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EXHIBIT 1.1
CLASS A NONVOTING COMMON STOCK
(par value $0.01 per share)
UNDERWRITING AGREEMENT
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November [10], 1999
Xxxxxxx, Xxxxx & Co.,
Lazard Freres & Co. LLC,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Xxxxx & Co.,
00 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Certain stockholders named in Schedule II hereto (the "Selling
Stockholders") of The Reader's Digest Association, Inc., a Delaware corporation
(the "Company"), propose, subject to the terms and conditions stated herein, to
sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 10,000,000 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 1,500,000 additional shares (the "Optional Shares") of Class
A Nonvoting Common Stock, par value $0.01 per share ("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 Stockholders that:
(i) A registration statement on Form S-3 (File No.
333-88625) (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 either 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 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
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"Preliminary Prospectus"; the various parts of the Initial
Registration Statement or the Rule 462(b) Registration Statement, if
any, including all exhibits thereto and including (A) 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 (B) 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 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"; 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. or by a 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 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, Xxxxx & Co. or by a Selling Stockholder expressly for
use therein;
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(iv) 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 do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto, and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein 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. or by a 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 in connection with the issuance of Stock in
the ordinary course of business pursuant to the Company's 1989 Key
Employee Long Term Incentive Plan, the 1994 Key Employee Long Term
Incentive Plan, the Employee Ownership Plan and 401(k) Partnership and
the Employee Stock Purchase Plan described in the Prospectus) or any of
its subsidiaries, any change in the short-term debt or 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, or any development involving a prospective material
adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, taken as a whole, otherwise than as
set forth or contemplated in the Prospectus;
(vi) The Company has good and marketable title in fee
simple to its headquarters and principal operating facilities in
Westchester County, New York free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as
do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and the Company or a
subsidiary of the Company has good and marketable title in fee simple,
or, in jurisdictions outside of the United States, the substantive
equivalent thereto, to all other real property and good and marketable
title to all personal property owned by the Company or a subsidiary of
the Company, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do
not in the aggregate materially affect the business or financial
condition of the Company and its subsidiaries, taken as a whole; and
any real property and buildings held under lease by the Company or a
subsidiary of the Company are held by the Company or a subsidiary of
the Company under valid, subsisting and enforceable leases with such
exceptions as do not, in the aggregate, materially adversely affect the
business or financial condition of the Company and its subsidiaries,
taken as a whole;
(vii) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Delaware, with power and authority to own its properties
and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of business
and is in good standing under
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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 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, 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,
except as to the extent that the failure of any subsidiary or
subsidiaries of the Company to be in good standing would not,
individually or in the aggregate, result in any material liability or
disability of the Company and its subsidiaries, taken as a whole, and
except that no representation is made with respect to any currently
inactive subsidiary of the Company;
(viii) 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 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
that no representation is made with respect to any currently inactive
subsidiary of the Company;
(ix) 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, 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 of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for 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;
(x) Neither the Company nor any of its subsidiaries
is in violation of its certificate of incorporation or by-laws or in
default in the performance or observance of any 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 its properties may be bound other than
any violation or default which would not have a material adverse effect
on the Company and its subsidiaries taken as a whole;
(xi) The statements set forth in the Prospectus under
the caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, present fairly the
information disclosed therein in all material respects;
(xii) Other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or
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of which any property of the Company or any of its subsidiaries is the
subject which the Company has reasonable cause to believe would
individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, stockholders' equity
or results of operations of the Company and its subsidiaries; and, to
the best of the Company's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others;
(xiii) The Company is not an "investment company" or
an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act" and, together with the Act, the "Acts");
(xiv) The Stock is listed on the New York Stock
Exchange;
(xv) 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;
(xvi) (A) 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 (B) Ernst & Young LLP,
who have certified certain financial statements of Books Are Fun, Ltd.
("Books Are Fun"), are independent public accountants as required by
the Act and the rules and regulations of the Commission thereunder;
(xvii) The Company has reviewed its operations and
that of its subsidiaries and any third parties with which the Company
or any of its subsidiaries has a material relationship to evaluate the
extent to which the business or operations of the Company or any of its
subsidiaries will be affected by the Year 2000 Problem. As a result of
such review, the Company has no reason to believe, and does not
believe, that the Year 2000 Problem will have a material adverse effect
on the general affairs, management, the current or future consolidated
financial position, business prospects, stockholders' equity or results
of operations of the Company and its subsidiaries taken as a whole or
result in any material loss or interference with the Company's business
or operations. The "Year 2000 Problem" as used herein means any
significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000; and
(xviii) The Company owns all the patents, trademarks,
service marks, trade names and copyrights or licenses rights with
respect to the foregoing 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 on the business or
condition, financial or otherwise, of the Company and its subsidiaries,
taken as a whole, without any known conflict with the rights of others,
the result of which conflict could materially and adversely affect the
business or condition, financial or otherwise, of the Company and its
subsidiaries, taken as a whole, 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
could materially and adversely affect the business or condition,
financial or otherwise, of the Company and its subsidiaries, taken as a
whole.
