THE READER'S DIGEST ASSOCIATION, INC.
COMMON STOCK, PAR VALUE $0.01 PER SHARE
UNDERWRITING AGREEMENT
, 2003
Xxxxxxx, Xxxxx & Co.,
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
00 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000
and
c/o Merrill Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000.
Ladies and Gentlemen:
A certain stockholder named in Schedule II hereto (the "Selling
Stockholder") of The Reader's Digest Association, Inc., a Delaware corporation
(the "Company"), proposes, subject to the terms and conditions stated herein, to
sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 10,989,989 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 1,648,498 additional shares (the "Optional Shares") of
Common Stock, par value $0.01 ("Stock"), of the Company (the Firm Shares and the
Optional Shares which the Underwriters elect to purchase pursuant to Section 2
hereof are herein collectively called the "Shares").
1. (a) The Company represents and warrants to, and agrees with,
each of the Underwriters and the Selling Stockholder that:
(i) A registration statement on Form S-3 (File No. 333-107278) (as
amended, the "Initial Registration Statement") in respect of the Shares
has been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any post-effective
amendment thereto, each in the form heretofore delivered to you, and,
excluding exhibits thereto but including all documents incorporated by
reference in the prospectus contained therein, to you for delivery to each
of the other Underwriters, have been declared effective by, or have been
filed with, as the case may be, the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended (the "Act"), which became effective
upon filing, no other document with respect to the Initial Registration
Statement or any document incorporated by reference
therein has heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration
Statement, if any, has been issued and no notice has been received from
the Commission by the Company that any proceeding for that purpose has
been initiated or, to the knowledge of the Company, threatened by the
Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act is
hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration Statement,
if any, including all exhibits thereto and including (i) the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of the
Initial Registration Statement at the time it was declared effective and
(ii) the documents incorporated by reference in the prospectus contained
in the Initial Registration Statement at the time such part of the Initial
Registration Statement became effective, each as amended at the time such
part of the Initial Registration Statement became effective or such part
of the Rule 462(b) Registration Statement, if any, became or hereafter
becomes effective, are hereinafter collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant to
Rule 424(b) under the Act, is hereinafter called the "Prospectus"; and 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 Item 12 of Form S-3 under the Act, as of the date of
such Preliminary Prospectus or Prospectus, as the case may be; any
reference to any amendment or supplement to any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any reference to any
amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Section 13(a)
or 15(d) of the Exchange Act after the effective date of the Initial
Registration Statement that is incorporated by reference in the
Registration Statement);
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Xxxxxxx, Sachs & Co. and Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated ("Xxxxxxx Xxxxx") expressly for use therein or by the Selling
Stockholder expressly for use therein;
(iii) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, 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; and any further documents so filed
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and incorporated by reference in the Prospectus or any further amendment
or supplement thereto, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Xxxxxxx, Sachs & Co. and
Xxxxxxx Xxxxx expressly for use therein;
(iv) (A) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or the
Prospectus, when they become effective or are filed with the Commission,
will conform, in all material respects to the requirements of the Act and
the rules and regulations of the Commission thereunder and (B) the
Registration Statement and any further amendments or supplements to the
Registration Statement, when they become effective, do not and will not,
as of the applicable effective date, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and (C)
the Prospectus and any amendment or supplement thereto, as of the
applicable filing date, do not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Xxxxxxx, Sachs & Co. and Xxxxxxx Xxxxx expressly for use therein or by the
Selling Stockholder expressly for use therein;
(v) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference,
material to the Company and its subsidiaries taken as a whole, with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or incorporated by
reference in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock of the Company (other
than the issuance of Stock upon the vesting of restricted stock in the
ordinary course of business or in connection with the issuance or
conversion or forfeiture and cancellation of Stock and other securities in
the ordinary course of business pursuant to the Company's 1989 Key
Employee Long Term Incentive Plan, 1994 Key Employee Long Term Incentive
Plan, 2002 Key Employee Long Term Incentive Plan, Employee Ownership Plan
and 401(k) Partnership, Employee Stock Purchase Plan, Amended
International Employee Stock Ownership Plan and Director Compensation
Program) or any of its Significant Subsidiaries (as defined) (in each case
other than de minimis changes relating to clerical errors), or any change
(other than in connection with increases relating to the funding of
working capital requirements and in connection with incentive compensation
payments for fiscal 2003, each in the ordinary course and consistent with
past practice) in the long-term debt of the Company or any of its
subsidiaries, which change is material to the Company and its
subsidiaries, taken as a whole, or any material adverse change in or
affecting the management, financial position or results of operation of
the Company and its subsidiaries, taken as a whole (a "Material Adverse
Effect"), or any development involving a prospective material adverse
change in or affecting the management,
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financial position or results of operations of the Company and its
subsidiaries taken as a whole, in each case otherwise than as set forth or
contemplated in the Prospectus;
(vi) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct its
business as described in the Prospectus, and, except as would not,
individually or in the aggregate, result in a Material Adverse Effect, has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified or in good standing
in any such jurisdiction; and each of Books Are Fun, Ltd., QSP, Inc.,
Xxxxxx Media Group, Inc. and Reader's Digest Sales and Services, Inc.
