Exhibit 1.1
[DRAFT]
GUITAR CENTER, INC.
6,750,000 SHARES OF COMMON STOCK, $0.01 PAR VALUE
--------------------------
UNDERWRITING AGREEMENT
[ ], 1997
Xxxxxxx, Xxxxx & Co.
Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation
Xxxxxxxxxx Securities
Xxxx Xxxxxxxx Incorporated
Chase Securities Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Xxxxx & Co.
00 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Guitar Center, Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and
sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 6,750,000 shares and, at the election of the Underwriters, up to
1,012,500 additional shares of Common Stock, $0.01 par value ("Stock"), of
the Company. The aggregate of 6,750,000 shares to be sold by the Company is
herein called the "Firm Shares" and the 1,012,500 additional shares to be
sold by the Company are herein called the "Optional Shares." The Firm Shares
and the Optional Shares that the Underwriters elect to purchase pursuant to
Section 2 hereof are herein collectively called the "Shares."
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(i) A registration statement on Form S-1 (File No.
333-[ ]) (the "Initial Registration Statement") in respect of
the Shares has been filed with the Securities and Exchange
Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in the
form heretofore delivered to you, and, excluding exhibits
thereto, for you and each of the other Underwriters, have been
declared effective by the Commission in such form; other than a
registration
statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended (the
"Act"), which became effective upon filing, no other document
with respect to the Initial Registration Statement has
heretofore been filed with the Commission; and no stop order
suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule
462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened
by the Commission (any preliminary prospectus included in the
Initial Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act, is hereinafter called a
"Preliminary Prospectus"; the various parts of the Initial
Registration Statement and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto and
including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b)
the Act in accordance with Section 6(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of the
Initial Registration Statement at the time it was declared
effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, each
as amended at the time such part of the registration statement
became effective, are hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the
form first filed pursuant to Rule 424(b) under the Act, is
hereinafter called the "Prospectus");
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and
each Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects to the requirements of the
Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that this representation and
warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished
in writing to the Company by an Underwriter through Xxxxxxx,
Sachs & Co. expressly for use therein;
(iii) The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in all
material respects to the requirements of the Act and the rules
and regulations of the Commission thereunder and do not and
will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the
applicable filing date as to the Prospectus and any amendment
or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein
(with respect to the Prospectus and any amendment or
supplement thereto, in light of the circumstances under which
such statements were made) not misleading; PROVIDED, HOWEVER,
that this representation and warranty shall not apply to any
statements or
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omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an
Underwriter through Xxxxxxx, Xxxxx & Co. expressly for use
therein;
(iv) The Company has not sustained since the date of the
latest audited financial statements included in the Prospectus
any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective
dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in
the capital stock (except for immaterial issuances of stock
options to employees of the Company pursuant to existing stock
ption plans as in effect prior to the date hereof or except
as contemplated and disclosed in the Prospectus) or long-term
debt or material increase in short-term debt other than in the
ordinary course of business and consistent with past
practices, of the Company or any material adverse change, or
any development reasonably likely to result in a prospective
material adverse change, in or affecting the business,
management, financial position, stockholders' equity or
results of operations of the Company, otherwise than as set
forth or contemplated in the Prospectus;
(v) The Company has good and marketable title in fee
simple to all real property owned by it and owns all of the
personal property disclosed in the Prospectus as being owned
it, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made
of such property by the Company or such as would not have a
material adverse effect on the business, management, condition
(financial or otherwise), stockholders' equity, results of
operations or prospects of the Company, either individually or
in the aggregate (a "Material Adverse Effect"); any real
property and buildings held under lease by the Company is held
by it under valid, currently existing and enforceable leases
with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company or except where the failure to have a
valid, currently existing and enforceable lease would not have
a Material Adverse Effect; and except for such assets and
facilities as are immaterial in the aggregate to the business
of the Company taken as a whole, all tangible assets and
facilities of the Company are reasonably adequate for the uses
to which they are being put or would be put in the ordinary
course of business;
(vi) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the state of Delaware, with power and authority
(corporate and other) to (i) own its properties and conduct
its business as described in the Prospectus, (ii) authorize
the offering of the Shares, (iii) execute, deliver and perform
this Agreement, and (iv) issue, sell and deliver the Shares;
and the Company has been duly qualified as a foreign
corporation for the transaction of
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business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except where
the failure to be so qualified, either individually or in the
aggregate, would not have a Material Adverse Effect;
(vii) The Company has an authorized capitalization as
set forth in the Prospectus; all of the issued shares of
capital stock of the Company have been duly and validly
authorized and issued, are fully paid and nonassessable and
conform to the description thereof contained in the Prospectus;
(viii) The unissued Shares to be issued and sold by the
Company to the Underwriters hereunder have been duly and
validly authorized and, when issued and delivered against
payment therefor as provided herein, will be duly and validly
issued and fully paid and nonassessable and will conform to
the description of the Stock contained in the Prospectus; and
the issuance and sale of the Shares by the Company will not be
subject to preemptive or other similar rights;
(ix) The issue and sale of the Shares to be sold by the
Company, and 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 is a party or by which the
Company is bound or to which any of the property or assets of
the Company is subject, nor will such action result in any