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(b) Each Selling Stockholder severally represents and warrants
to, and agrees with, each of the Underwriters and the Company that:
(i) The compliance by such Selling Stockholder with
all of the provisions of this Agreement, the power of attorney in
connection with this transaction (the "Power of Attorney") and the
Custody Agreement in connection with this transaction (the "Custody
Agreement"), each to which such Selling Stockholder is a party, and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder is bound or to which any of the property or
assets of such Selling Stockholder is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of such Selling Stockholder, or any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over such Selling Stockholder or any of the
property of such 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 such Selling Stockholder with or the
consummation by such Selling Stockholder of the transactions
contemplated by this Agreement, the Power of Attorney to which such
Selling Stockholder is a party or the Custody Agreement to which such
Selling Stockholder is a party, 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;
(ii) This Agreement has been duly authorized,
executed and delivered by such Selling Stockholder. The Power of
Attorney and the Custody Agreement, each to which such Selling
Stockholder is a party, have been duly authorized, executed and
delivered by such Selling Stockholder and, assuming due authorization,
execution and delivery by the other parties thereto, constitute valid
and legally binding agreements of such Selling Stockholder, enforceable
in accordance with their respective terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;
(iii) Such Selling Stockholder has, and immediately
prior to each Time of Delivery (as defined in Section 4(a) hereof) such
Selling Stockholder will have, good and valid title to the Shares to be
sold by such Selling Stockholder hereunder, free and clear of all
liens, encumbrances, equities or claims; and upon delivery of such
Shares and payment therefor pursuant hereto, good and valid title to
such Shares, free and clear of all liens, encumbrances, equities or
claims, will pass to the several Underwriters;
(iv) During the period beginning from the date hereof
and continuing to and including the date 180 days after the First Time
of Delivery (as defined herein), such Selling Stockholder will not
offer, sell, contract to sell or otherwise dispose of any Shares or 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, Shares or
any such substantially similar securities without prior written consent
of you, as the representatives of the Underwriters, except as provided
hereunder, pursuant to the Purchase Contracts in connection with the
February 13, 1998 offering of Trust Automatic Common Exchange
Securities, or pursuant to bona fide grants to persons who agree in
writing with you to be bound by the provisions of this clause;
provided, however, that in the event the Company enters into a
definitive business combination agreement providing for the acquisition
of the
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Company by, or the merger of the Company with, a third party in which
substantially all of the outstanding Shares or assets of the Company
are acquired by such third party, this provision shall not prohibit
such Selling Stockholder from tendering its Shares into any tender
offer or exchange offer, or from voting its Shares in favor of any
transaction, contemplated by such agreement;
(v) Such 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; and
(vi) 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 such 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 Acts 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.
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, each of the Selling
Stockholders agrees to 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).
Each of the Selling Stockholders represents and warrants that
certificates in negotiable form representing all of the Shares to be sold by
such Selling Stockholder hereunder have been placed in custody under a Custodial
Agreement, in the form heretofore furnished to you, duly executed and delivered
by such Selling Stockholder to ChaseMellon Shareholder Services L.L.C., as
custodian (the "Custodian"), and that such Selling Stockholder has duly executed
and delivered a Power of Attorney, in the form heretofore furnished to you,
appointing the persons indicated in Schedule II hereto, and each of them, as
such Selling Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with
authority to execute and deliver this Agreement on behalf of such Selling
Stockholder, to authorize the delivery of the Shares to be sold by such Selling
Stockholder hereunder and otherwise to act on behalf of such Selling Stockholder
in connection with the transactions contemplated by this Agreement and the
Custody Agreement.
Each of the Selling Stockholders specifically agrees that the
Shares represented by the certificates held in custody for such Selling
Stockholder under the Custody Agreement are subject to the interests of the
Underwriters hereunder, and that the arrangements made by such Selling
Stockholder for such custody, and the appointment by such Selling Stockholder of
the Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable.
Each of the Selling Stockholders specifically agrees that the obligations of the
Selling Stockholders hereunder shall not be terminated by operation of law,
whether by the dissolution of any Selling Stockholder, or by the occurrence of
any other event. If any Selling Stockholder should be dissolved, or if any other
such event should occur, before the delivery of the Shares hereunder,
certificates representing the Shares shall be delivered by or on behalf of the
Selling Stockholders in accordance with the terms and conditions of this
Agreement and of the Custody
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Agreements, as appropriate, and actions taken by the Attorneys-in-Fact pursuant
to the Powers of Attorney shall be as valid as if such dissolution or other
event had not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such
dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) each of
the Selling Stockholders agrees, severally and not jointly, to sell to each of
the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from each of the Selling Stockholders, at a purchase price
per share of $_____, the number of Firm Shares (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying the aggregate number of
Shares to be sold by each of the Selling Stockholders as set forth opposite
their respective names in Schedule II hereto by a fraction, the numerator of
which is the aggregate number of Firm Shares to be purchased by such Underwriter
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all of the Underwriters from all of the Selling Stockholders hereunder and (b)
in the event and to the extent that the Underwriters shall exercise the election
to purchase Optional Shares as provided below, each of the Selling Stockholders
agrees, severally and not jointly, to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from each of
the Selling Stockholders, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
The Selling Stockholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 1,500,000 Optional Shares, at the purchase
price set forth in clause (a) of the first paragraph of this Section 2, for the
sole purpose of covering overallotments in the sale of the Firm Shares. Any such
election to purchase Optional Shares shall be made in proportion to the maximum
number of Optional Shares to be sold by each Selling Stockholder as set forth in
