4,000,000 Shares
▇▇▇▇ DEPARTMENT STORES, INC.
Common Stock, $.01 par value
UNDERWRITING AGREEMENT
May [__], 1999
▇▇▇▇▇▇ BROTHERS INC.
NATIONSBANK ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
▇▇▇▇▇▇▇ ▇▇▇▇ & COMPANY LLC
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ GULL
As Representatives of the several
Underwriters named in Schedule 1
c/▇ ▇▇▇▇▇▇ Brothers Inc.
Three World Financial Center
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇ Department Stores, Inc., a Delaware corporation (the
"Company") proposes to sell an aggregate of 4,000,000 shares (the "Firm
Stock") of the Company's Common Stock, par value $.01 per share (the "Common
Stock"). In addition, the Company proposes to grant to the Underwriters named
in Schedule 1 hereto (the "Underwriters") an option to purchase up to an
additional 600,000 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."
As described in the Prospectus (as hereinafter defined), the Company will use
the net proceeds from the sale of the Stock for working capital and general
corporate purposes, and to reduce outstanding borrowings. This is to confirm
the agreement concerning the purchase of the Stock from the Company by the
Underwriters.
1. Representations, Warranties and Agreements of
the Company. The Company represents, warrants and agrees that:
(a) A registration statement on Form S-3, and
amendment No. 1 thereto, with respect to the Stock have (i)
been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the
"Securities Act") and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission
(the "Commission") thereunder, (ii)
been filed with the Commission under the Securities Act and
(iii) become effective under the Securities Act. Copies of
such registration statement and the amendment 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 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 amendment 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 in accordance with Section 6 hereof and deemed
to be a part of the registration statement as of the Effective
Time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations; and "Prospectus" means such final prospectus, as
first filed with the Commission pursuant to paragraph (1) or
(4) of Rule 424(b) of the Rules and Regulations. Reference
made herein to any Preliminary Prospectus or to the Prospectus
shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12 of Form
S-3 under the Securities Act, as of the date of such
Preliminary Prospectus or the Prospectus, as the case may be.
If the Company has filed or is required pursuant to the terms
hereof to file a registration statement pursuant to Rule
462(b) under the Securities Act registering additional shares
of Common Stock (a "Rule 462(b) Registration Statement"),
then, unless otherwise specified, any reference herein to the
term "Registration Statement" shall be deemed to include such
Rule 462(b) Registration Statement. The Commission has not
issued any order preventing or suspending the use of any
Preliminary Prospectus; and no stop order suspending the
effectiveness of the Registration Statement is in effect, and
no proceedings for such purpose are pending before or
threatened by the Commission. Any Rule 462(b) Registration
Statement filed after the effectiveness of this Agreement will
become effective no later than 10:00 A.M., New York City time,
on the date following this Agreement.
(b) The Registration Statement (other than any Rule
462(b) Registration Statement to be filed by the Company
after the effectiveness of this Agreement) conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement (including, if the Company is
required to file a Rule 462(b) Registration Statement after
the effectiveness of this Agreement, such Rule 462(b)
Registration Statement and any amendments thereto) 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
2
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 made
therein (i) in the case of the Registration Statement, not
misleading and (ii) in the case of the Prospectus, in the
light of the circumstances under which they were made, 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 documents incorporated by reference in the
Prospectus when they were filed with the Commission,
conformed in all material respects to the requirements of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the
Commission thereunder, and none of such documents, when read
together with the other information in the Prospectus,
contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light
of the circumstances under which they were made, not
misleading.
(d) The market-related and customer-related data
and estimates included in the Prospectus are based on or
derived from sources which the Company believes to be
reliable and accurate.
(e) Each of the Company and its subsidiaries (as
defined in Section 15 hereof) has been duly organized and
are validly existing as corporations in good standing under
the laws of their respective jurisdictions of organization,
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,
except for such qualification and good standing the failure
of which, individually or in the aggregate, would not result
in a material adverse effect on the condition (financial or
other), business, properties, stockholders' equity or
results of operations of the Company and its subsidiaries
taken as a whole (a "Material Adverse Effect"), and have all
power and authority necessary to own or hold their
respective properties and to conduct the businesses in which
they are engaged.
