ENCORE CAPITAL GROUP, INC.
5,000,000 Shares(1)
Common Stock
Underwriting Agreement
September 25, 2003
Xxxxxxxxx & Company, Inc.
Xxxxx Xxxxxx & Co., Inc.
Xxxx Capital Partners, LLC
c/x Xxxxxxxxx & Company, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Encore Capital Group, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the underwriters named in Schedule I hereto (the
"Underwriters"), and the stockholders of the Company listed on Schedule II
hereto (the "Selling Stockholders") propose to sell to the Underwriters an
aggregate of 5,000,000 shares (the "Firm Shares") of the Company's common stock,
par value $.01 per share (the "Common Stock"), of which 3,000,000 shares are to
be sold by the Company (the "Company Shares") and 2,000,000 shares are to be
sold by the Selling Stockholders (the "Selling Stockholders Firm Shares"). The
Selling Stockholders have also agreed to sell up to an aggregate of 750,000
shares of Common Stock (the "Additional Shares") to cover over-allotments, if
any. The Firm Shares and the Additional Shares are hereinafter collectively
referred to as the "Shares."
You have advised us that, subject to the terms and conditions herein
contained, you desire to purchase the Firm Shares and that you propose to make a
public offering of the Firm Shares as soon as you deem advisable after the
Registration Statement referred to below becomes effective.
The terms that follow, when used in this Agreement, shall have the
meanings indicated. "Preliminary Prospectus" shall mean each prospectus subject
to completion included in the Company's Registration Statement on Form S-1
referred to in Section 1(a)(i) below and includes each preliminary prospectus
relating to the Shares which has heretofore been furnished to the Underwriters
and dealers for distribution and use. "Registration Statement" shall mean the
registration statement referred to in Section 1(a)(i) below, including all
exhibits, as amended at the Representation Date (as defined in Section 1(a)
hereof) (or, if not effective at the Representation Date, in the form in which
it shall become effective), all financial statements and schedules thereto and,
if any post-effective amendment thereto becomes effective prior to any Closing
Date (as defined in Section 3 hereof), shall also mean such registration
statement as so
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1 Plus an option to purchase from the Selling Stockholders up to an
aggregate of 750,000 Additional Shares to cover over-allotments.
amended. The term "Registration Statement" shall include Rule 430A Information
(as defined herein) deemed to be included therein on the date the registration
statement becomes effective (the "Effective Date") as provided by Rule 430A (as
defined below) and also any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended (the "Act"). "Exchange Act" shall
mean the Securities Exchange Act of 1934, as amended, and "Exchange Act Rules
and Regulations" shall mean the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder. "Prospectus" shall mean the
prospectus first filed with the Commission pursuant to Rule 424(b) under the
Act, and the prospectus included in the Registration Statement at the time it
becomes effective. "Rule 158," "Rule 424," "Rule 434" and "Rule 430A" refer to
such rules under the Act (the rules and regulations under the Act, the "Act
Regulations"), and "Rule 430A Information" means information with respect to the
Shares and the offering thereof permitted to be omitted from the Registration
Statement when it becomes effective pursuant to Rule 430A. For purposes of the
representations and warranties contained herein, to the extent reference is made
to the Prospectus and at the relevant time the Prospectus is not yet in
existence, such reference shall be deemed to be to the most recent Preliminary
Prospectus. For purposes of this Agreement, all references to the Registration
Statement, Prospectus or Preliminary Prospectus or to any amendment or
supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering Analysis and
Retrieval system ("XXXXX").
1. Representations and Warranties of the Company.
(a) The Company represents and warrants to, and agrees with, each of
the Underwriters and each of the Selling Stockholders as of the date hereof
(such date being referred to as the "Representation Date"), as follows:
(i) The Company has satisfied the conditions for use of Form S-1
under the Act, as set forth in the general instructions thereto, and has filed
with the Commission a registration statement (Registration No. 333-108423) on
such form, including a Preliminary Prospectus, for the registration under the
Act of the offering and sale of the Shares (the "Offering"). The Company has
filed one or more amendments thereto, each of which has previously been
furnished to the Underwriters. After the execution of this Agreement, the
Company will file with the Commission either (A) prior to effectiveness of such
registration statement, a further amendment to such registration statement
(including a form of prospectus), a copy of which amendment has been furnished
to and approved by the Underwriters prior to the execution of this Agreement, or
(B) after effectiveness of such registration statement, a prospectus in the form
most recently included in an amendment to such registration statement (or, if no
amendment shall have been filed, in such registration statement) in accordance
with Rules 430A and 424(b) of the Act Regulations and as have been provided to
and approved by the Underwriters prior to execution of this Agreement. No
document has been or will be prepared or distributed in reliance on Rule 434.
(ii) Neither the Commission nor any "blue sky" or securities
authority of any jurisdiction in which the Shares have been offered has issued
any order preventing or suspending the use of any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto. On the Effective Date, the
Registration Statement did or will, and when the Prospectus is first filed (if
required) in accordance with Rule 424(b) and on each Closing Date, the
Prospectus will, comply with the applicable requirements of the Act and the Act
Regulations; on the Effective Date, the Registration Statement did not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading; on the Effective Date if not filed pursuant to Rule
424(b), and on the date of any filing pursuant to Rule 424(b) and each Closing
Date,
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the Prospectus did not and will not include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and each Preliminary Prospectus and the Prospectus delivered to the
Underwriters for use in connection with the Offering will, at the time of such
delivery, be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to XXXXX, except to the extent permitted by
Regulation S-T under the Act. Notwithstanding anything to the contrary in this
Agreement, the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement, any
Preliminary Prospectus or the Prospectus in accordance with information provided
in writing to the Company by or on behalf of the Underwriters expressly for use
in any Preliminary Prospectus, the Registration Statement or the Prospectus, and
the Company agrees that the only information provided in writing by or on behalf
of Underwriters to the Company expressly for use in any Preliminary Prospectus,
the Registration Statement or the Prospectus is (1) that information contained
in the fourth paragraph under the caption "Underwriting", (2) that information
contained in the twelfth paragraph under the caption "Underwriting", (3) the
fifteenth paragraph under the caption "Underwriting" and (4) that information on
the cover page of the Prospectus stating that the Underwriters expect to deliver
the Shares to purchasers on or about October 1, 2003 (collectively, the
"Underwriters' Information"). In addition, notwithstanding anything to the
contrary in this Agreement, the Company makes no representations or warranties
to the Selling Stockholders as to the information contained in or omitted from
the Registration Statement, any Preliminary Prospectus or the Prospectus in
reliance upon and in conformity with information provided in writing to the
Company by or on behalf of the Selling Stockholders expressly for use therein
(collectively, the "Selling Stockholder Information").
(iii) Each document filed with, or furnished to, the Commission
by the Company since January 1, 2001, when it became effective, or was filed
with, or furnished to, 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 Exchange Act Rules and Regulations, 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.
(iv) The Company has been duly organized and is validly existing
and in good standing under the laws of the State of Delaware, with all requisite
power (corporate and other) and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly qualified to conduct its business and
is in good standing in each jurisdiction or place where the nature or location
of its properties (owned, leased or managed) or the conduct of its business
requires such qualification, except where the failure so to qualify would not,
individually or in the aggregate, have an adverse effect on the condition
(financial or other), business, properties, assets, rights, operations or
results of operations of the Company or any of the Subsidiaries (as hereinafter
defined) that is
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or would be, material to the Company and the Subsidiaries, taken as a whole,
whether or not occurring in the ordinary course of business (a "Material Adverse
Effect").
(v) The only subsidiaries of the Company that are significant
subsidiaries within the meaning of Rule 405 under the Act and Rule 1-02(w) of
Regulation S-X (individually, a "Subsidiary" and collectively, the
"Subsidiaries") are listed in Schedule 1(a)(v) to this Agreement. Each of the
Subsidiaries is a corporation duly organized, validly existing and in good
standing in the jurisdiction of its incorporation with all requisite power
(corporate or other) and authority to own, lease, manage and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly qualified to conduct its business and
is in good standing in each jurisdiction or place where the nature or location
of its properties (owned, leased or managed) or the conduct of its business
requires such qualification, except where the failure to so qualify would not,
individually or in the aggregate, have a Material Adverse Effect.
(vi) Each of the Company and each Subsidiary possesses all
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from, and has made all declarations and filings with, all
regulatory or governmental officials, bodies and tribunals ("Permits") that are
material to the ownership, leasing, management or operation of their respective
properties and to the conduct of the business of the Company and its
Subsidiaries as described in the Registration Statement and the Prospectus,
except where the failure to have obtained or made the same would not have a
Material Adverse Effect. None of the Company or any of the Subsidiaries has
received any notice of proceedings relating to the revocation or modification of
any such Permits where the failure to be so licensed or approved or the
Company's becoming subject to an unfavorable decision, ruling or finding, would
have a Material Adverse Effect. Except as described in the Registration
Statement and Prospectus, each of the Company and each Subsidiary has fulfilled
and performed all its current material obligations with respect to such Permits
and no event has occurred that allows, or after notice or lapse of time, or
both, would allow, revocation or termination thereof or result in any other
material impairment of the rights of the holder of any such Permit, except where
such non-fulfillment, failure to perform, revocation, termination or impairment
would not result in a Material Adverse Effect. The Company and each of the
Subsidiaries are, in all material respects, in compliance with all federal,
state, local and foreign laws, rules, regulations, orders and consents of any
governmental agency or body or court and, to the knowledge of the Company,
except as set forth in the Registration Statement and Prospectus, no prospective
change in any such federal, state, local or foreign laws, rules, regulations,
orders or consents has been adopted or is proposed which, when made effective,
would have a Material Adverse Effect. The property and business of the Company
and the Subsidiaries conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus.