Schedule II hereto. Any such election to purchase Optional Shares may be
exercised only by written notice from you to the Attorneys-in-Fact (with copies
to Xxxxxxx Xxxxxx, Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx, Xxx Xxx Xxxx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000 and Xxxxxx X. Xxxxxxx, Shearman & Sterling, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 10022), given within a period of 30
calendar days after the date of this Agreement, 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(a) hereof) or, unless you
and the Attorneys-in-Fact 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 & Co. may request upon at least forty-eight hours' prior
notice to the Selling Stockholders, shall be delivered by or on behalf of the
Selling Stockholders to Xxxxxxx, Sachs & Co., through the facilities of the
Depository Trust Company ("DTC") for the account of such Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer or certified or official bank check or checks in Federal (same
day) funds to the account specified by each of the Selling Stockholders, to
Xxxxxxx, Xxxxx & Co. at least forty-eight hours in advance. The Company will
cause the certificates representing
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the Shares to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) with respect thereto at
the office of DTC or its designated custodian (the "Designated Office"). The
time and date of such delivery and payment shall be, with respect to the Firm
Shares, 9:30 a.m., New York City time, on November [16], 1999 or such other time
and date as Xxxxxxx, Sachs & Co. and the Selling Stockholders may agree upon in
writing, and, with respect to the Optional Shares, 9:30 a.m., New York City
time, on the date specified by Xxxxxxx, Xxxxx & Co. in the written notice given
by Xxxxxxx, Sachs & Co. of the Underwriters' election to purchase such Optional
Shares, or such other time and date as Xxxxxxx, Xxxxx & Co. and the Selling
Shareholders 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(k) hereof, will be delivered at the offices
of Milbank, Tweed, Xxxxxx & XxXxxx LLP, 0 Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxx, Xxx
Xxxx 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 3:30 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 City 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, such disapproval not to be unreasonably exercised; 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 any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, to promptly use its best efforts to obtain the
withdrawal of such order;
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(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 a.m. New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time to furnish the Underwriters with copies of the Prospectus in
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 same 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 copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its security-holders as
soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Act), an earnings statement of the Company and
its subsidiaries (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the First Time of
Delivery, not to offer, sell, contract to sell or otherwise dispose of
any Stock or any securities of the Company (other than pursuant to
employee plans existing (including the Employee Ownership Plan and
401(k) Partnership), or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of the Prospectus)
which 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 such
substantially similar securities 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 to its stockholders consolidated summary
financial information of the Company and its subsidiaries for such
quarter in reasonable detail;
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(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders
generally, and deliver to you 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. Such financial statements will 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 best efforts to maintain the listing of the
Stock on the New York Stock 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 each of the Selling Stockholders covenant and agree
with the one another and with the several Underwriters that (a) the Company will
pay or cause to be paid (i) the cost of preparing stock certificates for the
Shares; (ii) the cost and charges of any transfer agent or registrar for the
Shares; and (iii) all other costs and expenses incident to the performance of
its obligations hereunder which are not otherwise specifically provided for in
this Section; (b) the Selling Stockholders will pay or cause to be paid a pro
rata share (based on the number of Shares to be sold by each such Selling
Stockholder) of the following: (i) the fees, disbursements and expenses of the
Company's outside accountants and of the Company's outside counsel in connection
with the registration of the Shares under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus, the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing any Agreement
among Underwriters, this Agreement and Blue Sky Memorandum, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Shares; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 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; (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 NASD of the terms of the
sale of the Shares; (v) all fees and expenses in connection with the preparation
and filing of a registration statement under the Exchange Act relating to the
Shares and all costs and expenses incident to the listing of the Shares on the
New York Stock Exchange or other national or regional exchange, if any; and (vi)
all fees, expenses and costs of the Company and the Selling Stockholders in
connection with the marketing of the Shares; and (c) each Selling Stockholder
will pay or cause to be paid all costs and expenses incident to the performance
of such Selling Stockholder's obligations hereunder which are not otherwise
specifically provided for in this Section, including (i) any fees and expenses
of counsel for such Selling Stockholder; (ii) such Selling Stockholder's pro
rata share of the fees and expenses of the Attorneys-in-Fact and the Custodian;
and (iii) all expenses and taxes incident to the sale and delivery of the Shares
to be sold by such Selling Stockholder. In connection with clause (c)(iii) of
the preceding sentence, Xxxxxxx, Xxxxx & Co. agrees to pay New York State stock
transfer tax, and the Selling Stockholders agree to reimburse Xxxxxxx, Sachs &
Co. for associated carrying costs if such tax payment is not rebated on the day
of payment and for any portion of such tax payment not rebated. It is
understood, however, that the Company shall bear, and the Selling
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Stockholders shall not be required to pay or to reimburse the Company for, the
cost of any other matters not directly relating to the sale and purchase of the
Shares pursuant to this Agreement, and that, except as provided in this Section,
Section 8 and Section 11 hereof, the Underwriters will pay all of their own
costs and expenses, including the fees of their counsel, 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 of the Company and the
Selling Stockholders herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company and the Selling Stockholders shall have
performed all of its and their 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; 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) Milbank, Tweed, Xxxxxx & XxXxxx LLP, counsel for the
Underwriters, shall have furnished to you such opinion or opinions, dated such