(f) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the
Prospectus; and 100% 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 (except for directors' qualifying shares) are owned
directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims, other than liens,
encumbrances, equities or claims described in the
Prospectus. Neither the
3
Company nor any of its subsidiaries owns capital stock or
other equity interests of any corporation or entity other than
as disclosed in the Prospectus.
(g) Prior to the delivery of the Stock on the First
Delivery Date (as hereinafter defined), the unissued shares
of the Stock to be issued and sold by the Company to the
Underwriters hereunder will have been duly and validly
authorized and, when issued and delivered against payment
therefor as provided herein, will be duly and validly
issued, fully paid and non-assessable; and the Stock will
conform to the description thereof contained in the
Prospectus.
(h) The Company has all requisite power and
authority to execute, deliver and perform its obligations
under this Agreement.
(i) This Agreement has been duly authorized,
executed and delivered by the Company and (assuming due
execution and delivery by the Underwriters) constitutes a
valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, subject to
the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally
and general equitable principles, including, without
limitation, concepts of materiality, reasonableness, good
faith and fair dealing (whether considered in a proceeding
in equity or at law), and except as rights to indemnity and
contribution hereunder may be limited by Federal or state
securities laws or principles of public policy.
(j) The execution, delivery and performance of this
Agreement by the Company and the consummation of the
transactions contemplated hereby will not conflict with or
constitute a breach of, or 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
that is material to the financial condition or prospects of
the Company and its subsidiaries, taken as a whole
(collectively, the "Material Agreements"), nor will such
actions result in any violation of the provisions of the
charter or by-laws, or other organizational documents of the
Company or any of its subsidiaries or any material law,
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, provided that the provisions for
indemnification and contribution hereunder may be limited by
equitable principles and public policy consideration; and
except as may be required in connection with the
registration under the Securities Act of the Stock, approval
by the National Association of Securities Dealers, Inc. (the
"NASD") of the underwriting terms and arrangements, and
compliance with the securities or Blue Sky laws of various
jurisdictions 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
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the execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions
contemplated hereby.
(k) Except as described in the Prospectus and other
than the Registration Rights Agreement, dated as of April
27, 1999, among the parties named therein, 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 within the coverage of
the Registration Statement or any other registration
statement filed by the Company under the Securities Act. In
addition, except as described in the Prospectus, the
consummation of the transactions contemplated by this
Agreement will not give rise to any third-party rights of
first refusal under any Material Agreement 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 their respective properties or assets is subject.
(l) 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.
(m) Other than as set forth in the Prospectus,
neither the Company nor any of its subsidiaries has
sustained, since the date of the latest audited financial
statements included in the Prospectus, 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, that would have a Material Adverse Effect.
(n) The historical financial statements, together
with related notes, included in the Prospectus comply as to
form in all material respects with the requirements of
Regulation S-X under the Securities Act applicable to
registration statements on Form S-3 under the Securities Act
and documents incorporated by reference therein. The
historical consolidated financial statements of the Company
and its subsidiaries fairly present the consolidated
financial position of the Company and its subsidiaries at
the respective dates indicated and the results of operations
and cash flows of the Company and its subsidiaries for the
respective periods indicated, in accordance with generally
accepted accounting principles consistently applied
throughout such periods. The pro forma financial statements
have been prepared on a basis consistent with such
historical financial statements, except for the pro forma
adjustments specified therein, include all material
adjustments to the historical financial data required by
Rule 11-02 of Regulation S-X to reflect the Company's
acquisition of Hills Stores Company (as
5
described in the Prospectus), give effect to assumptions made
on a reasonable basis and in good faith and present fairly the
historical and proposed transactions contemplated by the
Prospectus and this Agreement (including the issuance of the
Company's 10% Senior Notes due 2006). The other financial
information and data included in the Prospectus, historical
and pro forma, have been derived from the financial records of
the Company and, in all material respects, have been prepared
on a basis consistent with such records, except as disclosed
therein.
