Exhibit 1.1
__________ Shares
ADVANTAGE PAYROLL SERVICES, INC.
Common Stock
UNDERWRITING AGREEMENT
___________, 2002
XXXXXX BROTHERS INC.
CIBC WORLD MARKETS CORP.
FIRST UNION SECURITIES, INC.
XXXXXX X. XXXXX & CO. INCORPORATED
As Representatives of the
several underwriters named in Schedule 1 hereto
c/x XXXXXX BROTHERS INC.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
Advantage Payroll Services, Inc., a Delaware corporation (the "Company"),
and certain stockholders of the Company named in Schedule 2 hereto (the "Selling
Stockholders"), propose to sell 5,750,000 shares (the "Firm Stock") of the
Company's common stock, par value $0.01 per share (the "Common Stock"). Of the
5,750,000 shares of the Firm Stock, 4,539,473 are being sold by the Company and
1,210,527 by the Selling Stockholders. In addition, the Selling Stockholder
named in Schedule 3 hereto (the "Principal Selling Stockholder") proposes to
grant to the Underwriters named in Schedule 1 hereto (the "Underwriters") an
option to purchase up to an additional 862,500 shares of the Common Stock on the
terms and for the purposes set forth in Section 3 (the "Option Stock"). The Firm
Stock and the Option Stock, if purchased, are hereinafter collectively called
the "Stock." This is to confirm the agreement concerning the purchase of the
Stock from the Company and the Selling Stockholders by the Underwriters.
SECTION 1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-1, and amendments thereto, with
respect to the Stock has (i) been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the rules and regulations (the "Rules and Regulations") of the United States
Securities and Exchange Commission (the "Commission") thereunder, (ii) been
filed with the Commission under the Securities Act and (iii) become effective
under the Securities Act. Copies of such registration statement and each of the
amendments thereto have been delivered by the Company to you as the
representatives (the "Representatives") of the
Underwriters. As used in this Agreement, "Effective Time" means the date and the
time as of which such registration statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the Commission; "Effective
Date" means the date of the Effective Time; "Preliminary Prospectus" means each
prospectus included in such registration statement, or amendments thereof,
before it became effective under the Securities Act and any prospectus filed
with the Commission by the Company with the consent of the Representatives
pursuant to Rule 424(a) of the Rules and Regulations; "Registration Statement"
means such registration statement, as amended at the Effective Time, including
all information contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations and deemed to be a part of
the registration statement as of the Effective Time pursuant to Rule 430A of the
Rules and Regulations; and "Prospectus" means the prospectus in the form first
used to confirm sales of Stock. If the Company has filed an abbreviated
registration statement to register additional shares of Common Stock pursuant to
Rule 462(b) under the Securities Act (the "Rule 462 Registration Statement"),
then any reference herein to the term "Registration Statement" shall be deemed
to include such Rule 462 Registration Statement. The Commission has not issued
any order preventing or suspending the use of any Preliminary Prospectus.
(b) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus will,
when they become effective or are filed with the Commission, as the case may be,
conform in all respects to the requirements of the Securities Act and the Rules
and Regulations and do not and will not, as of the applicable effective date (as
to the Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or supplement
thereto) contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided that no representation or warranty is made as
to information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information furnished
to the Company through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein.
(c) The Company and each of its subsidiaries have been duly incorporated
and are validly existing as corporations in good standing under the laws of
their respective jurisdictions of incorporation, are duly qualified to do
business and are in good standing as foreign corporations in each jurisdiction
in which their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all power and
authority necessary to own or hold their respective properties and to conduct
the businesses in which they are engaged; and none of the subsidiaries of the
Company [other than ____________ and ____________] is a "significant
subsidiary", as such term is defined in Rule 405 of the Rules and Regulations.
(d) The Company has an authorized capitalization as set forth in the
Prospectus. All of the issued shares of capital stock of the Company have been
duly and validly authorized and issued, were issued in compliance with federal
and state securities laws, are fully paid and non-assessable and conform to the
description thereof contained in the Prospectus. All of the Company's options,
warrants and other rights to purchase or exchange any securities for shares of
the Company's capital stock have been duly and validly authorized and issued,
were issued in compliance with federal and state securities
2
laws, and conform to the description thereof contained in the Prospectus. All of
the issued shares of capital stock of each subsidiary of the Company have been
duly and validly authorized and issued and are fully paid and non-assessable and
are owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(e) The shares of the Stock to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when issued
and delivered against payment therefor in accordance with this Agreement, will
be duly and validly issued, fully paid and non-assessable; and the Stock will
conform to the descriptions thereof contained in the Prospectus. Upon payment
for and delivery of the Stock to be sold by the Company pursuant to this
Agreement, the Underwriters will acquire good and valid title to such Stock, in
each case free and clear of all liens, encumbrances, equities, preemptive
rights, subscription rights, other rights to purchase, voting or transfer
restrictions and other claims.
(f) This Agreement has been duly authorized, executed and delivered by the
Company.
(g) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such actions result in any
violation of the provisions of the charter or by-laws of the Company or any of
its subsidiaries or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets; and except for the
registration of the Stock under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under the
Exchange Act of 1934, as amended (the "Exchange Act") and applicable state
securities laws in connection with the purchase and distribution of the Stock by
the Underwriters, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required for
the execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby.
(h) There are no contracts, agreements or understandings between the
Company and any person granting such person the right (other than rights which
have been waived or satisfied) to require the Company to file a registration
statement under the Securities Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration Statement
or in any securities being registered pursuant to any other registration
statement filed by the Company under the Securities Act. The holders of
outstanding shares of the Company's capital stock are not entitled to preemptive
or other rights to subscribe for the Stock. Except for (i) options to purchase
698,000 shares of Common Stock granted to executives and other key employees of
the Company under the Company's 1998 Key Employees Stock Option Plan; (ii)
options to purchase 87,550 shares of Common Stock granted to managers and sales
representatives of the Company under the Company's 2000 Management and Sales
Employees Stock
3
Option Plan; (iii) options to purchase 120,000 shares of Common Stock granted to
managers and sales representatives of the Company under the Company's 2001
Management and Sales Employees Stock Option Plan; and (iv) options to purchase
[____________] shares of Common Stock to be granted to officers, directors and
employees under the Company's 2002 Stock Option Plan concurrently with the
offering, upon completion of the offering, no options, warrants or other rights
to purchase, agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of capital stock of or
ownership interests in the Company are outstanding.
(i) Except as described in the Prospectus, the Company has not sold or
issued any shares of Common Stock during the six-month period preceding the date
of the Prospectus, including any sales pursuant to Rule 144A under, or
Regulations D or S of, the Securities Act, other than shares issued pursuant to
employee benefit plans, qualified stock options plans or other employee
compensation plans or pursuant to outstanding options, rights or warrants.
(j) Neither the Company nor any of its subsidiaries has sustained, since
the date of the latest audited financial statements included in the Prospectus,
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since such date, there has not
been any change in the capital stock or long-term debt of the Company or any of
its subsidiaries or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
management, consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus.
(k) The financial statements (including the related notes and supporting
schedules) filed as part of the Registration Statement or included in the
Prospectus present fairly the financial condition and results of operations of
the entities purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved. The pro forma financial information included in the Registration
Statement and Prospectus has been prepared in accordance with the applicable
requirements of the Securities Act and the Rules and Regulations and includes
all adjustments necessary to present fairly the pro forma financial position of
the respective entity or entities presented therein at the respective dates
indicated and the results of their operations for the respective periods
specified.
(l) PricewaterhouseCoopers LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and who have
delivered the letters referred to in Section 9(e) hereof, are independent public
accountants as required by the Securities Act and the Rules and Regulations.
(m) The Company and each of its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects, except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made
4
of such property by the Company and its subsidiaries; and all assets held under
lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases, with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such assets by the
Company and its subsidiaries.
(n) 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 businesses in similar
industries.
(o) The Company and each of its subsidiaries own or possess adequate rights
to use all material patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service xxxx registrations, copyrights and
licenses (collectively, the "Intellectual Property") necessary for the conduct
of their respective businesses and have no reason to believe that the conduct of
their respective businesses will conflict with, and have not received any notice
of any claim of conflict with, any such rights of others.
