Exhibit 2.h
READER'S DIGEST AUTOMATIC COMMON EXCHANGE SECURITY TRUST
(subject to exchange into shares of Class A Nonvoting Common Stock of
The Reader's Digest Association, Inc.)
$ TRUST AUTOMATIC COMMON EXCHANGE SECURITIES
Underwriting Agreement
, 1998
Xxxxxxx, Xxxxx & Co.,
Lazard Freres & Co. LLC,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Xxxxx & Co.,
00 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Reader's Digest Automatic Common Exchange Security Trust, a trust duly
created under the laws of the State of New York (such trust and the trustees
thereof acting in their capacities as such being referred to herein as the
"Trust"), proposes, subject to the terms and conditions stated herein, to issue
and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of shares of the $ Automatic Common Exchange Securities of the
Trust specified above (the "Firm Securities") and, at the election of the
Underwriters, up to an aggregate of additional shares of the $ Automatic
Common Exchange Securities (the "Optional Securities") (the Firm Securities and
the Optional Securities which the Underwriters elect to purchase pursuant to
Section 2 hereof are herein collectively called the "Securities").
The $ Automatic Common Exchange Securities of the Trust to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
called the "Automatic Common Exchange Securities". Each Automatic Common
Exchange Security will be exchanged for one or fewer shares of Class A Nonvoting
Common Stock, par value $.01 per share ("Stock"), of The Reader's Digest
Association, Inc., a Delaware corporation (the "Company"), on , 2001 (the
"Exchange Date") to be delivered pursuant to forward purchase contracts (the
"Contracts"), dated , 1998, between the Trust and certain existing
stockholders of the Company (collectively, the "Selling Stockholders"). The
Trust has entered into a Contract with each Selling Stockholder obligating that
Selling Stockholder to deliver to the Trust on the Exchange Date a number of
shares of Stock equal to the product of the Exchange Rate (as such term is
defined in the Trust Prospectus (as defined in Section 1(c)(i))) times the
initial number of shares of Stock subject to such Contract. Each Selling
Stockholder's obligations under such Contract will be secured by a pledge of
shares of Stock and, if applicable, other collateral pursuant to the terms of
collateral agreements, dated , 1998, between such Selling Stockholders,
The Bank of New York ("BONY"), as collateral agent (in such capacity, the
"Collateral Agent"), and the Trust (the "Collateral Agreements").
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters, the Trust and the Selling Stockholders that:
(i) A registration statement on Form S-3 (File No. 333- )
(the "Initial Company Registration Statement") in respect of the shares of
Stock deliverable pursuant to the Contracts has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial Company
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto but
including all documents incorporated by reference in the prospectus
contained therein, to you for delivery to each of the other Underwriters,
have been declared effective by, or have been filed with, as the case may
be, the Commission in such form; no other document with respect to the
Initial Company Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the Initial
Company Registration Statement or any post-effective amendment thereto has
been issued and no notice has been received from the Commission by the
Company that any proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the
Initial Company Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Securities Act of 1933, as amended (the "Act"), is hereinafter
called a "Company Preliminary Prospectus"; the various parts of the Initial
Company Registration Statement, including all exhibits thereto and
including (A) the information contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under
the Act to be part of the Initial Company Registration Statement at the
time it was declared effective and (B) the documents incorporated by
reference in the prospectus contained in the Initial Company Registration
Statement at the time such part of the Initial Company Registration
Statement became effective as amended at the time such part of the Initial
Company Registration Statement became effective, are hereinafter
collectively called the "Company Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b) under the Act,
is hereinafter called the "Company Prospectus"; the Trust Registration
Statement (as defined in Section 1(c)(i) hereof) and the Company
Registration Statement are hereinafter collectively called the
"Registration Statements" and the Trust Prospectus and the Company
Prospectus are hereinafter collectively called the "Prospectuses"; any
reference herein to any Company Preliminary Prospectus or the Company
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of such Company Preliminary Prospectus or Company
Prospectus, as the case may be; any reference to any amendment or
supplement to any Company Preliminary Prospectus or the Company Prospectus
shall be deemed to refer to and include any documents filed after the date
of such Company Preliminary Prospectus or Company Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such Company Preliminary
Prospectus or Company Prospectus, as the case may be; and any reference to
any amendment to the Company Registration Statement shall be deemed to
refer to and include any annual report of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective date of the
Initial Company Registration Statement that is incorporated by reference in
the Company Registration Statement);
(ii) No order preventing or suspending the use of any Company
Preliminary Prospectus has been issued by the Commission, and each Company
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement
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of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Xxxxxxx, Sachs & Co. or by a Selling Stockholder expressly for use therein;
(iii) The documents incorporated by reference in the Company
Prospectus, when they became effective or were filed with the Commission,
as the case may be, conformed in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed and
incorporated by reference in the Company Prospectus or any further
amendment or supplement thereto, when such documents become effective or
are filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Xxxxxxx, Xxxxx & Co. or by
a Selling Stockholder expressly for use therein;
(iv) The Company Registration Statement conforms, and the
Company Prospectus and any further amendments or supplements to the Company
Registration Statement or the Company Prospectus, when they become
effective or are filed with the Commission, will conform, in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder and do not and will not, as of the applicable
effective date as to the Company Registration Statement and any amendment
thereto, and as of the applicable filing date as to the Company Prospectus
and any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to
any statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Xxxxxxx, Sachs & Co. or by a Selling Stockholder expressly for use therein;
(v) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Company Prospectus any loss or
interference, material to the Company and its subsidiaries taken as a
whole, with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
incorporated by reference in the Company Prospectus; and, since the
respective dates as of which information is given in the Company
Registration Statement and the Company Prospectus, there has not been any
change in the capital stock of the Company (other than in connection with
the issuance of Stock in the ordinary course of business pursuant to the
Company's 1989 Key Employee Long Term Incentive Plan, the 1994 Key Employee
Long Term Incentive Plan, the Profit-Sharing Plan and the Employee Stock
Purchase Plan described in the Prospectus) or any of its subsidiaries, any
change in the short-term debt or long-term debt of
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the Company or any of its subsidiaries, which change is material to the
Company and its subsidiaries, taken as a whole, or any material adverse
change, or any development involving a prospective material adverse change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or contemplated
in the Company Prospectus;
(vi) The Company has good and marketable title in fee simple to
its headquarters and principal operating facilities in Westchester County,
New York, and a subsidiary of the Company has good and marketable title in
fee simple, or the substantive equivalent thereto, to such subsidiary's
facility in Swindon, United Kingdom, in each case free and clear of all
liens, encumbrances and defects except such as are described in the Company
Prospectus or such as do not materially affect the value of either of such
properties and do not materially interfere with the use made and proposed
to be made of either of such properties by the Company and its
subsidiaries; and the land underlying the Swindon, United Kingdom facility
is held by a subsidiary of the Company under valid, subsisting and
enforceable lease with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries; and the Company
or a subsidiary of the Company has good and marketable title in fee simple,
or, in jurisdictions outside of the United States, the substantive
equivalent thereto, to all other real property and good and marketable
title to all personal property owned by the Company or a subsidiary of the
Company, in each case free and clear of all liens, encumbrances and defects
except such as are described in the Prospectus or such as do not in the
aggregate materially affect the business or financial condition of the
Company and its subsidiaries, taken as a whole; and any real property and
buildings held under lease by the Company or a subsidiary of the Company
are held by the Company or a subsidiary of the Company under valid,
subsisting and enforceable leases with such exceptions as do not, in the
aggregate, materially adversely affect the business or financial condition
of the Company and its subsidiaries, taken as a whole;
(vii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with power and authority to own its properties and conduct its
business as described in the Company Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified or in good standing in any such
jurisdiction; and each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, or, in jurisdictions outside of the
United States, the substantive equivalent thereto, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Prospectus;
(viii) The Company has an authorized capitalization as set forth
in the Company Prospectus, and all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description of the Stock
contained in the Company Prospectus; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable, or the
substantive equivalent thereto, and (except for directors' qualifying
shares) are owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
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(ix) The compliance by the Company with all of the provisions of
this Agreement and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is subject, nor will
such action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the consummation by the Company of transactions contemplated
by this Agreement, except the registration under the Act of the shares of
Stock and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the shares of Stock by
the Trust pursuant to the Contracts;
(x) Neither the Company nor any of its subsidiaries is in
violation of its certificate of incorporation or by-laws or in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party or
by which it or its properties may be bound other than any violation or
default which would not have a material adverse effect on the Company and
its subsidiaries taken as a whole;
(xi) The statements set forth in the Company Prospectus under
the caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, present fairly the
information disclosed therein in all material respects;
(xii) Other than as set forth in the Company Prospectus, there
are no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which the Company has reasonable
cause to believe would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(xiii) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act"
and, together with the Act, the "Acts");
(xiv) The Stock is listed on the New York Stock Exchange;
(xv) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;
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(xvi) KPMG Peat Marwick LLP, who have certified certain
financial statements of the Company and its subsidiaries, are independent
public accountants as required by the Act and the rules and regulations of
the Commission thereunder;
(xvii) The Company owns all the patents, trademarks, service
marks, trade names and copyrights or licenses rights with respect to the
foregoing necessary for the present and planned future conduct of its
business, except where the failure to own or license the same would not
have a material adverse effect on the business or condition, financial or
otherwise, of the Company and its subsidiaries, taken as a whole, without
any known conflict with the rights of others, the result of which conflict
could materially and adversely affect the business or condition, financial
or otherwise, of the Company and its subsidiaries, taken as a whole, and to
the knowledge of the Company there is no infringement of such patents,
trademarks, service marks, trade names and copyrights by others, the result
of which infringement could materially and adversely affect the business or
condition, financial or otherwise, of the Company and its subsidiaries,
taken as a whole; and
(xviii) The Company has obtained from each of the Funds, the Xxxx
Xxxxxxx Xxxxxxx Fund for the Metropolitan Museum of Art and the Xxxxxx
Xxxxxxx Fund for Colonial Williamsburg and the Selling Stockholders, a
letter agreement to the Underwriters in which each signatory agrees
substantially to the effect of (b) (v) below (including with respect to the
voting stock); each such letter agreement has been delivered to the
Underwriters and is in full force and effect and the terms thereof have
been complied with on and as of the date hereof.