Time of Delivery, with respect paragraphs (i), (ii), (iv) and (ix) of subsection
(c) below, as well as a statement to the effect of the text following paragraph
(ix) of subsection (c) below, and 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) Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx, special counsel
for the Company, shall have furnished to you their written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to the effect that:
(i) The Company has been 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) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the Shares have been duly and
validly authorized and issued and are fully paid and non-assessable;
(iii) Each of QSP, Inc., and R.D. Manufacturing
Corporation (each a "Designated Subsidiary" and collectively, the
"Designated Subsidiaries") has been 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; and
all of the issued shares of capital stock of each such Designated
Subsidiary have been duly and validly authorized and issued, are fully
paid and non-assessable, and (except for directors' qualifying shares)
are owned of record directly or indirectly by the Company;
(iv) This Agreement has been duly authorized,
executed and delivered by the Company;
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(v) 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, (i) 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, (ii) the provisions of
the Certificate of Incorporation or By-laws of the Company, (iii) the
Delaware General Corporation Law or any present law, or present
regulation of any government agency or authority, of the State of New
York or the United States of America known by us to be applicable to
the Company or any of its subsidiaries or their respective properties
or (iv) any court decree or order binding upon the Company or any of
its subsidiaries or their respective properties (it being understood
that (A) with respect to the opinions 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 "Identified Documents") which have been
identified to such counsel in a certificate provided by an officer of
the Company as material to the Company and its subsidiaries, taken as a
whole, (x) such counsel is not required to express any opinion 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 indentures, mortgages,
deeds of trust, loan agreements, other agreements, instruments or court
decrees or orders not listed on such certificate, (y) in rendering its
opinion with respect to any covenant of a financial or numerical nature
or requiring computation such counsel may rely as to matters of fact on
an officers' certificate of the Company and (z) such counsel is not
required to make any independent investigation as to whether the
Identified Documents which are governed by the laws of any jurisdiction
other than the State of New York, will be enforced as written under the
laws of such jurisdiction and (B) the opinion in clause (iii) of this
paragraph is limited (x) to our review of only those laws and
regulations that, in our experience, are normally applicable to
transactions of the type contemplated by this Agreement, and (y) in
that such counsel is not required to express any opinion with respect
to the application of, or compliance with, Federal or state securities
or Blue Sky laws or any rules or regulations thereunder);
(vi) No consent, approval, authorization, order,
registration or qualification of or with any United States or New York
court or governmental agency or body, or with respect to matters
arising under the Delaware General Corporation Law, Delaware court or
governmental agency or body is required by or of the Company 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, orders, registrations or qualifications as may be
required under state or foreign securities or Blue Sky laws, rules and
regulations 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 our experience, are normally
applicable to transactions of the type contemplated by this Agreement);
(vii) The Company is not an "investment company", as
such term is defined in the Investment Company Act;
(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 (other than the financial
statements and related schedules, and other financial data derived from
the financial statements or accounting records of the Company therein,
as to which such counsel need express no opinion), when they were filed
with the Commission appear on their face to be
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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
(ix) The Registration Statement and the Prospectus
and or any amendments or supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
related schedules, and other financial data derived from the financial
statements or accounting records of the Company, therein, as to which
such counsel need express no opinion), 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.
In addition, in the course of the preparation by the Company of the
Registration Statement and any amendment thereto and the Prospectus and any
amendment or supplement thereto, such counsel has participated in conferences
with certain of the officers and other representatives of the Company,
representatives of the independent certified public accountants for the Company
and representatives of the Underwriters, at which the contents of the
Registration Statement and the Prospectus were discussed. Between the date of
effectiveness of the Registration Statement and any such amendment thereto and
the time of delivery of this letter, such counsel attended additional
conferences with certain of the officers and representatives of the Company, at
which the contents of the Registration Statement and any such amendment thereto
and the Prospectus and any such amendment or supplement thereto were discussed
to a limited extent. Given the limitations inherent in the independent
verification of factual matters and the character of determinations involved in
the registration process, such counsel may state that they are not passing upon
or assuming any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and any such amendment
thereto or the Prospectus and any such amendment or supplement thereto. Subject
to the foregoing and on the basis of the information gained in the performance
of the services referred to above, including information obtained from officers
and other representatives of, and the independent public accountants for, the
Company, no facts have come to their attention to cause them to believe that as
of its effective date, the Registration Statement or any amendment thereto made
by the Company prior to such Time of Delivery 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 that, as of its
date, the Prospectus or any amendment or supplement thereto made by the Company
prior to such Time of Delivery contained an untrue statement of a material fact
or omitted to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. Also,
subject to the foregoing, no facts have come to such counsel's attention in the
course of the procedures described in the second paragraph of this section that
have caused such counsel to believe that, as of such Time of Delivery, the
Prospectus as amended or supplemented contains an untrue statement of a material
fact or omits to state a material fact necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading. Such
counsel may state that they express no view or belief, however, with respect to
the financial statements and related schedules included in, and other financial
data derived from the financial statements or accounting records of the Company
excluded or omitted from, the Registration Statement or Prospectus.