(p) There are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property or assets
of the Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, might have a material
adverse effect on the general affairs, management, consolidated financial
position, stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries (a "Material Adverse Effect"); and to the best
of the Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others.
(q) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Securities Act or by the Rules and Regulations which have not been
described in the Prospectus or filed as exhibits to the Registration Statement.
(r) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders, customers or
suppliers of the Company on the other hand, which is required to be described in
the Prospectus which is not so described.
(s) No labor disturbance by the employees of the Company or any of its
Subsidiaries exists or, to the knowledge of the Company, is imminent, which
might be expected to have a Material Adverse Effect.
(t) The Company and its Subsidiaries are in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company or any Subsidiary would have any liability; neither the
Company nor any of its Subsidiaries has incurred nor does the Company or any of
its Subsidiaries expect to incur liability under (i) Title IV of ERISA with
respect to the termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company or any Subsidiary would have
5
any liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such qualification.
(u) The Company has filed all federal, state and local income and franchise
tax returns required to be filed through the date hereof and has paid all taxes
due thereon, and no tax deficiency has been determined adversely to the Company
or any of its subsidiaries which has had (nor does the Company have any
knowledge of any tax deficiency which, if determined adversely to the Company or
any of its subsidiaries, might have) a Material Adverse Effect.
(v) Since the date as of which information is given in the Prospectus
through the date hereof, and except as may otherwise be disclosed in the
Prospectus, the Company has not (i) issued or granted any securities, (ii)
incurred any liability or obligation, direct or contingent, other than
non-material liabilities and obligations which were incurred in the ordinary
course of business, (iii) entered into any transaction not in the ordinary
course of business or (iv) declared or paid any dividend on its capital stock.
(w) The Company (i) makes and keeps accurate books and records and (ii)
maintains internal accounting controls which provide reasonable assurance that
(A) transactions are executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its financial
statements and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management's authorization and (D)
the reported accountability for its assets is compared with existing assets at
reasonable intervals.
(x) Neither the Company nor any of its subsidiaries (i) is in violation of
its charter or by-laws, (ii) is in default in any material respect, and no event
has occurred which, with notice or lapse of time or both, would constitute such
a default, in the due performance or observance of any term, covenant or
condition contained in any material indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by which it
is bound or to which any of its properties or assets is subject or (iii) is in
violation in any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be subject
or has failed to obtain any material license, permit, certificate, franchise or
other governmental authorization or permit necessary to the ownership of its
property or to the conduct of its business.
(y) Neither the Company nor any of its subsidiaries, nor any director,
officer, agent, employee or other person associated with or acting on behalf of
the Company or any of its subsidiaries, has used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the Foreign Corrupt Practices Act of 1977; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(z) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any of its
subsidiaries (or, to the knowledge of the Company, any of their predecessors in
interest) at, upon or from any of the property now or previously owned or leased
by the Company or its
6
subsidiaries in violation of any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit or which would require remedial action under
any applicable law, ordinance, rule, regulation, order, judgment, decree or
permit, except for any violation or remedial action which would not have, or
could not be reasonably likely to have, singularly or in the aggregate with all
such violations and remedial actions, a Material Adverse Effect; there has been
no material spill, discharge, leak, emission, injection, escape, dumping or
release of any kind onto such property or into the environment surrounding such
property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or
hazardous substances due to or caused by the Company or any of its subsidiaries
or with respect to which the Company or any of its subsidiaries have knowledge,
except for any such spill, discharge, leak, emission, injection, escape, dumping
or release which would not have or would not be reasonably likely to have,
singularly or in the aggregate with all such spills, discharges, leaks,
emissions, injections, escapes, dumpings and releases, a Material Adverse
Effect. The terms "hazardous wastes", "toxic wastes", "hazardous substances" and
"medical wastes" shall have the meanings specified in any applicable local,
state, federal and foreign laws or regulations with respect to environmental
protection.
(aa) Neither the Company nor any subsidiary is, nor as of the Closing Date
will be, an "investment company" as defined in the Investment Company Act of
1940, as amended.
(bb) None of the Directed Shares (as defined below) distributed in
connection with the Directed Share Program (as defined below) will be offered or
sold outside of the United States.
(cc) There are no contracts, agreements or understandings between the
Company and any person that would give rise to a valid claim against the Company
or any Underwriter for a brokerage commission, finder's fee or other like
payment in connection with this offering.
(dd) The statistical and market-related data included in the Prospectus and
the Registration Statement are based on or derived from sources which the
Company believes to be reliable and accurate.
SECTION 2. Representations, Warranties and Agreements of the Selling
Stockholders. Each Selling Stockholder severally represents, warrants and agrees
that:
(a) The Selling Stockholder has, and immediately prior to the First
Delivery Date (as defined in Section 5 hereof) the Selling Stockholder will have
good and valid title to the shares of Stock to be sold by the Selling
Stockholder hereunder on such date, free and clear of all liens, encumbrances,
equities or claims; and upon delivery of such shares and payment therefor
pursuant hereto, good and valid title to such shares, free and clear of all
liens, encumbrances, equities or claims, will pass to the several Underwriters.
(b) The Selling Stockholder has placed in custody under a custody agreement
(the "Custody Agreement" and, together with all other similar agreements
executed by the other Selling Stockholders, the "Custody Agreements") with
____________, as custodian (the "Custodian"), for delivery under this Agreement,
certificates in negotiable form (with signature guaranteed by a commercial bank
or trust company having an office or correspondent in the United States or a
member firm of the
7
New York or American Stock Exchanges) representing the shares of Stock to be
sold by the Selling Stockholder hereunder.
(c) The Selling Stockholder has duly and irrevocably executed and delivered
a power of attorney (the "Power of Attorney" and, together with all other
similar agreements executed by the other Selling Stockholders, the "Powers of
Attorney") appointing the Custodian and one or more other persons, as
attorneys-in-fact, with full power of substitution, and will full authority
(exercisable by any one or more of them) to execute and deliver this Agreement
and to take such other action as may be necessary or desirable to carry out the
provisions hereof on behalf of the Selling Stockholder.
(d) The Selling Stockholder has full right, power and authority to enter
into this Agreement, the Power of Attorney and the Custody Agreement; the
execution, delivery and performance of this Agreement, the Power of Attorney and
the Custody Agreement by the Selling Stockholder and the consummation by the
Selling Stockholder of the transactions contemplated hereby and thereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder is bound or to which
any of the property or assets of the Selling Stockholder is subject, nor will
such actions result in any violation of the articles of partnership of the
Selling Stockholder, if applicable, or the provisions of any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Selling Stockholder or the property or assets of the
Selling Stockholder; and, except for the registration of the Stock under the
Securities Act and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable state
securities laws in connection with the purchase and distribution of the Stock by
the Underwriters, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is required for
the execution, delivery and performance of this Agreement, the Power of Attorney
or the Custody Agreement by the Selling Stockholder and the consummation by the
Selling Stockholder of the transactions contemplated hereby and thereby.
(e) The Registration Statement and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus will,
when they become effective or are filed with the Commission, as the case may be,
do not and will not, as of the applicable effective date (as to the Registration
Statement and any amendment thereto) and as of the applicable filing date (as to
the Prospectus and any amendment or supplement thereto) contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided that no representation or warranty is made as to information contained
in or omitted from the Registration Statement or the Prospectus in reliance upon
and in conformity with written information furnished to the Company through the
Representatives by or on behalf of any Underwriter specifically for inclusion
therein.
(f) The Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in Section 1 hereof are
not materially true and correct, is familiar with the Registration Statement and
the Prospectus (as amended or supplemented) and has no knowledge of any material
fact, condition or information not disclosed in the Registration Statement, as
of the effective date, or the Prospectus (or any
8
amendment or supplement thereto), as of the applicable filing date, which has
adversely affected or may adversely affect the business of the Company and is
not prompted to sell shares of Common Stock by any information concerning the
Company which is not set forth in the Registration Statement and the Prospectus.
(g) The Selling Stockholder has not taken and will not take, directly or
indirectly, any action which is designed to or which has constituted or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the shares of the Stock.