(b) Each Selling Stockholder represents and warrants to, and agrees
with, each of the Underwriters, the Company and the Trust that:
(i) The compliance by such Selling Stockholder with all of the
provisions of this Agreement, and the Contract, the power of attorney in
connection with this transaction (the "Power of Attorney"), the Custody
Agreement in connection with this transaction (the "Custody Agreement") and
the Collateral Agreement, each to which such Selling Stockholder is a
party, and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
statute, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder is bound or to which any of the property or
assets of such Selling Stockholder is subject, nor will such action result
in any violation of the provisions of the Certificate of Incorporation or
By-laws of such Selling Stockholder, or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over such Selling Stockholder or any of the property of such Selling
Stockholder; and no consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or body
is required for the execution and delivery of or compliance by such Selling
Stockholder with or the consummation by such Selling Stockholder of the
transactions contemplated by this Agreement, the Contract to which such
Selling Stockholder is a party, the Collateral Agreement to which such
Selling Stockholder is a party, the Power of Attorney to which such Selling
Stockholder is a party or the Custody Agreement to which such Selling
Stockholder is a party, except the registration under the Act of the Stock
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the Stock by the Trust
pursuant to the Contracts;
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(ii) This Agreement has been duly authorized, executed and
delivered by such Selling Stockholder. The Contract, the Collateral
Agreement, the Power of Attorney and the Custody Agreement, each to which
such Selling Stockholder is a party, have been duly authorized, executed
and delivered by such Selling Stockholder and, assuming due authorization,
execution and delivery by the other parties thereto, constitute valid and
legally binding agreements of such Selling Stockholder, enforceable in
accordance with their respective terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;
(iii) Such Selling Stockholder has, and immediately prior to each
Time of Delivery (as defined in Section 4(a) hereof) such Selling
Stockholder will have, good and valid title to the shares of Stock to be
pledged and assigned by it under the Collateral Agreement to which such
Selling Stockholder is a party, free and clear of all liens, encumbrances,
equities or claims other than those created pursuant to such Collateral
Agreement; all consents, approvals, authorizations and orders necessary for
such Selling Stockholder to pledge and assign the shares of Stock to be
pledged and assigned by such Selling Stockholder pursuant to such
Collateral Agreement have been obtained; such Selling Stockholder has full
right, power and authority to pledge and assign the shares of Stock to be
pledged and assigned by such Selling Stockholder pursuant to such
Collateral Agreement to which such Selling Stockholder is a party; and upon
delivery of such shares of Stock to the Collateral Agent, as defined in the
Collateral Agreement, for the benefit of the Trust and payment therefor
pursuant to the Contracts to which such Selling Stockholder is a party,
good and valid title to such shares of Stock, free and clear of all liens,
encumbrances, equities or claims, will pass to the Trust;
(iv) The representations and warranties of such Selling
Stockholder set forth in Section 3 of such Collateral Agreement are true
and correct on and as of the date hereof with the same effect as though
such representations and warranties had been set forth in full in this
Agreement;
(v) During the period beginning from the date hereof and
continuing to and including the date 180 days after the First Time of
Delivery (as defined herein), such Selling Stockholder will not offer,
sell, contract to sell or otherwise dispose of any Stock or any securities
of the Company that are substantially similar to the Stock, including but
not limited to any securities that are convertible into or exchangeable
for, or that represent the right to receive, Stock or any such
substantially similar securities without prior written consent of you, as
the representatives of the Underwriters, except as provided hereunder or
pursuant to bona fide grants to persons who agree in writing with you to be
bound by the provisions of this clause; provided, however, that in the
event the Company enters into a definitive business combination agreement
providing for the acquisition of the Company by, or the merger of the
Company with, a third party in which substantially all of the outstanding
shares of Stock or assets of the Company are acquired by such third party,
this provision shall not prohibit such Selling Stockholder from tendering
its shares of Stock into any tender offer or exchange offer, or from voting
its shares of Stock in favor of any transaction, contemplated by such
agreement;
(vi) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities; and
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(vii) To the extent that any statements or omissions made in the
Registration Statements, any Preliminary Prospectus, the Prospectuses or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company or the Trust,
as the case may be, by such Selling Stockholder expressly for use therein,
such Preliminary Prospectus and the Registration Statements did, and the
Prospectuses and any further amendments or supplements to the Registration
Statements and the Prospectuses, when they become effective or are filed
with the Commission, as the case may be, will conform in all material
respects to the requirements of the Acts and the rules and regulations of
the Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, each of the Selling
Stockholders agrees to deliver to you prior to or at the First Time of Delivery
(as hereinafter defined) a properly completed and executed United States
Treasury Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
Each of the Selling Stockholders represents and warrants that
certificates in negotiable form representing all of the shares of Stock to be
pledged and assigned by such Selling Stockholder hereunder have been placed in
custody under a Custodial Agreement, in the form heretofore furnished to you,
duly executed and delivered by such Selling Stockholder to The Bank of New York,
as custodian (the "POA Custodian"), and that such Selling Stockholder has duly
executed and delivered a Power of Attorney, in the form heretofore furnished to
you, appointing the persons indicated in Schedule II hereto, and each of them,
as such Selling Stockholder's attorneys-in-fact (the "Attorneys- in-Fact") with
authority to execute and deliver this Agreement on behalf of such Selling
Stockholder, to execute and deliver the Contract to which such Selling
Stockholder is a party and the Collateral Agreement to which such Selling
Stockholder is a party, to authorize the delivery of the shares of Stock to be
pledged and assigned by such Selling Stockholder hereunder and otherwise to act
on behalf of such Selling Stockholder in connection with the transactions
contemplated by this Agreement, the Custody Agreement, the Contract and the
Collateral Agreement.
Each of the Selling Stockholders specifically agrees that the shares of
Stock represented by the certificates held in custody for such Selling
Stockholder under the Custody Agreement are subject to the interests of the
Collateral Agent for the benefit of the Trust hereunder, and that the
arrangements made by such Selling Stockholder for such custody, and the
appointment by such Selling Stockholder of the Attorneys-in-Fact by the Power of
Attorney, are to that extent irrevocable. Each of the Selling Stockholders
specifically agrees that the obligations of the Selling Stockholders hereunder
shall not be terminated by operation of law, whether by the dissolution of any
Selling Stockholder, or by the occurrence of any other event. If any Selling
Stockholder should be dissolved, or if any other such event should occur, before
the delivery of the shares of Stock hereunder, certificates representing the
shares of Stock shall be delivered by or on behalf of the Selling Stockholders
in accordance with the terms and conditions of this Agreement, of the Contracts,
of the Collateral Agreements and of the Custody Agreements, as appropriate, and
actions taken by the Attorneys-in-Fact pursuant to the Powers of Attorney shall
be as valid as if such dissolution or other event had not occurred, regardless
of whether or not the Custodian, the Attorneys-in-Fact, or any of them, shall
have received notice of such dissolution or other event.
