Exhibit 1
WF&G DRAFT
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7/7/97
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$90,000,000
SYSTEM SOFTWARE ASSOCIATES, INC.
___% Convertible Subordinated Debentures Due 2002
UNDERWRITING AGREEMENT
August __, 1997
ALEX. ▇▇▇▇▇ & SONS INCORPORATED
As Representatives of the
Several Underwriters
c/o Alex. ▇▇▇▇▇ & Sons Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
System Software Associates, Inc., a Delaware corporation (the "Company"),
proposes to sell to the several underwriters (the "Underwriters") named in
Schedule I hereto for whom you are acting as representatives (the
"Representatives") $90,000,000 aggregate principal amount of its __% Convertible
Subordinated Debentures due 2002 (the "Firm Debentures"). The respective amounts
of the Firm Debentures to be so purchased by the several Underwriters are set
forth opposite their names in Schedule I hereto. The Company also proposes to
sell at the Underwriters' option up to an additional $13,500,000 aggregate
principal amount of such debentures (the "Option Debentures") as set forth
below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Debentures set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option
Debentures if you elect to exercise the over-allotment option in whole or in
part for the accounts of the several Underwriters. The Firm Debentures and the
Option Debentures (to the extent the aforementioned option is exercised) are
herein collectively called the "Debentures."
The Debentures are to be issued pursuant to the provisions of an Indenture
dated as of August ___, 1997 (the "Indenture") between the Company and First
Chicago Trust Company, as trustee (the "Trustee").
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company. The Company represents
and warrants to each of the Underwriters as follows:
(a) A registration statement on Form S-3 (File No. 333-_____) with
respect to the Debentures and the shares of Common Stock of the Company,
$.0033 par value per share (the "Common Stock"), issuable upon conversion
of the Debentures has been carefully prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended, (the
"Act") and the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and has
been filed with the Commission under the Act. The Company has complied with
the conditions for the use of Form S-3. Copies of such registration
statement, including any amendments thereto, the preliminary prospectuses
(meeting the requirements of the Rules and Regulations) contained therein
and the exhibits, financial statements and schedules, as finally amended
and revised, have heretofore been delivered by the Company to you. Such
registration statement, together with any registration Statement filed by
the Company pursuant to Rule 462(b) of the Act, herein referred to as the
"Registration Statement," which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of
the date of this Agreement. "Prospectus" means (i) the form of prospectus
first filed by the Company with the Commission pursuant to Rule 424(b), or
(ii) the last preliminary prospectus included in the Registration Statement
filed prior to the time it becomes effective or filed pursuant to Rule
424(a) under the Act that is delivered by the Company to the Underwriters
for delivery to purchasers of the Debentures, together with the term sheet
or abbreviated term sheet filed with the Commission pursuant to Rule
424(b)(7) of the Act. Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus." Any reference herein to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include the documents incorporated by reference
therein, as to the date of such Preliminary Prospectus or Prospectus, as
the case may be, and, in the case of any reference herein to any
Prospectus, also shall be deemed to include any documents incorporated by
reference therein, and any supplements or amendments thereto, filed with
the Commission after the date of filing of the Prospectus under Rules
424(b) or 430A, and prior to the termination of the offering of the
Debentures by the Underwriters.
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(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus. When the Registration Statement
becomes effective and at all times subsequent thereto up to and at the
Closing Date (hereinafter defined) and any later date on which Option
Debentures are to be purchased, (i) the Registration Statement and
Prospectus, and any amendments or supplements thereto, will conform in all
material respects to the requirements of the Act and the Rules and
Regulations, and (ii) neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, will include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which made, not misleading; provided,
however, that none of the representations and warranties contained in this
subparagraph shall apply to information contained in or omitted from the
Registration Statement or the Prospectus or any such amendment or
supplement in reliance upon, and in conformity with, (i) written
information furnished to the Company by any Underwriter, directly or
through you, specifically for use in the preparation thereof or (ii) that
part of the Registration Statement which constitutes the statement of
Eligibility and Qualification of the Trustee (Form T-1) under the Trust
Indenture Act of 1939, as amended.
(c) 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, with
full power and authority (corporate and other) to own, lease and operate
their properties and conduct their business as described in the
Registration Statement; except for the pledge of stock of certain
subsidiaries of the Company pursuant to the Amended and Restated Secured
Credit Agreement, dated as of February 28, 1997 (the "Amended and Restated
Credit Agreement"), among the Company, Bank of America National Trust and
Savings Association and the other financial institutions party thereto, the
Company owns all of the voting stock of its subsidiaries free and clear of
all liens, charges and encumbrances; the Company and each of its
subsidiaries have taken all necessary or required actions in order to
qualify to do business in each of the several jurisdictions in which the
Company and its subsidiaries owns or leases property or conducts business,
except where the failure to take any such actions, in the aggregate, would
not have a material adverse effect on the business, condition (financial or
otherwise), properties or prospects of the Company and its subsidiaries (a
"Material Adverse Effect"); the Company and each of its subsidiaries hold
all licenses, certificates and permits from foreign, state, federal and
other regulatory authorities which are material to the conduct of their
respective businesses, all of which
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are valid and in full force and effect; the Company and each of its
subsidiaries are not (i) in violation of their respective charter or By-
laws or (ii) except as set forth in the Prospectus, in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement bond, debenture, note agreement or other evidence of indebtedness
or in any other material lease, contract, joint venture or other agreement
or instrument to which the Company or any subsidiary is a party or by which
they or any of their properties may be bound or (iii) in violation of any
law, order, rule, regulation, writ, injunction or decree of any government,
governmental instrumentality or court, domestic or foreign.