(o) Except as disclosed in the Prospectus, since
the date of the latest audited consolidated financial
statements of the Company and its subsidiaries included in
the Prospectus, neither the Company nor any of its
subsidiaries has incurred any liability or obligation,
direct or contingent, or entered into any transaction, in
each case not in the ordinary course of business, that is
material to the Company and its subsidiaries, taken as a
whole, and there has not occurred, to the Company's
knowledge, any development or event involving a prospective
Material Adverse Effect and, except as disclosed in or
contemplated by the Prospectus, since the date of the latest
audited consolidated financial statements of the Company and
its subsidiaries included in the Prospectus, there has been
no (i) dividend or distribution of any kind declared, paid
or made by the Company on any class of its capital stock,
(ii) issuance of securities (other than the Stock offered
hereby) or (iii) material increase in short-term or
long-term debt of the Company.
(p) The Company maintains a system of internal
accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance
with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation
of consolidated financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability
for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to
any differences.
(q) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who have certified certain
financial statements of the Company, whose report appears in
the Prospectus and who will deliver the letter referred to
in Section 7(g) hereof, are independent public accountants
under Rule 101 of the AICPA's Code of Professional Conduct,
and its interpretation and rulings.
(r) The Company, directly or through a subsidiary,
has good and marketable title to all property (real and
personal) described in the Prospectus as being owned by it,
free and clear of all liens, claims, security interests or
other encumbrances except such as are described in the
Prospectus or to the extent that any such liens, claims,
security interests or other encumbrances (individually or in
the aggregate) would not have a Material Adverse Effect and
all the material properties described in the Prospectus as
being held under lease by the Company,
6
directly or through subsidiaries, are held under valid,
subsisting and enforceable leases, with only such exceptions
as would not have a Material Adverse Effect (individually or
in the aggregate); the Company and its subsidiaries are in
compliance with all material obligations, considering
applicable grace periods, under such leases, with such
exceptions as would not have a Material Adverse Effect; to the
knowledge of the Company, no person has instituted or
threatened to institute proceedings, or has taken or
threatened to take any other action, to challenge or
terminate, and no event or circumstance has occurred which
reasonably could be expected to materially interfere with (x)
the lessee's right to occupy the premises leased thereunder or
to continue to use such premises in the manner in which it is
currently being used, or (y) the lessor's right to continue to
lease such premises to the lessee, with such exceptions as
would not have a Material Adverse Effect; and none of such
leases contains any unusual or burdensome provision which
could reasonably be expected to have a Material Adverse
Effect.
(s) The Company, directly or through a subsidiary,
owns or possesses adequate rights to use all material
patents, trademarks, service marks, trade names, copyrights,
licenses, inventions, trade secrets and other rights, and
all registrations or applications relating thereto,
described in the Prospectus as being owned by it and
necessary for the conduct of its business, except as such
would not have a Material Adverse Effect (individually or in
the aggregate), and the Company is not aware of any pending
or threatened claim to the contrary or any pending or
threatened challenge by any other person to the rights of
the Company and its subsidiaries with respect to the
foregoing which, if determined adversely to the Company and
its subsidiaries, would have a Material Adverse Effect
(individually or in the aggregate).
(t) Except as described in the Prospectus, there
are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or
any of its subsidiaries or 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
such subsidiary, are reasonably likely to cause a Material
Adverse Effect.
(u) No material 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, except as described in the
Prospectus.
(v) The Company is not involved in any strike, job
action or labor dispute with any group of employees that
would have a Material Adverse Effect, and, to the Company's
knowledge, no such action or dispute is threatened.