In rendering such opinion, such counsel may rely, in respect to matters
of fact, and to the extent not specifically set forth above, upon certificates
of officers of the Company and its subsidiaries and certificates of public
officials. 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, the Federal law of the United States and, to the extent relevant
for the opinions expressed, the General Corporation Law of the State of
Delaware;
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(d) Xxxxxxxx X.X. XxXxxx, Vice President and Associate General
Counsel of the Company, shall have furnished to you his written opinion, dated
such Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company has been incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority and all governmental
licenses, permits, approvals, franchises, consents and authorizations
necessary to own its properties and conduct its business as described
in the Prospectus other than any such license, permit, approval,
franchise, consent or authorization the failure to possess which would
not have a material adverse effect on the business or financial
condition of the Company and its subsidiaries, taken as a whole;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the Shares 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) 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, or is subject to no material liability or disability by
reason of failure to be so qualified or in good standing in any such
jurisdiction;
(iv) Each of QSP, Inc., R.D. Manufacturing
Corporation, The Reader's Digest Association Proprietary Limited, The
Reader's Digest Association (Canada) Ltd., Selection du Reader's Digest
S.A., Verlag Das Beste G.m.b.H., The Reader's Digest Association
Limited and Books Are Fun, Ltd. (each an "Indicated Subsidiary" and
collectively, the "Indicated Subsidiaries") has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation or, in jurisdictions outside
of the United States, the substantive equivalent thereto, with
corporate power and authority and all governmental licenses, permits,
approvals, franchises, consents and authorizations necessary to own its
properties and conduct its business as described in the Prospectus,
other than any such license, permit, approval, franchise, consent or
authorization the failure to possess which would not have a material
adverse effect on the business or financial condition of the Company
and its subsidiaries, taken as a whole; and all of the issued shares of
capital stock of each such Indicated 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;
(v) Other than as set forth or incorporated by
reference 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 on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries; and, to the knowledge
of such counsel, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(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
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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 for any such conflict, breach,
violation or default which individually or in the aggregate would not
have a material adverse effect on the Company and its subsidiaries
taken as a whole or which would not have an adverse effect on the
transactions contemplated hereby, 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 subsidiaries or any
of their properties;
(vii) Neither the Company nor any of the Designated
Subsidiaries is in violation of its certificate of incorporation or
by-laws;
(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 (other than the financial
statements and related schedules, and other financial data derived from
the financial statements or accounting records of the Company therein,
as to which such counsel need express no opinion), when they were filed
with the Commission complied as to form in all material respects with
the requirements of the Exchange Act and the rules and regulations of
the Commission thereunder; and he has no reason to believe that any of
such documents, when such documents were so filed contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such documents were so
filed, not misleading;
(ix) 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 licenses
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 on the business or condition, financial or
otherwise, of the Company and its subsidiaries, taken as a whole,
without any conflict known to such counsel with the rights of others,
the result of which conflict could materially and adversely affect the
business or condition, financial or otherwise, of the Company and its
subsidiaries, taken as a whole, 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
could materially and adversely affect the business or condition,
financial or otherwise, of the Company and its subsidiaries, taken as a
whole; and
(x) The Registration Statement and the Prospectus and
or any amendments or supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules, and other financial data derived from the financial
statements or accounting records of the Company, therein, as to which
such counsel need express no opinion), 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.
In addition, in the course of the preparation by the Company of the
Registration Statement and any amendment thereto and the Prospectus and any
amendment or supplement thereto, such counsel has participated in conferences
with certain of the officers and other representatives of the Company,
representatives of the independent certified public accountants for the Company
and representatives of the Underwriters, at which the contents of the
Registration Statement and the Prospectus were discussed. Between the date of
effectiveness of the Registration Statement and any such amendment thereto and
the
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time of delivery of this letter, such counsel attended additional conferences
with certain of the officers and representatives of the Company, at which the
contents of the Registration Statement and any such amendment thereto and the
Prospectus and any such amendment or supplement thereto were discussed to a
limited extent. Given the limitations inherent in the independent verification
of factual matters and the character of determinations involved in the
registration process, such counsel may state that he is not passing upon or
assuming any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and any such amendment
thereto or the Prospectus and any such amendment or supplement thereto. Subject
to the foregoing and on the basis of the information gained in the performance
of the services referred to above, including information obtained from officers
and other representatives of, and the independent public accountants for, the
Company, no facts have come to his attention to cause him to believe that as of
its effective date, the Registration Statement or any amendment thereto made by
the Company prior to such Time of Delivery 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 that, as of its
date, the Prospectus or any amendment or supplement thereto made by the Company
prior to such Time of Delivery contained an untrue statement of a material fact
or omitted to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. Also,
subject to the foregoing, no facts have come to such counsel's attention in the
course of the procedures described in the second paragraph of this section that
have caused such counsel to believe that, as of such Time of Delivery, the
Prospectus as amended or supplemented contains an untrue statement of a material
fact or omits to state a material fact necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading. Such
counsel may state that he expresses no view or belief, however, with respect to
the financial statements and related schedules therein, and other financial data
derived from the financial statements or accounting records of the Company
excluded or omitted from the Registration Statement or Prospectus. Further,
based upon such participation and subject to such limitations and qualifications
described above, he does not know of any amendment to the Registration Statement
required to be filed or of any contracts or other documents of a character
required to be filed as an exhibit to the Registration Statement or required to
be incorporated by reference into the Prospectus or required to be described in
the Registration Statement or the Prospectus which are not filed or incorporated
by reference or described as required.