violation of any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction
over the Company or any of its properties, except where such
conflict, breach, violation, or default either individually or
in the aggregate, would not have a Material Adverse Effect,
nor will such action result in any violation of the provisions
of the Certificate of Incorporation or By-laws of the Company;
and no consent, approval, authorization, order, registration
or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the
Shares or the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under
the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be
equired under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the
Underwriters;
(x) The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to
which it is a party or by which it or any of its properties
may be bound, except where such default, either individually
or in the aggregate, would not have a Material Adverse Effect,
nor is the Company in violation of its Certificate of
Incorporation or By-laws; the Company is not in violation of
or in default in the performance of any
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statute, rule or regulation or administrative or court decree
applicable to the Company or any of its properties, except for
any such violation or default which, individually or in the
aggregate, would not have a Material Adverse Effect;
(xi) The statements set forth in the Prospectus under
the caption "Description of Capital Stock," insofar as they
purport to constitute a summary of the terms of the capital
stock of the Company, under the captions "Recapitalization,"
and "Certain Transactions" and under the caption
"Underwriting" (except, under the caption "Underwriting," for
paragraphs 3 and 6 and the last sentence of paragraph 7
thereof) insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate and
fair in all material respects;
(xii) Other than as set forth in the Prospectus, there
are no legal or governmental proceedings pending to which the
Company is a party or of which any property of the Company is
the subject which, if determined adversely to the Company,
would, individually or in the aggregate, have a Material
Adverse Effect and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(xiii) The Company is not and, after giving effect to
the offering and sale of the Shares, will not be (i) an
"investment company" or[, TO THE KNOWLEDGE OF THE COMPANY,] an
entity "controlled" by an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended
(the "Investment Company Act");
(xiv) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section
517.075, Florida Statutes;
(xv) KPMG Peat Marwick, L.L.P. and Ernst & Young L.L.P.,
who have certified certain financial statements of the Company
are each independent public accountants as required by the Act
and the rules and regulations of the Commission thereunder;
(xvi) The financial statements of the Company, together
with related notes, set forth in the Preliminary Prospectus
and the Prospectus (and any amendments or supplements thereto)
comply as to form in all material respects with the
requirements of the Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act") and fairly present the
financial position of the Company at the respective dates
indicated and the results of its operations and its cash flows
for the respective periods indicated, in accordance with
generally accepted accounting principles in the United States
of America ("GAAP") consistently applied throughout such
periods; the PRO FORMA financial statements, together with
related notes, set forth under the caption "Unaudited Pro
Forma Condensed Financial Data" in the Preliminary Prospectus
and
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the Prospectus have been prepared on a basis consistent
with such historical statements, except for the PRO FORMA
adjustments specified therein, and give effect to assumptions
made on a reasonable basis and present fairly the transactions
reflected thereby as indicated in the Preliminary Prospectus
and the Prospectus and this Agreement, and comply as to form
in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X and the PRO FORMA
adjustments have been properly applied to the historical
mounts in the compilation of those statements; and the other
financial information and data included in the Preliminary
Prospectus and the Prospectus (and any amendments or
supplements thereto), historical and PRO FORMA, are accurately
presented and prepared on a basis consistent with such
financial statements and the books and records of the Company;
(xvii) The Company has no subsidiaries;
(xviii) Except as would not, either individually or in
the aggregate, have a Material Adverse Effect or is otherwise
disclosed in the Prospectus, (i) the Company is not in
violation of any federal, state or local laws and regulations
relating to pollution or protection of human health or the
environment or the use, treatment, storage, disposal,
transport or handling, emission, discharge, release or
threatened release of toxic or hazardous substances, materials
or wastes, or petroleum and petroleum products ("Materials of
Environmental Concern") (collectively, "Environmental Laws"),
including, without limitation, noncompliance with or lack of
any permits or other environmental authorizations, and (ii)
(A) the Company has not received any communication from any
person or entity alleging any violation of or noncompliance
with any Environmental Laws, and, to the knowledge of the
Company [AFTER DUE INQUIRY], there are no past, present or
reasonably foreseeable circumstances that may lead to any such
violation in the future, (B) there is no pending or, to the
knowledge of the Company [AFTER DUE INQUIRY], threatened
claim, action, investigation or notice by any person or entity
against the Company or against any person or entity for whose
acts or omissions the Company is or would reasonably be
expected to be liable, either contractually or by operation of
law, alleging liability for investigatory, cleanup, or
governmental response costs, or natural resources or property
damages, or personal injuries, attorney's fees or penalties
relating to any Materials of Environmental Concern or any
violation [OR POTENTIAL VIOLATION], of any Environmental Law
(collectively, "Environmental Claims"), and (C) there are no
actions, activities, circumstances, conditions, events or
incidents that would reasonably be expected to form the basis
of any such Environmental Claim;
(xix) The Company is not in violation of any Federal,
state or local law relating to employment and employment
practices, discrimination in the hiring, promotion or pay of
employees nor any applicable wage or hour laws, nor any
provisions of ERISA or the rules and regulations promulgated
thereunder, except for any such violation which, individually
or in the aggregate, would not result in a Material Adverse
Effect or otherwise would not be required to be disclosed in
the Prospectus; there is (A) no
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significant unfair labor practice complaint pending or, to the
knowledge of the Company, threatened against the Company
before the National Labor Relations Board or any state or
local labor relations board, and no significant grievance or
significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending or, to the
knowledge of the Company, threatened against the Company, (B)
no labor strike, dispute, slowdown or stoppage ("Labor
Dispute") in which the Company is involved other than routine
disciplinary and grievance matters, the Company is not aware