7
(w) The Company and its subsidiaries have filed all
federal, state and local income and franchise tax returns
required to be filed through the date hereof and have paid
all taxes shown thereon to be due , and no tax deficiency
has been determined adversely to the Company or any of its
subsidiaries that would have a Material Adverse Effect, nor
does the Company have any knowledge of any tax deficiency
which, if determined adversely to the Company and its
subsidiaries, might have a Material Adverse Effect.
(x) Neither the Company nor any of its subsidiaries
(i) is in violation of its charter or by-laws or other
organizational document, (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 Agreement 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, except for such violations, defaults or failures
as would not, individually or in the aggregate, have a
Material Adverse Effect.
(y) The Company and its subsidiaries maintain or
are covered by insurance in such amounts and for such risks
as are adequate for the conduct of the Company's business
and the value of its properties and as is customary for
companies of like size engaged in a similar business.
(z) Neither the Company nor any subsidiary is, and,
upon sale of the Stock and the application of the net
proceeds of such sale as described in the Prospectus,
neither of them will be, an "investment company" or an
entity "controlled" by an "investment company" within the
meaning of such terms under the Investment Company Act of
1940, as amended (the "1940 Act") and the rules and
regulations of the Commission thereunder.
(aa) Except as permitted by the Securities Act, the
Company has not distributed and, prior to the later to occur
of the Closing Date and completion of the distribution of
the Stock, will not distribute any offering material in
connection with the offering and sale of the Stock other
than the Preliminary Prospectus and the Prospectus.
(bb) Neither the Company nor any of its
subsidiaries has taken or will take, directly or indirectly,
any action designed to cause or result in, or which has
constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price
of the Stock to facilitate the sale or resale of the Stock.
(cc) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule
436(g)(2) under the Securities Act (i) has
8
imposed (or has informed the Company that it is considering
imposing) any condition (financial or otherwise) on the
Company's retaining any rating assigned as of the date hereof
to the Company or any of its securities or (ii) has indicated
to the Company that it is considering (A) the downgrading,
suspension or withdrawal of, or any review for a possible
change that does not indicate the direction of the possible
change in, any rating so assigned or (B) any negative change
in the outlook for any rating of the Company.
(dd) Neither the Company nor any of its
subsidiaries has taken, and none of them will take, any
action that might cause this Agreement or the issuance or
sale of the Stock to violate Regulation T (12 C.F.R. Part
220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System.
(ee) 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 or incorporated therein by
reference as permitted by the Rules and Regulations.
2. 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 4,000,000 shares
of the Firm Stock 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 opposite that Underwriter's name in Schedule 1 hereto. Each
Underwriter shall be obligated to purchase from the Company 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 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 Company grants to the Underwriters an
option to purchase, in whole or in part, the 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 4 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 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 shall not be obligated to sell and deliver any
of the Stock to be delivered on any Delivery Date (as hereinafter defined), as
the case may be, except upon
9
purchase of and payment for all the Stock to be purchased on such Delivery Date
as provided herein.
3. 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.
Each Underwriter agrees that, except to the extent permitted
by the Agreement Between Underwriters, it will not offer or sell any of the
Stock outside of the United States [and Canada].
4. Delivery of and Payment for the Stock. Delivery of and
payment for the Firm Stock shall be made at the office of Milbank, Tweed,
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at
10:00 A.M., New York City time, on the third 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 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 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 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 2 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 Company 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 4 (or at such other place as shall be
10
determined by agreement between the Representatives and the Company) at 10:00
A.M., New York City time, on such Second Delivery Date. On such Second Delivery
Date, the Company 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 Company 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 Company 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.
