4,750,000 Shares
Sylvan Learning Systems, Inc.
Common Stock
($.01 Par Value)
UNDERWRITING AGREEMENT
----------------------
___________, 1997
Alex. Xxxxx & Sons Incorporated
Xxxxxxx Xxxxx & Co.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
Xxxxxxxxxx Securities
Xxxxxx Xxxxxxx & Co. Incorporated
Xxxxx Xxxxxx Inc.
As Representatives of the
Several Underwriters
c/o Alex. Xxxxx & Sons Incorporated
Xxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Gentlemen:
Sylvan Learning Systems, Inc., a Maryland corporation (the "Company"),
and certain shareholders of the Company named in Schedule II hereto (the
"Selling Shareholders") propose to sell to the several underwriters (the
"Underwriters") named in Schedule I hereto for whom you are acting as
representatives (the "Representatives") an aggregate of 4,750,000 shares of the
Company's Common Stock, $.01 par value (the "Firm Shares"), of which 1,464,505
shares will be sold by the Company and 3,285,495 shares will be sold by the
Selling Shareholders, and certain stock optionholders of the Company named in
Schedule II hereto (the "Selling Stock Optionholders") propose to sell to the
several Underwriters stock options to purchase an aggre-
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gate of 435,495 shares of Common Stock of the Company at exercise prices set
forth on Schedule II hereto (the "Stock Options"). The shares so proposed to be
sold by the Company are herein referred to as the "Company Shares." The
respective amounts of the Firm Shares and Stock Options to be so purchased by
the several Underwriters are set forth opposite their names in Schedule I
hereto, and the respective amounts of Firm Shares to be sold by the Selling
Shareholders and Stock Options to be sold by the Selling Stock Optionholders are
set forth opposite their names in Schedule II hereto. The Company, Selling
Shareholders and the Selling Stock Optionholders are sometimes referred to
herein collectively as the "Sellers." The Selling Shareholders and the Selling
Stock Optionholders are sometimes referred to herein as the "Selling
Securityholders". The Company also proposes to sell at the Underwriters' option
an aggregate of up to 412,500 additional shares of the Company's Common Stock,
and Selling Securityholders also propose to sell at the Underwriters' option an
aggregate of up to 300,000 additional shares of the Company's Common Stock
(collectively the "Option Securities"), as set forth below.
As the Representatives, you have advised the Company and the Selling
Securityholders (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
Shares and Stock Options set forth opposite their respective names in Schedule
I, plus their pro rata portion of the Option Securities if you elect to exercise
the over-allotment option in whole or in part for the accounts of the several
Underwriters. The Firm Shares, the Stock Options and the Option Securities (to
the extent the aforementioned option is exercised) are herein collectively
called the "Securities." The Firm Shares, the shares issuable upon exercise of
the Stock Options, and the additional shares included in the Option Securities
are herein collectively called the "Shares."
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 AND THE SELLING
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SECURITYHOLDERS.
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(a) The Company represents and warrants to each of the
Underwriters as follows:
(i) A registration statement on Form S-3 (File No. 333-
________) with respect to the Shares has been carefully prepared
by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and
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the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder
and has been filed with the Commission. 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 (a) the form of
prospectus first filed with the Commission pursuant to Rule
424(b) or (b) 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 Shares, together with the term sheet or
abbreviated term sheet filed with the Commission pursuant to Rule
424(b)(7) under 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 to the Prospectus shall be deemed to refer to and
include any documents incorporated by reference therein, 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
Rule 424(b) or 430A, and prior to the termination of the offering
of the Shares by the Underwriters.
(ii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the
State of Maryland, with corporate power and authority to own or
lease its properties and conduct its business as described in the
Registration Statement. Each of the subsidiaries of the Company
(collectively, the "Subsidiaries") has been duly organized and is
validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, with corporate power
and authority to own or lease its properties and conduct its
business as described in the Registration Statement. The
Subsidiaries are the only subsidiaries, direct or indirect, of
the Company. The Company and each of the Subsidiaries are duly
qualified to transact business in all jurisdictions in which the
conduct of their business requires such qualification. The
outstanding shares of capital stock of each of the
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Subsidiaries have been duly authorized and validly issued, are
fully paid and non-assessable and are owned by the Company or
another Subsidiary free and clear of all liens, encumbrances and
equities and claims; and no options, warrants or other rights to
purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or
ownership interests in the Subsidiaries are outstanding.
(iii) The outstanding shares of Common Stock of the Company,
including all shares to be sold by the Selling Shareholders, have
been duly authorized and validly issued and are fully paid and
non-assessable; the Company Shares have been duly authorized and
when issued and paid for as contemplated herein will be validly
issued, fully paid and non-assessable; and no preemptive rights
of stockholders exist with respect to any of the Shares or the
issue and sale thereof. Neither the filing of the Registration
Statement nor the offering or sale of the Shares as contemplated
by this Agreement gives rise to any rights, other than those
which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock. The Stock Options
have been duly authorized, executed and delivered by the Company
and constitute valid, binding and enforceable obligations of the
Company, the shares of Common Stock issuable upon exercise of the
Stock Options have been duly authorized and reserved for issuance
upon such exercise and, when issued and delivered upon exercise
of the Stock Options in accordance with the terms thereof, such
shares of Common Stock will be validly issued, fully paid and
non-assessable and will not be subject to any preemptive or
similar rights.