(vii) All of the Company's issued and outstanding capital stock
has been duly authorized, validly issued and is fully paid and nonassessable,
and the Company's outstanding classes of capital stock, including, without
limitation, the Common Stock, and the capitalization (authorized and
outstanding) of the Company conform in all material respects to the descriptions
thereof and the statements made with respect thereto in the Registration
Statement and the Prospectus as of the date set forth therein under the captions
"Capitalization" and "Description of Capital Stock." None of the issued and
outstanding shares of the Company's
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capital stock including, without limitation, the Common Stock, have been issued
in violation of any preemptive or other rights to subscribe for or purchase
shares of capital stock of the Company. Except as set forth in the Registration
Statement and the Prospectus, there are no outstanding securities convertible
into or exchangeable for, and no outstanding options, warrants or other rights
to purchase, any shares of the capital stock of the Company, nor any agreements
or commitments to issue any of the same, and there are no preemptive or other
rights to subscribe for or to purchase, and no restrictions upon the voting or
transfer of, any capital stock of the Company pursuant to the Company's
certificate of incorporation or bylaws or any agreement or other instrument to
which the Company is a party. All offers and sales of the Company's capital
stock prior to the date hereof were at all relevant times duly registered or
exempt from the registration requirements of the Act, and were duly registered
or the subject of an available exemption from the registration requirements of
the applicable state securities or blue sky laws. The form of certificates for
the Shares complies with the corporate laws of the State of Delaware.
(viii) All the outstanding shares of capital stock or other
equity interests of each Subsidiary have been duly authorized and validly issued
and are fully paid and nonassessable, and all outstanding shares of capital
stock and other equity interests of such Subsidiaries are owned of record and
beneficially by the Company, either directly or through one of the other
Subsidiaries, free and clear of any security interests, liens, encumbrances,
equities or other claims. Except as set forth in the Registration Statement and
the Prospectus, there are no outstanding rights, warrants or options to acquire,
or instruments convertible into or exchangeable for, any shares of capital stock
or other equity interest in any Subsidiary.
(ix) Each of the Company and each Subsidiary has good and
marketable title to, and possesses, each property (whether real or personal),
right, interest or estate constituting the properties and assets described in
the Registration Statement and the Prospectus as owned by it or reflected in the
Financial Statements (as defined below), free and clear of all liens, charges,
security interests, pledges, encumbrances and restrictions and other claims,
except such as are described in the Registration Statement and the Prospectus or
such as would not have a Material Adverse Effect. Each of the Company and each
Subsidiary has valid, subsisting and enforceable leases for the properties
described in the Registration Statement and the Prospectus as leased by it with
only such exceptions as are described in the Registration Statement and the
Prospectus or that in the aggregate would not have a Material Adverse Effect.
(x) No Subsidiary is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution with respect to such Subsidiary's capital stock or other equity
interests to the Company or a Subsidiary, as the case may be, from repaying to
the Company or a Subsidiary any loans or advances to such Subsidiary from the
Company or a Subsidiary or from transferring any of such Subsidiary's property
or assets to the Company or any Subsidiary, except as described in the
Registration Statement and the Prospectus.
(xi) The Company has all corporate power, authority,
authorizations, approvals, orders, licenses, certificates and permits to enter
into this Agreement and to carry out the provisions and conditions hereof,
including, but not limited to, the issuance and delivery of the Shares to the
Underwriters as provided herein. This Agreement has been duly and validly
5
authorized by the Company and duly executed and delivered by the Company and
constitutes a legal, valid and binding agreement of the Company.
(xii) The Company and each Subsidiary owns, or possesses adequate
rights to use, all patents, patent rights, licenses, inventions, trademarks,
service marks, trade names, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information or
procedures) and other rights necessary for the conduct of its business as
described in the Registration Statement and the Prospectus, and except as
described in the Registration Statement and the Prospectus, none of the Company
or any of the Subsidiaries has received a notice, or knows of any basis, of any
infringement or other conflict with the asserted rights of others in any such
respect that could reasonably be expected to have a Material Adverse Effect.
(xiii) The Shares (A) to be issued and sold by the Company have
been duly and validly authorized for issuance by the Company and the Company has
the corporate power and authority to issue, sell and deliver the Company Shares
to the Underwriters and (B) to be sold by such Selling Stockholders to the
Underwriters have been duly authorized and are, or upon the exercise of options
or warrants or conversion of shares of preferred stock will be, validly issued,
fully paid and non-assessable; and when the Company Shares are issued and
delivered and when such Selling Stockholders Firm Shares and the Additional
Shares are delivered against payment therefor as provided by this Agreement, the
Firm Shares and Additional Shares will be validly issued, fully paid and
nonassessable, and the issuance of such Firm Shares will not be subject to any
preemptive or similar rights. All corporate action required to be taken by the
stockholders or the Board of Directors of the Company for the authorization,
issuance and sale of the Company Shares has been duly and validly taken. The
Company Shares, Selling Stockholders Firm Shares and Additional Shares conform
in all material respects to the description of the Common Stock set forth in the
Registration Statement and the Prospectus under the caption "Description of
Capital Stock."
(xiv) To the Company's knowledge, each of BDO Xxxxxxx, LLP and
Ernst & Young LLP, whose reports are included in the Registration Statement and
who has certified certain of the Financial Statements, are independent certified
public accountants with respect to the Company and the Subsidiaries, under the
meaning of and as required by the Act and the Act Regulations. To the Company's
knowledge, BDO Xxxxxxx, LLP is not in violation of the auditor independence
requirements of the Xxxxxxxx-Xxxxx Act of 2002 (the "Xxxxxxxx-Xxxxx Act") with
respect to the Company.
(xv) The consolidated financial statements and related schedules
and notes included in the Registration Statement and the Prospectus (the
"Financial Statements") present fairly the financial position of the Company and
its subsidiaries, on the basis stated in the Registration Statement, as of the
respective dates thereof, and the results of operations and cash flows of the
Company and its subsidiaries, for the respective periods covered thereby, all in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the entire period involved, except as otherwise disclosed in
the Registration Statement and the Prospectus and all adjustments necessary for
a fair presentation of results for such periods have been made. The summary
consolidated financial data and the selected consolidated financial information
and the quarterly consolidated financial data included under
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the captions "Summary Consolidated Financial Data," and "Selected Financial
Data," respectively, in the Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with that of the audited
consolidated financial statements of the Company included therein. No other
financial statements, schedules or data of the Company and its Subsidiaries are
required by the Act or the Act Regulations to be included or incorporated by
reference in the Registration Statement or Prospectus.
(xvi) The Company and each Subsidiary maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (A)
transactions are executed in accordance with management's general or specific
authorization; (B) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (C) access to assets is
permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xvii) The Company and each Subsidiary maintains insurance issued
by insurers of nationally recognized financial responsibility and covering its
properties, operations, personnel and businesses. Such insurance insures against
such losses and risks and in such amounts as are prudent and customary in the
businesses in which the Company and its Subsidiaries are engaged. None of the
Company or any Subsidiary has been refused any insurance coverage sought or
applied for; and none of the Company or any Subsidiary has reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers, as
may be necessary to continue its business at a cost that could not reasonably be
expected to have a Material Adverse Effect. All such insurance is outstanding
and duly in force on the date hereof.
(xviii) Except as set forth in the Registration Statement and the
Prospectus, the Company and the Subsidiaries are in compliance in all material
respects with all federal, state, local or foreign laws or regulations relating
to pollution or protection of human health and safety, the environment or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"). Except
as set forth in the Registration Statement and the Prospectus, none of the
Company or any of the Subsidiaries has authorized, conducted or has knowledge of
the generation, transportation, storage, use, treatment, disposal or release of
any hazardous substance, hazardous waste, hazardous material, hazardous
constituent, toxic substance, pollutant, contaminant, petroleum product, natural
gas, liquefied gas or synthetic gas, defined or regulated under any
Environmental Law on, in or under any property in violation of any applicable
law, other than such that would not have a Material Adverse Effect. Except as
set forth in the Registration Statement and the Prospectus, there is no pending
or, to the Company's knowledge, threatened claim, action, litigation or any
administrative agency proceeding involving the Company or any of the
Subsidiaries or their respective properties, nor has the Company or any of the
Subsidiaries received any written notice, or any oral notice to any executive
officer of the Company or any other employee responsible for receipt of any such
notice, from any governmental entity or third party, that (A) alleges a
violation of any Environmental Laws by the Company or any of the Subsidiaries or
any person or entity whose liability for a violation of an Environmental Law the
Company or any Subsidiary has retained or assumed either contractually or by
operation of law; (B) alleges the Company or any of the
7
Subsidiaries is a liable party under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., or any state
superfund law; (C) alleges possible contamination of the environment by the
Company or any of the Subsidiaries; or (D) alleges possible contamination of any
of the Company's or the Subsidiaries' properties.
(xix) Each of the Company and each Subsidiary (A) is in
compliance, in all material respects, with any and all applicable foreign,
federal, state and local laws, rules, regulations, treaties, statutes and codes
promulgated by any and all governmental authorities (including pursuant to the
Occupational Health and Safety Act) relating to the protection of human health
and safety in the workplace ("Occupational Laws"); (B) has received all material
permits, licenses or other approvals required of it under applicable
Occupational Laws to conduct its business as currently conducted; and (C) is in
compliance, in all material respects, with all terms and conditions of such
permit, license or approval, and the Company does not have knowledge of any
facts, circumstances or developments relating to its operations or cost
accounting practices that could reasonably be expected to form the basis for or
give rise to such actions, suits, investigations or proceedings. No action,
proceeding, revocation proceeding, writ, injunction or claim is pending or, to
the Company's knowledge, threatened against the Company or any Subsidiary
relating to Occupational Laws.
(xx) There is (A) no material unfair labor practice complaint
pending against the Company or any of its Subsidiaries or, to the Company's
knowledge, threatened against it or any of its Subsidiaries before the National
Labor Relations Board or any state or local labor relations board, and no
material grievance or arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Company or any of its
Subsidiaries or, to its knowledge, threatened against it or any of its
Subsidiaries, (B) no labor dispute in which the Company or any of its
Subsidiaries is involved nor is any labor dispute imminent, other than routine
disciplinary and grievance matters, and (C) no union representation question
existing with respect to the employees of the Company or any of its Subsidiaries
and no union organizing activities are taking place. Neither the Company nor any
of its Subsidiaries has received any written notice that (i) any executive, key
employee or significant group of employees of the Company or any of its
Subsidiaries plans to terminate employment with the Company or any of its
Subsidiaries or (ii) any such executive or key employee is subject to any
noncompete, nondisclosure, confidentiality, employment, consulting or similar
agreement that would be violated by the present or proposed business activities
of the Company or any of its Subsidiaries.
(xxi) Each of the Company and each Subsidiary (A) is in
compliance, in all material respects, with any and all applicable foreign,
federal, state and local laws, rules, regulations, treaties, statutes and codes
promulgated by any and all governmental authorities relating to debt collection
and financial organizations, including without limitation, any applicable
provisions of the Fair Debt Collections Practices Act, the Truth-In-Lending Act,
the Fair Credit Billing Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Electronic Funds Transfer Act, the U.S. Bankruptcy Code, the
Xxxxx-Xxxxx-Xxxxxx Act, and comparable state statutes, guidelines and
procedures.