(each a "Significant Subsidiary") has been duly incorporated and is
validly existing and in good standing under the laws of its jurisdiction
of incorporation, or, in jurisdictions outside of the United States, the
substantive equivalent thereto, with power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus, other than such failures of any such Significant Subsidiary to
be in good standing or to have such power and authority that would not,
individually or in the aggregate, result in a Material Adverse Effect.
(vii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description of the Stock contained in
the Prospectus; and all of the issued shares of capital stock of each
Significant Subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable, or the
substantive equivalent thereto, and (except for directors' qualifying
shares) are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims, except for (i) those liens,
encumbrances, equities or claims that provide for security for borrowings
under the Company's $192,500,000 Amended and Restated Five-Year Revolving
Credit Agreement and Competitive Advance Facility Agreement and the
$950,000,000 Term Loan Agreement and (ii) liens arising by operation of
law or for taxes that are assessed but are not yet due and payable.
(viii) (A) The compliance by the Company with all of the provisions of
this Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company 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, except in each case as would not have a Material Adverse Effect,
(B) nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company, (C) nor will such
action result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties
except in each case as would not have a Material Adverse Effect; and (D)
no consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required for
sale of the Shares or the consummation by the Company of the transactions
contemplated by this Agreement, except (x) the registration under the Act
of the Shares and such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by the
Underwriters and (y) such consents, approvals, authorizations, orders,
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registrations or qualifications, the failure of which to obtain or make
would not, individually or in the aggregate, (I) result in a Material
Adverse Effect or (II) adversely affect the ability of the Company to
consummate the transactions contemplated hereby or to otherwise comply
with its obligations hereunder;
(ix) Neither the Company nor any of its Significant Subsidiaries is in
violation of its certificate of incorporation or by-laws or in default in
the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound, other than any
such violations or defaults which, individually or in the aggregate, would
not have a Material Adverse Effect;
(x) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, are accurate;
(xi) Other than as set forth in the Prospectus, 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 the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a Material Adverse Effect; and, to the knowledge of the Company, no
such proceedings are threatened or contemplated by governmental
authorities or, to the knowledge of the Company, threatened by others;
(xii) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company", as such term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(xiii) The Stock is listed on the New York Stock Exchange
(the "Exchange");
(xiv) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
(xv) KPMG LLP, who have certified certain financial statements of the
Company and its subsidiaries, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder; and
(xvi) The Company, either directly or through a subsidiary or
subsidiaries, owns all the patents, trademarks, service marks, trade names
and copyrights or licenses rights necessary for the present and planned
future conduct of its business, except where the failure to own or license
the same would not have a Material Adverse Effect, without any known
conflict with the rights of others, the result of which conflict would
have a Material Adverse Effect, and, to the knowledge of the Company,
there is no infringement of such patents, trademarks, service marks, trade
names and copyrights by others, the result of which infringement would
have a Material Adverse Effect.
(b) The Selling Stockholder represents and warrants to, and agrees with,
each of the Underwriters and the Company that:
(i) The compliance by the Selling Stockholder with all of the
provisions of this Agreement and the consummation of the transactions
herein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Selling Stockholder is a party or by
which the Selling Stockholder is
5
bound or to which any of the property or assets of the Selling Stockholder
is subject, nor will such action result in any violation of the provisions
of the Certificate of Incorporation or By-laws 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 the property of the Selling Stockholder; and no
consent, approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required for the
execution and delivery of or compliance by the Selling Stockholder with or
the consummation by the Selling Stockholder of the transactions
contemplated by this Agreement except the registration under the Act of
the Shares and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the Shares; and the
Selling Stockholder has full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the Shares to be sold
hereunder;
(ii) The Shares to be sold by the Selling Stockholder, before delivery
thereof to Cede & Co., as nominee for DTC (as defined in Section 4
hereof), pursuant to this Agreement are certificated securities in
registered form and, before delivery thereof to Cede & Co., as nominee for
DTC, are not held by or through any securities intermediary (within the
meaning of the Uniform Commercial Code as in effect in the state of New
York ("NYUCC"). The Selling Stockholder has, and at the initial Time of
Delivery (and, if Optional Shares are being sold by the Selling
Stockholder, on the relevant Time of Delivery) will have, full right,
power and authority to hold, sell, transfer and deliver the Shares then to
be sold by the Selling Stockholder hereunder, in each case, free and clear
of any adverse claim (as defined in Section 8-102(a)(1) of the NYUCC) to
such Shares (or any security entitlement therein within the meaning of
Section 8-501 of the NYUCC). Upon the delivery to DTC or its agent, by or
on behalf of the Selling Stockholder, of Shares registered in the name of
Cede & Co., as nominee for DTC, and the crediting by DTC of such Shares to
the securities account of Xxxxxxx Xxxxx with DTC (all in accordance with
Section 4 hereof), DTC will be a "protected purchaser" (as defined in
Section 8-303 of the NYUCC) of such Shares and will acquire its interest
in such Shares (including, without limitation, all rights that the Selling
Stockholder had or has the power to transfer in such Shares) free of any
adverse claim (as defined in Section 8-102(a)(1) of the NYUCC). Upon the
payment of the purchase price for such Shares and the crediting by DTC of
such Shares to the securities account of Xxxxxxx Xxxxx with DTC (all in
accordance with Section 4 hereof), Xxxxxxx Xxxxx will acquire a valid
security entitlement (within the meaning of Section 8-501 of the NYUCC) in
respect of such Shares, and no action (whether framed in conversion,
replevin, constructive trust, equitable lien or other theory) based on an
adverse claim to such security entitlement may be asserted against Xxxxxxx
Xxxxx;
(iii) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus, the
Selling Stockholder will not offer, sell, contract to sell or otherwise
dispose of, except as provided hereunder, any securities of the Company
that are substantially similar to the Shares, including but not limited to
any securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities, without the prior written consent of Xxxxxxx Sachs & Co. and
Xxxxxxx Xxxxx, as representatives of the several Underwriters;
(iv) The Selling Stockholder has not taken and will not take, directly
or indirectly, any action which is 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 Shares;
6
(v) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by the
Selling Stockholder expressly for use therein, such Preliminary Prospectus
and the Registration Statement did, and the Prospectus and any further
amendments or supplements to the Registration Statement and the
Prospectus, when they become effective or are filed with the Commission,
as the case may be, will conform in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and will not contain 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; and
(vi) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, the Selling Stockholder will deliver to you prior to or at
the First Time of Delivery (as hereinafter defined) a properly completed
and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations
in lieu thereof).