(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of
the Shares conform to the description thereof contained or
incorporated by reference in the Registration Statement. The form
of certificates for the Shares conforms to the Maryland General
Corporation Law.
(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed
offering of the Shares nor instituted proceedings for that
purpose. The Registration Statement contains, and the Prospectus
and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and
conforms and will conform, to the requirements of the Act and the
Rules and Regulations. The documents incorporated by reference in
the Prospectus, at the time filed with the Commission, conformed
in all respects to the requirements of the Securities Exchange
Act of 1934 or the Act, as applicable, and the rules and
regulations of the Commission thereunder. The Registration
Statement and any amendment
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thereto do not contain, and will not contain, any untrue
statement of a material fact and do not omit, and will not omit,
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The
Prospectus and any amendments and supplements thereto do not
contain, and will not contain, any untrue statement of material
fact; and do not omit, and will not omit, to state any material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the
Company makes no representations or warranties as 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, written information furnished to
the Company by or on behalf of any Underwriter through the
Representatives, specifically for use in the preparation thereof.
(vi) The financial statements, together with related notes
and schedules as set forth or incorporated by reference in the
Registration Statement, present fairly the financial position and
the results of operations and cash flows of the Company and the
consolidated Subsidiaries [and ANY SEPARATE FINANCIALS], 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, consistently
applied throughout the periods involved, except as disclosed
therein, and all adjustments necessary for a fair presentation of
results for such periods have been made. The summary financial
and statistical data included or incorporated by reference in the
Registration Statement presents fairly the information shown
therein and such data has been compiled on a basis consistent
with the financial statements presented therein and the books and
records of the Company. The pro forma financial statements and
other pro forma financial information included or incorporated by
reference in the Registration Statement and the Prospectus
present fairly the information shown therein, have been prepared
in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements, have been properly
compiled on the pro forma bases described therein, and, in the
opinion of the Company, the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances
referred to therein.
(vii) Ernst & Young L.L.P, who have certified certain of the
financial statements filed with the Commission as part of or
incorporated by reference in the Registration Statement, are
independent public accountants as required by the Act and the
Rules and Regulations.
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(viii) There is no action, suit, claim or proceeding pending
or, to the knowledge of the Company, threatened against the
Company or any of the Subsidiaries before any court or
administrative agency or otherwise which if determined adversely
to the Company or any of its Subsidiaries might result in any
material adverse change in the earnings, business, management,
properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and of the Subsidiaries
taken as a whole or to prevent the consummation of the
transactions contemplated hereby, except as set forth in the
Registration Statement.
(ix) The Company and the Subsidiaries have good and
marketable title to all of the properties and assets reflected in
the financial statements (or as described in the Registration
Statement) hereinabove described, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except those reflected
in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The Company and
the Subsidiaries occupy their leased properties under valid and
binding leases conforming in all material respects to the
description thereof set forth in the Registration Statement.
(x) The Company and the Subsidiaries have filed all
Federal, State, local and foreign income tax returns which have
been required to be filed and have paid all taxes indicated by
said returns and all assessments received by them or any of them
to the extent that such taxes have become due and are not being
contested in good faith. All tax liabilities have been adequately
provided for in the financial statements of the Company.
(xi) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or
supplemented, there has not been any material adverse change or
any development involving a prospective material adverse change
in or affecting the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise),
or prospects of the Company and its Subsidiaries taken as a
whole, whether or not occurring in the ordinary course of
business, and there has not been any material transaction entered
into or any material transaction that is probable of being
entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and
transactions described in the Registration Statement, as it may
be amended or supplemented. The Company and the Subsidiaries have
no material contingent obligations which are not disclosed in the
Company's financial statements which are included or incorporated
by reference in the Registration Statement.
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(xii) Neither the Company nor any of the Subsidiaries is or
with the giving of notice or lapse of time or both, will be, in
violation of or in default under its Charter or By-Laws or under
any agreement, lease, contract, indenture or other instrument or
obligation to which it is a party or by which it, or any of its
properties, is bound and which default is of material
significance in respect of the condition, financial or otherwise
of the Company and its Subsidiaries taken as a whole or the
business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company
and the Subsidiaries taken as a whole or which would or might
delay or prevent the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of
the transactions herein contemplated and the fulfillment of the
terms hereof will not conflict with or result in a breach of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any Subsidiary is a party, or
of the Charter or by-laws of the Company or any order, rule or
regulation applicable to the Company or any Subsidiary of any
court or of any regulatory body or administrative agency or other
governmental body having jurisdiction.
(xiii) 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 such additional steps as may be necessary to
qualify the Shares 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.
(xiv) The Company and each of the Subsidiaries holds all
material licenses, certificates and permits from governmental
authorities which are necessary to the conduct of their
businesses; and neither the Company nor any of the Subsidiaries
has infringed any patents, patent rights, trade names, trademarks
or copyrights, which infringement is material to the business of
the Company and the Subsidiaries taken as a whole. The Company
knows of no material infringement by others of patents, patent
rights, trade names, trademarks or copyrights owned by or
licensed to the Company.