(d) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable;
the Debentures to be issued and sold by the Company have been duly
authorized and, when issued and paid for as contemplated herein, will be
validly issued and outstanding, and valid and binding obligations of the
Company, enforceable in accordance with their terms and will be entitled to
the benefits of the Indenture; the shares of Common Stock of the Company
issuable upon conversion of the Debentures have been duly authorized and
reserved for issuance upon such conversion, and when issued upon conversion
in accordance with the terms of the Indenture, will have been validly
issued and will be fully paid and non-assessable. No person or entity holds
a right to require, or participate in, the registration under the Act of
the Debentures or shares of Common Stock of the Company issuable upon
conversion of the Debentures. No person or entity has any preemptive or
other right of participation or first refusal with respect to any of the
Debentures or the Common Stock to be issued upon conversion thereof or the
issue or sale thereof by the Company.
Each approval, consent, order, authorization, designation, declaration
or filing by or with any regulatory, administrative or other governmental
body necessary in connection with the execution and delivery by the Company
of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the
Commission, the National Association of Securities Dealers, Inc. (the
"NASD") or may be necessary to qualify the Debentures for public offering
by the Underwriters under state securities or Blue Sky laws) has been
obtained or made and is in full force and effect. No approval or
authorization of any shareholder is required for the issuance and sale of
the Debentures by the Company or in order for the Company to consummate the
transactions described in the Registration Statement.
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(e) The Debentures and the authorized capital stock of the Company
conform with the statements concerning them set forth and incorporated by
reference in the Registration Statement.
(f) The historical consolidated financial statements of the Company
and its subsidiaries, together with the related notes and schedules,
included in the Registration Statement present fairly the financial
position and the results of operations and cash flows of the Company and
its consolidated subsidiaries, at the indicated dates and for the indicated
periods. Such financial statements and related schedules have been prepared
in accordance with generally accepted principles of accounting ("GAAP"),
consistently applied throughout the periods involved, and all adjustments
necessary for a fair presentation of results for such periods have been
made. The pro forma financial statements set forth in the Registration
Statement fairly present the information required to be presented therein,
and such statements meet the requirements of the Act and have been prepared
in accordance with GAAP consistently applied throughout the periods
involved. The summary financial and statistical data included in the
Registration Statement present fairly the information shown therein and
have been compiled on a basis consistent with the financial statements
presented therein. The Company and its subsidiaries have no material
contingent obligations which are not disclosed in the Company's financial
statements which are included in the Registration Statement.
(g) The Company has full corporate power and authority to enter into
this Agreement and the Indenture and to perform its obligations hereunder
and thereunder (including to issue, sell and deliver the Debentures and the
Common Stock upon conversion thereof). This Agreement and the Indenture
have been duly authorized, executed and delivered by the Company and are
legal, valid and binding agreements on the part of the Company enforceable
in accordance with their respective terms, except as rights to indemnity
and contribution which may be limited by applicable law and except as
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights; the performance of this Agreement
and the Indenture and the consummation of the transactions contemplated
herein and therein will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, (i) any indenture,
mortgage, deed of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, or any other material lease, contract,
joint venture or other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which the property of the Company or
any of its subsidiaries is bound, or (ii) the Company's or any of its
subsidiaries' charters or By-laws,
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or (iii) any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or over the properties of the Company or any of its
subsidiaries.
(h) Except as set forth in the Prospectus, there is no pending or, to
the Company's knowledge, threatened action, suit, claim or proceeding
against the Company, any of its subsidiaries or any of their respective
officers, directors, properties, assets or rights before any court or
governmental agency or body or otherwise which, if adversely determined,
would reasonably be expected to have a Material Adverse Effect or adversely
affect the consummation of the transactions contemplated hereby or the
Recapitalization; and there are no contracts or documents of the Company or
any of its subsidiaries which are required to be described in the
Prospectus or to be filed as exhibits to the Registration Statement by the
Act or by the Rules and Regulations which have not been accurately
described in all material respects in the Prospectus and/or filed as
exhibits to the Registration Statement.
(i) KPMG Peat Marwick LLP and Price Waterhouse LLP, who have examined
certain of the consolidated financial statements, together with the related
schedules and notes of the Company, filed with the Commission as a part of
the Registration Statement, are independent accountants within the meaning
of the Act and the Rules and Regulations.
(j) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as may be
otherwise stated in the Prospectus, there has not been (i) any material
adverse change in the condition (financial or otherwise), business,
properties or prospects of the Company and its subsidiaries, (ii) any
transaction which is material to the Company and its subsidiaries, except
transactions in the ordinary course of business, (iii) any obligation which
is material to the Company and its subsidiaries, direct or contingent,
incurred by the Company or its subsidiaries, except obligations incurred in
the ordinary course of business, (iv) any change which is material to the
Company and its subsidiaries in the capital stock or outstanding
indebtedness of the Company or its subsidiaries, or (v) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or its subsidiaries.
(k) Except as set forth in the Registration Statement, (i) the Company
and its subsidiaries have good and marketable title to all properties and
assets described in the Prospectus as owned by them, free and clear of any
liens, charges, encumbrances or restrictions, other than the liens granted
pursuant to the Amended and Restated Credit Agreement and such liens,
charges, encumbrances or
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restrictions that are not significant in relation to the business of the
Company and its subsidiaries when taken in the aggregate, and (ii) the
material agreements to which the Company and its subsidiaries are a party
are valid and enforceable by the Company and its subsidiaries (as
applicable), except as enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights and, to the
Company's knowledge, the other contracting party or parties thereto are not
in material breach or material default under any of such agreements.
