Exhibit 1
Form of Underwriting Agreement
___________, 1999
[________________________]
As Representative of the several Underwriters
Ladies and Gentlemen:
Introductory. American Capital Strategies, Ltd., a Delaware
corporation (the "Company), proposes to issue and sell to the several
underwriters named in Schedule A (the "Underwriters") an aggregate of __________
shares (the "Firm Shares") of its Common Stock, par value $.01 per share (the
"Common Shares"). In addition, the Company has granted to the Underwriters an
option to purchase up to an additional __________ Common Shares (the "Option
Shares") as provided in Section 2. The Firm Shares and, if and to the extent
such option is exercised, the Option Shares are collectively called the
"Shares". [ ] has agreed to act as representative of the several Underwriters
(in such capacity, the "Representative") in connection with the offering and
sale of the Shares.
The Company has filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act") and the Investment Company Act of 1940, as amended, and the rules and
regulations promulgated thereunder (the "Investment Company Act"), a
registration statement (No. 333-79377) on Form N-2 for the offer and sale of the
Shares, which registration statement has become effective and copies of which
have heretofore been delivered to you. Such registration statement meets the
requirements set forth in Rule 415(a)(1) under the Securities Act and complies
in all other material respects with such Rule. The Company proposes to file with
the Commission pursuant to Rule 424 and/or Rule 497, as applicable, under the
Securities Act a supplement, dated the date specified in Schedule C hereto, to
the prospectus, dated the date specified in Schedule C hereto, relating to the
Shares and the method of distribution thereof and has previously advised you of
all further information (financial and other) with respect to the Shares set
forth therein. Such registration statement, including the exhibits thereto, as
amended at the date hereof is hereinafter called the "Registration Statement";
such prospectus, in the form in which it will be filed with the Commission
pursuant to Rule 424 and/or Rule 497, as applicable, under the Securities Act,
is hereinafter called the "Basic Prospectus"; such supplement to the Basic
Prospectus, in the form in which it will be filed with the Commission pursuant
to Rule 424 and/or Rule 497, as the case may be, under the Securities Act, is
hereinafter called the "Prospectus Supplement"; and the Basic Prospectus and the
Prospectus Supplement together are hereinafter called the "Prospectus". All
references in this Agreement to the Registration Statement, a Preliminary
Prospectus, the Prospectus, or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("XXXXX").
All references in this Agreement to financial statements and
schedules and other information which is "contained," "included" or "stated" in
the Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial statements and
schedules and other information which is or is deemed to be incorporated by
reference in the Registration Statement or the Prospectus, as the case may be;
and all references in this Agreement to amendments or supplements to the
Registration Statement or the Prospectus shall be deemed to mean and include the
filing of any document under the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder (the "Exchange Act") which is or is
deemed to be incorporated by reference in the Registration Statement or the
Prospectus, as the case may be.
The Company hereby confirms its agreements with the
Underwriters as follows:
Section 1. Representations and Warranties of the Company.
Representations and Warranties of the Company. The Company hereby
represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration
Statement has been declared effective by the Commission under the Securities
Act. The Company has complied to the Commission's satisfaction with all requests
of the Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement is in effect and no
proceedings for such purpose have been instituted or are pending or, to the best
knowledge of the Company, are contemplated or threatened by the Commission.
The Prospectus when filed complied in all material respects
with the Securities Act and Investment Company Act and, if filed by electronic
transmission pursuant to XXXXX (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares. As of
the date hereof, when the Registration Statement became effective, when the
Prospectus Supplement is first filed pursuant to Rule 497 under the Securities
Act, when, prior to the Closing Date (as defined in Section 2(b)), any other
amendment to the Registration Statement becomes effective, when, prior to the
Closing Date, any supplement to the Prospectus Supplement is filed with the
Commission, and at the Closing Date, (i) the Registration Statement, as amended
as of any such time, and the Prospectus, as amended or supplemented as of any
such time, complied or will comply in all material respects with the applicable
requirements of the Securities Act and the rules thereunder, (ii) the
Registration Statement, as amended as of any such time, did not and will not
contain any untrue statement of a material fact and did not and will not omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) the Prospectus, as amended or
supplemented as of any such time, did not and will not contain an untrue
statement of
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a material fact and did not and will not omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, that the Company makes no
representations or warranties as to the information contained in or omitted from
the Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by any Underwriter expressly for use therein. There are
no contracts or other documents required to be described in the Prospectus or to
be filed as exhibits to the Registration Statement which have not been described
or filed as required.
(b) Offering Materials Furnished to Underwriters. The Company has
delivered to the Representative one complete conformed copy of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and the Prospectus, as amended or supplemented, in such quantities and at such
places as the Representative has reasonably requested for each of the
Underwriters.