SECTION 3. Purchase of the Stock by the Underwriters. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell ____________ shares of
the Firm Stock and each Selling Stockholder hereby agrees to sell the number of
shares of the Firm Stock set opposite its name in Schedule 2 hereto, severally
and not jointly, to the several Underwriters and each of the Underwriters,
severally and not jointly, agrees to purchase the number of shares of the Firm
Stock set forth opposite that Underwriter's name in Schedule 1 hereto. Each
Underwriter shall be obligated to purchase from the Company, and from each
Selling Stockholder, that number of shares of the Firm Stock which represents
the same proportion of the number of shares of the Firm Stock to be sold by the
Company, and by each Selling Stockholder, as the number of shares of the Firm
Stock set forth opposite the name of such Underwriter in Schedule 1 represents
of the total number of shares of the Firm Stock to be purchased by all of the
Underwriters pursuant to this Agreement. The respective purchase obligations of
the Underwriters with respect to the Firm Stock shall be rounded among the
Underwriters to avoid fractional shares, as the Representatives may determine.
In addition, the Principal Selling Stockholder grants to the Underwriters
an option to purchase up to ____________ shares of Option Stock. Such option is
granted for the purpose of covering over-allotments in the sale of Firm Stock
and is exercisable as provided in Section 5 hereof. Shares of Option Stock shall
be purchased severally for the account of the Underwriters in proportion to the
number of shares of Firm Stock set forth opposite the name of such Underwriters
in Schedule 1 hereto. The respective purchase obligations of each Underwriter
with respect to the Option Stock shall be adjusted by the Representatives so
that no Underwriter shall be obligated to purchase Option Stock other than in
100 share amounts.
The price of both the Firm Stock and any Option Stock shall be $[ ] per
share.
The Company and the Selling Stockholders shall not be obligated to deliver
any of the Stock to be delivered on any Delivery Date (as hereinafter defined),
except upon payment for all the Stock to be purchased on such Delivery Date as
provided herein.
SECTION 4. Offering of Stock by the Underwriters. Upon authorization by the
Representatives of the release of the Firm Stock, the several Underwriters
propose to offer the Firm Stock for sale upon the terms and conditions set forth
in the Prospectus.
It is understood that approximately _________ shares of the Firm Stock
("Directed Shares") will initially be reserved by the Underwriters for offer and
sale to employees and persons having business relationships with the Company
("Directed Share Participants") upon the terms and conditions set forth in the
Prospectus (the "Directed Share Program") and in accordance with the rules and
regulations of the
9
National Association of Securities Dealers, Inc. ("NASD"), and that any
allocation of such Directed Shares among such persons will be made in accordance
with timely directions received by Xxxxxx Brothers Inc. from the Company. Under
no circumstances will Xxxxxx Brothers Inc. or any Underwriter be liable to the
Company or to any Directed Share Participant for any action taken or omitted to
be taken in good faith in connection with such Directed Share Program. To the
extent that any Directed Shares are not affirmatively reconfirmed for purchase
by any Directed Share Participant on or immediately after the date of this
Agreement, such Directed Shares may be offered to the public as part of the
public offering contemplated hereby.
SECTION 5. Delivery of and Payment for the Stock. Delivery of and payment for
the Firm Stock shall be made at the offices of Xxxxxx and Xxxxxxx, 000 Xxxxx
Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, at 10:00 A.M., New York City
time, on the fourth full business day following the date of this Agreement or at
such other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to as
the "First Delivery Date." On the First Delivery Date, the Company and the
Selling Stockholders shall deliver or cause to be delivered certificates
representing the Firm Stock to the Representatives for the account of each
Underwriter against payment to or upon the order of the Company and the Selling
Stockholders of the purchase price by wire transfer in immediately available
funds. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of
each Underwriter hereunder. Upon delivery, the Firm Stock shall be registered in
such names and in such denominations as the Representatives shall request in
writing not less than two full business days prior to the First Delivery Date.
For the purpose of expediting the checking and packaging of the certificates for
the Firm Stock, the Company and the Selling Stockholders shall make the
certificates representing the Firm Stock available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the First Delivery Date.
The option granted in Section 3 will expire 30 days after the date of this
Agreement and may be exercised in whole or in part from time to time by written
notice being given to the Principal Selling Stockholder by the Representatives.
Such notice shall set forth the aggregate number of shares of Option Stock as to
which the option is being exercised, the names in which the shares of Option
Stock are to be registered, the denominations in which the shares of Option
Stock are to be issued and the date and time, as determined by the
Representatives, when the shares of Option Stock are to be delivered; provided,
however, that this date and time shall not be earlier than the First Delivery
Date nor earlier than the second business day after the date on which the option
shall have been exercised nor later than the fifth business day after the date
on which the option shall have been exercised. The date and time the shares of
Option Stock are delivered are sometimes referred to as a "Second Delivery Date"
and the First Delivery Date and any Second Delivery Date are sometimes each
referred to as a "Delivery Date".
Delivery of and payment for the Option Stock shall be made at the place
specified in the first sentence of the first paragraph of this Section 5 (or at
such other place as shall be determined by agreement between the Representatives
and the Principal Selling Stockholder) at 10:00 A.M., New York City time, on
such Second Delivery Date. On such Second Delivery Date, the Principal Selling
Stockholder shall deliver or cause to be delivered the certificates representing
the Option Stock to the Representatives for the account of each Underwriter
against payment to or upon the order of the Principal Selling
10
Stockholder of the purchase price by wire transfer in immediately available
funds. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of
each Underwriter hereunder. Upon delivery, the Option Stock shall be registered
in such names and in such denominations as the Representatives shall request in
the aforesaid written notice. For the purpose of expediting the checking and
packaging of the certificates for the Option Stock, the Principal Selling
Stockholder shall make the certificates representing the Option Stock available
for inspection by the Representatives in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to such Second Delivery
Date.
SECTION 6. Further Agreements of the Company. The Company covenants and
agrees:
(a) To prepare the Prospectus in a form approved by the Representatives and
to file such Prospectus pursuant to Rule 424(b) under the Securities Act not
later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Securities Act; to
make no further amendment or any supplement to the Registration Statement or to
the Prospectus except as permitted herein; to advise the Representatives,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to
the Prospectus or any amended Prospectus has been filed and to furnish the
Representatives with copies thereof; to advise the Representatives, promptly
after it receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus, of the suspension of the qualification of the
Stock for offering or sale in any jurisdiction, of the initiation or threatening
of any proceeding for any such purpose, or of any request by the Commission for
the amending or supplementing of the Registration Statement or the Prospectus or
for additional information; and, in the event of the issuance of any stop order
or of any order preventing or suspending the use of any Preliminary Prospectus
or the Prospectus or suspending any such qualification, to use promptly its best
efforts to obtain its withdrawal;
(b) To furnish promptly to each of the Representatives and to counsel for
the Underwriters a signed copy of the Registration Statement as originally filed
with the Commission, and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith;
(c) To deliver promptly to the Representatives such number of the following
documents as the Representatives shall reasonably request: (i) conformed copies
of the Registration Statement as originally filed with the Commission and each
amendment thereto (in each case excluding exhibits) and (ii) each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus; and, if
the delivery of a prospectus is required at any time after the Effective Time in
connection with the offering or sale of the Stock or any other securities
relating thereto and if at such time any events shall have occurred as a result
of which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary to amend or supplement the Prospectus
in order to comply with the Securities Act, to notify the Representatives and,
upon their request, to
11
file such document and to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as the Representatives may from
time to time reasonably request of an amended or supplemented Prospectus which
will correct such statement or omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the Registration
Statement or the Prospectus or any supplement to the Prospectus that may, in the
judgment of the Company or the Representatives, be required by the Securities
Act or requested by the Commission;
(e) Prior to filing with the Commission any amendment to the Registration
Statement or supplement to the Prospectus or any Prospectus pursuant to Rule 424
of the Rules and Regulations, to furnish a copy thereof to the Representatives
and counsel for the Underwriters and obtain the consent of the Representatives
to the filing;
(f) As soon as practicable after the Effective Date, to make generally
available to the Company's security holders and to deliver to the
Representatives an earnings statement of the Company and its subsidiaries (which
need not be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to furnish to
the Representatives copies of all materials furnished by the Company to its
shareholders and all public reports and all reports and financial statements
furnished by the Company to the principal national securities exchange upon
which the Common Stock may be listed pursuant to requirements of or agreements
with such exchange or to the Commission pursuant to the Exchange Act or any rule
or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the Representatives