In rendering such opinion, such counsel may rely, (A) in respect to
matters of fact, and to the extent not specifically set forth above, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials, and (B) as to matters of law other than New York and Federal
law and the General Corporation Law of Delaware, on the opinions of local
counsel, provided that such counsel shall state that he believes that both you
and he is justified in relying upon such opinions and certificates and provided
further that true and complete copies of such opinions and certificates shall be
delivered to you. In lieu of delivering such opinion as to matters governed by
the laws of jurisdictions outside of the United States, such counsel shall cause
to be delivered to you opinions of local counsel reasonably satisfactory to you,
provided that such local counsel shall state that they believe that both you and
he are justified in relying upon such opinions;
(e) Shearman & Sterling, special counsel for each of the
Selling Stockholders, shall have furnished to you their written opinion with
respect to each of the Selling Stockholders, dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) A Power of Attorney has been duly authorized,
executed and delivered by each Selling Stockholder and constitutes a
valid and binding agreement of each such Selling Stockholder
enforceable against such Selling Stockholder in accordance with its
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting
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enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law);
(ii) A Custody Agreement has been duly authorized,
executed and delivered by each Selling Stockholder and assuming due
authorization, execution and delivery thereof by ChaseMellon
Shareholder Services L.L.C., constitutes a valid and binding agreement
of each such Selling Stockholder enforceable against such Selling
Stockholder in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law);
(iii) This Agreement has been duly executed and
delivered by or on behalf of each Selling Stockholder;
(iv) The compliance by each Selling Stockholder with
all of the provisions of this Agreement, the Power of Attorney and the
Custody Agreement to which such Selling Stockholder is a party and the
consummation of the transactions therein contemplated 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 such Selling Stockholder is a
party or by which such Selling Stockholder is bound, or to which any of
the property or assets of such Selling Stockholder is subject, (ii) the
provisions of the Certificate of Incorporation or By-laws of such
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 of America known by such counsel to be applicable to such
Selling Stockholder or its properties or (iv) any court decree or order
binding upon such Selling Stockholder or its properties (it being
understood that (A) with respect to the opinions in clauses (i) and
(iv) of this paragraph, (w) these 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
such Selling Stockholder in certificates attached to such counsel's
opinion as Exhibit A (the "Certificates") of an officer of such 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 of America, (x) such counsel expresses no opinion
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 such 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, the Custody Agreement and the
Power of Attorney, 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);
(v) No consent, approval, authorization, order,
registration or qualification of or with any United States or New York
court or governmental agency or body is required by or on behalf of
such Selling Stockholder for the consummation of the transactions
contemplated
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by this Agreement, except for the registration of the Shares under the
Act and such as may be required under state or foreign securities or
Blue Sky laws, rules or regulations 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 our
experience, are normally applicable to transactions of the type
contemplated by this Agreement, the Custody Agreement and the Power of
Attorney);
(vi) Assuming that (i) the certificate or
certificates representing the Common Stock to be sold by such 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 such Selling
Stockholder had or has the power to transfer in such Shares) free of
any adverse claim; and
(vii) None of the Selling Stockholders is 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, (i)
the accounting firm listed in Section 1(a)(xvi)(A) hereof shall have furnished
to you a letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in Annex I
hereto and (ii) the accounting firm listed in Section 1(a)(xvi)(B) hereof shall
have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex II hereto;
(g) (i) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall not have
been any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position, results of
operations, prospects, investment objectives, investment policies or liabilities
of the Company, otherwise than as set forth or contemplated in the Prospectus,
(ii) neither the Company nor any of its subsidiaries shall have sustained since
the date of the latest audited financial statements included in the Prospectus
or incorporated by reference therein any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectus, and (iii)
since the respective dates as of which information is given in the Prospectus
there shall not have been any change in the capital stock short-term debt or
long-term debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity 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), (ii) or (iii), is in your judgment so material and
adverse as
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to make it impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares being issued at such Time of Delivery on the terms
and in the manner contemplated in the Prospectus;
(h) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the securities of the Company on the New York
Stock Exchange; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; or (iv) the outbreak
or material escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this clause (iv) in your judgment makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being issued at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(i) The Shares to be sold by the Selling Stockholders at such
Time of Delivery shall have been duly listed, subject to notice of issuance, on
the New York Stock Exchange;
(j) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of copies of the Prospectus
on the New York Business Day next succeeding the date of this Agreement; and
(k) The Company and the Selling Stockholders shall have
furnished or caused to be furnished to you at such Time of Delivery certificates
of officers of the Company and the Selling Stockholders, respectively,
satisfactory to you as to the accuracy of the representations and warranties of
the Company and the Selling Stockholders, respectively, herein at and as of such
Time of Delivery, as to the satisfaction and performance by the Company and the
Selling Stockholders of all of their respective obligations hereunder and
thereunder to be performed at or prior to such Time of Delivery, as to the
matters set forth in subsections (a) and (g) of this Section (except in the case
of the Selling Stockholders) and as to such other matters relating to the
transactions contemplated herein and therein as you may reasonably request.
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 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, Xxxxx & Co. 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
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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) Each Selling Stockholder, severally, and not jointly, in
proportion to the number of Shares to be sold by each such 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 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 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 each Selling Stockholder against any losses, claims, damages or
liabilities to which the Company or such 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 amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Xxxxxxx, Sachs & Co.
expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such 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,
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to assume the defense thereof, with counsel satisfactory to such indemnified
party, provided, however, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been advised by its counsel that representation of such indemnified party
and the indemnifying party by the same counsel would be inappropriate (whether
or not such representation by the same counsel has been proposed) under
applicable standards of professional conduct due to actual or potential
differing interests between them, the indemnified party or parties shall have
the right to select one separate counsel to participate in the defense of such
action on behalf of all such indemnified parties. Upon receipt of notice from
the indemnifying party to such indemnified party of its election so to assume
the defense of such action and approval by the indemnified party of counsel, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation unless the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence. 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 Stockholders 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 Stockholders 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 Stockholders 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 Stockholders 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 Stockholders 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
Stockholders 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
subsection (c) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of
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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, and the
Selling Stockholders' obligations in this subsection (e) to contribute are
several and not joint.