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(c) The Trust represents and warrants to, and agrees with, each of the
Underwriters, the Selling Stockholders and the Company that:
(i) A notification on Form N-8A (the "Notification") of
registration of the Trust as an investment company has been filed with the
Commission; a registration statement on Form N-2 (File No. 333- and File
No. 811- ) (the "Initial Trust Registration Statement") in respect of the
Securities has been filed with the Commission; the Initial Trust
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, to
you for delivery to each of the other Underwriters, have been declared
effective by the Commission in such form; no other document with respect to
the Initial Trust Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the Initial
Trust Registration Statement, or any post-effective amendment thereto has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the
Initial Trust Registration Statement or filed with the Commission pursuant
to Rule 424(a) of the rules and regulations of the Commission under the
Act, is hereinafter called a "Trust Preliminary Prospectus"; the various
parts of the Initial Trust Registration Statement including all exhibits
thereto and including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the Act
in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the Initial Trust Registration Statement at the
time it was declared effective, as amended at the time such part of the
registration statement became effective, are hereinafter collectively
called the "Trust Registration Statement"; and such final prospectus, in
the form first filed pursuant to Rule 424(b) under the Act, is hereinafter
called the "Trust Prospectus");
(ii) No order preventing or suspending the use of any Trust
Preliminary Prospectus has been issued by the Commission, and each Trust
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Acts, and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Trust by an Underwriter through
Xxxxxxx, Xxxxx & Co. or by a Selling Stockholder expressly for use therein;
(iii) The Notification and the Trust Registration Statement
conform, and the Trust Prospectus and any further amendments or supplements
to the Notification, the Trust Registration Statement or the Trust
Prospectus will conform, in all material respects to the requirements of
the Acts and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the Trust
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Trust Prospectus and any amendment or supplement
thereto, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Trust by an Underwriter through Xxxxxxx, Sachs & Co. or by a
Selling Stockholder expressly for use therein;
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(iv) Since the respective dates as of which information is given
in the Trust Registration Statement and the Trust Prospectus, there has not
been any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, financial position, results of operations, prospects,
investment objectives, investment policies, or liabilities of the Trust,
otherwise than as set forth or contemplated in the Trust Prospectus, and
there have been no transactions entered into by the Trust which are
material to the Trust other than those in the ordinary course of its
business or as described in the Trust Prospectus;
(v) The Trust has been duly created, is validly existing as a
trust under the laws of the State of New York, with power and authority to
own its properties and conduct its business as described in the Trust
Prospectus and to enter into and perform its obligations under this
Agreement and the Fundamental Agreements (as defined in Section 1(c)(vii)
hereof); the Trust has all necessary consents, approvals, authorizations,
orders, registrations or qualifications, of and from, and has made all
declarations and filings with, all courts and governmental agencies and
bodies, to own and use its assets and to conduct its business in the manner
described in the Trust Prospectus, except to the extent that the failure to
obtain or file the foregoing would not have a material adverse effect on
the Trust and except the registration under the Act of the Securities and
such consents, approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Securities by the Underwriters;
the Trust has no subsidiaries;
(vi) The Trust is registered with the Commission as a non-
diversified, closed-end management investment company under the Investment
Company Act and no order of suspension or revocation of such registration
has been issued or proceedings therefor initiated or, to the knowledge of
the Trust, threatened by the Commission; no person is serving or acting as
an officer or trustee of the Trust except in accordance with the provisions
of the Investment Company Act;
(vii) Each of the Contracts, the Collateral Agreements, the
Administration Agreement between BONY and the Trust (the "Administration
Agreement"), the Custodian Agreement between BONY and the Trust (the
"Custodian Agreement"), the Paying Agent Agreement between BONY and the
Trust (the "Paying Agent Agreement"), the Fund Expense Agreement between
Xxxxxxx, Xxxxx & Co. and BONY (the "Fund Expense Agreement") and the Fund
Indemnity Agreement between Xxxxxxx, Sachs & Co. and the Trust (the "Fund
Indemnity Agreement") (the Contracts, the Collateral Agreements, the
Administration Agreement, the Custodian Agreement, the Paying Agent
Agreement, the Fund Expense Agreement and the Fund Indemnity Agreement are
herein collectively called the "Fundamental Agreements") has been duly
authorized, executed and delivered by the Trust and, assuming due
authorization, execution and delivery by the other parties thereto,
constitutes a valid and legally binding agreement of the Trust, enforceable
in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles;
(viii) The Amended and Restated Trust Agreement dated , 1998 (the
"Trust Agreement") and the Fundamental Agreements comply with all
applicable provisions of the Acts, and all approvals of such agreements
required under the Investment Company Act by the holders of the Automatic
Common Exchange Securities and the trustees have been obtained and are in
full force and effect;
10
(ix) All of the outstanding Automatic Common Exchange Securities
have been duly and validly authorized and issued and are fully paid and
non-assessable, and the form of certificates used to evidence the Automatic
Common Exchange Securities is in due and proper form and complies with all
provisions of applicable law; the Trust Agreement and the Fundamental
Agreements conform to the descriptions thereof contained in the Trust
Prospectus;
(x) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will be validly issued, fully paid
and nonassessable; the Securities will conform to the description thereof
in the Trust Prospectus; no person has rights to registration of any
securities because of the filing of the Trust Registration Statement;
(xi) The issue and sale of the Securities and the compliance by
the Trust with all of the provisions of the Securities, this Agreement and
each Fundamental Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, the Trust Agreement or any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Trust is a party or
by which the Trust is bound or to which any of the property or assets of
the Trust is subject, nor will such action result in any violation of any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Trust or any of its properties;
and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Securities or the consummation by
the Trust of the transactions contemplated by this Agreement or the
Fundamental Agreements, other than the registration under the Act of the
Securities and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the Securities by the
Underwriters;
(xii) Assuming due authorization, execution and delivery by the
parties other than the Trust, the Fundamental Agreements are in full force
and effect and the Trust is not in default in the performance or observance
of any obligation, covenant or condition thereunder and, to the knowledge
of the Trust, no event has occurred which with the passage of time or the
giving of notice or both would constitute a default thereunder; the Trust
is not in default in the performance or observance of any obligation,
covenant or condition contained in any other agreement or instrument to
which it is a party or by which it or any of its properties may be bound;
(xiii) The statements set forth in the Trust Prospectus under the
caption "Description of the Securities", insofar as they purport to
constitute a summary of the terms of the Securities, under the caption
"Certain Federal Income Tax Considerations", and under the caption
"Underwriting", insofar as they purport to describe the provisions of the
laws and agreements referred to therein, are accurate, complete and fair in
all material respects;
(xiv) Other than as set forth in the Trust Prospectus, there are
no legal or governmental proceedings pending to which the Trust is a party
or of which any property of the Trust is the subject which, if determined
adversely to the Trust, would individually or in the aggregate have a
material adverse effect on the current or future financial position, or
results of operations of the Trust; and, to the best of the Trust's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
11
(xv) There are no material restrictions, limitations or
regulations with respect to the ability of the Trust to invest its assets
as described in the Trust Prospectus, other than as described therein;
(xvi) The Automatic Common Exchange Securities outstanding prior
to the issuance of the Securities and the Securities have been approved for
listing on the New York Stock Exchange subject to notice of issuance; the
Trust's Registration Statement on Form 8-A under the Exchange Act is
effective; and
(xvii) Coopers & Xxxxxxx L.L.P., who have certified certain
financial statements included in the Trust Registration Statement, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
2. Subject to the terms and conditions herein set forth, (a) the Trust
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Trust, at a
purchase price of $ per Security, the number of Firm Securities set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Securities as provided below, the Trust agrees to issue and sell to
each of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Trust, at the same purchase price set forth in
clause (a) of this Section 2, that portion of the aggregate number of Optional
Securities as to which such election shall have been exercised (to be adjusted
by you so as to eliminate fractional securities) determined by multiplying such
number of Optional Securities by a fraction, the numerator of which is the
maximum aggregate number of Optional Securities which such Underwriter is
entitled to purchase as set forth opposite the name of such Underwriter in
Schedule I hereto and the denominator of which is the maximum aggregate number
of Optional Securities that all of the Underwriters are entitled to purchase
hereunder. The agreements in this Section made by the Trust are for the benefit
of and enforceable by the Underwriters and the Selling Stockholders. The
agreements in this Section made by the Underwriters are for the benefit of and
are enforceable by the Selling Stockholders and the Trust.
The Trust hereby grants to the Underwriters the right to purchase at
their election up to Optional Securities, at the purchase price set forth in
clause (a) of the first paragraph of this Section 2, for the sole purpose of
covering overallotments in the sale of the Firm Securities. Any such election to
purchase Optional Securities may be exercised only by written notice from you to
the Trust (with copies to ), given
within a period of 30 calendar days after the date of this Agreement, setting
forth the aggregate principal amount of Optional Securities to be purchased and
the date on which such Optional Securities are to be delivered, as determined by
you but in no event earlier than the First Time of Delivery (as defined in
Section 4(a) hereof) or, unless you and the Trust otherwise agree in writing,
earlier than two or later than ten business days after the date of such notice.
As compensation to the Underwriters for their commitments hereunder,
and in view of the fact that the proceeds of the sale of the Securities will be
used by the Trust as specified in the Contracts, the Selling Stockholders at
each Time of Delivery will pay to Xxxxxxx, Sachs & Co., for the accounts of the
several Underwriters, an amount equal to $ per Security for the Securities
to be delivered at such Time of Delivery; provided that the aggregate amount
payable to Xxxxxxx, Xxxxx & Co. by the Selling Stockholders shall be paid by the
Selling Stockholders on a pro rata basis according to the number of shares of
Stock pledged by each Selling Stockholder pursuant to the Collateral Agreement
to which such Selling Stockholder is a party. Alternatively, as a matter of
convenience, Xxxxxxx, Sachs & Co. may
12
deduct such amount from the purchase price of the Securities, and in such event
the Selling Stockholders shall be deemed to have paid the same.
3. Upon the authorization by you of the release of the Firm Securities,
the several Underwriters propose to offer the Firm Securities for sale upon the
terms and conditions set forth in the Trust Prospectus.
4. (a) The Securities to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Xxxxxxx, Xxxxx & Co. may request upon at least forty-eight hours' prior
notice to the Trust, shall be delivered by or on behalf of the Trust to Xxxxxxx,
Sachs & Co., for the account of such Underwriter, against payment by or on
behalf of such Underwriter of the purchase price therefor by wire transfer or
certified or official bank check or checks, payable to the order of the Trust in
Federal (same day) funds. The Trust will cause the certificates representing the
Securities to be made available for checking and packaging at least twenty-four
hours prior to the Time of Delivery (as defined below) at the office of Xxxxxxx,
Xxxxx & Co., 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Securities, 9:30 a.m., New York City time, on , 1998 or such
other time and date as Xxxxxxx, Sachs & Co. and the Trust may agree upon in
writing, and, with respect to the Optional Securities, 9:30 a.m., New York City
time, on the date specified by Xxxxxxx, Xxxxx & Co. in the written notice given
by Xxxxxxx, Sachs & Co. of the Underwriters' election to purchase such Optional
Securities, or such other time and date as Xxxxxxx, Xxxxx & Co. and the Trust
may agree upon in writing. Such time and date for delivery of the Firm
Securities is herein called the "First Time of Delivery", such time and date for
delivery of the Optional Securities, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Underwriters pursuant to Section 7(p) hereof, will be delivered at the offices
of Milbank, Tweed, Xxxxxx & XxXxxx, 0 Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the "Closing Location"), and the Securities will be delivered at the
Designated Office, all at such Time of Delivery. A meeting will be held at the
Closing Location at 3:30 p.m., New York City time, on the New York Business Day
next preceding such Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York City are generally
authorized or obligated by law or executive order to close.