5. Further Agreements of the Company. The Company
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 (i) 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 (ii) if the Company is required to file a
Rule 462(b) Registration Statement after the effectiveness
of this Agreement, when the Rule 462(b) Registration
Statement has become effective and, in the case of each of
(i) and (ii), 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
every reasonable effort to obtain its withdrawal at the
earliest possible time;
(b) To furnish promptly to each of the
Representatives and to counsel for the Underwriters a
conformed 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;
11
(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
including exhibits), (ii) each Preliminary Prospectus, the
Prospectus and any amended or supplemented Prospectus and
(iii) any document incorporated by reference in the
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 made therein, in the light
of the circumstances under which they were made, not be
misleading when such Prospectus is delivered, or, if for any
other reason it is necessary to amend or supplement the
Prospectus or to file under the Exchange Act any document
incorporated by reference into the Prospectus in order to
comply with applicable law, to promptly notify the
Representatives and, upon their request, to file such
document and to prepare and furnish (without charge for the
nine-month period following the First Delivery Date) 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 not to
file any such document to which the Representatives shall
reasonably object after having been given reasonable notice
of the proposed filing thereof, unless the Company shall
reasonably conclude, upon the advice of its counsel, that
any such document must be filed prior to obtaining such
consent;
(f) To make generally available to the Company's
security holders and to deliver to the Representatives as
soon as practicable, but not later than 45 days after the
end of its fiscal quarter in which the first anniversary of
the Effective Date occurs, 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 four years following the date
of the Prospectus, to furnish to the Representatives copies
of all materials furnished by the Company to
12
its stockholders and all public reports and financial
statements furnished by the company 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
(provided, however, that the Company shall not be obligated
to qualify as a foreign corporation in any jurisdiction in
which it is not now so qualified or to take any action that
would subject it to general consent to service of process in
any jurisdiction in which it is not now so subject) 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;
(i) For a period of 90 days from the date of the
Prospectus, not to, directly or indirectly, (1) offer for
sale, sell, 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 or exercisable
for Common Stock (other than (i) the Stock and (ii) shares
issued pursuant to employee benefit plans, nonqualified or
qualified stock option plans or other employee compensation
plans existing on the date hereof or pursuant to currently
outstanding options, warrants, rights or convertible
securities), 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 without the prior written consent of
▇▇▇▇▇▇ Brothers Inc.; and to cause each of the Company's
executive officers and directors [(other than ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇)] to furnish to the Representatives, prior to the
date of the Prospectus, a letter or letters, 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, 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 or exercisable 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 90 days from the
date of the Prospectus without the prior written consent of
▇▇▇▇▇▇ Brothers Inc.;
(j) Prior to the Effective Date, to apply for the
inclusion of the Stock in The Nasdaq Stock Market and to use
its best efforts to complete that inclusion, subject only to
official notice of issuance, prior to the First Delivery
Date;
13
(k) To apply the net proceeds from the sale of the
Stock as set forth in the Prospectus under the caption "Use
of Proceeds";
(l) To take such steps as shall be necessary to
ensure that neither the Company nor any subsidiary shall
become an "investment company" within the meaning of such
term under the 1940 Act and the rules and regulations of the
Commission thereunder; and
(m) If the Registration Statement at the time of
the effectiveness of this Agreement does not cover all of
the Shares, to file a Rule 462(b) Registration Statement
with the Commission registering the Shares not so covered in
compliance with Rule 462(b) by 10:00 A.M., New York City
time, on the date following this Agreement and to pay to the
Commission the filing fee for such Rule 462(b) Registration
Statement at the time of the filing thereof or to give
irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Securities Act.
6. 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 fees
and expenses incident to securing any required review by the NASD of the terms
of sale of the Stock (including related fees and expenses of counsel to the
Underwriters); (e) all expenses and listing fees in connection with the
application for inclusion of the Stock in The Nasdaq Stock Market; (f) all
fees and expenses (including fees and expenses of counsel) of the Company in
connection with approval of the Stock by DTC for "book-entry" transfer; (g)
the fees and expenses of qualifying the Stock under the securities laws of the
several jurisdictions as provided in Section 5(g) and of preparing, printing
and distributing a Blue Sky Memorandum (including related fees and expenses of
counsel to the Underwriters); and (h) all other costs and expenses incident to
the performance of the obligations of the Company.
7. 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 contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed
with the Commission in accordance with Section 5(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; any request of the Commission
for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall
14
have been complied with; and any 462(b) Registration Statement
required by this Agreement to be filed shall have been so
filed and become effective.
