Exhibit 10.1
DEUTSCHE BANK SECURITIES INC.
BANC OF AMERICA SECURITIES LLC
$150,000,000 AGGREGATE PRINCIPAL AMOUNT
POLYMEDICA CORPORATION
1.00% CONVERTIBLE SUBORDINATED NOTES
DUE SEPTEMBER 15, 2011
PURCHASE AGREEMENT
DATED SEPTEMBER 13, 2006
PURCHASE AGREEMENT
September 13, 2006
DEUTSCHE BANK SECURITIES INC.
BANC OF AMERICA SECURITIES LLC
As Representatives of the several Initial Purchasers
c/o DEUTSCHE BANK SECURITIES INC.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
PolyMedica Corporation, a Massachusetts corporation (the "Company"),
proposes to issue and sell to the several purchasers named in Schedule A (the
"Initial Purchasers") $150,000,000 in aggregate principal amount of its 1.00%
Convertible Subordinated Notes due September 15, 2011 (the "Firm Notes"). In
addition, the Company has granted to the Initial Purchasers an option to
purchase up to an additional $30,000,000 in aggregate principal amount of its
1.00% Convertible Subordinated Notes due September 15, 2011 (the "Optional
Notes" and, together with the Firm Notes, the "Notes"). Deutsche Bank Securities
Inc. ("DBS") and Banc of America Securities LLC ("BAS") have agreed to act as
representatives of the several Initial Purchasers (in such capacity, the
"Representatives") in connection with the offering and sale of the Notes.
The Notes will be convertible on the terms, and subject to the conditions,
set forth in the Indenture (as defined below). As used herein, "Conversion
Shares" means the shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") to be received by the holders of the Notes upon
conversion of the Notes pursuant to the terms of the Notes. In connection with
the offering of the Notes, the Company is entering into a convertible note hedge
and warrant transaction with Deutsche Bank AG and Bank of America pursuant to
confirmation letters dated September 13, 2006, to the form of the 2002 ISDA
Master Agreement (the "Convertible Note Hedge and Warrant Transaction
Documentation").
The Notes will be offered and sold to the Initial Purchasers without being
registered under the Securities Act of 1933, as amended, and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder (the "Securities Act"), in reliance upon an exemption therefrom.
Holders of the Notes (including the Initial Purchasers and their direct
and indirect transferees) will be entitled to the benefits of a Resale
Registration Rights Agreement, dated the Closing Date, between the Company and
the Initial Purchasers (the "Registration Rights Agreement"), pursuant to which
the Company will agree to file or have on file with the Commission a shelf
registration statement pursuant to Rule 415 under the Securities Act (the
"Registration Statement") covering the resale of the Notes and the Conversion
Shares. This Agreement, the Indenture, the Notes, the Registration Rights
Agreement and the Convertible Note Hedge and Warrant Transaction Documentation
are referred to herein collectively as the "Operative Documents."
The Company understands that the Initial Purchasers propose to make an
offering of the Notes on the terms and in the manner set forth herein and in the
Disclosure Package (as defined below), including the Preliminary Offering
Memorandum (as defined below), and the Final Offering Memorandum (as defined
below) and agrees that the Initial Purchasers may resell, subject to the
conditions set forth herein, all or a portion of the Notes to purchasers (the
"Subsequent Purchasers") at any time after the date of this Agreement.
The Company has prepared an offering memorandum, dated the date hereof,
setting forth information concerning the Company, the Notes, the Registration
Rights Agreement and the Common Stock, in form and substance reasonably
satisfactory to the Initial Purchasers. As used in this Agreement, "Offering
Memorandum" means, collectively, the Preliminary Offering Memorandum dated as of
September 12, 2006 (the "Preliminary Offering Memorandum") and the Offering
Memorandum dated the date hereof (the "Final Offering Memorandum"), each as then
amended or supplemented by the Company. As used herein, each of the terms
"Disclosure Package", "Offering Memorandum", "Preliminary Offering Memorandum"
and "Final Offering Memorandum" shall include in each case the documents
incorporated or deemed to be incorporated by reference therein.
The Company hereby confirms its agreements with the Initial Purchasers as
follows:
SECTION 1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
The Company hereby represents, warrants and covenants to each Initial
Purchaser as follows:
(a) No Registration. Assuming the accuracy of the representations and
warranties of the Initial Purchasers contained in Section 6 and their compliance
with the agreements set forth therein, compliance by the Initial Purchasers with
the offering and transfer procedures described in the Disclosure Package and the
Final Offering Memorandum, the accuracy of the representations and warranties
made in accordance with the Disclosure Package and the Final Offering Memorandum
by the investors to whom the Initial Purchasers initially resell the Notes and
receipt by the investors to whom the Initial Purchasers initially resell the
Notes of copies of the Disclosure Package and the Final Offering Memorandum
prior to the effectiveness of such resale, it is not necessary, in connection
with the issuance and sale of the Notes to the Initial Purchasers, the offer,
resale and delivery of the Notes by the Initial Purchasers and the conversion of
the Notes into Conversion Shares, in each case in the manner contemplated by
this Agreement, the Indenture, the Disclosure Package and the Final Offering
Memorandum, to register the Notes or the Conversion Shares under the Securities
Act or to qualify the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
(b) No Integration. None of the Company or any of its subsidiaries has,
directly or through any agent, sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any "security" (as defined in the
Securities Act) that is or will be integrated with the sale of the Notes or the
Conversion Shares in a manner that would require registration under the
Securities Act of the Notes or the Conversion Shares.
(c) Rule 144A. No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Notes are listed on any national
securities exchange registered under Section 6 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or quoted on an automated inter-dealer
quotation system.
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(d) Exclusive Agreement. The Company has not paid or agreed to pay to any
person any compensation for soliciting another person to purchase any securities
of the Company (except as contemplated in this Agreement).
(e) Offering Memoranda. The Company hereby confirms that it has authorized
the use of the Disclosure Package, including the Preliminary Offering
Memorandum, and the Final Offering Memorandum in connection with the offer and
sale of the Notes by the Initial Purchasers. Each document, if any, filed or to
be filed pursuant to the Exchange Act and incorporated by reference in the
Disclosure Package or the Final Offering Memorandum complied or will comply when
it is filed in all material respects with the Exchange Act and the rules and
regulations of the Commission thereunder. The Preliminary Offering Memorandum,
at the date thereof, did not contain any untrue statement of a material fact or
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. At
the date of this Agreement, the Closing Date and on any Subsequent Closing Date,
the Final Offering Memorandum did not and will not (and any amendment or
supplement thereto, at the date thereof, at the Closing Date and on any
Subsequent Closing Date, will not) contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that the Company makes no representation or
warranty as to information contained in or omitted from the Preliminary Offering
Memorandum or the Final Offering Memorandum, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company by or on the behalf of the Initial Purchasers specifically for
inclusion therein, it being understood and agreed that the only such information
furnished by or on the behalf of the Initial Purchasers consists of the
information described as such in Section 8 hereof.
(f) Disclosure Package. The term "Disclosure Package" shall mean (i) the
Preliminary Offering Memorandum, as amended or supplemented at the Applicable
Time, (ii) the Final Term Sheet (as defined herein) and (iii) any other writings
that the parties expressly agree in writing to treat as part of the Disclosure
Package ("Issuer Written Information"). The Disclosure Package as of 8:00 pm
(Eastern time) on the date hereof (the "Applicable Time") did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The preceding sentence does not apply to
statements in or omissions from the Disclosure Package in reliance upon and in
conformity with written information furnished to the Company by any Initial
Purchaser through the Representatives specifically for use therein, it being
understood and agreed that the only such information furnished by or on behalf
of any Underwriter consists of the information described as such in Section 8
hereof.
(g) Statements in Offering Memorandum. The statements in the Disclosure
Package and the Final Offering Memorandum under the headings "Material U.S.
Federal Income Tax Considerations", "Risk Factors -- We are subject to a
corporate integrity agreement" and "Risk Factors -- We are currently involved in
litigation and could experience reduced net income if this litigation is not
resolved in our favor"; the statements in the Disclosure Package and the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2006
under the headings "Business -- Government Regulation and Reimbursement",
"Business -- State Pharmacy Regulation", "Business -- Other Regulation",
"Business -- Compliance and Regulatory Affairs Department", "Factors Affecting
Future Operating Results -- We are subject to a corporate integrity agreement",
"Legal Proceedings" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources --
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Commitments -- Contingencies -- Class Action Lawsuit"; and the statements in the
Disclosure Package and the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 2006 under the headings "Other Information -- Risk Factors
-- We are subject to a corporate integrity agreement" and "Other Information --
Risk Factors -- We are currently involved in litigation and could experience
reduced net income if this litigation is not resolved in our favor", insofar as
such statements summarize legal matters, agreements, documents or proceedings
discussed therein, are accurate and fair summaries of such legal matters,
agreements, documents or proceedings.
(h) Offering Materials Furnished to Initial Purchasers. The Company has
delivered to the Representatives copies of the materials contained in the
Disclosure Package and the Final Offering Memorandum, each as amended or
supplemented, in such quantities and at such places as the Representatives have
reasonably requested for each of the Initial Purchasers.
(i) Authorization of the Purchase Agreement. The execution, delivery and
performance of this Agreement by the Company have been duly authorized by the
Company. This Agreement has been duly and validly executed and delivered by the
Company.
(j) Authorization of the Indenture. The execution, delivery and
performance of the Indenture by the Company have been duly authorized by the
Company and, upon the effectiveness of the Registration Statement, will be
qualified under the Trust Indenture Act; on the Closing Date, the Indenture will
have been duly and validly executed and delivered by the Company and, assuming
due authorization, execution and delivery thereof by the Trustee, will
constitute a legally valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles; and the Indenture
conforms in all material respects to the description thereof contained in the
Disclosure Package and the Final Offering Memorandum.
(k) Authorization of the Notes. The execution, delivery and performance of
the Notes by the Company have been duly authorized by the Company; when the
Notes are executed, authenticated and issued in accordance with the terms of the
Indenture and delivered to and paid for by the Initial Purchasers pursuant to
this Agreement on the Closing Date or any Subsequent Closing Date, as the case
may be (assuming due authentication of the Notes by the Trustee), such Notes
will constitute legally valid and binding obligations of the Company, entitled
to the benefits of the Indenture and enforceable against the Company in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles; and the Notes will conform in all material
respects to the description thereof contained in the Disclosure Package and the
Final Offering Memorandum.
(l) Authorization of the Conversion Shares. The Notes to be delivered on
the Closing Date or on any Subsequent Closing Date are convertible into the
Conversion Shares in accordance with the Indenture. The Conversion Shares have
been duly authorized and reserved and, when issued upon conversion of the Notes
in accordance with the terms of the Notes, will be validly issued, fully paid
and non-assessable, and the issuance of such shares will not be subject to any
preemptive or similar rights.
(m) Authorization of the Registration Rights Agreement. The execution,
delivery and performance of the Registration Rights Agreement by the Company
have been duly authorized.
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On the Closing Date, the Registration Rights Agreement will have been duly and
validly executed and delivered by the Company.
(n) Authorization of the Convertible Note Hedge and Warrant Transaction
Documentation. The execution, delivery and performance of the Convertible Note
Hedge and Warrant Transaction Documentation by the Company have been duly
authorized. The Convertible Note Hedge and Warrant Transaction Documentation has
been duly and validly executed and delivered by the Company.
(o) No Material Adverse Change. Except as otherwise disclosed in the
Disclosure Package and the Final Offering Memorandum (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
subsequent to the date of the most recent financial statements included or
incorporated by reference in the Disclosure Package: (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, properties, 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 (a "Material Adverse Change");
(ii) the Company and its subsidiaries, considered as one entity, have not
incurred any material liability or obligation, indirect, direct or contingent,
nor entered into any material transaction or agreement that would need to be
publicly disclosed or filed as an exhibit pursuant to the Exchange Act; 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.
(p) Independent Accountants. PricewaterhouseCoopers LLP, who have
expressed their opinion with respect to certain audited consolidated financial
statements (which term as used in this Agreement includes the related notes
thereto) and supporting schedule included in the Disclosure Package and the
Final Offering Memorandum, are independent registered public accountants with
respect to the Company as required by the Securities Act and the Exchange Act
and the applicable published rules and regulations thereunder.