(xxii) Neither the Company nor any of the Subsidiaries is in
violation of its respective charter or bylaws or other organizational documents.
Neither the Company nor
8
any Subsidiary is, nor with the passage of time or the giving of notice or both
would be, in violation of any federal, state, local or foreign law, statute,
ordinance, administrative or governmental rule, regulation or code applicable to
the Company or any of the Subsidiaries, including, without limitation, the
Federal Acquisitions Regulations and supplements and the Truth in Negotiations
Act, or of any judgment, order or decree of any court or governmental agency or
body or of any arbitrator having jurisdiction over the Company or any of the
Subsidiaries, or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any mortgage, loan
agreement, note, bond, debenture, credit agreement or any other evidence of
indebtedness or in any agreement, contract, indenture, lease, deed of trust or
other instrument to which the Company or any of the Subsidiaries is a party or
by which the Company or any of the Subsidiaries is bound, or to which any of the
property or assets of the Company or any of the Subsidiaries is subject, other
than (i) as described in the Registration Statement and the Prospectus, or (ii)
any violation of, or default with respect to, any of the foregoing that would
not have a Material Adverse Effect.
(xxiii) There is no legal or governmental action, suit,
investigation or proceeding before or by any court, arbitrator or governmental
agency or body pending or, to the Company's knowledge, threatened, against the
Company or any of the Subsidiaries, or to which any of their respective
properties, officers or personnel is subject, nor does the Company have
knowledge of any facts, circumstances or developments relating to its or its
Subsidiaries' operations or cost accounting practices that could reasonably be
expected to form the basis for or give rise to such actions, suits,
investigations or proceedings (A) that are required to be described in the
Registration Statement or the Prospectus but are not described as required, (B)
except as disclosed in the Prospectus that, if adversely determined, could
reasonably be expected to have a Material Adverse Effect, (C) that could prevent
or adversely affect the transactions contemplated by this Agreement or (D) that
could result in the suspension of the effectiveness of the Registration
Statement and/or prevent or suspend the use of the Preliminary Prospectus or
Prospectus in any jurisdiction. The Company is not a party to or subject to the
provisions of any injunction, judgment, decree or order of any court, regulatory
body or other governmental agency or body, other than (x) as described in the
Registration Statement or Prospectus or (y) any judgment that would not be
material to the Company. To the Company's knowledge, neither the Company nor any
of its Subsidiaries nor any of their respective directors or officers has been
subject to any investigations or proceedings by the Commission.
(xxiv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as otherwise
stated therein, (A) none of the Company or any of the Subsidiaries (1) has
issued or granted any securities or interests or rights to acquire capital stock
other than in connection with the exercise or conversion of any outstanding
options, preferred stock or warrants which are reflected in the Registration
Statement and the Prospectus, (2) incurred any material liability or obligation,
direct, indirect or contingent, other than liabilities and contingencies which
were incurred in the ordinary course of business, (3) entered into any
transaction, not in the ordinary course of business, that is material to the
Company and the Subsidiaries taken as a whole, (4) entered into any transaction
with an affiliate of the Company (as the term "affiliate" is defined in Rule 405
promulgated by the Commission pursuant to the Act), which would otherwise be
required to be disclosed in the Registration Statement and the Prospectus or (5)
declared or paid any dividend on its capital stock or made any other
distribution to its equity holders, (B) there has not been
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any material change in the capital stock or other equity interests, or material
increase in the short-term debt or long-term debt, of the Company or any of the
Subsidiaries and (C) there has been no change or development with respect to the
condition (financial or otherwise), business, properties, assets, rights,
operations, management, net worth or results of operations of the Company or any
of the Subsidiaries that could reasonably be expected to have a Material Adverse
Effect.
(xxv) Neither the execution, delivery or performance of this
Agreement, the offer, issuance, sale or delivery of the Shares, nor the
consummation of the other transactions contemplated hereby and by the
Registration Statement and the Prospectus (A) requires the consent, approval,
authorization or order of or provision by the Company to any court or
governmental agency or body applicable to the Company or any Subsidiary, except
such as have been obtained under the Act and such as may be required under the
blue sky laws of any jurisdiction in connection with the purchase and
distribution of the Shares by the Underwriters or such as may be required by the
National Association of Securities Dealers, Inc. (the "NASD") and such other
approvals as have been obtained, (B) will conflict with, result in a breach or
violation of, or constitute a default under the terms of any agreement,
contract, indenture, loan agreement, note, lease, deed of trust or other
instrument to which the Company or any of the Subsidiaries is a party or by
which any of them or any of their respective properties may be bound, (C) will
conflict with or violate any provision of the charter, bylaws or other
organizational documents of the Company or any Subsidiary, (D) will result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of the Subsidiaries or an acceleration of
indebtedness pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject, or (E) will conflict with or
violate any federal, state, local or foreign law, statute or regulation, or any
judgment, order, consent, decree or memorandum of understanding applicable to
the Company or any Subsidiary of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over the Company or
any of the Subsidiaries or their respective properties.
(xxvi) The Company has not distributed and, prior to the later to
occur of the Closing Date or completion of the distribution of the Shares, will
not distribute without the prior consent of Jefferies & Company, Inc.
("Jefferies") any offering material in connection with the Offering other than
the Registration Statement, any Preliminary Prospectus, the Prospectus or other
materials, if any, permitted by the Act and the Act Regulations and the use of
which has been approved in advance by Jefferies.
(xxvii) None of the Company or any Subsidiary nor, to the
Company's knowledge, any officer, director, employee or agent of the Company or
any Subsidiary has made any payment of funds of the Company or any Subsidiary,
or received or retained any funds, in violation of any law, rule or regulation,
or which payment, receipt or retention of funds is of a character required to be
disclosed in the Registration Statement or the Prospectus.
(xxviii) The Company (including all predecessors of the Company)
and each of the Subsidiaries have filed (or have obtained extensions thereto)
all federal, state, local and foreign tax returns that are required to be filed
(other than returns with respect to which failure to so file could not be
expected to have a Material Adverse Effect), which returns are
10
complete and correct in all material respects, and have paid all taxes shown on
such returns and all assessments received by them with respect thereto to the
extent that the same have become due, except those taxes that are being
contested or protested in good faith by the Company or its Subsidiaries and as
to which any reserves required under generally accepted accounting principles
have been established; and there is no tax deficiency that has been or, to the
knowledge of the Company, could reasonably be expected to be asserted or
threatened against the Company or any Subsidiary or any of their respective
assets or properties which could reasonably be expected to have a Material
Adverse Effect.
(xxix) Except for the shares of capital stock or other equity
interests of each of the Subsidiaries, neither the Company nor any of the
Subsidiaries owns any share of stock or any other securities of any corporation
or has any equity interest in any firm, partnership, association, limited
liability company, joint venture or other entity other than as reflected in the
consolidated financial statements included in the Registration Statement and the
Prospectus.
(xxx) No holder of any security of the Company has the right
(other than a right which has been waived or complied with) to have any security
owned by such holder included in the Registration Statement and, except as
described in the Registration Statement and the Prospectus, no holder of any
security of the Company has the right to demand registration of any security
owned by such holder during the period ending 12 months after the date of the
Prospectus.
(xxxi) Neither the Company nor any Subsidiary or their respective
officers, directors, employees or agents on behalf of the Company or any
Subsidiary have taken, directly or indirectly, (A) any action designed to cause
or to result in, or that has constituted or which might reasonably be expected
to constitute, the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares, or (B) since the
filing of the Registration Statement (1) sold, bid for, purchased or paid anyone
any compensation for soliciting purchases of the Shares or (2) paid or agreed to
pay any person any compensation for soliciting another to purchase any
securities of the Company.
(xxxii) As of the date of the Prospectus, neither the Company nor
any of the Subsidiaries is currently planning any probable acquisitions for
which disclosure of pro forma financial information would be required by the Act
or the Act Regulations.
(xxxiii) The Firm Shares and the Additional Shares have been
approved for quotation by the Nasdaq National Market upon official notice of
issuance.
(xxxiv) Neither the Company nor any Subsidiary is, and, upon
consummation of the Offering contemplated by the Prospectus, the Company will
not be, an "investment company" within the meaning of the Investment Company Act
of 1940, as amended, and the rules and regulations of the Commission thereunder,
and is not subject to registration under such act.
11
(xxxv) To the Company's knowledge, no officer, director or
beneficial owner of 5% or more of the Common Stock of the Company has any
affiliation or association with the NASD or any member thereof.
(xxxvi) There are no contracts, agreements or other documents
which are required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Act or by the Act Regulations which have not been
described in the Prospectus or filed as exhibits to the Registration Statement
as required by the Act Regulations. The contracts so described or otherwise
described in the Prospectus or filed as exhibits to the Registration Statement
are in full force and effect on the date hereof, and neither the Company or any
Subsidiary nor, to the Company's knowledge, any other party is in material
breach of or default under any of such contracts. The Company has not received
any written notice of such default or breach. The descriptions of such contracts
in the Prospectus and the Registration Statement are true summaries thereof and
fairly present, in all material respects, the information purported to be
summarized. All such agreements to which the Company or any of its Subsidiaries
is a party have been duly authorized, executed and delivered by the Company or a
Subsidiary, constitute valid and binding agreements of the Company or a
Subsidiary, and are enforceable against the Company or a Subsidiary in
accordance with the terms thereof, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally, or by
general equitable principles.
(xxxvii) No relationship, direct or indirect, exists between or
among the Company or any Subsidiary on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or any Subsidiary
(or any partner, affiliate or associate of any of the foregoing persons or
entities) on the other hand, which is required to be described in the Prospectus
which is not so described.
(xxxviii) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(xxxix) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's, consulting or origination fee with respect to the sale of the Shares
hereunder or any other arrangements, agreements, understandings, payments or
issuances with respect to the Company or any Subsidiary, or any of their
respective officers, directors, stockholders, partners, employees or
12
affiliates on behalf of the Company or any Subsidiary that may affect the
Underwriter's compensation, as determined by the NASD, other than as described
in the Prospectus.