(l) The Company and its subsidiaries have filed all necessary foreign,
federal and state income and franchise tax returns and have paid all taxes
shown thereon as due, and the Company has no knowledge of any tax
deficiency which has been or might be asserted against the Company or its
subsidiaries which could reasonably be expected to have a Material Adverse
Effect; to the Company's knowledge, all tax liabilities are adequately
provided for on the books of the Company and its subsidiaries.
(m) The Company and its subsidiaries maintain insurance of the types
and in amounts generally deemed adequate for their respective business and
consistent with insurance coverage maintained by similar companies in
similar businesses, including, but not limited to, insurance covering real
and personal property owned or leased by the Company and its subsidiaries
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and
effect.
(n) To the Company's knowledge, no labor disturbance by the employees
of the Company and its subsidiaries exists or is imminent.
(o) The Company and its subsidiaries own, or possess adequate rights
to use, all material patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights described or referred to in the
Prospects as owned or used by it or which are necessary for the conduct of
their businesses; neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any patents, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations or other rights which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would reasonably be expected to have a Material Adverse Effect.
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(p) Neither the Company nor, to the Company's knowledge, any of its
affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the price of the shares of Common Stock to facilitate the sale or resale of
the Debentures.
(q) The Company is not, and after giving effect to the issuance of the
Debentures will not be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, and the Company is not, nor
will be subject to regulation under said Act.
(r) Upon the execution and delivery of the Indenture by the parties
thereto, the Indenture will be duly qualified under, and conform to the
requirements of, the Trust Indenture Act of 1939, as amended.
(s) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income
Securities Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
2. Purchase, Sale and Delivery of the Firm Debentures. On the basis of
the representations, warranties and covenants herein contained, and subject to
the conditions herein set forth, the Company agrees to sell to the Underwriters
and each Underwriter agrees, severally and not jointly, to purchase the
principal amount of Firm Debentures set forth opposite the name of each
Underwriter in Schedule I hereof at a purchase price of ___% of their principal
amount, plus interest, if any, subject to adjustments in accordance with Section
9 hereof.
Payment for the Firm Debentures to be sold hereunder is to be made in New
York Clearing House funds by certified or bank cashier's checks drawn to the
order of the Company for the Firm Debentures against delivery of such Firm
Debentures to the Representatives for the several accounts of the Underwriters.
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Such payment and delivery are to be made at the offices of Alex. ▇▇▇▇▇ & Sons
Incorporated, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at 10:00 a.m.,
Baltimore time, on the third business day after the date of this Agreement, or
at such other time and date not later than five business days thereafter as you
and the Company shall agree upon, such time and date being herein referred to as
the "Closing Date." (As used herein, "business day" means a day on which the
New York Stock Exchange is open for trading and on which banks in New York are
open for business and not permitted by law or executive order to be closed.)
The Firm Debentures will be delivered in such denominations and in such
registrations as the Representatives request in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representatives at least one business day prior to the
Closing Date.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase the Option
Debentures at the price set forth in the first paragraph of this Section 2. The
option granted hereby may be exercised in whole or in part but only once and at
any time upon written notice given within 30 days after the date of this
Agreement, by you, as Representatives of the several Underwriters, to the
Company setting forth the number of Option Debentures as to which the several
Underwriters are exercising the option, the names and denominations in which the
Option Debentures are to be registered and the time and date at which such
Option Debentures are to be delivered. The time and date at which the Option
Debentures are to be delivered shall be determined by the Representatives but
shall not be earlier than three nor later than 10 full business days after the
exercise of such option, nor in any event prior to the Closing Date (such time
and date being herein referred to as the "Option Closing Date"). If the date of
exercise of the option is three or more days before the Closing Date, the notice
of exercise shall set the Closing Date as the Option Closing Date. The
principal amount of Option Debentures to be purchased by each Underwriter shall
be in the same proportion to the total principal amount of Option Debentures
being purchased as the principal amount of Firm Debentures being purchased by
such Underwriter bears to $75,000,000, adjusted by you in such manner as to
avoid fractional debentures. The option with respect to the Option Debentures
granted hereunder may be exercised only to cover over-allotments in the sale of
the Firm Debentures by the Underwriters. You, as Representatives of the several
Underwriters, may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Debentures shall be
made on the Option Closing Date in New York Clearing House funds by certified or
bank cashier's check drawn to the order of the Company for the Option Debentures
to be sold by it against delivery of the Option
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Debentures at the offices of Alex. ▇▇▇▇▇ & Sons Incorporated, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
3. Offering by the Underwriters. It is understood that the several
Underwriters are to make a public offering of the Firm Debentures as soon as the
Representatives deem it advisable to do so. The Firm Debentures are to be
initially offered to the public at 100% of their principal amount, plus
interest, if any. The Representatives may from time to time thereafter change
the public offering price and other selling terms. To the extent, if at all,
that any Option Debentures are purchased pursuant to Section 2 hereof, the
Underwriters will offer them to the public on the foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Debentures in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company. The Company covenants and agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective or, if the procedure in Rule 430A of the
Rules and Regulations is followed, the Company will (A) prepare and timely
file with the Commission under Rule 424(b) of the Rules and Regulations a
Prospectus in a form approved by the Representatives containing information
previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A of the Rules and Regulations, (B) not
file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been
advised and furnished with a copy or to which the Representatives shall
have reasonably objected in writing or which is not in compliance with the
Rules and Regulations and (C) file on a timely basis all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission subsequent to the date of the Prospectus and
prior to the termination of the offering of the Debentures by the
Underwriters.