(q) Preparation of the Financial Statements. The financial statements
included in the Disclosure Package and the Final Offering Memorandum present
fairly the consolidated financial position of the Company and its consolidated
subsidiaries as of and at the dates indicated and the results of their
operations and cash flows for the periods specified. Such financial statements
comply as to form with the applicable accounting requirements of Regulation S-X
and 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. The financial data set
forth in the Disclosure Package and the Final Offering Memorandum under the
captions "Summary -- Summary Consolidated Financial Data", "Capitalization" and
"Ratio of Earnings to Fixed Charges" and the financial data set forth in the
Disclosure Package and the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2006 under the heading "Selected Consolidated Financial
Data" fairly present the information set forth therein on a basis consistent
with that of the audited financial statements contained in the Disclosure
Package and the Final Offering Memorandum. The Company's ratios of earnings to
fixed charges set forth in the Disclosure Package and the Final Offering
Memorandum have been calculated in compliance with Item 503(d) of Regulation S-K
under the Securities Act.
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(r) Incorporation and Good Standing of the Company and its Subsidiaries.
Each of the Company and its subsidiaries has been duly incorporated or formed,
as the case may be, and is validly existing as a corporation or limited
liability company, as the case may be, in good standing under the laws of the
jurisdiction of its incorporation or formation, as the case may be, and has
corporate or limited liability, as the case may be, power and authority to own
or lease, as the case may be, and operate its properties and to conduct its
business as described in the Disclosure Package and the Final Offering
Memorandum and, in the case of the Company, to enter into and perform its
obligations under this Agreement. Each of the Company and each subsidiary is
duly qualified as a foreign corporation or limited liability company, as the
case may be, to transact business and is in good standing in each jurisdiction
in which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except for such jurisdictions
where the failure to so qualify or to be in good standing would not,
individually or in the aggregate, reasonably be expected to result in a material
adverse effect on the condition, financial or otherwise, or on the earnings,
business, properties, 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 (a "Material Adverse Effect"). All of the
issued and outstanding shares of capital stock or membership interests, as the
case may be, of each subsidiary have been duly authorized and validly issued,
are fully paid and nonassessable and are owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance or claim, except for (i) any security interest, claim, lien or
encumbrance created by or under, or relating to, that certain credit agreement,
dated as of April 12, 2005, among the Company, the lenders from time to time
parties thereto and Bank of America, N.A., as administrative agent, as
supplemented, amended and modified by the Credit Agreement Supplement and
Amendment, dated as of May 24, 2005, Amendment and Limited Waiver No. 2, dated
as of November 18, 2005, the Consent, dated as of February 8, 2006, the Credit
Agreement Supplement and Amendment No. 3, dated as of March 30, 2006, and the
Consent and Amendment No. 4, dated as of September 12, 2006 (collectively, the
"Credit Agreement"), including any notes, collateral documents, letters of
credit and documentation and guarantees and any appendices, exhibits, schedules
to any of the preceding and (ii) any liens with respect to the payment of taxes,
assessments or governmental charges in each case that are not yet due or that
are being contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being maintained to
the extent required by generally accepted accounting principles. The Company
does not own or control, directly or indirectly, any corporation, association or
other entity other than the subsidiaries listed in Exhibit 21.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 2006 (excluding
those subsidiaries that may be omitted from such list pursuant to Form 10-K).
(s) Capitalization and Other Capital Stock Matters. The authorized, issued
and outstanding capital stock of the Company is as set forth in the Disclosure
Package and the Final Offering Memorandum under the caption "Capitalization"
(other than for subsequent issuances, if any, pursuant to employee benefit plans
described in the Disclosure Package and the Final Offering Memorandum or upon
exercise of outstanding options or warrants described in the Disclosure Package
and the Final Offering Memorandum, as the case may be). The Common Stock
(including the Conversion Shares) conforms in all material respects to the
description thereof contained in the Disclosure Package and the Final Offering
Memorandum. All of the issued and outstanding shares of Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable and have
been issued in compliance with federal and state securities laws. None of the
outstanding shares of Common Stock were 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
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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 described in
the Disclosure Package and the Final Offering Memorandum. 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 Disclosure
Package and the Final Offering Memorandum accurately and fairly presents and
summarizes such plans, arrangements, options and rights.
(t) Non-Contravention of Existing Instruments; No Further Authorizations
or Approvals Required. Neither the Company nor any of its subsidiaries (i) is in
violation of its charter, by-laws or other organizational documents, (ii) is
(or, with the giving of notice or lapse of time, would be) in default
("Default") under any indenture, mortgage, loan or credit agreement, note,
contract, franchise, lease or other instrument to which the Company or any of
its subsidiaries is a party or by which it or any of them may be bound
(including, without limitation, the Credit Agreement) or to which any of the
property or assets of the Company or any of its subsidiaries is subject (each,
an "Existing Instrument"), or (iii) is in violation of 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 with respect to clauses (ii) and (iii) above only, for such
Defaults as would not, individually or in the aggregate, have a Material Adverse
Effect.
The Company's execution, delivery and performance of the Operative
Documents and consummation of the transactions contemplated thereby (i) have
been duly authorized by all necessary corporate action and will not result in
any violation of the charter, by-laws or other organizational documents of the
Company or any subsidiary, (ii) will not conflict with or constitute a breach
of, or Default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, or require the consent of any other party to, any
Existing Instrument and (iii) will not result in any violation of 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, except
with respect to clause (ii) above only, for such Defaults as would not,
individually or in the aggregate, have a Material Adverse Effect.
No consent, approval, authorization or other order of, or registration or
filing with, any court or other governmental or regulatory authority or agency
is required for the Company's execution, delivery and performance of the
Operative Documents and consummation of the transactions contemplated thereby,
except (i) with respect to the transactions contemplated by the Registration
Rights Agreement, as may be required under the federal and state securities
laws, the Trust Indenture Act and the rules and regulations promulgated
thereunder and (ii) such as have been obtained or made by the Company and are in
full force and effect.
(u) No Stamp or Transfer Taxes. There are no stamp or other issuance or
transfer taxes or duties or other similar fees or charges required to be paid in
connection with the execution and delivery of this Agreement or the issuance or
sale by the Company of the Notes or upon the issuance of Common Stock upon the
conversion thereof.
(v) No Material Actions or Proceedings. Except as otherwise disclosed in
the Disclosure Package and the Final Offering Memorandum, there are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened (i) against or
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affecting the Company or any of its subsidiaries, (ii) which has as the subject
thereof any officer or director of, or property owned or leased by, the Company
or any of its subsidiaries or (iii) relating to environmental or discrimination
matters, where in any such case (A) there is a reasonable possibility that such
action, suit or proceeding might be determined adversely to the Company or such
subsidiary and (B) any such action, suit or proceeding, if so determined
adversely, would reasonably be expected to have a Material Adverse Effect or
adversely affect the consummation of the transactions contemplated by this
Agreement.
(w) Labor Matters. No labor problem or dispute with the employees of the
Company or any of its subsidiaries exists or, to the best of the Company's
knowledge, is threatened or imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its or its
subsidiaries' principal suppliers, contractors or customers, that could have a
Material Adverse Effect.
(x) Intellectual Property Rights. The Company and its subsidiaries own,
possess, license or have other rights to use, on reasonable terms, all patents,
patent applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets,
technology, know-how and other intellectual property (collectively, the
"Intellectual Property") necessary for the conduct of the Company's business as
now conducted or as proposed in the Disclosure Package and the Final Offering
Memorandum to be conducted, except where the failure to so own, possess, license
or have other rights to use the Intellectual Property would not reasonably be
expected to have a Material Adverse Effect. Except as set forth in the
Disclosure Package and the Final Offering Memorandum, (a) no party has been
granted an exclusive license to use any portion of such Intellectual Property
owned by the Company; (b) there is no material infringement by third parties of
any such Intellectual Property owned by or exclusively licensed to the Company;
(c) there is no pending or, to the best of the Company's knowledge, threatened
action, suit, proceeding or claim by others challenging the Company's rights in
or to any material Intellectual Property, and the Company is unaware of any
facts which would form a reasonable basis for any such claim; (d) there is no
pending or, to the best of the Company's knowledge, threatened action, suit,
proceeding or claim by others challenging the validity or scope of any such
Intellectual Property, and the Company is unaware of any facts which would form
a reasonable basis for any such claim; and (e) there is no pending or, to the
best of the Company's knowledge, threatened action, suit, proceeding or claim by
others that the Company's business as now conducted infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
rights of others, and the Company is unaware of any other fact which would form
a reasonable basis for any such claim.
(y) All Necessary Permits, etc. The Company and each subsidiary possess
such valid and current licenses, certificates, authorizations or permits issued
by the appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct their respective businesses as now operated by them, 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 have a Material
Adverse Effect.
(z) 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 included in the Disclosure Package and the Final Offering
Memorandum, in each case free and clear of any security interests, mortgages,
liens, encumbrances, equities, claims and other defects, except for (i) any
security interest, mortgage, lien or encumbrance created by or under, or
relating to, the Credit Agreement, including any notes, collateral documents,
letters of credit and
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documentation and guarantees and any appendices, exhibits, schedules to any of
the preceding, (ii) any liens with respect to the payment of taxes, assessments
or governmental charges in each case that are not yet due or that are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained to the
extent required by generally accepted accounting principles and (iii) such as do
not, singly or in the aggregate, materially and adversely affect the value of
such property and do not, singly or in the aggregate, 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, singly
or in the aggregate, 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.
(aa) Tax Law Compliance. The Company and its consolidated subsidiaries
have filed all necessary federal, state, local and foreign income and franchise
tax returns in a timely manner (except in any case in which the failure to so
file would not have a Material Adverse Effect) and have paid or made adequate
reserves for 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, except for any taxes, assessments, fines or penalties as may be being
contested in good faith and by appropriate proceedings, or as would not have a
Material Adverse Effect. The Company has made appropriate provisions in the
financial statements included in the Disclosure Package and the Final Offering
Memorandum in respect of all federal, state and foreign income and franchise
taxes for all current or prior periods as to which the tax liability of the
Company or any of its consolidated subsidiaries has not been finally determined.
(bb) Company Not an "Investment Company". The Company is not, and, after
receipt of payment for the Notes and application of the proceeds as described
under "Use of Proceeds" in the Disclosure Package and the Final Offering
Memorandum will not be, required to register as an "investment company" within
the meaning of the Investment Company Act of 1940, as amended (the "Investment
Company Act") and will conduct its business in a manner so that it will not
become subject to the Investment Company Act.
(cc) Compliance with Reporting Requirements. The Company is subject to and
in full compliance with the reporting requirements of Section 13 or Section
15(d) of the Exchange Act.
(dd) Insurance. Each of the Company and its subsidiaries are insured by
recognized and, to the best of Company's knowledge, 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 the
businesses in which they are currently engaged 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 terrorism or
vandalism and earthquakes. All policies of insurance insuring the Company or any
of its subsidiaries or their respective material existing businesses, assets,
employees, officers and directors are in full force and effect; the Company and
its subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and there are no material claims by the
Company or any of its subsidiaries under any such policy or instrument as to
which any insurance company is denying liability or defending under a
reservation of rights clause; and neither the Company nor, to the best of
Company's knowledge (with such knowledge qualification applying only to those
subsidiaries that the Company has acquired since April 1, 2005), any such
subsidiary has been refused any insurance coverage sought or applied for since
April 1, 2005. The Company has no reason to believe that it or any subsidiary
will not be able (i) to renew its existing insurance
9
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 have a Material Adverse
Effect.
(ee) No Restriction on 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 Disclosure Package and the Final Offering Memorandum.
(ff) 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 any security of the Company to facilitate the sale or resale of the
Notes. The Company acknowledges that the Initial Purchasers may engage in
passive market making transactions in the Common Stock on The Nasdaq Global
Select Market in accordance with Regulation M under the Exchange Act.
(gg) Related Party Transactions. There are no material business
relationships or related party transactions involving the Company or any
subsidiary or any other person that have not been described in the Disclosure
Package or the Final Offering Memorandum.