(xl) Except as set forth on Schedule 1(a)(xl)(A), the Company has
obtained written agreements and delivered such agreements to the Underwriters as
of the date hereof ("Lock-Up Agreements") to the effect and in substantially the
form attached hereto as Schedule 1(a)(xl)(B) from each of its directors,
director nominees, executive officers, each of the stockholders holding over 5%
of the Company's outstanding Common Stock, and each of the stockholders listed
on Schedule 1(a)(xl)(C).
(xli) Other than as contemplated by this Agreement, the Company
has not incurred any liability for any finder's or broker's fee or agent's
commission in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
(xlii) There is and has been no failure on the part of the
Company or any of the Company's directors or officers, in their capacities as
such, to comply with any provision of the Xxxxxxxx-Xxxxx Act of 2002 and the
rules and regulations promulgated in connection therewith, including Section 402
related to loans and Sections 302 and 906 related to certifications.
(xliii) Nothing has come to the attention of the Company that has
caused the Company to believe that the statistical and market-related data
included in the Registration Statement and the Prospectus is not based on or
derived from sources that are reliable and accurate in all material respects.
(xliv) Any certificate signed by any officer of the Company
delivered to the Underwriters or to counsel for the Underwriters pursuant to the
terms of this Agreement shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
2. Representations and Warranties of the Selling Stockholders.
(a) Each Selling Stockholder, severally and not jointly, represents
and warrants to, and agrees with, the Company and each Underwriter as of the
Representation Date, as follows:
(i) Such Selling Stockholder is, or upon the exercise of options
or warrants or conversion of shares of Series A Cumulative Participating
Convertible Preferred Stock of the Company (the "Series A Stock") will be, the
lawful owner of the Shares to be sold by such Selling Stockholder pursuant to
this Agreement and has (or upon the exercise of options or warrants or
conversion of shares of Series A Stock of the Company will have), and on each
Closing Date, as applicable, will have, good, valid and clear title to such
Shares, free of any and all restrictions on transfer, liens, encumbrances,
security interests, equities, claims and other defects whatsoever, except for
such restrictions on transfer as do not restrict the sale of the Shares to the
Underwriters hereunder.
13
(ii) Such Selling Stockholder has, and on each Closing Date, as
applicable, will have, full legal right, power and authority, and all
authorizations and approvals required by law, to enter into this Agreement and
to sell, assign, transfer and deliver the Shares to be sold by such Selling
Stockholder in the manner provided herein.
(iii) This Agreement has been duly executed and delivered by or
on behalf of such Selling Stockholder and is a legal, valid and binding
agreement of such Selling Stockholder, except as rights to indemnity and
contribution hereunder may be limited by federal or state securities laws or
public policy underlying such laws, and except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally and by equitable
principles (whether enforcement is sought by proceedings in equity or at law).
(iv) Upon delivery of and payment for the Shares to be sold by
such Selling Stockholder pursuant to this Agreement, assuming that the several
Underwriters shall have purchased the Shares for value in good faith and without
notice of any adverse claim (within the meaning of the Uniform Commercial Code
as adopted in the State of New York), good, valid and clear title to such Shares
will pass to the Underwriters, free and clear of all restrictions on transfer,
liens, encumbrances, security interests, equities, claims and defects
whatsoever.
(v) The execution, delivery and performance of this Agreement by
such Selling Stockholder, the compliance by such Selling Stockholder with all
the provisions hereof and the consummation by such Selling Stockholder of the
transactions contemplated hereby will not (A) require such Selling Stockholder
to obtain any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except as such may
be required under the Act and the Exchange Act or the securities or blue sky
laws of the various states or as have been or will be obtained), (B) conflict
with or constitute a breach of any of the terms or provisions of, or a default
under, any indenture, loan agreement, mortgage, deed of trust, lease, license or
other agreement or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder or any property of such Selling Stockholder is
bound, except for such as would not adversely affect such Selling Stockholder's
ability to perform its obligations hereunder, or (C) to his knowledge, violate
or conflict with any applicable federal, state, local or foreign law, statute,
rule, regulation or judgment, order or decree of any court or any governmental
body or agency having jurisdiction over such Selling Stockholder or any property
of such Selling Stockholder.
(vi) The information in the Registration Statement and Prospectus
under the caption "Selling and Principal Stockholders" which specifically
relates to such Selling Stockholder does not, and will not on any Closing Date,
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,
in the light of the circumstances under which they were made, not misleading and
such Selling Stockholder has agreed to immediately notify the Company, if, at
any time during the period when a Prospectus is required by law to be delivered
in connection with sales of Common Stock by an Underwriter or a dealer, there is
any material change in such information.
14
(vii) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to, 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
pursuant to the distribution contemplated by this Agreement, and, other than as
permitted by the Act, such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
Offering.
(viii) Such Selling Stockholder has duly authorized, executed and
delivered a Custody Agreement and Irrevocable Power of Attorney ("Custody
Agreement"), which Custody Agreement is a legal, valid and binding agreement of
such Selling Stockholder, except as rights to indemnity and contribution
thereunder may be limited by federal or state securities laws or public policy
underlying such laws, and except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally and by equitable principles (whether
enforcement is sought by proceedings in equity or at law); pursuant to the
Custody Agreement, such Selling Stockholder has placed in custody with American
Stock Transfer & Trust Company, as Custodian (the "Custodian"), for delivery
under this Agreement, certificates or securities entitlements in respect of
shares held in "street name" representing the Shares to be sold by such Selling
Stockholder, and/or the certificates representing shares of Series A Stock which
are convertible into shares of Common Stock to be sold by such Stockholder under
this Agreement, and/or an Irrevocable Exercise Notice (as defined in the Custody
Agreement) with respect to an option or warrant granting the right to purchase
shares of Common Stock to be sold by such Stockholder under this Agreement; and
such certificates or Irrevocable Exercise Notice with respect to such option or
warrant were duly and properly endorsed in blank for transfer, or were
accompanied by all documents duly and properly executed that are necessary to
validate the transfer of title thereto, to the Underwriters, free of any legend,
restriction on transferability, proxy, lien or claim, whatsoever.
(ix) If such Selling Stockholder, is a party to that certain
Preferred Stock Conversion Agreement dated as of August 29, 2003 (the
"Conversion Agreement"), by and among the Company and the parties identified
therein, such Selling Stockholder had the power and authority to enter into the
Conversion Agreement and had duly authorized, executed and delivered the
Conversion Agreement, and such Conversion Agreement is a legal, valid and
binding agreement of such Selling Stockholder, except as rights to indemnity and
contribution thereunder may be limited by federal or state securities laws or
public policy underlying such laws, and except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally and by equitable
principles (whether enforcement is sought by proceedings in equity or at law).
(x) Such Selling Stockholder has duly authorized, executed and
delivered to the Custodian a Custody Agreement containing an irrevocable power
of attorney (a "Power of Attorney") authorizing and directing the
Attorneys-in-Fact designated in the Custody Agreement, or any of them, to effect
the sale and delivery of the Shares being sold by such Selling Stockholder, to
enter into this Agreement and to take all such other action as may be necessary
hereunder.
(xi) Any certificate signed by or on behalf of such Selling
Stockholder and delivered to the Underwriters or counsel of the Underwriters on
or after the date hereof shall
15
be deemed to be a representation and warranty by such Selling Stockholder to the
Underwriters as to the matters covered thereby.
3. Sale and Delivery to the Underwriters; Closing.
(a) Subject to the terms and conditions and in reliance upon the
representations, warranties, covenants and agreements herein set forth, the
Company agrees to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at a purchase price of
$10.34 per share (the "Purchase Price"), that number of Firm Shares which bears
the same proportion to the aggregate number of Firm Shares to be issued and sold
by the Company as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I bears to the aggregate number of Firm Shares, subject
to adjustment in accordance with Section 10 hereof.
(b) Subject to the terms and conditions and in reliance upon the
representations, warranties, covenants and agreements herein set forth, each
such Selling Stockholder agrees, severally and not jointly, to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from such Selling Stockholder, at the Purchase Price, that number of
Firm Shares which bears the same proportion to the aggregate number of Firm
Shares to be sold by such Selling Stockholder as the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I bears to the aggregate
number of Firm Shares, subject to adjustment in accordance with Section 10
hereof.
(c) Each Selling Stockholder listed on Schedule II as a seller of
Additional Shares, grants, severally and not jointly, to the Underwriters an
option to purchase all or any part of such Additional Shares at the Purchase
Price. Subject to the terms and conditions and in reliance upon the
representations, warranties, covenants and agreements herein set forth,
Additional Shares may be purchased from such Selling Stockholders, for the
accounts of the respective Underwriters in the same proportion that the number
of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares. Such option may be
exercised only to cover over-allotments in the sale of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time and from time
to time within 30 days after the date of this Agreement, in each case upon
written or facsimile notice, or verbal or telephonic notice confirmed by written
or telegraphic notice, by the Underwriters to such Selling Stockholder no later
than 12:00 noon, New York City time, on the business day before the Firm Shares
Closing Date (as hereinafter defined) or at least two business days before the
Additional Shares Closing Date (as hereinafter defined), as the case may be,
setting forth the number of Additional Shares to be purchased and the time and
date (if other than the Firm Shares Closing Date) of such purchase.
(d) Payment of the purchase price for, and delivery of, the Firm
Shares to be purchased by the Underwriters shall be made at the offices of
Jefferies & Company, Inc., 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, or at such other place as shall be agreed upon by the Underwriters and
the Company at 10:00 A.M., New York City time, on the third (fourth, if the
pricing occurred after 4:30 P.M., New York City time, on any given day) business
day after the date of this Agreement, or such other time not later than ten
business days after such date as shall be agreed upon by the Underwriters and
the Company (such time and
16
date of payment and delivery being herein called the "Firm Shares Closing
Date"). Payment shall be made to the Company and such Selling Stockholders by
wire transfer and payable in immediately available funds to the order of the
Company and such Selling Stockholders against delivery to the Underwriters of
the Firm Shares.
(e) Payment of the purchase price for, and delivery of, the
Additional Shares to be purchased by the Underwriters shall be made at the
offices as set forth above or at such other place as shall be agreed upon by the
Underwriters and the Company at the time and on the date (which may be the same
as, but in no event shall be earlier than, the Firm Shares Closing Date)
specified in the notice referred to in Section 3(c) hereof (such time and date
of delivery and payment are called the "Additional Shares Closing Date"). The
Firm Shares Closing Date and the Additional Shares Closing Date are called,
individually, a "Closing Date" and together, the "Closing Dates." Payment shall
be made to such Selling Stockholders by wire transfer and payable in immediately
available funds to the order of such Selling Stockholders against delivery to
the Underwriters of the applicable Additional Shares.