(xv) Neither the Company, nor to the Company's best
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
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to constitute, the stabilization or manipulation of the price of
the shares of Common Stock to facilitate the sale or resale of
the Shares. The Company acknowledges that the Underwriters may
engage in passive market making transactions in the Shares on the
Nasdaq National Market in accordance with Rule 103 of Regulation
M under the Exchange Act.
(xvi) Neither the Company nor any Subsidiary is an
"investment company" within the meaning of such term under the
Investment Company Act of 1940, as amended (the "1940 Act") and
the rules and regulations of the Commission thereunder.
(xvii) The Company maintains a system of internal accounting
controls in compliance with the Exchange Act and the rules and
guidelines of the Commissions, and such system is sufficient to
provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets; (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 existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xviii) The Company and each of its Subsidiaries carry, or
are covered by, insurance in such amounts and covering such risks
as is adequate for the conduct of their respective businesses and
the value of their respective properties and as is customary for
companies engaged in similar industries.
(xix) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA");
no "reportable event" (as defined in ERISA) has occurred with
respect to any "pension plan" (as defined in ERISA) for which the
Company would have any liability; the Company has not incurred
and does not expect to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any
"pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would
cause the loss of
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such qualification.
(xx) The Company and its Subsidiaries are in compliance in
all material respects with all applicable provisions of federal,
state and local law governing the provision of educational
services of the type provided by or contemplated to be provided
by the Company and its Subsidiaries.
(b) Each of the Selling Securityholders severally represents and
warrants as follows:
(i) Such Selling Securityholder who is a Selling
Shareholder now has and at the Closing Date and, as applicable,
the Option Closing Date (as such dates are hereinafter defined)
will have, good and marketable title to the Shares to be sold by
such Selling Shareholder, free and clear of any liens,
encumbrances, equities and claims, and full right, power and
authority to effect the sale and delivery of such Shares; and
upon the delivery of, against payment for, such Shares pursuant
to this Agreement, the Underwriters will acquire good and
marketable title thereto, free and clear of any liens,
encumbrances, equities and claims.
(ii) Such Selling Securityholder who is a Selling Stock
Optionholder is the lawful owner of the Stock Options to be sold
by such Selling Stock Optionholder pursuant to this Agreement and
now has, and at the Closing Date and, as applicable, the Option
Closing Date, will have, good and marketable title to such Stock
Options, free and clear of any liens, encumbrances, equities and
claims and full right, power and authority to effect the sale and
delivery of such Stock Options; and upon the delivery of, against
payment for, such Stock Options pursuant to this Agreement, the
Underwriters will acquire good and marketable title thereto, free
and clear of any liens, encumbrances, equities and claims.
(iii) Such Selling Securityholder has full right, power and
authority to execute and deliver this Agreement, the Power of
Attorney, and the Custodian Agreement referred to below and to
perform its obligations under such Agreements. The execution and
delivery of this Agreement and the consummation by such Selling
Securityholder of the transactions herein contemplated and the
fulfillment by such Selling Securityholder of the terms hereof
will not require any consent, approval, authorization, or other
order of any court, regulatory body, administrative agency or
other governmental body (except as may be required under the Act,
state securities laws or Blue Sky laws) and will not result in a
breach of any of the terms and provisions of, or constitute a
default under, the organizational documents of such Selling
Securityholder, if not an
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individual, or any indenture, mortgage, deed of trust or other
agreement or instrument to which such Selling Securityholder is a
party, or of any order, rule or regulation applicable to such
Selling Securityholder of any court or of any regulatory body or
administrative agency or other governmental body having
jurisdiction.
(iv) Such Selling Securityholder has not taken and will not
take, directly or indirectly, any action designed to, or which
has constituted, or which might reasonably be expected to cause
or result in the stabilization or manipulation of the price of
the Common Stock of the Company and, other than as permitted by
the Act, the Selling Securityholder will not distribute any
prospectus or other offering material in connection with the
offering of the Shares.
(v) Without having undertaken to determine independently
the accuracy or completeness of either the representations and
warranties of the Company contained herein or the information
contained in the Registration Statement, such Selling
Securityholder has no reason to believe that the representations
and warranties of the Company contained in this Section 1 are not
true and correct, is familiar with the Registration Statement and
has no knowledge of any material fact, condition or information
not disclosed in the Registration Statement which has adversely
affected or may adversely affect the business of the Company or
any of the Subsidiaries; and the sale of the Securities by such
Selling Securityholder pursuant hereto is not prompted by any
information concerning the Company or any of the Subsidiaries
which is not set forth in the Registration Statement or the
documents incorporated by reference therein. The information
pertaining to such Selling Securityholder the caption "Principal
and Selling Securityholders" in the Prospectus is complete and
accurate in all material respects.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES AND STOCK OPTIONS.