5. (a) The Trust agrees with each of the Underwriters:
(i) To prepare the Trust Prospectus in a form approved by you and
to file such Trust Prospectus pursuant to Rule 497(h) under the Act not
later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if applicable,
such earlier time as may be required by Rule 430A(a)(3) under the Act; to
make no further amendment or any supplement to the Trust Registration
Statement or Trust Prospectus prior to the last Time of Delivery which
shall be disapproved by you promptly after reasonable notice thereof; to
advise you, promptly after it receives notice thereof, of the time when any
amendment to the Trust Registration Statement has been filed or becomes
effective or any supplement to the Trust Prospectus or any amended
prospectus has been filed
13
and to furnish you with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be filed by the
Trust with the Commission pursuant to the Acts and the Exchange Act
subsequent to the date of the Trust Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Securities; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Trust Preliminary Prospectus
or prospectus or any order pursuant to Section 8(e) of the Investment
Company Act, of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Trust Registration Statement or
Trust Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending the use
of any Trust Preliminary Prospectus or prospectus or suspending any such
qualification or order pursuant to Section 8(e) of the Investment Company
Act, promptly to use its best efforts to obtain the withdrawal of such
order;
(ii) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under
the securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Securities, provided that in connection therewith
the Trust shall not be required to qualify as a foreign trust or
association or to file a general consent to service of process in any
jurisdiction;
(iii) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to
time, at the expense of the Selling Stockholders, to furnish the
Underwriters with copies of the Trust Prospectus in New York City in such
quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Trust Prospectus in connection with the
offering or sale of the Securities and if at such time any event shall have
occurred as a result of which the Trust Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Trust Prospectus is delivered, not misleading, or, if for any other
reason it shall be necessary during such period to amend or supplement the
Trust Prospectus in order to comply with the Act, to notify you and upon
your request to prepare and furnish without charge to each Underwriter and
to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Trust Prospectus or a supplement to the
Trust Prospectus which will correct such statement or omission or effect
such compliance; and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Securities at any time
nine months or more after the time of issue of the Trust Prospectus, upon
your request but at the expense of such Underwriter, to prepare and deliver
to such Underwriter as many copies as you may request of an amended or
supplemented Trust Prospectus complying with Section 10(a)(3) of the Act;
(iv) To make generally available to the Trust's security holders
as soon as practicable, but in any event not later than eighteen months
after the effective date of the Trust Registration Statement (as defined in
Rule 158(c) under the Act), an earnings statement of the Trust (which need
not be audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the option of the
Trust, Rule 158);
14
(v) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the Trust
Prospectus under the caption "Use of Proceeds"; and
(vi) To use its best efforts to maintain the listing of the
Automatic Common Exchange Securities and the Securities on the New York
Stock Exchange.
(b) The Company agrees with each of the Underwriters:
(i) To prepare the Company Prospectus in a form approved by you
and to file such Company Prospectus pursuant to Rule 424(b) under the Act
not later than the Commission's close of business on the second business
day following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3) under
the Act; to make no further amendment or any supplement to the Company
Registration Statement or Company Prospectus prior to the last Time of
Delivery which shall be disapproved by you promptly after reasonable notice
thereof, such disapproval not to be unreasonably exercised; to advise you,
promptly after it receives notice thereof, of the time when any amendment
to the Company Registration Statement has been filed or becomes effective
or any supplement to the Company Prospectus or any amended Company
Prospectus has been filed and to furnish you with copies thereof; to file
promptly all reports and any definitive proxy or information statements
required to be filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
Company Prospectus and for so long as the delivery of a prospectus is
required in connection with the offering or sale of the Securities; to
advise you, promptly after it receives notice thereof, of the issuance by
the Commission of any stop order or of any order preventing or suspending
the use of any Company Preliminary Prospectus or prospectus, of the
suspension of the qualification of the shares of Stock to be delivered
pursuant to the Contracts for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the Company
Registration Statement or Company Prospectus or for additional information;
and, in the event of the issuance of any stop order or any order preventing
or suspending the use of any Company Preliminary Prospectus or prospectus
or suspending any such qualification, to promptly use its best efforts to
obtain the withdrawal of such order;
(ii) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(iii) Prior to 10:00 a.m. New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to
time to furnish the Underwriters with copies of the Company Prospectus in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Company Prospectus in connection with the
offering or sale of the Securities and if at such time any events shall
have occurred as a result of which the Company Prospectus as then amended
or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the
15
light of the circumstances under which they were made when such Company
Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary during such same period to amend or supplement the
Company Prospectus or to file under the Exchange Act any document
incorporated by reference in the Company Prospectus in order to comply with
the Act or the Exchange Act, to notify you and upon your request to file
such document and to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Company Prospectus or a supplement to the
Company Prospectus which will correct such statement or omission or effect
such compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Securities at any time
nine months or more after the time of issue of the Company Prospectus, upon
your request but at the expense of such Underwriter, to prepare and deliver
to such Underwriter as many copies as you may request of an amended or
supplemented Company Prospectus complying with Section 10(a)(3) of the Act;
(iv) To make generally available to its security- holders as soon
as practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earning statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(v) During the period beginning from the date hereof and
continuing to and including the date 180 days after the First Time of
Delivery, not to offer, sell, contract to sell or otherwise dispose of any
Stock or any securities of the Company (other than pursuant to employee
plans described in the Prospectus) which are substantially similar to the
Stock, including but not limited to any securities that are convertible
into or exchangeable for, or that represent the right to receive, Stock or
such substantially similar securities without your prior written consent;
(vi) To furnish to its stockholders as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(vii) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and deliver
to you as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Company is
listed. Such financial statements will be on a consolidated basis to the
extent the accounts of the Company and its subsidiaries are consolidated in
reports furnished to its stockholders generally or to the Commission; and
(viii) To use its best efforts to maintain the listing of the
Stock on the New York Stock Exchange.
16
6. The Trust, the Company and the Selling Stockholders covenant and
agree with the several Underwriters that (a) the Selling Stockholders will pay
or cause to be paid a pro rata share (based on the number of shares of Stock to
be sold by each such Selling Stockholder pursuant to the Contracts) of the
following: (i) the fees, disbursements and expenses of the Company's outside
accountants and of the Company's outside counsel in connection with the
registration of the Securities and the Stock under the Act and all other
expenses in connection with the preparation, printing and filing of the
Notification, the Trust Registration Statement, the Company Registration
Statement, any Trust Preliminary Prospectus or Company Preliminary Prospectus,
the Trust Prospectus and the Company Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to the Underwriters and
dealers; (ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement and Blue Sky Memorandum, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Securities and the Stock; (iii)
all expenses in connection with the qualification of the Securities and the
Stock for offering and sale under state securities laws as provided in Section
5(b)(ii) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) the filing fees incident to, and the fees and
disbursements of counsel for the Underwriters in connection with, securing any
required review by the NASD of the terms of the sale of the Stock and the
Securities; (v) all fees and expenses in connection with the preparation and
filing of a registration statement under the Exchange Act relating to the
Securities and all costs and expenses incident to the listing of the Securities
on the New York Stock Exchange or other national or regional exchange; (vi) the
cost of preparing certificates representing the Securities; (vii) the cost and
charges of any transfer agent or registrar for the Securities; (viii) all
expenses and taxes incident to the sale and delivery of the shares of Stock to
be sold or pledged by the Selling Stockholders; (ix) all fees, expenses and
costs in connection with the marketing of the Securities; and (x) all other
costs and expenses incident to the performance of all obligations hereunder
which are not otherwise specifically provided for in this Section; (b) the
Company will pay or cause to be paid (i) the cost of preparing Stock
certificates; and (ii) the cost and charges of any transfer agent or registrar
for the Stock; (c) each Selling Stockholder will pay or cause to be paid all
costs and expenses incident to the performance of such Selling Stockholder's
obligations hereunder which are not otherwise specifically provided for in this
Section, including (i) any fees and expenses of counsel for such Selling
Stockholder, (ii) such Selling Stockholder's pro rata share of the fees and
expenses of the Attorneys-in-Fact and the POA Custodian, and (iii) all expenses
and taxes incident to the sale and delivery of the shares of Stock to be sold or
pledged by such Selling Stockholder; and (d) the Underwriters will severally pay
or cause to be paid the organizational expenses and the ongoing expenses of the
Trust and all fees, disbursements and expenses of the Trust's counsel and the
Trust's accountants in connection with the registration of the Securities under
the Acts. In connection with Clause (c)(iii) of the preceding sentence, Xxxxxxx,
Xxxxx & Co. agrees to pay New York State stock transfer tax, and the Selling
Stockholders agree to reimburse Xxxxxxx, Sachs & Co. for associated carrying
costs if such tax payment is not rebated on the day of payment and for any
portion of such tax payment not rebated. It is understood, however, that the
Company shall bear, and the Selling Stockholders shall not be required to pay or
to reimburse the Company for, the cost of any other matters not directly
relating to the sale and purchase of the Shares pursuant to this Agreement, and
that, except as provided in this Section, Section 8 and Section 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Securities
to be delivered at each Time of Delivery, shall be subject, in their discretion,
to the condition that all representations and warranties of the Trust, the
Company and the Selling Stockholders herein are, at and as of such Time of
Delivery, true and correct, the condition that the Trust, the Company and the
Selling Stockholders shall
17
have performed all of its and their obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectuses shall have been filed with the Commission pursuant
to Rule 424(b) or Rule 497(h), as applicable, within the applicable time period
prescribed for such filing by the rules and regulations under the Act and in
accordance with Sections 5(a)(i) and 5(b)(i) hereof; no stop order suspending
the effectiveness of the Registration Statements or any part thereof, and no
order pursuant to Section 8(e) of the Investment Company Act affecting this
transaction, shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been complied
with to your reasonable satisfaction;
(b) Milbank, Tweed, Xxxxxx & XxXxxx, counsel for the Underwriters,
shall have furnished to you such opinion or opinions, dated such Time of
Delivery, with respect to paragraphs (i), (ii), (iii), (v), (vi) and (viii) of
subsection (c) below and paragraphs (i), (ii) and (vi) of subsection (e) below,
as well as a statement to the effect of the text following paragraph (x) of
