EXHIBIT 1.01
[___] Shares
SALEM COMMUNICATIONS CORPORATION
(a Delaware corporation)
Class A Common Stock
(Par Value $.01 Per Share)
EQUITY UNDERWRITING AGREEMENT
June __, 1999
BT Alex. Brown Incorporated
ING Baring Furman Selz LLC
Salomon Smith Barney Inc.
As Representatives of the
Several Underwriters
c/o BT Alex. Brown Incorporated
One South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
Salem Communications Corporation, a Delaware corporation (the
"Company"), and Edward G. Atsinger, III; Edward G. Atsinger, III Trust; and
Stuart W. Epperson, Sr. (the "Selling Stockholders") confirm their respective
agreements with BT Alex. Brown Incorporated ("BT Alex. Brown") and each of the
other Underwriters named in Schedule A hereto (collectively, the "Underwriters,"
which term shall also include any underwriter substituted as hereinafter
provided in Section 10 hereof), for whom BT Alex. Brown, ING Baring Furman Selz
LLC (together with BT Alex. Brown, the "Lead Managers") and Salomon Smith Barney
Inc. are acting as representatives (in such capacity, the "Representatives"),
with respect to (i) the issue
and sale by the Company, the sale by the Selling Stockholders and the purchase
by the Underwriters, acting severally and not jointly, of the respective numbers
of shares of Class A common stock, par value $.01 per share, of the Company
("Common Stock") set forth in said Schedule A, and (ii) the grant by the Selling
Stockholders to the Underwriters, acting severally and not jointly, of the
option described in Section 2(b) hereof to purchase all or any part of [___]
additional shares of Common Stock to cover over-allotments, if any. The
aforesaid [___] shares of Common Stock (the "Initial Securities") to be
purchased by the Underwriters and all or any part of the [___] shares of Common
Stock subject to the option described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities."
The Company and the Selling Stockholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company, the Selling Stockholders and the Underwriters agree that up
to [________] shares of the Initial Securities to be purchased by the
Underwriters (the "Reserved Securities") shall be reserved for sale by the
Underwriters to certain eligible employees and persons having business
relationships with the Company, as part of the distribution of the Securities by
the Underwriters, subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc. (the "NASD") and all other applicable laws, rules and regulations.
To the extent that such Reserved Securities are not orally confirmed for
purchase by such eligible employees and persons having business relationships
with the Company by the end of the first business day after the date of this
Agreement, such Reserved Securities may be offered to the public as part of the
public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-76649) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus. Promptly after
execution and delivery of this Agreement, the Company will prepare and file a
prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the
rules and regulations of the Commission under the 1933 Act (the "1933 Act
Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act
Regulations. The information included in such prospectus that was omitted from
such registration statement at the time it became effective but that is deemed
to be part of such registration statement at the time it became effective
pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each form of prospectus used before
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such registration statement became effective, and any prospectus that omitted
the Rule 430A Information that was used after such effectiveness and prior to
the execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto at the time it became effective and including the Rule 430A
Information, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final form of prospectus in the form first furnished to the
Underwriters for use in connection with the offering of the Securities is herein
called the "Prospectus." For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b), hereof and agrees with each Underwriter,
as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information has
been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the
Rule 462(b) Registration Statement and any amendments and supplements
thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated
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therein or necessary to make the statements therein not misleading.
Neither the Prospectus nor any amendments or supplements thereto, at the
time the Prospectus or any amendments or supplements thereto were issued
and at the Closing Time (and, if any Option Securities are purchased, at
the Date of Delivery), included or will include an untrue statement of a
material fact or omitted or will 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. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through the
Representatives expressly for use in the Registration Statement or the
Prospectus.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when
so filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectus delivered to the Underwriters
for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
The Company has filed a registration statement pursuant to Section
12(b) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), to register the Common Stock under the 1934 Act, and such
registration statement has become effective.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included in the
Registration Statement and the Prospectus, together with the related
schedules and notes, present fairly the financial position of the
Company and its consolidated subsidiaries at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries for the periods specified;
said financial statements have been prepared in conformity with
generally accepted accounting principles
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("GAAP") applied on a consistent basis throughout the periods involved.
The supporting schedules included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information included in the Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with that of
the audited financial statements included in the Registration Statement.
The pro forma financial statements and the related notes thereto
included in the Registration Statement and the Prospectus present fairly
the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described
therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein. The
applicable requirements of Rules 3-05 and 11-01 of Regulation S-X under
the 1933 Act as they relate to the Company's August 1998 purchase of
KIEV-AM have been properly applied.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been
no material adverse change in the condition, financial or otherwise, or
in the earnings, business affairs or business prospects of the Company
and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the
Company or any of its subsidiaries, other than those in the ordinary
course of business, which are material with respect to the Company and
its subsidiaries considered as one enterprise, and (C) there has been no
dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing in
each other jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the
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conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each "significant subsidiary" of
the Company (as such term is defined in Rule 1-02 of Regulation S-X) and
Salem Radio Network Incorporated, Salem Radio Representatives, Inc., CCM
Communications, Inc. and One Place, Ltd. (each a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly organized and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and is duly qualified as a foreign
corporation 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 where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect; all of the issued and
outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any
Subsidiary was issued in violation of the preemptive or similar rights
of any securityholder of such Subsidiary. The only subsidiaries of the
Company are the subsidiaries listed on Exhibit 21 to the Registration
Statement.
(vii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement pursuant to
agreements or employee benefit plans referred to in the Prospectus or
pursuant to the exercise of options referred to in the Prospectus). The
shares of issued and outstanding capital stock of the Company, including
the Securities to be purchased by the Underwriters from the Selling
Stockholders, have been duly authorized and validly issued and are fully
paid and non-assessable; none of the outstanding shares of capital stock
of the Company, including the Securities to be purchased by the
Underwriters from the Selling Stockholders, was issued in violation of
the preemptive or other similar rights of any securityholder of the
Company.
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(viii) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Securities to
be purchased by the Underwriters from the Company have been duly
authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued, fully paid and non-assessable; the Common Stock conforms
to all statements relating thereto contained in the Prospectus and such
description conforms to the rights set forth in the instruments defining
the same; no holder of the Securities will be subject to personal
liability by reason of being such a holder; and the issuance and sale of
the Securities by the Company and the sale of the Securities by the
Selling Stockholders is not subject to the preemptive or other similar
rights of any securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor any
of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a party
or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated in this Agreement and in the Registration
Statement (including the issuance and sale of the Securities, and the
use of the proceeds from the sale of the Securities as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the
Company with its obligations under this Agreement have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event
(as defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any subsidiary pursuant to, the Agreements and Instruments (except
for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor
will such action result in any violation of the provisions of the
charter or by-laws of the Company or any subsidiary or any applicable
law, statute, rule, regulation,
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judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
the Company or any subsidiary or any of their respective assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the employees
of the Company or any subsidiary exists or, to the knowledge of the
Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any
subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to result
in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, including, but not limited to, the
Federal Communications Commission (the "FCC"), now pending, or, to the
knowledge of the Company, threatened, to which the Company or any
subsidiary is a party, or to which the property or assets of the Company
or any subsidiary is subject, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which might
reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal
or governmental proceedings to which the Company or any subsidiary is a
party or of which any of their respective property or assets is the
subject which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
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(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the subject
of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
(xv) Absence of Further Requirements. No registration or filing
with, or authorization, approval, consent, license, order, qualification
or decree of, any court or governmental authority or agency is necessary
or required for the performance by the Company of its obligations
hereunder, in connection with the offering, issuance, sale or delivery
of the Securities under this Agreement or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933
Act Regulations and foreign or state securities or blue sky laws.