(f) The obligations of the Company and the Selling
Stockholders under this Section 8 shall be in addition to any liability which
the Company and the respective Selling Stockholders 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 of any
Selling Stockholders and to each person, if any, who controls the Company or any
Selling Stockholder within the meaning of the Act.
(g) Notwithstanding the foregoing provisions of this Section
8, in no event shall any Selling Stockholder be liable under this Section 8 for
an amount in excess of the net proceeds received by such Selling Stockholder
from the sale of the Shares.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Shares on the
terms contained herein at a Time of Delivery. If within thirty-six hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Company and the Selling Stockholders shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Stockholders shall have the right to postpone such 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 and the Selling Stockholders agree 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 Company and the Selling Stockholders as provided in subsection (a) above,
the aggregate number of such Shares which remains unpurchased does not exceed
one-eleventh of the aggregate number of all the Shares to be purchased at such
Time of Delivery, then the Company and the Selling Stockholders 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.
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(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 Stockholders as provided in subsection (a) above,
the aggregate number of such Shares which remains unpurchased exceeds
one-eleventh of the aggregate number of all the Shares to be purchased at such
Time of Delivery, or if the Company and the Selling Stockholders 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 Stockholders sell
the Optional Shares) shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company and the Selling Stockholders,
except for the expenses to be borne by the Company, the Selling Stockholders and
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 Stockholders 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 any of the Selling Stockholders or any officer or
director or controlling person of the Company or any controlling person of any
Selling Stockholder and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders 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 Stockholders as provided herein, the each of Selling Stockholders, pro
rata (based on the number of Shares to be sold by each such Selling Stockholder
hereunder), 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 Company and
the Selling Stockholders shall then 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. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Xxxxxxx, Sachs &
Co., 00 Xxx Xxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Registration
Department; 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; and if to any Selling Stockholder
shall be delivered or sent by mail, telex or facsimile transmission to counsel
for such Selling Stockholder at its address set forth in Schedule II hereto;
provided, however, that any notice to an Underwriter pursuant to Section 8(d)
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
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the Company or the Selling Stockholders by you upon 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 Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company, the Selling Stockholders and each person who controls the Company,
any 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.
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.
If the foregoing is in accordance with your understanding, please sign
and return to us eight counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Underwriters,
the Company and the Selling Stockholders. It is understood that your
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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 Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
THE READER'S DIGEST ASSOCIATION, INC.
By:
---------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President and
Chief Financial Officer
XXXXXX XXXXXXX-READER'S DIGEST FUND, INC.
XXXX XXXXXXX-READER'S DIGEST FUND, INC.
XXXX XXXXXXX XXXXXXX FUND FOR THE
METROPOLITAN MUSEUM OF ART
XXXX XXXXXXX AND XXXXXX XXXXXXX FUND FOR
LINCOLN CENTER
XXXXXX XXXXXXX FUND FOR
MACALESTER COLLEGE
XXXX XXXXXXX AND XXXXXX XXXXXXX FUND FOR
THE XXXXXX HIGHLANDS
XXXXXX XXXXXXX FUND FOR
COLONIAL WILLIAMSBURG
XXXX XXXXXXX XXXXXXX FUND FOR
THE NEW YORK ZOOLOGICAL SOCIETY
XXXXXX XXXXXXX FUND FOR MEMORIAL
XXXXX-XXXXXXXXX CANCER CENTER
COMMUNITY FUNDS, INC.
By:
-----------------------------
As Attorney-in-Fact
Accepted as of the date hereof:
Xxxxxxx, Xxxxx & Co.
Xxxxxx Freres & Co. LLC
By:
------------------------------
(Xxxxxxx, Sachs & Co.)
On behalf of each of the Underwriters
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SCHEDULE I
UNDERWRITER TOTAL NUMBER OF FIRM NUMBER OF OPTIONAL SHARES
----------- SHARES TO BE PURCHASED IF
TO BE PURCHASED MAXIMUM OPTION EXERCISED
--------------- ------------------------
Xxxxxxx, Xxxxx & Co.
Lazard Freres & Co. LLC
========== =========
Total 10,000,000 1,500,000
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SCHEDULE II
Total Number of Number of
Firm Shares to Optional Shares
be Delivered to be Delivered
---------------- if Maximum
Option Exercised
----------------
The Selling Stockholders(a):
XxXxxx Xxxxxxx-Reader's Digest Fund, Inc.................... 2,836,069 425,410
Xxxx Xxxxxxx-Reader's Digest Fund, Inc...................... 2,048,629 307,294
Xxxx Xxxxxxx Xxxxxxx Fund for the Metropolitan Museum Of Art 1,481,795 222,270
Xxxx Xxxxxxx and Xxxxxx Xxxxxxx Fund for Lincoln Center..... 882,963 132,444
Xxxxxx Xxxxxxx Fund for Macalester College 549,575 82,437
Xxxx Xxxxxxx and Xxxxxx Xxxxxxx Fund for the Xxxxxx Highlands. 535,437 80,315
Xxxxxx Xxxxxxx Fund for Colonial Williamsburg............... 629,561 94,435
Xxxx Xxxxxxx Xxxxxxx Fund for the New York Zoological Society 401,347 60,202
Xxxxxx Xxxxxxx Fund for Memorial Xxxxx-Xxxxxxxxx Cancer Center 321,078 48,161
Community Funds, Inc........................................ 313,546 47,032
------- ------
Total............................................. 10,000,000 1,500,000
---------------
(a) Each Selling Stockholder is represented by Shearman & Sterling, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 and has appointed Xxxxxx X.