2. Subject to the terms and conditions herein set forth, (a)
the Selling Stockholder agrees to sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase
from the Selling Stockholder, at a purchase price per share of
$..........., the respective number of Firm Shares set forth opposite
such Underwriter's name in Schedule I hereto and (b) in the event and
to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Selling Stockholder
agrees to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the
Selling Stockholder, at the purchase price per share set forth in
clause (a) of this Section 2, that portion of the number of Optional
Shares set forth opposite such Underwriter's name in Schedule I hereto
as to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional shares).
The Selling Stockholder hereby grants to the Underwriters the right to
purchase at their election up to 1,648,498 Optional Shares, at the purchase
price per share set forth in the paragraph above, for the sole purpose of
covering sales of Shares in excess of the number of Firm Shares. Any such
election to purchase Optional Shares may be exercised from time to time only by
written notice from you to the Selling Stockholder, given within a period of 30
calendar days after the date of this Agreement and setting forth the aggregate
number of Optional Shares to be purchased and the date on which such Optional
Shares are to be delivered, as determined by you but in no event earlier than
the First Time of Delivery (as defined in Section 4 hereof) or, unless you and
the Selling Stockholder otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter
hereunder, in definitive form, and in such authorized denominations and
registered in such names as Xxxxxxx Xxxxx may request upon at least
forty-eight hours' prior notice to the Selling Stockholder shall be
delivered by or on behalf of the Selling Stockholder to Xxxxxxx Xxxxx,
through the facilities of the Depository Trust Company ("DTC"), for the
account of such Underwriters, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified by the Selling Stockholder to
Xxxxxxx Xxxxx at least forty-eight hours in advance. Each of the
Selling Stockholder and the Company will use its best efforts to cause
the certificates representing the
7
Shares to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect thereto at
the office of DTC or its designated custodian (the "Designated Office"). The
time and date of such delivery and payment shall be, with respect to the Firm
Shares, 9:30 a.m., New York time, on ............., 2003 or such other time and
date as Xxxxxxx, Sachs & Co., Xxxxxxx Xxxxx and the Selling Stockholder may
agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New
York time, on the date specified by Xxxxxxx, Sachs & Co. and Xxxxxxx Xxxxx in
the written notice given by Xxxxxxx, Sachs & Co. and Xxxxxxx Xxxxx of the
Underwriters' election to purchase such Optional Shares, or such other time and
date as Xxxxxxx, Sachs & Co., Xxxxxxx Xxxxx and the Selling Stockholder may
agree upon in writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery", such time and date for delivery of
the Optional Shares, if not the First Time of Delivery, is herein called the
"Second Time of Delivery", and each such time and date for delivery is herein
called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7 hereof, will be delivered at the offices of Cravath,
Swaine & Xxxxx LLP, 000 Xxxxxx Xxxxxx, Xxx Xxxx, XX 00000 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at 2 p.m.,
New York City time, on the New York Business Day next preceding such Time of
Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus prior to the last Time of
Delivery which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been
filed and to furnish you with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or sale of
the Shares; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or suspending any
such qualification, promptly to use its reasonable best efforts to obtain the
withdrawal of such order;
(b) To use its reasonable best efforts qualify the Shares for offering and
sale under the securities laws of such jurisdictions as you may reasonably
request and to comply with such laws so
8
as to permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the Shares,
provided that in connection therewith the Company and its subsidiaries shall not
be required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction or subject themselves to any tax;
(c) Prior to 10:00 A.M., New York City time, on the New York Business Day
next succeeding the date of this Agreement and from time to time at the expense
of the Selling Stockholder, to furnish the Underwriters with written and
electronic copies of the Prospectus in New York City in such quantities as you
may reasonably request, and, if the delivery of a prospectus is required at any
time prior to the expiration of nine months after the time of issue of the
Prospectus in connection with the offering or sale of the Shares and if at such
time any events shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus or to file
under the Exchange Act any document incorporated by reference in the Prospectus
in order to comply with the Act or the Exchange Act, to notify you and upon your
request to file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many written and electronic
copies as you may from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which will correct such statement or omission
or effect such compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Shares at any time nine months
or more after the time of issue of the Prospectus, upon your request but at the
expense of such Underwriter, to prepare and deliver to such Underwriter as many
written and electronic copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
of the Commission thereunder (including, at the option of the Company, Rule
158);
(e) During the period beginning from the date hereof and continuing to and
including the date 90 days after the date of the Prospectus, not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder, any
securities of the Company that are substantially similar to the Shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any such
substantially similar securities (other than pursuant to employee benefit and
compensation plans existing on the date of this Agreement, or upon the
conversion or exchange of convertible or exchangeable securities outstanding as
of the date of this Agreement, or to employees of the Company hired on or after
the date of this Agreement in the ordinary course of the Company's business),
without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the end of
each fiscal year an annual report (including a balance sheet and statements of
income, stockholders' equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), to make available (including without limitation by