may reasonably request to qualify the Stock for offering and sale under the
securities laws of such jurisdictions as the Representatives may request and to
comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete the
distribution of the Stock; provided that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(i) For a period of 180 days from the date of the Prospectus, not to,
directly or indirectly, (1) offer for sale, sell, pledge or otherwise dispose of
(or enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the future
of) any shares of Common Stock or securities convertible into or exchangeable
for Common Stock (other than the Stock and shares issued pursuant to employee
benefit plans, qualified stock option plans or other employee compensation plans
existing on the date hereof or pursuant to currently outstanding options,
warrants or rights; provided, that during such period the Company shall not
accelerate the vesting of any outstanding options or issue any options that
become exercisable during such period), or sell or grant options, rights or
warrants with respect to any shares of Common Stock or securities convertible
into or exchangeable for Common Stock (other than the grant of options pursuant
to option plans existing on the date hereof), (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of such shares of Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or other securities, in cash or
12
otherwise, or (3) file or cause to be filed a registration statement on Form S-8
or other similar form with respect to any shares of Common Stock or securities
convertible, exercisable or exchangeable into Common Stock or any other
securities of the Company, in each case without the prior written consent of
Xxxxxx Brothers Inc. on behalf of the Underwriters; and to cause each
stockholder, officer and director of the Company and each Directed Share
Participant to furnish to the Representatives, prior to the First Delivery Date,
a letter or letters, substantially in the form of Exhibit A hereto, pursuant to
which each such person shall agree not to, directly or indirectly, (1) offer for
sale, sell, pledge or otherwise dispose of (or enter into any transaction or
device which is designed to, or could be expected to, result in the disposition
by any person at any time in the future of) any shares of Common Stock or
securities convertible into or exchangeable for Common Stock or (2) enter into
any swap or other derivatives transaction that transfers to another, in whole or
in part, any of the economic benefits or risks of ownership of such shares of
Common Stock, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Common Stock or other securities, in cash or
otherwise, in each case for a period of 180 days from the date of the
Prospectus, without the prior written consent of Xxxxxx Brothers Inc. on behalf
of the Underwriters;
(j) To apply for the inclusion of the Stock on the Nasdaq National Market
System, and to use its best efforts to effect that quotation, subject only to
official notice of issuance, prior to the First Delivery Date;
(k) To apply the net proceeds from the sale of the Stock as set forth in
the Prospectus;
(l) To take such steps as shall be necessary to ensure that neither the
Company nor any subsidiary shall become an "investment company" as defined in
the Investment Company Act of 1940, as amended and the rules and regulations of
the Commission thereunder;
(m) In connection with the Directed Share Program, to ensure that the
Directed Shares will be restricted to the extent required by the NASD or the
rules of such association from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of the
effectiveness of the Registration Statement, and Xxxxxx Brothers Inc. will
notify the Company as to which Directed Share Participants will need to be so
restricted. At the request of Xxxxxx Brothers Inc., the Company will direct the
transfer agent to place stop transfer restrictions upon such securities for such
period of time; and
(n) To comply with all applicable securities and other applicable laws,
rules and regulations in each foreign jurisdiction in which the Directed Shares
are offered in connection with the Directed Share Program.
SECTION 7. Further Agreements of the Selling Stockholders. Each Selling
Stockholder agrees:
(a) For a period of 180 days from the date of the Prospectus, not to,
directly or indirectly, (1) offer for sale, sell, pledge or otherwise dispose of
(or enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the future
of any shares of Common Stock or securities convertible into or exchangeable for
Common Stock (other than the Stock) or (2) enter into any swap or other
derivatives transaction that transfers to another, in whole
13
or in part, any of the economic benefits or risks of ownership of such shares of
Common Stock, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Common Stock or other securities, in cash or
otherwise, in each case without the prior written consent of Xxxxxx Brothers,
Inc. on behalf of the Underwriters.
(b) That the Stock to be sold by the Selling Stockholder hereunder, which
is represented by the certificates held in custody for the Selling Stockholder,
is subject to the interest of the Underwriters and the other Selling
Stockholders thereunder, that the arrangements made by the Selling Stockholder
for such custody are to that extent irrevocable, and that the obligations of the
Selling Stockholder hereunder shall not be terminated by any act of the Selling
Stockholder, by operation of law, by the death or incapacity of any individual
Selling Stockholder or, in the case of a trust, by the death or incapacity of
any executor or trustee or the termination of such trust, or the occurrence of
any other event.
(c) To deliver to the Representatives prior to the First Delivery Date a
properly completed and executed United States Treasury Department Form W-8 (if
the Selling Stockholder is a non-United States person) or Form W-9 (if the
Selling Stockholder is a United States person).
SECTION 8. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
this Agreement; (d) the costs of producing and distributing this Agreement, any
supplemental agreement among the Underwriters and any other related documents in
connection with the offering, purchase, sale and delivery of the stock; (e) the
costs of delivering and distributing the Custody Agreements and the Powers of
Attorney; (f) the filing fees incident to securing the review by the NASD of the
terms of sale of the Stock; (g) any applicable listing or other fees; (h) the
fees and expenses of qualifying the Stock under the securities laws of the
several jurisdictions (including, without limitation, Canada) as provided in
Section 6(h) and of preparing, printing and distributing a Blue Sky Memorandum
and Canadian wrap (including related fees and expenses of counsel to the
Underwriters); (i) all costs and expenses of the Underwriters, including the
fees and disbursements of counsel for the Underwriters, incident to the Directed
Share Program described in Section 4; (j) the costs and expenses of the Company
relating to investor presentations on any "road show" undertaken in connection
with the marketing of the offering of the Stock, including, without limitation,
expenses associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show and (k) all other costs and expenses incident to the performance of the
obligations of the Company and the Selling Stockholders under this Agreement;
provided that, except as provided in this Section 8 and in Section 13 the
Underwriters shall pay their own costs and expenses, including the costs and
expenses of their counsel, any transfer taxes on the Stock which they may sell
and the expenses of advertising any offering of the Stock made by the
Underwriters.
14
SECTION 9. Conditions of Underwriters' Obligations. The respective obligations
of the Underwriters hereunder are subject to the accuracy, when made and on each
Delivery Date, of the representations and warranties of the Company and the
Selling Stockholders contained herein, to the performance by the Company and the
Selling Stockholders of their respective obligations hereunder, and to each of
the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the Commission in
accordance with Section 6(a); no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus or otherwise shall
have been complied with.
(b) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Custody Agreements, the
Powers of Attorney, the Stock, the Registration Statement and the Prospectus,
and all other legal matters relating to this Agreement and the transactions
contemplated hereby shall be reasonably satisfactory in all material respects to
counsel for the Underwriters, and the Company and the Selling Stockholders shall
have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(c) Xxxxxxxx & Xxxxx shall have furnished to the Representatives its
written opinion, as counsel to the Company and the Selling Stockholders,
addressed to the Underwriters and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives as set forth in Exhibit
B attached hereto.
(d) The Representatives shall have received from Xxxxxx & Xxxxxxx, counsel
for the Underwriters, such opinion or opinions, dated such Delivery Date, with
respect to the issuance and sale of the Stock, the Registration Statement, the
Prospectus and other related matters as the Representatives may reasonably
require, and the Company shall have furnished to such counsel such documents as
they reasonably request for the purpose of enabling them to pass upon such
matters.
(e) At the time of execution of this Agreement, the Representatives shall
have received from PricewaterhouseCoopers LLP a letter or letters, in form and
substance satisfactory to the Representatives, addressed to the Underwriters and
dated the date hereof (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X of the Commission and (ii) stating, as of the date
hereof (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the
Prospectus, as of a date not more than five days prior to the date hereof), the
conclusions and findings of such firm with respect to the financial information
and other matters ordinarily covered by accountants' "comfort letters" to
underwriters in connection with registered public offerings.
(f) With respect to the letter or letters of PricewaterhouseCoopers LLP
referred to in the preceding paragraph and delivered to the Representatives
concurrently with the execution of this Agreement (the "initial letters"), the
Company shall have furnished to the Representatives a letter (the "bring-down
letter") of such accountants,
15
addressed to the Underwriters and dated such Delivery Date (i) confirming that
they are independent public accountants within the meaning of the Securities Act
and are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date of the bring-down letter (or, with
respect to matters involving changes or developments since the respective dates
as of which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the financial information
and other matters covered by the initial letters and (iii) confirming in all
material respects the conclusions and findings set forth in the initial letters.
