Exhibit 1.1
$24,000,000
XXXXXXXX (U.S.A.), INC.
_______% SENIOR DEBENTURES DUE APRIL __, 2014
FORM OF UNDERWRITING AGREEMENT
------------------------------
April __, 1999
SOUTHWEST SECURITIES, INC.
0000 XXX XXXXXX, XXXXX 0000
Xxxxxx, Xxxxx 00000
Ladies and Gentlemen:
XXXXXXXX (U.S.A.), INC., an Oklahoma corporation (the "COMPANY"),
proposes to sell $24,000,000 of the Company's _____% Senior Debentures due 2014
(the "SECURITIES"). The Securities are to be issued pursuant to an indenture to
be dated as of the Effective Date (as defined below) (the "INDENTURE"), between
the Company and U.S. Trust Company of Texas, N.A., as trustee (the "TRUSTEE").
This Underwriting Agreement (the "AGREEMENT") sets forth the terms pursuant to
which the Company will issue and sell the Securities to Southwest Securities,
Inc. (the "UNDERWRITER").
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-1 (Registration
No. 333-___) and one or more amendments thereto with respect to the
Securities have (i) been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and the rules and regulations (the "RULES AND
REGULATIONS") of the Securities and Exchange Commission (the
"Commission") thereunder, (ii) been filed with the Commission under
the Securities Act and (iii) become effective under the Securities
Act. Copies of such registration statement and any amendments thereto
have been delivered by the Company to you as the Underwriter. As used
in this Agreement, "EFFECTIVE Time" means, with respect to the
Registration Statement, the date and the time as of which such
registration statement was declared effective by the Commission;
"EFFECTIVE DATE" means the date of the Effective Time of such
registration statement;
"PRELIMINARY PROSPECTUS" means each prospectus included in the
Registration Statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with the
Commission by the Company with the consent of the Underwriter pursuant
to Rule 424(a) of the Rules and Regulations; "REGISTRATION STATEMENT"
means the Form S-1 registration statement (Registration No.
333-_____), as amended at the Effective Time, including any documents
incorporated by reference therein at such time and all information
contained in the final prospectus filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations in accordance with Section
5(a) hereof and deemed to be a part of such registration statements as
of the Effective Time pursuant to paragraph (b) of Rule 430A of the
Rules and Regulations; and "PROSPECTUS" means such final prospectus,
as first filed with the Commission pursuant to paragraph (1 ) or (4)
of Rule 424(b) of the Rules and Regulations. The Commission has not
issued any order preventing or suspending the use of any Preliminary
Prospectus.
(b) The Registration Statement conforms, in all material
respects, and the Prospectus and any further amendments or supplements
to the Registration Statement or the Prospectus will, when they become
effective or are filed with the Commission, as the case may be,
conform, in all material respects to the requirements of the
Securities Act and the Rules and Regulations and do not and will not,
as of the applicable effective date (as to the Registration Statement
and any amendment thereto) and as of the applicable filing date (as to
the Prospectus and any amendment or supplement thereto), contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED that no representation or warranty is
made as to (i) the Trustee's Statement of Eligibility and
Qualification (Form T-l) under the Trust Indenture Act of 1939, as
amended (the "TRUST INDENTURE ACT"), and (ii) information contained in
or omitted from the Registration Statement or the Prospectus in
reliance upon and in conformity with written information relating to
the Underwriter furnished to the Company by or on behalf of any
Underwriter specifically for inclusion therein (the "UNDERWRITER
INFORMATION"). The Indenture conforms in all respects to the
requirements of the Trust Indenture Act of 1939 and the rules and
regulations of the Commission thereunder.
(c) The authorized capital stock of National American Insurance
Company, a Nebraska corporation ("NAICO"), consists solely of 30,000
shares of common stock, par value $250 per share, 20,000 of which have
been duly and validly authorized and issued and are outstanding and
held of record and beneficially by the Company free and clear of any
and all liens, claims or other encumbrances; the authorized capital
stock of LaGere & Xxxxxxxxxxxx Insurance Agency, Inc., an Oklahoma
corporation ("L&W" and, together with NAICO, the "Subsidiaries"),
consists solely of 50,000 shares of common stock, par value $1.00 per
share, ______ of which have been duly and validly authorized and
issued and are outstanding and held of record and beneficially by the
Company free and clear of any and all liens, claims or other
encumbrances; the authorized capital stock of the
Company consists solely of 50,000 shares of common stock, par value
$1.00 per share, ______ of which have been duly and validly authorized
and issued and are outstanding and held of record and beneficially by
Xxxxxxxx Insurance (Barbados), Ltd., a Barbados company ("CIB"); and
the authorized capital stock of CIB consists solely of __________,
__________ of which are issued and outstanding and held of record and
beneficially by Xxxxxxxx Insurance Company, Ltd., a Cayman Islands
company ("CIC"). Except as described in the foregoing sentence, there
are no outstanding shares or shares of capital stock of NAICO, L&W,
the Company, or CIB or any other securities, rights (preemptive or
other), subscriptions, calls, warrants, options or other agreements
that give any person or entity the right to (i) purchase or otherwise
receive or be issued any shares or shares of capital stock or other
securities of NAICO, L&W, the Company, or CIB (or any interest
therein) or any security convertible into or exchangeable for any
shares or shares of capital stock or other securities of NAICO, L&W,
the Company, or CIB (or any interest therein), (ii) receive any
dividend, voting or ownership rights similar to those accruing to a
holder of such shares or shares of capital stock or other securities
as described in the foregoing sentence or (iii) participate in the
equity, income or election of directors or officers of NAICO, L&W, the
Company, or CIB.
(d) Except for the outstanding common stock of NAICO and L&W,
all of which is owned of record and beneficially by the Company,
neither the Company nor any Subsidiary owns or holds, directly or
indirectly, any capital stock or other equity interest in any company,
corporation, partnership, limited liability company, joint venture or
other entity other than equity securities held in the ordinary course
of investment activities which do not constitute 5% or more of the
outstanding capital stock or equity interest in any such company,
corporation, partnership, limited liability company, joint venture or
other entity.
(e) The Company and each of the Subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are
duly qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification, and have all power and authority
necessary to own or hold their respective properties and to conduct
the businesses in which they are engaged, except where the failure to
so qualify or have such power or authority would not, singularly or in
the aggregate, have a material adverse effect on the condition
(financial or otherwise), results of operations, business or prospects
of the Company and its Subsidiaries taken as a whole (a "MATERIAL
ADVERSE EFFECT").
(f) CIC is subject to and in full compliance with the reporting
requirements of Section 13 or 15(d) of the Exchange Act.
(g) The Company has full right, power and authority to execute
and deliver this Agreement, the Indenture and the Securities
(collectively, the "TRANSACTION DOCUMENTS") and to perform its
obligations hereunder and thereunder; and all corporate authorization
required for the due and proper authorization, execution and delivery
of each of the Transaction Documents and the consummation of the
transactions contemplated thereby have been duly and validly given.
(h) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally binding
agreement of the Company.
(i) The Indenture has been duly authorized by the Company and,
when duly executed and delivered in accordance with its terms by each
of the parties thereto, will constitute a valid and legally binding
agreement of the Company enforceable against the Company in accordance
with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing. On the Effective Date, the Indenture will
conform to the requirements of the Trust Indenture Act and the rules
and regulations of the Commission applicable to an indenture which is
qualified thereunder.