issuing a quarterly earnings release) to its stockholders consolidated summary
financial information of the Company and its subsidiaries for such quarter in
reasonable detail;
9
(g) During a period of three years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed, other than
any such reports or financial statements that are publicly available through the
Commission's website; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to time
reasonably request and which is readily available (such financial statements to
be on a consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders generally
or to the Commission);
(h) To use its reasonable best efforts to maintain the listing
of the Stock on the Exchange; and
(i) If the Company elects to rely upon Rule 462(b), the Company shall file
a Rule 462(b) Registration Statement with the Commission in compliance with Rule
462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and
the Company shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company and the Selling Stockholder covenant and agree with one
another and with the several Underwriters that: (a) the Selling Stockholder will
pay or cause to be paid the following: (i) the fees, disbursements and expenses
of the Selling Stockholder's counsel and other advisors, if any, in connection
with the registration of the Shares and all other expenses in connection with
the printing and filing of the Registration Statement, any Preliminary
Prospectus and the Prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof by the printer to the Underwriters and
dealers; (ii) all expenses in connection with the qualification of the Shares
for offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey,
(iii) all expenses and taxes incident to the sale and delivery of the Shares to
be sold by the Selling Stockholder to the Underwriters hereunder, (iv) the
filing fees incident to, and the fees and disbursements of counsel for the
Underwriters in connection with, securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the Shares,
(v) the cost of preparing stock certificates; (vi) the cost and charges of any
transfer agent or registrar and (vii) the expenses of the Company relating to
"road show" investor presentations relating to the resale of the Shares by the
Underwriters (including the costs of any aircraft chartered in connection
therewith); and (b) the Company will pay or cause to be paid the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act. The Underwriters
will not be responsible for any costs or expenses of either of the Selling
Stockholder or the Company incident to the performance of their respective
obligations hereunder which are not otherwise specifically provided for in this
Agreement. Except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling
10
Stockholder herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company and the Selling Stockholder shall have performed
all of their respective obligations hereunder theretofore to be performed, and
the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance with
Section 5(a) hereof; if the Company has elected to rely upon Rule 462(b),
the Rule 462(b) Registration Statement shall have become effective by
10:00 P.M., Washington, D.C. time, on the date of this Agreement; no stop
order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and all
requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
(b) Cravath, Swaine & Xxxxx LLP, counsel for the Underwriters, shall
have furnished to you such written opinion or opinions, dated such Time of
Delivery, with respect to the matters covered in paragraphs (i), (ii),
(vii), (viii) and (ix) of Annex II below as well as such other related
matters as you may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Wachtell, Lipton, Xxxxx & Xxxx, special counsel for the Company,
shall have furnished to you and the Selling Stockholder their written
opinion, dated such Time of Delivery, in form and substance satisfactory
to you, to the effect as set forth on Annex II;
(d) Xxxxxxxx X.X. XxXxxx, Vice President and Associate General Counsel
of the Company, shall have furnished to you and the Selling Stockholder
his written opinion, dated the Closing Date, in form and substance
satisfactory to you, to the effect as set forth on Annex III;
(e) Shearman & Sterling LLP, counsel for the Selling Stockholder,
shall have furnished to you their written opinion with respect to the
Selling Stockholder, dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) This Agreement has been duly executed and
delivered by or on behalf of the Selling Stockholder;
(ii) The compliance by the Selling Stockholder with all of the
provisions of this Agreement will not conflict with or result in a
breach or violation of, or constitute a default under, (i) any
indenture, mortgage, deed 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, (ii) the provisions of
the Certificate of Incorporation or By-laws of the Selling
Stockholder, (iii) any present law, or present regulation of any
government agency or authority, of the State of New York or the United
States known by such counsel to be applicable to the Selling
Stockholder or its properties or (iv) any court decree or order
binding upon the Selling Stockholder or its properties (it being
understood that (A) with respect to the opinion in clauses (i) and
(iv) of this paragraph, (w) such opinions are limited to the
indentures, mortgages, deeds of trust, loan agreements, other
agreements, instruments or court decrees or orders (the "Specified
Documents") which have been identified to such counsel as material to
the Selling Stockholder in certificates attached to such counsel's
opinion as Exhibit A (the "Certificates") of an officer of the Selling
Stockholder and only to the extent such Specified Documents are
governed by the laws of the State of New York or the federal laws of
the United States, (x) such counsel expresses no opinion
11
with respect to any violation not readily ascertainable from the face
thereof or arising under or based upon any cross-default provision
insofar as it relates to a default under any indenture, mortgage, deed
of trust, loan agreement, other agreement, instrument or court decree
or order not listed on the Certificates and (y) in rendering its
opinion with respect to any covenant of a financial or numerical
nature or requiring computation, such counsel has relied as to matters
of fact on an officer's certificate of the Selling Stockholder
attached to such counsel's opinion as Exhibit A and Exhibit B and (B)
the opinion in clause (iii) of this paragraph is limited (x) to such
counsel's review of only those laws and regulations that, in such
counsel's experience, are normally applicable to transactions of the
type contemplated by this Agreement, and (y) in that such counsel