(b) The Company will advise the Representatives promptly when the
Registration Statement or any post-effective amendment thereto shall have
become effective; of the receipt of any comments from the Commission; of
any request of the Commission for amendment of the Registration Statement
or for supplement to the Prospectus or for any additional information, or
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the use of the Prospectus or
of the institution or threatened institution of any proceedings
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for that purpose, and the Company will use its best efforts to prevent the
issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if
issued.
(c) The Company will cooperate with the Representatives in endeavoring
to qualify the Debentures for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in
writing and will make such applications, file such documents, and furnish
such information as may be reasonably required for that purpose, provided
the Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction where it
is not now so qualified or required to file such a consent. The Company
will, from time to time, prepare and file such statements, reports, and
other documents, as are or may be required to continue such qualifications
in effect for so long a period as the Representatives may reasonably
request for distribution of the Debentures.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period
when delivery of a Prospectus is required under the Act, as many copies of
the Prospectus in final form, or as thereafter amended or supplemented, as
the Representatives may reasonably request. The Company will deliver to
the Representatives, at or before the Closing Date, four signed copies of
the Registration Statement and all amendments thereto including all
exhibits filed therewith, and will deliver to the Representatives such
number of copies of the Registration Statement (including such number of
copies of the exhibits filed therewith that may be reasonably requested),
including documents incorporated by reference therein, and of all
amendments thereto, as the Representatives may reasonably request.
(e) The Company will comply to the best of its ability with the Act
and the Rules and Regulations and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution
of the Debentures as contemplated in this Agreement and the Prospectus. If
during the period in which a prospectus is required by law to be delivered
by an Underwriter or dealer any event shall occur as a result of which, in
the judgment of the Company or in the reasonable opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
existing at the time the Prospectus is
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delivered to a purchaser, not misleading, or, if it is necessary at any
time to amend or supplement the Prospectus to comply with any law, the
Company promptly will either (i) prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus or (ii) prepare and file with the Commission an appropriate
filing under the Exchange Act which shall be incorporated by reference in
the Prospectus so that the Prospectus as so amended or supplemented will
not, in the light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with the law.
(f) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15
months after the effective date of the Registration Statement, an earnings
statement (which need not be audited) in reasonable detail, covering a
period of at least 12 consecutive months beginning after the effective date
of the Registration Statement, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise you in writing when such statement has been so
made available.
(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of
all other documents, reports and information (including similar documents,
reports and information with respect to significant subsidiaries, as that
term is defined in the Rules and Regulations, which are not consolidated in
the Company's financial statements) furnished by the Company to its
stockholders generally or filed with any securities exchange pursuant to
the requirements of such exchange or with the Commission pursuant to the
Act or the Exchange Act.
(h) No offering, sale, short sale or other disposition of any Common
Stock of the Company or other securities convertible into or exchangeable
for Common Stock or derivative of Common Stock will be made for a period of
90 days after the date of this Agreement, directly or indirectly, by the
Company otherwise than hereunder or with the prior written consent of Alex.
▇▇▇▇▇ & Sons Incorporated, except that the Company may, without such
consent, (i) issue the Preferred Stock and Warrants in connection with the
Recapitalization (as defined in the Prospectus), (ii) issue shares to
directors pursuant to the Company's restricted stock plan, (iii) grant
options pursuant to its option plans described in the Prospectus, and (iv)
issue shares upon the exercise of options and warrants or the conversion of
securities outstanding on the date of this Agreement and described in the
Prospectus.
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(i) The Company will use its best efforts to list, subject to notice
of issuance, the Debentures and the Common Stock issuable upon conversion
thereof on The Nasdaq National Market.
(j) The Company has caused each officer and director of the Company to
furnish to you, on or prior to the date of this Agreement, a letter or
letters, in form and substance satisfactory to the Representatives,
pursuant to which each such person shall agree not to offer, sell, sell
short or otherwise dispose of any shares of Common Stock or other capital
stock of the Company, or any other securities convertible, exchangeable or
exercisable for shares of Common Stock or derivative of shares of Common
Stock owned by such person or request the registration for the offer or
sale of any of the foregoing (or as to which such person has the right to
direct the disposition of) for a period of 90 days after the date of this
Agreement, directly or indirectly, except with the prior written consent of
Alex. ▇▇▇▇▇ & Sons Incorporated ("Lockup Agreements").
(k) The Company will apply the net proceeds from the sale of the
Debentures and the other transactions contemplated by the Recapitalization
for the purposes set forth in the Prospectus.
(l) The Company is familiar with the Investment Company Act of 1940,
as amended, and the rules and regulations thereunder and has in the past
conducted and will in the future conduct its affairs in such a manner as to
ensure that the Company was not and will not be an "investment company"
within the meaning of said Act and such rules and regulations.
(m) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably
be expected to constitute, the stabilization or manipulation of the price
of any securities of the Company.