(g) The Company shall have furnished to the Representatives a certificate,
dated such Delivery Date, of its Chairman of the Board, its President or a Vice
President and its chief financial officer stating that:
(i) The representations, warranties and agreements of the Company in
Section 1 are true and correct as of such Delivery Date; the Company has
complied with all its agreements contained herein; and the conditions set forth
in Sections 9(a) and 9(i) have been fulfilled; and
(ii) They have carefully examined the Registration Statement and the
Prospectus and, in their opinion (A) as of the Effective Date, the Registration
Statement and Prospectus did not include any untrue statement of a material fact
and did not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B) since the
Effective Date no event has occurred which should have been set forth in a
supplement or amendment to the Registration Statement or the Prospectus which
has not been so set forth.
(h) Each Selling Stockholder (or the Custodian or one or more
attorneys-in-fact on behalf of the Selling Stockholders) shall have furnished to
the Representatives on the First Delivery Date a certificate, dated the First
Delivery Date, signed by, or on behalf of, the Selling Stockholder (or the
Custodian or one or more attorneys-in-fact) stating that the representations,
warranties and agreements of the Selling Stockholder contained herein are true
and correct as of the First Delivery Date and that the Selling Stockholder has
complied with all agreements contained herein to be performed by the Selling
Stockholder at or prior to the First Delivery Date.
(i) Neither the Company nor any of its subsidiaries shall have sustained
since the date of the latest audited financial statements included in the
Prospectus (A) any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus or (B) since such date, there shall not
have been any change in the capital stock or long-term debt of the Company or
any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (A) or (B), is, in the
judgment of the Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Stock being delivered on such Delivery Date on the terms and in the
manner contemplated in the Prospectus.
16
(j) Subsequent to the execution and delivery of this Agreement there shall
not have occurred any of the following: (i) trading in securities generally on
the New York Stock Exchange or the American Stock Exchange or in the
over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or the
settlement of such trading generally shall have been materially disrupted or
minimum prices shall have been established on any such exchange or such market
by the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Federal or state authorities, (iii) the United States shall
have become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a declaration
of a national emergency or war by the United States or (iv) there shall have
occurred such a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on the financial
markets in the United States shall be such), including, without limitation, as a
result of terrorist activities after the date hereof, as to make it, in the
judgment of the Representatives, impracticable or inadvisable to proceed with
the public offering or delivery of the Stock being delivered on such Delivery
Date on the terms and in the manner contemplated in the Prospectus.
(k) The Nasdaq National Market System shall have approved the Stock for
quotation, subject only to official notice of issuance.
(l) No Underwriter shall have discovered and disclosed to the Company on or
prior to such Delivery Date that the Registration Statement or the Prospectus or
any amendment or supplement thereto contains an untrue statement of a fact
which, in the reasonable opinion of Xxxxxx & Xxxxxxx, counsel for the
Underwriters, is material or omits to state a fact which, in the reasonable
opinion of such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
SECTION 10. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Underwriter
(including any Underwriter in its role as qualified independent underwriter
pursuant to the rules of the National Association of Securities Dealers, Inc.),
its directors, officers and employees and each person, if any, who controls any
Underwriter within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Stock), to which that Underwriter, director,
officer, employee or controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto or (B) in any materials or information provided to investors by, or with
the approval of, the Company in connection with the marketing of the offering of
the Stock, including any roadshow or investor presentations made to investors by
the Company (whether in person or electronically)
17
(the "Marketing Materials"), (ii) the omission or alleged omission to state in
any Preliminary Prospectus, the Registration Statement or the Prospectus, or in
any amendment or supplement thereto, or in any Marketing Materials, any material
fact required to be stated therein or necessary to make the statements therein
not misleading or (iii) any act or failure to act or any alleged act or failure
to act by any Underwriter in connection with, or relating in any manner to, the
Stock or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action arising out of or
based upon matters covered by clause (i) or (ii) above (provided that the
Company shall not be liable under this clause (iii) to the extent that it is
determined in a final judgment by a court of competent jurisdiction that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Underwriter through
its gross negligence or willful misconduct), and shall reimburse each
Underwriter and each such director, officer, employee or controlling person
promptly upon demand for any legal or other expenses reasonably incurred by that
Underwriter, director, officer, employee or controlling person in connection
with investigating or defending or preparing to defend against any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus, or in any such amendment or supplement, in reliance upon and
in conformity with written information concerning such Underwriter furnished to
the Company through the Representatives by or on behalf of any Underwriter
specifically for inclusion therein which information consists solely of the
information specified in Section 10(g). The foregoing indemnity agreement is in
addition to any liability which the Company may otherwise have to any
Underwriter or to any director, officer, employee or controlling person of that
Underwriter.
The Company hereby confirms that at its request Xxxxxx Brothers Inc. has
acted as "qualified independent underwriter" (in such capacity, the "QIU")
within the meaning of Rule 2720 of the Conduct Rules of the National Association
of Securities Dealers, Inc. in connection with the offering of the Stock. The
Company agrees to indemnify and hold harmless the QIU, including its officers
and employees and each person, if any, who controls the QIU within the meaning
of the Securities Act (collectively with the QIU, the "QIU Entities") from and
against any losses, claims, damages or liabilities or any action in respect
thereof, joint or several, to which any of the QIU Entities may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
QIU's acting (or alleged failing to act) as such "qualified independent
underwriter" and will reimburse the QIU Entities for any legal or other expenses
reasonably incurred by them in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred.
The Company agrees to indemnify and hold harmless Xxxxxx Brothers Inc.
(including its officers and employees) and each person, if any, who controls
Xxxxxx Brothers Inc. within the meaning of the Securities Act ("Xxxxxx Brothers
Entities"), from and against any loss, claim, damage or liability or any action
in respect thereof to which any of the Xxxxxx Brothers Entities may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action (i) arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained
18
in any material prepared by or with the approval of the Company for distribution
to Directed Share Participants in connection with the Directed Share Program or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
arises out of, or is based upon, the failure of the Directed Share Participant
to pay for and accept delivery of Directed Shares that the Directed Share
Participant agreed to purchase or (iii) is otherwise related to the Directed
Share Program, other than losses, finally judicially determined to have resulted
directly from the bad faith or gross negligence of Xxxxxx Brothers Inc. The
Company shall reimburse the Xxxxxx Brothers Entities promptly upon demand for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred.
(b) The Principal Selling Stockholder shall indemnify and hold harmless
each Underwriter (including any Underwriter in its role as qualified independent
underwriter pursuant to the rules of the National Association of Securities
Dealers, Inc.), its directors, officers and employees, and each person, if any,
who controls any Underwriter within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of stock), to which that
Underwriter, director, officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any amendment or supplement thereto, any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse each Underwriter, its directors, officers and
employees and each such controlling person for any legal or other expenses
reasonably incurred by that Underwriter, its directors, officers and employees
or controlling person in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Principal Selling Stockholder
shall not be liable in any such case to the extent that any such loss, claims,
damage, liability or action arises out of, or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or in any
such amendment or supplement thereto in reliance upon and in conformity with
written information concerning such Underwriter furnished to the Company through
the Representatives by or on behalf of any Underwriter specifically for
inclusion therein which information consists solely of the information specified
in Section 10(g). Notwithstanding the provisions of this Section 10(b), the
aggregate liability of the Principal Selling Stockholder under this Section
10(b) shall not exceed the proceeds received by the Principal Selling
Stockholder from the sale of shares of Stock under this Agreement. The foregoing
indemnity agreement is in addition to any liability which the Principal Selling
Stockholder may otherwise have to any Underwriter or to any director, officer,
employee or controlling person of that Underwriter.