(xvi) Regulatory Matters. The Company and its subsidiaries possess
such permits, licenses, approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by, and have satisfied
all filing, registration and other regulatory requirements
(collectively, "Regulations") of, the appropriate federal, state, local
or foreign regulatory agencies or bodies (including, but not limited to,
the FCC) necessary to conduct the business now operated by them; the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses and Regulations, except
where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect; all of the Governmental Licenses are
valid and in full force and effect, for the maximum term customarily
issued, with no material conditions, restrictions or qualifications,
except when the invalidity of such Governmental Licenses or the failure
of such Governmental Licenses to be in full force and effect or the
restrictions would not have a Material
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Adverse Effect; neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the revocation,
modification, non-renewal or suspension of any such Governmental
Licenses which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material
Adverse Effect; and the Company knows of no reason why any proceedings
relating to the revocation, modification, non-renewal or suspension of
any such Governmental Licenses might be initiated.
(xvii) Title to Property. The Company and its subsidiaries have good
and marketable title to all real property owned by the Company and its
subsidiaries and good title to all other properties owned by them, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or any of its subsidiaries; and all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Prospectus, are in full
force and effect, and neither the Company nor any subsidiary has any
notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any subsidiary under any
of the leases or subleases mentioned above, or affecting or questioning
the rights of the Company or such subsidiary to the continued possession
of the leased or subleased premises under any such lease or sublease.
(xviii) Tax Returns and Payment of Taxes. The Company and its
subsidiaries have timely filed all Federal, state, local and foreign tax
returns that are required to be filed or have duly requested extensions
thereof and all such tax returns are true, correct and complete, except
to the extent that any failure to file or request an extension, or any
incorrectness would not, individually or in the aggregate, result in a
Material Adverse Effect. The Company and its subsidiaries have timely
paid all taxes shown as due on such filed tax returns (including any
related assessments, fines or penalties), except to the extent that any
such taxes are being contested in good faith and by appropriate
proceedings, or to the extent that any failure to pay would not,
individually or in the aggregate, result in a Material Adverse Effect;
and adequate charges, accruals and reserves have been provided for in
the financial statements referred to in Section 1(a)(iii) above in
accordance with GAAP in respect of all Federal, state, local and foreign
taxes for all periods as to which
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the tax liability of the Company or any of its subsidiaries has not been
finally determined or remains open to examination by applicable taxing
authorities. The Company is not a "United States real property holding
corporation" within the meaning of Section 897(c)(3) of the Internal
Revenue Code of 1986, as amended.
(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except as described in the Registration
Statement and except as would not, singly or in the aggregate, result in
a Material Adverse Effect, (A) neither the Company nor any of its
subsidiaries is in violation of any federal, state, local or foreign
statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, 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 the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials (collectively, "Environmental Laws"), (B) the
Company and its subsidiaries have all permits, authorizations and
approvals required under any applicable Environmental Laws and are each
in compliance with their requirements, (C) there are no pending or
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company or any of its subsidiaries and (D) there are no
events or circumstances that might reasonably be expected to form the
basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against
or affecting the Company or any of its subsidiaries relating to
Hazardous Materials or any Environmental Laws.
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(xxi) Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; and the Company has no reason to
believe that the Company or any of its subsidiaries will not be able to
renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary
to continue its business, except where the failure to renew or maintain
such coverage is not reasonably expected to result in a Material Adverse
Effect.
(xxii) Year 2000. The Company has reviewed its operations and those
of its subsidiaries and any third party with which the Company or any of
its subsidiaries has a material relationship to evaluate the extent to
which the business or operations of the Company or any of its
subsidiaries will be affected by the Year 2000 Problem. Other than as
set forth in the Prospectus, the Company does not anticipate incurring
operating expenses or costs material to the financial position or
results of operations of the Company and its subsidiaries in connection
with the actions that the Company currently believes are necessary to
address the Year 2000 Problem. As a result of the aforementioned review,
the Company has no reason to believe, and does not believe, that the
Year 2000 Problem will have a Material Adverse Effect on the Company and
its subsidiaries considered as one enterprise or result in any material
loss or interference with the business or operations of the Company or
any of its subsidiaries. The "Year 2000 Problem" as used herein means
any risk that computer hardware or software used in the receipt,
transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000.
(xxiii) Affiliate Transactions. No relationship, direct or indirect,
exists between or among any of the Company or any affiliate of the
Company, on the one hand, and any director, officer, stockholder,
customer or supplier of any of them, on the other hand, that is required
by the 1933 Act or the 1933 Act Regulations to be described in the
Registration Statement or the Prospectus which is not so described or is
not described as required.
(xxiv) No Stabilization or Manipulation. The Company has not taken
and will not take directly or indirectly, any action designed to, or
that might
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reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Securities in violation of Regulation M
under the 1934 Act.
(xxv) Registration Rights. There are no persons with registration
rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the
Company under the 1933 Act.
(b) Representations and Warranties by the Selling Stockholders. Each
Selling Stockholder severally represents and warrants to each Underwriter as of
the date hereof, as of the Closing Time, and, if such Selling Stockholder is
selling Option Securities on a Date of Delivery, as of each such Date of
Delivery, and agrees with each Underwriter, as follows:
(i) Accurate Disclosure. To the best knowledge of such Selling
Stockholder, the representations and warranties of the Company contained
in Section 1(a) hereof are true and correct; such Selling Stockholder
has reviewed and is familiar with the Registration Statement and the
Prospectus, and the Prospectus does 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; such Selling Stockholder is not
prompted to sell the Securities to be sold by such Selling Stockholder
hereunder by any information concerning the Company or any subsidiary of
the Company which is not set forth in the Prospectus.
(ii) Authorization of Agreements. Such Selling Stockholder has the
full right, power and authority to enter into this Agreement and a Power
of Attorney and Custody Agreement (collectively, the "Power of Attorney
and Custody Agreement") and to sell, transfer and deliver the Securities
to be sold by such Selling Stockholder hereunder. The execution and
delivery of this Agreement and the Power of Attorney and Custody
Agreement and the sale and delivery of the Securities to be sold by such
Selling Stockholder and the consummation of the transactions
contemplated herein and compliance by such Selling Stockholder with its
obligations hereunder do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute
a breach of, or default under, or result in the creation or imposi tion
of any tax, lien, charge or encumbrance upon the Securities to be sold
by such Selling Stockholder or any property or assets of such Selling
Stockholder pursuant to, any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, license, lease or other agreement
or instrument to which such
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Selling Stockholder is a party or by which such Selling Stockholder may
be bound, or to which any of the property or assets of such Selling
Stockholder is subject, nor will such action result in any violation of
any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, having
jurisdiction over such Selling Stockholder or any of such Selling
Stockholder's properties or assets.