expresses no opinion with respect to the application of, or compliance
with, federal or state securities or Blue Sky laws or any rules or
regulations thereunder);
(iii) No consent, approval, authorization or order of any United
States or New York court or governmental agency or body is required
for the consummation of the transactions contemplated by this
Agreement in connection with the Shares to be sold by the Selling
Stockholder hereunder, except for registration under the Act and such
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of such Shares by the
Underwriters (it being understood that this opinion is limited to
those consents, approvals, authorizations, orders, registrations or
qualifications that, in such counsel's experience, are normally
applicable to transactions of the type contemplated by this
Agreement);
(iv) Assuming that (i) the certificate or certificates
representing the Common Stock to be sold by the Selling Stockholder
pursuant to this Agreement has been effectively indorsed in blank in
accordance with Article 8 of the Uniform Commercial Code as in effect
in the State of New York ("NYUCC") and (ii) neither the Underwriters,
nor the agents acquiring possession of the Shares on their behalf,
have notice of any adverse claim to the Shares, then, upon the
Underwriters' acquiring possession of such certificate or certificates
for the Shares (or the agent's acquiring possession of such
certificate or certificates for the Shares on the Underwriters'
behalf) and paying the purchase price therefor pursuant to the
Underwriting Agreement, each Underwriter will be a "protected
purchaser" of the Shares to be purchased by it (within the meaning of
Section 8-303 of the NYUCC) and will acquire its interest in such
Shares (including, without limitation, all rights that the Selling
Stockholder had or has the power to transfer in such Shares) free of
any adverse claim; and
(v) The Selling Stockholder is not an "investment company", as
such term is defined under the Investment Company Act of 1940, as
amended.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York and the federal laws of the United States;
(f) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date
of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time of
Delivery, KPMG LLP shall have furnished to you and the Selling
Stockholder a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto, (the executed copy of the letter delivered prior
to the execution of this Agreement is attached as Annex I(a) hereto and a
draft of the form of letter to be delivered on the effective date of any
post-effective amendment to the Registration Statement and as of each
Time of Delivery is attached as Annex I(b) hereto);
12
(g)(i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any loss or
interference material to the Company and its subsidiaries, taken as a
whole, with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective dates as of
which information is given in the Prospectus there shall not have been any
change in the capital stock (other than de minimis changes relating to
clerical errors and other than in connection with the issuance of Stock
upon the vesting of restricted stock in the ordinary course of business or
the issuance or conversion or forfeiture and cancellation of Stock and
other securities in the ordinary course of business pursuant to the
Company's 1989 Key Employee Long Term Incentive Plan, 1994 Key Employee
Long Term Incentive Plan, 2002 Key Employee Long Term Incentive Plan,
Employee Ownership Plan and 401(k) Partnership, Employee Stock Purchase
Plan, Amended International Employee Stock Ownership Plan and Director
Compensation Program) or long-term debt (other than in connection with
increases relating to the funding of working capital requirements and in
connection with incentive compensation payments for fiscal 2003, each in
the ordinary course and consistent with past practice) or any change, or
any development involving a prospective change, in or affecting the
management, financial position or results of operations of the Company and
its subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is in the judgment of the Representatives
so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(h) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no
such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities; provided, however, that the
provisions of this Section 7(h) will not apply to a downgrading of the
rating of the Company's debt securities or a public announcement of a
downgrading of the rating of the Company's debt securities by (A) Xxxxx'x
Investors Service to a rating of no worse than Ba2 or (B) Standard &
Poor's Ratings Services to a rating of no worse than BB;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the Exchange; (ii) a suspension or material
limitation in trading in the Company's securities on the Exchange; (iii) a
general moratorium on commercial banking activities declared by either
Federal or New York State authorities or a material disruption in
commercial banking or securities settlement or clearance services in the
United States; (iv) the outbreak or escalation of hostilities involving
the United States or the declaration by the United States of a national
emergency or war or (v) the occurrence of any other calamity or crisis or
any change in financial, political or economic conditions in the United
States or elsewhere, if the effect of any such event specified in clause
(iv) or (v) in the judgment of the Representatives makes it impracticable
or inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
13
(j) The Shares at such Time of Delivery shall remain listed on the
Exchange;
(k) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and
(l) The Company shall have furnished or caused to be furnished to you
and the Selling Stockholder and the Selling Stockholder shall have
furnished to you, at such Time of Delivery, certificates of officers of
the Company and of the Selling Stockholder, respectively, satisfactory to
you as to the accuracy in all material respects of the representations and
warranties of the Company and the Selling Stockholder, respectively,
herein at and as of such Time of Delivery, as to the performance by the
Company and the Selling Stockholder in all material respects of all of
their respective obligations hereunder to be performed at or prior to such
Time of Delivery, and as to such other matters as you may reasonably
request, and the Company shall have furnished or caused to be furnished to
you and the Selling Stockholder certificates as to the matters set forth
in subsections (a) and (g) of this Section (it being understood that such
certificates need not address that portion of Section 7(g) beginning with
the words "the effect of which" and continuing through the end of such
Section).
