock provided in the
Company's articles of incorporation or by-laws or, to the knowledge
of such counsel, in any agreement to which the Company is a party.
(xiii) To the knowledge of such counsel, no holders of
securities of the Company have rights to require the registration
of such securities because
17
of the filing by the Company of the Shelf Registration Statement or the
New Notes Registration Statement (as such terms are defined in the
Offering Circular) except such as have been validly waived.
(xiv) Except as disclosed in the Offering Circular
and any document incorporated by reference therein, and except for
stock options outstanding under the Company's existing stock option
plan(s), to the knowledge of such counsel there are no outstanding
options, warrants or other rights calling for the issuance of, and
no commitments or obligations on the part of the Company to issue,
any shares of capital stock of the Company or any security
convertible into or exchangeable for capital stock of the Company.
In addition, such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants for the Company,
representatives of the Initial Purchasers and Counsel for the Initial
Purchasers at which the contents of the Offering Circular and related matters
were discussed and, although such counsel did not independently verify such
information and is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Offering Circular, on the basis of the foregoing (relying as to the factual
matters upon the statements of officers and other representatives of the
Company and public officials) no facts have come to such counsel's attention
that caused such counsel to believe that the Offering Circular (other than
the financial statements and notes thereto and other financial and accounting
data included or incorporated by reference therein, or omitted therefrom, as
to which such counsel need express no belief) at the date of the Offering
Circular and as of the Closing Date contained or contains an untrue statement
of a material fact or omitted or omits to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely (x) as to matters
involving the application of laws other than the laws of the United States
and jurisdictions in which such counsel are admitted, to the extent such
counsel may deem proper and to the extent specified in such opinion, if at
all, upon an opinion or opinions (in form and substance reasonably
satisfactory to Counsel for the Initial Purchasers) of other counsel,
reasonably acceptable to Counsel for the Initial Purchasers, familiar with
the applicable laws (it being understood, however, that with respect to the
validity and binding effect of the Indenture, the Notes and the Registration
Rights Agreement, counsel may opine as if such instruments were governed by
the laws of the Commonwealth of Pennsylvania); (y) as to matters of fact, to
the extent they deem
18
proper, on the representations and warranties of the Company contained
herein, on certificates of responsible officers of the Company and
certificates or other written statements of officers of departments of
various jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company and its subsidiaries, provided that
copies of any such statements or certificates shall be delivered to Counsel
for the Initial Purchasers. The opinion of such counsel for the Company
shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and, in their opinion, the Initial Purchasers
and they are justified in relying thereon.
(b) All proceedings taken in connection with the sale of the Notes as
herein contemplated shall be reasonably satisfactory in form and substance to
you and to Counsel for the Initial Purchasers, and the Initial Purchasers shall
have received from said Counsel for the Initial Purchasers a favorable opinion,
dated as of the Closing Date with respect to the issuance and sale of the Notes,
the Offering Circular and such other related matters as you may reasonably
require, and the Company shall have furnished to Counsel for the Initial
Purchasers such documents as they reasonably may request for the purpose of
enabling them to pass upon such matters.
(c) At the Closing Date you shall have received a certificate of the
Chief Executive Officer and Chief Financial Officer of the Company, dated the
Closing Date, to the effect that (i) as of the date hereof and as of the Closing
Date, the representations and warranties of the Company set forth in Section 1
hereof are accurate in all material respects, (ii) as of the Closing Date, the
obligations of the Company to be performed hereunder on or prior thereto have
been duly performed in all material respects and (iii) subsequent to the
respective dates as of which information is given in the Offering Circular, the
Company and its subsidiaries have not sustained any material loss or
interference with their respective businesses or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding, and there has
not been any material adverse change, or any development involving a material
adverse change, in the business, properties, operations, condition (financial or
otherwise), or results of operations of the Company and its subsidiaries taken
as a whole, except in each case as disclosed in the Offering Circular.
(d) At the time this Agreement is executed and at the Closing Date,
you shall have received a letter, from Coopers & Xxxxxxx L.L.P., independent
accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date and addressed to the Initial Purchasers, in
form, scope and substance as shall have been previously agreed to by the
Representative.
19
(e) Prior to the Closing Date, the Company shall have furnished to
the Initial Purchasers such further information, certificates and documents as
the Initial Purchasers may reasonably request.
(f) You shall have received from each person who is a director or
executive officer (as defined in the proxy rules of the Securities and Exchange
Commission) of the Company an agreement to the effect that during the period of
90 days from the date of the Offering Circular, such person will not, directly
or indirectly, without the prior written consent of the Representative, offer to
sell, sell, contract to sell, grant any option or rights to acquire or purchase
any option to sell, or otherwise dispose of, any shares of Common Stock.