(c) Distribution of Offering Material By the Company. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than the Prospectus or the Registration
Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(e) Authorization of the Shares. The Shares to be purchased by the
Underwriters from the Company have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
(g) No Material Adverse Change. Subsequent to the respective dates as
of which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change or effect, where the
context so requires, is called a
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"Material Adverse Change" or a "Material Adverse Effect"); (ii) the Company and
its subsidiaries, considered as one entity, have not incurred any material
liability or obligation, indirect, direct or contingent, not in the ordinary
course of business nor entered into any material transaction or agreement not in
the ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or, except for
dividends paid to the Company or other subsidiaries, any of its subsidiaries on
any class of capital stock or repurchase or redemption by the Company or any of
its subsidiaries of any class of capital stock.
(h) Independent Accountants. Ernst & Young LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) filed with the Commission as
a part of the Registration Statement and included in the Prospectus, are
independent public or certified public accountants as required by the Securities
Act and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act").
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the financial position of the Company and its
subsidiaries as of and at the dates indicated and the results of their
operations and cash flows for the periods specified. Such financial statements
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. No other financial statements or
supporting schedules are required to be included in the Registration Statement.
The financial data set forth in the Prospectus under the captions "Prospectus
Summary--Summary Financial Data", "Selected Financial Data" and "Capitalization"
fairly present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration Statement.
(j) Company's Accounting System. The Company and each of its
subsidiaries maintain a system of accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(k) Subsidiaries of the Company. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
entities in which it has an investment (each, a "Portfolio Company" and
collectively, the "Portfolio Companies") and the subsidiaries listed in Item 27
of the Registration Statement. The term "subsidiary" as used in this Agreement
shall be deemed to exclude each Portfolio Company.
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(l) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been duly organized
and is validly existing as a corporation or business trust, as the case may be,
in good standing under the laws of the jurisdiction in which it is organized
with full power and authority to own its properties and conduct its business as
described in the Prospectus, and is duly qualified to do business as a foreign
corporation or business trust, as the case may be, and is in good standing under
the laws of each jurisdiction that requires such qualification.
(m) Capitalization of the Subsidiaries. All the outstanding shares of
capital stock or interests of each subsidiary have been duly and validly
authorized and issued and are fully paid and nonassessable, and, except as
otherwise set forth in the Prospectus, all outstanding shares of capital stock
or interests of the subsidiaries are owned by the Company either directly or
through wholly owned subsidiaries free and clear of any security interests,
claims, liens or encumbrances.
(n) No Prohibition on Subsidiaries from Paying Dividends or Making
Other Distributions. No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from making
any other distribution on such subsidiary's capital stock, from repaying to the
Company any loans or advances to such subsidiary from the Company or from
transferring any of such subsidiary's property or assets to the Company or any
other subsidiary of the Company, except as described in or contemplated by the
Prospectus or as provided in the CP Conduit Facility (as defined in the
Prospectus).
(o) Capitalization and Other Capital Stock Matters. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options described in the Prospectus).
The Common Stock (including the Shares) conform in all material respects to the
description thereof contained in the Prospectus. All of the issued and
outstanding Common Stock has been duly authorized and validly issued, is fully
paid and nonassessable and has been issued in compliance with federal and state
securities laws. None of the outstanding Common Stock was issued in violation of
any preemptive rights, rights of first refusal or other similar rights to
subscribe for or purchase securities of the Company. There are no authorized or
outstanding options, warrants, preemptive rights, rights of first refusal or
other rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any capital stock of the Company or any of its
subsidiaries other than those accurately described in the Prospectus. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth in
the Prospectus accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and rights.
(p) Nasdaq National Market. The Shares are registered pursuant to
Section 12(b) or 12(g) of the Exchange Act and are listed on the Nasdaq National
Market, and the Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or delisting the Common Stock from the Nasdaq National Market,
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nor has the Company received any notification that the Commission or the
National Association of Securities Dealers, LLC (the "NASD") is contemplating
terminating such registration or listing.
(q) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act, the Investment Company Act and such as may be required (i) under
the blue sky laws of any jurisdiction in connection with the purchase and
distribution of the Shares by the Underwriters in the manner contemplated herein
and in the Prospectus, (ii) by the National Association of Securities Dealers,
LLC and (iii) by the federal and provincial laws of Canada.
(r) Non-Contravention of Existing Instruments Agreements. Neither the
issue and sale of the Shares nor the consummation of any of the other
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, (i) the charter, by-laws, or other organizational
documents of the Company or any of its subsidiaries, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which the Company or any of its subsidiaries is a party or bound or to which its
or their property is subject or (iii) any statute, law, rule, regulation,
judgment, order or decree applicable to the Company or any of its subsidiaries
of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or any of its
subsidiaries or any of its or their properties.
(s) No Defaults or Violations. Neither the Company nor any subsidiary
is in violation or default of (i) any provision of its charter, by-laws, or
other organizational document (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which it is a party or bound or
to which its property is subject or (iii) any statute, law, rule, regulation,
judgment, order or decree of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over the
Company or such subsidiary or any of its properties, as applicable, except any
such violation or default which could not, singly or in the aggregate,
reasonably be expected to result in a Material Adverse Change except as
otherwise disclosed in the Prospectus.