(f) The Shares shall be in such denominations and registered in such
names as the Underwriters may request in writing at least two business days
before the Firm Shares Closing Date or, in the case of the Additional Shares, on
the day of notice of exercise of the option as described in Section 3(c) hereof.
The Shares will be made available for examination and packaging by the
Underwriters not later than 1:00 P.M., New York City time, on the last business
day prior to the Firm Shares Closing Date (or the Additional Shares Closing Date
in the case of the Additional Shares) at such place as is reasonably designated
by the Underwriters. If the Underwriters so elect, delivery of the Shares may be
made by credit through full FAST transfer to the accounts of The Depository
Trust Company designated by the Underwriters.
(g) It is understood that each Underwriter, individually and not as
a representative of the other Underwriters, may (but shall not be obligated to)
make payment to the Company or any Selling Stockholder, as the case may be, on
behalf of any Underwriter or Underwriters for any Shares to be purchased by such
Underwriter or Underwriters in connection with the Offering. Any such payment by
an Underwriter shall not relieve such Underwriter or Underwriters from any of
its or their other obligations hereunder.
4. Covenants of the Company.
(a) The Company covenants with each Underwriter as follows:
(i) The Company will use its reasonable best efforts to cause the
Registration Statement, if not effective at the Representation Date, and any
amendment thereto, to become effective, as promptly as possible after the filing
thereof and agrees to prepare the Prospectus in a form approved by the
Underwriters. The Company will not file any amendment to the Registration
Statement or amendment or supplement to the Prospectus of which the Underwriters
shall not previously have been advised and furnished with a copy or to which the
Underwriters shall reasonably object in writing after a reasonable opportunity
to review such amendment or supplement. Subject to the foregoing sentences in
this clause 4(a)(i), if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus or supplement to
the Prospectus is otherwise required under Rule 424(b), the
17
Company will cause the Prospectus, properly completed, or such supplement
thereto, to be filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed therein and will provide evidence
satisfactory to the Underwriters of such timely filing upon their request. The
Company will promptly advise the Underwriters (A) when the Registration
Statement, if not effective at the Representation Date, and any amendment
thereto, shall have become effective, (B) when the Prospectus, and any
supplement thereto, shall have been filed (if required) with the Commission
pursuant to Rule 424(b), (C) when any amendment to the Registration Statement
shall have been filed or become effective, (D) of receipt of any comments from
the Commission or any request by the Commission for any amendment of or
supplement to the Registration Statement or any Prospectus or for any additional
information, (E) of the receipt by the Company of any notification of, or if the
Company otherwise has knowledge of, the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose, (F) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (G) when, prior to
termination of the Offering of the Shares, any document shall have been filed by
the Company under the Act or the Exchange Act or under the rules and regulations
promulgated thereunder. The Company will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as possible
the lifting thereof.
(ii) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Act or the Act Regulations in connection with
the Offering of the Shares, any event occurs as a result of which the Prospectus
as then amended or supplemented would include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
in the light of the circumstances under which they were made not misleading, or
if it shall be necessary to amend the Registration Statement or amend or
supplement the Prospectus to comply with the Act or the Act Regulations, the
Company promptly will prepare and file with the Commission, at the Company's
expense, an amendment or supplement which will correct such statement or
omission or effect such compliance and will use its reasonable best efforts to
cause the same to become effective as soon as possible; and, in case any
Underwriter is required to deliver a prospectus after such time, the Company
upon request, but at the expense of such Underwriter, will promptly prepare such
amendment or amendments to the Registration Statement and such Prospectus or
Prospectuses as may be necessary to permit compliance with the requirements of
the Act and the Act Regulations. Neither your consent to, nor your delivery of,
any such amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 7.
(iii) During such period when a prospectus is required by law to
be delivered in connection with sales by an Underwriter or dealer, the Company,
at its expense, will furnish to each Underwriter or mail to its order copies of
the Registration Statement, the Prospectus, the Preliminary Prospectus and all
amendments and supplements to any such documents in each case as soon as
available and in such quantities as such Underwriter may reasonably request, for
the purposes contemplated by the Act.
(iv) The Company consents to the use of the Prospectus in
accordance with the provisions of the Act and with the securities or blue sky
laws of the jurisdictions in
18
which the Shares are offered by the Underwriters and by all dealers to whom
Shares may be sold, both in connection with the Offering and for such period of
time thereafter as the Prospectus is required by the Act to be delivered in
connection with the sales by any Underwriter or dealer. The Company will comply
with all requirements imposed upon it by the Act as the same may be amended so
far as necessary to permit the continuance of sales of or dealing in the Shares
in accordance with the provisions hereof and the Prospectus.
(v) As soon as practicable, the Company will make generally
available to its security holders and to the Underwriters a consolidated
earnings statement or statements of the Company and the Subsidiaries covering a
twelve-month period beginning with the first full calendar quarter following the
Effective Date which will satisfy the provisions of Section 11(a) of the Act and
Rule 158 thereunder (it being understood that such delivery requirements shall
be deemed met by the Company's compliance with the Company's reporting
requirements pursuant to the Exchange Act and the Exchange Rules and
Regulations).
(vi) The Company will (A) on or before the Closing Date, deliver
to the Underwriters manually signed copies of the Registration Statement as
originally filed and of each amendment thereto filed prior to the time the
Registration Statement becomes effective and, promptly upon the filing thereof,
manually signed copies of each post-effective amendment, if any, to the
Registration Statement (together with, in each case, all exhibits thereto unless
previously furnished to you) and will also deliver to you, for distribution to
the Underwriters, a sufficient number of additional conformed copies of each of
the foregoing (but without exhibits) so that one copy of each may be distributed
to each Underwriter, (B) as promptly as possible deliver to you and send to the
several Underwriters, at such office or offices as you may designate, as many
copies of the Preliminary Prospectus and Prospectus as you may reasonably
request and (C) thereafter from time to time during the period in which a
prospectus is required by law to be delivered by an Underwriter or dealer,
likewise send to the Underwriters as many additional copies of the Prospectus
and as many copies of any supplement to the Prospectus and of any amended
Prospectus, filed by the Company with the Commission, as you may reasonably
request for the purposes contemplated by the Act.
(vii) The Company will apply the net proceeds from the Offering,
and the sale of the Shares to be sold by the Company, in accordance with the
description set forth in the "Use of Proceeds" section of the Prospectus.
(ix) The Company will cooperate with the Underwriters and their
counsel in connection with endeavoring to obtain and maintain the qualification
or registration, or exemption from qualification, of the Shares for offer and
sale under the applicable securities laws of such states of the United States
and other jurisdictions as the Underwriters may designate; provided, that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to taxation or general service of process in any jurisdiction where
it is not now so subject.
(x) The Company will not, and will not permit any Subsidiary to,
at any time, directly or indirectly (A) take any action designed to cause or
result in, or that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of any of the Shares or
19
(B) (1) sell, bid for, purchase or pay anyone any compensation for soliciting
purchases of the Shares or (2) pay or agree to pay any person any compensation
for soliciting another to purchase any other securities of the Company.
(xi) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(xii) The Company will not for a period of 90 days following the
date of the Prospectus, without the prior written consent of Jefferies, (A)
directly or indirectly, offer, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, lend, pledge, hypothecate or otherwise dispose
of or transfer or enter into any transaction which is designed, or might
reasonably be expected, to result in the disposition of any shares of capital
stock of the Company or any securities convertible into or exercisable or
exchangeable for or repayable with shares of capital stock of the Company (other
than (1) the Shares, (2) shares of capital stock of the Company or securities
convertible into or exercisable or exchangeable for shares of capital stock of
the Company which are issued, sold or awarded pursuant to the Company's 1999
Equity Participation Plan as contemplated by and described in the Registration
Statement and Prospectus; provided, however, that any such shares of capital
stock or other securities issued, sold or awarded under the Company's 1999
Equity Participation Plan shall not vest or become exercisable prior to the 90th
day following the date of the Prospectus (unless otherwise subject to a Lockup
Agreement for such period) or (3) pursuant to currently outstanding options,
warrants or rights (which are described in the Registration Statement and
Prospectus), or enter into any swap or other derivatives transaction that
transfers to another, in whole or in part, any of the economic benefits or risks
of ownership of shares of such capital stock of the Company or securities
convertible into or exercisable or exchangeable for shares of capital stock of
the Company whether any such transaction is to be settled by delivery of capital
stock, or other securities, in cash or otherwise or (B) file (or participate in
the filing of) a registration statement with the Commission in respect of any
shares of capital stock of the Company or securities convertible into or
exercisable or exchangeable for such capital stock (except for a registration
statement on Form S-8) or (C) publicly announce any intention to effect any
transaction described in clause (A) or clause (B) during the 90 days following
the date of the Prospectus, other than the transactions that are specifically
permitted by clause (A) and clause (B). In addition, during the 90 days
following the date of the Prospectus, the Company will not (x) release any
executive officer, director or security holder of the Company from their
obligations under any similar agreement with the Company not to sell, transfer
or dispose of securities of the Company for the 90-day period following the date
of the Prospectus and (y) waive compliance with any prohibitions on trading
which may be in effect during such 90-day period under the Company's trading
policy as previously provided to the Underwriters and in effect on the date
hereof.
(xiii) The Company shall cause the Shares to be quoted on the
Nasdaq National Market and shall use its reasonable best efforts to maintain
such trading while the Shares are outstanding for a period of 365 days following
the Firm Shares Closing Date; provided, however, that during the 365-day period,
the Company may apply to list the securities on a national securities exchange
in lieu of being included for quotation on the Nasdaq National Market.
20
(xiv) The Company has not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Shares, and has not effected any sales of Common Stock which are required to
be disclosed in response to Item 701 of Regulation S-K under the Act which have
not been so disclosed in the Registration Statement.
(b) The Company agrees to use its reasonable best efforts to appoint
such number of additional independent directors as may be necessary for the
Company to remain in compliance with applicable SEC rules and regulations and
the Nasdaq National Market listing standards.
5. Covenants of the Selling Stockholders.
(a) Each Selling Stockholder covenants with each Underwriter as
follows:
(i) Such Selling Stockholder will advise the Underwriters
promptly upon such Selling Stockholder obtaining actual knowledge of any event
during any period in which a prospectus relating to the Shares is required to be
delivered under the Act which, in the judgment of such Selling Stockholder,
would require the making of any change in the Selling Stockholder Information
relating to such Selling Stockholder so that the Prospectus would not include an
untrue statement of material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
are made, not misleading.