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(a) On the basis of the representations, warranties and
covenants herein contained, and subject to the conditions herein set
forth, (i) the Company agrees to issue and sell to the several
Underwriters the Company Shares, (ii) the Selling Shareholders, severally
and not jointly, agree to sell to the several Underwriters the portion of
the Firm Shares set forth on Schedule II hereof to be sold by them, and
(iii) the Selling Stock Optionholders, severally and not jointly, agree
to sell to the several Underwriters the Stock Options set forth on
Schedule II hereto to be sold by them, and each Underwriter agrees,
severally and not jointly, to purchase the number of Firm Shares and
Stock Options set forth opposite the name of each Underwriter in Schedule
I hereto, subject to
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adjustments in accordance with Section 9 hereof. The Underwriters further
agree, severally and not jointly, to exercise the Stock Options so
purchased hereby at the Closing and the Company agrees, upon exercise and
tender of the applicable warrant exercise price, to issue to the
respective Underwriters the number of Shares issuable upon exercise of
the Stock Options so exercised. The number of Firm Shares and Stock
Options to be purchased by each Underwriter from each Seller shall be as
nearly as practicable in the same proportion to the total number of Firm
Shares and Stock Options being sold by each Seller as the number of Firm
Shares and Stock Options being purchased by each Underwriter bears to the
total number of Firm Shares and Stock Options to be sold hereunder. The
obligations of the Company and of each of the Selling Securityholders
shall be several and not joint.
The purchase price to be paid to the Company and the Selling
Shareholders for the Firm Shares shall be $________ per share (the "Share
Price"). The purchase price to be paid to the Selling Stock Optionholders
for each of the Stock Options shall be an amount equal to the Share Price
multiplied by the number of Shares issuable upon exercise of that Stock
Option, less the exercise price of that Stock Option (the "Stock Option
Price").
(b) Certificates in negotiable form for the total number of the
Shares to be sold hereunder by the Selling Shareholders and original
stock options representing the total Stock Options to be sold hereunder
by the Selling Stock Optionholders, endorsed in blank for transfer have
been placed in custody with [Street State Bank & Trust Company] as
custodian (the "Custodian") pursuant to the Custodian Agreement executed
by each Selling Securityholder for delivery of all Securities to be sold
hereunder by the Selling Securityholders. Each of the Selling
Securityholders specifically agrees that the Securities represented by
the certificates and stock options held in custody for the Selling
Securityholders under the Custodian Agreement are subject to the
interests of the Underwriters hereunder, that the arrangements made by
the Selling Securityholders for such custody are to that extent
irrevocable, and that the obligations of the Selling Securityholders
hereunder shall not be terminable by any act or deed of the Selling
Securityholders (or by any other person, firm or corporation including
the Company, the Custodian or the Underwriters) or by operation of law
(including the death of an individual Selling Securityholder or the
dissolution of a corporate Selling Securityholder) or by the occurrence
of any other event or events, except as set forth in the Custodian
Agreement. If any such event should occur prior to the delivery to the
Underwriters of the Securities hereunder, the Securities shall be
delivered by the Custodian in accordance with the terms and conditions of
this Agreement as if such event has not occurred. The Custodian is
authorized to receive and acknowledge receipt of the proceeds of sale of
the Securities held by it against delivery of such Securities.
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(c) Payment of the Share Price and the Stock Option Price for the
Firm Shares and Stock Options to be sold hereunder, and for the exercise
price of the Stock Options, 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
Company Shares and the exercise price of the Stock Options, and to the
order of "[State Street Bank & Trust Company], as Custodian" for the Firm Shares
and the Stock Options to be sold by the Selling Securityholders, in each
case against delivery of certificates for the Firm Shares and the Shares
issuable upon exercise of the Stock Options to the Representatives for the
several accounts of the Underwriters. Such payment and delivery are to be made
at the offices of Alex. Xxxxx & Sons Incorporated, Xxx Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx, 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 certificates for the Firm Shares and the
Shares issuable upon exercise of the Stock Options 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.
(d) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and the Selling Securityholders hereby grant an option to the several
Underwriters to purchase the Option Securities at the Share Price and Stock
Option Price, as applicable, as set forth in the first paragraph of this
Section 2. The maximum number of Option Securities to be sold by the Selling
Securityholders is as set forth opposite their respective names on Schedule II
hereto. Each Underwriter agrees, severally and not jointly, to exercise any
additional Stock Options included in the Option Securities so purchased and the
Company agrees, upon exercise and tender of the applicable exercise price, to
issue to the respective Underwriters the number of Shares called for by the
applicable Stock Options so exercised. The option granted hereby may be
exercised in whole or in part by giving written notice (i) at any time before
the Closing Date and (ii) only once thereafter within 30 days after the date of
this Agreement, by you, as Representatives of the several Underwriters, to the
Company, the Attorney-in-Fact and the Custodian, setting forth the Option
Securities as to which the several Underwriters are exercising the option, the
names and denominations in which the certificates for the Shares to be delivered
in connection therewith (including upon exercise of Stock Options included in
the Option Securities) are to be registered and the time and date at which such
certificates are to be delivered. If the option granted hereby is exercised in
part, the respective number of
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Option Securities to be sold by the Company and each of the Selling
Securityholders shall be determined on a pro rata basis in accordance with the
percentages set forth opposite their names on Schedule III hereto. The time and
date at which certificates for Shares to be delivered in connection therewith
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 number of
Option Securities to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Securities being purchased as the
number of Firm Shares and Stock Options being purchased by such Underwriter
bears to the total number of Firm Shares and Stock Options, adjusted by you in
such manner as to avoid fractional shares. The option with respect to the Option
Securities granted hereunder may be exercised only to cover over-allotments in
the sale of the Firm Shares and the Shares issuable upon exercise of the Stock
Options 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 Securities shall be
made on the Option Closing Date in New York Clearing House funds by certified or
bank cashier's checks drawn to the order of the Company for the Share Price of
any Option Securities so purchased from the Company and the exercise price of
any Stock Options so purchased, and to "[State Street Bank & Trust Company] as
Custodian" for the Stock Option Price and Share Price of the Option Securities
so purchased from the Selling Securityholders, against delivery of certificates
for the Shares included in the Option Securities and the Shares issuable upon
exercise of any Stock Options included among the Option Securities, at the
offices of Alex. Xxxxx & Sons Incorporated, Xxx Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx.