(t) No Actions, Suits or Proceedings. No action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company or any of its subsidiaries or its or their property is
pending or, to the best knowledge of the Company, threatened that (i) could
reasonably be expected to have a Material Adverse Effect on the performance of
this Agreement or the consummation of any of the transactions contemplated
hereby or (ii) could reasonably be expected to result in a Material Adverse
Effect.
(u) All Necessary Permits, Etc. The Company and each subsidiary possess
such valid and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign
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regulatory agencies or bodies necessary to conduct their respective businesses,
and neither the Company nor any subsidiary has received any notice of
proceedings relating to the revocation or modification of, or non-compliance
with, any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, could
reasonably be expected to result in a Material Adverse Change.
(v) Title to Properties. The Company and each of its subsidiaries has
good and marketable title to all the properties and assets reflected as owned in
the financial statements referred to in the Prospectus, in each case free and
clear of any security interests, mortgages, liens, encumbrances, equities,
claims and other defects, except such as do not materially and adversely affect
the value of such property and do not materially interfere with the use made or
proposed to be made of such property by the Company or such subsidiary. The real
property, improvements, equipment and personal property held under lease by the
Company or any subsidiary are held under valid and enforceable leases, with such
exceptions as are not material and do not materially interfere with the use made
or proposed to be made of such real property, improvements, equipment or
personal property by the Company or such subsidiary.
(w) Tax Law Compliance. The Company and its subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns and have
paid all taxes required to be paid by any of them and, if due and payable, any
related or similar assessment, fine or penalty levied against any of them. The
Company has made adequate charges, accruals and reserves in the applicable
financial statements referred to in the Prospectus in respect of all federal,
state and foreign income and franchise taxes for all periods as to which the tax
liability of the Company or any of its subsidiaries has not been finally
determined. The Company is not aware of any tax deficiency that has been or
might be asserted or threatened against the Company or any subsidiary that could
result in a Material Adverse Change.
(x) Intellectual Property Rights. Each of the Company and its
subsidiaries owns or possesses adequate rights to use all patents, patent rights
or licenses, inventions, collaborative research agreements, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration Statement
and Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not result in a
Material Adverse Change that is not otherwise disclosed in the Prospectus; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a Material Adverse Effect. There is no
claim being made against the Company or any subsidiary regarding patents, patent
rights or licenses, inventions, collaborative research, trade secrets, know-how,
trademarks, service marks, trade names or copyrights. The Company and its
subsidiaries
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do not in the conduct of their business as now or proposed to be conducted as
described in the Prospectus infringe or conflict with any right or patent of any
third party, or any discovery, invention, product or process which is the
subject of a patent application filed by any third party, known to the Company
or any of its subsidiaries, which such infringement or conflict is reasonably
likely to result in a Material Adverse Change.
(y) Year 2000 Preparedness. There are no issues related to the
Company's, or any of its subsidiaries', preparedness for the Year 2000 that (i)
are of a character required to be described or referred to in the Registration
Statement or Prospectus by the Securities Act, the Investment Company Act or by
the Exchange Act or the rules and regulations of the Commission thereunder which
have not been accurately described in the Registration Statement or Prospectus
or (ii) might reasonably be expected to result in any Material Adverse Change or
that might materially affect their properties, assets or rights. The Company
has inquired of material vendors and each Portfolio Company as to their
preparedness for the Year 2000 and has disclosed in the Registration Statement
or Prospectus any issues that might reasonably be expected to result in any
Material Adverse Effect.
(z) No Transfer Taxes or Other Fees. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the Shares.
(aa) BDC Election; RIC. The Company has duly filed with the Commission,
pursuant to Section 54(a) of the Investment Company Act, a duly completed and
executed Form N-54A, pursuant to which the Company has elected to be subject to
the provisions of Sections 55 through 65 of the Investment Company Act (the
"Company BDC Election"); the Company has not filed with the
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Commission any notice of withdrawal of the Company BDC Election pursuant to
Section 54(c) of the Investment Company Act; the Company BDC Election remains in
full force and effect, and, to the Company's actual knowledge, no order of
suspension or revocation of such election under the Investment Company Act has
been issued or proceedings therefor initiated or threatened by the Commission.
The Company is, and at all times through completion of the transactions
contemplated here by, will be, in compliance in all material respects with the
terms and conditions of the Securities Act and the Investment Company Act. As
required by Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company is currently in compliance with requirements to qualify as
they regulated investment company under the Code.
(bb) Insurance. Each of the Company and its subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes, general liability and directors and officers liability. The Company
has no reason to believe that it or any subsidiary will not be able (i) to renew
its existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Neither of the Company nor any
subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.
(cc) Labor Matters. No labor disturbance by the employees of the
Company or any of its subsidiaries exists or, to the best of Company's
knowledge, is imminent.
(dd) No Price Stabilization or Manipulation. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(ee) Lock-Up Agreements. Each officer and director of the Company has
agreed to sign an agreement substantially in the form attached hereto as Exhibit
A (the "Lock-up Agreements"). The Company has provided to counsel for the
Underwriters true, accurate and complete copies of all of the Lock-up Agreements
presently in effect or effected hereby. The Company hereby represents and
warrants that it will not release any of its officers, directors or other
stockholders from any Lock-up Agreements currently existing or hereafter
effected without the prior written consent of [_______________].