5. Costs and Expenses. The Company will pay all costs, expenses and fees
incident to the performance of the obligations of the Company under this
Agreement, including, without limiting the generality of the foregoing, the
following: accounting fees of the Company; the fees and disbursements of
counsel for the Company, the cost of printing and delivering to, or as requested
by, the Underwriters copies of the Registration Statement, Preliminary
Prospectuses, the Prospectus, all documents incorporated by reference in the
foregoing, this Agreement, the Master Agreement Among Underwriters, the
Underwriters' internal Selling Memorandum, the Underwriters' Questionnaire, the
Invitation Letter, the Power of Attorney, the Blue Sky Survey and any
supplements or amendments thereto; the filing fees of the Commission; the filing
fees and expenses (including legal fees
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and disbursements) incident to securing any required review by NASD of the terms
of the sale of the Debentures (and the shares of Common Stock into which they
are convertible); the listing fee of the Nasdaq System and the expenses,
including the fees and disbursements of counsel for the Underwriters, incurred
in connection with the qualification of the Debentures (and the shares of Common
Stock into which they are convertible) under State securities or Blue Sky laws.
Any transfer taxes imposed on the sale of the Debentures to the several
Underwriters will be paid by the Company. The Company shall not, however, be
required to pay for any of the Underwriters' expenses (other than those related
to qualification under State securities or Blue Sky laws and NASD review) except
that, if this Agreement shall not be consummated because the conditions in
Section 6 hereof are not satisfied, or because this Agreement is terminated by
the Representatives pursuant to Section 11 hereof, or by reason of any failure,
refusal or inability on the part of the Company to perform any undertaking or
satisfy any condition of this Agreement or to comply with any of the terms
hereof on their part to be performed, unless such failure to satisfy said
condition or to comply with said terms is due to the default or omission of any
Underwriter, then the Company shall reimburse the several Underwriters for the
reasonable out-of-pocket expenses, including fees and disbursements of counsel
for the Underwriters, incurred in connection with investigating, marketing and
proposing to market the Debentures or in contemplation of performing their
obligations hereunder; but the Company shall not in any event be liable to any
of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Debentures.
6. Conditions of Obligations of the Underwriters. The several obligations
of the Underwriters to purchase the Firm Debentures on the Closing Date and the
Option Debentures, if any, on the Option Closing Date are subject to the
accuracy, as of the Closing Date or the Option Closing Date, as the case may be,
of the representations and warranties of the Company contained herein, and to
the performance by the Company of the covenants and obligations hereunder and to
the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations shall have been made,
and any request of the Commission for additional information (to be
included in the Registration Statement or otherwise) shall have been
disclosed to the Representatives and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been
issued and no proceedings for that purpose shall have been taken or, to the
knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a
-14-
Federal or state court of competent jurisdiction shall have been issued as
of the Closing Date which would prevent the issuance of the Debentures.
(b) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date or the Option Closing Date, as the case may be,
there shall not have occurred any downgrading, nor shall any notice have
been given of (A) any intended or potential downgrading or (B) any review
of possible change that does not indicate the direction of a possible
change, in the rating accorded any of the Debentures by any "nationally
recognized statistical rating organization," as such term is defined for
purposes of Rule 436(g)(2) of the Rules and Regulations.
(c) The Representatives shall have received on the Closing Date and on
the Option Closing Date, if any, the opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd.,
counsel for the Company, dated the Closing Date or the Option Closing Date,
as the case may be, addressed to the Underwriters and with reproduced
copies or signed counterparts thereof for each of the Underwriters, to the
effect that:
(i) Each of the Company and its subsidiaries incorporated in the
United States (the "U.S. Subsidiaries") has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
respective jurisdiction of incorporation;
(ii) The Company and each of its U.S. Subsidiaries have the requisite
corporate power to own, lease and operate their respective businesses as
described in the Prospectus; and the Company and each of its subsidiaries
are duly qualified to do business as a foreign corporation and are in good
standing in all jurisdictions in the United States in which the Company and
its subsidiaries are required to be qualified, except where the failure so
to qualify would not reasonably be expected to have a Material Adverse
Effect;
(iii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein; and the issued and
outstanding shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and nonassessable, and have
not been issued in violation of any preemptive right or, to such counsel's
knowledge, right of first refusal;
(iv) Except as described in or contemplated by the Prospectus, to the
knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares of capital stock of the Company and
there are no outstanding or authorized options, warrants or
-15-
rights of any character obligating the Company to issue any shares of its
capital stock or any securities convertible or exchangeable into or
evidencing the right to purchase or subscribe for any shares of such stock;
and except as described in the Prospectus, to the knowledge of such
counsel, no holder of any securities of the Company or any other person has
the right, contractual or otherwise, which has not been satisfied or
effectively waived, to cause the Company to sell or otherwise issue to
them, or to permit them to underwrite the sale of, shares of Common Stock
or other securities of the Company or the right to have any shares of
Common Stock or other securities of the Company included in the
Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any shares
of Common Stock or other securities of the Company;
(v) The Registration Statement, the Prospectus and each amendment
or supplement thereto and document incorporated by reference therein comply
as to form in all material respects with the requirements of the Act or the
Exchange Act, as applicable and the applicable rules and regulations
thereunder (except that such counsel need express no opinion as to the
financial statements and related schedules therein). The conditions for the
use of Form S-3, set forth in the General Instructions thereto, have been
satisfied;
(vi) Such counsel does not know of any contracts or documents
required to be filed as exhibits to or incorporated by reference in the
Registration Statement or described in the Registration Statement or the
Prospectus which are not so filed, incorporated by reference or described
as required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all
material respects;
(vii) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the Investment Company
Act of 1940, as amended;
(viii) The Indenture (i) has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company, and, assuming due authorization, execution and
delivery by the Trustee, is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms and (ii) has
been duly qualified under, and conforms to the requirements of, the Trust
Indenture Act of 1939, as amended;
-16-
(ix) The Company has full corporate power and authority to enter
into this Agreement and the Indenture and to issue, sell and deliver to the