(hh) No General Solicitation. None of the Company or any of its affiliates
(as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation
D")), has, directly or through an agent (provided that the Company makes no
representation with respect to the actions of the Initial Purchasers or any of
their affiliates), engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D) in connection with the
offering of the Notes or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act in connection with the offering of
the Notes; the Company has not entered into any contractual arrangement with
respect to the distribution of the Notes or the Conversion Shares except for
this Agreement, and the Company will not enter into any such arrangement except
for the Registration Rights Agreement and as may be contemplated thereby.
(ii) FSA Price Stabilizing Rules. To the extent that information is
required to be publicly disclosed under the U.K. Financial Services Authority's
Price Stabilizing Rules (the "Stabilizing Rules") before stabilizing
transactions can be undertaken in compliance with the safe harbor provided under
such Stabilizing Rules, such information has been adequately publicly disclosed
(within the meaning of the Stabilizing Rules).
(jj) No Unlawful Contributions or Other Payments. Neither the Company nor
any of its subsidiaries nor, to the knowledge of the Company, any director,
officer, agent, employee or affiliate of the Company or any of its subsidiaries
is aware of or has taken any action, directly or indirectly, that would result
in a violation by such persons of the FCPA, including, without limitation,
making use of the mails or any means or instrumentality of interstate commerce
corruptly in furtherance of an offer, payment, promise to pay or authorization
of the payment of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any "foreign official" (as
such term is defined in the FCPA) or any foreign political party or official
thereof or any candidate for foreign political office, in contravention of the
FCPA and the Company, its subsidiaries and, to the knowledge of the Company, its
affiliates have conducted their businesses in compliance with the FCPA and have
instituted and maintain policies and
10
procedures designed to ensure, and which are reasonably expected to continue to
ensure, continued compliance therewith.
"FCPA" means Foreign Corrupt Practices Act of 1977, as amended, and the
rules and regulations thereunder.
(kk) No Conflict with Money Laundering Laws. The operations of the Company
and its subsidiaries are and have been conducted at all times in compliance with
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended and, to the best of
the Company's knowledge, the money laundering statutes of all applicable
jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines issued, administered or enforced by any
governmental agency (collectively, the "Money Laundering Laws") and 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 with
respect to the Money Laundering Laws is pending or, to the best of the Company's
knowledge, threatened.
(ll) No Conflict with OFAC Laws. Neither the Company nor any of its
subsidiaries nor, to the knowledge of the Company, any director, officer, agent,
employee or affiliate of the Company or any of its subsidiaries is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department ("OFAC"); and the Company will not
directly or indirectly use the proceeds of the offering, or lend, contribute or
otherwise make available such proceeds to any subsidiary, joint venture partner
or other person or entity, for the purpose of financing the activities of any
person currently subject to any U.S. sanctions administered by OFAC.
(mm) Compliance with Environmental Laws. Except as otherwise disclosed in
the Disclosure Package and the Final Offering Memorandum, (i) neither the
Company nor any of its subsidiaries is in violation of any federal, state, local
or foreign law, regulation, order, permit or other requirement relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or wildlife, including without limitation, laws and regulations relating
to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum and petroleum products (collectively, "Materials of Environmental
Concern"), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Materials of
Environmental Concern (collectively, "Environmental Laws"), which violation
includes, but is not limited to, noncompliance with any permits or other
governmental authorizations required for the current operation of the business
of the Company or its subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or any
of its subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges that
the Company or any of its subsidiaries is in violation of any Environmental Law,
except as would not, individually or in the aggregate, have a Material Adverse
Effect; (ii) there is no claim, action or cause of action filed with a court or
governmental authority, no investigation with respect to which the Company has
received written notice, and no written notice by any person or entity alleging
potential liability for investigatory costs, cleanup costs, governmental
responses costs, natural resources damages, property damages, personal injuries,
attorneys' fees or penalties arising out of, based on or resulting from the
presence, or release into the environment, of any Material of Environmental
Concern at any location owned, leased or operated by the Company or any of its
subsidiaries, now or in the past (collectively, "Environmental Claims"), pending
or, to the best of the
11
Company's knowledge, threatened against the Company or any of its subsidiaries
or any person or entity whose liability for any Environmental Claim the Company
or any of its subsidiaries has retained or assumed either contractually or by
operation of law, except as would not, individually or in the aggregate, have a
Material Adverse Effect; (iii) to the best of the Company's knowledge, there are
no past, present or anticipated future actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Material of Environmental
Concern, that reasonably could result in a violation of any Environmental Law,
require expenditures to be incurred pursuant to Environmental Law, or form the
basis of a potential Environmental Claim against the Company or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has retained or
assumed either contractually or by operation of law, except as would not,
individually or in the aggregate, have a Material Adverse Effect; and (iv)
neither the Company nor any of its subsidiaries is subject to any pending or, to
the best of the Company's knowledge, threatened proceeding under any
Environmental Law to which a governmental authority is a party and which is
reasonably likely to result in monetary sanctions of $100,000 or more.
(nn) Periodic Review of Costs of Environmental Compliance. In the ordinary
course of its business, the Company conducts a periodic review of the effect of
Environmental Laws on the business, operations and properties of the Company and
its subsidiaries, in the course of which it identifies and evaluates associated
costs and liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties). On the
basis of such review and the amount of its established reserves, the Company has
reasonably concluded that such associated costs and liabilities would not,
individually or in the aggregate, have a Material Adverse Effect.
(oo) ERISA Compliance. None of the following events has occurred or
exists: (i) a failure to fulfill the obligations, if any, under the minimum
funding standards of Section 302 of the United States Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the regulations and published
interpretations thereunder with respect to a Plan, determined without regard to
any waiver of such obligations or extension of any amortization period; (ii) an
audit or investigation by the Internal Revenue Service, the U.S. Department of
Labor, the Pension Benefit Guaranty Corporation or any other federal or state
governmental agency or any foreign regulatory agency with respect to the
employment or compensation of employees by any member of the Company that could
have a Material Adverse Effect on the Company; (iii) any breach of any
contractual obligation, or any violation of law or applicable qualification
standards, with respect to the employment or compensation of employees by any
member of the Company that could have a Material Adverse Effect. None of the
following events has occurred or, to the best of the Company's knowledge, is
reasonably likely to occur: (i) a material increase in the aggregate amount of
contributions required to be made to all Plans in the current fiscal year of the
Company compared to the amount of such contributions made in the Company's most
recently completed fiscal year; (ii) a material increase in the Company's
"accumulated post-retirement benefit obligations" (within the meaning of
Statement of Financial Accounting Standards 106) compared to the amount of such
obligations in the Company's most recently completed fiscal year; (iii) any
event or condition giving rise to a liability under Title IV of ERISA that could
have a Material Adverse Effect on the Company; or (iv) the filing of a claim by
one or more employees or former employees of the Company related to their
employment that could have a Material Adverse Effect on the Company. For
purposes of this paragraph, the term "Plan" means a plan
12
(within the meaning of Section 3(3) of ERISA) subject to Title IV of ERISA with
respect to which any member of the Company may have any liability.
(pp) Brokers. There is no broker, finder or other party that is entitled
to receive from the Company any brokerage or finder's fee or other fee or
commission as a result of any transactions contemplated by this Agreement.
(qq) Xxxxxxxx-Xxxxx Compliance. There is and has been no failure on the
part of the Company and any of the Company's directors or officers, in their
capacities as such, to comply in all material respects with the applicable
provisions of the Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations
promulgated in connection therewith (the "Xxxxxxxx-Xxxxx Act"), including
Section 402 related to loans and Sections 302 and 906 related to certifications.
(rr) Internal Controls and Procedures. The Company maintains (i) effective
internal control over financial reporting as defined in Rule 13a-15 under the
Exchange Act, and (ii) a system of internal accounting controls sufficient to
provide reasonable assurance that (A) transactions are executed in accordance
with management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(ss) No Material Weakness in Internal Controls. Since the end of the
Company's most recent audited fiscal year, there has been no change in the
Company's internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
(tt) Disclosure Controls. The Company and its subsidiaries maintain an
effective system of "disclosure controls and procedures" (as defined in Rule
13a-15 of the Exchange Act) that is designed to ensure that information required
to be disclosed by the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission's rules and forms, including controls and
procedures designed to ensure that such information is accumulated and
communicated to the Company's management as appropriate to allow timely
decisions regarding required disclosure. The Company and its subsidiaries have
carried out evaluations of the effectiveness of their disclosure controls and
procedures as required by Rule 13a-15 of the Exchange Act.
(uu) Subsidiaries. The subsidiaries listed on Annex A attached hereto are
the only significant subsidiaries of the Company as defined by Rule 1-02(w) of
Regulation S-X (the "Subsidiaries").
Any certificate signed by an officer of the Company and delivered to the
Representatives or to counsel for the Initial Purchasers shall be deemed to be a
representation and warranty by the Company to each Initial Purchaser as to the
matters set forth therein.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE NOTES
(a) The Firm Notes. The Company agrees to issue and sell to the several
Initial Purchasers the Firm Notes upon the terms herein set forth. On the basis
of the representations,
13
warranties and agreements herein contained, and upon the terms but subject to
the conditions herein set forth, the Initial Purchasers agree, severally and not
jointly, to purchase from the Company the respective principal amount of Firm
Notes set forth opposite their names on Schedule A at a purchase price of 97% of
the aggregate principal amount thereof.
(b) The Closing Date. Delivery of the Firm Notes to be purchased by the
Initial Purchasers and payment therefor shall be made at the offices of Xxxxxx
Xxxxxxxx Xxxxx & Xxxxxxxx LLP, Xxx Xxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or
such other place as may be agreed to by the Company and the Representatives) at
9:00 a.m. New York City time, on September 19, 2006, or such other time and date
not later than October 3, 2006 as the Representatives shall designate by notice
to the Company (the time and date of such closing are called the "Closing
Date").
(c) The Optional Notes; any Subsequent 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 Initial Purchasers to purchase, severally
and not jointly, up to $30,000,000 aggregate principal amount of Optional Notes
from the Company at the same price as the purchase price to be paid by the
Initial Purchasers for the Firm Notes. The option granted hereunder may be
exercised only to cover over-allotments in the sale of the Firm Notes by the
Initial Purchasers. The option granted hereunder may be exercised at any time
and from time to time upon notice by the Representatives to the Company, which
notice may be given at any time within 30 days from the date of this Agreement.
Such notice shall set forth (i) the amount (which shall be an integral multiple
of $1,000 in aggregate principal amount) of Optional Notes as to which the
Initial Purchasers are exercising the option, (ii) the names and denominations
in which the Optional Notes are to be registered and (iii) the time, date and
place at which such Notes will be delivered (which time and date may be
simultaneous with, but not earlier than, the Closing Date; and in such case the
term "Closing Date" shall refer to the time and date of delivery of the Firm
Notes and the Optional Notes). Such time and date of delivery, if subsequent to
the Closing Date, is called a "Subsequent Closing Date" and shall be determined
by the Representatives. Such date may be the same as the Closing Date but not
earlier than the Closing Date nor later than 10 business days after the date of
such notice. If any Optional Notes are to be purchased, each Initial Purchaser
agrees, severally and not jointly, to purchase the principal amount of Optional
Notes (subject to such adjustments to eliminate fractional amount as the
Representatives may determine) that bears the same proportion to the total
principal amount of Optional Notes to be purchased as the principal amount of
Firm Notes set forth on Schedule A opposite the name of such Initial Purchaser
bears to the total principal amount of Firm Notes.
(d) Payment for the Notes. Payment for the Notes shall be made on the
Closing Date (and, if applicable, on any Subsequent Closing Date) by wire
transfer of immediately available funds to the order of the Company.
It is understood that the Representatives have been authorized, for their
own account and the accounts of the several Initial Purchasers, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Notes and any Optional Notes the Initial Purchasers have agreed to
purchase. DBS or BAS, individually and not as the Representative of the Initial
Purchasers, may (but shall not be obligated to) make payment for any Notes to be
purchased by any Initial Purchaser whose funds shall not have been received by
the Representatives by the Closing Date or any Subsequent Closing Date, as the
case may be, for the account of such Initial Purchaser, but any such payment
shall not relieve such Initial Purchaser from any of its obligations under this
Agreement.