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement, 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 (in the case of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, in light of the circumstances under which they
were made) not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus, or any such amendment or supplement thereto, in reliance upon
and in conformity with written information furnished to the Company by any
Underwriter through Xxxxxxx Sachs & Co. and Xxxxxxx Xxxxx expressly for use
therein; and provided further, that the Company shall not be liable to any
Underwriter under the indemnity agreement in this subsection (a) with respect to
any Preliminary Prospectus to the extent that any such loss, claim, damage or
liability results from the fact such Underwriter sold Shares to a person to whom
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Prospectus (or of the Prospectus as then amended or
supplemented) in any case where such delivery is required by the Act if the
Company has previously furnished copies thereof to such Underwriter and the
loss, claim, damage or liability of such Underwriter results from an untrue
statement or omission of a material fact contained in the Preliminary Prospectus
which was corrected in the Prospectus (or the Prospectus as amended or
supplemented).
(b) The Selling Stockholder will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material
14
fact contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, in light of the circumstances under which they were made) not
misleading in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Prospectus, the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by the Selling Stockholder expressly for
use therein, and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Selling Stockholder shall not be liable to any Underwriter
under the indemnity agreement in this subsection (b) with respect to any
Preliminary Prospectus to the extent that any such loss, claim, damage or
liability of such Underwriter results from the fact such Underwriter sold Shares
to a person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus or of the Prospectus as then
amended or supplemented in any case where such delivery is required by the Act
if the Company has previously furnished copies thereof to such Underwriter and
the loss, claim, damage or liability of such Underwriter results from an untrue
statement or omission of a material fact contained in the Preliminary Prospectus
which was corrected in the Prospectus (or the Prospectus as amended or
supplemented).
(c) Each Underwriter will indemnify and hold harmless the Company and the
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or the Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Xxxxxxx, Sachs & Co. and Xxxxxxx Xxxxx expressly for use
therein; and will reimburse the Company and the Selling Stockholder for any
legal or other expenses reasonably incurred by the Company or the Selling
Stockholder in connection with investigating or defending any such action or
claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party
15
under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(e) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a),
(b) or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholder on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (d) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholder on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholder on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company and the Selling Stockholder bear to the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholder on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Stockholder and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (e). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (e), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.
16
(f) The obligations of the Company and the Selling Stockholder under this
Section 8 shall be in addition to any liability which the Company and the
Selling Stockholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company or the Selling Stockholder within the meaning of the Act.
(g) Notwithstanding the foregoing provisions of this Section 8, in no
event shall the Selling Stockholder be liable under this Section 8 for an amount
in excess of the net proceeds received by the Selling Stockholder from the sale
of the Shares contemplated hereby.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Selling Stockholder shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Selling Stockholder that you have so arranged
for the purchase of such Shares, or the Selling Stockholder notifies you that
its has so arranged for the purchase of such Shares, you or the Selling
Stockholder shall have the right to postpone a Time of Delivery for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholder as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Selling Stockholder shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholder as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Selling Stockholder shall not exercise the right described in
subsection (b) above to require non-defaulting Underwriters to purchase Shares
of a defaulting Underwriter or Underwriters, then this Agreement (or, with
respect to the Second Time of Delivery, the obligations of the Underwriters to
purchase and of the Selling Stockholder to sell the Optional Shares) shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company or the Selling Stockholder, except for the expenses
to be borne by the Company and the Selling Stockholder and
17
the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholder and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or the Selling Stockholder, or any officer or
director or controlling person of the Company, or any controlling person of the
Selling Stockholder, and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof or
as a result of the occurrence of any event described in Section 7(i) hereof,
neither the Company nor the Selling Stockholder shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Selling Stockholder as provided herein, the Selling Stockholder will reimburse
the Underwriters through you for all out-of-pocket expenses approved in writing
by you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Selling Stockholder shall then be, and the
Company shall continue to be, under no further liability to any Underwriter in
respect of the Shares not so delivered except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Xxxxxxx, Xxxxx & Co. or Xxxxxxx Xxxxx on behalf of
you as the representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of (i) Xxxxxxx,
Sachs & Co., 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Registration
Department and (ii) Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated, 0 Xxxxx
Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000; if to the Selling Stockholder shall be
delivered or sent by mail, telex or facsimile transmission to The Xxxxxxx
Foundation, 0 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000 and if to the Company
shall be delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire or telex constituting such Questionnaire, which address will be
supplied to the Company or the Selling Stockholder by you on request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholder and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and each person who controls the Company, the Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
18
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
17. The Company and the Selling Stockholder are authorized, subject to
applicable law, to disclose any and all aspects of this potential transaction
that are necessary to support any U.S. federal income tax benefits expected to
be claimed with respect to such transaction, and all materials of any kind
(including tax opinions and other tax analyses) related to those benefits,
without the Underwriters imposing any limitation of any kind.