(ff) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any other
person required to be described in the Prospectus which have not been described
as required.
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(gg) Environmental Laws. (i) The Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") that are applicable to its business, except where the failure to comply
would not result in a Material Adverse Effect, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company will not be required to make
future material capital expenditures to comply with Environmental Laws and (iv)
no property that is owned, leased or occupied by the Company has been designated
as a Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local law.
(hh) ERISA Compliance. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained by
the Company, its subsidiaries or their "ERISA Affiliates" (as defined below) are
in compliance with ERISA except where the failure to comply would not have a
Material Adverse Effect. "ERISA Affiliate" means, with respect to the Company or
a subsidiary, any member of any group of organizations described in Sections
414(b),(c),(m) or (o) of the Code of which the Company or such subsidiary is a
member. No "reportable event" (as defined under ERISA) has occurred or is
reasonably expected to occur with respect to any "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates. No "employee benefit plan" established or maintained by the Company,
its subsidiaries or any of their ERISA Affiliates, if such "employee benefit
plan" were terminated, would have any "amount of unfounded benefit liabilities"
(as defined under ERISA). Neither the Company, its subsidiaries nor any of their
ERISA Affiliates has incurred or reasonably expects to incur any liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal from, any
"employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code.
Each "employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates that is intended to be qualified
under Section 401(a) of the Code, including the American Capital Strategies,
Ltd. Employee Stock Ownership Plan (the "ESOP") is so qualified and nothing has
occurred, whether by action or failure to act, which would cause the loss of
such qualification. The Company has not received any notification of any
investigation, examination, audit or review of any type by or with the Internal
Revenue Service or Department of Labor regarding or in connection with any
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates.
(ii) Exchange Act Compliance. The documents filed by the Company with
the Commission complied and will comply in all material respects with the
requirements of the Exchange Act, and, when read together with the other
information in the Prospectus, at the time the Registration Statement and any
amendments thereto become effective and at the First Closing Date and the Second
Closing Date, as the case may be, will not 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, in the light of the circumstances
under which they were made, not misleading.
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(jj) Reports Filed. The Company has filed all reports required to be
filed pursuant to the Securities Act, the Investment Company Act and the
Exchange Act.
(kk) Conditions for Use of Form N-2. The Company has satisfied the
conditions for the use of Form N-2, as set forth in the general instructions
thereto, with respect to the Registration Statement and Rule 415(a)(1) of the
Act.
(ll) Officer Certificates. Any certificate signed by an officer of the
Company and delivered to the Representative or to counsel for the Underwriters
shall be deemed to be a representation and warranty by the Company to each
Underwriter as to the matters set forth therein.
Section 2. Purchase, Sale and Delivery of the Shares.
(a) The Firm Shares. The Company agrees to issue and sell to the
several Underwriters the Firm Shares upon the terms herein set forth. On the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Underwriters
agree, severally and not jointly, to purchase from the Company the respective
number of Firm Shares set forth opposite their names on Schedule A. The purchase
price per Firm Share to be paid by the several Underwriters to the Company shall
be $[___].
(b) The First Closing Date. Delivery of the Firm Shares to be purchased
by the Underwriters and payment therefor shall be made by the Company and the
Representative at 6:00 a.m. San Francisco time, at the offices of
___________________________________ (or at such other place as may be agreed
upon among the Representative and the Company), (i) on the third (3rd) full
business day following the date of this Agreement, (ii) if this Agreement is
executed and delivered after 1:30 P.M., San Francisco time, the fourth (4th)
full business day following the day that this Agreement is executed and
delivered or (iii) at such other time and date not later that seven (7) full
business days following the first day that Shares are traded as the
Representative and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 8 hereof),
such time and date of payment and delivery being herein called the "First
Closing Date;" provided, however, that if the Company has not made available to
the Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representative may, in its sole discretion, postpone the First
Closing Date until no later that two (2) full business days following delivery
of copies of the Prospectus to the Representative.
(c) The Option Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of __________ Option Shares from the Company at
the purchase price per share to be paid by the Underwriters for the Firm Shares.
The option granted hereunder is for use by the Underwriters solely in covering
any over-allotments in connection with the sale and distribution of the Firm
Shares. The option granted hereunder may be
11
exercised at any time upon notice by the Representative to the Company, which
notice may be given at any time within 30 days from the date of this Agreement.
The time and date of delivery of the Option Shares, if subsequent to the First
Closing Date, is called the "Second Closing Date" and shall be determined by the
Representative and shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. If any Option Shares
are to be purchased, each Underwriter agrees, severally and not jointly, to
purchase, and the Company agrees to sell to such Underwriter, the number of
Option Shares (subject to such adjustments to eliminate fractional shares as the
Representative may determine) that bears the same proportion to the total number
of Option Shares to be purchased as the number of Firm Shares set forth on
Schedule A opposite the name of such Underwriter bears to the total number of
Firm Shares. The Representative may cancel the option at any time prior to its
expiration by giving written notice of such cancellation to the Company.