(c) The Selling Stockholders listed on Schedule 4 hereto, severally in
proportion to the number of shares of Stock to be sold by each of them
hereunder, shall indemnify and hold harmless each Underwriter (including any
Underwriter in its role as
19
qualified independent underwriter pursuant to the rules of the National
Association of Securities Dealers, Inc.), its directors, officers and employees,
and each person, if any, who controls any Underwriter within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claims, damage, liability or action relating to purchases and sales of
Stock), to which that Underwriter, director, officer, employee or controlling
person may become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or act arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Prospectus, the Registration Statement or the Prospectus or in
any amendment or supplement thereto or (ii) the omission or alleged omission to
state in any Preliminary Prospectus, Registration Statement or the Prospectus,
or in any amendment or supplement thereto, any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse each Underwriter, its directors, officers and employees and each
such controlling person for any legal or other expenses reasonably incurred by
that Underwriter, its directors, officers and employees or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the aggregate liability of any Selling Stockholder
listed on Schedule 4 hereto shall not exceed the proceeds received by the
Selling Stockholder from the sale of shares of Stock under this Agreement, and
provided further, that with respect to any such loss, claim, damage, liability
or action that arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission in any Preliminary Prospectus,
the Registration Statement or the Prospectus, or in any amendment or supplement
thereto, a Selling Stockholder listed on Schedule 4 hereto shall be liable to
the extent, but only to the extent, that such statement or omission is made in
reliance upon and in conformity with written information about such Selling
Stockholder furnished to the Company by such Selling Stockholder or its
representatives expressly for use in the preparation of any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any amendment or
supplement thereto. The foregoing indemnity agreement is in addition to any
liability which the Selling Stockholders may otherwise have to any Underwriter
or any officer, employee or controlling person of that Underwriter.
(d) Each Underwriter, severally and not jointly, shall indemnify and hold
harmless the Company, its officers and employees, each of its directors, and
each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer or controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, or (ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any amendment or
supplement thereto, any material fact required to be stated therein or
necessary to make the statements therein not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information concerning such Underwriter furnished to the Company through the
Representatives by or on behalf of that Underwriter specifically for inclusion
therein, which information is limited to the information set forth in Section
20
10(g), and shall reimburse the Company and any such director, officer or
controlling person for any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any Underwriter may
otherwise have to the Company or any such director, officer, employee or
controlling person.
(e) Promptly after receipt by an indemnified party under this Section 10 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 10, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 10 except to the extent it has been materially
prejudiced by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 10. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Representatives shall have the right to employ counsel to represent jointly
the Representatives and those other Underwriters and their respective officers,
employees and controlling persons who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by the Underwriters
against the Company or any Selling Stockholder under this Section 10 if, in the
reasonable judgment of the Representatives, it is advisable for the
Representatives and those Underwriters, directors, officers, employees and
controlling persons to be jointly represented by separate counsel, and in that
event the fees and expenses of such separate counsel shall be paid by the
Company or the Selling Stockholders. Notwithstanding anything contained herein
to the contrary, if indemnity may be sought pursuant to Section 10(a) hereof in
respect of such claim or action, then in addition to such separate firm for the
indemnified parties, the indemnifying party shall be liable for the fees and
expenses of not more than one separate firm (in addition to any local counsel)
for the Xxxxxx Brothers Entities for the defense of any loss, claim, damage,
liability or action arising out of the Directed Share Program. No indemnifying
party shall (i) without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding,
or (ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with the consent of the indemnifying party or if there be a final
judgment of the plaintiff in any such action, the
21
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(f) If the indemnification provided for in this Section 10, shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 10(a), 10(b), 10(c) or 10(d) in respect of any loss, claim, damage
or liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Stock or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Selling Stockholders on the one hand and the Underwriters on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other with
respect to such offering shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Stock purchased under this Agreement
(before deducting expenses) received by the Company and the Selling
Stockholders, on the one hand, and the total underwriting discounts and
commissions received by the Underwriters with respect to the shares of the Stock
purchased under this Agreement, on the other hand, bear to the total gross
proceeds from the offering of the shares of the Stock under this Agreement, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company, the Selling
Stockholders or the Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section were to be 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 into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section shall be deemed to include, for
purposes of this Section 10(f), 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 Section 10(f), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the shares of Stock underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute as provided in this Section 10(f) are
several in proportion to their respective underwriting obligations and not
joint.
22
(g) The Underwriters severally confirm and the Company acknowledges that
the statements with respect to the public offering of the Stock by the
Underwriters set forth on the cover page of, the legend concerning
over-allotments on the inside front cover page of and the concession and
reallowance figures appearing under the caption "Underwriting" in, the
Prospectus are correct and constitute the only information concerning such
Underwriters furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
SECTION 11. Defaulting Underwriters.
If, on either Delivery Date, any Underwriter defaults in the performance of
its obligations under this Agreement, the remaining non-defaulting Underwriters
shall be obligated to purchase the Stock which the defaulting Underwriter agreed
but failed to purchase on such Delivery Date in the respective proportions which
the number of shares of the Firm Stock set opposite the name of each remaining
non-defaulting Underwriter in Schedule 1 hereto bears to the total number of
shares of the Firm Stock set opposite the names of all the remaining
non-defaulting Underwriters in Schedule 1 hereto; provided, however, that the
remaining non-defaulting Underwriters shall not be obligated to purchase any of
the Stock on such Delivery Date if the total number of shares of the Stock which
the defaulting Underwriter or Underwriters agreed but failed to purchase on such
date exceeds 9.09% of the total number of shares of the Stock to be purchased on
such Delivery Date, and any remaining non-defaulting Underwriter shall not be
obligated to purchase more than 110% of the number of shares of the Stock which
it agreed to purchase on such Delivery Date pursuant to the terms of Section 3.
If the foregoing maximums are exceeded, the remaining non-defaulting
Underwriters, or those other underwriters satisfactory to the Representatives
who so agree, shall have the right, but shall not be obligated, to purchase, in
such proportion as may be agreed upon among them, all the Stock to be purchased
on such Delivery Date. If the remaining Underwriters or other underwriters
satisfactory to the Representatives do not elect to purchase the shares which
the defaulting Underwriter or Underwriters agreed but failed to purchase on such
Delivery Date, this Agreement (or, with respect to the Second Delivery Date, the
obligation of the Underwriters to purchase, and of the Principal Selling
Stockholder to sell, the Option Stock) shall terminate without liability on the
part of any non-defaulting Underwriter, the Company or the Selling Stockholders,
except that the Company will continue to be liable for the payment of expenses
to the extent set forth in Sections 8 and 13. As used in this Agreement, the
term "Underwriter" includes, for all purposes of this Agreement unless the
context requires otherwise, any party not listed in Schedule 1 hereto who,
pursuant to this Section 11, purchases Firm Stock which a defaulting Underwriter
agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company and the Selling Stockholders for damages
caused by its default. If other Underwriters are obligated or agree to purchase
the Stock of a defaulting or withdrawing Underwriter, either the Representatives
or the Company may postpone the Delivery Date for up to seven full business days
in order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement, the
Prospectus or in any other document or arrangement.
SECTION 12. Termination. The obligations of the Underwriters hereunder may be
terminated by the Representatives by notice given to and received by the Company
and
23
the Selling Stockholders prior to delivery of and payment for the Firm Stock if,
prior to that time, any of the events described in Sections 9(i) or 9(j), shall
have occurred or if the Underwriters shall decline to purchase the Stock for any
reason permitted under this Agreement.
SECTION 13. Reimbursement of Underwriters' Expenses. If the Company or any
Selling Stockholder shall fail to tender the Stock for delivery to the
Underwriters by reason of any failure, refusal or inability on the part of the
Company or such Selling Stockholder to perform any agreement on its part to be
performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled by the Company or the Selling Stockholder is
not fulfilled, the Company and the Selling Stockholder will reimburse the
Underwriters for all reasonable out-of-pocket expenses (including fees and
disbursements of counsel) incurred by the Underwriters in connection with this
Agreement and the proposed purchase of the Stock, and upon demand the Company
and the Selling Stockholders shall pay the full amount thereof to the
Representatives. If this Agreement is terminated pursuant to Section 11 by
reason of the default of one or more Underwriters, neither the Company nor any
Selling Stockholder shall be obligated to reimburse any defaulting Underwriter
on account of those expenses.