If the foregoing is in accordance with your understanding, please sign and
return to us seven counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and the Selling Stockholder. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters, the form of which shall be
submitted to the Company and the Selling Stockholder for examination, upon
request, but without warranty on your part as to the authority of the signers
thereof.
19
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.
Very truly yours,
The Reader's Digest
Association, Inc.
By:...................................
Name:
Title:
The Xxxxxxx Foundation
By:...................................
Name:
Title:
Accepted as of the date hereof at New York, New York:
.........................................
Xxxxxxx, Sachs & Co.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
By:.....................................
Name:
Title:
On behalf of each of the Underwriters
20
SCHEDULE I
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ------------------
Xxxxxxx, Sachs & Co....................................
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated.....
[Names of other Underwriters]..........................
------------ --------------
Total.......................................
============ ==============
21
SCHEDULE II
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
--------------- ------------------
The Selling Stockholder:
The Xxxxxxx Foundation........... 10,989,989 1,648,498
---------- ---------
Total 10,989,989 1,648,498
========== =========
22
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters and the Selling Stockholder to the
effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder adopted by the
Commission;
(ii) In their opinion, the consolidated financial statements audited
by them and included in the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the
Act or the Exchange Act, as applicable, and the related published rules
and regulations adopted by the Commission;
(iii) They have compared the information in the Registration
Statement under the heading "Selected Consolidated Financial Information"
with the requirements of Items 301 and 302 of Regulation S-K and, on the
basis of inquiries of officials of the Company who have responsibility for
financial and accounting matters, nothing came to their attention as a
result of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the disclosure
requirements of Items 301 and 302, respectively, of Regulation S-K;
(iv) On the basis of limited procedures, not constituting an audit
in accordance with generally accepted auditing standards, consisting of a
reading of the latest available unaudited consolidated financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included in the Registration Statement,
inquiries of officials of the Company and its subsidiaries responsible for
financial and accounting matters and such other inquiries and procedures
as may be specified in such letter, nothing came to their attention that
caused them to believe that:
(A) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances or forfeitures and
cancellations of capital stock upon exercise of options and stock
appreciation rights, vesting or forfeiture of restricted stock, upon
earn-outs of performance shares and upon conversions of convertible
securities, in each case which were outstanding on the date of the
latest balance sheet included in the Registration Statement) or any
increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity, in each case as compared with amounts shown in
the latest balance sheet included in the Registration Statement,
except in each case for changes, increases or decreases which the
Registration Statement discloses have occurred or may occur; and
(B) for the period from the date of the latest financial
statements included or incorporated by reference in the Registration
Statement to the specified date referred to in clause (A) there were
any decreases in consolidated net revenues or the total or per share
amounts of consolidated net income, in each case as compared with
the comparable period of the preceding year, except in each case for
increases or decreases
I-1
which the Registration Statement discloses have occurred or may
occur or which are described in such letter; and
(v) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Registration Statement and
the limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraph (iv) above, they have carried out
certain specified procedures, not constituting an audit in accordance with
generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Representatives
which are derived from the general accounting records of the Company and
its subsidiaries, which appear in the Registration Statement.
I-2
ANNEX II
Outside Counsel Opinion Matters
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority necessary to own its properties and
conduct its business as described in the Prospectus;
(ii) This Agreement has been duly authorized, executed and delivered
by the Company;
(iii) The Company has an authorized capitalization as set forth in
the Prospectus;
(iv) No consent, approval, authorization, order, registration or
qualification of or with any U.S. or New York state court or governmental
agency or body is required for the sale of the Shares or the consummation
by the Company of the transactions contemplated by this Agreement, except
the registration under the Act of the Shares, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters (it being
understood that this opinion is limited to those consents, approvals,
authorizations, orders, registrations or qualifications that, in such
counsel's experience, are normally applicable to transactions of the type
contemplated by this Agreement);
(v) The statements set forth in the Prospectus under the caption
"Description of Capital Stock" insofar as they purport to constitute a
summary of the terms of the Stock are accurate;
(vi) The Company is not an "investment company", as such term is
defined in the Investment Company Act;
(vii) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to the First
Time of Delivery (other than the financial statements and related notes
and other financial, accounting, statistical or reserve data included
therein or omitted therefrom as to which such counsel need not comment)
appear on their face to be responsive as to form in all material respects
with the requirements of the Act and the rules and regulations thereunder;
and
(viii) In the course of such counsel's participation in the
preparation of the Registration Statement and Prospectus and review and
discussion of the contents thereof, although such counsel has not
independently checked or verified, and is not passing upon and assumes no
responsibility for, the accuracy, completeness or fairness thereof, or
otherwise verified the statements made therein, other than those mentioned
in subclause (v) above, at such Time of Delivery no facts have come to
such counsel's attention that lead such counsel to believe (i) that the
Registration Statement or any amendment thereto (except for the financial
statements and related notes and other financial, accounting, statistical
or reserve data included therein or omitted therefrom as to which such
counsel need not comment), at the time the Registration Statement or any
II-1
such amendment 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 or (ii)
that the Prospectus or any amendment or supplement thereto (except for the
financial statements and related notes and other financial, accounting,
statistical or reserve data included therein or omitted therefrom, as to
which such counsel need not comment), at the time the Prospectus was
issued, at the time any such amended or supplemented Prospectus was issued
or at the Closing Time, included or includes 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 the light of the circumstances
under which they were made, not misleading.