14
(e) Delivery of the Notes. The Company shall deliver, or cause to be
delivered, to the Representatives for the accounts of the several Initial
Purchasers the Firm Notes at the 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, to the
Representatives for the accounts of the several Initial Purchasers, the Optional
Notes the Initial Purchasers have agreed to purchase at the Closing Date or any
Subsequent Closing Date, as the case may be, against the irrevocable release of
a wire transfer of immediately available funds for the amount of the purchase
price therefor. Delivery of the Notes shall be made through the facilities of
The Depository Trust Company unless the Representatives shall otherwise
instruct. 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
Initial Purchasers.
SECTION 3. COVENANTS OF THE COMPANY
The Company covenants and agrees with each Initial Purchaser as follows:
(a) Representatives' Review of Proposed Amendments and Supplements. During
such period beginning on the date hereof and ending on the date of the
completion of the resale of the Notes by the Initial Purchasers (as notified by
the Initial Purchasers to the Company), prior to amending or supplementing the
Disclosure Package or the Final Offering Memorandum, the Company shall furnish
to the Representatives for review a copy of each such proposed amendment or
supplement, and the Company shall not print, use or distribute such proposed
amendment or supplement to which the Representatives reasonably object.
(b) Amendments and Supplements to the Offering Memorandum and Other
Securities Act Matters. If, at any time prior to the completion of the resale of
the Notes by the Initial Purchasers (as notified by the Initial Purchasers to
the Company), any event or development shall occur or condition exist as a
result of which it is necessary to amend or supplement the Disclosure Package or
the Final Offering Memorandum in order that the Disclosure Package or the Final
Offering Memorandum will not include an untrue statement of a material fact or
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 or then prevailing,
as the case may be, not misleading, or if in the reasonable opinion of the
Representatives or counsel for the Initial Purchasers it is otherwise necessary
to amend or supplement the Disclosure Package or the Final Offering Memorandum
to comply with applicable law, the Company shall promptly notify the Initial
Purchasers and prepare, subject to Section 3(a) hereof, such amendment or
supplement as may be necessary to correct such untrue statement or omission.
(c) Copies of Disclosure Package and the Offering Memorandum. The Company
agrees to furnish to the Representatives, without charge, until the earlier of
(i) six months after the completion of the sale of the Notes to the Initial
Purchasers and (ii) the date of the effectiveness of the Registration Statement
as many copies of the materials contained in the Disclosure Package and the
Final Offering Memorandum and any amendments and supplements thereto as the
Representatives may request.
(d) Blue Sky Compliance. The Company shall cooperate with the
Representatives and counsel for the Initial Purchasers, as the Initial
Purchasers may reasonably request from time to time, to qualify or register the
Notes for sale under (or obtain exemptions from the application of) the state
securities or blue sky laws or Canadian provincial securities laws or other
foreign laws of those jurisdictions designated by the Representatives, shall
comply with such laws and shall continue such qualifications, registrations and
exemptions in effect so long as required for the
15
distribution of the Notes. The Company shall not be required to qualify as a
foreign corporation or to take any action that would subject it to general
service of process in any such jurisdiction where it is not presently qualified
or where it would be subject to taxation as a foreign corporation. The Company
will advise the Representatives promptly of the suspension of the qualification
or registration of (or any such exemption relating to) the Notes for offering,
sale or trading in any jurisdiction or any initiation or threat of any
proceeding for any such purpose, and in the event of the issuance of any order
suspending such qualification, registration or exemption, the Company shall use
its best efforts to obtain the withdrawal thereof at the earliest possible
moment.
(e) Rule 144A Information. For so long as any of the Notes are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act, the
Company shall provide to any holder of the Notes or to any prospective purchaser
of the Notes designated by any holder, upon request of such holder or
prospective purchaser, information required to be provided by Rule 144A(d)(4) of
the Securities Act if, at the time of such request, the Company is not subject
to the reporting requirements under Section 13 or 15(d) of the Exchange Act.
(f) Compliance with Securities Law. The Company will comply with all
applicable securities and other laws, rules and regulations, including, without
limitation, the Xxxxxxxx-Xxxxx Act.
(g) Legends. Each of the Notes will bear, to the extent applicable, the
legend contained in "Notice to Investors" in the Disclosure Package and the
Final Offering Memorandum for the time period and upon the other terms stated
therein.
(h) Written Information Concerning the Offering. Without the prior written
consent of the Representatives, the Company will not give to any prospective
purchaser of the Notes any written information concerning the offering of the
Notes other than the Disclosure Package, the Final Offering Memorandum or any
other offering materials prepared by or with the prior consent of the
Representatives.
(i) No General Solicitation. Except following the effectiveness of the
Registration Statement, the Company will not, and will cause its subsidiaries
not to, solicit any offer to buy or offer to sell the Notes by means of any form
of general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.
(j) No Integration. The Company will not, and will cause its subsidiaries
not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any "security" (as defined in the Securities Act) in a transaction
that could be integrated with the sale of the Notes in a manner that would
require the registration under the Securities Act of the Notes.
(k) Information to Publishers. Any information provided by the Company to
publishers of publicly available databases about the terms of the Notes shall
include a statement that the Notes have not been registered under the Act and
are subject to restrictions under Rule 144A of the Act.
(l) DTC. The Company will cooperate with the Representatives and use its
best efforts to permit the Notes to be eligible for clearance and settlement
through The Depository Trust Company.
16
(m) Rule 144 Tolling. During the period of two years after the last
Closing Date, the Company will not, and will not permit any of its "affiliates"
(as defined in Rule 144 under the Securities Act) to, resell any of the Notes
which constitute "restricted securities" under Rule 144 that have been
reacquired by any of them.
(n) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Notes sold by it in the manner described under the caption "Use of
Proceeds" in the Disclosure Package and the Final Offering Memorandum.
(o) Transfer Agent. The Company shall engage and maintain, at its expense,
a registrar and transfer agent for the Common Stock.
(p) Available Conversion Shares. The Company will reserve and keep
available at all times, free of preemptive rights, the full number of Conversion
Shares.
(q) Conversion Price. Between the date hereof and the Closing Date, the
Company will not do or authorize any act or thing that would result in an
adjustment of the conversion price.
(r) Company to Provide Interim Financial Statements and Other Information.
Prior to the Closing Date, the Company will furnish the Initial Purchasers, as
soon as they have been prepared by or are available to the Company, a copy of
any unaudited interim financial statements of the Company for any period
subsequent to the period covered by the most recent financial statements
appearing in the Disclosure Package and the Final Offering Memorandum.
(s) Agreement Not to Offer or Sell Additional Securities. During the
period commencing on the date hereof and ending on the 90th day following the
date of the Final Offering Memorandum, the Company will not, without the prior
written consent of the Representatives (which consent may be withheld at the
sole discretion of the Representatives), directly or indirectly, sell, offer,
contract or grant any option to sell, pledge, transfer or establish an open "put
equivalent position" or liquidate or decrease a "call equivalent position"
within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose
of or transfer (or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition of), or announce the
offering of, or file any registration statement under the Securities Act in
respect of, any shares of Common Stock, options or warrants to acquire shares of
the Common Stock or securities exchangeable or exercisable for or convertible
into shares of Common Stock; provided, however, that the Company may issue
shares of its Common Stock or options to purchase its Common Stock, or Common
Stock upon exercise of options, pursuant to any stock option, stock bonus or
other stock plan or arrangement described in the Disclosure Package and the
Final Offering Memorandum, but only if the holders of such shares, options, or
shares issued upon exercise of such options, agree in writing not to sell,
offer, dispose of or otherwise transfer any such shares or options during such
90-day period without the prior written consent of the Representatives (which
consent may be withheld at the sole discretion of the Representatives),
provided, further, that the foregoing shall not apply to (i) the sale of the
Notes under this Agreement or the issuance of the Conversion Shares, (ii) the
entry into the transactions contemplated by the Convertible Note Hedge and
Warrant Transaction Documentation and (iii) the filing of the Registration
Statement.
(t) Future Reports to Holders of Notes. Unless such information is
publicly available on XXXXX, to furnish to its holders of Notes as soon as
practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders' equity and cash flows of
the Company and its consolidated subsidiaries certified by independent public
17
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter ending
after the Closing Date), to make available to its holders of Notes consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail.
(u) Investment Limitation. The Company shall not invest or otherwise use
the proceeds received by the Company from its sale of the Notes in such a manner
as would require the Company or any of its subsidiaries to register as an
investment company under the Investment Company Act.
(v) No Manipulation of Price. The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, under the Exchange Act or
otherwise, the stabilization or manipulation of the price of any securities of
the Company to facilitate the sale or resale of the Notes.
(w) Lock-Up Agreements. The Company will enforce all agreements between
the Company and any of its security holders to be entered into pursuant to this
agreement that prohibit the sale, transfer, assignment, pledge or hypothecation
of any of the Company's securities. In addition, the Company will direct the
transfer agent to place stop transfer restrictions upon any such securities of
the Company that are bound by such "lock-up" agreements for the duration of the
periods contemplated in such agreements.
(x) Final Term Sheet. The Company will prepare a final term sheet,
containing solely a description of the Notes and the offering thereof, in the
form approved by you and attached as Schedule B hereto (the "Final Term Sheet").
SECTION 4. 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 Notes (including all
printing and engraving costs), (ii) all fees and expenses of the Trustee under
the Indenture, (iii) all necessary issue, transfer and other stamp taxes in
connection with the issuance and sale of the Notes to the Initial Purchasers,
(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, shipping and distribution
of the materials contained in the Disclosure Package, including the Preliminary
Offering Memorandum, and the Final Offering Memorandum, all amendments and
supplements thereto and this Agreement, (vi) all filing fees, attorneys' fees
and expenses incurred by the Company or the Initial Purchasers in connection
with qualifying or registering (or obtaining exemptions from the qualification
or registration of) all or any part of the Notes for offer and sale under the
state securities or blue sky laws, and, if requested by the Representatives,
preparing and printing a "Blue Sky Survey" or memorandum, and any supplements
thereto, advising the Initial Purchasers of such qualifications, registrations
and exemptions, (vii) the expenses of the Company and the Initial Purchasers in
connection with the marketing and offering of the Notes, including all
transportation and other expenses incurred in connection with presentations to
prospective purchasers of the Notes, except that the Company and the Initial
Purchasers will each pay 50% of the cost of privately chartered airplanes used
for such purposes, (viii) the fees and expenses associated with listing the
Conversion Shares on The Nasdaq Global Market and (ix) all expenses and fees in
connection with admitting the Notes for trading in the PORTAL Market. Except as
18
provided in this Section 4, Section 7, Section 10 and Section 11 hereof, the
Initial Purchasers shall pay their own expenses, including the fees and
disbursements of their counsel.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASERS
The obligations of the several Initial Purchasers to purchase and pay for
the Notes as provided herein on the Closing Date and, with respect to the
Optional Notes, any Subsequent Closing Date, shall be subject to the accuracy of
the representations, warranties and covenants on the part of the Company set
forth in Section 1 hereof as of the date hereof and as of the Closing Date as
though then made and, with respect to the Optional Notes, as of the related
Subsequent Closing Date as though then made, to the accuracy of the statements
of the Company made in any certificates pursuant to the provisions hereof, to
the timely performance by the Company of its covenants and other obligations
hereunder, and to each of the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Representatives
shall have received from PricewaterhouseCoopers LLP, independent public
accountants for the Company, a letter dated the date hereof addressed to the
Initial Purchasers, the form of which is attached as Exhibit A.
(b) No Material Adverse Change or Rating Agency Change. For the period
from and after the date of this Agreement and prior to the Closing Date and,
with respect to the Optional Notes, any Subsequent Closing Date:
(i) there shall not have occurred any Material Adverse Change, the
effect of which is, in the sole judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to proceed
with the offering or delivery of the Notes as contemplated by the
Disclosure Package and the Final Offering Memorandum;
(ii) there shall not have been any change or decrease specified in
the letter or letters referred to in paragraph (a) of this Section 5 which
is, in the sole judgment of the Representatives, so material and adverse
as to make it impractical or inadvisable to proceed with the offering or
delivery of the Notes as contemplated by the Disclosure Package and the
Final Offering Memorandum; and
(iii) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any securities of the Company or
any of its subsidiaries by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under
the Securities Act.