of any existing Labor Dispute by the employees of any of its
principal suppliers and (C) no question concerning union
representation within the meaning of the National Labor
Relations Act existing with respect to the employees of the
Company and, to the knowledge of the Company, no union
organizing activities are taking place, except (with respect
to any matter specified in clause (A), (B) or (C) above,
singly or in the aggregate) such as would not have a Material
Adverse Effect; and except for the Company's Profit Sharing
Plan, the Company is not a "party in interest" or a
"disqualified person" (as such terms are defined in Section
3(14) of ERISA or Section 4975 of the Code, respectively) with
respect to any employee benefit plan (as defined in Section
3(3) of ERISA) or any plan (as defined in Section 4975 of the
Code);
(xx) The Company maintains reasonable levels of
insurance in accordance with retail industry standards
covering its properties, operations, personnel and business;
the Company has not received written notice from any insurer
or agent of such insurer that substantial capital improvements
or other similar expenditures will have to be made in order to
continue such insurance; and all such insurance is outstanding
and in full force and effect on the date hereof and will be
outstanding and in full force and effect on each Time of
Delivery;
(xxi) All (A) (x) Federal, state and local income and
Franchise Tax returns required to be filed by the Company in
any jurisdiction have been filed and (y) material Tax returns
required to be filed by the Company in any jurisdiction have
been filed, and (B) material Taxes due or claimed to be due
from such entities have been paid, other than those being
contested in good faith and by appropriate proceedings and for
which adequate reserves have been provided in accordance with
GAAP on the books and records of the Company or those
currently payable without penalty or interest; "TAXES" shall
mean all Federal, state, local and foreign taxes, and other
assessments of a similar nature (whether imposed directly or
through withholding), including any interest, additions to
tax, or penalties applicable thereto;
(xxii) The Company possesses such licenses,
certificates, authorizations, exemptions, consents, approvals,
franchises, permits and other rights issued by local, state,
Federal or foreign regulatory agencies or bodies or other
governmental authorities or self-regulatory organizations
(collectively, "Permits") as are necessary to own, lease and
operate its properties and to conduct its business now
conducted by it except where the failure to possess any such
permit would not have a Material Adverse Ef-
7
fect; the Company has fulfilled and performed all of its
material obligations with respect to such Permits; the Company
is in compliance with the terms and conditions of all such
Permits and with the rules and regulations of the regulatory
authorities and governing bodies having jurisdiction with
respect thereto, except to the extent that would not,
individually or in the aggregate, have a Material Adverse
Effect; and the Company has not received any notice of
proceedings relating to the revocation or modification of any
such Permit that would have a Material Adverse Effect and no
such Permits contain any restrictions that would result in a
Material Adverse Effect;
(xxiii) The Company owns or possesses all patents,
patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names
(collectively, the "Intellectual Property") presently employed
by it in connection with the business now operated by it,
except where the failure so to own or possess would not,
individually or in the aggregate, have a Material Adverse
Effect, and the Company has not received any notice of
infringement of or conflict with asserted rights of others
with respect to any of the foregoing, except where such
infringement or conflict would not individually, or in the
aggregate, have a Material Adverse Effect; and, to the
Company's knowledge, the use of the Intellectual Property in
connection with the business and operations of the Company
does not infringe on the rights of any person, except where
such infringement would not individually or in the aggregate
have a Material Adverse Effect;
(xxiv) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance
that (1) transactions are executed in accordance with
management's general or specific authorizations, (2)
transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to
maintain asset accountability, (3) access to assets is
permitted only in accordance with management's general or
specific authorization, and (4) the recorded accountability
for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences;
(xxv) On October 11, 1996, Guitar Center Management
Company, Inc., a California corporation, was merged with and
into the Company in accordance with California, Delaware and
all other applicable law (the "Reincorporation").
(xxvi) Except as disclosed in the Preliminary Prospectus
and the Prospectus or except for which valid waivers of such
rights as have been obtained, no holder of any security of the
Company has any right to require registration of any security
of the Company; and
(xxvii) There are no material business arrangements or
related party transactions which are not disclosed in the
Preliminary Prospectus and the Prospectus (or any
8
amendments or supplements thereto) which would be required to
be disclosed by Item 404 of Regulation S-K of the Commission.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to sell to each of the Underwriters and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
at a purchase price per share of $[ ], the number of Firm Shares (to be
adjusted by you so as to eliminate fractional shares) determined by
multiplying the aggregate number of Shares to be sold by the Company by a
fraction, the numerator of which is the aggregate number of Firm Shares to be
purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased by all of the Underwriters
from the Company hereunder, and (b) in the event and to the extent that the
Underwriters shall exercise the election to purchase Optional Shares as
provided below, the Company agrees to sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase from
the Company, at the purchase price per share set forth in clause (a) of this
Section 2, that portion of the number of Optional Shares as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of Optional Shares
by a fraction the numerator of which is the maximum number of Optional Shares
which such Underwriter is entitled to purchase as set forth opposite the name
of such Underwriter in Schedule I hereto and the denominator of which is the
maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 870,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from Xxxxxxx, Xxxxx &
Co. to the Company, given within a period of 30 calendar days after the date
of this Agreement and setting forth the aggregate number of Optional Shares
to be purchased and the date on which such Optional Shares are to be
delivered, as determined by you but in no event earlier than the First Time
of Delivery (as defined in Section 5 hereof) or, unless you and the Company
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
3. The Company hereby confirms its engagement of Xxxxxxx, Sachs &
Co. as, and Xxxxxxx, Xxxxx & Co. hereby confirms its agreement with the
Company to render services as, a "qualified independent underwriter" within
the meaning of Rule 2720 of the National Association of Securities Dealers,
Inc. (the "NASD") with respect to the offering and sale of the Shares.