(e) If on the Closing Date or the Option Closing Date any Selling
Securityholder fails to sell the Securities which such Selling Securityholder
has agreed to sell on such date as set forth in Schedule II hereto, the Company
-----------
agrees that it will sell or arrange for the sale of that number of shares of
Common Stock to the Underwriters which represents Securities which such Selling
Securityholder has failed to so sell including any Shares issuable upon
exercise of Stock Options which such Selling Securityholder has failed to so
sell, as set forth in Schedule II hereto, or such lesser number as may be
-----------
requested by the Representatives.
-13-
3. Offering by the Underwriters.
----------------------------
It is understood that the several Underwriters are to make a public
offering of the Firm Shares and the shares underlying the Stock Options as soon
as the Representatives deem it advisable to do so. The Firm Shares and the
shares underlying the Stock Options are to be initially offered to the public at
the initial public offering price set forth in the Prospectus. 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
Securities are purchased pursuant to Section 2 hereof, the Underwriters will
offer the Shares represented thereby 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 Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company and the Selling Securityholders.
--------------------------------------------------------
(a) The Company covenants and agrees with the several Underwriters that:
(i) The Company will (A) 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, to 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 with the
Commission subsequent to the date of the Prospectus and prior to the
termination of the offering of the Shares by the Underwriters.
(ii) The Company will advise the Representatives promptly (A) when
the Registration Statement or any post-effective amendment thereto shall
have become effective, (B) of receipt of any comments from the Commission,
(C) of any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, and (D) of the issuance by the Commission of any stop order
suspending the effectiveness of the
-14-
Registration Statement or the use of the Prospectus or of the institution
of any proceedings for that purpose. 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.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares 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 Shares.
(iv) 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 reasonably be requested), including
documents incorporated by reference therein, and of all amendments thereto,
as the Representatives may reasonably request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, and the rules and
regulations of the Commission thereunder, so as to permit the completion of
the distribution of the Shares 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 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 delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend
-15-
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.
(vi) The Company will make generally available to its
securityholders, 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 earning 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 earning 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.
(vii) 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 furnished by the Company to
its stockholders 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, as amended. The Company will deliver to the
Representatives similar reports 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.
(viii) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other securities convertible into
or exchangeable or exercisable for shares of Common Stock or derivative of
Common Stock (or agreement for such) 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. Xxxxx &
Sons Incorporated, except for issuances of shares upon exercise of
outstanding options and warrants.
(ix) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on the Nasdaq National Market.
(x) The Company has caused each officer and director of the
Company, and shareholders specified to the Company by Alex. Xxxxx & Sons
Incorporated, to furnish to you, on or prior to the date of this agreement,
a letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such
-16-
person shall agree not to offer, sell, sell short or otherwise dispose of
any shares of Common Stock of the Company or other capital stock of the
Company, or any other securities convertible, exchangeable or exercisable
for Common Shares or derivative of Common Shares 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. Xxxxx & Sons Incorporated
("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of the
Shares and the exercise of the Stock Options as set forth in the
Prospectus.
(xii) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares and the exercise of
the Stock Options in such a manner as would require the Company or any of
the Subsidiaries to register as an investment company under the 1940 Act.
(xiii) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.
(xiv) 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.