Underwriters the Debentures to be issued and sold by it hereunder;
(x) This Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming due authorization, execution and
delivery by you, is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
insofar as indemnification and contribution provisions may be limited by
applicable law or equitable principles, and except as enforceability may be
limited by bankruptcy, reorganization, moratorium or similar laws affecting
the enforceability of creditors' rights generally;
(xi) The Registration Statement has become effective under the Act
and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or, to
such counsel's knowledge, are contemplated under the Act;
(xii) The terms and provisions of the Debentures and capital stock
of the Company conform in all material respects to the descriptions thereof
contained in the Registration Statement and Prospectus, and the information
in the Prospectus under the captions "Description of Debentures,"
"Description of Preferred Stock," and "Description of Common Stock," has
been reviewed by such counsel and is correct in all material respects;
(xiii) The performance of the Company's obligations under the
Indenture and this Agreement and the consummation of the transactions
contemplated herein and by the Recapitalization will not result in the
breach or violation of any of the terms and provisions, or constitute a
default under, (a) any indenture, mortgage, deed of trust, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, or any
material lease, contract, joint venture or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the
property of the Company or any of its subsidiaries is bound, (b) the
Company's or any of its subsidiaries' charters or by-laws, (c) any
applicable statute, rule or regulation or (d) to such counsel's knowledge,
any order, writ or decree of any court or governmental agency or body
having jurisdiction over the Company, any of its subsidiaries or over any
of their respective properties or operations;
(xiv) No authorization, approval or consent of any governmental
authority or agency is necessary in connection
-17-
with consummation of the transactions herein contemplated, except such as
have been obtained under the Act or such as may be required under state or
other securities or Blue Sky laws or by the NASD in connection with the
purchase and distribution of the Debentures by the Underwriters;
(xv) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened of a character that are required to be
disclosed in the Registration Statement by the Act or the applicable Rules
and Regulations, other than those disclosed therein;
(xvi) To such counsel's knowledge, neither the Company nor any of its
subsidiaries is presently in breach of, or in default under, any indenture,
mortgage, deed of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness or any other material lease, joint venture,
contract, agreement or instrument to which the Company or any of its
subsidiaries is a party or by which any of their respective property is
bound;
(xvii) The Debentures, assuming they are in the form of the specimen
received by such counsel, are in due and proper form; the Debentures,
including the Option Debentures, if any, to be sold by the Company pursuant
to this Agreement have been duly authorized and when executed and
authenticated in accordance with the provisions of the Indenture and
delivered and paid for as contemplated by this Agreement will be validly
issued and outstanding, and valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms and will be
entitled to the benefits of the Indenture; the shares of Common Stock of
the Company issuable upon conversion thereof in accordance with the terms
of the Indenture will have been validly issued and will be fully paid and
non-assessable; and no preemptive rights of shareholders exist with respect
to any of the Debentures (including the shares of Common Stock issuable
upon conversion thereof) or the issue and sale thereof; and
(xviii) Upon delivery of certificates for the Debentures to be sold
by the Company under this Agreement and the payment therefor as
contemplated by this Agreement, valid marketable title to the Debentures
represented thereby will have been acquired by the Underwriters, free and
clear of all security interests, liens, encumbrances, claims or equities
whatsoever, assuming for the purpose that the Underwriters purchased the
same in good faith without notice of any adverse claims.
In addition, such counsel shall state that although they have not
verified the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the attention of
such counsel
-18-
which caused them to believe that, either at the time the Registration Statement
became effective or at the Closing Date or Option Closing Date, as the case may
be, the Registration Statement or the Prospectus (except as to financial
statements, financial data and supporting schedules contained therein, as to
which such counsel need express no opinion) contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the States of Illinois or
Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company and of government
officials, in which case their opinion is to state that they are so doing and
that they have no knowledge of any material misstatement or inaccuracy in such
opinions, representations or certificate. Copies of any opinion, representation
or certificate so relied upon shall be delivered to you, as Representatives of
the Underwriters, and to Underwriters' counsel.
(d) The Representatives shall have received from ▇▇▇▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, counsel for the Underwriters, an opinion dated the Closing Date
or the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (v), (viii), (x), (xi) and (xvii) of Paragraph
(b) of this Section 6. In rendering such opinion ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
may rely as to all matters governed other than by Delaware or Federal laws
on the opinion of counsel referred to in Paragraph (b) of this Section 6.
In addition to the matters set forth above, such opinion shall also include
a statement to the effect that nothing has come to the attention of such
counsel which leads them to believe that the Registration Statement, as of
the time it became effective under the Act (but after giving effect to
changes incorporated pursuant to Rule 430A under the Act), contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, or that the Prospectus or any amendment or supplement
thereto, on the date it was filed pursuant to the Rules and Regulations and
the Registration Statement and the Prospectus, or any amendment or
supplement thereto, as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading (except that such counsel need express
no view as to financial statements, schedules and other financial
information included therein). With respect to such
-19-
statement, ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ may state that their belief is based
upon the procedures set forth therein, but is without independent check and
verification.
(e) The Representatives shall have received at or prior to the Closing
Date from ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Debentures
under the state securities or Blue Sky laws of such jurisdictions as the
Representatives may reasonably have designated to the Company.
(f) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the
date hereof, the Closing Date or the Option Closing Date, as the case may
be, in form and substance satisfactory to you, of KPMG Peat Marwick LLP
confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder
and stating that in their opinion the financial statements and schedules
examined by them and included in the Registration Statement comply in form
in all material respects with the applicable accounting requirements of the
Act and the related published Rules and Regulations; and containing such
other statements and information as is ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements
and certain financial and statistical information contained in the
Registration Statement and Prospectus.