(iii) Valid and Marketable Title. Such Selling Stockholder has and
will at the Closing Time and, if any Option Securities are purchased, on
each Date of Delivery have valid and marketable title to the Securities
to be sold by such Selling Stockholder pursuant to this Agreement free
and clear of any security interest, mortgage, pledge, lien, charge,
claim, equity or encumbrance of any kind; and upon delivery of such
Securities and payment of the purchase price therefor as contemplated
herein, assuming each such Underwriter has no notice of any adverse
claim, each of the Underwriters will receive valid and marketable title
to the Securities purchased by it from such Selling Stockholder, free
and clear of any security interest, mortgage, pledge, lien, charge,
claim, equity or encumbrance of any kind.
(iv) Due Execution of Power of Attorney and Custody Agreement. Such
Selling Stockholder has duly executed and delivered, in the form
heretofore furnished to the Representatives, the Power of Attorney and
Custody Agreement with Eric H. Halvorson and Dirk Gastaldo, or any of
them, as attorneys-in-fact (the "Attorneys-in-Fact") and The Bank of New
York, as custodian (the "Custodian"); the Custodian is authorized to
deliver the Securities to be sold by such Selling Stockholder hereunder
and to accept payment therefor; and each Attorney-in-Fact is authorized
to execute and deliver this Agreement and any certificate that may be
required pursuant to Section 5 on behalf of such Selling Stockholder, to
sell, assign and transfer to the Underwriters the Securities to be sold
by such Selling Stockholder under this Agreement, to determine the
purchase price to be paid by the Underwriters to such Selling
Stockholder, as provided in Section 2(a) hereof, to authorize the
delivery of the Securities to be sold by such Selling Stockholder
hereunder, to accept payment therefor, and otherwise to act on behalf of
such Selling Stockholder in connection with this Agreement.
(v) No Stabilization or Manipulation. Such Selling Stockholder has
not taken and will not take, directly or indirectly, any action designed
to, or might reasonably be expected to, cause or result in stabilization
or manipulation of the price of the Securities in violation of
Regulation M under the 1934 Act.
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(vi) Absence of Further Requirements. No registration or filing
with, or authorization, approval, consent, license, order, qualification
or decree of, any court or governmental authority or agency is necessary
or required to be obtained by such Selling Stockholder for the
performance by such Selling Stockholder of such Selling Stockholder's
obligations hereunder or in the Power of Attorney and Custody Agreement,
or in connection with the offer, sale or delivery of the Securities
under this Agreement or the consummation of the transactions
contemplated by this Agreement, except such as may have been already
obtained or as may be required under the 1933 Act or the 1933 Act
Regulations and foreign or state securities or blue sky laws.
(vii) Restriction on Sale of Securities. During a period of 180 days
from the date of the Prospectus, such Selling Stockholder will not,
without the prior written consent of the Lead Managers, (i) directly or
indirectly, offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose
of, directly or indirectly, any share of Common Stock or any securities
convertible into or exercisable or exchangeable for or repayable with
Common Stock or file any registration statement under the 1933 Act with
respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not
apply to the Securities to be sold hereunder.
(viii) Certificates Suitable for Transfer. Certificates for all of
the Securities to be sold by such Selling Stockholder pursuant to this
Agreement, in suitable form for transfer by delivery or accompanied by
duly executed instruments of transfer or assignment in blank with
signatures guaranteed, have been placed in custody with the Custodian
with irrevocable conditional instructions to deliver such Securities to
the Underwriters pursuant to this Agreement.
(ix) No Association with NASD. Neither such Selling Stockholder nor
any of such Selling Stockholder's affiliates directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, or has any other association with (within the
meaning of Article I, Section 1(q) of the By-laws of the NASD), any
member firm of the NASD.
15
(c) Officer's Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of the Selling Stockholders as such and
delivered to the Representatives or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by
such Selling Stockholder to the Underwriters as to matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and each Selling Stockholder, severally and not jointly,
agree to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company and
each Selling Stockholder, at the price per share set forth in Schedule C, that
proportion of the number of Initial Securities set forth in Schedule B opposite
the name of the Company or such Selling Stockholder, as the case may be, which
the number of Initial Securities set forth in Schedule A opposite the name of
such Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, bears to the total number of Initial Securities, subject, in
each case, to such adjustments among the Underwriters as the Representatives in
their sole discretion shall make to eliminate any sales or purchases of
fractional securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Selling Stockholders, acting severally and not jointly, hereby
grant an option to the Underwriters, severally and not jointly, to purchase up
to an additional [__] shares of Common Stock at the price per share set forth in
Schedule C, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities but not payable on
the Option Securities. The option hereby granted will expire 30 days after the
date hereof and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Initial Securities upon notice by BT Alex.
Brown to the Company and the Selling Stockholders setting forth the number of
Option Securities as to which the several Underwriters are then exercising the
option and the time and date of payment and delivery for such Option Securities.
Any such time and date of delivery for the Option Securities (a "Date of
Delivery") shall be determined by the Lead Managers, but shall not be later than
seven full business days
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after the exercise of said option, nor in any event prior to the Closing Time,
as hereinafter defined. If the option is exercised as to all or any portion of
the Option Securities, each of the Underwriters, acting severally and not
jointly, will purchase that proportion of the total number of Option Securities
then being purchased which the number of Initial Securities set forth in
Schedule A opposite the name of such Underwriter bears to the total number of
Initial Securities, subject in each case to such adjustments as BT Alex. Brown
in its discretion shall make to eliminate any sales or purchases of fractional
shares. Any election to purchase Option Securities will be made in proportion to
the number of Option Securities to be sold by the Selling Stockholders as set
forth in Schedule B.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, or at such
other place as shall be agreed upon by the Lead Managers and the Company, at
9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Lead Managers and the Company (such time and date of payment and delivery being
herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Lead Managers and
the Selling Stockholders, on each Date of Delivery as specified in the notice
from BT Alex. Brown to the Company and the Selling Stockholders.
Payment shall be made to the Company and the Selling Stockholders by
wire transfer of immediately available funds to a bank account designated by the
Company and the Custodian pursuant to each Selling Stockholder's Power of
Attorney and Custody Agreement, as the case may be, against delivery to the
Representatives for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. It is understood that each
Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. BT Alex. Brown, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as
17
the case may be, but such payment shall not relieve such Underwriter from its
obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Representatives may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 9:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(b), will comply with the requirements
of Rule 430A and will notify the Global Coordinator immediately, and
confirm the notice in writing, (i) when any post-effective amendment to
the Registration Statement shall become effective, or any supplement to
the Prospectus or any amended Prospectus shall have been filed, (ii) of
the receipt of any comments from the Commission, (iii) of any request by
the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information,
and (iv) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of
the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect
the filings necessary pursuant to Rule 424(b) and will take such steps
as it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order
is issued, to obtain the lifting thereof at the earliest possible
moment.