(d) Public Offering of the Shares. The Representative hereby advises
the Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed as the Representative, in its sole
judgment, has determined is advisable and practicable.
(e) Payment for the Shares. Payment for the Shares shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company.
It is understood that the Representative has been authorized,
for its own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
[________________], individually and not as the Representative of the
Underwriters, may (but shall not be obligated to) make payment for any Shares to
be purchased by any Underwriter whose funds shall not have been received by the
Representative by the First Closing Date or the Second Closing Date, as the case
may be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any of its obligations under this Agreement.
(f) Delivery of the Shares. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representative for the
accounts of the Representative and the several Underwriters at the First Closing
Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered a credit representing the Option Shares
the Underwriters have agreed to purchase at the First Closing Date (or the
Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representative and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
12
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00
noon (New York time) on the second business day following the date the Shares
are released by the Underwriters for sale to the public, the Company shall
deliver or cause to be delivered copies of the Prospectus in such quantities and
at such places as the Representative shall request.
Section 3. Covenants of the Company.
Covenants of the Company. The Company further covenants and agrees with
each Underwriter as follows:
(a) Registration Statement and Prospectus. The Company will promptly
advise the Underwriters (i) when, during any period that a prospectus relating
to the Shares is required to be delivered under the Securities Act, any
amendment to the Registration Statement affecting the Shares shall have become
effective, (ii) of any request by the Commission for any amendment to the
Registration Statement or the Prospectus, or for any additional information,
affecting or in respect of the Shares, (iii) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement
affecting the Shares or the institution or threatening of any proceeding for
that purpose and (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will not file any amendment to the Registration Statement
affecting the Shares or any supplement to the Prospectus unless the Company has
furnished you with a copy for your review prior to filing, and will not file any
such proposed amendment or supplement to which you reasonably object, in any
event until after the end of the period during which a prospectus is required to
be delivered to purchasers of the Shares under the Securities Act. Subject to
the foregoing sentence, the Company will cause the Prospectus Supplement to be
transmitted to the Commission for filing pursuant to Rule 424 and/or Rule 497,
as applicable, under the Securities Act by means reasonably calculated to result
in filing with the Commission pursuant to said Rules. The Company will use its
best efforts to prevent the issuance of any stop order suspending the
effectiveness of the Registration Statement affecting the Shares and, if issued,
to obtain as soon as possible the withdrawal thereof. The Company will timely
file the requisite copies of the Prospectus with the Commission pursuant to Rule
497(c) or Rule 497(h) of the Securities Act, whichever is applicable or, if
applicable, will timely file the certification permitted by Rule 497(j) of the
Securities Act and will advise the Representative of the time and manner of such
filing.
(b) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representative may reasonably have designated in writing and
will make such applications, file such documents, and furnish such information
as may be reasonably required for that purpose, provided the Company shall not
be required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so qualified or
required to file such a consent. The Company will, from time to time, prepare
and file such statements, reports and other documents, as are or may be required
to continue such
13
qualifications in effect for so long a period as the Representative may
reasonably request for distribution of the Shares.
(c) Amendments and Supplements to the Prospectus. The Company will
comply with the Securities Act, the Exchange Act, and the Investment Company Act
and the rules and regulations of the Commission thereunder, so as to permit the
completion of the distribution of the Shares as contemplated in this Agreement
and the Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur as a
result of which, in the judgment of the Company or in the reasonable opinion of
the Representative or counsel for the Underwriters, it becomes necessary to
amend or supplement the Prospectus in order to make the statements therein, in
the light of the circumstances existing at the time the Prospectus is delivered
to a purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any law, the Company promptly will
prepare and file with the Commission, and furnish at its own expense to the
Underwriters and to dealers, an appropriate amendment to the Registration
Statement or supplement to the Prospectus so that the Prospectus as so amended
or supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
(d) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representative, without charge, during the period
beginning on the date hereof and ending on the later of the First Closing Date
or such date, as in the opinion of counsel for the Underwriters, the Prospectus
is no longer required by law to be delivered in connection with sales by an
Underwriter or dealer (the "Prospectus Delivery Period"), as many copies of the
Prospectus and any amendments and supplements thereto (including any documents
incorporated or deemed incorporated by reference therein) as the Representative
may request.
(e) Insurance. The Company shall (i) obtain Directors and Officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby and (ii) shall cause [_______________] to be
added as an additional insured to such policy in respect of the offering
contemplated hereby.
(f) Notice of Subsequent Events. If at any time during the ninety (90)
day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(g) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
14
(h) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representative an
earnings statement (which need not be audited) covering the twelve-month period
ending July 31, 2000 that satisfies the provisions of Section 11(a) of the
Securities Act.
(i) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act.