(g) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of
the Chief Executive Officer and the Principal Financial and Accounting
Officer of the Company to the effect that, as of the Closing Date or the
Option Closing Date, as the case may be, each of them severally represents
as follows:
(i) The Registration Statement has become effective under the Act and
no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or
are, to such officer's knowledge, contemplated by the Commission.
(ii) Such officer does not know of any litigation instituted or
threatened against the Company of a character required to be disclosed in
the Registration Statement which is not so disclosed; such officer does not
know of any material contract required to be filed as an exhibit to the
Registration Statement which is not so filed; and the representations and
warranties of the Company contained in
-20-
Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be.
(iii) Such officer has carefully examined the Registration Statement
and the Prospectus and, in such officer's opinion, as of the effective date
of the Registration Statement, the statements contained in the Registration
Statement, including any document incorporated by reference therein, were
true and correct in all material respects, and such Registration Statement
and Prospectus or any document incorporated by reference therein did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and, in such officer's
opinion, since the effective date of the Registration Statement, no event
has occurred which should have been set forth in a supplement to or an
amendment of the Prospectus which has not been so set forth in such
supplement or amendment.
(h) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties contained herein and related matters as the Representatives may
reasonably have requested.
(i) The Firm Notes and Option Notes, if any, and the Common Stock
issuable upon conversion thereof, have been approved for designation upon
notice of issuance on The Nasdaq National Market.
(j) All filings required to have been made pursuant to the Rules and
Regulations under the Act have been made.
(k) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective adverse change in
or affecting the condition, financial or otherwise, of the Company or the
earnings, business affairs, properties, management or business prospects of
the Company whether or not arising in the ordinary course of business.
(l) The Company shall have delivered to you the Lockup Agreements.
(m) The transactions contemplated by the Private Offering (as defined
in the Prospectus).
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects reasonably satisfactory to the Representatives and to ▇▇▇▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the
-21-
Underwriters hereunder may be terminated by the Representatives by notifying the
Company of such termination in writing or by telegram at or prior to the Closing
Date or the Option Closing Date, as the case may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. Conditions of the Obligations of the Company. The obligations of the
Company to sell and deliver the Debentures required to be delivered as and when
specified in this Agreement are subject to the conditions that at the Closing
Date or the Option Closing Date, as the case may be, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and in
effect or proceedings therefor initiated or threatened.
8. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act against any losses, claims, damages or liabilities
to which such Underwriter or such controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
or incorporated by reference in the Registration Statement, any Preliminary
Prospectus, the Prospectus or 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 to make the statements therein not misleading, and
will reimburse each Underwriter and each such controlling person upon demand for
any legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding and expenses reasonably incurred
in responding to a subpoena or governmental inquiry whether or not such
Underwriter or controlling person is a party to the related action or
proceeding; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement, or omission or
alleged omission made or incorporated by reference in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by or through the Representatives specifically for use
in the preparation thereof. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed the
Registration Statement, and each person, if
-22-
any, who controls the Company within the meaning of the Act, against any
losses, claims, damages or liabilities to which the Company or any such
director, officer or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained or incorporated by reference in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto, or (ii) the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made; and will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided, however,
that each Underwriter will be liable in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission has been made or incorporated by reference in
the Registration Statement, any Preliminary Prospectus, the Prospectus or
such amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to this Section 8, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought
(the "indemnifying party") in writing. No indemnification provided for in
Section 8(a) or (b) shall be available to any party who shall fail to give
notice as provided in this Section 8(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related
and was materially prejudiced by the failure to give such notice, but the
failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified
party for contribution or otherwise than on account of the provisions of
Section 8(a) or (b). In case any such proceeding shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party and shall pay
-23-
as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred the fees and
expenses of the counsel retained by the indemnified party in the event (i)
the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them or (iii) the indemnifying party shall have failed to
assume the defense and employ counsel acceptable to the indemnified party
within a reasonable period of time after notice of commencement of the
action. It is understood that the indemnifying party shall not, in
connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant
to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent (which
consent shall not be unreasonably withheld) but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss
or liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment in any pending
or threatened claim, action or proceeding, of which indemnification may be
sought hereunder (whether or not any indemnified party is an actual or
potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative
-24-
benefits received by the Company on the one hand and the Underwriters on
the other from the offering of the Debentures. If, however, the allocation
provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
8(d). The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this subsection (d), (i) no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Debentures
purchased by such Underwriter and, (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this
Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
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(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may join him or it as an additional defendant in any
such proceeding in which such other contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Debentures and
payment therefor hereunder, and (iii) any termination of this Agreement. A
successor to any Underwriter, or to the Company, its directors or officers,
or any person controlling the Company, shall be entitled to the benefits of
the indemnity, contribution and reimbursement agreements contained in this
Section 8.