(b) 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 opinion of Milbank, Tweed, ▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, counsel for the Underwriters, is material or
omits to state a fact which, in the opinion of such counsel,
is material and is required to be stated therein or is
necessary to make the statements made therein (i) in the
case of the Registration Statement, not misleading and (ii)
in the case of the Prospectus, in the light of the
circumstances under which they were made, not misleading.
(c) All corporate proceedings and other legal
matters incident to the authorization, form and validity of
this Agreement, 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 shall have furnished
to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(d) Weil, Gotshal & ▇▇▇▇▇▇ LLP shall have furnished
to the Representatives its written opinion, addressed to the
Underwriters and dated such Delivery Date, to the effect set
forth in Exhibit B hereto.
(e) ▇▇▇▇▇ ▇. ▇▇▇▇▇, General Counsel of the Company,
shall have furnished to the Representatives his written
opinion, addressed to the Underwriters and dated such
Delivery Date, to the effect set forth in Exhibit C hereto.
(f) The Representatives shall have received from
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, 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.
(g) The Representatives shall have received from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP a letter (the "AA Comfort Letter"),
addressed to the Underwriters and dated the date hereof, in
form and substance satisfactory to the Representatives (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 the conclusions and
findings of such firm with respect to the financial
information and other matters ordinarily covered by
15
accountants' "comfort letters" to underwriters in connection
with registered public offerings.
(h) On each Delivery Date, the Representatives
shall have received a letter (the "AA Bring-Down Letter")
from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, addressed to the Underwriters and
dated such Delivery Date confirming in all material respects
the conclusions and findings set forth in the AA Comfort
Letter.
(i) The Company shall have furnished to the
Representatives a certificate, dated such Delivery Date, of
its chief executive officer and chief financial officer
stating that:
(i) The representations and warranties 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 7(a) and 7(j) 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 did not contain 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 made therein
not misleading, (B) as of the date thereof and as
of such Delivery Date, the Prospectus did not and
does not contain any untrue statement of a material
fact and did not and does not omit to state a
material fact required to be stated therein or
necessary to make the statements made therein, in
the light of the circumstances under which they
were made, not misleading, and (C) 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.
(j) (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 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 or (ii) 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 business, management, financial position, stockholders'
equity or results of operations of the Company and its
subsidiaries taken as a whole, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in
any such case described in clause (i) or (ii), is, in the
judgment of the Representatives, so material and adverse as
to make it impracticable or inadvisable to proceed with the
public offering and sale of the Stock being
16
delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
(k) Subsequent to the execution and delivery of
this Agreement (i) no downgrading shall have occurred in the
rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule
436(g)(2) of the Rules and Regulations and (ii) no such
organization shall have publicly announced that it has under
surveillance or review, with possible negative implications,
its rating of any of the Company's debt securities.
(l) Subsequent to the execution and delivery of
this Agreement there shall not have occurred any of the
following: (i) trading in securities generally on the New
York Stock Exchange or The Nasdaq Stock Market, or trading
in the Common Stock of the Company on The Nasdaq Stock
Market, shall have been suspended or minimum prices shall
have been established on 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) as to make it impracticable or inadvisable,
in the judgment of a majority in interest of the several
Underwriters, to proceed with the public offering and sale
of the Stock being delivered on such Delivery Date on the
terms and in the manner contemplated in the Prospectus.
(m) The Nasdaq Stock Market shall have approved the
Stock for inclusion, subject only to official notice of
issuance.
(n) Each of the directors and executive officers of
the Company [(other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇)] shall have
furnished to the Representatives letters dated the First
Delivery Date in the form of Exhibit A hereto.