(g) At the Closing Date, the Notes shall have been approved for
quotation in the PORTAL market.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as required by this Agreement,
or if any of the certificates, opinions, written statements or letters furnished
to you or to Counsel for the Initial Purchasers pursuant to this Section 6 shall
not be in all material respects reasonably satisfactory in form and scope to the
Representative and to Counsel for the Initial Purchasers, all obligations of the
Initial Purchasers hereunder may be canceled by the Representative at, or at any
time prior to, the Closing Date and the obligations of the Initial Purchasers to
purchase the Optional Notes may be canceled by the Representative at, or at any
time prior to, the Additional Closing Date. Notice of such cancellation shall
be given to the Company in writing, or by telephone, telex or telegraph,
confirmed in writing.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Initial
Purchaser and each person, if any, who controls any Initial Purchaser within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against any and all
losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue
20
statement of a material fact contained in the Offering Circular or any
related Preliminary Offering Circular 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, in light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that the Company will not be liable
in any such case to the extent but only to the extent that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Initial Purchaser through the
Representative expressly for use therein, and PROVIDED FURTHER, that the
foregoing indemnity with respect to any untrue statement contained in or
omission from a Preliminary Offering Circular shall not inure to the benefit
of any Initial Purchaser (or any person controlling such Initial Purchaser)
from whom the person asserting any such loss, liability, claim, damage or
expense purchased any of the Notes if a copy of the Offering Circular (as
then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of
such Initial Purchaser to such person at or prior to the written confirmation
of the sale of such Notes to such person, and if the Offering Circular (as so
amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability. This indemnity agreement will be in
addition to any liability which the Company may otherwise have including
under this Agreement.
(b) Each Initial Purchaser severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the Company,
each of the officers of the Company, and each other person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, against any losses, liabilities, claims, damages and
expenses whatsoever as incurred (including but not limited to attorneys' fees
and any and all expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), jointly or severally, to which they or any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Offering Circular, or any related
Preliminary Offering Circular, or in any amendment thereof 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, in light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
any such
21
loss, liability, claim, damage or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Initial Purchaser
through the Representative expressly for use therein; PROVIDED, HOWEVER, that
in no case shall any Initial Purchaser be liable or responsible for any
amount in excess of the aggregate principal amount of the Notes purchased by
such Initial Purchaser hereunder. This indemnity will be in addition to any
liability which any Initial Purchaser may otherwise have including under this
Agreement. The Company acknowledges that the statements set forth in the
last paragraph of the cover page and under the caption "Plan of Distribution"
in the Offering Circular constitute the only information furnished in writing
by or on behalf of any Initial Purchaser through Bear Xxxxxxx expressly for
use in the Offering Circular or in any amendment thereof or supplement
thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have otherwise than under this Section 7). In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and to the extent it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by one of the
indemnifying parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel to have charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses shall be borne by the indemnifying parties.
In no event shall the indemnifying party be liable for the fees and expenses of
more than one counsel in connection with any one such action or separate but
similar related actions in the same jurisdiction arising out of the same general
22
allegations or circumstances. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; PROVIDED, HOWEVER,
that such consent was not unreasonably withheld.
8. CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7 hereof is
for any reason held to be unavailable from any indemnifying party, or to any
indemnified party, or is insufficient to hold harmless a party indemnified
thereunder, the Company and the Initial Purchasers shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company any contribution received by the Company from persons,
other than the Initial Purchasers, who may also be liable for contribution,
including persons who control the Company within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act, officers and directors
of the Company) as incurred to which the Company and one or more of the Initial
Purchasers may be subject, in such proportions as is appropriate to reflect the
relative benefits received by the Company and the Initial Purchasers from the
offering of the Notes or, if such allocation is not permitted by applicable law
or indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 7 hereof, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and the Initial Purchasers in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Initial Purchasers shall
be deemed to be in the same proportion as (x) the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and (y) the underwriting discounts and
commissions received by the Initial Purchasers respectively. The relative fault
of the Company and of the Initial Purchasers shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Initial Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 8 were determined by pro rata allocation (even if the
Initial Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
23
referred to above. Notwithstanding the provisions of this Section 8, (i) in no
case shall any Initial Purchaser be liable or responsible for any amount in
excess of the underwriting discount applicable to the Notes purchased by such
Initial Purchaser hereunder, (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation and (iii) no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at which
the Note purchased by it and sold in the Offering were offered to subsequent
purchasers exceeds the amount of any damages that such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. For purposes of this Section 8, each
person, if any, who controls an Initial Purchaser within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act shall have the
same rights to contribution as such Initial Purchaser, and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act, each officer and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to clauses (i) and (ii) of this Section 8. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties, notify each party or
parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 8 or
otherwise. No party shall be liable for contribution with respect to any action
or claim settled without its consent; PROVIDED, HOWEVER, that such consent was
not unreasonably withheld.
9. DEFAULT BY AN INITIAL PURCHASER. If either of the Initial
Purchasers shall fail at the Closing Date to purchase the Notes which it is
obligated to purchase under this Agreement (the "Defaulted Notes"), the
non-defaulting Initial Purchaser shall have the right, within 24 hours
thereafter, to make arrangements for it to purchase all, but not less than
all, of the Defaulted Notes upon the terms herein set forth; PROVIDED,
HOWEVER, that if the non-defaulting Initial Purchaser shall not have
completed such arrangements within such 24-hour period, then, upon the
expiration of such 24-hour period, this Agreement shall terminate without
liability on the part of the non-defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve the defaulting
Initial Purchaser from liability in respect of its default.