(ii) Such Selling Stockholder will pay all federal and other
taxes, if any, on the transfer and sale of the Shares being sold by such Selling
Stockholder to the Underwriters. The Selling Stockholder will deliver to
Jefferies on or prior to the first Closing Date a properly completed and
executed United States Treasury Department Form W-9 (or other applicable form in
lieu thereof).
6. Payment of Expenses.
(a) The Company shall, regardless of whether the Offering
contemplated by this Agreement and the Prospectus is consummated, be responsible
for and shall pay all costs, fees and expenses incurred in connection with or
incident to the proposed Offering, including, without limitation, (A) all
expenses and taxes incident to the authorization, issuance, sale and delivery of
the Shares to be sold by the Company to the Underwriters, (B) all expenses
incident to the registration of the Shares under the Act, (C) all costs of
preparing stock certificates, including printing and engraving costs, (D) all
fees and expenses of the registrar and transfer agent of the Shares, (E) without
limiting clause (A) above, all necessary, transfer and other stamp taxes in
connection with the issuance and sale of the Shares to be sold by the Company to
the Underwriters, (F) all fees and expenses of the Company's counsel, the
Company's independent accountants and any other experts retained by or on behalf
of the Company in connection with the Offering, (G) all costs and expenses
incurred in connection with the preparation, printing, filing, shipping and
distribution of the Registration Statement, each Preliminary Prospectus and the
Prospectus, including all exhibits and financial statements, and all amendments
and supplements provided for herein, including, without limitation, any
post-effective amendments,
21
the blue sky memoranda, this Agreement, the Agreement among Underwriters, the
Underwriters' Questionnaire and Power of Attorney, (H) the filing fees and
expenses incurred by the Company or the Underwriters in connection with
exemptions from qualifying or registering (or obtaining qualification or
registration of) all or any part of the Shares for offer and sale and
determination of eligibility for investment under the blue sky or other
securities laws of such jurisdictions as the Underwriters may designate and
incurred in connection with filings made with the NASD (including related fees
and expenses of counsel to the Underwriters not to exceed $7,500), (I) all
travel and lodging fees and expenses incurred by or on behalf of officers and
representatives of the Company in connection with presentations to prospective
purchasers of the Shares, (J) all word processing charges, messenger and
duplicating services, facsimile expenses and other customary expenses of the
Company related to the proposed Offering, (K) the costs and expenses relating to
preparation and delivery to the Underwriters of five closing binders, (L) all
applicable listing or other fees relating to the Shares, including, without
limitation, the fees relating to quotation of the Common Stock on the Nasdaq
National Market and (M) all other costs and expenses incident to the performance
by the Company and such Selling Stockholders of their obligations under this
Agreement; provided, however, that except as provided in this Section 6 and in
Section 11, the Underwriters shall pay their own costs and expenses, including
the costs and expenses of their counsel.
(b) The Company will pay, either directly or by reimbursement, all
fees and expenses incident to the performance of such Selling Stockholders'
obligations under this Agreement, which are not otherwise specifically provided
for herein, including but not limited to the fees and expenses of the Selling
Stockholders' counsel and any fees payable to the Custodian, provided, however,
that (i) in no event shall such fees and expenses include the underwriting
discounts and commissions applicable to such Selling Stockholders Firm Shares or
the Additional Shares; and (ii) the provisions of this Section 6(b) shall not
affect any agreement which the Company and such Selling Stockholders may make
for the allocation or sharing of such expenses and costs.
7. Conditions of the Underwriters' Obligation.
The several obligations of the Underwriters to purchase the Shares
hereunder are subject to the accuracy of the representations and warranties of
the Company and such Selling Stockholders herein contained as of the date hereof
and on each Closing Date, to the accuracy of the statements of the Company and
such Selling Stockholders made in any certificate or certificates pursuant to
the provisions hereof as of the date of thereof and on each Closing Date and to
the performance by the Company and such Selling Stockholders of their
obligations hereunder, and to the following further conditions:
(a) The Registration Statement shall have become effective either
prior to the execution of this Agreement or not later than 1:30 P.M., Pacific
Standard Time, on the first full business day after the date of this Agreement,
or at such later time and date as may be approved by the Underwriters and the
Company, and shall remain effective at each Closing Date. No stop order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the Act shall be in effect or proceedings
therefor initiated or threatened by the Commission. If the Company has elected
to rely upon Rule 430A, the price of the Shares and any price-related or other
information previously omitted from the effective
22
Registration Statement pursuant to Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) within the prescribed time period,
and prior to the Firm Shares Closing Date, the Company shall have provided
evidence satisfactory to the Underwriters of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirement of Rule 430A.
(b) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, and except as set forth in or
contemplated in the Prospectus, there shall not have occurred (i) any change in
or affecting the business (including, without limitation, a change in management
or control of the Company), properties, condition (financial or other), or
results of operations of the Company or the Subsidiaries, taken as a whole, or
adverse change in the capital stock, short-term debt or long-term debt of the
Company which, in the good faith judgment of the Underwriters, materially
adversely affects the market for the Shares or otherwise makes it impracticable
or inadvisable to proceed with the Offering or to purchase the Shares as
contemplated by this Agreement or (ii) any material loss or interference with
the business or properties of the Company or any of the Subsidiaries from fire,
explosion, flood or other casualty, whether or not covered by insurance, or from
any labor dispute, (iii) any development involving any court or legislative or
other governmental or administrative action, order or decree, which would have a
Material Adverse Effect, if in the judgment of the Underwriters any such
development makes it impracticable or inadvisable to proceed with completion of
the Offering and the sale of and payment for the Shares, or (iv) any development
involving any governmental investigation involving the Company or any Subsidiary
if in the judgment of the Underwriters any such development makes it
impracticable or inadvisable to proceed with completion of the Offering and the
sale and payment for the Shares.
(c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
litigation, investigation or other proceeding instituted against the Company or
any of the Subsidiaries or any of their respective officers, directors or senior
management personnel, before or by any federal, state, local or foreign court,
commission, regulatory body, administrative agency or other governmental body,
domestic or foreign, or arbitrator, in which such litigation, investigation or
proceeding, an unfavorable ruling, decision or finding would result in a
Material Adverse Effect or may affect the Company's or such Selling
Stockholders' ability to perform their respective obligations under this
Agreement.
(d) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Shares, the
Registration Statement and the Prospectus, and all other legal matters relating
to this Agreement and the transactions contemplated hereby and by the
Registration Statement and Prospectus shall be reasonably satisfactory in all
material respects to counsel for the Underwriters, and the Company and such
Selling Stockholders shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass upon such
matters.
(e) Xxxxx & Xxxxxx LLP, counsel for the Company, shall have
furnished to the Underwriters their opinion, reasonably satisfactory in form and
substance to counsel for the
23
Underwriters, dated each Closing Date and substantially to the effect as set
forth in Exhibit A hereto.
(f) Debevoise & Xxxxxxxx, counsel for certain Selling Stockholders,
and Mayer, Brown, Xxxx & Maw LLP, counsel to the remaining Selling Stockholders,
shall have furnished to the Underwriters their opinion, reasonably satisfactory
in form and substance to counsel for the Underwriters, dated each Closing Date
and substantially to the effect as set forth in Exhibit B hereto.
(g) Xxxxxx & Xxxxxxx LLP, counsel for the Underwriters, shall have
furnished to the Underwriters an opinion with respect to such matters as may be
reasonably requested by the Underwriters, dated each Closing Date.
(h) The following conditions contained in clauses (A) through (C) of
this Section 7(h) shall have been satisfied on and as of each Closing Date and
the Company shall have furnished to the Underwriters and the Selling
Stockholders a certificate of the Company, signed by the Chairman of the Board
or the President and the principal financial or accounting officer of the
Company, dated such Closing Date, to the effect that the signers of such
certificate have examined the Registration Statement, the Prospectus, any
supplement or amendment to the Prospectus and this Agreement and that:
(A) the representations and warranties of the Company in this
Agreement are true and correct on and as of such Closing Date, with the same
effect as if made on such Closing Date; and the Company has complied with all
the agreements and satisfied all the conditions under this Agreement on its part
to be performed or satisfied at or prior to such Closing Date;
(B) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or, to the knowledge of the Company, threatened; and
(C) since the date of the most recent financial statements
included in the Prospectus, there has been no change, with respect to the
business, financial condition or results of operations of the Company or the
Subsidiaries, taken as a whole, that could reasonably be expected to have a
Material Adverse Effect.
(i) There shall have been furnished to the Underwriters a
certificate or certificates dated as of such Closing Date and addressed to the
Underwriters, signed by each of such Selling Stockholders or any of such Selling
Stockholder's Attorneys-in-Fact to the effect that the representations and
warranties of such Selling Stockholder contained in this Agreement are true and
correct as if made at and as of such Closing Date, and that such Selling
Stockholder has complied with all the agreements and satisfied all the
conditions on such Selling Stockholder's part to be performed or satisfied at or
prior to such Closing Date.
(j) At the Effective Date, and at each Closing Date, the
Underwriters shall have received from each of BDO Xxxxxxx, LLP and Ernst & Young
LLP a letter, in form and substance satisfactory to the Underwriters, addressed
to the Underwriters and dated the respective dates set forth above stating, as
of the date thereof (or, with respect to matters
24
involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date not
more than five days prior to the date thereof), the conclusions and finding of
such firm with respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to underwriters in connection with
registered public offerings. The letter from BDO Xxxxxxx, LLP shall also confirm
they are independent public accountants within the meaning of the Act and are in
compliance with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission. At the
Effective Date, and at each Closing Date, the Underwriters shall have received
from BDO Xxxxxxx, LLP a letter, in form and substance satisfactory to the
Underwriters, addressed to the Underwriters and dated the respective dates set
forth above stating, as of the date thereof, certain agreed upon procedures that
such firm has performed in connection with specified disclosures in the
Prospectus.
(k) The Nasdaq National Market shall have approved the Shares for
inclusion, subject only to official notice of issuance and evidence of
satisfactory distribution.