SECTION 14. Notices, Etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission to Xxxxxx Brothers Inc., 000 Xxxxxx Xxxxxx, Xxxxxx Xxxx,
XX 00000, Attention: Syndicate Department (Fax: (000) 000-0000), with a copy, in
the case of any notice pursuant to Section 10(e), to the Director of Litigation,
Office of the General Counsel, Xxxxxx Brothers Inc., 000 Xxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, XX 00000;
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Xxxxxxx X. Xxxxxxx, Xx. (Fax: (207)
000-0000); provided, however, that any notice to an Underwriter pursuant to
Section 10(e) shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its acceptance
telex to the Representatives, which address will be supplied to any other party
hereto by the Representatives upon request. Any such statements, requests,
notices or agreements shall take effect at the time of receipt thereof. The
Company and the Selling Stockholders shall be entitled to act and rely upon any
request, consent, notice or agreement given or made on behalf of the
Underwriters by Xxxxxx Brothers Inc. on behalf of the Representatives and the
Company and the Underwriters shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the Selling Stockholder
by the Custodian; and
(c) if to any Selling Stockholder, such notice shall be addressed to such
Selling Stockholder in care of the Company at the address of the Company set
forth in the Registration Statement, Attention: Xxxxxxx X. Xxxxxxx, Xx. (Fax:
(000) 000-0000).
SECTION 15. Persons Entitled to Benefit of Agreement. This Agreement shall inure
to the benefit of and be binding upon the Underwriters, the Company, the Selling
Stockholders and their respective personal representatives and successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (A) the representations, warranties, indemnities and
agreements of
24
the Company and the Selling Stockholders contained in this Agreement shall also
be deemed to be for the benefit of the directors, officers and the person or
persons, if any, who control any Underwriter within the meaning of Section 15 of
the Securities Act and (B) the indemnity agreement of the Underwriters contained
in Section 8(b) of this Agreement shall be deemed to be for the benefit of
directors of the Company, officers of the Company who have signed the
Registration Statement and any person controlling the Company within the meaning
of Section 15 of the Securities Act. Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section 15, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
SECTION 16. Survival. The respective indemnities, representations, warranties
and agreements of the Company, the Selling Stockholders and the Underwriters
contained in this Agreement or made by or on behalf on them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Stock and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
SECTION 17. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means each Monday, Tuesday,
Wednesday, Thursday or Friday which is not a day on which banking institutions
in New York are generally authorized or obligated by law or executive order to
close and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules
and Regulations.
SECTION 18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New York.
SECTION 19. Consent to Jurisdiction. Each party irrevocably agrees that any
legal suit, action or proceeding arising out of or based upon this Agreement or
the transactions contemplated hereby ("Related Proceedings") may be instituted
in the federal courts of the United States of America located in the City of New
York or the courts of the State of New York in each case located in the Borough
of Manhattan in the City of New York (collectively, the "Specified Courts"), and
irrevocably submits to the exclusive jurisdiction (except for proceedings
instituted in regard to the enforcement of a judgment of any such court (a
"Related Judgment"), as to which such jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding. The parties further agree that
service of any process, summons, notice or document by mail to such party's
address set forth above shall be effective service of process for any lawsuit,
action or other proceeding brought in any such court. The parties hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any lawsuit, action or other proceeding in the Specified Courts, and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such lawsuit, action or other proceeding brought in any
such court has been brought in an inconvenient forum.
SECTION 20. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
SECTION 21. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
25
If the foregoing correctly sets forth the agreement between the Company and
the Underwriters, please indicate your acceptance in the space provided for that
purpose below.
Very truly yours,
ADVANTAGE PAYROLL SERVICES, INC.
By:___________________________________
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Chairman, Chief Executive
Officer and President
Accepted: SELLING STOCKHOLDERS
XXXXXX BROTHERS INC. By:___________________________________
CIBC WORLD MARKETS CORP. As Attorney-in-Fact acting
FIRST UNION SECURITIES, INC. on behalf of the Selling
XXXXXX X. XXXXX & CO. INCORPORATED Stockholders Named in
Schedule 2
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By: XXXXXX BROTHERS INC.
By:__________________________________
Authorized Representative
26
SCHEDULE 1
Underwriters Number of Firm Shares to be Purchased
------------ -------------------------------------
Xxxxxx Brothers Inc......................
CIBC World Markets Corp..................
First Union Securities, Inc..............
Xxxxxx X. Xxxxx & Co. Incorporated.......
27
SCHEDULE 2
NO. OF
SELLING STOCKHOLDERS: SHARES OF COMMON STOCK
----------------------
Xxxxxx Xxxxx & Partners, L.P. [____________]
X. Xxxxxx Xxxxxxxx 122,981
Xxxxx X. Xxxxxxxx 65,994
28
SCHEDULE 3
NUMBER OF
PRINCIPAL SELLING STOCKHOLDER: OPTION SHARES
----------------------------- -------------
Xxxxxx Xxxxx & Partners, L.P.
29
SCHEDULE 4
X. Xxxxxx Xxxxxxxx
Xxxxx X. Xxxxxxxx
Exhibit A
LOCK-UP LETTER AGREEMENT
Xxxxxx Brothers Inc.
CIBC World Markets Corp.
Wachovia Securities
Xxxxxx X. Xxxxx & Co. Incorporated
As Representatives of the several
Underwriters named in Schedule 1
to the Underwriting Agreement,
c/x Xxxxxx Brothers Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned understands that you and certain other firms propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") providing
for the purchase by you and such other firms (the "Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Advantage Payroll Services, Inc., a Delaware corporation (the "Company"), and
that the Underwriters propose to reoffer the Shares to the public (the
"Offering").
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that, without the prior written consent of Xxxxxx
Brothers Inc., on behalf of the Underwriters, the undersigned will not, directly
or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or
enter into any transaction or device that is designed to, or could be expected
to, result in the disposition by any person at any time in the future of) any
shares of Common Stock (including, without limitation, shares of Common Stock
that may be deemed to be beneficially owned by the undersigned in accordance
with the rules and regulations of the Securities and Exchange Commission and
shares of Common Stock that may be issued upon exercise of any option or
warrant) or securities convertible into or exchangeable for Common Stock (other
than the Shares) owned by the undersigned on the date of execution of this
Lock-Up Letter Agreement or on the date of the completion of the Offering, or
(2) enter into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of ownership
of such shares of Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, for a period of 180 days after the date of the
final Prospectus relating to the Offering.
The foregoing sentence shall not apply to bona fide gifts, sales or other
dispositions of shares of Common Stock, in each case that are made exclusively
between and among the undersigned or members of the undersigned's family, or
affiliates of the undersigned, including its partners (if a partnership) or
members (if a limited liability company); provided that it shall be a condition
to any such transfer that (i) the transferee agrees to be bound by the terms of
this Lock-Up Letter Agreement to the same extent as if the transferee were a
party hereto, and (ii) no filing by any party (donor, donee, transferor or
transferee) under the Securities Exchange Act of 1934, as amended, shall be
required or shall be voluntarily made in
+connection with such transfer or distribution (other than a filing on a Form 5
made after the expiration of the 180-day period referred to above).
In furtherance of the foregoing, the Company and its Transfer Agent are
hereby authorized to decline to make any transfer of securities if such transfer
would constitute a violation or breach of this Lock-Up Letter Agreement.
It is understood that, if the Company notifies you that it does not intend
to proceed with the Offering, if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
and delivery of the Shares, we will be released from our obligations under this
Lock-Up Letter Agreement.
The undersigned understands that the Company and the Underwriters will
proceed with the Offering in reliance on this Lock-Up Letter Agreement.
Whether or not the Offering actually occurs depends on a number of factors,
including market conditions. Any Offering will only be made pursuant to an
Underwriting Agreement, the terms of which are subject to negotiation between
the Company and the Underwriters.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Lock-Up Letter Agreement and that,
upon request, the undersigned will execute any additional documents necessary in
connection with the enforcement hereof. Any obligations of the undersigned shall
be binding upon the heirs, personal representatives, successors and assigns of
the undersigned.