(b) Filing of Amendments. The Company will give the Lead Managers
notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)) or any
amendment,
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supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the
Prospectus, will furnish the Lead Managers with copies of any such
documents a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file or use any such document to
which the Lead Managers or counsel for the Underwriters shall object.
(c) Delivery of Registration Statements. The Company has furnished
or will deliver to the Representatives and counsel for the Underwriters,
without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Representatives, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the Underwriters. The copies of the Registration
Statement and each amendment thereto furnished to the Underwriters will
be identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(d) Delivery of Prospectus. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each Underwriter, without charge,
during the period when the Prospectus is required to be delivered under
the 1933 Act or the 1934 Act, such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably request.
The Prospectus and any amendments or supplements thereto furnished to
the Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to
the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit
the completion of the distribution of the Securities as contemplated in
this Agreement and in the Prospectus. If at any time when a prospectus
is required by the 1933 Act to be delivered in connection with sales of
the Securities, any event shall occur or condition shall exist as a
result of which it is necessary, in the opinion of counsel for the
Underwriters or for the Company, to amend the
19
Registration Statement or amend or supplement any Prospectus in order
that the Prospectus will not include any untrue statements of a material
fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, or if it shall be
necessary, in the opinion of such counsel, at any such time to amend the
Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as may
be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements,
and the Company will furnish to the Underwriters such number of copies
of such amendment or supplement as the Underwriters may reasonably
request.
(f) Blue Sky Qualifications. The Company will use its best efforts,
in cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states
and other jurisdictions as the Lead Managaers may designate and to
maintain such qualifications in effect for a period of not less than one
year from the later of the effective date of the Registration Statement
and any Rule 462(b) Registration Statement; provided, however, that the
Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company
will file such statements and reports as may be required by the laws of
such jurisdiction to continue such qualification in effect for a period
of not less than one year from the effective date of the Registration
Statement and any Rule 462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to
its securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds."
20
(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Common Stock (including the Securities) on
the Nasdaq National Market and will file with the Nasdaq National Market
all documents and notices required by the Nasdaq National Market of
companies that have securities that are traded in the over-the-counter
market and quotations for which are reported by the Nasdaq National
Market.
(j) Restriction on Sale of Securities. During a period of 180 days
from the date of the Prospectus, the Company will not, without the prior
written consent of the Lead Managers, (i) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any share of
Common Stock or any securities convertible into or exercisable or
exchangeable for or repayable with Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or
(ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise.
The foregoing sentence shall not apply to (A) the Securities to be sold
hereunder, (B) any shares of Common Stock issued by the Company upon the
exercise of an option outstanding on the date hereof and referred to in
the Prospectus, (C) any shares of Common Stock issued or options to
purchase Common Stock granted pursuant to existing employee benefit
plans of the Company referred to in the Prospectus or (D) any shares of
Common Stock issued pursuant to any non-employee director stock plan.
(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934
Act and the rules and regulations of the Commission thereunder.
(l) Compliance with NASD Rules. The Company hereby agrees that it
will ensure that the Reserved Securities will be restricted as required
by the NASD or the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of this
Agreement. The Underwriters will notify the Company as to which persons
will need to be so restricted. At the request of the Underwriters, the
Company will direct the transfer agent to place a stop transfer
restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the
Reserved Securities, the Company
21
agrees to reimburse the Underwriters for any reasonable expenses
(including, without limitation, legal expenses) they incur in connection
with such release.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company and the Selling Stockholders will pay or cause
to be paid all expenses incident to the performance of their obligations under
this Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriters of this Agreement, any Agreement among
Underwriters and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Securities, (iii) the
preparation, issuance and delivery of the certificates for the Securities to the
Underwriters, including any stock or other transfer taxes and any stamp or other
duties payable upon the sale, issuance or delivery of the Securities to the
Underwriters, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, (vi) the printing and
delivery to the Underwriters of copies of each preliminary prospectus and of the
Prospectus and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities, (ix) the filing fees incident to the review by the
NASD of the terms of the sale of the Securities, (x) the fees and expenses
incurred in connection with the inclusion of the Securities in the Nasdaq
National Market and (xi) all costs and expenses of the Underwriters, including
the reasonable fees and disbursements of counsel for the Underwriters, in
connection with matters related to the Reserved Securities which are designated
by the Company for sale to employees and others having a business relationship
with the Company.
(b) Expenses of the Selling Stockholders. The Selling Stockholders,
jointly and severally, will pay all expenses incident to the performance of each
Selling Stockholder's obligations under, and the consummation of the
transactions contemplated by, this Agreement, including (i) any stamp duties,
capital duties and stock transfer taxes, if any, payable upon the sale of the
Securities to the Underwriters and (ii) the fees and disbursements of their
respective counsel and accountants.
22
(c) Termination of Agreement. If this Agreement is terminated (x) by the
Representatives in accordance with the provisions of Section 5 (other than
paragraph (k) thereof), Section 9(a)(i) or Section 11(a) hereof or (y) in
accordance with Section 11(b) hereof, the Company and the Selling Stockholders
shall reimburse the Underwriters for all of their out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Underwriters.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Stockholders may make for
the sharing of such costs and expenses.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Stockholders
contained in Section 1 hereof or in certificates of any officer of the Company
or any subsidiary of the Company or of or on behalf of any Selling Stockholder
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the 1933 Act
or proceedings therefor initiated or threatened by the Commission, and
any request on the part of the Commission for additional information
shall have been complied with to the reasonable satisfaction of counsel
to the Underwriters. A prospectus containing the Rule 430A Information
shall have been filed with the Commission in accordance with Rule 424(b)
(or a post-effective amendment providing such information shall have
been filed and declared effective in accordance with the requirements of
Rule 430A).
(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinions, dated as of
Closing Time, of Eric H. Halvorson, Executive Vice President, Chief
Operating Officer and General Counsel of the Company, and Gibson, Dunn &
Crutcher LLP, counsel for the Company, each in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letters for each of the other Underwriters, to
the effect set forth in Exhibit A-1 and Exhibit A-2 hereto,
respectively, and to such further effect as counsel to the Underwriters
may reasonably request.
23
(c) Opinion of Regulatory Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Fletcher, Heald & Hildreth, P.L.C., special regulatory
counsel for the Company, in form and substance satisfactory to counsel
for the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters, to the effect set forth in
Exhibit B hereto and to such further effect as counsel to the
Underwriters may reasonably request.