Xxxxxxx, Sachs & Co., in its capacity as qualified independent underwriter
and not otherwise, is referred to herein as the "QIU". As compensation for
the services of the QIU hereunder, the Company agrees to pay the QIU $10,000
on the Closing Date.
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4. Upon the authorization by you of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale
upon the terms and conditions set forth in the Prospectus.
5. (a) The Shares to be purchased by each Underwriter hereunder,
in definitive form, and in such authorized denominations and registered in
such names as Xxxxxxx, Xxxxx & Co. may request upon at least forty-eight
hours' prior notice to the Company shall be delivered by or on behalf of the
Company to Xxxxxxx, Sachs & Co., through the facilities of the Depository
Trust Company ("DTC"), for the account of such Underwriter, against payment
by or on behalf of such Underwriter of the purchase price therefor by wire
transfer of federal (same-day) funds, payable to the Company. The Company
will cause the certificates representing the Shares to be made available for
checking and packaging at least twenty-four hours prior to the Time of
Delivery (as defined below) with respect thereto at the office of DTC or its
designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m.,
New York time, on [ ], 1997 or such other time and date as
Xxxxxxx, Xxxxx & Co. and the Company may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., New York time, on the date
specified by Xxxxxxx, Sachs & Co. in the written notice given by Xxxxxxx,
Xxxxx & Co. of the Underwriters' election to purchase such Optional Shares,
or such other time and date as Xxxxxxx, Sachs & Co. and the Company may agree
upon in writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery," such time and date for delivery
of the Optional Shares, if not the First Time of Delivery, is herein called
the "Second Time of Delivery," and each such time and date for delivery is
herein called a "Time of Delivery."
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 8 hereof, including
the cross receipt for the Shares and any additional documents requested by
the Underwriters pursuant to Section 8(k) hereof, will be delivered at the
offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx, 000 Xxxxx Xxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (the "Closing Location"), and the
Shares will be delivered at the Designated Office, all at such Time of
Delivery. A meeting will be held at the Closing Location at [ ] p.m., New
York City time, on the New York Business Day next preceding such Time of
Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 5, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not
a day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
6. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you
and to file such Prospectus pursuant to Rule 424(b) under the
Act not later than the Commission's close of business on the
second business day following the execution and delivery of
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this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after
reasonable notice thereof; to advise you, promptly after it
receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has
been filed and to furnish you with copies thereof; to advise
you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus
or prospectus, of the suspension of the qualification of the
Shares for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending
or supplementing of the Registration Statement or Prospectus
or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus
or suspending any such qualification, promptly to use its best
efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as
you may reasonably request to qualify the Shares for offering
and sale under the securities laws of such jurisdictions as
you may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New
York Business Day next succeeding the date of this Agreement
and from time to time, to furnish the Underwriters with copies
of the Prospectus in New York City in such quantities as you
may reasonably request, and, if the delivery of a prospectus
is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with
the offering or sale of the Shares and if at such time any
events shall have occurred as a result of which the Prospectus
as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any
other reason it shall be necessary during such period to amend
or supplement the Prospectus in order to comply with the Act,
to notify you and upon your request to prepare and furnish
without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to
the Prospectus which will correct such statement or omission
or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the
time of issue of the Prospectus, upon your request but at the
expense of such Underwriter, to prepare and deliver to such
Underwriter as
11
many copies as you may reasonably request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of
the Act;
(d) To make generally available to its securityholders
as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration
Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which
need not be audited) complying with Section 11(a) of the Act
and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date
of the Prospectus, not to offer, sell, contract to sell or
otherwise dispose of, except as provided hereunder, any
securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that
are convertible into or exchangeable for, or that represent
the right to receive, Stock or any such substantially similar
securities (other than pursuant to employee stock option plans
existing on, or upon the conversion or exchange of convertible
or exchangeable securities outstanding as of, the date of this
Agreement), without the prior written consent of Xxxxxxx,
Sachs & Co.;
(f) To furnish to its stockholders as soon as
practicable after the end of each fiscal year an annual report
(including a balance sheet and statements of income,
stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each
of the first three quarters of each fiscal year (beginning
with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial
information of the Company and its subsidiaries for such
quarter in reasonable detail;
(g) During a period of five years from the effective
date of the Registration Statement, to furnish to you copies
of all reports or other communications (financial or other)
furnished to stockholders, and to deliver to you (i) as soon
as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities
of the Company is listed; and (ii) such additional information
concerning the business and financial condition of the Company
as you may from time to time reasonably request (such
financial statements to be on a consolidated basis to the
extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders
generally or to the Commission);
(h) To use the net proceeds received by it from the sale
of the Shares pursuant to this Agreement in the manner
specified in the Prospectus under the caption "Use of
Proceeds";
12
(i) To use its best efforts to list for quotation the
Shares on the Nasdaq National Market ("NASDAQ");
(j) To file with the Commission such reports on Form SR
as may be required by Rule 463 under the Act; and
(k) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with
the Commission in compliance with Rule 462(b) by 10:00 p.m.,
Washington, D.C. time, on the date of this Agreement, and the
Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of
such fee pursuant to Rule 11(b) under the Act.
7. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or
producing any Agreement among Underwriters, this Agreement, the Blue Sky
Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery
of the Shares; (iii) all expenses in connection with the qualification of the
Shares for offering and sale under state securities laws as provided in
Section 6(b) hereof, including the reasonable fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky survey (not to exceed $10,000) (iv) all fees and
expenses in connection with listing the Shares on the NASDAQ; (v) the filing
fees incident to, [AND THE FEES AND DISBURSEMENTS OF COUNSEL FOR THE
UNDERWRITERS IN CONNECTION WITH,] securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the Shares;
(vi) the fees associated with the use of a QIU, (vii) the cost of preparing
stock certificates; (viii) the cost and charges of any transfer agent or
registrar and (ix) all other costs and expenses incident to the performance of
the Company's obligations hereunder which are not otherwise specifically
provided for in this Section 7. It is understood, however, that the Company
shall bear the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as
provided in this Section 7, and Sections 9 and 13 hereof, the Underwriters
will pay all of their own costs and expenses, including the fees of their
counsel, stock transfer taxes on resale of any of the Shares by them, and any
advertising expenses connected with any offers they may make.
8. The obligations of the Underwriters hereunder, as to the
Shares to be delivered at each Time of Delivery, shall be subject, in their
discretion, to the condition that all representations and warranties and
other statements of the Company herein are, at and as of such Time of
Delivery, true and correct, the condition that the Company shall have
13
performed all of its obligations hereunder theretofore to be performed, and
the following additional conditions:
(a) The Prospectus shall have been filed
with the Commission pursuant to Rule 424(b) within the
applicable time period prescribed for such filing by the rules
and regulations under the Act and in accordance with Section
6(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 p.m., Washington, D.C. time, on the
date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your
reasonable satisfaction;
(b) Skadden, Arps, Slate, Xxxxxxx & Xxxx, counsel for
the Underwriters, shall have furnished to you such opinion or
opinions (a draft of each such opinion is attached as Annex
II(a) hereto), dated such Time of Delivery, with respect to
the matters covered in paragraphs (i), (iv) and (xi) of
subsection (c) below as well as such other related matters as
you may reasonably request, and such counsel shall have
received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Xxxxxx & Xxxxxxx, counsel for the Company, shall
have furnished to you their written opinion, dated such Time
of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The Company has been duly incorporated and is
validly existing in good standing under the laws of the
State of Delaware, with corporate power and authority to
own, lease and operate its properties and to conduct its
business described in the Prospectus. Based solely on
certificates from public officials, such counsel will
confirm that the Company is qualified to do business in
the States listed on Annex A hereto;
(ii) The authorized capital stock of the Company
consists solely of ________ shares of Common Stock, $.01
par value per share, and ________ shares of Preferred
Stock, $.01 par value per share. All of the outstanding
shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable;
(iii) The Shares to be issued and sold by the
Company pursuant to the Underwriting Agreement have been
duly authorized and, when issued to and paid for by the
Underwriters in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully
paid and non-assessable;
14
(iv) The Underwriting Agreement has been duly
authorized, executed and delivered by the Company;
(v) The issuance and sale of the Shares to be sold
by the Company pursuant to the Underwriting Agreement
will not result in the violation by the Company of its
Certificate of Incorporation or Bylaws or the violation
by the Company of any federal, California or Delaware
statute, rule or regulation known by such counsel to be
applicable to the Company (other than federal, California
or Delaware securities laws as to which no opinion need
be expressed in this paragraph) or in the breach of or a
default under any agreement or instrument filed as an
"Exhibit 4" or "Exhibit 10" exhibit to the Registration
Statement. No consent, approval, authorization or order
of, or filing with, any federal, California or Delaware
court or governmental agency or body known by such
counsel to be applicable to the Company is required for
the consummation of the issuance and sale of the Shares
to be sold by the Company, except for the filing of the
Company's Certificate of Amendment to the Certificate of
Incorporation filed as Exhibit ___ to the Registration
Statement and except such as have been obtained under the
Act and such as may be required under California and
Delaware securities laws in connection with the purchase
and distribution of Shares by the Underwriters (such
opinion to be based upon such counsel's consideration of
only those statutes, rules and regulations which, in such
counsel's experience, are normally applicable to
transactions of the type contemplated by Underwriting
Agreements, and no opinion need be expressed as to the
application of any antifraud, antitrust or trade
regulation laws);
(vi) The Registration Statement has become
effective under the Act, and no stop order suspending the
effectiveness of the Registration Statement has been
issued under the Act and no proceedings therefor, to the
best of such counsel's knowledge, have been initiated by
the Commission;
(vii) The Registration Statement and the Prospectus
comply as to form in all material respects with the
requirements for registration statements on Form S-1
under the Act and the rules and regulations of the
Commission thereunder; it being understood, however, that
such counsel need express no opinion with respect to the
financial statements, schedules and other financial data
included in the Registration Statement or the Prospectus.