(b) Each of the Selling Securityholders covenants and agrees with the
several Underwriters that:
(i) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other capital stock of the Company or
other securities convertible, exchangeable or exercisable for Common Stock
or derivative of Common Stock owned by the Selling Securityholder or
request the registration for the offer or sale of any of the foregoing (or
as to which the Selling Securityholder has the right to direct the
disposition of) will be made for a period of 90 days after the date of this
Agreement, directly or indirectly, by such Selling Securityholder otherwise
than hereunder or with the prior written consent of Alex. Xxxxx & Sons
Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of
-17-
1982 and the Interest and Dividend Tax Compliance Act of 1983 with respect
to the transactions herein contemplated, each of the Selling
Securityholders agrees to deliver to you prior to or at the Closing Date a
properly completed and executed United States Treasury Department Form W-9
(or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
(iii) Such Selling Securityholder 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 Sellers 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 and the
Selling Securityholders; the cost of printing and delivering to, or as requested
by, the Underwriters copies of the Registration Statement, Preliminary
Prospectuses, the Prospectus, this Agreement, the Underwriters' Selling
Memorandum, the Underwriters' Invitation Letter, the Listing Application, the
Blue Sky Survey and any supplements or amendments thereto; the filing fees of
the Commission; the filing fees and expenses (including legal fees and
disbursements) incident to securing any required review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of
the Shares; the Listing Fee of the NASDAQ Stock Market; and the expenses,
including the fees and disbursements of counsel for the Underwriters, incurred
in connection with the qualification of the Shares under State securities or
Blue Sky laws. To the extent, if at all, that any of the Selling Securityholders
engage separate legal counsel to represent them in connection with this
offering, the fees and expenses of such counsel shall be borne by such Selling
Securityholder. Any transfer taxes imposed on the sale of the Securities to the
several Underwriters will be paid by the Sellers pro rata. The Company agrees to
pay all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, incident to the offer and sale of
directed shares of the Common Stock by the Underwriters to employees and persons
having business relationships with the Company and its Subsidiaries. The Sellers
shall not, however, be required to pay for any of the Underwriters expenses
(other than those related to qualification under NASD regulation and State
securities or Blue Sky laws) 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 or the Selling Securityholders to perform any undertaking or satisfy any
condition of this Agreement or
-18-
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 be due to
the default or omission of any Underwriter, then the Company shall reimburse the
several Underwriters for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Shares or in contemplation of performing
their obligations hereunder; but the Company and the Selling Securityholders
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 Shares.
6. Conditions of Obligations of the Underwriters.
---------------------------------------------
The several obligations of the Underwriters to purchase the Firm Shares
[and the Stock Options] on the Closing Date and the Option Securities, 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 and the Selling Securityholders contained herein, and
to the performance by the Company and the Selling Securityholders of their
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 or the Selling Securityholders, shall be
contemplated by the Commission and no injunction, restraining order, or order of
any nature by a Federal or state court of competent jurisdiction shall have been
issued as of the Closing Date which would prevent the sale of any of the
Securities, the exercise of any of the Stock Options or the issuance of any of
the Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinions of Piper & Marbury L.L.P.,
counsel for the Company and the Selling Securityholders, dated the Closing Date
or the Option Closing Date, as the case may be, addressed to the Underwriters
(and stating that it may be relied upon by counsel to the Underwriters) to the
effect that:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland, with
-19-
corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement; each of the
Subsidiaries has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement; the Company and each of the Subsidiaries are duly qualified to
transact business in all jurisdictions set forth in an exhibit to such
opinion; and the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued and are fully
paid and non-assessable and are owned by the Company or a Subsidiary; and,
to the best of such counsel's knowledge, the outstanding shares of capital
stock of each of the Subsidiaries is owned free and clear of all liens,
encumbrances and equities and claims, and no options, warrants or other
rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into any shares of capital stock or of
ownership interests in the Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as set
forth in the Prospectus; the authorized shares of the Company's Common
Stock have been duly authorized; the outstanding shares of the Company's
Common Stock, including the Shares to be sold by the Selling Shareholders,
have been duly authorized and validly issued and are fully paid and non-
assessable; all of the Shares conform to the description thereof contained
in the Prospectus; the certificates for the Shares, assuming they are in
the form filed with the Commission, comply with Maryland law and the
Company's Charter and By-laws; the shares of Common Stock to be sold by the
Company pursuant to this Agreement have been duly authorized and will be
validly issued, fully paid and non-assessable when issued and paid for as
contemplated by this Agreement; no preemptive rights of stockholders exist
with respect to any of the Shares or the issue or sale thereof; the Stock
Options have been duly authorized, executed and delivered by the Company
and constitute the valid and binding obligations of the Company; the Stock
Options are transferable to the Underwriters without restriction and
without the consent of any person, including the Company, that has not been
obtained; the Shares issuable upon exercise of the Stock Options have been
duly authorized and reserved for issuance upon such exercise and, when
issued and delivered upon exercise of the Stock Options and payment of the
exercise price therefor, in accordance with the terms thereof, such Shares
will be validly issued, fully paid and non-assessable.
(iii) 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
-20-
for any shares of capital stock of the Company and there are no outstanding
or authorized options, warrants or 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, any of the Shares or the right to have any Common Shares 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.
(iv) The Registration Statement has become effective under the Act
and, to the best of the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending or
threatened under the Act.
(v) The Registration Statement, the Prospectus and each amendment
or supplement thereto and documents 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 or other financial or
statistical information included or incorporated by reference therein).
(vi) The statements under the captions "__________________" and
"___________________" in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or matters of law,
fairly summarize in all material respects the information called for with
respect to such documents and matters.
(vii) 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.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries except as set forth in the Prospectus.
-21-
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, the Charter or by-laws of the Company, or
any agreement or instrument filed with the Commission, listed on an exhibit
to such opinion or otherwise known to such counsel as to which the Company
or any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries may be bound.