(j) The Securities have been duly authorized for issuance and
sale by the Company and, when duly executed, authenticated, issued and
delivered as provided in the Indenture and paid for as provided
herein, will be duly and validly issued and outstanding and will
constitute valid and legally binding obligations of the Company
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(k) The execution, delivery and performance by the Company of
each of the Transaction Documents, the issuance, authentication, sale
and delivery of the Securities and compliance by the Company with the
terms thereof and the consummation of the transactions contemplated by
the Transaction Documents will not (i) conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or any of the Subsidiaries pursuant to any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which CIC or any of its subsidiaries (which include the
Company and the Subsidiaries) is a party or by which CIC or any of its
subsidiaries is bound or to which any of the
property or assets of CIC or any of its subsidiaries is subject, (ii)
result in any violation of the provisions of the charter or by-laws of
CIC or any of its subsidiaries or any statute or any judgment, order,
decree, rule or regulation of any court or arbitrator or governmental
agency or body having jurisdiction over CIC or any of its subsidiaries
or any of their properties or assets or (iii) require any consent,
approval, authorization or order of, or filing or registration with,
any such court or arbitrator or governmental agency or body under any
such statute, judgment, order, decree, rule or regulation, except, in
the case of this clause (iii), for the registration of the Securities
under the Securities Act and such consents, approvals, authorizations,
filings, registrations or qualifications as may be required to be
obtained or made under the Trust Indenture Act (which shall have been
obtained or made prior to the Effective Date) and applicable state
Blue Sky or securities laws and rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the purchase
and distribution of the Securities by the Underwriter hereunder and
certain of their transferees or as described in the Prospectus.
(l) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require
the Company to file a registration statement under the Securities Act
with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities in
any securities being registered pursuant to any registration statement
filed by the Company under the Securities Act.
(m) Neither the Company nor any of the Subsidiaries has
sustained, since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since such
date, there has not been any material change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development which would reasonably be
expected to involve 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, otherwise than as set forth or contemplated in the
Prospectus.
(n) The Securities and the Indenture conform in all material
respects to the descriptions thereof contained in the Prospectus.
(o) The Company has previously delivered to the Underwriter true
and complete copies of the following (i) the Annual Statements of
NAICO for each of the years ended December 31, 1996, 1997 and 1998,
filed with the Nebraska Insurance Department (including the supporting
memorandum to the actuarial opinions given in connection with such
Annual Statements); and (ii) any annual statutory statements of
NAICO that were filed for the year ended December 31, 1998, in any
jurisdiction (other than Nebraska) and which differ from the Annual
Statement for the year ended December 31, 1998. Each such statement
referred to in clauses (i) and (ii) above (A) complied in all material
respects with all applicable laws when so filed, (B) was prepared in
accordance with accounting practices required or permitted by the
insurance regulatory authority in the applicable state in which filed,
consistently applied throughout the specified period and in the
comparable period in the immediately preceding year ("SAP"), (C) is
true and complete in all material respects and (D) presents fairly the
financial position of NAICO as of the respective dates thereof and the
related summary of operations and changes in capital and surplus and
in cash flows of NAICO for and during the respective periods covered
thereby. No material deficiency has been asserted by any insurance
regulatory authority with respect to any such statement.
(p) Deloitte & Touche LLP are independent certified public
accountants with respect to the Company and the Subsidiaries within
the meaning of Rule 101 of the Code of Professional Conduct of the
American Institute of Certified Public Accountants ("AICPA") and its
interpretations and rulings thereunder. The historical financial
statements and financial statement schedules (including the related
notes) contained in the Prospectus and the Registration Statement
comply with the applicable requirements under the Securities Act and
the Securities Exchange Act of 1934 (the "EXCHANGE ACT") (including
the requirements of Regulation S-K and Regulation S-X promulgated
thereunder); such financial statements have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods covered thereby and fairly present the
financial position of the entities purported to be covered thereby at
the respective dates indicated and the results of their operations and
their cash flows for the respective periods indicated; and the
financial information contained in the Prospectus under the headings
"Summary Financial Data," "Selected Consolidated Financial Data,"
"Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" are derived from
the accounting records of the Company and the Subsidiaries and fairly
present the information purported to be shown thereby. The other
historical financial and statistical information and data included in
the Registration Statement are fairly presented.
(q) The statutory reserves and other similar amounts with
respect to losses, benefits, claims, and expenses in respect of
NAICO's insurance business as established or reflected in the December
31, 1998, Annual Statement (i) were determined in accordance with SAP
and generally accepted actuarial assumptions, (ii) were in accordance
with the benefits and risks specified in the related insurance or
reinsurance contracts, and (iii) meet the requirements of the
insurance laws of each applicable jurisdiction. NAICO owns assets that
qualify as legal reserve assets under applicable insurance laws in an
amount at least equal to all such statutory reserves and other similar
amounts of NAICO.
(r) Except as described in the Prospectus, (i) there are no
legal or
governmental proceedings pending to which CIC or any of its
subsidiaries is a party or of which any property or assets of the
Company or any of the Subsidiaries is the subject which, (A)
singularly or in the aggregate, if determined adversely to CIC or any
of its subsidiaries, could reasonably be expected to have a Material
Adverse Effect or (B) question the validity or enforceability of any
of the Transaction Documents or any action taken or to be taken
pursuant thereto, (ii) to the knowledge of the Company, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others and (iii) there are no writs, judgments,
decrees, injunctions, or similar orders of any person or entity
outstanding against CIC or any of its subsidiaries.
(s) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency
or body which prevents the issuance of the Securities or suspends the
sale of the Securities in any jurisdiction; no injunction, restraining
order or order of any nature by any federal or state court of
competent jurisdiction has been issued with respect to CIC or any of
its subsidiaries which would prevent or suspend the issuance or sale
of the Securities or the use of the Preliminary Prospectus or the
Prospectus in any jurisdiction; no action, suit or proceeding is
pending against or, to the knowledge of the Company, threatened
against or affecting CIC or any of its subsidiaries before any court
or arbitrator or any governmental agency, body or official, domestic
or foreign, which could reasonably be expected to interfere with or
adversely affect the issuance of the Securities or in any manner draw
into question the validity or enforceability of any of the Transaction
Documents or any action taken or to be taken pursuant thereto; and, to
the knowledge of the Company, the Company has complied with any and
all requests by any securities authority in any jurisdiction for
additional information to be included in the Preliminary Prospectus
and the Prospectus.
(t) Neither the Company nor either Subsidiary is (i) in
violation of its charter or by-laws, (ii) in default, and no event has
occurred which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement or other material agreement or instrument to
which it is a party or by which it is bound or to which any of its
property or assets is subject or (iii) in violation of any law,
ordinance, governmental rule, regulation or court decree to which it
or its property or assets may be subject, except, in the case of
clause (ii) or (iii), such occurrences which, individually or in the
aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect or adversely affect the consummation of the
transactions contemplated by this Agreement.
(u) The Company and each of the Subsidiaries possess all
licenses, certificates, authorizations and permits issued by, and have
made all declarations and filings with, the appropriate federal, state
or foreign regulatory agencies or bodies which
are required or necessary for the ownership of their respective
properties or the conduct of their respective businesses as described
in the Prospectus, except where the failure to possess or make the
same would not, singularly or in the aggregate, have a Material
Adverse Effect, and neither the Company nor any of its Subsidiaries
has received notification of any revocation or modification of any
such license, certificate, authorization or permit or has any reason
to believe that any such license, certificate, authorization or permit
will not be renewed in the ordinary course.
(v) SCHEDULE II attached hereto contains a true and complete
list of all jurisdictions in which NAICO is licensed to transact
insurance business and the lines of business for which NAICO is
licensed in each jurisdiction. NAICO owns or validly holds such
insurance licenses, which are valid and in full force and effect. No
such license to transact insurance business is the subject of a
proceeding for suspension or revocation or any similar proceeding and,
to the knowledge of the Company, there is no pending threat of such
suspension or revocation by any such licensing authority.