subsection (e) below, and such other related matters as you may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters;
(c) Xxxxxxxx & Xxxxxxxx, counsel for the Trust, shall have furnished to
you their written opinion or opinions, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Trust (x) has been duly formed and is validly existing as
a trust under the laws of the State of New York and (y) is registered with
the Commission under the Investment Company Act as a non-diversified,
closed-end management investment company;
(ii) The Securities have been duly authorized and validly issued
and are fully paid and non-assessable and are entitled to the benefits
provided by the Trust Agreement;
(iii) The Securities will be exchanged for shares of Stock in
accordance with the terms of the Trust Agreement and the Contracts (unless
a Reorganization Event (as such term is defined in the Contracts) occurs),
subject to bankruptcy, insolvency, reorganization and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles;
(iv) All regulatory consents, authorizations, approvals and
filings required to be obtained or made by the Trust under the Federal laws
of the United States and the laws of the State of New York for the
issuance, sale and delivery of the Securities by the Trust to you have been
obtained or made;
(v) This Agreement has been duly authorized, executed and
delivered by the Trust;
(vi) Each Fundamental Agreement has been duly authorized,
executed and delivered by the Trust and, assuming due authorization,
execution and delivery by the other parties thereto, constitutes a valid
and legally binding agreement of the Trust, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
18
(vii) The statements in the Trust Prospectus under the caption
"Certain Federal Income Tax Considerations", to the extent that such
statements constitute summaries of the legal matters referred to therein,
fairly represent their opinion as to such matters;
(viii) On the basis of information which was reviewed in the
course of the performance of the services referred to in their opinion
considered in the light of their understanding of the applicable law
(including the requirements of Form N-2 and the character of the Prospectus
contemplated thereby) and the experience they have gained through their
practice under the Acts, such counsel are of the opinion that the Trust
Registration Statement, as of its effective date, and the Trust Prospectus,
as of the date of the Trust Prospectus, appeared on their face to be
appropriately responsive in all material respects to the requirements of
the Acts and the applicable rules and regulations of the Commission
thereunder; and that nothing that came to their attention in the course of
such review has caused them to believe that the Trust Registration
Statement, as of its effective date, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Trust Prospectus, as of the date of the Trust Prospectus, contained any
untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; also, nothing
that has come to such counsel's attention in the course of certain
procedures (as described in such opinion) has caused such counsel to
believe that the Trust Prospectus, as of the date and time of delivery of
such opinion, contained any untrue statement of a material fact or omitted
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that such opinion may state that the
limitations inherent in the independent verification of factual matters and
the character of determinations involved in the registration process are
such, however, that such counsel do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Trust
Registration Statement or the Trust Prospectus except for those made under
the captions "Underwriting", "Investment Objective and Policies", and
"Description of the Securities" in the Trust Prospectus insofar as they
relate to provisions of documents therein described, and such counsel need
not express any opinion or belief as to the financial statements or other
financial data; and provided further that such counsel may state that they
have not participated in the preparation of the Company Registration
Statement or the Company Prospectus, and need not express any opinion or
belief with respect thereto or with respect to information relating to the
Company contained in the Trust Prospectus under the captions "Prospectus
Summary--The Company", "Investment Objectives and Policies--The Company"
and "Risk Factors--Risks Relating to the Company and the Company's
Industry";
(d) Xxxxxxxx & Xxxxxxxx, counsel for the Trust, shall have furnished to
the Selling Stockholders their written opinion, dated such Time of Delivery,
with respect to paragraphs (i)(y), (iv) and (vii) of subsection (c) above and,
in addition, to the effect that the statements in the Trust Prospectus under the
captions "Underwriting", "Investment Objective and Policies" and "Description of
the Securities", insofar as such statements summarize provisions of documents
referred to therein, are accurate in all material respects and fairly summarize
the matters referred to therein;
(e) Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx, special counsel for the
Company, shall have furnished to you their written opinion, dated such Time of
Delivery, in form and substance satisfactory to you, to the effect that:
19
(i) The Company has been incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority necessary to own its properties and
conduct its business as described in the Company Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Company Prospectus, and all of the issued shares of capital stock of
the Company issued since June 17, 1991 and the shares of Stock to be
pledged under the Collateral Agreements have been duly and validly
authorized and issued and are fully paid and non-assessable;
(iii) Each of QSP, Inc., and R.D. Manufacturing Corporation (each
a "Designated Subsidiary" and collectively, the "Designated Subsidiaries")
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware with corporate power and
authority necessary to own its properties and conduct its business as
described in the Company Prospectus; and all of the issued shares of
capital stock of each such Designated Subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable, and (except for
directors' qualifying shares) are owned of record directly or indirectly by
the Company;
(iv) This Agreement has been duly authorized, executed and
delivered by the Company;
(v) The compliance by the Company with all of the provisions of
this Agreement and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, (i) any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is subject, (ii) the
provisions of the Certificate of Incorporation or By-laws of the Company,
(iii) the Delaware General Corporation Law or any present law, or present
regulation of any government agency or authority, of the State of New York
or the United States of America known by us to be applicable to the Company
or any of its subsidiaries or their respective properties or (iv) any court
decree or order binding upon the Company or any of its subsidiaries or
their respective properties (it being understood that (A) with respect to
the opinions in clauses (i) and (iv) of this paragraph, (w) such opinions
are limited to the indentures, mortgages, deeds of trust, loan agreements,
other agreements, instruments or court decrees or orders (the "Identified
Documents") which have been identified to such counsel in a certificate
provided by an officer of the Company as material to the Company and its
subsidiaries, taken as a whole, (x) such counsel is not required to express
any opinion with respect to any violation not readily ascertainable from
the face thereof or arising under or based upon any cross-default provision
insofar as it relates to a default under an Identified Document not listed
on such certificate, (y) in rendering its opinion with respect to any
covenant of a financial or numerical nature or requiring computation such
counsel may rely as to matters of fact on an officers' certificate of the
Company and (z) such counsel is not required to make any independent
investigation as to whether the Identified Documents which are governed by
the laws of any jurisdiction other than the State of New York, will be
enforced as written under the laws of such jurisdiction and (B) the opinion
in clause (iii) of this paragraph is limited (x) to our review of only
those laws and regulations that, in our experience, are normally applicable
to transactions of the type contemplated by this Agreement, and (y) in that
such counsel is not required to express
20
any opinion with respect to the application of, or compliance with, Federal
or state securities or Blue Sky laws or any rules or regulations
thereunder);
(vi) No consent, approval, authorization, order, registration or
qualification of or with any United States or New York, or with respect to
matters arising under the Delaware General Corporation Law, Delaware court
or governmental agency or body is required by or of the Company for the
sale of the shares of Stock or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration under
the Act of the shares of Stock, and such consents, approvals,
authorizations, orders, registrations or qualifications as may be required
under state or foreign securities or Blue Sky laws, rules and regulations
in connection with the purchase and distribution of the shares of Stock by
the Trust pursuant to the Contracts (it being understood that this opinion
is limited to those consents, approvals, authorizations, orders,
registrations or qualifications that, in our experience, are normally
applicable to transactions of the type contemplated by this Agreement);
(vii) The statements set forth in the Company Prospectus under
the caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock (including shares of Stock
subject to the Contracts), present fairly the information disclosed therein
in all material respects;
(viii) Neither the Company nor either of the Funds (as defined in
the Company Registration Statement) is an "investment company", as such
term is defined in the Investment Company Act;
(ix) The documents incorporated by reference in the Company
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial statements
and related schedules, and other financial data derived from the financial
statements or accounting records of the Company therein, as to which such
counsel need express no opinion), when they were filed with the Commission
appear on their face to be responsive as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations of
the Commission thereunder;
(x) The Company Registration Statement and the Company Prospectus
and or any amendments or supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules, and other financial data derived from the financial statements
or accounting records of the Company, therein, as to which such counsel
need express no opinion), appear on their face to be responsive as to form
in all material respects with the requirements of the Act and the rules and
regulations thereunder.
In addition, in the course of the preparation by the Company of the
Company Registration Statement and any amendment thereto and the Company
Prospectus and any amendment or supplement thereto, such counsel has
participated in conferences with certain of the officers and other
representatives of the Company, representatives of the independent certified
public accountants for the Company and representatives of the Underwriters, at
which the contents of the Company Registration Statement and the Company
Prospectus were discussed. Between the date of effectiveness of the Company
Registration Statement and any such amendment thereto and the time of delivery
of this letter, such counsel attended additional conferences with certain of the
officers and representatives of the Company, at which the contents of the
Company Registration Statement and any such amendment thereto and the Company
Prospectus and any such amendment or supplement thereto were discussed to a
limited extent. Given the
21
limitations inherent in the independent verification of factual matters and the
character of determinations involved in the registration process, such counsel
may state that they are not passing upon or assuming any responsibility for the
accuracy, completeness or fairness of the statements contained in the Company
Registration Statement and any such amendment thereto or the Company Prospectus
and any such amendment or supplement thereto except as specified in paragraph
(vii) above. Subject to the foregoing and on the basis of the information gained
in the performance of the services referred to above, including information
obtained from officers and other representatives of, and the independent public
accountants for, the Company, no facts have come to their attention to cause
them to believe that as of its effective date, the Company Registration
Statement or any amendment thereto made by the Company prior to such Time of
Delivery contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Company Prospectus or any
amendment or supplement thereto made by the Company prior to such Time of
Delivery contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. Also, subject to the
foregoing, no facts have come to such counsel's attention in the course of the
procedures described in the second paragraph of this section that have caused
such counsel to believe that, as of such Time of Delivery, the Company
Prospectus as amended or supplemented contains an untrue statement of a material
fact or omits to state a material fact necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading. Such
counsel may state that they express no view or belief, however, with respect to
the financial statements and related schedules included in, and other financial
data derived from the financial statements or accounting records of the Company
excluded or omitted from, the Company Registration Statement or Company
Prospectus.