(d) Opinion of Counsel for Selling Stockholders. At Closing Time,
the Representatives shall have received the favorable opinion, dated as
of Closing Time, of Gibson, Dunn & Crutcher LLP, counsel for the Selling
Stockholders, in form and substance satisfactory to counsel for the
Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters, to the effect set forth in Exhibit C
hereto and to such further effect as counsel to the Underwriters may
reasonably request.
(e) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Debevoise & Plimpton, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the
other Underwriters, with respect to the matters set forth in clauses
(i), (ii), (iv) through (viii), inclusive, (ix) (solely as to the
information in the Prospectus under "Description of Capital Stock-Common
Stock") and the penultimate paragraph of Exhibit A-2 hereto. Such
counsel may state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and
certificates of public officials.
(f) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in
the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary
course of business, and the Representatives shall have received a
certificate of the President and Chief Executive Officer of the Company
and of the Vice President and Chief Financial Officer of the Company,
dated as of Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect
as though expressly made at and as of Closing Time, (iii) the Company
24
has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to Closing Time, and (iv)
no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted
or are pending or are contemplated by the Commission.
(g) Certificate of Selling Stockholders. At Closing Time, the
Representatives shall have received a certificate of each Selling
Stockholder, dated as of Closing Time, to the effect that (i) the
representations and warranties of such Selling Stockholder contained in
Section 1(b) hereof are true and correct with the same force and effect
as though expressly made at and as of Closing Time and (ii) such Selling
Stockholder has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied under this Agreement
at or prior to Closing Time.
(h) Accountants' Comfort Letter. At the time of the execution of
this Agreement, the Representatives shall have received from Ernst &
Young LLP a letter dated such date, in form and substance satisfactory
to the Representatives, together with signed or reproduced copies of
such letter for each of the other Underwriters containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement
and the Prospectus.
(i) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from Ernst & Young LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (h) of this Section, except that the
specified date referred to shall be a date not more than three business
days prior to Closing Time.
(j) Approval of Listing. At Closing Time, the Securities shall have
been approved for inclusion in the Nasdaq National Market.
(k) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.
25
(l) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the
form of Exhibit D hereto signed by the persons listed on Schedule D
hereto.
(m) Conditions to Purchase of Option Securities. In the event that
the Underwriters exercise their option provided in Section 2(b) hereof
to purchase all or any portion of the Option Securities, the
representations and warranties of the Company and the Selling
Stockholders contained herein and the statements in any certificates
furnished by the Company or any subsidiary of the Company hereunder
shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President and Chief Executive Officer of the
Company and of the Vice President and Chief Financial Officer of the
Company confirming that the certificate delivered at the Closing
Time pursuant to Section 5(f) hereof remains true and correct as of
such Date of Delivery.
(ii) Certificate of Selling Stockholders. A certificate, dated
such Date of Delivery, of each Selling Stockholder confirming that
the certificate delivered at Closing Time pursuant to Section 5(g)
remains true and correct as of such Date of Delivery.
(iii) Opinions of Counsel for Company. The favorable opinions
of Eric H. Halvorson, Executive Vice President, Chief Operating
Officer and General Counsel of the Company, Gibson, Dunn & Crutcher
LLP, counsel for the Company, and Fletcher, Heald & Hildreth,
P.L.C., special regulatory counsel for the Company, each in form and
substance satisfactory to counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities to be purchased
on such Date of Delivery and otherwise to the same effect as the
opinions required by Section 5(b) and (c) hereof, respectively.
(iv) Opinion of Counsel for the Selling Stockholders. The
favorable opinion of Gibson, Dunn & Crutcher LLP, counsel for the
Selling Stockholders, in form and substance satisfactory to counsel
for the Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Section 5(d)
hereof.
26
(v) Opinion of Counsel for Underwriters. The favorable opinion
of Debevoise & Plimpton, counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities to be purchased
on such Date of Delivery and otherwise to the same effect as the
opinion required by Section 5(e) hereof.
(vi) Bring-down Comfort Letter. A letter from Ernst & Young
LLP, in form and substance satisfactory to the Representatives and
dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the Representatives pursuant to
Section 5(i) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than
five days prior to such Date of Delivery.
(n) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with
such documents and opinions as they may require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
and the Selling Stockholders in connection with the issuance and sale of
the Securities as herein contemplated shall be satisfactory in form and
substance to the Representatives and counsel for the Underwriters.
(o) Termination of Agreement. If any condition specified in this
Section 5 shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several Underwriters to purchase
the relevant Option Securities, may be terminated by the Representatives
by notice to the Company at any time at or prior to Closing Time or such
Date of Delivery, as the case may be, and such termination shall be
without liability of any party to any other party except as provided in
Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such
termination and remain in full force and effect.
27
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company and the Selling
Stockholders, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement
or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or (B) any
alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Securities or the offering contemplated
hereby, and which is included as part of or referred to in any loss,
liability, claim, damage or expense arising out of or based upon matters
covered by clause (A) above, provided that the Company shall not be
liable under this clause (B) to the extent that it is determined in a
final judgment by a court of competent jurisdiction that such loss,
liability, claim, damage or expense resulted directly from any such acts
or failures to act undertaken or omitted to be taken by such Underwriter
through its gross negligence or willful misconduct;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by BT Alex. Brown),
reasonably incurred in investigating, preparing or defending against any
litigation, or any
28
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense (x) to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information, or
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) and (y) with respect to any preliminary prospectus to the extent that
the Company shall sustain the burden of proving that any such loss, liability,
claim, damage or expense of such Underwriter resulted solely from the fact that
such Underwriter, in contravention of a requirement of this Agreement or
applicable law, sold Securities to a person to whom such Underwriter failed to
send or give, at or prior to the Closing Time, a copy of the Prospectus as, if
applicable, amended or supplemented if the Company has previously furnished
copies thereof (sufficiently in advance of the Closing Time to allow for
distribution by the Closing Time) to such Underwriter and the loss, liability,
claim, damage or expense of such Underwriter resulted from an untrue statement
or omission of a material fact contained in or omitted from the preliminary
prospectus that was corrected in the Prospectus as, if applicable, amended or
supplemented prior to the Closing Time and such Prospectus was required by law
to be delivered at or prior to the written confirmation of sale to such person.
(b) Indemnification of Company, Directors and Officers and Selling
Stockholders. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and each Selling
Stockholder against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).
29
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by BT Alex. Brown, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
30
(e) Indemnification for Reserved Securities. In connection with the
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request, in writing to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of eligible employees and persons having
business relationships with the Company to pay for and accept delivery of
Reserved Securities which, by the end of the first business day following the
date of this Agreement, were subject to a properly confirmed agreement to
purchase.
(f) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Stockholders with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other hand from
the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Selling Stockholders on the one hand and of the Underwriters on the other hand
in connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Stockholders and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus, bear to the aggregate initial public offering price
of the Securities as set forth on such cover.