(j) Agreement Not to Offer or Sell Additional Securities. The Company
will not, without the prior written consent of [_______________], for a period
of 90 days following the date of the Prospectus Supplement, offer, sell or
contract to sell, or otherwise dispose of or enter into any transaction that is
designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, or announce the offering of, any other shares of Common Stock or any
senior securities (as defined in the Investment Company Act) or any securities
convertible into, or exchangeable for, shares of Common Stock or any senior
securities (as defined in the Investment Company Act); provided, however, that
the Company may (i) issue and sell shares of Common Stock or any senior
securities (as defined in the Investment Company Act) pursuant to any director
or employee stock option plan, stock ownership plan or dividend reinvestment
plan of the Company in effect at the date of the Prospectus and described in the
Prospectus so long as none of those shares may be transferred by the recipient
during the period of 90 days from the date that the Registration Statement is
declared effective (the "Lock-Up Period") and the Company shall enter stop
transfer instructions with its transfer agent and registrar against the transfer
of any such shares of Common Stock or senior securities, (ii) the Company may
issue shares of Common Stock issuable upon the conversion of securities or the
exercise of warrants outstanding at the date of the Prospectus and described in
the Prospectus and (iii) enter into credit agreements with and borrow funds from
banks, commercial lenders and other financial institutions.
(k) Future Reports to the Representative. During the period of five
years hereafter the Company will furnish to the Representative (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
15
(l) Exchange Act Compliance. During the Prospectus Delivery Period, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act.
Section 4. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing Date as
though then made, to the timely performance by the Company of its covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No
Objection from the National Association of Securities Dealers, LLC. The
Registration Statement shall have become effective prior to the execution of
this Agreement, and no stop order suspending the effectiveness thereof shall
have been issued and no proceedings for that purpose shall have been initiated
or, to the knowledge of the Company or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the satisfaction of Underwriters' Counsel; and the
National Association of Securities Dealers, LLC shall have raised no objection
to the fairness and reasonableness of the underwriting terms and arrangements.
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement and prior to the First Closing Date, or the Second
Closing Date, as the case may be, there shall not have been any Material Adverse
Change in the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus.
(d) Opinion of Counsel for the Company. You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Xxxxxx & Xxxxxx counsel for the Company substantially in the form of Exhibit
B attached hereto, dated the First Closing Date, or the Second Closing Date, as
the case may be, addressed to the Underwriters and with reproduced copies or
signed counterparts thereof for each of the Underwriters.
16
Counsel rendering the opinion contained in Exhibit B may rely
as to questions of law not involving the laws of the United States or the
General Corporation Law of the State of Delaware upon opinions of local counsel,
and as to questions of fact upon representations or certificates of officers of
the Company and of government officials, in which case their opinion is to state
that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to you, as Representative of the Underwriters, and to Underwriters'
Counsel.
(e) Opinion of Counsel for the Underwriters. You shall have received on
the First Closing Date or the Second Closing Date, as the case may be, an
opinion of _______________, substantially in the form of Exhibit D hereto. The
Company shall have furnished to such counsel such documents as they may have
requested for the purpose of enabling them to pass upon such matters.
(f) Accountants' Comfort Letter. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
Ernst & Young LLP addressed to the Underwriters, dated the First Closing Date or
the Second Closing Date, as the case may be, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and based upon the procedures described in such
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
four (4) business days prior to the First Closing Date or the Second Closing
Date, as the case may be, (i) confirming, to the extent true, that the
statements and conclusions set forth in the Original Letter are accurate as of
the First Closing Date or the Second Closing Date, as the case may be, and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise from that set
forth in the Registration Statement or Prospectus, which, in your sole judgment,
is material and adverse and that makes it, in your sole judgment, impracticable
or inadvisable to proceed with the public offering of the Shares as contemplated
by the Prospectus. The Original Letter from Ernst & Young LLP shall be addressed
to or for the use of the Underwriters in form and substance satisfactory to the
Underwriters and shall (i) represent, to the extent true, that they are
independent certified public accountants with respect to the Company within the
meaning of the Securities Act, (ii) set forth their opinion with respect to
their examination of the consolidated balance sheets including the schedule of
investments of the Company as of December 31, 1998 and December 31, 1997 and
related statements of operations, shareholders' equity, and cash flows for the
twelve (12) months ended December 31, 1998 and December 31, 1996, the nine (9)
months ended September 30, 1997 and the three (3) months ended December 31, 1997
(iii) state that Ernst & Young LLP has performed the procedures set out in
Statement on Auditing Standards No. 71 ("SAS 71") for a review of interim
financial information and providing the report of Ernst & Young LLP as described
in SAS 71 on the financial statements for the first-quarter periods ended March
31, 1999 and March 31, 1998 (the "Quarterly Financial
17
Statements"), (iv) state that in the course of such review, nothing came to
their attention that leads them to believe that any material modifications need
to be made to the Quarterly Financial Statements in order for them to be in
compliance with generally accepted accounting principles consistently applied
across the periods presented, and address other matters agreed upon by Ernst &
Young LLP and you.