(w) All outstanding insurance policies, surety and fidelity
bonds and annuity contracts (collectively, "Insurance Contracts")
issued, reinsured or underwritten by NAICO are, to the extent required
under applicable laws, on forms and at rates approved by the insurance
regulatory authority of the jurisdiction where such insurance
contracts were issued or delivered or have been filed with and not
objected to by such authority within the period provided for
objection. All Insurance Contract benefits payable by NAICO or (to the
knowledge of the Company) by any other person or entity that is a
party to or bound by any reinsurance, coinsurance, or other similar
contract with NAICO have been paid in accordance with the terms of the
Insurance Contracts under which they arose, except for such benefits
for which the Company believes there is a reasonable basis to contest
payment. No outstanding Insurance Contract issued, reinsured or
underwritten by NAICO entitles the holder thereof or any other person
or entity to receive dividends, distributions, or other benefits based
on the revenues or earnings of NAICO or any other person or entity. To
the knowledge of the Company, all amounts to which NAICO is entitled
under reinsurance, coinsurance or other similar contracts (including
without limitation amounts based on paid and unpaid losses) are
collectible in the ordinary course of business. To the knowledge of
the Company, each insurance agent, at the time such agent wrote, sold,
or produced business for NAICO, was duly licensed as an insurance
agent (for the type of business written, sold, or produced by such
insurance agent) in the particular jurisdiction in which such agent
wrote, sold, or produced such business. To the knowledge of the
Company, each insurance agent, at the time such agent wrote, sold, or
produced business for L&W, was duly licensed as an insurance agent
(for the type of business written, sold, or produced by such insurance
agent) in the particular jurisdiction in which such agent wrote, sold,
or produced such business.
(x) Neither the Company nor any of the Subsidiaries is an
"investment
company" or a company "controlled by" an investment company within the
meaning of the Investment Company Act of 1940 (the "Investment Company
Act") and the rules and regulations of the Commission thereunder.
(y) The Company and each of the Subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted
only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(z) The Company and each of the Subsidiaries own or possess
adequate rights to use all patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service xxxx
registrations, copyrights, licenses and know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) (collectively, "IP
RIGHTS") used in the conduct of their respective businesses, except
where the failure to own or possess such IP Rights individually, or in
the aggregate, has not had and could not reasonably be expected to
have a Material Adverse Effect; the conduct of their respective
businesses has not and does not conflict with any such rights of
others, except for such conflicts about which neither the Company nor
any Subsidiary is aware and which conflicts, individually or in the
aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect; and neither the Company nor the Subsidiaries
has received any notice of any claim of conflict with any such rights
of others.
(aa) There are no contracts or other documents which are required
to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed
as exhibits to the Registration Statement.
(bb) No relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which is required to be described in the Prospectus which is not so
described.
(cc) CIC and each of its subsidiaries is in compliance in all
material respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to
any
"pension plan" (as defined in ERISA) for which the Company or any
Subsidiary would have any liability; neither the Company nor any
Subsidiary has incurred or expects to incur liability under (i) Title
IV of ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue
Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for
which the Company or any Subsidiary would have any liability that is
intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and, to the Company's knowledge,
nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(dd) CIC and each of its subsidiaries have filed all federal,
state and local income and franchise tax returns required to be filed
through the date hereof and has paid, or made adequate reserve or
provision for the payment of, all taxes due thereon and no tax
deficiency has been determined adversely to CIC or any of its
subsidiaries which was not paid or satisfied in full prior to December
31, 1998.
(ee) Neither the Company nor any of its subsidiaries, nor, to the
Company's knowledge, any director, officer, agent, employee or other
person associated with or acting on behalf of the Company or any of
its subsidiaries, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating
to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
(ff) None of CIC or any of its subsidiaries does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Florida Statutes Section 517.075.
(gg) Since December 31, 1998, except as otherwise stated in the
Prospectus, (i) there has been no change or development which,
individually or in the aggregate with other changes or developments,
has had or reasonably could be expected to result in a Material
Adverse Effect, whether or not arising in the ordinary course of
business, (ii) none of the Company or any Subsidiary has incurred any
liability or obligation, direct or contingent, other than in the
ordinary course of business which is material to the Company and the
Subsidiaries taken as a whole, (iii) none of the Company or any
Subsidiary has entered into any transaction other than in the ordinary
course of business which is material to the Company and the
Subsidiaries taken as a whole, (iv) there has not been any change in
the capital stock or , except for changes that are not material to the
Company and the Subsidiaries taken as a whole, long-term debt of the
Company or any Subsidiary, and (v) there has not been any dividend or
distribution of any kind declared, paid or made by the Company or any
Subsidiary on any class of its capital stock.
(hh) No forward-looking statement (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act)
contained in the Preliminary Prospectus or the Prospectus has been
made or reaffirmed without a reasonable basis or has been made other
than in good faith.
2. PURCHASE AND OFFERING OF THE SECURITIES BY THE UNDERWRITER. On
the basis of the representations and warranties contained in, and subject to the
terms and conditions of, this Agreement, the Company agrees to issue and to sell
to the Underwriter, and the Underwriter agrees to purchase from the Company,
$24,000,000 principal amount of Securities at a purchase price equal to ____% of
the principal amount thereof. The Company shall not be obligated to deliver any
of the Securities to be delivered except upon payment for all the Securities to
be purchased as provided herein.
The Underwriter proposes to offer the Securities for sale upon the
terms and conditions set forth in the Prospectus.
3. DELIVERY OF AND PAYMENT FOR THE SECURITIES. Delivery of and
payment for the Securities shall be made at the offices of Xxxxxx & Xxxxxx
L.L.P., Dallas, Texas, or at such other place as shall be agreed upon by the
Underwriter and the Company, at 9:00 a.m., Dallas time, on __________, 1999, or
at such other time or date, not later than three full business days after the
date of this Agreement, as shall be agreed upon by the Underwriter and the
Company. This date and time are sometimes referred to as the "DELIVERY DATE." On
the Delivery Date, the Company shall deliver or cause to be delivered the
Securities to the Underwriter for the account of the Underwriter against payment
to or upon the order of the Company of the purchase price. On the Delivery Date,
the Underwriter shall deliver the purchase price to the Company by wire or
book-entry transfer of immediately available funds to such account as the
Company shall specify prior to the Delivery Date or by such other means as the
parties hereto shall agree prior to the Delivery Date. Time shall be of the
essence, and delivery at the time and place specified pursuant to this Agreement
is a further condition of the obligation of each Underwriter hereunder. Upon
delivery, the Securities shall be in definitive fully registered form and
registered in such names and in such denominations as the Underwriter shall
request in writing not less than two full business days prior to the Delivery
Date. For the purpose of expediting the checking and packaging of the
Securities, the Company shall make the Securities available for inspection by
the Underwriter in [NEW YORK, NEW YORK], not later than 2:00 P.M., New York City
time, on the business day prior to the Delivery Date.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Underwriter and to file such Prospectus pursuant to Rule 424(b) under the
Securities 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 Securities Act; to make no further amendment or any
supplement to the Registration Statement or to the Prospectus except as
permitted herein; to advise the Underwriter, promptly after it receives notice
thereof, of the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Underwriter with copies thereof; to
advise the Underwriter, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, 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 Registration Statement or the Prospectus or for additional information;
and, in the event of the issuance of any stop order or of any order preventing
or suspending the use of any Preliminary Prospectus or the Prospectus or
suspending any such qualification, to use promptly its best efforts to obtain
its withdrawal;
(b) To furnish promptly to the Underwriter and to counsel for
the Underwriter a signed copy of the Registration Statement as originally filed
with the Commission, and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith;
(c) To deliver promptly to the Underwriter such number of the
following documents as the Underwriter shall reasonably request: (i) conformed
copies of the Registration Statement as originally filed with the Commission and
each amendment thereto (in each case excluding exhibits other than this
Agreement and the computation of per share earnings), (ii) each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus and (iii)
any document incorporated by reference in the Prospectus (excluding exhibits
thereto); and, if the delivery of a prospectus is required at any time after the
Effective Time 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 Prospectus
as then amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made
when such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary to amend or supplement the Prospectus in order to comply
with the Securities Act, to notify the Underwriter and, upon request of the
Underwriter, to prepare and furnish without charge to the Underwriter and to any
dealer in securities as many copies as the Underwriter may from time to time
reasonably request of an amended or supplemented Prospectus which will correct
such statement or omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or the Underwriter, be required by the
Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any (i) Preliminary
Prospectus, (ii) amendment to the Registration Statement or supplement to the
Prospectus or (iii) any Prospectus pursuant to Rule 424 of the Rules and
Regulations, to furnish a copy thereof to the Underwriter and counsel for the
Underwriter and obtain the consent of the Underwriter to the filing (which shall
not be unreasonably denied);
(f) As soon as practicable after the Effective Date to make
generally available to the Company's security holders and to deliver to the
Underwriter an earnings statement of the Company and its subsidiaries (which
need not be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations;
(g) For a period of five years following the Effective Date, to
furnish to the Underwriter copies of all materials furnished by the Company to
its shareholders and all public reports and all reports and financial statements
furnished by the Company to the principal national securities exchange upon
which the Securities may be listed pursuant to requirements of or agreements
with such exchange or to the Commission pursuant to the Exchange Act or any rule
or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the
Underwriter may reasonably request to qualify the Securities for offering and
sale under the securities laws of such jurisdictions as the Underwriter may
reasonably request and to comply in all material respects with such laws so as
to permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be reasonably necessary to complete the distribution of the
Securities, PROVIDED that in connection therewith the Company shall not be
required to (i) qualify as a foreign corporation in any jurisdiction where it is
not now so qualified or (ii) to file a general consent to service of process or
take any action which would subject the Company to (A) service of process in
suits or other judicial proceedings, other than those arising out of the
offering or sale of the Securities, and (B) taxation in any jurisdiction where
it is not now so subject.