(c) Opinion of Counsel for the Company. On each of the Closing Date and
any Subsequent Closing Date, the Representatives shall have received the
favorable opinion of Xxxx, Gotshal & Xxxxxx LLP, counsel for the Company, dated
as of such Closing Date, the form of which is attached as Exhibit B.
(d) Opinion of Counsel for the Initial Purchasers. On each of the Closing
Date and any Subsequent Closing Date, the Representatives shall have received
the favorable opinion of Xxxxxx Xxxxxxxx Xxxxx & Xxxxxxxx LLP, counsel for the
Initial Purchasers, dated as of such Closing Date, in form and substance
satisfactory to, and addressed to, the Representatives, with respect to the
issuance and sale of the Shares, the Disclosure Package, the Final Offering
Memorandum and
19
other related matters as the Representatives may reasonably require, and the
Company shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(e) Officers' Certificate. On each of the Closing Date and any Subsequent
Closing Date, the Representatives shall have received a written certificate
executed by the Chairman of the Board, Chief Executive Officer or President of
the Company and the Chief Financial Officer or Chief Accounting Officer of the
Company, dated as of such Closing Date, to the effect that the signers of such
certificate have carefully examined the Disclosure Package, including the
Preliminary Offering Memorandum, and the Final Offering Memorandum, any
amendments or supplements thereto and this Agreement, to the effect set forth in
subsection (b)(iii) of this Section 5, and further to the effect that:
(i) for the period from and after the date of this Agreement and
prior to such Closing Date or such Subsequent Closing Date, as the case
may be, there has not occurred any Material Adverse Change;
(ii) the representations, warranties and covenants of the Company
set forth in Section 1 of this Agreement are true and correct on and as of
the Closing Date or the Subsequent Closing Date, as the case may be, with
the same force and effect as though expressly made on and as of such
Closing Date or such Subsequent Closing Date, as the case may be; and
(iii) the Company has complied with all the agreements hereunder and
satisfied all the conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date or such Subsequent Closing
Date, as the case may be.
(f) Bring-down Comfort Letter. On each of the Closing Date and any
Subsequent Closing Date, the Representatives shall have received from
PricewaterhouseCoopers LLP, independent public accountants for the Company, a
letter dated such date, in form and substance satisfactory to the
Representatives, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to subsection (a) of this Section 5, except
that the specified date referred to therein for the carrying out of procedures
shall be no more than five days prior to the Closing Date or Subsequent Closing
Date, as the case may be.
(g) Registration Rights Agreement. The Company and the Initial Purchasers
shall have executed and delivered the Registration Rights Agreement (in form and
substance satisfactory to the Initial Purchasers), and the Registration Rights
Agreement shall be in full force and effect.
(h) Lock-Up Agreement from Certain Securityholders of the Company. On or
prior to the date hereof, the Company shall have furnished to the
Representatives an agreement in the form of Exhibit C hereto from each director
and the officers listed below of the Company, and such agreement shall be in
full force and effect on each of the Closing Date and any Subsequent Closing
Date.
- Xxxxxxx X. Xxxx;
- Xxxxxxx X. Xxxxxxx;
- Xxxxx X. Xxxxx; and
- Xxxxx X. Xxxxxxxx.
20
(i) PORTAL Designation. The Notes shall have been designated
PORTAL-eligible securities in accordance with the rules and regulations of the
National Association of Securities Dealers, Inc.
(j) The Company shall have caused the Conversion Shares to be duly listed,
subject to issuance, for trading on The Nasdaq Global Select Market.
(k) Additional Documents. On or before each of the Closing Date and any
Subsequent Closing Date, the Representatives and counsel for the Initial
Purchasers 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 Notes 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 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the Closing
Date and, with respect to the Optional Notes, at any time prior to the
applicable Subsequent Closing Date, which termination shall be without liability
on the part of any party to any other party, except that Section 4, Section 7,
Section 8, Section 9 and Section 13 shall at all times be effective and shall
survive such termination.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF INITIAL
PURCHASERS
Each of the Initial Purchasers represents and warrants that it is an
"accredited investor", as defined in Rule 501(a) of Regulation D. Each Initial
Purchaser agrees with the Company that:
(a) it has not offered or sold, and will not offer or sell, any Notes
within the United States or to, or for the account or benefit of, U.S. persons
(x) as part of their distribution at any time or (y) otherwise until one year
after the later of the commencement of the offering and the date of closing of
the offering except to those it reasonably believes to be "qualified
institutional buyers" (as defined in Rule 144A under the Act);
(b) neither it nor any person acting on its behalf has made or will make
offers or sales of the Notes in the United States by means of any form of
general solicitation or general advertising (within the meaning of Regulation D)
in the United States;
(c) in connection with each sale pursuant to Section 6(a)(i), it has taken
or will take reasonable steps to ensure that the purchaser of such Notes is
aware that such sale is being made in reliance on Rule 144A;
(d) any information provided by the Initial Purchasers to publishers of
publicly available databases about the terms of the Notes shall include a
statement that the Notes have not been registered under the Act and are subject
to restrictions under Rule 144A under the Act;
(e) it acknowledges that additional restrictions on the offer and sale of
the Notes and the Common Stock issuable upon conversion thereof are described in
the Disclosure Package and the Final Offering Memorandum;
(f) it is a person whose ordinary activities involve it in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of its business and it has not offered or sold and will not offer or
sell the Notes other than to persons whose ordinary activities
21
involve them in acquiring, holding, managing or disposing of investments (as
principal or as agent) for the purposes of their businesses or who it is
reasonable to expect will acquire, hold, manage or dispose of investments (as
principal or agent) for the purposes of their businesses where the issue of the
Notes would otherwise constitute a contravention of Section 19 of the FSMA by
the Company;
(g) it has complied and will comply with all applicable provisions of the
FSMA with respect to anything done by it in relation to the Notes in, from or
otherwise involving the United Kingdom;
(h) it has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to engage
in investment activity (within the meaning of section 21 of the FSMA) received
by it in connection with the issue or sale of any Notes, in circumstances in
which section 21(1) of the FSMA does not apply to the Company;
(i) in relation to each Member State of the European Economic Area which
has implemented the Prospectus Directive (each, a "Relevant Member State"), it
has not made and will not make an offer to the public of any Notes which are the
subject of the offering contemplated by this Agreement in that Relevant Member
State, except that it may make an offer to the public in that Relevant Member
State of any Notes at any time under the following exemptions under the
Prospectus Directive, if they have been implemented in that Relevant Member
State:
(i) to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated, whose
corporate purpose is solely to invest in securities;
(ii) to any legal entity which has two or more of (a) an average of
at least 250 employees during the last financial year, (b) a total balance
sheet of more than E43,000,000 and (c) an annual turnover of more than
E50,000,000, as shown in its last annual or consolidated accounts;
(iii) to fewer than 100 natural or legal persons (other than
qualified investors as defined in the Prospectus Directive) subject to
obtaining the prior written consent of the Representatives for any such
offer; or
(iv) in any other circumstances falling within Article 3(2) of the
Prospectus Directive;
provided that no such offer of Notes shall result in a requirement
for the publication by the Company or any Initial Purchaser of a prospectus
pursuant to Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an "offer to the public" in
relation to any Notes in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms of the offer
and the Notes to be offered so as to enable an investor to decide to purchase
any Notes, as the same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State and the expression
"Prospectus Directive" means Directive 2003/71/EC and includes any relevant
implementing measure in each Relevant Member State.
22
SECTION 7. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES
If this Agreement is terminated by the Representatives pursuant to Section
5 or Section 11, or if the sale to the Initial Purchasers of the Notes on the
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof other than by reason of a default by any of the Initial
Purchasers, the Company agrees to reimburse the Representatives and the other
Initial Purchasers (or such Initial Purchasers as have terminated this Agreement
with respect to themselves), severally, upon demand for all out-of-pocket
expenses that shall have been reasonably incurred by the Representatives and the
Initial Purchasers in connection with the proposed purchase and the offering and
sale of the Notes, including but not limited to fees and disbursements of
counsel, printing expenses, travel expenses, postage, facsimile and telephone
charges.
SECTION 8. INDEMNIFICATION
(a) Indemnification of the Initial Purchasers. The Company agrees to
indemnify and hold harmless each Initial Purchaser, its directors, officers and
employees, agents, and each person, if any, who controls any Initial Purchaser
within the meaning of the Securities Act and the Exchange Act against any loss,
claim, damage, liability or expense, as incurred, to which such Initial
Purchaser or such controlling person may become subject, 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 statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum, the Final Offering Memorandum, the Final Term Sheet, any
Issuer Written Information or any other written information used by or on behalf
of the Company in connection with the offer or sale of the Notes (or any
amendment or supplement to the foregoing), or the omission or alleged omission
therefrom of a material fact, in each case, necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and to reimburse each Initial Purchaser, its officers,
directors, employees, agents and each such controlling person for any and all
expenses (including the fees and disbursements of counsel chosen by the
Representatives) as such expenses are reasonably incurred by such Initial
Purchaser, its officers, directors, employees, agents 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 Representatives expressly for use in
the Preliminary Offering Memorandum, the Final Offering Memorandum, the Final
Term Sheet, any Issuer Written Information or any other written information used
by or on behalf of the Company in connection with the offer or sale of the Notes
(or any amendment or supplement to the foregoing). The indemnity agreement set
forth in this Section 8(a) shall be in addition to any liabilities that the
Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Initial Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company, each of its directors, each of its officers 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, insofar as such loss, claim, damage, liability or
expense (or actions in
23
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 Preliminary
Offering Memorandum, the Final Offering Memorandum, the Final Term Sheet, any
Issuer Written Information or any other written information used by or on behalf
of the Company in connection with the offer or sale of the Notes (or any
amendment or supplement to the foregoing), or arises out of or is based upon the
omission or alleged omission to state therein a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, in each case to the extent, and only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Preliminary Offering Memorandum, the Final
Offering Memorandum, the Final Term Sheet, any Issuer Written Information or any
other written information used by or on behalf of the Company in connection with
the offer or sale of the Notes (or any amendment or supplement to the
foregoing), in reliance upon and in conformity with written information
furnished to the Company by the Representatives 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 Company hereby acknowledges that the only
information that the Initial Purchasers have furnished to the Company expressly
for use in the Preliminary Offering Memorandum, the Final Offering Memorandum,
the Final Term Sheet, any Issuer Written Information or any other written
information used by or on behalf of the Company in connection with the offer or
sale of the Notes (or any amendment or supplement to the foregoing) are the
statements set forth in Schedule C. The indemnity agreement set forth in this
Section 8(b) shall be in addition to any liabilities that each Initial Purchaser
may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 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 8, notify
the indemnifying party in writing of the commencement thereof, but the failure
to so notify the indemnifying party (i) will not relieve it from liability under
paragraph (a) or (b) above unless and to the extent it did not otherwise learn
of such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a) or (b)
above. 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 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 that 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
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 8 for any legal
24
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 preceding sentence (it
being understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (other than local counsel),
reasonably approved by the indemnifying party (or by the Representatives in the
case of Section 8(b)), representing the indemnified parties who are parties to
such action) or (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, in each of which
cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 shall not be
liable for any settlement of any proceeding effected without its written
consent, which shall not be withheld unreasonably, but if settled with such
consent or if there is 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 8(c) 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 (x) includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (y) 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.
SECTION 9. CONTRIBUTION
If the indemnification provided for in Section 8 is for any reason
unavailable to or otherwise insufficient to hold harmless an indemnified party
in respect of any losses, claims, damages, liabilities or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
paid or payable by such indemnified party, as incurred, as a result of any
losses, claims, damages, liabilities or expenses referred to therein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Initial Purchasers, on the other hand, from
the offering of the Notes pursuant to this Agreement or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, on the one
hand, and the Initial Purchasers, on the other hand, in connection with the
statements or omissions or alleged statements or alleged omissions that resulted
in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Initial Purchasers, on the other hand, in
connection with the offering of the Notes pursuant to this Agreement shall be
deemed to be in the same respective proportions as the total net proceeds from
the offering of the Notes pursuant to this Agreement (before deducting expenses)
received by the Company, and the total discount received by the Initial
Purchasers bear
25
to the aggregate initial offering price of the Notes. The relative fault of the
Company, on the one hand, and the Initial Purchasers, on the other hand, shall
be determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Company, on the one
hand, or the Initial Purchasers, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Initial Purchasers 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 in this Section 9.