Xxxxx and M. Xxxxxxxxx XxXxxx, and each of them, as the
Attorneys-in-Fact for such Selling Stockholder.
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ANNEX I
Pursuant to Section 7(f)(i) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries within the meaning of
the Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and
any supplementary financial information and schedules (and, if
applicable, financial forecasts and/or pro forma financial information)
examined by them and included or incorporated by reference in the
Registration Statement or the Prospectus 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 thereunder; and, if applicable, they have made a review
in accordance with standards established by the American Institute of
Certified Public Accountants of the consolidated interim financial
statements, selected financial data, pro forma financial information,
financial forecasts and/or condensed financial statements derived from
audited financial statements of the Company for the periods specified
in such letter, as indicated in their reports thereon, copies of which
have been furnished to the representatives of the Underwriters (the
"Representatives") and are attached hereto;
(iii) They have made a review in accordance with
standards established by the American Institute of Certified Public
Accountants of the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus and/or included in the Company's
quarterly report on Form 10-Q incorporated by reference into the
Prospectus as indicated in their reports thereon copies of which are
attached hereto; and on the basis of specified procedures including
inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited
condensed consolidated financial statements referred to in paragraph
(vi)(A)(i) below comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and
the related published rules and regulations, nothing came to their
attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the Exchange Act and the related published rules and
regulations;
(iv) The unaudited selected financial information
with respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years included
in the Prospectus and included or incorporated by reference in Item 6
of the Company's Annual Report on Form 10-K for the most recent fiscal
year agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the
Prospectus under selected captions with the disclosure requirements of
Regulation S-K and on the basis of limited procedures specified in such
letter 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
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30
respects with the disclosure requirements of Items 301, 302, 402 and
503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not
constituting an examination in accordance with generally accepted
auditing standards, consisting of a reading of the unaudited financial
statements and other information referred to below, a reading of the
latest available interim financial statements of the Company and its
subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, 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) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus and/or
included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in
the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the
Exchange Act as it applies to Form 10-Q and the related
published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the
Prospectus or included in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus, for
them to be in conformity with generally accepted accounting
principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and
any such unaudited data and items were not determined on a
basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial
statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent
fiscal year;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited
condensed financial statements referred to in Clause (A) and
any unaudited income statement data and balance sheet items
included in the Prospectus and referred to in Clause (B) were
not determined on a basis substantially consistent with the
basis for the audited financial statements included or
incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest balance sheet included or incorporated
by
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31
reference in the Prospectus) 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 or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with amounts
shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the
Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with the
comparable period of the preceding year and with any other
period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in
their report(s) included or incorporated by reference in the Prospectus
and the limited procedures, inspection of minute books, inquiries and
other procedures referred to in paragraphs (iii) and (vi) above, they
have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Prospectus (excluding documents incorporated by reference) or in
Part II of, or in exhibits and schedules to, the Registration Statement
specified by the Representatives or in documents incorporated by
reference in the Prospectus specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and
have found them to be in agreement.
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32
ANNEX II
Pursuant to Section 7(f)(ii) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants
with respect to Books Are Fun within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and
any supplementary financial information and schedules (and, if
applicable, financial forecasts and/or pro forma financial information)
examined by them and incorporated by reference in the Registration
Statement or the Prospectus 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
thereunder;
(iii) They have made a review in accordance with
standards established by the American Institute of Certified Public
Accountants of the unaudited condensed statements of income, balance
sheets and statements of cash flows included in the Company's amended
current report on Form 8-K/A as filed with the Commission on
___________, 1999 (the "BAF 8-K"), which amends and restates the
Company's current report on Form 8-K as filed with the Commission on
October 7, 1999, incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which are attached hereto;
and on the basis of specified procedures including inquiries of
officials of Books Are Fun who have responsibility for financial and
accounting matters regarding whether the unaudited condensed financial
statements referred to in paragraph (iv) below comply as to form in all
material respects with the applicable accounting requirements of the
Act and the Exchange Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations; and
(iv) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of Books Are Fun, inspection of the minute
books of Books Are Fun since the date of the latest audited financial
statements incorporated by reference in the Prospectus, inquiries of
officials of Books Are Fun 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 the unaudited condensed statements of income, balance
sheets and statements of cash flows included in the BAF 8-K
incorporated by reference in the Prospectus do not comply as to form in
all material respects with the applicable accounting requirements of
the Exchange Act as it applies to Quarterly Reports on Form 10-Q and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed statements of
income, balance sheets and statements of cash flows included in the BAF
8-K incorporated by reference in the Prospectus, for them to be in
conformity with generally accepted accounting principles.
1