(i) To apply the net proceeds from the sale of the Securities
being sold by the Company as set forth in the Prospectus.
5. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter hereunder are subject to the accuracy, when made and on the Delivery
Date, of the representations and warranties of the Company contained herein, to
the performance by the Company of its obligations hereunder, and to each of the
following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 4(a); no stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and any request
of the Commission for inclusion of additional information in the
Registration Statement or the Prospectus or otherwise shall have been
complied with.
(b) The Underwriter shall not have discovered and disclosed to
the Company on or prior to the Delivery Date that the Prospectus or
any amendment or supplement thereto contains an untrue statement of a
fact which, in the opinion of Xxxxxx & Xxxxxx L.L.P., counsel for the
Underwriter, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the
Indenture, the Securities, the Prospectus and all other legal matters
relating to this Agreement and the transactions contemplated hereby
shall be satisfactory in all material respects to counsel for the
Underwriter, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable
them to pass upon such matters.
(d) Gardere & Xxxxx, L.L.P. shall have furnished to the
Underwriter its written opinion, as counsel to the Company, addressed
to the Underwriter and dated the Delivery Date, in form and substance
reasonably satisfactory to the Underwriter, substantially to the
effect set forth in ANNEX A hereto.
(e) The Underwriter shall have received from Xxxxxx & Xxxxxx
L.L.P., counsel for the Underwriter, such opinion or opinions, dated
the Effective Date, with respect to such matters as the Underwriter
may reasonably require, and the Company shall have furnished to such
counsel such documents and information as it requests for the purpose
of enabling it to pass upon such matters.
(f) The Company shall have furnished to the Underwriter a letter
(the "INITIAL LETTER") of Deloitte & Touche LLP addressed to the
Underwriter and dated the date hereof, in form and substance
satisfactory to the Underwriter, substantially to the effect set forth
in ANNEX B hereto.
(g) The Company shall have furnished to the Underwriter a letter
(the "BRING-DOWN LETTER") of Deloitte & Touche LLP, addressed to the
Underwriter and dated the Delivery Date (i) confirming that they are
independent public accountants within the meaning of the Securities
Act and are in compliance with the applicable requirements relating to
the qualification of accountants under Rule 2-01 of Regulation S-X of
the Commission, (ii) stating, as of the date of the Bring-Down Letter
(or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is
given in the Prospectus, as of a date not more than three business
days prior to the date of the Bring-Down Letter), that the conclusions
and findings of such accountants with respect to the financial
information and other matters
covered by the Initial Letter are accurate and (iii) confirming in all
material respects the conclusions and findings set forth in the
Initial Letter.
(h) The Company shall have furnished to the Underwriter a
certificate, dated the Delivery Date, of its Chairman of the Board,
its President or a Vice President and its Chief Financial Officer
stating that:
(i) The representations and warranties of the Company in
Section 1 are true and correct in all material respects as of
such Delivery Date; the Company has complied in all material
respects with all its agreements contained herein; and the
conditions set forth in Sections 5(a) and 5(i) have been
fulfilled in all material respects;
(ii) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion (A) as of the
Effective Date, the Registration Statement and the Prospectus did
not include any untrue statement of a material fact and did not
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B)
since the Effective Date no event has occurred which should have
been set forth in a supplement or amendment to the Registration
Statement or the Prospectus and was not so set forth; and
(iii) Subsequent to the date of the most recent financial
statements contained in the Prospectus there has been no material
adverse change in the financial position or results of operation
of the Company or any of the Subsidiaries or any change, or any
development which has had or reasonably could be expected to have
a Material Adverse Effect, except as set forth in the Prospectus.
(i) The Indenture shall have been duly executed and delivered by
the Company and the Trustee, and the Securities shall have been duly
executed and delivered by the Company and duly authenticated by the
Trustee.
(j) Subsequent to the execution and delivery of this Agreement
or, if earlier, the dates as of which information is given in the
Prospectus, there shall not have been any change in the capital stock
or long-term debt or any change, or any development involving a
prospective material adverse change, in or affecting the condition
(financial or otherwise), results of operations, business or prospects
of the Company and the Subsidiaries taken as a whole, the effect of
which, in any such case described above, is, in the judgment of the
Underwriter, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or delivery of the Securities on
the terms and in the manner contemplated by this Agreement or in the
Prospectus (exclusive of any
amendment or supplement thereto).
(k) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Delivery Date,
prevent the issuance or sale of the Securities; and no injunction,
restraining order or order of any other nature by any federal or state
court of competent jurisdiction shall have been issued as of the
Delivery Date which would prevent the issuance or sale of the
Securities.
(l) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, the American
Stock Exchange or the over-the-counter market shall have been
suspended or limited, or minimum prices shall have been established on
any such exchange or market by the Commission, by any such exchange or
by any other regulatory body or governmental authority having
jurisdiction, or trading in any securities of the Company on any such
exchange or in the over-the-counter market shall have been suspended,
(ii) any moratorium on commercial banking activities shall have been
declared by federal or New York state authorities, (iii) an outbreak
or escalation of hostilities or a declaration by the United States of
a national emergency or war or (iv) a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) the effect of which, in the case of clauses (iii) or
(iv), is, in the judgment of the Underwriter, so material and adverse
as to make it impracticable or inadvisable to proceed with the sale or
the delivery of the Securities on the terms and in the manner
contemplated by this Agreement and in the Prospectus.
(m) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the
Securities or NAICO by Standard & Poor's or A.M. Best Company, as
applicable, and (ii) no such organization or any other "nationally
recognized statistical rating organization," as such term is defined
by the Commission for purposes of Rule 436(g)(2) of the rules and
regulations of the Commission under the Securities Act shall have
publicly announced that it has under surveillance or review (other
than an announcement with positive implications of a possible
upgrading), its rating of the Securities or NAICO.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriter.
6. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless the
Underwriter, its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls the Underwriter within the meaning
of the Securities Act or the Exchange Act (collectively referred to for purposes
of this Section 6(a) and Section 7 as the Underwriter), from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, without limitation, any loss, claim, damage, liability or
action relating to purchases and sales of the Securities), to which the
Underwriter may become subject, whether commenced or threatened, under the
Securities Act or any other federal or state statutory law or regulation, at
common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Prospectus, the
Registration Statement, the Prospectus or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse the Underwriter promptly upon demand for any
legal or other expenses reasonably incurred by the Underwriter in connection
with investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; PROVIDED, HOWEVER, that the Company
shall not be liable and shall not be required to indemnify the Underwriter in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from the Preliminary Prospectus,
the Registration Statement or the Prospectus or any amendment or supplement
thereto in reliance upon and in conformity with the Underwriter Information; and
PROVIDED, FURTHER, that with respect to any such untrue statement in or omission
from the Preliminary Prospectus, the indemnity agreement contained in this
Section 6(a) shall not inure to the benefit of the Underwriter on account of any
such loss, claim, damage, liability or action arising from the sale of
Securities to any person by the Underwriter if the Underwriter failed to send or
give a copy of the Prospectus, as the same may be amended or supplemented, to
the person within the time required by the Securities Act and the untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact in such Preliminary Prospectus was corrected
in the Prospectus, unless such failure resulted from the non-compliance by the
Company with Section 4(c). For the purpose of the last proviso to the
immediately preceding sentence, the term "Prospectus" shall not be deemed to
include the documents, if any, incorporated therein by reference, and the
Underwriter shall not be obligated to send or give any supplement or amendment
to any document, if any, incorporated by reference in any Preliminary Prospectus
or the Prospectus to any person other than a person to whom the Underwriter had
delivered such incorporated document or documents in response to a written
request therefor. The foregoing indemnity agreement is in addition to any
liability which the Company may otherwise have to the Underwriter or to any
officer, employee or to any controlling person of the Underwriter.
(b) The Underwriter shall indemnify and hold harmless the
Company, its officers, directors, employees, representatives and agents, and
each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act
(collectively referred to for purposes of this Section 6(b) and Section 7 as the
Company), from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company may become
subject, whether commenced or threatened, under the Securities Act or any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Prospectus, the Registration Statement or the
Prospectus, in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with the
Underwriter Information, and shall reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending or preparing to defend against or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that an indemnified party shall have
the right to employ its own counsel in any such action, but the fees, expenses
and other charges of such counsel for the indemnified party will be at the
expense of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (ii)
the indemnified party has reasonably concluded (based upon advice of counsel to
the indemnified party) that there may be legal defenses available to it that are
different from or in addition to those available to the indemnifying party and
in the reasonable judgment of such counsel it is advisable for such indemnified
party to employ separate counsel to assert such defenses on its behalf, (iii) a
conflict or potential conflict exists (based upon advice of
counsel to the indemnified party) between the indemnified party and the
indemnifying party (in which case the indemnifying party will not have the right
to direct the defense of such action on behalf of the indemnified party) or (iv)
the indemnifying party has not in fact employed counsel reasonably satisfactory
to the indemnified party to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm of attorneys (in addition to any local counsel) at any one time for all
such indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 6(a) and 6(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final, nonappealable judgment for the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party (which consent shall not be unreasonably
withheld), effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
The obligations of the Company and the Underwriter in this Section 6
and in Section 7 are in addition to any other liability that the Company or the
Underwriter, as the case may be, may otherwise have, including in respect of any
breaches of representations, warranties and agreements made herein by any such
party.
7. CONTRIBUTION. If the indemnification provided for in Section 6 is
unavailable (other than in accordance with the express terms thereof) or
insufficient to hold harmless an indemnified party under Section 6(a) or 6(b),
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability, or action in respect thereof,
(a) in such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriter on the other from
the offering of the Securities or (b) if the allocation provided by clause (a)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (a) above but
also the relative fault of the Company on the one hand and the Underwriter on
the other with respect to the statements or omissions that resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriter on the other with respect
to such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering, of the Securities purchased under this Agreement
(after deducting discounts and commissions but before deducting expenses)
received by or on behalf of the Company, on the one hand, and the total
discounts and commissions received by the Underwriter with respect to the
Securities purchased under this Agreement, on the other, bear to the total gross
proceeds from the sale of the Securities under this Agreement, in each case as
set forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to the Company or information supplied by the
Company on the one hand or to the Underwriter's Information on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company
and the Underwriter agree that it would not be just and equitable if
contributions pursuant to this Section 7 were to be determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 7 shall be deemed
to include, for purposes of this Section 7, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 7, the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total discounts and
commissions received by such Underwriter with respect to the Securities
purchased by it under this Agreement exceeds the amount of any damages which the
Underwriter has otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. TERMINATION. The obligations of the Underwriter hereunder may be
terminated by the Underwriter by notice given to and received by the Company
prior to delivery of and payment for the Securities if, prior to that time, any
of the events described in Sections [5(K) OR 5(1)] shall have occurred or if the
Underwriter shall decline to purchase the Securities for any reason permitted
under this Agreement.
9. EXPENSES. The Company shall pay (a) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Securities and
any taxes payable in that connection; (b) the costs incident to the preparation,
printing and distribution of the Preliminary Prospectus, the Registration
Statement and any amendments or supplements thereto; (c) the costs of
distributing the Registration Statement as originally filed and each amendment
thereto and any post-effective amendments thereof (including, in each case,
exhibits), any Preliminary Prospectus, the Prospectus and any amendment or
supplement to the Prospectus or any document incorporated by reference therein,
all as provided in this Agreement; (d) the costs of reproducing and distributing
each of the Transaction Documents; (e) the costs incident to the preparation,
printing and delivery of the certificates evidencing the Securities, including
stamp duties and transfer taxes, if any, payable upon issuance of the
Securities; (f) the fees and expenses of the Company's counsel and independent
accountants; (g) the fees and expenses of qualifying the Securities under the
securities laws of the several jurisdictions as provided in Section 4(h) and of
preparing, printing and distributing Blue Sky Memoranda (including related
reasonable fees and expenses of counsel for the Underwriter); (h) any fees
charged by rating agencies for rating the Securities; (i) the fees and expenses
of the Trustee and any paying agent (including related fees and expenses of any
counsel to such parties); (j) all expenses and application fees incurred in
connection with the application for the approval of the Securities for
book-entry transfer by DTC; (k) the Underwriter's out-of-pocket expenses
(including reasonable fees and disbursements of counsel) as shall have been
reasonably incurred by the Underwriter in connection with this Agreement and the
proposed purchase of the Securities as contemplated by that certain letter
agreement by and between the Company and the Underwriter dated January 18, 1999;
(l) fees and expenses of the Company and the Underwriter (including without
limitation airfare, hotel and other travel expenses) incurred in connection with
the road show; and (m) all other reasonable costs and expenses incident to the
performance of the obligations of the Company under this Agreement which are not
otherwise specifically provided for in this Section 9; provided, however, that
except as provided in this Section 9, the Underwriter shall pay its own costs
and expenses.
10. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriter, shall be delivered or sent by mail or
telecopy transmission to Southwest Securities, 0000 Xxx Xxxxxx, Xxxxx
0000, Xxxxxx, Xxxxx 00000, Attention: Xxxx Xxxxxxxx (telecopier no.:
(000) 000-0000), with a copy to Xxxxxx & Xxxxxx L.L.P., 3700 Xxxxxxxx
Xxxx Center, 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000 Attention:
Xxxxxx X. Xxxxx (telecopier no.: (000) 000-0000); or
(b) if to the Company, shall be delivered or sent by mail or
telecopy transmission to the address of the Company set forth in the
Registration Statement, Attention: Xxxxx XxXxxx (telecopier no.: (405)
258-3140), with a copy to Gardere & Xxxxx, L.L.P., 0000 Xxx Xxxxxx,
Xxxxx 0000, Xxxxxx, Xxxxx 00000, Attention: Xxxxx XxXxxx (telecopier
no.: (000) 000-0000).