In rendering such opinion, such counsel may rely, without independent
verification, as to matters of fact, to the extent they deem appropriate, on
certificates of responsible officers of the Company and public officials. Such
opinion will be limited to the laws of the State of New York, the federal laws
of the United States and the General Corporation Law of the State of Delaware,
and such counsel will express no opinion as to the effect on the matters covered
by such opinion of the laws of any other jurisdiction. Such opinion may also
state that such counsel acted as special counsel to the Company in connection
with the offering of the Shares contemplated hereby and did not act, and has not
acted, as the Company's regular outside counsel.
II-2
ANNEX III
Internal Counsel Opinion Matters
(i) The Company has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, except where such failure to
be so qualified in any such jurisdiction would not have a Material Adverse
Effect;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of Delivery)
have been duly and validly authorized and issued and are fully paid and
non-assessable; and the Shares conform to the description of the Stock
contained in the Prospectus;
(iii) Each Significant Subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock of each such Significant Subsidiary have been duly
and validly authorized and issued, are fully paid and non-assessable, and
(except for directors' qualifying shares) are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances, equities or
claims, other than such liens, encumbrances, equities or claims that
provide security for borrowings under the Company's credit facilities;
(iv) To such counsel's knowledge and other than as set forth in the
Prospectus, there are no legal or governmental proceedings pending to
which the Company or any of its Significant Subsidiaries is a party or of
which any property of the Company or any of its Significant Subsidiaries
is the subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material
Adverse Effect; and such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others;
(v) To the knowledge of such counsel, the Company, either directly
or through a subsidiary, owns all the patents, trademarks, service marks,
trade names and copyrights, or license rights with respect to the
foregoing necessary for the present and planned future conduct of its
business as described in the Prospectus, except where the failure to own
or license the same would not have a Material Adverse Effect without any
conflict known to such counsel with the rights of others, the result of
which conflict would result in a Material Adverse Effect and, to the
knowledge of such counsel, there is no infringement on such patents,
trademarks, service marks, trade names and copyrights by others, the
result of which infringement would have a Material Adverse Effect;
(vi) The compliance by the Company with all of the provisions of
this Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument known to such counsel to which the Company or any
of its Significant Subsidiaries is a party or by which the Company or any
of its Significant Subsidiaries is bound or to which any of the property
or assets of the Company or any of
III-1
its Significant Subsidiaries is subject except for such violations that
would not, individually or in the aggregate, have a Material Adverse
Effect, nor will such action result in any violation of the provisions of
the Certificate of Incorporation or By-laws of the Company or any statute
or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any of
its Significant Subsidiaries or any of their properties;
(vii) Neither the Company nor any of the Significant Subsidiaries is
in violation of its certificate of incorporation or by-laws or other
organizational documents as the case may be;
(viii) The documents incorporated by reference in the Prospectus or
any further amendment or supplement thereto made by the Company prior to
such Time of Delivery (except for the financial statements and related
notes and other financial, accounting, statistical or reserve data
included therein or omitted therefrom as to which such counsel need not
comment), when they became effective or were filed with the Commission, as
the case may be, appear on their face to be responsive 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, when such documents became
effective or were so filed, as the case may be, contained, in the case of
a registration statement which became effective under the Act, 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, or, in the case of other documents which were filed under the
Exchange Act with the Commission, 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;
(ix) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to the First
Time of Delivery (other than the financial statements and related notes
and other financial, accounting, statistical or reserve data included
therein or omitted therefrom as to which such counsel need not comment)
appear on their face to be responsive as to form in all material respects
with the requirements of the Act and the rules and regulations thereunder;
and
(x) In the course of such counsel's participation in the preparation
of the Registration Statement and Prospectus and review and discussion of
the contents thereof, although such counsel has not independently checked
or verified, and is not passing upon and assumes no responsibility for,
the accuracy, completeness or fairness thereof, or otherwise verified the
statements made therein, at such Time of Delivery no facts have come to
such counsel's attention that lead such counsel to believe (i) that the
Registration Statement or any amendment thereto (except for the financial
statements and related notes and other financial, accounting, statistical
or reserve data included therein or omitted therefrom as to which such
counsel need not comment), at the time the Registration Statement or any
such amendment 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 or (ii)
that the Prospectus or any amendment or supplement thereto (except for the
financial statements and related notes and other financial, accounting,
statistical or reserve data included
III-2
therein or omitted therefrom as to which such counsel need not comment),
at the time the Prospectus was issued, at the time any such amended or
supplemented Prospectus was issued or at the Closing Time, included or
includes 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 the light of the circumstances under which they were made, not
misleading.
In rendering such opinion, such counsel may rely, without independent
verification, (A) as to matters of fact, to the extent he deems appropriate, on
certificates of responsible officers of the Company and public officials; and
(B) as to matters involving the application of laws of any jurisdiction other
than the States of Delaware and New York or the Federal laws of the United
States, to the extent he deems appropriate and specified in such opinion, upon
the opinion of other counsel of good standing whom he reasonably believes to be
reliable and who are reasonably satisfactory to counsel for the Underwriters.
III-3