Notwithstanding the provisions of this Section 9, no Initial Purchaser
shall be required to contribute any amount in excess of the purchase discount or
commission received by such Initial Purchaser in connection with the Notes
purchased by it hereunder. 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 Initial Purchasers' obligations to contribute pursuant to
this Section 9 are several, and not joint, in proportion to their respective
commitments as set forth opposite their names in Schedule A. For purposes of
this Section 9, each director, officer, employee and agent of an Initial
Purchaser and each person, if any, who controls an Initial Purchaser within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Initial Purchaser, and each director of the Company, each
officer of the Company, and each person, if any, who controls the Company within
the meaning of the Securities Act and the Exchange Act shall have the same
rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL PURCHASERS
If, on the Closing Date or any Subsequent Closing Date, as the case may
be, any one or more of the several Initial Purchasers shall fail or refuse to
purchase Notes that it or they have agreed to purchase hereunder on such date,
and the aggregate principal amount of Notes which such defaulting Initial
Purchaser or Initial Purchasers agreed but failed or refused to purchase does
not exceed 10% of the aggregate principal amount of the Notes to be purchased on
such date, the other Initial Purchasers shall be obligated, severally, in the
proportions that the principal amount of Firm Notes set forth opposite their
respective names on Schedule A bears to the aggregate principal amount of Firm
Notes set forth opposite the names of all such non-defaulting Initial
Purchasers, or in such other proportions as may be specified by the
Representatives with the consent of the non-defaulting Initial Purchasers, to
purchase the Notes which such defaulting Initial Purchaser or Initial Purchasers
agreed but failed or refused to purchase on such date. If, on the Closing Date
or any Subsequent Closing Date, as the case may be, any one or more of the
Initial Purchasers shall fail or refuse to purchase Notes and the aggregate
principal amount of Notes with respect to which such default occurs exceeds 10%
of the aggregate principal amount of Notes to be purchased on such date, and
arrangements satisfactory to the Representatives and the Company for the
purchase of such Notes are not made within 48 hours after such default, this
Agreement shall terminate without liability of any party (other than a
defaulting Initial Purchaser) to any other party except that the provisions of
Section 4, Section 7, Section 8 and Section 9 shall
26
at all times be effective and shall survive such termination. In any such case
either the Representatives or the Company shall have the right to postpone the
Closing Date or any Subsequent 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
Final Offering Memorandum or any other documents or arrangements may be
effected.
As used in this Agreement, the term "Initial Purchaser" shall be deemed to
include any person substituted for a defaulting Initial Purchaser under this
Section 10. Any action taken under this Section 10 shall not relieve any
defaulting Initial Purchaser from liability in respect of any default of such
Initial Purchaser under this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT
On or prior to the Closing Date this Agreement may be terminated by the
Representatives 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 Global Select Market, or trading in
securities generally on either the New York Stock Exchange or the Nasdaq Global
Select Market 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 NASD; (ii) a general banking moratorium shall have been
declared by any federal or New York authority or a material disruption in
commercial banking or securities settlement or clearance services in the United
States has occurred; or (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 substantial change in
United States' or international political, financial or economic conditions, as
in the judgment of the Representatives is material and adverse and makes it
impracticable or inadvisable to market the Notes in the manner and on the terms
described in the Disclosure Package and the Final Offering Memorandum or to
enforce contracts for the sale of securities. Any termination pursuant to this
Section 11 shall be without liability on the part of (a) the Company to any
Initial Purchaser, except that the Company shall be obligated to reimburse the
expenses of the Representatives and the Initial Purchasers pursuant to Sections
4 and 7 hereof or (b) any Initial Purchaser to the Company.
SECTION 12. NO ADVISORY OR FIDUCIARY RESPONSIBILITY
The Company acknowledges and agrees that: (i) the purchase and sale of the
Notes pursuant to this Agreement, including the determination of the offering
price of the Notes and any related discounts and commissions, is an arm's-length
commercial transaction between the Company, on the one hand, and the several
Initial Purchasers, on the other hand, and the Company is capable of evaluating
and understanding and understands and accepts the terms, risks and conditions of
the transactions contemplated by this Agreement; (ii) in connection with each
transaction contemplated hereby and the process leading to such transaction each
Initial Purchaser is and has been acting solely as a principal and is not the
financial advisor, agent or fiduciary of the Company or its affiliates,
stockholders, creditors or employees or any other party; (iii) no Initial
Purchaser has assumed or will assume an advisory, agency or fiduciary
responsibility in favor of the Company with respect to any of the transactions
contemplated hereby or the process leading thereto (irrespective of whether such
Initial Purchaser has advised or is currently advising the Company on other
matters) and no Initial Purchaser has any obligation to the Company with respect
to the offering contemplated hereby except the obligations expressly set forth
in this Agreement; (iv) the several Initial Purchasers and their respective
affiliates may be engaged in a broad range of transactions that involve
interests that differ from those of the Company and that
27
the several Initial Purchasers have no obligation to disclose any of such
interests by virtue of any advisory, agency or fiduciary relationship; and (v)
the Initial Purchasers have not provided any legal, accounting, regulatory or
tax advice with respect to the offering contemplated hereby and the Company has
consulted its own legal, accounting, regulatory and tax advisors to the extent
it deemed appropriate.
This Agreement supersedes all prior agreements and understandings (whether
written or oral) between the Company and the several Initial Purchasers, or any
of them, with respect to the subject matter hereof. The Company hereby waives
and releases, to the fullest extent permitted by law, any claims that the
Company may have against the several Initial Purchasers with respect to any
breach or alleged breach of agency or fiduciary duty.
SECTION 13. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY
The respective indemnities, contribution, agreements, representations,
warranties and other covenants of the Company, of its officers and of the
several Initial Purchasers set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation, or statement as to the result hereof, made by or on behalf of any
Initial Purchaser or the Company or any of its or their partners, officers,
directors, employees, agents or any controlling person, as the case may be, (ii)
acceptance of the Notes and payment for them hereunder or (iii) any termination
of this Agreement.
SECTION 14. 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 Representatives:
Deutsche Bank Securities Inc.
00 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attention: Syndicate Manager
with a copy to:
Deutsche Bank Securities Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 212-797-4564
Attention: General Counsel
Banc of America Securities LLC
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attention: Syndicate Department
If to the Company:
PolyMedica Corporation
000 Xxxxxxxxx Xxxxx, Xxxxx 000
28
Wakefield, Massachusetts 01880
Facsimile: 000-000-0000
Attention: General Counsel
Any party hereto may change the address for receipt of communications by
giving written notice to the others.
SECTION 15. SUCCESSORS
This Agreement will inure to the benefit of and be binding upon the
parties hereto, including any substitute Initial Purchasers pursuant to Section
10 hereof, and to the benefit of the employees, officers and directors and
controlling persons referred to in Section 8 and Section 9, and in each case
their respective successors, and no other person will have any right or
obligation hereunder. The term "successors" shall not include any purchaser of
the Notes as such from any of the Initial Purchasers merely by reason of such
purchase.
SECTION 16. 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 17. GOVERNING LAW PROVISIONS; CONSENT TO JURISDICTION
(a) Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(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 New York, Borough of
Manhattan or the courts of the State of New York in each case located in the
City and County of New York, Borough of Manhattan (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.
SECTION 18. 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
29
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. The Section
headings herein are for the convenience of the parties only and shall not affect
the construction or interpretation of this Agreement.
30
If the foregoing is in accordance with your understanding of our
agreement, kindly 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,
POLYMEDICA CORPORATION
By:__________________________
Name:
Title:
The foregoing Purchase Agreement is hereby confirmed and accepted by
the Representatives as of the date first above written.
DEUTSCHE BANK SECURITIES INC.
BANC OF AMERICA SECURITIES LLC
Acting as Representatives of the
several Initial Purchasers named in
the attached Schedule A.
By DEUTSCHE BANK SECURITIES INC.
By____________________________________________________________
Authorized Representative
By____________________________________________________________
Authorized Representative
By BANC OF AMERICA SECURITIES LLC
By____________________________________________________________
Authorized Representative
31
SCHEDULE A
AGGREGATE PRINCIPAL AMOUNT OF
INITIAL PURCHASERS FIRM NOTES TO BE PURCHASED
------------------ --------------------------
Deutsche Bank Securities Inc. ...................................... $75,000,000
Banc of America Securities LLC ..................................... $45,000,000
Wachovia Capital Markets, LLC ...................................... $15,000,000
SunTrust Capital Markets, Inc. ..................................... $7,500,000
KeyBanc Capital Markets, a division of
McDonald Investments Inc. .......................................... $7,500,000
Total.................................................... $150,000,000
1
SCHEDULE B
ISSUER: PolyMedica Corporation.
TITLE OF SECURITIES: 1.00% Convertible Subordinated Notes due September 15,
2011.
ISSUE PRICE: $1,000.
AGGREGATE PRINCIPAL AMOUNT OFFERED: $150,000,000 (or $180,000,000 after giving
effect to full exercise of the over-allotment option by the initial purchasers).
NET PROCEEDS: $145,500,000 (or $174,600,000 after giving effect to full exercise
of the over-allotment option by the initial purchasers).
OVER-ALLOTMENT OPTION: $30,000,000. This option has been exercised in full.
MATURITY: September 15, 2011.
ANNUAL INTEREST RATE: 1.00%.
INTEREST PAYMENT DATES: March 15 and September 15 of each year, commencing March
15, 2007.
CALL DATES: None.
PUT DATES: The issuer may be required to repurchase the securities upon the
occurrence of a fundamental change at the option of the holder of the
securities.
CONVERSION PRICE: $47.9028 per share of the issuer's common stock.
CONVERSION RATE: The rate equal to $1,000 divided by the then applicable
conversion price at the time of determination (initially approximately 20.8756
shares of the issuer's common stock).
USE OF PROCEEDS: The issuer intends to use the net proceeds from the offering to
(i) pay the net cost to the issuer of the convertible note hedge and warrant
transactions described in the preliminary offering memorandum dated September
12, 2006; (ii) purchase approximately 705,000 shares of the issuer's common
stock under the issuer's existing share repurchase program; and (iii) repay a
portion of the outstanding borrowings under the issuer's revolving credit
facility.
SETTLEMENT: September 19, 2006.
PLAN OF DISTRIBUTION:
INITIAL PURCHASERS PRINCIPAL AMOUNT OF NOTES
------------------ -------------------------
Deutsche Bank Securities Inc. $75,000,000
Banc of America Securities LLC $45,000,000
Wachovia Capital Markets, LLC $15,000,000
SunTrust Capital Markets, Inc. $7,500,000
KeyBanc Capital Markets, a division of McDonal Investments Inc. $7,500,000
--------------------------
Total $150,000,000
ADJUSTMENT TO CONVERSION RATE UPON A CHANGE OF CONTROL: If a qualifying change
in control occurs at any time prior to maturity, additional shares will be
deliverable in respect of securities converted in connection with such
qualifying change of control.
ANTIDILUTION ADJUSTMENTS: The conversion price will be subject to adjustment as
described under "Description of the Notes -- Conversion Price Adjustments" in
the preliminary offering memorandum dated September 12, 2006. The issuer will
not take any action that would result in an adjustment pursuant to such
provisions without complying with the NASDAQ's shareholder approval rules.