In rendering such opinion, such counsel may rely, in respect to matters
of fact, and to the extent not specifically set forth above, upon certificates
of officers of the Company and its subsidiaries and certificates of public
officials. In rendering such opinion, such counsel may state that they express
no opinion as to the laws of any jurisdiction other than the laws of the State
of New York, the Federal law of the United States and, to the extent relevant
for the opinions expressed, the General Corporation Law of the State of
Delaware;
(f) Xxxxxxxx X.X. XxXxxx, Vice President and Associate General Counsel
of the Company, shall have furnished to you his written opinion, dated such Time
of Delivery, in form and substance satisfactory to you, to the effect that:
(i) The Company has been incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority and all governmental licenses, permits,
approvals, franchises, consents and authorizations necessary to own its
properties and conduct its business as described in the Company Prospectus
other than any such license, permit, approval, franchise, consent or
authorization the failure to possess which would not have a material
adverse effect on the business or financial condition of the Company and
its subsidiaries, taken as a whole;
(ii) The Company has an authorized capitalization as set forth in
the Company Prospectus, and all of the issued shares of capital stock of
the Company (including the shares of Stock to be pledged and assigned under
the Collateral Agreements have been duly and validly authorized and issued
and are fully paid and non-assessable; and the shares of Stock conform to
the description of the Stock contained in the Company Prospectus;
22
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases properties,
or conducts any business, so as to require such qualification, or is
subject to no material liability or disability by reason of failure to be
so qualified or in good standing in any such jurisdiction;
(iv) Each of QSP, Inc., R.D. Manufacturing Corporation, The
Reader's Digest Association Proprietary Limited, The Reader's Digest
Association (Canada) Ltd., Selection du Reader's Digest S.A., Verlag Das
Beste G.m.b.H., The Reader's Digest Association Limited and Selezione Dal
Reader's Digest S.p.A. (each an "Indicated Subsidiary" and collectively,
the "Indicated Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation or, in jurisdictions outside of the United
States, the substantive equivalent thereto, with corporate power and
authority and all governmental licenses, permits, approvals, franchises,
consents and authorizations necessary to own its properties and conduct its
business as described in the Company Prospectus, other than any such
license, permit, approval, franchise, consent or authorization the failure
to possess which would not have a material adverse effect on the business
or financial condition of the Company and its subsidiaries, taken as a
whole; and all of the issued shares of capital stock of each such Indicated
Subsidiary have been duly and validly authorized and issued, are fully paid
and non-assessable, and (except for directors' qualifying shares) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(v) Other than as set forth or incorporated by reference in the
Company Prospectus, there are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries; and, to the
knowledge of such counsel, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vi) The compliance by the Company with all of the provisions of
this Agreement and the consummation of the transactions herein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is subject, except for
any such conflict, breach, violation or default which individually or in
the aggregate would not have a material adverse effect on the Company and
its subsidiaries taken as a whole or which would not have an adverse effect
on the transactions contemplated hereby, nor will such action result in any
violation of the provisions of the Certificate of Incorporation or By-laws
of the Company or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties;
(vii) Neither the Company nor any of the Designated Subsidiaries
is in violation of its certificate of incorporation or by-laws;
23
(viii) The documents incorporated by reference in the Company
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial statements
and related schedules, and other financial data derived from the financial
statements or accounting records of the Company therein, as to which such
counsel need express no opinion), when they were filed with the Commission
complied as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder;
and he has no reason to believe that any of such documents, when such
documents were so filed contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such documents were so filed, not misleading;
(ix) To the knowledge of such counsel, the Company owns all the
patents, trademarks, service marks, trade names and copyrights, or licenses
rights with respect to the foregoing necessary for the present and planned
future conduct of its business as described in the Company Prospectus,
except where the failure to own or license the same would not have a
material adverse effect on the business or condition, financial or
otherwise, of the Company and its subsidiaries, taken as a whole, without
any conflict known to such counsel with the rights of others, the result of
which conflict could materially and adversely affect the business or
condition, financial or otherwise, of the Company and its subsidiaries,
taken as a whole, and, to the knowledge of such counsel, there is no
infringement on such patents, trademarks, service marks, trade names and
copyrights by others, the result of which infringement could materially and
adversely affect the business or condition, financial or otherwise, of the
Company and its subsidiaries, taken as a whole; and
(x) The Company Registration Statement and the Company Prospectus
and or any amendments or supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules, and other financial data derived from the financial statements
or accounting records of the Company, therein, as to which such counsel
need express no opinion), appear on their face to be responsive as to form
in all material respects with the requirements of the Act and the rules and
regulations thereunder.
In addition, in the course of the preparation by the Company of the
Company Registration Statement and any amendment thereto and the Company
Prospectus and any amendment or supplement thereto, such counsel has
participated in conferences with certain of the officers and other
representatives of the Company, representatives of the independent certified
public accountants for the Company and representatives of the Underwriters, at
which the contents of the Company Registration Statement and the Company
Prospectus were discussed. Between the date of effectiveness of the Company
Registration Statement and any such amendment thereto and the time of delivery
of this letter, such counsel attended additional conferences with certain of the
officers and representatives of the Company, at which the contents of the
Company Registration Statement and any such amendment thereto and the Company
Prospectus and any such amendment or supplement thereto were discussed to a
limited extent. Given the limitations inherent in the independent verification
of factual matters and the character of determinations involved in the
registration process, such counsel may state that they are not passing upon or
assuming any responsibility for the accuracy, completeness or fairness of the
statements contained in the Company Registration Statement and any such
amendment thereto or the Company Prospectus and any such amendment or supplement
thereto. Subject to the foregoing and on the basis of the information gained in
the performance of the services referred to above, including information
obtained from officers and other representatives of, and the independent public
accountants for, the Company, no facts have come to their
24
attention to cause them to believe that as of its effective date, the Company
Registration Statement or any amendment thereto made by the Company prior to
such Time of Delivery contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that, as of its date, the Company
Prospectus or any amendment or supplement thereto made by the Company prior to
such Time of Delivery contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. Also,
subject to the foregoing, no facts have come to such counsel's attention in the
course of the procedures described in the second paragraph of this section that
have caused such counsel to believe that, as of such Time of Delivery, the
Company Prospectus as amended or supplemented contains an untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading.
Such counsel may state that they express no view or belief, however, with
respect to the financial statements and related schedules therein, and other
financial data derived from the financial statements or accounting records of
the Company excluded or omitted from the Company Registration Statement or
Company Prospectus. Further, based upon such participation and subject to such
limitations and qualifications described above, he does not know of any
amendment to the Company Registration Statement required to be filed or of any
contracts or other documents of a character required to be filed as an exhibit
to the Company Registration Statement or required to be incorporated by
reference into the Company Prospectus or required to be described in the Company
Registration Statement or the Prospectus which are not filed or incorporated by
reference or described as required.