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof. The Company shall be entitled to act and rely upon any
request, consent, notice or agreement given by the Underwriter.
11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Underwriter, the Company, and
their respective successors. This Agreement and the terms and provisions hereof
are for the sole benefit of only those
persons, except that (a) the representations, warranties, indemnities and
agreements of the Company contained in this Agreement shall also be deemed to be
for the benefit of the person or persons, if any, who are collectively referred
to as the Underwriter as indicated therein and (b) the indemnity agreement of
the Underwriter contained in Section 6(b) of this Agreement shall be deemed to
be for the benefit of the person or persons, if any, who are collectively
referred to as the Company as indicated therein. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 11, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
12. SURVIVAL. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company and the Underwriter
contained in this Agreement or made by or on behalf of the Company or the
Underwriter pursuant to this Agreement or any certificate delivered pursuant
hereto shall survive the delivery of and payment for the Securities and shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any of them or
any of their respective affiliates, officers, directors, employees,
representatives, agents or controlling persons.
13. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY." For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 under the Securities Act.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
16. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
If the foregoing correctly sets forth the agreement between the
Company and the Underwriter, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
XXXXXXXX (U.S.A.), INC.
ACCEPTED:
SOUTHWEST SECURITIES, INC.
By
---------------------------
Name:
Title:
SCHEDULE I
SCHEDULE II
[STATES/LINES OF INSURANCE]
ANNEX A
[Form of Opinion of Counsel for the Company]
Gardere & Xxxxx, L.L.P. (or, in the case of certain opinions related
to matters of Oklahoma or Nebraska law, such local counsel as reasonably
acceptable to Underwriter) shall have furnished to the Underwriter their written
opinion, as counsel to the Company, addressed to the Underwriter and dated the
Effective Date, in form and substance reasonably satisfactory to the
Underwriter, substantially to the effect set forth below (and with such
qualifications as may be appropriate and reasonably approved by the
Underwriter):
(i) the Company and each of its Subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are
duly qualified to do business and are in good standing as a foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification, and have all power and authority
necessary to own or hold their respective properties and to conduct
the businesses in which they are engaged, except where the failure to
so qualify or have such power or authority would not, singularly or in
the aggregate, have a material adverse effect on the condition
(financial or otherwise), results of operations, business or prospects
of the Company and its Subsidiaries taken as a whole (a "MATERIAL
ADVERSE EFFECT");
(ii) each of NAICO and L&W is a corporation validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own, lease
and operate its properties and conduct its business as described in
the Prospectus;
(iii) The authorized capital stock of NAICO consists solely of
30,000 shares of common stock, par value $250 per share, 20,000 of
which have been duly and validly authorized and issued and are
outstanding and held of record and beneficially by the Company free
and clear of any and all liens, claims or other encumbrances; the
authorized capital stock of L&W consists solely of 50,000 shares of
common stock, par value $1.00 per share, ______ of which have been
duly and validly authorized and issued and are outstanding and held of
record and beneficially by the Company free and clear of any and all
liens, claims or other encumbrances; the authorized capital stock of
the Company consists solely of 50,000 shares of common stock, par
value $1.00 per share, ______ of which have been duly and validly
authorized and issued and are outstanding and held of record and
beneficially by Xxxxxxxx Insurance (Barbados), Ltd., a Barbados
company ("CIB") free and clear of any and all liens, claims or other
encumbrances; and the authorized capital stock of CIB consists solely
of __________, __________ of which
are issued and outstanding and held of record and beneficially by
Xxxxxxxx Insurance Company, Ltd., a Cayman Islands company ("CIC").
Except as described in the foregoing sentence, there are no
outstanding shares or shares of capital stock of NAICO, L&W, the
Company, or CIB or any other securities, rights (preemptive or other),
subscriptions, calls, warrants, options or other agreements that give
any person or entity the right to (i) purchase or otherwise receive or
be issued any shares or shares of capital stock or other securities of
NAICO, L&W, the Company, or CIB (or any interest therein) or any
security convertible into or exchangeable for any shares or shares of
capital stock or other securities of NAICO, L&W, the Company, or CIB
(or any interest therein), (ii) receive any dividend, voting or
ownership rights similar to those accruing to a holder of such shares
or shares of capital stock or other securities as described in the
foregoing sentence or (iii) participate in the equity, income or
election of directors or officers of NAICO, L&W, the Company, or CIB;
(iv) the statements in the Prospectus under the caption
"Description of the Debentures," insofar as they purport to constitute
summaries of certain terms of documents referred to therein,
constitute accurate summaries of the terms of such documents in all
material respects;
(v) the statements in the Prospectus under the heading
"Certain United States Federal Income Tax Considerations," to the
extent that they constitute summaries of matters of law or regulation
or legal conclusions, have been reviewed by such counsel and fairly
summarize the matters purported to be described therein in all
material respects; and, to such counsel's knowledge, (a) there are no
current or pending legal or governmental actions, suits or proceedings
required to be described in the Prospectus that are not described
therein as required under the Securities Act and the Rules and
Regulations and (b) there is no contract, indenture, mortgage, loan
agreement, note, lease or other document that are required to be
described in the Xxxxxxxxxx X-0 that are not described as so required
under the Securities Act and Rules and Regulations;
(vi) the Indenture conforms in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations
of the Commission applicable to an indenture which is qualified
thereunder;
(vii) the Company has full corporate power and authority to
execute and deliver each of the Transaction Documents and to perform
its obligations thereunder; and all corporate action required to be
taken by the Company for the due authorization, execution and delivery
of each of the Transaction Documents and the Company's consummation of
the transactions described therein have been duly and validly taken by
or on behalf of the Company;
(viii) the Underwriting Agreement has been duly authorized,
executed and
delivered by the Company and constitutes a valid and legally binding
agreement of the Company enforceable against the Company in accordance
with its terms;
(ix) the Indenture has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution
and delivery thereof by the Trustee, constitutes a valid and legally
binding agreement of the Company enforceable against the Company in
accordance with its terms;
(x) the Securities have been duly authorized, executed, issued
and delivered by the Company and, assuming due authentication thereof
by the Trustee in accordance with the terms of the Indenture and upon
payment and delivery in accordance with the Underwriting Agreement,
will constitute valid and legally binding obligations of the Company
that are entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms;
(xi) each Transaction Document conforms in all material
respects to the description thereof contained in the Prospectus;
(xii) the execution, delivery and performance by the Company of
each of the Transaction Documents, the issuance, sale and delivery of
the Securities by the Company thereunder, the compliance by the
Company with the terms thereof and the consummation of the
transactions described in the Transaction Documents will not (i)
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant
to any indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which CIC or any of its
subsidiaries (which include the Company and the Subsidiaries) is a
party or by which CIC or any of its subsidiaries is bound or to which
any of the property or assets of CIC or any of its subsidiaries is
subject, (ii) result in any violation of the provisions of the charter
or by-laws of CIC or any of its subsidiaries or any statute or any
judgment, order, decree, rule or regulation of any court or arbitrator
or governmental agency or body having jurisdiction over CIC or any of
its subsidiaries or any of their properties or assets; or (iii)
require any consent, approval, authorization or order of, or filing or
registration with, any such court or arbitrator or governmental agency
or body under any such statute, judgment, order, decree, rule or
regulation, except, in the case of this clause (iii), for such
consents, approvals, authorizations, filings, registrations or
qualifications (A) which shall have been obtained or made prior to the
Effective Date or (B) as may be required to be obtained or made under
applicable state Blue Sky or securities laws in connection with the
offer or the issuance or sale of the Securities under the Underwriting
Agreement;
[(XIII) THE COMPANY AND EACH OF THE SUBSIDIARIES POSSESS ALL
LICENSES,
CERTIFICATES, AUTHORIZATIONS AND PERMITS ISSUED BY, AND HAVE MADE ALL
DECLARATIONS AND FILINGS WITH, THE APPROPRIATE FEDERAL, STATE OR
FOREIGN REGULATORY AGENCIES OR BODIES WHICH ARE REQUIRED OR NECESSARY
FOR THE OWNERSHIP OF THEIR RESPECTIVE PROPERTIES OR THE CONDUCT OF
THEIR RESPECTIVE BUSINESSES AS DESCRIBED IN THE PROSPECTUS, EXCEPT
WHERE THE FAILURE TO POSSESS OR MAKE THE SAME WOULD NOT, SINGULARLY OR
IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT, AND NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES HAS RECEIVED NOTIFICATION OF ANY
REVOCATION OR MODIFICATION OF ANY SUCH LICENSE, CERTIFICATE,
AUTHORIZATION OR PERMIT OR HAS ANY REASON TO BELIEVE THAT ANY SUCH
LICENSE, CERTIFICATE, AUTHORIZATION OR PERMIT WILL NOT BE RENEWED IN
THE ORDINARY COURSE.]