1
MAKE-WHOLE TABLE:
EFFECTIVE
DATE
STOCK PRICE
$42.02 $44.00 $46.00 $47.90 $50.00 $55.00 $60.00 $65.00 $70.00 $75.00 $80.00 $90.00 $100.00 $110.00 $120.00
--------------------------------------------------------------------------------------------------------------------------
19-Sep-06 2.92 2.63 2.32 2.07 1.82 1.35 1.01 0.76 0.57 0.43 0.32 0.18 0.09 0.04 0.00
15-Sep-07 2.92 2.81 2.47 2.18 1.90 1.39 1.02 0.75 0.55 0.40 0.29 0.15 0.07 0.03 0.00
15-Sep-08 2.92 2.92 2.54 2.22 1.92 1.35 0.96 0.68 0.48 0.34 0.23 0.10 0.04 0.01 0.00
15-Sep-09 2.92 2.92 2.52 2.16 1.83 1.23 0.82 0.55 0.36 0.23 0.14 0.05 0.01 0.00 0.00
15-Sep-10 2.92 2.77 2.27 1.87 1.51 0.89 0.51 0.28 0.15 0.07 0.03 0.00 0.00 0.00 0.00
15-Sep-11 2.91 1.84 0.87 0.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
This communication is intended for the sole use of the person to whom it is
provided by the sender.
These securities have not been registered under the Securities Act of 1933, as
amended, and may only be sold to qualified institutional buyers pursuant to Rule
144A or pursuant to another applicable exemption from registration.
The information in this term sheet supplements the Company's preliminary
Offering Memorandum, dated September 12, 2006 (the "Preliminary Offering
Memorandum") and supersedes the information in the Preliminary Offering
Memorandum to the extent inconsistent with the information in the Preliminary
Offering Memorandum. This term sheet is qualified in its entirety by reference
to the Preliminary Offering Memorandum. Terms used herein but not defined herein
shall have the respective meanings as set forth in the Preliminary Offering
Memorandum.
A securities rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time.
ANY DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO
THIS COMMUNICATION AND SHOULD BE DISREGARDED. SUCH DISCLAIMERS OR OTHER NOTICES
WERE AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT VIA
BLOOMBERG OR ANOTHER EMAIL SYSTEM.
2
SCHEDULE C
The names of the Initial Purchasers which appear on the front cover of the
Offering Memorandum
The names of the Initial Purchasers which appear under the caption "Plan of
Distribution" in the Offering Memorandum
The first sentence of the second paragraph under the caption "Plan of
Distribution" in the Offering Memorandum concerning the offering price.
The sixth paragraph covering over-allotment, stabilizing transactions and
covering transactions under the caption "Plan of Distribution" in the Offering
Memorandum
The fourth sentence of the penultimate paragraph under the caption "Plan of
Distribution" in the Offering Memorandum concerning market-making activities by
the Initial Purchasers
1
EXHIBIT A
[FORM OF ACCOUNTANTS' COMFORT LETTER]
Accountants' comfort letter to be delivered pursuant to Section 5(a) of
the Purchase Agreement.
We have audited:
1. the consolidated financial statements of PolyMedica Corporation (the
"Company") and subsidiaries as of March 31, 2006 and 2005 and for
each of the three years in the period ended March 31, 2006 included
in the Company's annual report on Form 10-K for the year ended March
31, 2006 (the "Form 10-K"),
2. the related consolidated financial statement schedule included in
the Form 10-K,
3. management's assessment of the effectiveness of the Company's
internal control over financial reporting as of March 31, 2006 which
is included in the Form 10-K, and
4. the effectiveness of the Company's internal control over financial
reporting as of March 31, 2006.
The consolidated financial statements, financial statement schedule and
management's assessment referred to above are all incorporated by reference in
the offering memorandum dated September 13, 2006 (herein referred to as the
"Offering Memorandum") for 1.00% Convertible Subordinated Notes due September
15, 2011 (the "Convertible Debt"). Our report as of March 31, 2006, which
contains an explanatory paragraph on management's assessment of the
effectiveness of internal control over financial reporting and on the
effectiveness of internal control over financial reporting due to the exclusion
of certain elements of the internal control over financial reporting of the
National Diabetic Pharmacy and Intellicare businesses that the Company acquired
during the fiscal year ended March 31, 2006, is also incorporated by reference
in the Offering Memorandum.
This letter is being furnished in reliance upon your representation to us that:
a. You are knowledgeable with respect to the due diligence review process
that would be performed if this placement of securities were being
registered pursuant to the Securities Act of 1933 (the "Act").
b. In connection with the offering of Convertible Debt, the review process
you have performed is substantially consistent with the due diligence
review process that you would have performed if this placement of
securities were being registered pursuant to the Act.
In connection with the Offering Memorandum:
1. We are an independent registered public accounting firm with respect to
the Company within the applicable rules and regulations adopted by the
Securities and Exchange Commission (the "SEC") and the Public Company
Accounting Oversight Board (United States) (the "PCAOB").
2. Company officials have advised us that the consolidated financial
statements incorporated by reference in the Offering Memorandum are
prepared in accordance with Regulation S-X of the SEC. In our opinion, the
consolidated financial statements audited by us and
A-1
incorporated by reference in the Offering Memorandum comply as to form in
all material respects with the applicable sections of Regulation S-X.
3. We have not audited any financial statements of the Company as of any date
or for any period subsequent to March 31, 2006; although we have conducted
an audit for the year ended March 31, 2006, the purpose (and therefore the
scope) of the audit was to enable us to express an opinion on the
consolidated financial statements as of March 31, 2006 and for the year
then ended, but not on the financial statements for any interim period
within that year. Therefore, we are unable to and do not express any
opinion on the unaudited condensed consolidated balance sheet as of June
30, 2006 and the unaudited condensed consolidated statements of income and
cash flows for the three-month periods ended June 30, 2006 and 2005,
incorporated by reference in the Offering Memorandum, or on the financial
position, results of operations, or cash flows as of any date or for any
period subsequent to March 31, 2006. Also, we have not audited the
Company's internal control over financial reporting as of any date
subsequent to March 31, 2006. Therefore, we do not express any opinion on
the Company's internal control over financial reporting as of any date
subsequent to March 31, 2006.
4. For purposes of this letter we have read the fiscal year 2007 minutes of
the meetings of the stockholders, the Board of Directors, and the Audit
Committee, Compensation Committee, Compliance Committee, and the
Nominating and Corporate Governance Committee of the Company and its
subsidiaries as set forth in minute books at September 8, 2006, officials
of the Company having advised us that the minutes of all such meetings
through that date were set forth therein (except for the minutes of the
August 21, 2006 Board of Directors meeting which were not approved in
final form, for which drafts were provided to us; officials of the Company
have represented that such drafts include all substantive actions taken at
such meeting), and have carried out other procedures to September 8, 2006
(our work did not extend to the period from September 9, 2006 to September
13, 2006, inclusive), as follows:
a. With respect to the three-month periods ended June 30, 2006 and 2005,
we have:
(i) performed the procedures (completed on August 4, 2006) specified
by the PCAOB for a review of interim financial information as
described in SAS No. 100, Interim Financial Information, on the
unaudited condensed consolidated balance sheet as of June 30, 2006
and the unaudited condensed consolidated statements of income and
cash flows for the three-month periods ended June 30, 2006 and 2005
incorporated by reference in the Offering Memorandum.
(ii) inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether the
unaudited condensed consolidated financial statements referred to in
a(i) above comply as to form in all material respects with the
applicable sections of Regulation S-X.
The foregoing procedures do not constitute an audit conducted in
accordance with standards of the PCAOB. Also, they would not necessarily
reveal matters of significance with respect to the comments in the
following paragraph. Accordingly, we make no representations regarding the
sufficiency of the foregoing procedures for your purposes.
A-2
5. It should also be noted effective April 1, 2006, the Company adopted FASB
123(R) "Share-Based Payment". Nothing came to our attention as a result of
the foregoing procedures, however, that caused us to believe that:
a. Any material modifications should be made to the unaudited condensed
consolidated financial statements described in 4a(i) for them to be in
conformity with generally accepted accounting principles; or
b. The unaudited condensed consolidated financial statements described in
4a(i) do not comply as to form in all material respects with the
applicable sections of Regulation S-X.
6. Company officials have advised us that no consolidated financial data as
of any date or for any period subsequent to June 30, 2006, are available;
accordingly, the procedures carried out by us with respect to changes in
financial statement items after June 30, 2006, have, of necessity, been
even more limited than those with respect to the periods referred to in 4.
We have inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether (i) at July
31, 2006 there was any change in capital stock or increase in long term
debt of the Company as compared with amounts shown on the June 30, 2006
unaudited condensed consolidated balance sheet incorporated by reference
in the Offering Memorandum, or (ii) for the period from July 1, 2006 to
July 31, 2006, there were any decreases, as compared to the corresponding
period in the preceding year, in total consolidated net sales. On the
basis of these inquiries and our reading of the minutes as described in 4,
nothing came to our attention that caused us to believe that there was any
such change, increase or decrease, except in all instances that the
Offering Memorandum discloses have occurred or may occur and except that
long term debt increased from $180 million at June 30, 2006 to $185
million at July 31, 2006 and capital stock increased from 23,124,799
shares at June 30, 2006 to 23,127,337 shares at July 31, 2006.
7. Company officials have advised us that no consolidated financial data as
of any date or for any period subsequent to June 30, 2006, are available;
accordingly, the procedures carried out by us with respect to changes in
financial statement items after June 30, 2006, have, of necessity, been
even more limited than those with respect to the periods referred to in 4.
We have inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether (i) at
September 8, 2006 there was any change in capital stock or increase in
long term debt of the Company as compared with amounts shown on the June
30, 2006 unaudited condensed consolidated balance sheet incorporated by
reference in the Offering Memorandum. On the basis of these inquiries and
our reading of the minutes as described in 4, nothing came to our
attention that caused us to believe that there was any such change,
increase or decrease, except in all instances that the Offering Memorandum
discloses have occurred or may occur and except that long term debt
increased from $180 million at June 30, 2006 to $190 million at September
8, 2006 and capital stock increased from 23,124,799 shares at June 30,
2006 to 23,175,179 shares at September 8, 2006.
8. For purposes of this letter, we have also read the items identified by you
on the attached copy of the Offering Memorandum and have performed the
following procedures, which were applied as indicated with respect to the
letters explained below. We make no comment as to whether the SEC would
view any non-GAAP financial information included or incorporated by
reference in this document as being compliant with the requirements of
Regulation G or Item 10 of Regulation S-K. We also make no comment
regarding the Company's
A-3
completeness, appropriateness or reasons given for changes between periods
of any of the items read by us.
A Compared to or recomputed from a corresponding amounts
included in the Company's accounting A records and found
such amounts to be in agreement after rounding as
appropriate.
B Compared to or recomputed from a schedule prepared by the
Company from its accounting records and found such amounts
to be in agreement. We (a) compared the amounts on the
schedule to corresponding amounts appearing in the
accounting records and found such amounts to be in agreement
after rounding as appropriate and (b) determined that the
schedule was mathematically correct.
C Compared to or recomputed from a corresponding amount in the
Company's audited financial statements and financial
statement schedule incorporated by reference in the Offering
Memorandum and found such amounts to be in agreement after
rounding as appropriate.
D Compared to or recomputed from a corresponding amount in the
Company's unaudited financial statements incorporated by
reference in the Offering Memorandum and found such amounts
to be in agreement after rounding as appropriate.
E Compared to or recomputed from a schedule prepared by the
Company from the Company's audited financial statements, not
incorporated by reference in the offering memorandum for the
period indicated, adjusted by the Company to reflect the
impact of discontinued operations and found such amounts to
be in agreement after rounding as appropriate.
F Compared to or recomputed from a corresponding amount
included in the Company's accounting records and found such
amounts to be in agreement after rounding as appropriate. It
should be noted that we make no comment about the method
employed or plans used by the Company to repurchased its
shares
G Compared to or recomputed from a corresponding amount in the
Company's audited financial statements incorporated by
reference in the Offering Memorandum and found such amounts
to be in agreement after rounding as appropriate. It should
be noted that the effective tax rate excluding the
settlement charge of $29.99 million is not a measure of
operating performance or liquidity defined by generally
accepted accounting principles and may not be comparable to
similarly titled measures presented by other companies. We
make no comment about the Company's definition, calculation
or presentation of the effective tax rate excluding the
settlement charge of $29.99 million or its usefulness for
any purposes.
H Not used
A-4
I Recomputed from a schedule prepared by the Company for the
proposed use of proceeds of the convertible debt to be
offered by means of this Offering Memorandum as described
under "Capitalization." However, we make no comment as to
whether the sale of the debentures will be consummated and
the use of proceeds as described therein will actually
occur.