(l) At each Closing Date, counsel for the Underwriters shall have
been furnished with such information, certificates and documents as they may
reasonably require for the purpose of enabling them to pass upon the issuance
and sale of the Shares as contemplated herein and related proceedings, or to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained, or otherwise in
connection with the Offering contemplated hereby; and all opinions and
certificates mentioned above or elsewhere in this Agreement shall be reasonably
satisfactory in form and substance to the Underwriters and counsel for the
Underwriters.
(m) The Underwriters shall have received the Lock-Up Agreements
referenced in Section 1(a)(xl).
8. Indemnification and Contribution.
(a) The Company agrees to indemnify, defend and hold harmless, each
Underwriter, each Selling Stockholder, the directors, officers, employees and
agents of each Underwriter and each Selling Stockholder and each person who
controls any Underwriter or any Selling Stockholder within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, to the fullest extent
lawful from and against any losses, expenses, claims, damages or liabilities
(including any and all investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted), which, jointly or severally, any of
them may become subject under the Act, the Exchange Act, or any other federal,
state, local or foreign statute or regulation, at common law or otherwise
insofar as such losses, expenses, claims, damages or liabilities arise out of or
are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in (A) the Registration Statement, any Preliminary
Prospectus or the Prospectus, or in any amendment thereof or supplement thereto,
or (B) any blue sky application or other document executed by the Company
specifically for that purpose or based upon information furnished by the Company
in writing filed in any state or other jurisdiction in order to qualify any or
all of the Shares under the securities laws thereof or filed with the Commission
or any securities association or securities exchange (each, an "Application"),
or (C) in any materials or information provided to investors
25
by, or with the approval of, the Company in connection with the marketing of the
Offering, including any roadshow or investor presentations made to investors by
the Company (whether in person or electronically), or (ii) the omission or
alleged omission to state (with respect to (A), (B) or (C) above) therein 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 the Company will not be liable in any such
case to the extent that any such loss, expense, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with the Underwriters' Information; provided further, that the
Company will not be liable to any Selling Stockholder to the extent that any
such loss, expense, claim, damage or liability arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with the Selling
Stockholder Information relating to such Selling Stockholder; and, provided
further, that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any Preliminary Prospectus, the indemnity
contained in this Section 8(a) shall not inure to the benefit any such
indemnified Selling Stockholder or Underwriter or their respective officers,
employees, directors, agents and control persons, and the Company shall not be
liable to any such indemnified Selling Stockholder or Underwriter or their
respective officers, employees, directors, agents, and control persons, from
whom the person asserting any such losses, claims, expense, damage, or
liabilities purchased the Shares concerned, to the extent that any such loss,
claim, expense, damage or liability of such indemnified Selling Stockholder or
Underwriter or their respective officers, employees, directors, agents and
control persons results from the fact that there was not sent or given to such
person at or prior to the written confirmation of the sale of such shares to
such person, a copy of the Prospectus, as the same may be amended or
supplemented, and the untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact in such
Preliminary Prospectus was corrected in such Prospectus and the Company had
previously furnished copies thereof to such indemnified Underwriter on a timely
basis to permit the Prospectus (as the same may be amended or supplemented) to
be sent or given. The foregoing indemnity agreement shall be in addition to any
liability that the Company may otherwise have.
(b) Each Selling Stockholder agrees, severally and not jointly, to
indemnify, defend and hold harmless the Company, each of its directors, each of
its officers who signs the Registration Statement, each Underwriter, the
directors, officers, employees and agents of each Underwriter and each person
who controls any Underwriter or the Company within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, to the fullest extent lawful from and
against any losses, expenses, claims, damages or liabilities (including any and
all investigative, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted), which, jointly or severally, any of them may become subject
under the Act, the Exchange Act, or any other federal, state, local or foreign
statute or regulation, at common law or otherwise, as such expenses are
incurred, insofar as such losses, expenses, claims, damages or liabilities arise
out of or are based upon (i) any untrue statement or alleged untrue statement of
a material fact contained (A) in the Selling Stockholder Information that
relates to such Selling Stockholder, or (B) in any Application executed by such
Selling Stockholder for that purpose or based upon information furnished in
writing by such Selling Stockholder specifically for inclusion in any
Application, or
26
(ii) the omission or alleged omission to state therein with respect to either
(A) or (B) a material fact required to be stated therein or necessary to make
the statements relating to such Selling Stockholder therein not misleading;
provided, however, that such Selling Stockholder will not be liable in any such
case to the extent that any such loss, expense, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with the Underwriters' Information; and, provided further, that with
respect to any untrue statement or omission or alleged untrue statement or
omission made in any Preliminary Prospectus, the indemnity contained in this
Section 8(b) shall not inure to the benefit any such indemnified Underwriter or
its respective officers, employees, directors, agents and control persons, and
such Selling Stockholders shall not be liable to any such indemnified
Underwriter or its respective officers, employees, directors, agents, and
control persons, from whom the person asserting any such losses, claims,
expense, damage, or liabilities purchased the Shares concerned, to the extent
that any such loss, claim, expense, damage or liability of such indemnified
Underwriter or its respective officers, employees, directors, agents and control
persons results from the fact that there was not sent or given to such person at
or prior to the written confirmation of the sale of such shares to such person,
a copy of the Prospectus, as the same may be amended or supplemented, and the
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact in such Preliminary Prospectus was
corrected in such Prospectus and the Company had previously furnished copies
thereof to such indemnified Underwriter on a timely basis to permit the
Prospectus (as the same may be amended or supplemented) to be sent or given. The
Underwriters agree that the only information provided in writing by or on behalf
of such Selling Stockholders expressly for use in the Registration Statement is
that information contained in the section of the Prospectus entitled "Selling
and Principal Stockholders." The foregoing indemnity agreement shall be in
addition to any liability that such Selling Stockholders may otherwise have.
(c) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer who signs the Registration Statement, and each Selling
Stockholder, to the same extent as the foregoing indemnities from the Company
and each Selling Stockholder to each Underwriter, the directors, officers,
employees, and agents of such Underwriter and any person controlling such
Underwriter, but only insofar as such loss, expense, claim, damage or liability
arises out of or is based upon any untrue statement or omission or alleged
untrue statement or omission made in reliance on or in conformity with the
Underwriters' Information. This indemnity agreement will be in addition to any
liability that any Underwriter may otherwise have.
(d) If any action is brought against an indemnified party under this
Section 8, the indemnified party or parties shall promptly notify the
indemnifying party in writing of the institution of such action (provided that
the failure to give such notice shall not relieve the indemnifying party of any
liability which it may have pursuant to this Agreement, unless and to the extent
the indemnifying party did not otherwise learn of such action and such failure
has resulted in the forfeiture of substantive rights or defenses by the
indemnifying party) and the indemnifying party shall assume the defense of such
action, including the employment of counsel and payment of reasonable expenses.
The indemnified party or parties shall have the right to employ separate counsel
(including local counsel) in any such case and to participate in
27
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party or parties unless (i) the employment of such
counsel shall have been authorized in writing by the indemnifying party in
connection with the defense of such action, (ii) the indemnifying party shall
not have employed counsel reasonably satisfactory to the indemnified party to
take charge of the defense of such action within a reasonable time after notice
of the institution of such action, or (iii) the defendants in any such action
include both the indemnified party and the indemnifying party and such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them that are different from or additional to those
available to the indemnifying party or the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest that would make it inappropriate for the same
counsel to represent both of them (in which case the indemnifying party shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the indemnifying party and paid as incurred; provided that the
indemnifying party shall only be responsible for the reasonable fees and
expenses of one firm of attorneys together with appropriate local counsel for
the indemnified party or parties hereunder. Anything in this paragraph to the
contrary notwithstanding, the indemnifying party shall not be liable for any
settlement of any such claim or action effected without its written consent,
which consent shall not be unreasonably withheld. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent involves only the payment of
monetary damages and includes an unconditional release of each indemnified party
from all liability arising out of such claim, action, suit or proceeding.
(e) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under subsections (a), (b) or (c) of this
Section 8 or is insufficient to hold harmless a party indemnified thereunder, in
respect of any losses, expenses, claims, damages or liabilities referred to
therein, then each applicable indemnifying party shall contribute to the amount
paid in settlement of any action, suit or proceeding or any claims asserted, but
after deducting any contribution received by an applicable indemnified party
from persons who may also be liable for contribution, including persons who
control the indemnified party within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, in such proportion as is appropriate to reflect
the relative benefits received by the Company or such Selling Stockholders on
the one hand, and the Underwriters on the other hand, from the Offering or, if,
but only if, such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to above but also the relative fault of the Company or such Selling Stockholders
on the one hand, and the Underwriters on the other hand, in connection with the
statements or alleged statements or omissions or alleged omissions which
resulted in such losses, expenses, claims, damages or liabilities as well as any
other relevant equitable considerations. The relative benefits received by the
Company or such Selling Stockholders on the one hand, and the Underwriters on
the other hand, shall be deemed to be in the same proportion as the total
proceeds from the Offering (net of underwriting discounts but before deducting
expenses) received by the Company and such Selling Stockholder bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault of the Company or such
28
Selling Stockholders on the one hand, and the Underwriters on the other hand,
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, such
Selling Stockholders or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, expenses, claims and liabilities referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any claim or action. The Company,
such Selling Stockholder and the Underwriters agree that it would not be just
and equitable if contribution pursuant hereto 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. Notwithstanding the provisions of
this Section 8(e), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount received by it by reason of such untrue
statement 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 Section
8(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The Company and such Selling Stockholders may agree, as between
themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such liability for which they each
shall be responsible; provided that in the absence of any such agreement, such
liability shall be allocated in accordance with each such party's pro rata
portion of the aggregate net proceeds from the Offering contemplated hereby.
(g) The liability of each Selling Stockholder under the indemnity
and contribution agreements contained in this Section 8 shall be limited to an
amount equal to the aggregate net sales price for the Shares sold by such
Selling Stockholder to the Underwriters.
9. Survival. The respective indemnity and contribution agreements
contained in Section 8 hereof and the covenants, warranties and other
representations of the Company and such Selling Stockholders contained in this
Agreement or contained in certificates of officers of the Company or such
Selling Stockholders submitted pursuant hereto, shall remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter,
or any of their respective officers, employees, directors, stockholders or
persons who control the Underwriters within the meaning of Section 15 of the
Act, or by or on behalf of the Company or any of its directors, officers,
employees or any person who controls the Company within the meaning of Section
15 of the Act or any Selling Stockholder or any controlling persons thereof, and
shall survive delivery of and payment for the Shares.