The relative fault of the Company and the Selling Stockholders on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material
31
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or the Selling Stockholders or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholder and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
32
The provisions of this Section 7 shall not affect any agreement among
the Company and the Selling Stockholders with respect to contributions.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries or the Selling Stockholders submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or controlling person, or by or on behalf of the
Company or the Selling Stockholders, and shall survive delivery of the
Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Stockholders, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representatives, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the Nasdaq National Market, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the NASD
or any other governmental authority, or (iv) if a banking moratorium has been
declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
33
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of Securities to be purchased on such date, this Agreement or, with
respect to any Date of Delivery which occurs after the Closing Time, the
obligation of the Underwriters to purchase and of the Selling
Stockholders to sell the Option Securities to be purchased and sold on
such Date of Delivery shall terminate without liability on the part of
any non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Selling Stockholders to sell the relevant
Option Securities, as the case may be, either (i) the Representatives or (ii)
the Company and the Selling Stockholders shall have the right to postpone
Closing Time or the relevant Date of Delivery, as the case may be, for a period
not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
As used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.
SECTION 11. Default by one or more of the Selling Stockholders or the
Company. (a) If a Selling Stockholder shall fail at Closing Time or at a Date of
34
Delivery to sell and deliver the number of Securities which such Selling
Stockholder is obligated to sell hereunder, and the remaining Selling
Stockholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number to be sold by all Selling Stockholders as set forth in Schedule B hereto,
then the Underwriters may, at the option of the Representatives, by notice from
the Representatives to the Company and the non-defaulting Selling Stockholders,
either (a) terminate this Agreement without any liability on the fault of any
non-defaulting party except that the provisions of Sections 1, 4, 6, 7 and 8
shall remain in full force and effect or (b) elect to purchase the Securities
which the non-defaulting Selling Stockholders have agreed to sell hereunder. No
action taken pursuant to this Section 11 shall relieve any Selling Stockholder
so defaulting from liability, if any, in respect of such default.
In the event of a default by a Selling Stockholder as referred to in
this Section 11, each of the Representatives, the Company and the non-defaulting
Selling Stockholders shall have the right to postpone Closing Time or Date of
Delivery for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectus or in any other documents or
arrangements.
(b) If the Company shall fail at Closing Time to sell the number of
Securities that it is obligated to sell hereunder, then this Agreement shall
terminate without any liability on the part of any nondefaulting party,
provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain
in full force and effect. No action taken pursuant to this Section 11 shall
relieve the Company from liability, if any, in respect of such default.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at One South Street,
Baltimore, Maryland 21202, attention of Equity Syndicate, with a copy to BT
Alex. Brown Incorporated, One Bankers Trust Plaza, 130 Liberty Street, New York,
New York, 10006, attention of General Counsel; notices to the Company shall be
directed to it at 4880 Santa Rosa Road, Suite 300, Camarillo, California 93012,
attention of Eric H. Halvorson; and notices to the Selling Stockholders shall be
directed to the Selling Stockholders, care of the Company at the foregoing
address, attention of Eric H. Halvorson.
35
SECTION 13. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters, the Company and the Selling Stockholders
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Stockholders and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and the Selling Stockholders
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Information Provided by the Underwriters. The Company, the
Selling Stockholders and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the fourth, fifth and thirteenth through seventeenth,
inclusive, paragraphs under the caption "Underwriting" in the Prospectus.
SECTION 16. Effect of Headings. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
36
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Stockholders a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the Underwriters,
the Company and the Selling Stockholders in accordance with its terms.
Very truly yours,
SALEM COMMUNICATIONS
CORPORATION
By
--------------------------
Title:
EDWARD G. ATSINGER, III
EDWARD G. ATSINGER, III TRUST
STUART W. EPPERSON, SR.
By
--------------------------
Name:
Attorney-in-Fact
CONFIRMED AND ACCEPTED,
as of the date first above written:
BT ALEX. BROWN INCORPORATED
ING BARING FURMAN SELZ LLC
SALOMON SMITH BARNEY INC.
By: BT ALEX. BROWN INCORPORATED
By
-----------------------------------
Authorized Signatory
For themselves and as Representatives of the
other Underwriters named in Schedule A hereto.
37
SCHEDULE A
Number of
Initial
Name of Underwriter Securities
------------------- ----------
BT Alex. Brown Incorporated..........................................
ING Baring Furman Selz LLC...........................................
Salomon Smith Barney Inc.............................................
----------
Total................................................................
==========
Sch A-1
SCHEDULE B
Number of Initial Maximum Number
Securities of Option Securities
to be Sold to Be Sold
----------------- --------------------
Salem Communications Corporation..............
Edward G. Atsinger, III Trust.................
Stuart W. Epperson, Sr........................
--------
Total.........................................
========
Sch B-1
SCHEDULE C
SALEM COMMUNICATIONS CORPORATION
[___] Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $[___].
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $[___], being an amount equal to the initial
public offering price set forth above less $[___] per share.
Sch C-1
SCHEDULE D
List of persons and entities
subject to lock-up
Edward G. Atsinger III
Stuart W. Epperson, Sr.
Eric H. Halvorson
Greg R. Anderson
Dirk Gastaldo
Kenneth L. Gaines
Dave Armstrong
Joe D. Davis
Kenneth W. Sasso
David Ruleman
W. Douglas Young
John W. Styll
Richard A. Riddle
Roland S. Hinz
Joseph S. Schuchert
Donald P. Hodel
Nancy A. Epperson
Edward G. Atsinger, III Trust
E. Atsinger 1999 Trust No. 1
M. Atsinger 1999 Trust No. 1
Epperson 1999 Trust No. 1
Sch D-1
Exhibit A-1
FORM OF OPINION OF ERIC H. HALVORSON
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) The Company is duly qualified as a foreign corporation 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 where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(ii) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the Underwriting Agreement, pursuant to agreements or employee benefit plans
referred to in the Prospectus or pursuant to the exercise of options referred to
in the Prospectus); the shares of issued and outstanding capital stock of the
Company, including the Securities to be purchased by the Underwriters from the
Selling Stockholders, have been duly authorized and validly issued and are fully
paid and non-assessable; and none of the outstanding shares of capital stock of
the Company, including the Securities to be purchased by the Underwriters from
the Selling Stockholders, was issued in violation of the preemptive or other
similar rights of any securityholder of the Company.
(iii) The issuance and sale of the Securities by the Company and the
sale of the Securities by the Selling Stockholders is not subject to the
preemptive or other similar rights of any securityholder of the Company.
(iv) Each Subsidiary has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation 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 where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; all of the issued and outstanding capital
stock of each Subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and, to the best of my knowledge, is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, except for
security interests created under the Credit Agreement, dated September 25, 1997,
as amended, by and among the Company, The Bank of New
A-1
York, as administrative agent, Bank of America NT & SA, as documentation agent,
and the lenders party thereto; none of the outstanding shares of capital stock
of any Subsidiary was issued in violation of the preemptive or similar rights of
any securityholder of such Subsidiary.