In rendering such opinion, such counsel may rely, (A) in respect to
matters of fact, and to the extent not specifically set forth above, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials, and (B) as to matters of law other than New York and Federal
law and the General Corporation Law of Delaware, on the opinions of local
counsel, provided that such counsel shall state that they believe that both you
and he is justified in relying upon such opinions and certificates and provided
further that true and complete copies of such opinions and certificates shall be
delivered to you. In lieu of delivering such opinion as to matters governed by
the laws of jurisdictions outside of the United States, such counsel shall cause
to be delivered to you opinions of local counsel reasonably satisfactory to you,
provided that such counsel shall state that they believe that both you and they
are justified in relying upon such opinions;
(g) Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx, special counsel for each
of the Selling Stockholders, shall have furnished to you their written opinion
with respect to each of the Selling Stockholders, dated such Time of Delivery,
in form and substance satisfactory to you, to the effect that:
(i) A Power of Attorney and a Custody Agreement have been duly
executed and delivered by such Selling Stockholder and constitute valid and
binding agreements of such Selling Stockholder enforceable in accordance
with their terms, subject to customary bankruptcy and equitable principles
qualifications;
(ii) This Agreement has been duly executed and delivered by or on
behalf of such Selling Stockholder; each of the Contracts and the
Collateral Agreements to which a Selling Stockholder is a party has been
duly executed and delivered by or on behalf of such Selling Stockholder and
constitutes a valid and binding agreement of such Selling Stockholder
enforceable in accordance with its terms, subject to customary bankruptcy
and equitable principles qualifications;
25
(iii) The compliance by each Selling Stockholder with all of the
provisions of this Agreement and the Power of Attorney, Custody Agreement,
Contract and Collateral Agreement to which such Selling Stockholder is a
party and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of,
or constitute a default under, (i) any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound, or to
which any of the property or assets of such Selling Stockholder is subject,
(ii) the provisions of the Certificate of Incorporation or By-laws of such
Selling Stockholder, (iii) any present law, or present regulation of any
government agency or authority, of the State of New York or the United
States of America known by us to be applicable to the Selling Stockholder
or their respective properties or (iv) any court decree or order binding
upon the Selling Stockholder or their respective properties (it being
understood that (A) with respect to the opinions in clauses (i) and (iv) of
this paragraph, (w) such opinions are limited to the indentures, mortgages,
deeds of trust, loan agreements, or other agreements, instruments or court
decrees or orders (the "Specified Documents") which have been identified to
such counsel in a certificate provided by an officer of the Selling
Stockholder as material to the Selling Stockholder and its subsidiaries,
taken as a whole, (x) such counsel is not required to express any opinion
with respect to any violation not readily ascertainable from the face
thereof or arising under or based upon any cross-default provision insofar
as it relates to a default under a Specified Document not listed on such
certificate, (y) in rendering its opinion with respect to any covenant of a
financial or numerical nature or requiring computation such counsel may
rely as to matters of fact on an officers' certificate of the Company and
(z) such counsel is not required to make any independent investigation as
to whether the Specified Documents which are governed by the laws of any
jurisdiction other than the State of New York, will be enforced as written
under the laws of such jurisdiction and (B) the opinion in clause (iii) of
this paragraph is limited (x) to our review of only those laws and
regulations that, in our experience, are normally applicable to
transactions of the type contemplated by this Agreement, and (y) in that
such counsel is not required to express any opinion with respect to the
application of, or compliance with, Federal or state securities or Blue Sky
laws or any rules or regulations thereunder);
(iv) No consent, approval, authorization or order of any United
States or New York court or governmental agency or body is required by or
of such Selling Stockholder for the consummation of the transactions
contemplated by this Agreement, the Contract to which such Selling
Stockholder is a party and the Collateral Agreement to which such Selling
Stockholder is a party, except for the registration of the Securities and
the Stock, under the Acts and such as may be required under state or
foreign securities or Blue Sky laws, rules or regulations in connection
with the purchase and distribution of the Securities and the Stock (it
being understood that this opinion is limited to those consents, approvals,
authorizations, orders, registrations or qualifications that, in our
experience, are normally applicable to transactions of the type
contemplated by this Agreement);
(v) Assuming due authorization, execution and delivery thereof in
the State of New York by the Trust and the Collateral Agent, each
Collateral Agreement, together with the delivery of (x) the certificates in
registered form representing the Stock pledged thereunder by the Selling
Stockholder party thereto and (y) undated stock powers with respect thereto
effectively endorsed in blank, to the Collateral Agent for the benefit of
the Trust, creates in favor of the Collateral Agent for the benefit of the
Trust a perfected security interest in such Stock under the Uniform
Commercial Code as in effect in the State of New York (the "New York
26
UCC"); upon such delivery, at the First Time of Delivery, assuming that (A)
the Collateral Agent and the Trust will acquire the security interest in
such shares without notice of any adverse claim (within the meaning of the
New York UCC) and (B) such Selling Stockholder has rights in the shares of
Stock subject to such Collateral Agreement, the Collateral Agent will
acquire such security interest in such shares of Stock for the benefit of
the Trust free of any adverse claim (within the meaning of the New York
UCC); and
(vi) Assuming (A) due authorization, execution and delivery of
the Contract and the Collateral Agreement by the Trust and each Collateral
Agreement by the Collateral Agent, (B) each Selling Stockholder continues
to be the sole registered owner of the shares of Stock to be sold by it,
(C) the certificates representing such shares do not contain any notation
of liens or restrictions, (D) the holders of Securities acquire such shares
of Stock without notice of any adverse claim (within the meaning of the New
York UCC) and (E) undated stock powers with respect to the certificates
representing such shares of Stock effectively endorsed in blank are
delivered to the holders of Securities, upon payment for and delivery to
the holders of Securities of the shares of Stock in accordance with the
Contract and Collateral Agreement to which each Selling Stockholder is a
party, the holders of Securities will acquire all of the rights of such
Selling Stockholder in such shares of Stock and will also acquire their
interest in such shares of Stock free of any adverse claim (within the
meaning of the New York UCC).
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York and the Federal laws of the United States.
(h) On the date of the Trust Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the effective
date of any post-effective amendment to the Trust Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
Coopers & Xxxxxxx L.L.P. shall have furnished to you a letter or letters, dated
the respective dates of delivery thereof, in form and substance satisfactory to
you;
(i) On the date of the Company Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the effective
date of any post-effective amendment to the Company Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery, the
accounting firm listed in Section 1(a)(xvi) hereof shall have furnished to you a
letter or letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annex I hereto;
(j) (i) Since the respective dates as of which information is given in
the Trust Registration Statement and the Trust Prospectus, there shall not have
been any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position, results of
operations, prospects, investment objectives, investment policies or liabilities
of the Trust, otherwise than as set forth or contemplated in the Trust
Prospectus, (ii) neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Company Prospectus or incorporated by reference therein any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Company Prospectus, and (iii) since the respective dates as
of which information is given in the Company Prospectus there shall not have
been any change in the capital stock short-term debt or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position,
27
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or contemplated in
the Company Prospectus, the effect of which, in any such case described in
clause (i), (ii) or (iii), is in your judgment so material and adverse as to
make it impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities being issued at such Time of Delivery on the terms
and in the manner contemplated in the Trust Prospectus;
(k) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a suspension or material
limitation in trading in the securities of the Company or the Trust on the New
York Stock Exchange; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; or (iv) the outbreak
or material escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this clause (iv) in your judgment makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities being issued at such Time of Delivery on the terms and in the
manner contemplated in the Trust Prospectus;
(l) The Securities shall have been duly listed, subject to notice of
issuance, on the New York Stock Exchange;
(m) Each Fundamental Agreement shall have been executed and delivered
by all parties thereto and each Selling Stockholder shall have delivered to the
Collateral Agent the number of shares of Stock required by the Collateral
Agreement to which such Selling Stockholder is a party to be initially pledged
thereunder in accordance with the requirements of such Collateral Agreement;
(n) The Trust and the Company shall have complied with the provisions
of Section 5(a)(iii) and 5(b)(iii) hereof with respect to the furnishing of
prospectuses on the New York Business Day next succeeding the date of this
Agreement; and
(o) The Trust, the Company and the Selling Stockholders shall have
furnished or caused to be furnished to you at such Time of Delivery certificates
of officers of the Trust, the Company and the Selling Stockholders,
respectively, satisfactory to you as to the accuracy of the representations and
warranties of the Trust, the Company and the Selling Stockholders, respectively,
herein and in the Contracts and Collateral Agreements at and as of such Time of
Delivery, as to the satisfaction and performance by the Trust, the Company and
the Selling Stockholders of all of their respective obligations hereunder and
thereunder to be performed at or prior to such Time of Delivery, as to the
matters set forth in subsections (a) and (i) of this Section (except in the case
of the Selling Stockholders) and as to such other matters relating to the
transactions contemplated herein and therein as you may reasonably request.
8. (a) The Company will indemnify and hold harmless the Trust and each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which the Trust or such Underwriter may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Company
Preliminary Prospectus or Trust Preliminary Prospectus, either of the
Registration Statements or either of the Prospectuses, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Trust and each Underwriter for any legal or other expenses reasonably incurred
by the Trust or such Underwriter in connection with investigating or defending
any such action or claim as such expenses are incurred; provided, however, that
the Company shall not be liable in any such case to the
28
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Company Preliminary Prospectus or Trust Preliminary
Prospectus, either of the Registration Statements or either of the Prospectuses,
or any such amendment or supplement thereto, in reliance upon and in conformity
with written information furnished to the Company by any Underwriter through
Xxxxxxx, Sachs & Co. expressly for use therein, and provided, further, that the
Company shall not be liable to any Underwriter under the indemnity agreement in
this subsection (a) with respect to any Company Preliminary Prospectus or Trust
Preliminary Prospectus to the extent that any such loss, claim, damage or
liability results from the fact such Underwriter sold Securities to a person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Company Prospectus or the Trust Prospectus, as the case
may be (or of the Company Prospectus or the Trust Prospectus, as the case may
be, as then amended or supplemented) in any case where such delivery is required
by the Act if the Company or the Trust, as the case may be, has previously
furnished copies thereof to such Underwriter and the loss, claim, damage or
liability of such Underwriter results from an untrue statement or omission of a
material fact contained in the Company Preliminary Prospectus or the Trust
Preliminary Prospectus which was corrected in the Company Prospectus or the
Trust Prospectus, as the case may be (or the Company Prospectus or the Trust
Prospectus, as the case may be, as amended or supplemented).
(b) Each Selling Stockholder, severally, and not jointly, in proportion
to the number of shares of Stock to be sold by each such Selling Stockholder
pursuant to the Contracts will indemnify and hold harmless the Trust and each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which the Trust or such Underwriter may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Company
Preliminary Prospectus or Trust Preliminary Prospectus, either of the
Registration Statements or either of the Prospectuses, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Company Preliminary
Prospectus or Trust Preliminary Prospectus, either of the Registration
Statements or either of the Prospectuses or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company or the Trust, as the case may be, by such Selling Stockholder expressly
for use therein, and will reimburse the Trust and each Underwriter for any legal
or other expenses reasonably incurred by the Trust or such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Selling Stockholder shall not
be liable to any Underwriter under the indemnity agreement in this subsection
(b) with respect to any Company Preliminary Prospectus or Trust Preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results from the fact such Underwriter sold Securities to a person
to whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Company Prospectus or the Trust Prospectus, as the case
may be, or of the Company Prospectus or the Trust Prospectus, as the case may
be, as then amended or supplemented in any case where such delivery is required
by the Act if the Company or the Trust, as the case may be, has previously
furnished copies thereof to such Underwriter and the loss, claim, damage or
liability of such Underwriter results from an untrue statement or omission of a
material fact contained in the Company Preliminary Prospectus or Trust
Preliminary Prospectus, as the case may be, which was corrected in the Company
Prospectus or the Trust Prospectus (or the Company Prospectus or the Trust
Prospectus as amended or supplemented).