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.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless
each Underwriter, its 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
17
(including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of Stock),
to which that Underwriter, 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 blue sky application or other document
prepared or executed by the Company (or based upon any written
information furnished by the Company) specifically for the
purpose of qualifying any or all of the Stock under the
securities laws of any state or other jurisdiction (any such
application, document or information being hereinafter called
a "Blue Sky Application"), 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, or in any Blue Sky Application any
material fact required to be stated therein or necessary to
make the statements made therein, in the light of the
circumstances under which they were made, not misleading, and
shall reimburse each Underwriter and each such officer,
employee or controlling person promptly upon demand for any
legal or other expenses reasonably incurred by that
Underwriter, 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, or in any
Blue Sky Application, 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; provided
further, that with respect to any such untrue statement or
omission made in any Preliminary Prospectus, the indemnity
agreement contained in this Section 8(a) shall not inure to
the benefit of the Underwriter from whom the person asserting
any such losses, claims, damages or liabilities purchased the
Stock concerned if any such loss, claim, damage or liability
of such Underwriter is a result of the fact that both (A) a
copy of the Prospectus was not sent or given to such person at
or prior to written confirmation of the sale of such Stock to
such person and (B) the untrue statement or omission in the
Preliminary Prospectus was corrected in the Prospectus unless
such failure to deliver the Prospectus was a result of
noncompliance by the Company with Section 5(c) hereof. The
foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to any Underwriter or to
any officer, employee or controlling person of that
Underwriter.
(b) Each Underwriter, severally and not jointly,
shall indemnify and hold harmless the Company, its
directors, officers and employees and each person, if any,
who controls the Company within the meaning of the
Securities
18
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,
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 Blue Sky
Application 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, or in any Blue Sky Application any
material fact required to be stated therein or necessary to
make the statements made 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, and shall reimburse the
Company and each such director, officer, employee or
controlling person for any legal or other expenses
reasonably incurred by the Company or such 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. 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.
(c) Promptly after receipt by an indemnified party
under this Section 8 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 8, 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 8
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 8. 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 8 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, any indemnified party
shall have the right to employ separate counsel in any such
action and to participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment
19
of such counsel has been specifically authorized by the
indemnifying party in writing, (ii) such indemnified party
shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different
from or additional to those available to the indemnifying
party and in the reasonable judgment of such counsel, it is
advisable for such indemnified party to employ separate
counsel or (iii) the indemnifying party has failed to assume
the defense of such action and employ counsel reasonably
satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not, in
connection with any one such action or separate but
substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys (in addition to
one local counsel) at any time for all such indemnified
parties, which firm shall be designated in writing (i) by
▇▇▇▇▇▇ Brothers Inc., if the indemnified parties under this
Section 8 consist of any Underwriters or any of their
respective officers, employees or controlling persons, or (ii)
by the Company, if the indemnified parties under this Section
8 consist of the Company or any its directors, officers,
employees or controlling persons. 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 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.
(d) If the indemnification provided for in this
Section 8 shall for any reason be unavailable to or
insufficient to hold harmless an indemnified party under
Section 8(a) or 8(b) 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 on the one hand and the
20
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 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
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 proceeds from the sale of the Stock under this
Agreement (before deducting expenses) received by the Company,
on the one hand, and the total underwriting discounts received
by the Underwriters with respect to the shares of the Stock
purchased under this Agreement, on the other hand, bear to the
total public offering price of the shares of the Stock sold
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, on the one hand, or the Underwriters,
on the other hand, the intent of the parties and their
relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and
the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 8(d) were 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 8(d) shall be deemed to
include, for purposes of this Section 8(d), 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 8(d), no
Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the
Stock underwritten by it and distributed to the public was
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 8(d) are several in proportion to
their respective underwriting obligations and not joint.
(e) The Underwriters severally confirm and the
Company acknowledges that the last sentence on the cover
page of, and the third, twelfth, thirteenth and fourteenth
paragraphs and the stabilization language in paragraphs
seven through ten under the caption "Underwriting" in, the
Prospectus 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.
21
9. 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 2. 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 Company to sell, the
Option Stock) shall terminate without liability on the part of any
non-defaulting Underwriter or the Company, except that the Company will
continue to be liable for the payment of expenses to the extent set forth in
Sections 6 and 11. 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 9,
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 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.