(xiv) SCHEDULE I attached hereto contains a true list of all
jurisdictions in which NAICO is licensed to transact insurance
business and the lines of business for which NAICO is licensed in each
jurisdiction. [NAICO OWNS OR VALIDLY HOLDS SUCH INSURANCE LICENSES,
WHICH ARE VALID AND IN FULL FORCE AND EFFECT.] To our knowledge, no
such license to transact insurance business is the subject of a
pending proceeding for suspension or revocation or any similar
proceeding nor is any such suspension or revocation threatened in
writing by any such licensing authority.
(xv) to the knowledge of such counsel, there are no pending
actions or suits or judicial, arbitral, administrative or other
proceedings to which the Company or any of its subsidiaries is a party
or of which any property or assets of the Company or any of its
subsidiaries is the subject which (A) singularly or in the aggregate,
if determined adversely to the Company or any of its subsidiaries,
could reasonably be expected to have a Material Adverse Effect or (B)
questions the validity or enforceability of any of the Transaction
Documents or any action taken or to be taken pursuant thereto; and to
the knowledge of such counsel, no such proceedings have been
threatened in writing by governmental authorities or threatened by
others;
(xvi) neither the Company nor any of its Subsidiaries is an
"investment company" or a company "controlled by" an "investment
company" within the meaning of the Investment Company Act and the
rules and regulations of the Commission thereunder, without taking
account of any exemption under the Investment Company Act arising out
of the number of holders of the Company's securities;
(xvii) As of the date of the Prospectus and as of the Delivery
Date, the description of the litigation involving the CenTra Group set
forth under "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of OperationsCCenTra Litigation," and
"Legal Proceedings" of the Prospectus did not contain and does not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
Such counsel shall also state that they have participated in
conferences with representatives of the Company, representatives of its
independent accountants and representatives of the Underwriter and their counsel
at which conferences the contents of the Prospectus were discussed and, although
such counsel assumes no responsibility for the accuracy, completeness or
fairness of statements contained in the Prospectus (except to the limited extent
expressly stated in paragraph (iv) and (xvi) above), nothing has come to the
attention of such counsel to cause such counsel to believe that either (i) the
Registration Statement contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (other than the financial statements contained therein, as to which
such counsel need express no belief) or (ii) the Prospectus contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (other than the financial statements
contained therein, as to which such counsel need express no belief).
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials which are furnished to the
Underwriter.
ANNEX B
[Form of Initial Comfort Letter]
The Company shall have furnished to the Underwriter a letter of
Deloitte & Touche, LLP, addressed to the Underwriter and dated the date of the
Underwriting Agreement, in form and substance satisfactory to the Underwriter,
substantially to the effect set forth below:
(i) they are independent certified public accountants with
respect to the Company within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and its interpretations and rulings;
(ii) in their opinion, the audited financial statements and
financial statement schedules included in the Registration Statement
and reported on by them comply in form in all material respects with
the accounting requirements of the Securities Act and the related
published rules and regulations of the Commission thereunder that
apply to the Registration Statement;
(iii) based upon a reading of minutes and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters and certain other limited procedures requested by
the Underwriter and described in detail in such letter, nothing has
come to their attention that causes them to believe that the
information included under the headings "Summary--Summary Consolidated
Financial Data," "Capitalization," "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and
"Business" is not in conformity with the disclosure requirements of
Regulation S-K that would apply to the Registration Statement;
(iv) based upon the procedures detailed in such letter with
respect to the period subsequent to the date of the last available
balance sheet, including reading of minutes and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters, nothing has come to their attention that causes
them to believe that (A) at a specified date not more than three
business days prior to the date of such letter, there was any change
in capital stock, increase in long-term debt or decrease in net
current assets as compared with the amounts shown in the [DECEMBER 31,
1998,] audited balance sheet included in the Registration Statement or
(B) for the period from [JANUARY 1, 1999,] to a specified date not
more than three business days prior to the date of such letter, there
were any decreases, as compared with the corresponding period in the
preceding year, in direct premiums written and assumed, net premiums
earned, EBITDA or net income, except in all instances for changes,
increases or decreases that the Registration Statement discloses have
occurred or which are set forth in such letter, in
which case the letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said explanation is not
deemed necessary by the Underwriter; and
[(V) FOR PURPOSES OF THIS LETTER WE HAVE READ THE 1999 MINUTES
OF THE STOCKHOLDERS, THE BOARD OF DIRECTORS, AND [INCLUDE OTHER
APPROPRIATE COMMITTEES, IF ANY] OF THE COMPANY AND ITS SUBSIDIARIES AS
SET FORTH IN THE MINUTE BOOKS AT JUNE 23, 1999 [OR JULY 20, 1999],
OFFICIALS OF THE COMPANY HAVING ADVISED US THAT THE MINUTES OF ALL
SUCH MEETINGS THROUGH THAT DATE WERE SET FORTH THEREIN; WE HAVE
CARRIED OUT OTHER PROCEDURES TO JUNE 23, 1999 [OR JULY 20, 1999] AS
FOLLOWS (OUR WORK DID NOT EXTEND TO THE PERIOD FROM JUNE 24, 1999, TO
JUNE 28, 1999, INCLUSIVE [ OR JULY 21, 1999, TO JULY 25, 1999]:
WITH RESPECT TO THE THREE-MONTH PERIODS ENDED MARCH 31, 1999 AND 1998,
WE HAVE:
(A) PERFORMED THE PROCEDURES SPECIFIED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS FOR A REVIEW OF INTERIM
FINANCIAL INFORMATION AS DESCRIBED IN SAS NO. 71, INTERIM
FINANCIAL INFORMATION, ON THE UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 1999, AND UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME, RETAINED EARNINGS
(STOCKHOLDERS' EQUITY), AND CASH FLOWS FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1999 AND 1998, INCLUDED IN THE
REGISTRATION STATEMENT.
(B) INQUIRED OF CERTAIN OFFICIALS OF THE COMPANY WHO HAVE
RESPONSIBILITY FOR FINANCIAL AND ACCOUNTING MATTERS WHETHER THE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS REFERRED TO
IN (V)(A) COMPLY AS TO FORM IN ALL MATERIAL RESPECTS WITH THE
APPLICABLE ACCOUNTING REQUIREMENTS OF THE ACT AND THE RELATED
PUBLISHED RULES AND REGULATIONS.
(VI) WITH RESPECT TO THE PERIOD FROM APRIL 1, 1999 TO MAY 31,
1999 [OR THE SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998], WE HAVE:
(A) READ THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS1
OF THE COMPANY AND SUBSIDIARIES FOR APRIL AND MAY OF BOTH 1998
AND 1999 FURNISHED US BY THE COMPANY, OFFICIALS OF THE COMPANY
HAVING ADVISED US THAT NO SUCH FINANCIAL STATEMENTS AS OF ANY
DATE OR FOR ANY PERIOD SUBSEQUENT TO MAY 31, 1999, WERE
AVAILABLE.