24
In the event of any such default which does not result in a
termination of this Agreement, either the non-defaulting Initial Purchaser or
the Company shall have the right to postpone the Closing Date for a period not
exceeding seven days in order to effect any required changes in the Offering
Circular or in any other documents or arrangements.
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations
and warranties, covenants and agreements of the Initial Purchasers and the
Company contained in this Agreement, including the agreements contained in
Section 5, the indemnity agreements contained in Section 7 and the contribution
agreements contained in Section 8, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Initial
Purchasers or any agent, representative or controlling person thereof or by or
on behalf of the Company, any of its officers and directors or any controlling
person thereof, and shall survive delivery of and payment for the Notes to and
by the Initial Purchasers. The representations contained in Section 1 and the
agreements contained in Sections 5, 7, 8 and 11(c) hereof shall survive the
termination of this Agreement, including termination pursuant to Section 9 or 11
hereof.
11. TERMINATION.
(a) The Representative shall have the right to terminate this
Agreement at any time prior to the Closing Date or the obligations of the
Initial Purchasers to purchase the Optional Notes at any time prior to the
Additional Closing Date, as the case may be, if (A) any domestic or
international event, act or occurrence shall have materially disrupted, or in
the Representative's reasonable opinion will in the immediate future materially
disrupt, the United States or international securities markets; or (B) trading
on the New York Stock Exchange shall have been suspended, or materially limited;
or (C) a banking moratorium shall have been declared by any United States
federal or New York or Pennsylvania state authority or if any new restriction
materially adversely affecting the distribution of the Firm Notes or the
Optional Notes, as the case may be, shall have become effective; or (D) any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Securities Act) shall have announced that it is (i)
downgrading its rating assigned to any class of the Company's debt securities or
(ii) reviewing any such rating with a view to possible downgrading or with
negative implications; or (E) there shall have occurred any outbreak or
escalation of hostilities involving the United States, or a declaration of war
or national emergency by the United States, or any change in political,
financial or economic conditions the effect of which is such, in the judgment of
the Representative, to make it impracticable or inadvisable to proceed with the
offering, sale and delivery of the Firm
25
Notes or the Optional Notes, as the case may be, on the terms contemplated by
the Offering Circular.
(b) Any notice of termination pursuant to this Section 11 shall be by
telephone, telex, or telegraph, confirmed in writing by letter.
(c) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to Section 9 or 11(a) hereof), or if
the sale of the Notes provided for herein is not consummated because any
condition to the obligations of the Initial Purchasers set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof, the
Company will, upon demand by the Representative, reimburse the Initial
Purchasers for all reasonable out-of-pocket expenses (including the reasonable
fees and expenses of Counsel for the Initial Purchasers), incurred by the
Initial Purchasers solely and directly in connection with the transactions
contemplated by this Agreement, and thereafter the Company shall have no further
liability to the Initial Purchaser.
12. NOTICE. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and shall be mailed,
delivered, or telexed or telegraphed and confirmed in writing, (i) if to either
of the Initial Purchasers, to such Initial Purchaser in care of Bear, Xxxxxxx &
Co. Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X.
XxXxxxxx, Senior Managing Director or (ii) if to the Company, to the Company at
0000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxx 00000, Attention: Xxxxxxx Xxxxx,
Chief Financial Officer.
13. PARTIES. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Initial Purchasers and the Company and their
respective successors and assigns, and no other person shall have or be deemed
to have any legal or equitable right, remedy or claim under or in respect of or
by virtue of this Agreement or any provision hereof. The term "successors and
assigns" shall not include a purchaser, in its capacity as such, of Notes from
any of the Initial Purchasers.
14. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York.
26
If the foregoing correctly sets forth the understanding between you
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
PENN TREATY AMERICAN CORPORATION
By: /s/ Xxxxxx Xxxxx
________________________
Name: Xxxxxx Xxxxx
Title: President and
Chief Executive Officer
Accepted as of the date first above written
BEAR, XXXXXXX & CO. INC.
By: /s/ Xxxxxxx Parish
____________________________
Name: Xxxxxxx Parish
Title: Senior Managing Director
ADVEST, INC.
By: /s/ Xxxxx X.X. Xxxxx
____________________________
Name: Xxxxx T.W. Minot
Title: Managing Director
27
SCHEDULE I
Principal Amount of Firm
Name of Initial Purchaser Notes to be Purchased
------------------------- ------------------------
Bear, Xxxxxxx & Co. Inc. . . . . . . . . . . . $ 47,125,000
Advest, Inc. . . . . . . . . . . . . . . . . . $ 17,875,000
------------
Total . . . . . . . . . . . . . $ 65,000,000
------------
------------
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