(x) This Agreement has been duly authorized, executed and delivered
by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or as required by
State securities and Blue Sky laws as to which such counsel need express no
opinion) except such as have been obtained or made, specifying the same.
(xii) The Company is not, and will not become, required to register
as an investment company under the 1940 Act as a result of the consummation
of the transactions contemplated by this Agreement, assuming application of
the net proceeds therefrom as described in the Prospectus.
(xiii) This Agreement has been duly authorized, executed and delivered
on behalf of the Selling Securityholders.
(xiv) Each Selling Securityholder has full legal right, power and
authority, and any approval required by law (other than as required by
State securities and Blue Sky laws as to which such counsel need express no
opinion), to sell, assign, transfer and deliver the portion of the
Securities to be sold by such Selling Securityholder.
(xv) The Custodian Agreement and the Power of Attorney executed and
delivered by each Selling Securityholder are valid and binding.
(xvi) The Underwriters (assuming that they are bona fide purchasers
within the meaning of the Uniform Commercial Code) have acquired good and
marketable title to the Shares and Stock Options being sold by each Selling
Securityholder on the Closing Date, and the Option Closing Date, as the
case may
-22-
be, [and have acquired good and marketable title to the Shares issued upon
exercise of the Stock Options on the Closing Date, and the Option Closing
Date, as the case may be, in each case] free and clear of all liens,
encumbrances, equities and adverse claims.
In rendering such opinion Piper & Marbury L.L.P. may rely as to matters
governed by the laws of states other than Maryland, Pennsylvania, New York or
Federal laws on local counsel in such jurisdictions and as to the matters set
forth in subparagraphs (xiii), (xiv) and (xv) on opinions of other counsel
representing the respective Selling Securityholders, provided that in each case
Piper & Marbury L.L.P. shall state that they believe that they and the
Underwriters are justified in relying on such other counsel. 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 (i) the Registration Statement, at the time it became effective
under the Act (but after giving effect to any modifications incorporated therein
pursuant to Rule 430A under the Act) and 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 not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and 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 necessary in order to make the statements, in the light of
the circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein). With respect to such statement, Piper &
Marbury L.L.P. may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(c) The Representatives shall have received from Xxxxx & Xxxxxxx L.L.P.,
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 (ii), (iii), (iv) and (x) of Paragraph (b) of this Section 6, and
that the Company was incorporated and is a validly existing corporation under
the laws of the State of Maryland. 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 (i) the
Registration Statement, or any amendment thereto, as of the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act), contained an untrue
statement of a material fact or
-23-
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and 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, necessary in order to make the statements, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information therein). With respect to such statement, Xxxxx &
Xxxxxxx L.L.P. may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(d) The Representatives shall have received at or prior to the Closing
Date from Xxxxx & Xxxxxxx L.L.P. 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 Shares under the State securities
or Blue Sky laws of such jurisdictions as the Representatives may reasonably
have designated to the Company.
(e) 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 Ernst & Young L.L.P. 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 or incorporated
by reference 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 or incorporated by reference in the
Registration Statement and Prospectus or as otherwise specified by the
Underwriters and agreed to by Ernst & Young L.L.P.
(f) 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 Chief Financial 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 Registrations
Statement has been issued, and no proceedings for such purpose have been
taken or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company contained in
Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be;
-24-
(iii) All filings required to have been made pursuant to Rules 424 or
430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and the
Prospectus and, in his or her opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and
Prospectus 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 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; and
(v) 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 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,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a
whole, whether or not arising in the ordinary course of business.
(g) The Company and the Selling Securityholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein and
related matters as the Representatives may reasonably have requested.
(h) The Shares have been approved for designation upon notice of issuance
on the Nasdaq National Market.
(i) The Lockup Agreements described in Section 4 (x) are in full force and
effect.
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 satisfactory to the Representatives and to Xxxxx & Xxxxxxx L.L.P.,
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 Underwriters hereunder may be terminated by the
Representatives by notifying the
-25-
Company and the Selling Securityholders 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 Selling Securityholders, 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 SELLERS.