(g) Officers' Certificate. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this Agreement
are true and correct, as if made on and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the First Closing
Date or the Second Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Securities Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act, the Investment Company Act or
the Exchange Act, as the case may be, and in all material respects
conformed to the requirements of the Securities Act, the Investment
Company Act or the Exchange Act, as the case may be, the Registration
Statement and the Prospectus, and any amendments or supplements
thereto, did not and does not include any 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;
and, since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been
(a) any Material Adverse Change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its Subsidiaries considered as one enterprise, (b) any
transaction that is material to the Company and its Subsidiaries
considered as one enterprise, except transactions entered into in the
ordinary course of business, (c) any obligation, direct or contingent,
that is material to the Company and its Subsidiaries considered as one
enterprise, incurred by the Company or its Subsidiaries, except
obligations incurred in the ordinary course of business, (d) any change
in the capital stock or outstanding indebtedness of the Company or any
of its subsidiaries that is material to the Company and its
subsidiaries considered as one enterprise,
18
(e) any dividend or distribution of any kind declared, paid or made on
the capital stock of the Company or any of its subsidiaries, or (f) any
loss or damage (whether or not insured) to the property of the Company
or any of its subsidiaries which has been sustained or will have been
sustained which has a Material Adverse Effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one
enterprise.
(h) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
Company.
(i) Nasdaq National Market. The Shares shall have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(j) Compliance with Prospectus Delivery Requirements. The Company shall
have complied with the provisions of Sections 2(g) and 3(d) hereof with respect
to the furnishing of Prospectuses.
(k) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representative and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied
when and as required to be satisfied, this Agreement may be terminated by the
Representative by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 7 (Indemnification and Contribution) and Section 10 (Representations and
Indemnities to Survive Delivery) shall at all times be effective and shall
survive such termination.
Section 5. Payment of Expenses. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Shares (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agent of the Common Stock, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Shares to the Underwriters, (iv) all fees and expenses of the Company's
counsel, independent public or certified public accountants and other advisors,
(v) all costs and expenses incurred in connection with the preparation,
printing, filing, shipping and distribution of the Registration Statement
(including financial statements, exhibits,
19
schedules, consents and certificates of experts), each preliminary prospectus
and the Prospectus, and all amendments and supplements thereto, and this
Agreement, (vi) all filing fees, attorneys' fees and expenses incurred by the
Company or the Underwriters in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all or any part
of the Shares for offer and sale under the state securities or blue sky laws or
the provincial securities laws of Canada or any other country, and, if requested
by the Representative, preparing and printing a "Blue Sky Survey", an
"International Blue Sky Survey" or other memorandum, and any supplements
thereto, advising the Underwriters of such qualifications, registrations and
exemptions, (vii) the filing fees incident to, and the reasonable fees and
expenses of counsel for the Underwriters in connection with, the National
Association of Securities Dealers, LLC review and approval of the Underwriters'
participation in the offering and distribution of the Shares, (viii) the fees
and expenses associated with including the Shares on the Nasdaq National Market,
and (ix) all other fees, costs and expenses referred to in or all of Part C of
the Registration Statement. Except as provided in this Section 5 and Section 7
hereof, the Underwriters shall pay their own expenses, including the fees and
disbursements of their counsel, and all costs and expenses incident to the
preparation and undertaking of "road show" presentations to be made to
prospective investors (except the Company's travel and accommodation expenses).
Section 6. [Reserved]
Section 7. Indemnification and Contribution.
(a) Indemnification of the Underwriters.
(1) The Company agrees to 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 and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter, officer, employee or such controlling person may become
subject, under the Securities Act, the Investment Company Act, the Exchange Act
or other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company, which consent shall not be
unreasonably withheld), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based (i) upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, or any amendment
20
thereto, including any information deemed to be a part thereof pursuant to Rule
430A or Rule 434 under the Securities Act, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading; or (ii) upon any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; or (iii) in whole or in part upon any inaccuracy in
the representations and warranties of the Company contained herein; or (iv) in
whole or in part upon any failure of the Company to perform its obligations
hereunder or under law; or (v) 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 Shares 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 any matter covered by clause (i), (ii), (iii) or (iv)
above, provided that the Company shall not be liable under this clause (v) to
the extent that a court of competent jurisdiction shall have determined by a
final judgment 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 bad faith or willful misconduct; and to
reimburse each Underwriter and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by
[__________]) as such expenses are reasonably incurred by such Underwriter or
such controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but only
to the extent, arising out of or based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by the
Representative expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto); and
provided, further, that with respect to any preliminary prospectus, the
foregoing indemnity agreement shall not inure to the benefit of any Underwriter
from whom the person asserting any loss, claim, damage, liability or expense
purchased Shares, or any person controlling such Underwriter, if copies of the
Prospectus were timely delivered to the Underwriter pursuant to Section 2 and a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. The indemnity agreement set forth in this Section 7(a) shall be in
addition to any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Investment Company Act, the Exchange
21
Act, or other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter), insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representative expressly for use therein; and to reimburse the Company, or any
such director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The indemnity
agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Underwriter may otherwise have.
(c) Information Provided by the Underwriters. The Company hereby
acknowledges that the only information that the Underwriters have furnished to
the Company expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the table in the first paragraph and the second
paragraph under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct.