Very truly yours,
By:
----------------------------------
Name:
Title:
Dated:
----------------------
32
Exhibit B
FORM OF OPINION OF XXXXXXXX & XXXXX
(i) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation, are duly qualified to
do business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of property or the
conduct of their respective businesses requires such qualification and have all
power and authority necessary to own or hold their respective properties and
conduct the businesses in which they are engaged;
(ii) The Company has an authorized capitalization as set forth in the
Prospectus. All of the issued shares of capital stock of the Company have been
duly and validly authorized and issued, were issued in compliance with federal
and state securities laws, are fully paid and non-assessable and conform to the
description thereof contained in the Prospectus. All of the Company's options,
warrants and other rights to purchase or exchange any securities for shares of
the Company's capital stock have been duly and validly authorized and issued,
were issued in compliance with federal and state securities laws, and conform to
the description thereof contained in the Prospectus. All of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable and are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(iii) The shares of the Stock being delivered on such Delivery Date
to the Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefore will be duly and validly issued,
fully paid and non-assessable;
(iv) There are no preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the voting or transfer of, any shares of the
Stock pursuant to the Company's charter or by-laws or any agreement or other
instrument known to such counsel;
(v) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is a party or of which any
property or assets of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its subsidiaries, might
have a Material Adverse Effect; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(vi) The Registration Statement was declared effective under the
Securities Act as of the date and time specified in such opinion, the Prospectus
was filed with the Commission pursuant to the subparagraph of Rule 424(b) of the
Rules and Regulations specified in such opinion on the date specified therein
and no stop order suspending the effectiveness of the Registration Statement has
been issued and, to the knowledge of such counsel, no proceeding for that
purpose is pending or threatened by the Commission;
(vii) The Registration Statement and the Prospectus and any further
amendments or supplements thereto made by the Company prior to such Delivery
Date (except for the financial statements and related schedules therein, as to
which such counsel need express no belief) comply as to form in all material
respects with the requirements of the Securities Act and the Rules and
Regulations;
(viii) The statements contained in the Prospectus under the captions
"Business", "Certain Relationships and Related Transactions", "Description of
Capital Stock" and "Shares Eligible for Future Sale", insofar as they describe
statutes, rules and regulations, constitute a fair summary thereof and the
opinion of such counsel filed as Exhibit 5.1 to the Registration Statement is
confirmed and the Underwriters may rely upon such opinion as if it were
addressed to them;
(ix) To the best of such counsel's knowledge, there are no contracts
or other documents which are required to be described in the Prospectus or filed
as exhibits to the Registration Statement by the Securities Act or by the Rules
and Regulations which have not been described or filed as exhibits to the
Registration Statement;
(x) This Agreement has been duly authorized, executed and delivered by
the Company;
(xi) The issue and sale of the shares of Stock being delivered on such
Delivery Date by the Company pursuant to this Agreement and the execution,
delivery and compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such counsel to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will such actions result
in any violation of the provisions of the charter or by-laws of the Company or
any of its subsidiaries or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their properties or
assets; and, except for the registration of the Stock under the Securities Act
and such consents, approvals, authorizations, registrations or qualifications as
may be required under the Exchange Act and applicable state securities laws in
connection with the purchase and distribution of the Stock by the Underwriters,
no consent, approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is required for the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, except for such consents, approvals,
authorizations, orders, filings or registrations as have been obtained or made;
(xii) Except as described in the Prospectus, to the best of such
counsel's knowledge, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with respect
to any securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company under the
Securities Act;
(xiii) The Company owns, holds, licenses to or otherwise has rights to
use, all of the Intellectual Property that is necessary for the conduct of the
Company's business as now conducted or as proposed in the Prospectus to be
conducted. Except as set forth in the Prospectus, (A) there are no rights of
third parties to any such Intellectual Property; (B) to the knowledge of such
counsel, there is no infringement by third parties of any such Intellectual
Property; (C) there is no pending or, to such counsel's knowledge, threatened
action, suit, proceeding or claim by others challenging the Company's rights in
or to any such Intellectual Property; (D) there is no pending or, to the
knowledge of such counsel, threatened action, suit, proceeding or claim by
others challenging the validity or scope of any such Intellectual Property and
(E) there is no pending or, to such counsel's knowledge, threatened action,
suit, proceeding or claim by others that the Company infringes or otherwise
violates any patent,
34
trademark, copyright, trade secret or other proprietary rights of others, and
such counsel is unaware of any other fact which would form a reasonable basis
for any such claim;
(xiv) The Company is in compliance in all material respects with all
presently applicable provisions of 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 Code; and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such qualification;
(xv) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company or any of its
subsidiaries (or, to the knowledge of the Company, any of their predecessors in
interest) at, upon or from any of the property now or previously owned or leased
by the Company or its subsidiaries in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or which would
require remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or remedial action
which would not have, or could not be reasonably likely to have, singularly or
in the aggregate with all such violations and remedial actions, a Material
Adverse Effect; there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or into the
environment surrounding such property of any toxic wastes, medical wastes, solid
wastes, hazardous wastes or hazardous substances due to or caused by the Company
or any of its subsidiaries or with respect to which the Company or any of its
subsidiaries have knowledge, except for any such spill, discharge, leak,
emission, injection, escape, dumping or release which would not have or would
not be reasonably likely to have, singularly or in the aggregate with all such
spills, discharges, leaks, emissions, injections, escapes, dumpings and
releases, a Material Adverse Effect; and
(xvi) Neither the Company nor any subsidiary is an "investment
company" as defined in the Investment Company Act of 1940, as amended.
(xvii) Each Selling Stockholder has full right, power and authority to
enter into this Agreement, the Power of Attorney and the Custody Agreement; the
execution, delivery and performance of this Agreement, the Power of Attorney and
the Custody Agreement be each Selling Stockholder and the consummation by each
Selling Stockholder of the transactions contemplated hereby and thereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument known
to such counsel to which any Selling Stockholder is a party or by which any
Selling Stockholder is bound or to which any of the property or assets of any
Selling Stockholder is subject, nor will such actions result in any violation of
the provisions of the articles of partnership of any Selling Stockholder, if
applicable, or any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having jurisdiction over any
Selling Stockholder or the property or assets of any Selling Stockholder; and,
except for the registration of the Stock under the Securities Act and such
consents, approvals, authorizations, registrations or qualifications as may be
required under the Exchange Act and applicable state securities laws in
connection with the purchase and distribution of the Stock by the Underwriters,
no consent, approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body is
35
required for the execution, delivery and performance of this Agreement, the
Power of Attorney or the Custody Agreement by any Selling Stockholder and the
consummation by any Selling Stockholder of the transactions contemplated hereby
and thereby;
(xviii) This Agreement has been duly authorized, executed and
delivered by or on behalf of each Selling Stockholder;
(xix) A Power-of-Attorney and a Custody Agreement have been duly
authorized, executed and delivered by each Selling Stockholder and constitute
valid and binding agreements of each Selling Stockholder, enforceable in
accordance with their respective terms;
(xx) Immediately prior to the First Delivery Date, each Selling
Stockholder had good and valid title to the shares of Stock to be sold by the
Selling Stockholder under this Agreement, free and clear of all liens,
encumbrances, equities or claims, and full right, power and authority to sell,
assign, transfer and deliver such shares to be sold by the Selling Stockholder
hereunder; and
(xxi) Good and valid title to the shares of Stock to be sold by each
Selling Stockholder under this Agreement, free and clear of all liens,
encumbrances, equities or claims, has been transferred to each of the several
Underwriters.
In rendering such opinion, such counsel may (i) state that its opinion
is limited to matters governed by the Federal laws of the United States of
America, the laws of the State of New York, the Delaware Revised Uniform Limited
Partnership Act, and the Delaware General Corporation Law and (ii) in rendering
the opinion in paragraph (xx) above, rely upon a certificate of each Selling
Stockholder in respect of matters of fact as to ownership of and liens,
encumbrances, equities or claims on the shares of Stock sold by the Selling
Stockholder, provided that such counsel shall furnish copies thereof to the
Representatives and state that it believes that both the Underwriters and it are
justified in relying upon such certificate. Such opinion shall also be to the
effect that (x) such counsel has acted as counsel to the Company and the Selling
Stockholders listed on Schedule 4 hereto in connection with the preparation of
the Registration Statement and has acted as counsel to the Principal Selling
Stockholder on a regular basis and (y) based on the foregoing, no facts have
come to the attention of such counsel which lead them to believe that the
Registration Statement (except for the financial statements and related
schedules therein, as to which such counsel need express no belief) as of the
Effective Date, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading, or that the Prospectus (except as
stated above) contains any untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (other than as set forth in clause
(viii) above).
36