In passing upon the compliance as to the form of
Registration Statement and Prospectus, such counsel may
assume that the statements made therein are correct and
complete;
(viii) The statements set forth in the Prospectus
under the heading "Description of Capital Stock,"
["THE RECAPITALIZATION," AND "CERTAIN TRANSACTIONS"]
insofar as such statements constitute a summary of the
terms
15
of the Company's capital stock, legal matters or
documents referred to therein, are accurate in all
material respects;
(ix) To the best of such counsel's knowledge, there
are no legal or governmental proceedings required to be
described in the Prospectus that are not described as
required [ ,WHICH, IF DETERMINED ADVERSELY TO THE COMPANY,
WOULD INDIVIDUALLY OR IN THE AGGREGATE HAVE A MATERIAL
ADVERSE EFFECT ON THE CURRENT OR FUTURE CONSOLIDATED
FINANCIAL POSITION STOCKHOLDERS' EQUITY OR RESULTS OF
OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES; AND, TO
THE BEST OF SUCH COUNSEL'S KNOWLEDGE, NO SUCH PROCEEDINGS
ARE THREATENED OR CONTEMPLATED BY GOVERNMENTAL AUTHORITIES
OR THREATENED BY OTHERS], or contracts or documents of a
character required to be described in the Registration
Statement or Prospectus or to be filed as exhibits to the
Registration Statement that are not described and filed as
required;
(x) The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940,
as amended;
(xi) Such counsel has participated in conferences
with officers and other representatives of the Company,
representatives of the independent accountants for the
Company, and representatives of the Underwriters, at
which the contents of the Registration Statement and the
Prospectus and related matters were discussed and,
although such counsel need not pass upon, and need not
assume any responsibility for, the accuracy, completeness
or fairness of the statements contained in the
Registration Statement and the Prospectus and need not
make any independent check or verification thereof
(except as set forth in paragraph (viii) above) during
the course of such participation (relying as to
materiality to the extent such counsel has deemed
appropriate upon the statements of officers and other
representatives of the Company), no facts came to such
counsels attention that caused them to believe that the
Registration Statement, at the time it became effective,
contained any untrue statement of a material fact or
omitted to state a material fact required to be stated
therein or necessary to make statements therein not
misleading, or that the Prospectus, as of its date and as
of the Closing Date, contained any untrue statement of a
material fact or omitted to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
it being understood that such counsel need not express
any belief with respect to the financial statements,
schedules and other financial data included in the
Registration Statement or the Prospectus;
(d) Xxxxx X. Xxxxxxx, the Company's General Counsel, shall
have furnished to you his written opinion, dated such Time of
Delivery, in form and substance satisfactory to you, to the
effect that:
16
(i) Any real property and buildings held under
lease by the Company is held by it under valid,
subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made
and proposed to be made of such property and buildings by
the Company (in giving the opinion in this clause, such
counsel may state that no examination of record titles
for the purpose of such opinion has been made, and that
they are relying upon a general review of the titles of
the Company, upon abstracts, reports and policies of
title companies rendered or issued at or subsequent to
the time of acquisition of such property by the Company,
upon opinions of counsel to the lessors of such property
and, in respect of matters of fact, upon certificates of
officers of the Company, provided that such counsel shall
state that they believe that both you and they are
justified in relying upon such opinions, abstracts,
reports, policies and certificates);
[(ii) THE COMPANY IS NOT IN VIOLATION OF ITS
CERTIFICATE OF INCORPORATION OR BY-LAWS OR IN DEFAULT IN
THE PERFORMANCE OR OBSERVANCE OF ANY MATERIAL OBLIGATION,
AGREEMENT, COVENANT OR CONDITION CONTAINED IN ANY INDENTURE,
MORTGAGE, DEED OF TRUST, LOAN AGREEMENT, OR LEASE OR
AGREEMENT OR OTHER INSTRUMENT TO WHICH IT IS A PARTY OR BY
WHICH IT OR ANY OF ITS PROPERTIES MAY BE BOUND;]
(e) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time,
on the effective date of any post-effective amendment to the
Registration Statement filed subsequent to the date of this
Agreement and also at each Time of Delivery, KPMG Peat
Marwick, L.L.P. and Ernst & Young, L.L.P. shall have furnished
to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you,
to the effect set forth in Annex I hereto (the executed copy
of the letter delivered prior to the execution of this
Agreement is attached as Annex I(A) hereto and a draft of the
form of letter to be delivered on the effective date of any
post-effective amendment to the Registration Statement and as
of each Time of Delivery is attached as Annex I(B) hereto);
(f)(i) The Company shall not have sustained since the
date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital
stock (except for immaterial issuances of stock options to
employees of the Company pursuant to existing stock option
plans as in effect prior to the date hereof or except as
contemplated and disclosed in the Prospectus) or long-term
debt or material increase in short-term debt other than in the
ordinary course of business and consistent with past
practices, of the Company or any
17
change, or any development involving a prospective change, in
or affecting the business, management, financial position,
stockholders' equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Prospectus,
the effect of which, in any such case described in Clause (i)
or (ii), is in the judgment of the Representatives so material
and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in
the manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall
have occurred in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating
organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under
surveillance or review, with possible negative implications,
its rating of any of the Company's debt securities;
(h) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York
Stock Exchange or on NASDAQ; (ii) a suspension or material
limitation in trading in the Company's securities on NASDAQ;
(iii) a general moratorium on commercial banking activities
declared by either Federal or New York or California State
authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any
such event specified in this Clause (iv) in the judgment of
the Representatives makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares
being delivered at such Time of Delivery on the terms and in
the manner contemplated in the Prospectus;
(i) The Shares at such Time of Delivery shall have been
duly listed for quotation on NASDAQ;
(j) The Company has obtained and delivered to the
Underwriters executed copies of an agreement from each of
[TO COME], substantially to the effect set forth in Subsection
1(b)(iv) hereof in form and substance satisfactory to you;
(k) The Company shall have furnished or caused to be
furnished to you at such Time of Delivery certificates of
officers of the Company satisfactory to you as to the accuracy
of the representations and warranties of the Company herein at
and as of such Time of Delivery, as to the performance by the
Company of all of its obligations hereunder to be performed at
or prior to such Time of Delivery, and as to such other
matters as you may reasonably request, and the Company shall
have furnished or caused to be furnished certificates as to
the matters set forth in subsections (a) and (e) of this
Section 8; and
18
(l) The Company shall have complied with the
provisions of Section 6(c) hereof with respect to the furnishing
of prospectuses on the New York Business Day next succeeding the
date of this Agreement.
9. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (with respect to the Prospectus and
any amendment or supplement thereto, in light of the circumstances under
which such statements were made) not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; PROVIDED, HOWEVER, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Xxxxxxx,
Xxxxx & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the
Company may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement
in reliance upon and in conformity with written information furnished to the
Company by such Underwriter through Xxxxxxx, Sachs & Co. expressly for use
therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party
in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have
to any
19
indemnified party otherwise than under such subsection. In case any
such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of
the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action
or claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential
party to such action or claim) unless such settlement, compromise or judgment
(i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as
is appropriate to reflect not only such relative benefits but also the
relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from
the offering (before deducting expenses) received by the Company bears to the
total underwriting discounts and commissions received by the Underwriters, 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 on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company
and the Underwriters agree
20
that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by PRO RATA allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this
subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) The obligations of the Company under this Section 9 shall
be in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations
of the Underwriters under this Section 9 shall be in addition to any
liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of
the Company and to each person, if any, who controls the Company within the
meaning of the Act.
10. (a) The Company will indemnify and hold harmless Xxxxxxx,
Xxxxx & Co., in its capacity as QIU, against any losses, claims, damages or
liabilities, joint or several, to which the QIU may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (with respect to
the Prospectus and any amendment or supplement thereto, in light of the
circumstances under which such statements were made) not misleading, and will
reimburse the QIU for any legal or other expenses reasonably incurred by the
QIU in connection with investigating or defending any such action or claim as
such expenses are incurred.
(b) Promptly after receipt by the QIU under Subsection 10(a)
above of notice of the commencement of any action, the QIU shall, if a claim
in respect thereof is to be made against the Company under such subsection,
notify the Company in writing of the commencement thereof; but the omission
so to notify the Company shall not relieve it from any liability which it may
have to the QIU otherwise than under such subsection. In case
21
any such action shall be brought against the QIU and it shall notify the
Company of the commencement thereof, the Company shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to the QIU (who shall not, except with the consent
of the QIU, be counsel to the Company), and, after notice from the
indemnifying party to the QIU of its election so to assume the defense
thereof, the indemnifying party shall not be liable to the QIU under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by the QIU, in connection with the defense
thereof other than reasonable costs of investigation. The Company shall not,
without the written consent of the indemnified party, effect the settlement
or compromise of, or consent to the entry of any judgment with respect to,
any pending or threatened action or claim in respect of which indemnification
or contribution may be sought hereunder (whether or not the QIU is an actual
or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the QIU from
all liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of the QIU.
(c) If the indemnification provided for in this Section 10 is
unavailable to or insufficient to hold harmless Xxxxxxx, Sachs & Co., in its
capacity as QIU, under Subsection 10(a) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then the Company shall contribute to the amount paid or payable by
the QIU as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the QIU on
the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the QIU failed to give the notice required under subsection (b)
above, then the Company shall contribute to such amount paid or payable by
the QIU in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand
and the QIU on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the QIU on
the other shall be deemed to be in the same proportion as the total net
proceeds from the sale of the Shares (before deducting expenses) received by
the Company, as set forth in the table on the cover page of the Prospectus,
bear to the fee payable to the QIU pursuant to Section 3 hereof. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the QIU on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the QIU agree
that it would not be just and equitable if contributions pursuant to this
subsection (c) were determined by PRO RATA allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to above in this subsection (c). The amount paid or payable by the
QIU as a result of the losses, claims, damages or liabilities (or actions in
respect thereof)
22
referred to above in this subsection (c) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(d) The obligations of the Company under this Section 10 shall
be in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls the QIU within the meaning of the Act.
11. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or
other parties to purchase such Shares on the terms contained herein. If
within thirty-six hours after such default by any Underwriter you do not
arrange for the purchase of such Shares, then the Company shall be entitled
to a further period of thirty-six hours within which to procure another party
or other parties satisfactory to you to purchase such Shares on such terms.
In the event that, within the respective prescribed periods, you notify the
Company that you have so arranged for the purchase of such Shares, or the
Company notifies you that they have so arranged for the purchase of such
Shares, you or the Company shall have the right to postpone a Time of
Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement
or the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section 11 with like effect as if such person had originally been
a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the
number of Shares which such Underwriter agreed to purchase hereunder) of the
Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number
of all of the Shares to be purchased at such Time of
23
Delivery, or if the Company shall not exercise the right described in
subsection (b) above to require non-defaulting Underwriters to purchase
Shares of a defaulting Underwriter or Underwriters, then this Agreement (or,
with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company to sell the Optional Shares)
shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be
borne by the Company and the Underwriters as provided in Section 7 hereof and
the indemnity and contribution agreements in Section 9 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
12. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set
forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless
of any investigation (or any statement as to the results thereof) made by or
on behalf of any Underwriter or any controlling person of any Underwriter, or
the Company, or any officer or director or controlling person of the Company,
and shall survive delivery of and payment for the Shares.
13. If this Agreement shall be terminated pursuant to Section 11
hereof, the Company shall then be under any liability to any Underwriter
except as provided in Sections 7 and 9 hereof; but, if for any other reason
any Shares are not delivered by or on behalf of the Company as provided
herein, the Company will reimburse the Underwriters through you for all
reasonable out-of-pocket expenses approved in writing by you, including fees
and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of the Shares not so
delivered, but the Company shall then be under no further liability to any
Underwriter in respect of the Shares not so delivered except as provided in
Sections 7 and 9 hereof.
14. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made
or given by you jointly or by Xxxxxxx, Xxxxx & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to you as the representatives in care of Xxxxxxx,
Sachs & Co., 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Registration Department; and if to the Company shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company set forth
in the Registration Statement, Attention: Secretary; provided, however, that
any notice to an Underwriter pursuant to Section 9(c) hereof shall be
delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or
telex constituting such Questionnaire, which address will be supplied to the
Company by you on request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
24
15. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters and the Company and, to the extent provided in
Sections 9 and 12 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Shares from any Underwriter shall be deemed a
successor or assign by reason merely of such purchase.
16. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
17. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the
same instrument.
25
If the foregoing is in accordance with your understanding, please sign
and return to us eight counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters
and the Company. It is understood that your acceptance of this letter on
behalf of each of the Underwriters is pursuant to the authority set forth in
a form of Agreement among Underwriters, the form of which shall be submitted
to the Company for examination, upon request, but without warranty on your
part as to the authority of the signers thereof.
Very truly yours,
GUITAR CENTER, INC.
By: __________________________
Name:
Title:
Accepted as of the date hereof
Xxxxxxx, Xxxxx & Co.
Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation
Xxxxxxxxxx Securities
Xxxx Xxxxxxxx Incorporated
Chase Securities Inc.
By: ___________________________
(Xxxxxxx, Xxxxx & Co.)
On behalf of each of the Underwriters
26
SCHEDULE I
Number of
Optional Shares
Total Number of Firm to be Purchased
Shares if Maximum Option
Underwriter to be Purchased Exercised
----------- -------------------- ------------------
Xxxxxxx, Sachs & Co. . . . .
Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities
Corporation. . . . . . . .
Xxxxxxxxxx Securities . . . .
Xxxx Xxxxxxxx
Incorporated . . . . . . . .
Chase Securities Inc. . . . . ------------
Total . . . . . . . . . 6,750,000
------------
------------
27
ANNEX I
Pursuant to Section 8(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants
with respect to the Company within the meaning of the Act and
the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if
applicable, financial forecasts and/or pro forma financial
information) examined by them and included in the Prospectus
or the Registration Statement comply as to form in all
material respects with the applicable accounting requirements
of the Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in
accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited
consolidated interim financial statements, selected financial
data, pro forma financial information, financial forecasts
and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified
in such letter, copies of which have been separately furnished
to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with
standards established by the American Institute of Certified
Public Accountants of the unaudited condensed statements of
income, balance sheets and statements of cash flows included
in the Prospectus as indicated in their reports thereon copies
of which have been separately furnished to the Representatives
and on the basis of specified procedures including inquiries
of officials of the Company who have responsibility for
financial and accounting matters regarding whether the
unaudited condensed financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the
Act and the related published rules and regulations, nothing
came to their attention that caused them to believe that the
unaudited condensed financial statements do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations;
1
(iv) The unaudited selected financial information with
respect to the results of operations and financial position of
the Company for the five most recent fiscal years included in
the Prospectus agrees with the corresponding amounts (after
restatements where applicable) in the audited financial
statements for such five fiscal years;
(v) On the basis of limited procedures, not constituting
an examination in accordance with generally accepted auditing
standards, consisting of a reading of the unaudited financial
statements and other information referred to below, a reading
of the latest available interim financial statements of the
Company, inspection of the minute books of the Company since
the date of the latest audited financial statements included
in the Prospectus, inquiries of officials of the Company
responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such
letter, nothing came to their attention that caused them to
believe that:
(A) (i) the unaudited statements of income, balance
sheets and statements of cash flows included in the
Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of
the Act and the related published rules and regulations,
or (ii) any material modifications should be made to the
unaudited condensed statements of income, balance sheets
and statements of cash flows included in the Prospectus
for them to be in conformity with generally accepted
accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not
agree with the corresponding items in the unaudited
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited
financial statements included in the Prospectus;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived
any unaudited condensed financial statements referred to
in Clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and
referred to in Clause (B) were not determined on a
2
basis substantially consistent with the basis for the
audited financial statements included in the Prospectus;
(D) any unaudited pro forma condensed financial
statements included in the Prospectus do not comply as to
form in all material respects with the applicable
accounting requirements of the Act and the published
rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the
historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any
changes in the capital stock (other than issuances of
capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares
and upon conversions of convertible securities, in each
case which were outstanding on the date of the latest
financial statements included in the Prospectus) or any
increase in the long-term debt of the Company, or any
decreases in net current assets or stockholder's equity
or other items specified by the Representatives, or any
increases in any items specified by the Representatives,
in each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each
case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which
are described in such letter; and
(F) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in Clause (E) there were any
decreases in net revenues or operating profit or the
total or per share amounts of net income or other items
specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as
compared with the comparable period of the preceding year
and with any other period of corresponding length
specified by the Representatives, except in each case for
decreases or increases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and
(vi) In addition to the examination referred to in
their report(s) included in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (v) above, they
have carried out certain specified procedures, not
3
constituting an examination in accordance with generally
accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the
Representatives, which are derived from the general accounting
records of the Company, which appear in the Prospectus, or in
Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared
certain of such amounts, percentages and financial information
with the accounting records of the Company and have found them
to be in agreement.
4