10. Default by an Underwriter. If one or more of the Underwriters shall
fail or refuse on the Firm Shares Closing Date or the Additional Shares Closing
Date to purchase and pay for any of the Shares agreed to be purchased by such
Underwriter or Underwriters hereunder on such date and the aggregate number of
Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused to
purchase is not more than one-tenth of the total number of Shares to be
purchased on
29
such date by all Underwriters, each non-defaulting Underwriter shall be
obligated severally, in the proportion which the number of Firm Shares set forth
opposite its name in Schedule I bears to the total number of Firm Shares which
all the non-defaulting Underwriters, as the case may be, have agreed to
purchase, or in such other proportion as the Underwriters may specify, to
purchase the Firm Shares or Additional Shares, as the case may be, which such
defaulting Underwriter or Underwriters, as the case may be, agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Firm Shares or Additional Shares, as the case may be, which any Underwriter has
agreed to purchase pursuant to Section 3 hereof be increased pursuant to this
Section 10 by an amount in excess of one-tenth of the total number of Firm
Shares or Additional Shares, as the case may be, that the Underwriters are
obligated to purchase on the Firm Shares Closing Date or the Additional Shares
Closing Date, as applicable, without the written consent of such Underwriter. If
on the Firm Shares Closing Date or on the Additional Shares Closing Date, as the
case may be, any Underwriter or Underwriters shall fail or refuse to purchase
Firm Shares, or Additional Shares, as the case may be, and the aggregate number
of Firm Shares or Additional Shares, as the case may be, with respect to which
such default occurs is more than one-tenth of the aggregate number of Shares to
be purchased on such date by all Underwriters in the event of a default by an
Underwriter and arrangements satisfactory to the Underwriters and the Company
for purchase of such Shares are not made within 48 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, any Selling Stockholder and the Company. In any such
case which does not result in termination of this Agreement, either the
Underwriters or the Company shall have the right to postpone the Firm Shares
Closing Date or the Additional Shares Closing Date, as the case may be, but in
no event for longer than seven days, in order that the required changes, if any,
in the Registration Statement and the Prospectus or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
any such Underwriter under this Agreement.
11. Termination of Agreement.
(a) The Underwriters may terminate this Agreement, by written notice
to the Company and the Attorneys-in-Fact for such Selling Stockholders prior to
the Firm Shares Closing Date (or, if applicable, the Additional Shares Closing
Date) (i) if there shall occur any failure, refusal or inability of the Company
or any Selling Stockholder to satisfy any of the conditions contained in Section
7 hereof or (ii) if, since the date of this Agreement and prior to the Firm
Shares Closing Date (or, if applicable, the Additional Shares Closing Date), (A)
there has occurred any material adverse change in the financial markets of the
United States or in political, financial or economic conditions in the United
States or any outbreak or material escalation of hostilities or any other
insurrection or armed conflict or declaration by the United States of a national
emergency or war or other calamity or crisis, the effect of which on the
financial securities markets of the United States is such as to make it, in the
judgment of the Underwriters, impracticable or inadvisable to market the Shares
on the terms and in the manner contemplated by the Prospectus, (B) trading in
any of the securities of the Company has been suspended by the Commission, or
trading generally on the New York Stock Exchange or the Nasdaq National Market
has been suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, by the New York
Stock Exchange or the Nasdaq National Market or by order of the Commission or
any other
30
governmental authority or (C) a banking moratorium has been declared by any of
the federal or New York authorities.
(b) If this Agreement is terminated pursuant to this Section 11 or
any other provision of this Agreement, such termination shall be without
liability of any party to any other party except the provisions of Sections 6, 8
and 11(c) shall remain in full force and effect.
(c) Notwithstanding any other provisions hereof, (i) if this
Agreement shall be terminated by the Underwriters under Section 11, the Company
will bear and pay the expenses to be paid by the Company pursuant to Section 6
hereof and (ii) if this Agreement shall be terminated by the Underwriters under
Section 11(a)(i), in addition to its obligations pursuant to Section 8 and
Section 11(c)(i) hereof, the Company will reimburse the reasonable out-of-pocket
expenses of the several Underwriters (including reasonable fees and
disbursements of counsel for the underwriters) incurred in connection with this
Agreement and the proposed purchase and Offering of the Shares, and promptly
upon demand the Company will pay such amounts to the Underwriters.
12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed, delivered or
transmitted by facsimile or telegraphed and confirmed. Notices to the
Underwriters or the Underwriters shall be directed to the Underwriters, c/x
Xxxxxxxxx & Company, Inc., 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000, with a copy to Xxxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000,
Xxxxx Xxxx, Xxxxxxxxxx 00000, attention of Xxxxxxx X. Xxxx, Esq.; notices to the
Company, such Selling Stockholders and the Attorneys-in-Fact shall be directed
to Encore Capital Group, Inc., 0000 Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000,
attention of Xxxxx Xxxxxx, with a copies to Xxxxx & Xxxxxx LLP, Xxx Xxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxx 00000, attention of Xxxxx X. Xxxxxxx, Esq., Debevoise &
Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, attention of Xxxxxx Xxxxxx and
Mayer, Brown, Xxxx & Maw LLP, 0000 Xxxxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000,
attention of Xxxxx X. Xxxxxxx.
13. Parties. This Agreement shall inure to the benefit of and be binding
upon the Underwriters, the Company, such Selling Stockholders and their
respective successors and legal representatives and controlling persons and
officers, employees, directors and stockholders referred to in Sections 8 and 9
and their respective heirs and legal representatives. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to provide any
person, firm or corporation, other than the Underwriters, the Company, such
Selling Stockholders and their respective successors and legal representatives
and the controlling persons and officers, employees, directors and stockholders
referred to in Sections 8 and 9 and their respective heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company, such Selling Stockholders
and their respective successors and legal representatives, and said controlling
persons, stockholders, officers and directors and their respective heirs and
legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Shares from the Underwriters shall be deemed to be
a successor by reason merely of such purchase.
31
14. Construction; Choice of Law. This Agreement incorporates the entire
understanding of the parties and supersedes all previous agreements relating to
the subject matter hereof should they exist. This Agreement and any issue
arising out of or relating to the parties' relationship hereunder shall be
governed by, and construed in accordance with, the laws of the State of New
York, without regard to the principles of conflicts of law thereof.
15. Jurisdiction and Venue. Each party hereto consents specifically to the
exclusive jurisdiction of the federal courts of the United States sitting in the
Southern District of New York, or if such federal court declines to exercise
jurisdiction over any action filed pursuant to this Agreement, the courts of the
State of New York in the County of New York, and any court to which an appeal
may be taken in connection with any action filed pursuant to this Agreement, for
purposes of all legal proceedings arising out of or relating to this Agreement.
In connection with the foregoing consent, each party irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the court's exercise of personal jurisdiction over each party to this
Agreement or the laying of venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. Each party further irrevocably waives its right to a
trial by jury and consents that service of process may be effected in any manner
permitted under the laws of the State of New York.
16. Counterparts. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
17. Partial Unenforceability. The invalidity or unenforceability of any
section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph or provision hereof. If any
section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
18. General. In this Agreement, the masculine, feminine and neuter genders
and the singular and the plural include one another. The section headings in
this Agreement are for the convenience of the parties only and will not affect
the construction or interpretation of this Agreement. This Agreement may be
amended or modified, and the observance of any term of this Agreement may be
waived, only by a writing signed by or on behalf of the Company, such Selling
Stockholders and the Underwriters.
[Remainder of page intentionally left blank]
32
* * * * *
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Selling Stockholders a
counterpart hereof, whereupon this instrument, along with all counterparts, will
become a binding agreement among the Underwriters, the Company and the Selling
Stockholders in accordance with its terms.
Very truly yours,
ENCORE CAPITAL GROUP, INC.
By: /s/ Xxxx X. Xxxxxxx, III
------------------------------------
Name: Xxxx X. Xxxxxxx, III
Title: President and Chief Executive
Officer
SELLING STOCKHOLDERS
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Attorney-in-Fact for certain
Selling Stockholders
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Attorney-in-Fact for certain
Selling Stockholders
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXXXXXX & COMPANY, INC.
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Name: Xxxxxxx Xxxxx
Title: Managing Director
XXXXX XXXXXX & CO., INC.
By: /s/ A. Xxxxx Xxxxxx
------------------------------------
Name: A. Xxxxx Xxxxxx
Title: Chairman and Chief Executive
XXXX CAPITAL PARTNERS, LLC
By: /s/ Xxxxxx Xxxx
------------------------------------
Name: Xxxxxx Xxxx
Title: Chief Operating Officer and Chief Financial Officer
SCHEDULE I
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
--------------------------------------------------- -----------------------
Xxxxxxxxx & Company, Inc. 3,250,000
Xxxxx Xxxxxx & Co., Inc. 1,000,000
Xxxx Capital Partners, LLC 750,000
---------
TOTAL 5,000,000
=========
SCHEDULE II
SELLING STOCKHOLDERS
MAXIMUM NUMBER OF
NUMBER OF FIRM SHARES ADDITIONAL SHARES TO BE
NAME TO BE SOLD SOLD
------------------------------------------- --------------------- -----------------------
C.P. International Investments Ltd. 629,613 303,199
Madison West Associates Corp. 256,270 123,409
Xxxxx Trust/Xxxxx Xxxxxx, Trustee 266,050 128,120
JP May 1998 Trust/Xxxxxxxx Xxx 61,391 29,564
LA May 1998 Trust/Xxxxxx Xxx 61,391 29,564
Xxxx X. Xxxxx 43,927 21,154
Xxxxxxxxx Xxxxxx 13,038 6,279
Xxxx X. Xxxxxx, Xx. 13,915 6,701
JPAH Holdings, LLC/Xxxxxxx Xxxxxx 11,200 5,394
Xxxxxx Garden 7,342 3,536
Xxxxx X. Xxxxxx 3,479 1,675
Xxxxxx X. Xxxxx 3,069 1,478
Xxxxxx X. Xxxxx 120,285 62,918
Xxxxx Xxxxx Xxxxxxx Xxxxxx 37,118 12,882
ING (U.S.) Investment Corp./ING Capital LLC 233,812 0
Xxxx X. Xxxxxxx, III 101,716 6,040
Xxxxx X. Xxxxxxx 67,811 4,027
J. Xxxxxxx Xxxxx 67,811 4,027
Xxxxx Xxxxxx 762 33
--------- -------
Total 2,000,000 750,000
========= =======