9. Default by Underwriters. If on the Closing Date or the Option Closing
Date, as the case may be, any Underwriter shall fail to purchase and pay for the
portion of the Debentures which such Underwriter has agreed to purchase and pay
for on such date (otherwise than by reason of any default on the part of the
Company), you, as Representatives of the Underwriters, shall use reasonable
efforts to procure within 24 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company such amounts as may be
agreed upon and upon the terms set forth herein, the Firm Debentures or Option
Debentures, as the case may be, which the defaulting Underwriter or Underwriters
failed to purchase. If during such 24 hours you, as such Representatives, shall
not have procured such other Underwriters, or any others, to purchase the Firm
Debentures or Option Debentures, as the case may be, agreed to be purchased by
the defaulting Underwriter or Underwriters, then (a) if the aggregate principal
amount of Firm Debentures or Option Debentures, as the case may be, with respect
to which such default shall occur does not exceed 10% of the Firm Debentures or
Option Debentures, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion to the respective principal
-26-
amount of Firm Debentures or Option Debentures, as the case may be, which they
are obligated to purchase hereunder, to purchase the Firm Debentures or Option
Debentures, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate principal amount of
Firm Debentures or Option Debentures, as the case may be, with respect to which
such default shall occur exceeds 10% of the Firm Debentures or Option
Debentures, as the case may be, covered hereby, the Company or you as the
Representatives of the Underwriters will have the right, by written notice given
within the next 24-hour period to the parties to this Agreement, to terminate
this Agreement without liability on the part of the non-defaulting Underwriters
or of the Company except to the extent provided in Section 8 hereof. In the
event of a default by any Underwriter or Underwriters, as set forth in this
Section 9, the Closing Date or Option Closing Date, as the case may be, may be
postponed for such period, not exceeding seven days, as you, as Representatives,
may determine in order that the required changes in the Registration Statement
or in the Prospectus or in any other documents or arrangements may be effected.
The term "Underwriter" includes any person substituted for a defaulting
Underwriter. Any action taken under this Section 9 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
10. Notices. All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered or telegraphed and
confirmed as follows: if to the Underwriters, to Alex. ▇▇▇▇▇ & Sons
Incorporated, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: [________]; with a copy to Alex. ▇▇▇▇▇ & Sons Incorporated, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel; if to
the Company, to System Software Associates, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive
Officer.
11. Termination. This Agreement may be terminated by you by notice to the
Company as follows:
(a) At any time prior to the earlier of (i) the time the Debentures
are released by you for sale by notice to the Underwriters, or (ii) 11:30
a.m. on the first business day following the date of this Agreement;
(b) At any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change, or any development involving a prospective material adverse change,
in or affecting the condition, financial or otherwise, of the Company and
its subsidiaries taken as a whole or the earnings, business affairs,
properties,
-27-
management, assets, rights, operations or business prospects of the Company
and its subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, (ii) any outbreak or escalation of hostilities
or declaration of war or national emergency after the date hereof or other
national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation,
declaration, emergency, calamity, crisis or change on the financial markets
of the United States would, in your reasonable judgment, make the offering
or delivery of the Debentures impracticable or inadvisable, (iii)
suspension of trading in securities on the New York Stock Exchange, the
American Stock Exchange or Nasdaq or limitation on prices (other than
limitations on hours or number of days of trading) for securities on either
such Exchange or Nasdaq, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority which in your reasonable opinion
materially and adversely affects or will materially and adversely affect
the business or operations of the Company, (v) declaration of a banking
moratorium by either Federal or New York State authorities, (vi) the taking
of any action by any Federal, State or local government or agency in
respect of its monetary or fiscal affairs which in your reasonable opinion
has a material adverse effect on the securities markets in the United
States or (vii) the suspension of trading of the Company's Common Stock on
Nasdaq; or
(c) As provided in Sections 6 and 9 of this Agreement.
This Agreement also may be terminated by you, by notice to the Company, as
to any obligation of the Underwriters to purchase the Option Debentures, upon
the occurrence at any time prior to the Option Closing Date of any of the events
described in subparagraph (b) above or as provided in Sections 6 and 9 of this
Agreement.
12. Successors. This Agreement has been and is made solely for the
benefit of the Underwriters and the Company and their respective successors,
executors, administrators, heirs and assigns, and the officers, directors and
controlling persons referred to herein, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Debentures merely because of such purchase. No purchaser of Debentures
from any Underwriter shall be deemed a successor or assign merely because of
such purchase.
13. Information Provided by Underwriters. The Company and the
Underwriters acknowledge and agree that the only information furnished or to be
furnished by any Underwriter to the Company for inclusion in any Prospectus or
the Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
-28-
Underwriters), information provided in connection with Item 502(d) of Regulation
S-K under the Act and information under the caption "Underwriting" in the
Prospectus.
14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its directors or officers and (c) delivery of and payment for the
Debentures under this Agreement. The other covenants of the Company in this
Agreement shall remain in full force and effect regardless of (a) any
investigation made by or on behalf of any Underwriter or controlling person and
(b) delivery of any payment for the Debentures under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms. It is understood that your acceptance
of this letter on behalf of each of the Underwriters is pursuant to the
authority set forth in a form of Agreement among Underwriters, the form of which
shall be submitted to the Company for examination, upon request, but without
warranty on your part as to the authority of the signers thereof.
[Remainder of Page Intentionally Left Blank]
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Very truly yours,
SYSTEM SOFTWARE ASSOCIATES, INC.
By:______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
The foregoing Underwriting
Agreement is hereby confirmed and
accepted as of the date first
above written.
ALEX. ▇▇▇▇▇ & SONS INCORPORATED
As Representatives of the several
Underwriters listed on Schedule I
By: ALEX. ▇▇▇▇▇ & SONS INCORPORATED
By:________________________________
Authorized Officer
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SCHEDULE I
SCHEDULE OF UNDERWRITERS
Principal Amount
of Firm
Debentures
Underwriter to be Purchased
----------- ------------------
Alex. ▇▇▇▇▇ & Sons Incorporated.......
Total............................... $90,000,000