29
(c) Each Underwriter will indemnify and hold harmless the Company, the
Trust and each Selling Stockholder against any losses, claims, damages or
liabilities to which the Company, the Trust or such Selling Stockholder may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Company Preliminary Prospectus or Trust Preliminary Prospectus,
either of the Registration Statements or either of the Prospectuses, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Company
Preliminary Prospectus or Trust Preliminary Prospectus, either of the
Registration Statements or either of the Prospectuses, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Trust or the Company by such Underwriter through Xxxxxxx, Xxxxx
& Co. expressly for use therein; and will reimburse the Company, the Trust and
each Selling Stockholder for any legal or other expenses reasonably incurred by
the Company, the Trust or such Selling Stockholder in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party, provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have been advised by its
counsel that representation of such indemnified party and the indemnifying party
by the same counsel would be inappropriate (whether or not such representation
by the same counsel has been proposed) under applicable standards of
professional conduct due to actual or potential differing interests between
them, the indemnified party or parties shall have the right to select one
separate counsel to participate in the defense of such action on behalf of all
such indemnified parties. Upon receipt of notice from the indemnifying party to
such indemnified party of its election so to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation unless the indemnified party shall have
employed separate counsel in accordance with the proviso to the next preceding
sentence. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses,
30
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company, the Trust and the
Selling Stockholders on the one hand and the Underwriters on the other from the
offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (d) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company, the Trust and
the Selling Stockholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company, the Trust and the Selling Stockholders on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company, the Trust and the Selling Stockholders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Trust Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company, the
Trust or the Selling Stockholders on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Trust, the Selling Stockholders and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this subsection (e) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (e). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in subsection (c) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(e) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under
this Section 8 shall be in addition to any liability which the Company and the
Selling Stockholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company or the Selling Stockholders, to each trustee
of the Trust and to each person, if any, who controls the Company, the Trust or
any Selling Stockholder within the meaning of the Act.
(g) Notwithstanding the foregoing provisions of this Section 8, in no
event shall any Selling Stockholder be liable under this Section 8 for an amount
in excess of the pro rata share (based on
31
the number of shares of Stock to be sold by each Selling Stockholder pursuant to
the Contracts) of the gross proceeds from the transactions contemplated by this
Agreement and the Fundamental Agreements received by such Selling Stockholder
from the sale of the Shares.
9. (a) If any Underwriter shall default in its obligation to purchase
the Securities which it has agreed to purchase hereunder, you may in your
discretion arrange for you or another party or other parties to purchase such
Securities on the terms contained herein at a Time of Delivery. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Securities, then the Company, the Trust and the Selling
Stockholders shall be entitled to a further period of thirty-six hours within
which to procure another party or other parties satisfactory to you to purchase
such Securities on such terms. In the event that, within the respective
prescribed periods, you notify the Company, the Trust and the Selling
Stockholders that you have so arranged for the purchase of such Securities, or
the Company, the Trust and the Selling Stockholders notify you that they have so
arranged for the purchase of such Securities, you or the Company, the Trust and
the Selling Stockholders shall have the right to postpone such Time of Delivery
for a period of not more than seven days, in order to effect whatever changes
may thereby be made necessary in the Registration Statements or the
Prospectuses, or in any other documents or arrangements, and the Company, the
Trust and the Selling Stockholders agree to file promptly any amendments to the
Registration Statements or the Prospectuses which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company,
the Trust and the Selling Stockholders as provided in subsection (a) above, the
aggregate principal amount of such Securities which remains unpurchased does not
exceed one-eleventh of the aggregate principal amount of all the Securities to
be purchased at such Time of Delivery, then the Company, the Trust and the
Selling Stockholders shall have the right to require each non-defaulting
Underwriter to purchase the principal amount of Securities which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the principal amount of Securities which such Underwriter agreed
to purchase hereunder) of the Securities of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company,
the Trust and the Selling Stockholders as provided in subsection (a) above, the
aggregate principal amount of such Securities which remains unpurchased exceeds
one-eleventh of the aggregate principal amount of all the Securities to be
purchased at such Time of Delivery, or if the Company, the Trust and the Selling
Stockholders shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Securities of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Underwriters to purchase and of the
Trust to sell the Optional Securities) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company, the
Trust and the Selling Stockholders, except for the expenses to be borne by the
Company, the Trust, the Selling Stockholders and the Underwriters as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
32
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Trust, the Selling Stockholders and the
several Underwriters, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company, the Trust or the Selling Stockholders or any
officer or director or controlling person of the Company, the Trust or the
Selling Stockholders and shall survive delivery of and payment for the
Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company, the Trust nor the Selling Stockholders shall then be under
any liability to any Underwriter except as provided in Sections 6 and 8 hereof;
but, if for any other reason, any Securities are not delivered by or on behalf
of the Trust as provided herein, the Selling Stockholders, pro rata (based on
the number of shares of Stock to be sold by each such Selling Stockholder
pursuant to the Contracts), will reimburse the Underwriters through you for all
out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Securities not so
delivered, but the Company, the Trust and the Selling Stockholders shall then be
under no further liability to any Underwriter in respect of the Securities not
so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Xxxxxxx, Xxxxx & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder,
you, the Trust and the Company shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of such Selling Stockholder
made or given by any or all of the Attorneys-in-Fact for such Selling
Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Xxxxxxx, Sachs &
Co., 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Registration
Department; if to the Trust shall be delivered or sent by mail, telex or
facsimile transmission in care of Xxxxxx X. Xxxxxxx, Xxxxxxx & Associates, 000
Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000; if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; and if to
any Selling Stockholder shall be delivered or sent by mail, telex or facsimile
transmission to counsel for such Selling Stockholder at its address set forth in
Schedule II hereto; provided, however, that any notice to an Underwriter
pursuant to Section 8(d) hereof shall be delivered or sent by mail, telex or
facsimile transmission to such Underwriter at its address set forth in its
Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company or the Selling Stockholders by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company, the Trust, the Selling Stockholders
and, to the extent provided in Sections 8 and 10 hereof, the officers and
directors of the Company, the Trust, the Selling Stockholders and each person
who controls the Company, any Selling Stockholder or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Securities from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
33
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us eight counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Underwriters,
the Trust, the Company and the Selling Stockholders. It is understood that your
34
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
THE READER'S DIGEST ASSOCIATION, INC.
By: ________________________________________
Name:
Title:
READER'S DIGEST AUTOMATIC COMMON EXCHANGE
SECURITY TRUST
By: ________________________________________
Name:
Title:
By: ________________________________________
Name:
Title:
By: ________________________________________
Name:
Title:
each a trustee of Reader's Digest
Automatic Common Exchange Security
Trust
[OTHERS]
By: ________________________________________
As Attorney-in-Fact acting on behalf of
each Selling Stockholder named in
Schedule II to this Agreement
Accepted as of the date hereof:
Xxxxxxx, Sachs & Co.
Lazard Freres & Co. LLC
By:______________________________
(Xxxxxxx, Xxxxx & Co.)
On behalf of each of the Underwriters
35
SCHEDULE I
NUMBER OF OPTIONAL
SECURITIES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SECURITIES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ------------------
Xxxxxxx, Sachs & Co.
Lazard Freres & Co. LLC
Total ======= =======
SCHEDULE II
[TO COME]
_____________________
(a) Each Selling Stockholder is represented by Fried, Frank, Harris,
Xxxxxxx & Xxxxxxxx, Xxx Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 and
has appointed Xxxxxx X. Xxxxx and M. Xxxxxxxxx XxXxxx, and each of
them, as the Attorneys-in-Fact for such Selling Stockholder.
1
ANNEX I
Pursuant to Section 7(i) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and
any supplementary financial information and schedules (and, if
applicable, financial forecasts and/or pro forma financial information)
examined by them and included or incorporated by reference in the
Registration Statement or the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the
Act or the Exchange Act, as applicable, and the related published rules
and regulations thereunder; and, if applicable, they have made a review
in accordance with standards established by the American Institute of
Certified Public Accountants of the consolidated interim financial
statements, selected financial data, pro forma financial information,
financial forecasts and/or condensed financial statements derived from
audited financial statements of the Company for the periods specified
in such letter, as indicated in their reports thereon, copies of which
have been furnished to the representatives of the Underwriters (the
"Representatives") and are attached hereto;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's quarterly
report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which are attached hereto;
and on the basis of specified procedures including inquiries of
officials of the Company who have responsibility for financial and
accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i)
below comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations, nothing came to their attention that
caused them to believe that the unaudited condensed consolidated
financial statements do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the Exchange
Act and the related published rules and regulations;
(iv) The unaudited selected financial information with
respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years included
in the Prospectus and included or incorporated by reference in Item 6
of the Company's Annual Report on Form 10-K for the most recent fiscal
year agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus
under selected captions with the disclosure requirements of Regulation
S-K and on the basis of limited
1
procedures specified in such letter nothing came to their attention as
a result of the foregoing procedures that caused them to believe that
this information does not conform in all material respects with the
disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements
of cash flows included in the Prospectus and/or included or
incorporated by reference in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act as it applies to Form
10-Q and the related published rules and regulations, or (ii) any
material modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the
Prospectus or included in the Company's Quarterly Reports on Form
10-Q incorporated by reference in the Prospectus, for them to be
in conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included
or incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived the unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included
in the Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the basis for
the audited financial statements included or incorporated by
reference in the Company's Annual Report on Form 10-K for the
most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the
Prospectus do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
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(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon
earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on
the date of the latest balance sheet included or incorporated by
reference in the Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or stockholders'
equity or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with amounts shown in the latest balance sheet
included or incorporated by reference in the Prospectus, except
in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the
Prospectus to the specified date referred to in Clause (E) there
were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with the comparable period of the preceding year
and with any other period of corresponding length specified by
the Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Prospectus (excluding documents incorporated by reference) or in
Part II of, or in exhibits and schedules to, the Registration Statement
specified by the Representatives or in documents incorporated by
reference in the Prospectus specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and
have found them to be in agreement.
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