9. Our audit of the consolidated financial statements for the periods
referred to in the introductory paragraph of this letter comprised audit
tests and procedures deemed necessary for the purpose of expressing an
opinion on such financial statements taken as a whole. For none of the
periods referred to therein, or any other period, did we perform audit
tests for the purpose of expressing an opinion on individual balances of
accounts or summaries of selected transactions such as those enumerated
above and, accordingly, we express no opinion thereon.
10. The procedures enumerated in paragraph 8 do not constitute an audit
conducted in accordance with standards of the PCAOB. Accordingly, we make
no representations regarding the sufficiency of the foregoing procedures
for your purposes.
11. It should be understood that we make no representations regarding
questions of legal interpretation or regarding the sufficiency for your
purposes of the procedures enumerated in the preceding paragraphs; also,
such procedures would not necessarily reveal any material misstatement of
the amounts or percentages listed above. Further, we have addressed
ourselves solely to the foregoing data as set forth in the Offering
Memorandum and make no representations regarding the adequacy of
disclosure or regarding whether any material facts have been omitted.
12. This letter is solely for the information of the addressees and to assist
Deutsche Bank Securities Inc. and Banc of America Securities LLC, as
Representatives of the several Initial Purchases in conducting and
documenting its investigation of the affairs of the Company in connection
with the offering of securities covered by the Offering Memorandum, and it
is not to be used, circulated, quoted, or otherwise referred to for any
other purpose, including but not limited to the registration, purchase or
sale of securities, nor is it to be filed with or referred to in whole or
in part in the Offering Memorandum or any other document, except that
reference may be made to it in the Purchase Agreement or in any list of
closing documents pertaining to the offering of securities covered by the
Offering Memorandum.
A-5
EXHIBIT B
[FORM OF OPINION OF COUNSEL FOR THE COMPANY]
Opinion of counsel for the Company to be delivered pursuant to Section
5(c) of the Purchase Agreement in a form substantially consistent with the
following.
References to the Disclosure Package, the Preliminary Offering Memorandum
and the Final Offering Memorandum in this Exhibit B include any amendments or
supplements thereto, respectively, at the Closing Date.
(i) The Company is a corporation validly existing and in good standing
under the laws of the State of Massachusetts and has all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
Based solely on a review of a certificate of good standing, the
Company is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction identified in
Schedule I hereto.
(ii) The execution, delivery and performance of the Agreement by the
Company have been duly authorized by all necessary corporate action
on the part of the Company. This Agreement has been duly and validly
executed and delivered by the Company.
(iii) The execution, delivery and performance of the Indenture by the
Company have been duly authorized by all necessary corporate action
on the part of the Company. The Indenture has been duly and validly
executed and delivered by the Company and (assuming the due
authorization, execution and delivery thereof by the Trustee)
constitutes the legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(iv) The execution, delivery and performance of the Notes by the Company
have been duly authorized by all necessary corporate action on the
part of the Company. The Notes have been duly and validly executed
and delivered by the Company and, when authenticated in accordance
with the provisions of the Indenture and paid for by the Initial
Purchasers pursuant to the Agreement, constitute the legal, valid
and binding obligations of the Company, enforceable against it in
accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(v) The execution, delivery and performance of the Registration Rights
Agreement by the Company have been duly authorized by all necessary
corporate action on the part of the Company. The Registration Rights
Agreement has been duly and
B-1
validly executed and delivered by the Company and (assuming the due
authorization, execution and delivery thereof by the Initial
Purchasers) constitutes the legal, valid and binding obligation of
the Company, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) and except that rights to
indemnification and contribution thereunder may be limited by
federal or state securities laws or public policy relating thereto,
(vi) The execution, delivery and performance of the Convertible Note
Hedge and Warrant Transaction Documentation have been duly
authorized by all necessary corporate action on the part of the
Company. The Convertible Note Hedge and Warrant Transaction
Documentation has been duly and validly executed and delivered by
the Company.
(vii) The Notes to be delivered on the Closing Date or on any Subsequent
Closing Date are convertible into the Conversion Shares in
accordance with the Indenture. The Conversion Shares have been duly
authorized and reserved for issuance upon such conversion and, when
issued pursuant to the Indenture and the Notes, will be validly
issued, fully paid and non-assessable and free of preemptive rights
pursuant to law or the Company's Restated Articles of
Incorporation.
(viii) Assuming (i) the representations of the Initial Purchasers and the
Company contained in the Agreement are true, correct and complete,
(ii) compliance by the Initial Purchasers and the Company with
their respective covenants set forth in the Agreement (iii) the
accuracy of the representations and warranties made in accordance
with the Agreement and the Final Offering Memorandum by purchasers
to whom the Initial Purchasers initially resell the Notes and (iv)
that purchasers to whom the Initial Purchasers initially resell the
Notes receive a copy of the Final Offering Memorandum prior to such
sale or a preliminary offering memorandum containing a section
captioned "Notice to Investors" that is substantially similar to
the section captioned "Notice to Investors" in the Final Offering
Memorandum, it is not necessary in connection with the offer, sale
and delivery of the Notes to the Initial Purchasers pursuant to the
Agreement or the offer and resales of the Notes by the Initial
Purchasers, in the manner contemplated by the Agreement and
described in the Final Offering Memorandum, to register the offer
and sale of the Notes under the Securities Act of 1933, as amended,
or to qualify the Indenture under the Trust Indenture Act of 1939,
as amended.
(ix) To our knowledge, there is no litigation, proceeding or
governmental investigation pending or overtly threatened against
the Company that relates to any of the transactions contemplated by
the Agreement or which, if adversely determined, would have a
material adverse effect on the business, assets or financial
condition of the Company and its subsidiaries taken as a whole.
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(x) No consent, approval, waiver, license or authorization or other
action by or filing with any federal, New York or Massachusetts
corporate governmental authority is required in connection with the
execution and delivery by the Company of the Operative Documents,
the consummation by the Company of the transactions contemplated
thereby or the performance by the Company of its obligations
thereunder, except for those in connection with federal and state
securities or blue sky laws, securities laws of any foreign
jurisdiction, or from the National Association of Securities
Dealers, Inc., as to which we express no opinion in this paragraph,
and those already obtained or made.
(xi) The execution and delivery by the Company of the Operative Documents
and the performance by the Company of its obligations thereunder
will not conflict with, constitute a default under or violate (i)
any of the terms, conditions or provisions of the Restated Articles
of Incorporation or Restated By-laws of the Company, (ii) any of the
terms, conditions or provisions of any document, agreement or other
instrument listed on Schedule III hereto, (iii) New York,
Massachusetts corporate or federal law or regulation (other than
federal and state securities or blue sky laws, as to which we
express no opinion in this paragraph) or (iv) any judgment, writ,
injunction, decree, order or ruling of any court or governmental
authority binding on the Company of which we are aware.
(xii) The Company is not, and after giving effect to the transactions
contemplated in the Final Offering Memorandum (including the use of
proceeds from the sale of the Notes) will not be required to
register as, an "investment company," as such term is defined in the
Investment Company Act of 1940, as amended.
(xiii) The statements made in the Offering Circular under the captions
"Description of the Notes" and "Plan of Distribution" in each case
insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly
summarize the matters referred to therein in all material respects.
(xiv) The statements made in the Offering Circular under the caption
"Material U.S. Federal Income Tax Considerations," insofar as they
purport to constitute summaries of U.S. federal income tax law and
regulations or legal conclusions with respect thereto, fairly
summarize the matters referred to therein in all material respects.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Initial Purchasers at which the
contents of the Disclosure Package, including the Preliminary Offering
Memorandum, and the Final Offering Memorandum, and any supplements or amendments
thereto, and related matters were discussed and, although such counsel is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Disclosure Package
and the Final Offering Memorandum (other than as specified above), and any
supplements or amendments thereto, on the basis of the foregoing, nothing has
come to their attention which would lead them to believe that (i) the Disclosure
Package, as of the Applicable Time, contained any untrue statement of a material
fact or omitted to state any material fact necessary in order to make the
statements therein, in the light of circumstances under which they were made,
not misleading or (ii) either the Final Offering Memorandum or any amendments
thereto, as of its date or at the Closing Date or any Subsequent Closing Date,
as the case may be,
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contained an untrue statement of a material fact or omitted 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 (it being understood
that such counsel need express no belief as to the financial statements or
schedules or other financial data derived therefrom, included in the Disclosure
Package, the Final Offering Memorandum or any amendments or supplements
thereto).
In rendering such opinion, such counsel may rely as to matters of fact, to
the extent they deem proper, on certificates of responsible officers of the
Company and public officials.
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EXHIBIT C
[FORM OF LOCK-UP AGREEMENT]
September 13, 2006
Deutsche Bank Securities Inc.
Banc of America Securities LLC
As Representatives of the Several Initial Purchasers
c/o Deutsche Bank Securities Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, XX ,00000
Re: PolyMedica Corporation (the "Company")
Ladies and Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into or
exchangeable or exercisable for Common Stock. The Company proposes to carry out
an offering of 1.00% Convertible Subordinated Notes due September 15, 2011,
which will be convertible into common stock, $0.01 par value (the "Common
Stock"), of the Company (the "Offering"), for which you will act as the
representatives of the initial purchasers (in such capacity, the
"Representatives"). The undersigned recognizes that the Offering will be of
benefit to the undersigned and will benefit the Company. The undersigned
acknowledges that you and the other initial purchasers are relying on the
representations and agreements of the undersigned contained in this letter in
carrying out the Offering and in entering into purchase arrangements with the
Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, (and will cause any spouse or immediate family member of
the spouse or the undersigned living in the undersigned's household not to),
without the prior written consent of the Representatives (which consent may be
withheld in its sole discretion), directly or indirectly, sell, offer, contract
or grant any option to sell (including without limitation any short sale),
pledge, transfer, establish an open "put equivalent position" or liquidate or
decrease a "call equivalent position" within the meaning of Rule 16a-1(h) under
the Securities Exchange Act of 1934, as amended, or otherwise dispose of or
transfer (or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition of) including the filing
(or participation in the filing of) of a registration statement with the
Securities and Exchange Commission in respect of, any shares of Common Stock,
options or warrants to acquire shares of Common Stock, or securities
exchangeable or exercisable for or convertible into shares of Common Stock
currently or hereafter owned either of record or beneficially (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by the
undersigned (or such spouse or family member), or publicly announce an intention
to do any of the foregoing, for a period commencing on the date hereof and
continuing through the close of trading on the date 90
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days after the date of the Final Offering Memorandum (the "Lock-Up Period"). The
foregoing shall not apply to transfers or sales of Common Stock pursuant to any
contract, instruction or plan, including a contract, instruction or plan
complying with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended,
that has been entered into by the undersigned prior to the date of this
agreement. The undersigned hereby acknowledges that the Company has agreed in
the Purchase Agreement to provide written notice of any event that would result
in an extension of the Lock-Up Period pursuant to the previous paragraph to the
undersigned (in accordance with Section 14 of the Purchase Agreement) and agrees
that any such notice properly delivered will be deemed to have given to, and
received by, the undersigned. The undersigned hereby further agrees that, prior
to engaging in any transaction or taking any other action that is subject to the
terms of this Lock-Up Agreement during the period from the date of this Lock-Up
Agreement to and including the 34th day following the expiration of the initial
Lock-Up Period, it will give notice thereof to the Company and will not
consummate such transaction or take any such action unless it has received
written confirmation from the Company that the Lock-Up Period (as such may have
been extended pursuant to the previous paragraph) has expired. The undersigned
also agrees and consents to the entry of stop transfer instructions with the
Company's transfer agent and registrar against the transfer of shares of Common
Stock or securities convertible into or exchangeable or exercisable for Common
Stock held by the undersigned except in compliance with the foregoing
restrictions.
This agreement is irrevocable and will be binding on the undersigned and
the respective successors, heirs, personal representatives, and assigns of the
undersigned.
Very truly yours,
_______________________
Name:
Title:
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ANNEX A
LIST OF SIGNIFICANT SUBSIDIARIES
Liberty Medical Supply, Inc.
National Diabetic Pharmacies, LLC
1