----------
(1) If the interim financial information is incomplete, a sentence similar to
the following should be added: "The financial information for April and May
is incomplete in that it omits the statements of cash flows and other
disclosures."
[OR (A) READ THE UNAUDITED AMOUNTS FOR SALES, NET INCOME, AND
EARNINGS PER SHARE FOR THE SIX-MONTH PERIODS ENDED JUNE 30,
1999 AND 1998, AS SET FORTH IN PARAGRAPH (IDENTIFY
LOCATION).
(B) PERFORMED THE PROCEDURES SPECIFIED BY THE AMERICAN INSTITUTE
OF CERTIFIED PUBLIC ACCOUNTANTS FOR A REVIEW OF INTERIM
FINANCIAL INFORMATION AS DESCRIBED IN SAS NO. 71, INTERIM
FINANCIAL INFORMATION, ON THE UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999, AND
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME,
RETAINED EARNINGS (STOCKHOLDERS' EQUITY), AND CASH FLOWS FOR
THE SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998, FROM
WHICH THE UNAUDITED AMOUNTS REFERRED TO IN (VI)(A) ARE
DERIVED.] ]
(B) [OR (C)] INQUIRED OF CERTAIN OFFICIALS OF THE COMPANY WHO
HAVE RESPONSIBILITY FOR FINANCIAL AND ACCOUNTING MATTERS WHETHER THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS REFERRED TO IN (VI)(A) ARE
STATED ON A BASIS SUBSTANTIALLY CONSISTENT WITH THAT OF THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE REGISTRATION
STATEMENT.
THE FOREGOING PROCEDURES DO NOT CONSTITUTE AN AUDIT CONDUCTED IN
ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS. ALSO, THEY WOULD NOT
NECESSARILY REVEAL MATTERS OF SIGNIFICANCE WITH RESPECT TO THE COMMENTS IN THE
FOLLOWING PARAGRAPH. ACCORDINGLY, WE MAKE NO REPRESENTATIONS REGARDING THE
SUFFICIENCY OF THE FOREGOING PROCEDURES FOR YOUR PURPOSES.
(VII) NOTHING CAME TO OUR ATTENTION AS A RESULT OF THE FOREGOING
PROCEDURES, HOWEVER, THAT CAUSED US2 TO BELIEVE THAT:
(A) (1) ANY MATERIAL MODIFICATIONS SHOULD BE MADE TO THE UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DESCRIBED IN
(V)(A), INCLUDED IN THE REGISTRATION STATEMENT, FOR THEM TO
BE IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.3
----------
(2) If there had been a change in accounting principle during the interim
period, a reference to that change should be included herein.
(3) SAS No. 71 does not require the accountants to modify the report on a
review of interim financial information for a lack of consistency in the
application of accounting principles provided that the interim financial
information appropriately discloses such matters.
(2) THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DESCRIBED IN (V)(A) DO NOT COMPLY AS TO FORM IN ALL MATERIAL
RESPECTS WITH THE APPLICABLE ACCOUNTING REQUIREMENTS OF THE
ACT AND THE RELATED PUBLISHED RULES AND REGULATIONS.
(B) (1) AT MAY 31, 1999, THERE WAS ANY CHANGE IN THE CAPITAL STOCK,
INCREASE IN LONG-TERM DEBT, OR DECREASE IN CONSOLIDATED NET
CURRENT ASSETS OR STOCKHOLDERS' EQUITY OF THE CONSOLIDATED
COMPANIES AS COMPARED WITH AMOUNTS SHOWN IN THE MARCH 31,
1999, UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
INCLUDED IN THE REGISTRATION STATEMENT, OR (2)FOR THE PERIOD
FROM APRIL 1, 1999, TO MAY 31, 1999, THERE WERE ANY
DECREASES, AS COMPARED TO THE CORRESPONDING PERIOD IN THE
PRECEDING YEAR, IN CONSOLIDATED NET SALES OR IN THE TOTAL OR
PER-SHARE AMOUNTS OF INCOME BEFORE EXTRAORDINARY ITEMS OR OF
NET INCOME, EXCEPT IN ALL INSTANCES FOR CHANGES, INCREASES,
OR DECREASES THAT THE REGISTRATION STATEMENT DISCLOSES HAVE
OCCURRED OR MAY OCCUR.
[OR AT JUNE 30, 1999, THERE WAS ANY CHANGE IN THE
CAPITAL STOCK, INCREASE IN LONG-TERM DEBT OR ANY
DECREASES IN CONSOLIDATED NET CURRENT ASSETS OR
STOCKHOLDERS' EQUITY OF THE CONSOLIDATED COMPANIES AS
COMPARED WITH AMOUNTS SHOWN IN THE MARCH 31, 1999,
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET INCLUDED
IN THE REGISTRATION STATEMENT, EXCEPT IN ALL INSTANCES
FOR CHANGES, INCREASES, OR DECREASES THAT THE
REGISTRATION STATEMENT DISCLOSES HAVE OCCURRED OR MAY
OCCUR.]
AS MENTIONED IN (VI), COMPANY OFFICIALS HAVE ADVISED US THAT NO
CONSOLIDATED FINANCIAL STATEMENTS AS OF ANY DATE OR FOR ANY PERIOD SUBSEQUENT
TO MAY 31, 1999 [OR JUNE 30, 1999], ARE AVAILABLE; ACCORDINGLY, THE
PROCEDURES CARRIED OUT BY US WITH RESPECT TO CHANGES IN FINANCIAL STATEMENT
ITEMS AFTER MAY 31, 1999 [OR JUNE 30, 1999], HAVE, OF NECESSITY, BEEN EVEN
MORE LIMITED THAN THOSE WITH RESPECT TO THE PERIODS REFERRED TO IN (V). WE
HAVE INQUIRED OF CERTAIN OFFICIALS OF THE COMPANY WHO HAVE RESPONSIBILITY FOR
FINANCIAL AND ACCOUNTING MATTERS WHETHER (A) AT JUNE 23, 1999
[OR JULY 20, 1999], THERE WAS ANY CHANGE IN THE CAPITAL STOCK, INCREASE IN
LONG-TERM DEBT OR ANY DECREASES IN CONSOLIDATED NET CURRENT ASSETS OR
STOCKHOLDERS' EQUITY OF THE CONSOLIDATED COMPANIES AS COMPARED WITH AMOUNTS
SHOWN ON THE MARCH 31, 1999, UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
----------
(3) SAS No. 71 does not require the accountants to modify the report on a
review of interim financial information for a lack of consistency in the
application of accounting principles provided that the interim financial
information appropriately discloses such matters.
INCLUDED IN THE REGISTRATION STATEMENT OR (B) FOR THE PERIOD FROM APRIL 1, 1999,
TO JUNE 23, 1999 [OR JULY 1, 1999 TO JULY 20, 1999], THERE WERE ANY DECREASES,
AS COMPARED WITH THE CORRESPONDING PERIOD IN THE PRECEDING YEAR, IN CONSOLIDATED
NET SALES OR IN THE TOTAL OR PER-SHARE AMOUNTS OF INCOME BEFORE EXTRAORDINARY
ITEMS OR OF NET INCOME. ON THE BASIS OF THESE INQUIRIES AND OUR READING OF THE
MINUTES AS DESCRIBED IN (IV OR V?), NOTHING CAME TO OUR ATTENTION THAT CAUSED US
TO BELIEVE THAT THERE WAS ANY SUCH CHANGE, INCREASE, OR DECREASE, EXCEPT IN ALL
INSTANCES FOR CHANGES, INCREASES, OR DECREASES THAT THE REGISTRATION STATEMENT
DISCLOSES HAVE OCCURRED OR MAY OCCUR.]
(v) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company) set forth or incorporated
by reference in the Registration Statement agrees with the accounting
records of the Company, excluding any questions of legal
interpretation.