(d) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise
22
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of such indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 7 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party ([ ] in the case of Section 7(b)
and Section 8), representing the indemnified parties who are parties to such
action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
(e) Settlements. The indemnifying party under this Section 7 shall not
be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this Section 7
is unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then
23
each indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, (or actions or
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriter on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company bears to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page of
the Prospectus or Prospectus Supplement. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and Underwriters agree that it would not be just
and equitable if contributions pursuant to this Section 7(f) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 7(f). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above in this Section 7(f) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (f), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 7(f) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than thirty
(30) days of invoice to the indemnifying party.
(h) Survival. The indemnity and contribution agreements contained in
this Section 7 and the representation and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter, its officers
or employees, or any person controlling any Underwriter, the Company, its
directors or officers or any persons controlling the Company, (ii) acceptance of
any Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter, or to the Company, its directors or
officers, or any person controlling the Company,
24
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 7.
(i) Acknowledgments of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
Section 8. Default of One or More of the Several Underwriters. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares of Common Stock which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Shares set forth opposite their respective names on Schedule A bears to
the aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as may be specified by
the Representative with the consent of the non-defaulting Underwriters, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date. If, on the First Closing Date or the
Second Closing Date, as the case may be, any one or more of the Underwriters
shall fail or refuse to purchase Shares and the aggregate number of Shares with
respect to which such default occurs exceeds 10% of the aggregate number of
Shares to be purchased on such date, and arrangements satisfactory to the
Representative and the Company for the purchase of such Shares are not made
within 48 hours after such default, this Agreement shall terminate without
liability of any party to any other party except that the provisions of Section
4, and Section 7 shall at all times be effective and shall survive such
termination. In any such case either the Representative or the Company shall
have the right to postpone the First Closing Date or the Second Closing Date, as
the case may be, but in no event for longer than seven days in order that the
required changes, if any, to the Registration Statement and the Prospectus or
any other documents or arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be
deemed to include any person substituted for a defaulting Underwriter under this
Section 8. Any action taken under this Section 8 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
Section 9. Termination of this Agreement. Prior to the First Closing
Date, this Agreement may be terminated by the Representative by notice given to
the Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market, or trading in securities generally on either the Nasdaq
Stock Market
25
or the New York Stock Exchange shall have been suspended or limited, or minimum
or maximum prices shall have been generally established on any of such stock
exchanges by the Commission or the National Association of Securities Dealers,
LLC; (ii) a general banking moratorium shall have been declared by any of
federal, New York, Delaware or California authorities; (iii) there shall have
occurred any outbreak or escalation of national or international hostilities or
any crisis or calamity, or any change in the United States or international
financial markets, or any substantial change or development involving a
prospective change in United States' or international political, financial or
economic conditions, as in the judgment of the Representative is material and
adverse and makes it impracticable or inadvisable to market the Shares in the
manner and on the terms described in the Prospectus or to enforce contracts for
the sale of securities; (iv) in the judgment of the Representative there shall
have occurred any Material Adverse Change; or (v) the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as in the judgment of the Representative may interfere
materially with the conduct of the business and operations of the Company
regardless of whether or not such loss shall have been insured. Any termination
pursuant to this Section 9 shall be without liability on the part of (a) the
Company to any Underwriter, except that the Company shall be obligated to
reimburse the expenses of the Representative and the Underwriters pursuant to
Section 5 hereof, (b) any Underwriter to the Company, or (c) of any party hereto
to any other party except that the provisions of Section 7 shall at all times be
effective and shall survive such termination.
Section 10. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder and any termination of this Agreement.
Section 11. Notices. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representative:
[_____________________]
[ADDRESS]
If to the Company:
AMERICAN CAPITAL STRATEGIES, LTD.
0 Xxxxxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxx
26
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 12. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 9 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 7, and to their
respective successors, and personal representatives, and no other person will
have any right or obligation hereunder. The term "successors" shall not include
any purchaser of the Shares as such from any of the Underwriters merely by
reason of such purchase.
Section 13. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
Section 14. Governing Law Provisions.
(a) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction. 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 and County of San Francisco or the
courts of the State of California in each case located in the City and County of
San Francisco (collectively, the "Specified Courts"), and each party 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. 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 suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 00 Xxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000, Xxxxxx Xxxxxx of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
27
Section 15. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Section headings herein are for the convenience of the parties only and
shall not affect the construction or interpretation of this Agreement.
[The remainder of this page has been intentionally left blank.]
28
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
AMERICAN CAPITAL STRATEGIES, LTD.
By:
-------------------------------
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representative as of the date first above written.
[_________________________]
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
By [__________________________________]
By:
--------------------------------
Authorized Signatory
29
SCHEDULE A
Number of
Firm
Shares
Underwriters To be Purchased
[_________________________].......... [___]
[_________________________].......... [___]
[_________________________].......... [___]
[_________________________].......... [___]
[_________________________].......... [___]
[_________________________].......... [___]
[_________________________].......... [___]
Total................................ [___]
S-A
SCHEDULE B
[NO SELLING SHAREHOLDER]
S-B
SCHEDULE C
[TO BE COMPLETED]
S-C