--------------------------------------------
The obligations of the Sellers to sell and deliver the portion of the
Securities 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 and the Selling Securityholders, jointly and severally,
agree 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 any 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 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, in the light of the circumstances under which they were made; 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 or liability, action or proceeding or in responding to a subpoena
or governmental inquiry related to the offering of the Shares, whether or not
such Underwriter or controlling person is a party to any action or proceeding;
provided, however, that the Company and the Selling Securityholders 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 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; and provided further that neither the Company nor the
Selling Securityholders shall be liable to any Underwriter
-26-
under this Section 8(a) with respect to any Preliminary Prospectus to the extent
that any such loss, claim, damage or liability of such Underwriter results
solely from an untrue statement of a material fact contained in, or the omission
of a material fact from, such Preliminary Prospectus, which untrue statement or
omission was corrected in the Prospectus, if the Company or the Selling
Securityholders, as the case may be, shall sustain the burden of proving that
such Underwriter sold Securities to the person alleging such loss, claim, damage
or liability without sending or giving, at or prior to the written confirmation
of such sale, a copy of the Prospectus if the Company has previously furnished
copies thereof to such Underwriter. This indemnity agreement will be in addition
to any liability which the Company or the Selling Securityholders may otherwise
have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Securityholders, and each person,
if any, who controls the Company or the Selling Securityholders within the
meaning of the Act, against any losses, claims, damages or liabilities to which
the Company or any such director, officer, Selling Securityholder 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 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, Selling Securityholder 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 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
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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 as incurred (or within 30 days of presentation)
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, (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 proceedings 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 and the
Selling Securityholders 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 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, 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
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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
benefits received by the Company and the Selling Securityholders on the one hand
and the Underwriters on the other from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is
not permitted by applicable law 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 and the Selling Securityholders 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 and the Selling
Securityholders 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 (including the proceeds
from the exercise of the Stock Options) and the Selling Securityholders 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 or in
the Term Sheet or Abbreviated Term Sheet, as the case may be. 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
or the Selling Securityholders on the one hand or the Underwriters on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Securityholders 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 Shares 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
-29-
misrepresentation. The Underwriters' obligations in this Section 8(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(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 Securities 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 Securities
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 or a Selling
Securityholder), you, as Representatives of the Underwriters, shall use your
reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company and the Selling
Securityholders such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares, Stock Options or Option Securities, as the case may be,
which the defaulting Underwriter or Underwriters failed to purchase. If during
such 36 hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares, Stock Options or
Option Securities, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of Securities
-30-
with respect to which such default shall occur does not exceed 10% of the Firm
Shares and Stock Options or Option Securities, as the case may be, covered
hereby, the other Underwriters shall be obligated, severally, in proportion to
the respective numbers of Firm Shares and Stock Options or Option Securities, as
the case may be, which they are obligated to purchase hereunder, to purchase the
Firm Shares and Stock Options or Option Securities, as the case may be, which
such defaulting Underwriter or Underwriters failed to purchase, or (b) if the
aggregate number of Securities with respect to which such default shall occur
exceeds 10% of the Firm Shares and Stock Options or Option Securities, as the
case may be, covered hereby, the Company and the Selling Securityholders or you
as the Representatives of the Underwriters will have the right, by written
notice given within the next 36-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 or of the Selling Securityholders 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, telecopied or telegraphed and
confirmed as follows: if to the Underwriters, to Alex. Xxxxx & Sons
Incorporated, Xxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxxxxx
X. Xxxxxxxxx; with a copy to Alex. Xxxxx & Sons Incorporated, Xxx Xxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxx 00000. Attention: General Counsel; if to the Company or the
Selling Securityholders, to Sylvan Learning Systems, Inc., 0000 Xxxxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxx, President.
11. TERMINATION.
-----------
This Agreement may be terminated by you by notice to the Sellers as
follows:
(a) at any time prior to the earlier of (i) the time the Shares 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;
-31-
(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, management, properties, assets, rights,
operations, condition (financial or otherwise) or 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 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 it
impracticable to market the Shares or to enforce contracts for the sale of the
Shares, or (iii) suspension of trading in securities generally on the New York
Stock Exchange or the American Stock Exchange or limitation on prices (other
than limitations on hours or numbers of days of trading) for securities on
either such Exchange, (iv) the enactment, publication, decree or other
promulgation of any statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects or
may materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading in the rating of the Company's debt securities
by any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Exchange Act); (vii) the suspension of trading
of the Company's common stock by the Commission on the Nasdaq National Market or
(viii) the taking of any action by any governmental body 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
(c) 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, the Company and the Selling Securityholders 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. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
------------------------------------
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The Company, the Selling Securityholders 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 of the Prospectus, the Term Sheet or the
Abbreviated Term Sheet, as the case may be (insofar as such information relates
to the Underwriters), legends required by Item 502(d) of Regulation S-K under
the Act and the 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 Securities 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 Maryland.
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 Selling Securityholders,
the Company and the several Underwriters in accordance with its terms.
-33-
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Securityholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Securityholder pursuant to a validly
existing and binding Power of Attorney which authorizes such Attorney-in-Fact to
take such action.
Very truly yours,
SYLVAN LEARNING SYSTEMS, INC.
By:
President
Selling Securityholders listed on Schedule II
By:
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. XXXXX & SONS INCORPORATED
XXXXXXX XXXXX & CO.
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED
XXXXXXXXXX SECURITIES
XXXXXX XXXXXXX & CO. INCORPORATED
XXXXX XXXXXX INC.
As Representatives of the several
Underwriters listed on Schedule I
By: Alex. Xxxxx & Sons Incorporated
By:
Authorized Officer
-34-
SCHEDULE I
Schedule of Underwriters
Number of Firm Shares Number of
Underwriter to be Purchased Stock Options to be
Purchased
Total
SCHEDULE II
Schedule of Selling Shareholders and Selling Stock Optionholders
[Number of
Number of Number of Additional Stock
Selling Shareholder/ Stock Options to Additional Options to be
Selling Stock Number of Firm be Sold/Exercise Shares to be Sold/Exercise
Optionholder Shares to be Sold Price Per Share Sold Price Per Share]
--------------- --------------- --------------- ---------------
Totals