(v) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(vi) To the best of my knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
subsidiary is a party, or to which the property or assets of the Company or any
subsidiary is subject, before or brought by any court or governmental agency or
body, domestic or foreign, including, but not limited to, the FCC, which might
reasonably be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the properties or
assets thereof or the consummation of the transactions contemplated in the
Underwriting Agreement or the performance by the Company of its obligations
thereunder.
(vii) All descriptions in the Prospectus of contracts and other
documents to which the Company or its subsidiaries are a party are accurate in
all material respects; to the best of my knowledge, there are no franchises,
contracts, indentures, mortgages, deeds of trust, loan or credit agreements,
notes, leases or other agreements or instruments required to be described or
referred to in the Registration Statement or to be filed as exhibits thereto
other than those described or referred to therein or filed or incorporated by
reference as exhibits thereto, and the descriptions thereof or references
thereto are correct in all material respects.
(viii) To the best of my knowledge, neither the Company nor any
subsidiary is in violation of its charter or by-laws or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument that is described
or referred to in the Registration Statement or the Prospectus or filed or
incorporated by reference as an exhibit to the Registration Statement.
(ix) The execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions contemplated in the
Underwriting Agreement and in the Registration Statement (including the issuance
and sale of the Securities, and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use Of Proceeds")
and compliance by the Company with its obligations under the Underwriting
Agreement has been duly authorized by all necessary corporate action and do not
and will not, whether with
A-2
or without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
1(a)(x) of the Underwriting Agreement) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any subsidiary pursuant to, any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to me, to which the Company or any subsidiary is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company or any subsidiary is subject (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation of any
applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to me, of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any subsidiary or any of their
respective properties, assets or operations (except with respect to foreign,
federal or state securities laws, as to which I express no opinion).
(x) To the best of my knowledge, there are no persons with registration
rights or other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the 1933
Act.
Nothing has come to my attention that leads me to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information, (except for financial statements and schedules and other financial
data included therein or omitted therefrom, as to which I need make no
statement), at the time such Registration Statement or any such amendment became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any amendment or
supplement thereto (except for financial statements and schedules and other
financial data included therein or omitted therefrom, as to which I need make no
statement), at the time the Prospectus was issued, at the time any such amended
or supplemented prospectus was issued or at the Closing Time, included or
includes an untrue statement of a material fact or omitted or omits 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.
In rendering the above opinion, such counsel may rely, as to matters of
fact (but not as to legal conclusions), to the extent he deems proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
A-3
Exhibit A-2
FORM OF OPINION OF GIBSON, DUNN & CRUTCHER LLP
TO BE DELIVERED PURSUANT TO SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Underwriting
Agreement.
(iii) The shares of issued and outstanding capital stock of the Company,
including the Securities to be purchased by the Underwriters from the Selling
Stockholders, have been duly authorized and validly issued and are fully paid
and non-assessable; and none of the outstanding shares of capital stock of the
Company, including the Securities to be purchased by the Underwriters from the
Selling Stockholders, was issued in violation of preemptive or other similar
rights of any securityholder of the Company arising under the Delaware General
Corporation Law or the Company's certificate of incorporation or by-laws.
(iv) The Securities to be purchased by the Underwriters from the Company
have been duly authorized for issuance and sale to the Underwriters pursuant to
the Underwriting Agreement and, when issued and delivered by the Company
pursuant to the Underwriting Agreement against payment of the consideration set
forth in the Underwriting Agreement, will be validly issued, fully paid and
non-assessable, and no holder of the Securities is or will be subject to
personal liability by reason of being such a holder. The issuance and sale of
the Securities by the Company and the sale of the Securities by the Selling
Stockholders is not subject to the preemptive or other similar rights of any
securityholder of the Company arising under the Delaware General Corporation Law
or the Company's certificate of incorporation or by-laws.
(v) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
(vi) To our knowledge, based solely on oral advice of the staff of the
Commission, the Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in a manner reasonably
calculated to result in filing within the time period required by Rule 424(b);
and, to our knowledge, based solely on oral advice of the staff of the
Commission, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration
A-4
Statement has been issued under the 1933 Act and no proceedings for that purpose
have been instituted or are pending or contemplated by the Commission.
(vii) The Registration Statement, including any Rule 462(b) Registration
Statement and the Rule 430A Information, the Prospectus and each amendment or
supplement to the Registration Statement and the Prospectus as of their
respective effective or issue dates (other than the financial statements and
supporting schedules and other financial data included therein, as to which we
need express no opinion) appeared on their face to be appropriately responsive
in all material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(viii) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the certificate of incorporation and by-laws
of the Company and the requirements of the Nasdaq National Market.
(ix) The information in the Prospectus under "Description of Capital
Stock" and "Certain U.S. Federal Income Tax Considerations for Non-U.S. Holders
of Class A Common Stock" and in the Registration Statement under Items 14 and
15, to the extent that it constitutes matters of law, summaries of legal
matters, the Company's certificate of incorporation and by-laws or legal
conclusions, has been reviewed by us and is correct in all material respects.
(x) To the best of our knowledge, there are no laws, statutes, rules or
regulations that are required to be described in the Prospectus that are not
described as required.
(xi) No registration or filing with, or authorization, approval,
consent, license, order, qualification or decree of, any court or governmental
authority or agency (other than under the 1933 Act and the 1933 Act Regulations,
which have been obtained, or as may be required under foreign and state
securities or blue sky laws, as to which we need express no opinion) is
necessary or required by the Company in connection with the authorization,
execution and delivery by the Company of the Underwriting Agreement or for the
offering, issuance, sale or delivery of the Securities.
(xii) The execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions contemplated in the
Underwriting Agreement, and in the Registration Statement (including the
issuance and sale of the Securities, and the use of the proceeds from the sale
of the Securities as described in the Prospectus under the caption "Use Of
Proceeds") and compliance by the Company with its
A-5
obligations under the Underwriting Agreement will not result in any violation of
the provisions of the certificate of incorporation or by-laws of the Company.
(xiii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
Nothing has come to our attention that leads us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information, (except for financial statements and schedules and other financial
data included therein or omitted therefrom, as to which we need make no
statement), at the time such Registration Statement or any such amendment became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any amendment or
supplement thereto (except for financial statements and schedules and other
financial data included therein or omitted therefrom, as to which we need make
no statement), at the time the Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or at the Closing Time, included
or includes an untrue statement of a material fact or omitted or omits 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.
In rendering the above opinion, such counsel may rely, as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials, and
may state that they are not opining on matters governed by the Communications
Act of 1934, as amended, and the rules, regulations or administrative orders
promulgated thereunder. Such opinion shall not state that it is to be governed
or qualified by, or that it is otherwise subject to, any treatise, written
policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
A-6
Exhibit B
FORM OF OPINION OF FLETCHER, HEALD & HILDRETH, P.L.C.
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) No further registration or filing with, or authorization, approval,
consent, license, order, qualification or decree, of any court or government
authority or agency is necessary or required under the Federal Communications
Laws in connection with the authorization, execution and delivery by the Company
of the Underwriting Agreement or for the offering, issuance, sale or delivery of
the Securities, except that a routine filing of ownership reports with the FCC
will be necessary following this transaction.