10. Termination. The obligations of the Underwriters
hereunder may be terminated by the Representatives by notice given to and
received by the Company prior to delivery of and payment for the Firm Stock
if, prior to that time, any of the events described in Sections 7(j), 7(k) or
7(l), shall have occurred or if the Underwriters shall decline to purchase the
Stock for any reason permitted under this Agreement.
11. Reimbursement of Underwriters' Expenses. If (a) the
Company 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 to
perform any agreement on its part to be performed, or because any
22
other condition of the Underwriters' obligations hereunder required to be
fulfilled by the Company is not fulfilled, the Company 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
shall pay the full amount thereof to the Representatives. If this Agreement is
terminated pursuant to Section 9 by reason of the default of one or more
Underwriters, the Company shall not be obligated to reimburse any defaulting
Underwriter on account of those expenses.
12. 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 ▇▇▇▇▇▇
Brothers Inc., Three World Financial Center, New York, New
York 10285, Attention: Syndicate Department (Fax:
212-526-6588), with a copy to Milbank, Tweed, ▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III (Fax: ▇▇▇-▇▇▇-▇▇▇▇)
and, in the case of any notice pursuant to Section 8, to the
Director of Litigation, Office of the General Counsel,
▇▇▇▇▇▇ Brothers Inc., Three World ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; and
(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: ▇▇▇▇▇ ▇. ▇▇▇▇▇ (Fax: ▇▇▇-▇▇▇-▇▇▇▇), with a copy
to Weil, Gotshal & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Fax:
212-310-8975);
provided, however, that any notice to an Underwriter pursuant to Section 8(c)
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 shall
be entitled to act and rely upon any request, consent, notice or agreement
given or made on behalf of the Underwriters by ▇▇▇▇▇▇ Brothers Inc. on behalf
of the Representatives.
13. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Underwriters, the
Company, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(A) the representations, warranties, indemnities and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control each 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 13, any
23
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
14. Survival. The respective indemnities, representations,
warranties and agreements of the Company 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.
15. 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.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of New York.
17. 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.
18. 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.
[Signature pages follow]
24
If the foregoing correctly sets forth the agreement among
the Company and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
▇▇▇▇ DEPARTMENT STORES, INC.
By:
Name:
Title:
Accepted:
▇▇▇▇▇▇ BROTHERS INC.
NATIONSBANK ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
▇▇▇▇▇▇▇ RICE & COMPANY LLC
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ GULL
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By: ▇▇▇▇▇▇ BROTHERS INC.
By:
Name:
Title:
SCHEDULE 1
Number of
Underwriters Shares
------------ ---------
▇▇▇▇▇▇ Brothers Inc...........................................
NationsBank ▇▇▇▇▇▇▇▇▇▇ Securities LLC.........................
Bear, ▇▇▇▇▇▇▇ & Co. Inc.......................................
▇▇▇▇▇▇▇ Rice & Company LLC....................................
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Gull....................................
---------
Total 4,000,000
=========
EXHIBIT A
FORM OF LOCK-UP LETTER AGREEMENT
▇▇▇▇▇▇ BROTHERS INC.
NATIONSBANK ▇▇▇▇▇▇▇▇▇▇ SECURITIES LLC
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
▇▇▇▇▇▇▇ ▇▇▇▇ & COMPANY LLC
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ GULL
As Representatives of the
several underwriters
c/▇ ▇▇▇▇▇▇ BROTHERS INC.
Three World Financial Center
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
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 (collectively, the
"Underwriters") of shares (the "Shares") of Common Stock, par value $.01 per
share (the "Common Stock"), of ▇▇▇▇ Department Stores, Inc. (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 ▇▇▇▇▇▇ Brothers Inc., the undersigned will not, directly or indirectly, (1)
offer for sale, sell, 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 or exercisable 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 90
days after the date of the final Prospectus relating to the Offering; except
that the foregoing shall not restrict the disposition of any shares of Common
Stock beneficially owned by the undersigned by or under will or the laws of
descent.
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.
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: May ___, 1999