(ii) Except as described in the Prospectus, the Company and its
subsidiaries hold all necessary authorizations, approvals, consents, orders,
licenses, certificates and permits issued by the FCC to own and to operate their
respective radio broadcast stations as identified in an attachment to this
opinion (all such held FCC authorizations, approvals, consents, orders,
licenses, certificates and permits, collectively, "FCC Licenses").
(iii) The FCC Licenses are in full force and effect for the maximum
license term customarily issued, with no material conditions, restrictions or
qualifications other than as set forth on the face of the authorizations
evidencing the FCC Licenses or as described in the Prospectus.
(iv) To the best of our knowledge, neither the Company nor any of its
subsidiaries is in violation of, or in default under, the Federal Communications
Laws, except as would not, singly or in the aggregate, result in a Material
Adverse Effect.
(v) To the best of our knowledge, (i) there is no unsatisfied adverse
FCC order, decree or ruling outstanding against the Company or any of its
subsidiaries, (ii) there is no proceeding, complaint or investigation against
the Company or any of its subsidiaries or in respect of any of the FCC Licenses
pending or threatened before the FCC nor is there any rulemaking proceeding
except such proceedings involving the AM and/or FM radio broadcasting industries
generally and (iii) no action, suit, proceeding or investigation is pending or
threatened, and no judgment, order, decree or ruling has been entered, against
the Company or any of its subsidiaries that gives us any reason to believe that
any of the FCC Licenses will be revoked or not renewed in the ordinary course.
(vi) The information in the Prospectus under the sections "Risk Factors
Government Regulation of the Broadcasting Industry May Negatively Impact Our
Business" and "Business - Federal Regulation of Radio Broadcasting," only to the
extent it constitutes matters of law, summaries of legal matters or legal
conclusions, has been reviewed by us and is correct in all material respects;
and we have no reason to believe that such sections of the Prospectus as of the
time the Registration Statement or any amendment became effective or at the time
the Prospectus or any amendment orsupplement thereto was issued or at the
Closing Time, contained or contain an untrue statement of a material matter of
law or omitted or omit to state a material matter of law necessary to make such
statements, in the light of the circumstances under which they were made, not
misleading.
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Exhibit C
FORM OF OPINION OF GIBSON, DUNN & CRUTCHER LLP
TO BE DELIVERED PURSUANT TO SECTION 5(d)
(i) No registration or filing with, or authorization, approval, consent,
license, order, qualification or decree of, any court or governmental authority
or agency is necessary or required to be obtained by the Selling Stockholders
for the performance by each Selling Stockholder of such Selling Stockholder's
obligations under the Underwriting Agreement or in the Power of Attorney and
Custody Agreement, or in connection with the offer, sale or delivery of the
Securities, except such as may have been already obtained or as may be required
under the 1933 Act or the 1933 Act Regulations and foreign or state securities
or blue sky laws, as to which we need express no opinion.
(ii) Each Power of Attorney and Custody Agreement has been duly executed
and delivered by the Selling Stockholders and constitutes the legal, valid and
binding agreement of such Selling Stockholder, and each Attorney-in-Fact has
been duly authorized thereunder to deliver the Securities on behalf of the
Selling Stockholders in accordance with the terms of the Underwriting Agreement.
(iii) The Underwriting Agreement has been duly executed and delivered by
or on behalf of each Selling Stockholder.
(iv) To our knowledge, the execution and delivery of the Underwriting
Agreement and the Power of Attorney and Custody Agreement and the sale and
delivery of the Securities and the consummation of the transactions contemplated
in the Underwriting Agreement and in the Registration Statement and compliance
by the Selling Stockholders with their respective obligations under the
Underwriting Agreement do not and will not, whether with or without the giving
of notice or passage of time or both, conflict with or constitute a breach of,
or default under, any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, license, lease or other or agreement or instrument to
which any Selling Stockholder is a party or by which any Selling Stockholder is
bound, or to which any of the property or assets of the Selling Stockholders is
subject (except for such conflicts, breaches or defaults that would not have a
material adverse effect on the ability of the Selling Stockholders to consummate
the transactions contemplated by the Underwriting Agreement), nor will such
action result in the creation or imposition of any tax, lien, charge or
encumbrance upon the Securities to be sold by the Selling Stockholders or in any
violation of any applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, governmental instrumentality or court having
jurisdiction over the Selling Stockholders or any of their respective properties
or assets.
C-1
(v) Upon delivery of the Securities and payment of the purchase price
therefor as contemplated by the Underwriting Agreement, assuming each
Underwriter has no notice of any adverse claim (within the meaning of the
Uniform Commerical Code as in effect in the State of New York (the "UCC") each
of the Underwriters will acquire all rights in such Securities free of any
adverse claim (within the meaning of the UCC), lien in favor of the Company or
restriction on transfer imposed by the Company.
In rendering the above opinion, such counsel may rely, as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials, and
may state that they are not opining on matters governed by the Communications
Act of 1934, as amended, and the rules, regulations or administrative orders
promulgated thereunder. Such opinion shall not state that it is to be governed
or qualified by, or that it is otherwise subject to, any treatise, written
policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
C-2
Exhibit D
[Form of lock-up from directors, officers or
other stockholders pursuant to Section 5(l)]
[ ], 1999
BT Alex. Brown Incorporated
ING Baring Furman Selz LLC
Salomon Smith Barney Inc.
As Representatives of the Several
Underwriters to be named in the
within-mentioned Underwriting Agreement
c/o BT Alex. Brown Incorporated
One South Street
Baltimore, Maryland 21202
Re: Proposed Public Offering by Salem Communications Corporation
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of Salem
Communications Corporation, a Delaware corporation (the "Company), understands
that BT Alex. Brown Incorporated, ING Baring Furman Selz LLC and Salomon Smith
Barney Inc. propose to enter into an Equity Underwriting Agreement (the
"Agreement") with the Company and certain selling stockholders (the "Selling
Stockholders"), providing for the public offering of shares (the "Securities")
of the Company's Class A common stock, par value $.01 per share (the "Common
Stock"). In recognition of the benefit that such an offering will confer upon
the undersigned as a stockholder [and an officer and/or director] of the
Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
underwriter to be named in the Agreement that, during a period of 180 days from
the date of the Agreement, the undersigned will not, without the prior written
consent of BT Alex. Brown Incorporated and ING Baring Furman Selz LLC, directly
or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, or otherwise dispose of or transfer any shares
of the Company's Common Stock or any securities convertible into or exchangeable
or exercisable for or repayable with Common Stock, whether now owned or
hereafter acquired by the undersigned or with respect to which the undersigned
has or hereafter acquires the power of disposition, or file any registration
statement under the Securities Act of 1933, as amended, with respect to any of
the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise.
Very truly yours,
Signature:
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Print Name:
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D-1