EXHIBIT 1
EXECUTION VERSION
SCHERING-PLOUGH CORPORATION
6.00% MANDATORY CONVERTIBLE PREFERRED STOCK
UNDERWRITING AGREEMENT
August 4, 2004
GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
CITIGROUP GLOBAL MARKETS INC.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
As Representatives of the
Underwriters named in
SCHEDULE II hereto
Ladies and Gentlemen:
Schering-Plough Corporation, a New Jersey corporation (the "COMPANY"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the underwriters named in SCHEDULE II hereto (the "UNDERWRITERS"), for whom
you (the "REPRESENTATIVES") are acting as representatives, an aggregate of
25,000,000 shares of its 6.00% mandatory convertible preferred stock, par value
$1.00 per share (the "PREFERRED STOCK"), convertible into common shares, par
value $0.50 per share (the "COMMON STOCK") of the Company (the "FIRM
SECURITIES") and, at the election of the Underwriters, up to an additional
3,750,000 shares of Preferred Stock (the "OPTIONAL SECURITIES") (the Firm
Securities and the Optional Securities that the Underwriters elect to purchase
pursuant to Section 2 hereof being collectively called the "UNDERWRITTEN
SECURITIES"). The Underwritten Securities will be established by the certificate
of amendment to the certificate of incorporation of the Company identified in
SCHEDULE I hereto (the "CERTIFICATE OF AMENDMENT"). If the firm or firms listed
in SCHEDULE II hereto include only the firm or firms listed in SCHEDULE I hereto
as Representatives, then the terms "Underwriters" and "Representatives", as used
herein, shall each be deemed to refer to such firm or firms.
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement on Form S-3 (No. 333-113222) in respect
of certain of the Company's securities (the "SHELF SECURITIES"), and has filed
such amendments thereto as may have been required to the date of this Agreement.
The Company has also filed with, or proposes to file with, the Commission
pursuant to Rule 424 under the Securities Act of 1933, as amended (the "1933
ACT"), a prospectus supplement specifically relating to the Underwritten
Securities. The registration statement, as amended, has been declared effective
by the Commission. Such registration statement, as amended, and the related
prospectus covering the Shelf Securities constituting a part thereof, as from
time to time amended or supplemented
pursuant to the Securities Exchange Act of 1934, as amended (the "1934 ACT"),
the 1933 Act, or otherwise, and including any registration statement filed
pursuant to Rule 462(b) of the 1933 Act, are collectively referred to herein as
the "REGISTRATION STATEMENT" and the "BASIC PROSPECTUS", respectively. The Basic
Prospectus as supplemented by the prospectus supplement (the "PROSPECTUS
SUPPLEMENT") specifically relating to the Underwritten Securities in the form
used to confirm sales of the Underwritten Securities is hereinafter referred to
as the "PROSPECTUS"; PROVIDED, HOWEVER, that all references to the "Registration
Statement" and the "Prospectus" will include all documents incorporated therein
by reference and filed prior to the execution of this Agreement.
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Representatives and to each Underwriter named in SCHEDULE II
hereto as of the date hereof, as follows:
(a) The Registration Statement and the Prospectus, at the time
the Registration Statement became effective and as of the date of this
Agreement, complied in all material respects with the requirements of
the 1933 Act and the rules and regulations thereunder (the
"REGULATIONS"). The Registration Statement, at the time the
Registration Statement became effective and as of the date of this
Agreement, did not, and will not, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus, at the time the Registration Statement became effective and
as of the date of this Agreement, did not, and will not, contain an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Notwithstanding the foregoing, the representations and warranties in
this subsection shall not apply to statements in or omissions from the
Registration Statement or 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 Prospectus.
(b) The financial statements (as supplemented by the related
notes and schedules) included in the Registration Statement and
Prospectus present fairly the financial position of the Company and its
consolidated subsidiaries on a consolidated basis, as at the dates
indicated, and the respective results of operations for the periods
specified therein, and have been prepared in conformity with U.S.
generally accepted accounting principles applied on a consistent basis
during the periods involved.
(c) The documents incorporated by reference in the Prospectus,
at the time they were or hereafter are filed with the Commission,
complied or will comply when so filed, as the case may be, in all
material respects with the requirements of the 1934 Act and the rules
and regulations thereunder, and, when read together and with the other
information in the Prospectus, at the time the Registration Statement
became effective and at the time any amendments thereto become
effective or hereafter during the period specified in Section 3(b), did
not and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they are made, not misleading.
2
(d) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, except as may
otherwise be disclosed or incorporated in or contemplated by the
Registration Statement and Prospectus as of the date of this Agreement:
(i) there has not been any material adverse change in the financial
condition, or in the results of operations, of the Company and its
subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business (a "MATERIAL ADVERSE EFFECT") and (ii)
there have not been any transactions entered into by the Company or its
subsidiaries not in the ordinary course of business, including
borrowings for the acquisition of receivables and other operations,
other than transactions that are not material in relation to the
Company and its subsidiaries considered as one enterprise.
(e) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of New Jersey with power and authority to own, lease and operate its
properties and conduct its business as described in the Registration
Statement and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases property, or conducts any
business, so as to require such qualification, other than where the
failure to be so qualified or in good standing would not have a
Material Adverse Effect.
(f) The execution and delivery of this Agreement, and the
consummation of the transactions contemplated herein, have been duly
authorized by all necessary corporate action and will not result in any
breach of any of the terms, conditions or provisions of, or constitute
a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company, as
applicable, pursuant to the Company's charter or by-laws or any
indenture, loan agreement, contract or other agreement or instrument to
which the Company is a party or by which the Company may be bound or to
which any of the property or assets of the Company is subject, except
for such breaches, defaults, liens, charges or encumbrances that
individually or in the aggregate would not reasonably be expected to
result in a Material Adverse Effect, nor, to its knowledge, will such
actions result in any material violation of any applicable law, order,
rule or regulation applicable to the Company of any court or of any
federal, state or other regulatory authority or other governmental body
having jurisdiction over the Company, except for such violations that
individually or in the aggregate would not reasonably be expected to
result in a Material Adverse Effect, nor will such actions result in
any violation of the provisions of the charter or by-laws of the
Company.
(g) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable.
(h) The shares of Common Stock initially issuable upon
conversion of the Underwritten Securities have been duly and validly
authorized and reserved for issuance and, when issued and delivered
upon conversion and in accordance with the provisions of the
Certificate of Amendment, will be duly and validly issued, fully paid
and non-assessable and will conform in all material respects to the
description of the Common Stock contained in the Prospectus.
3
(i) The Certificate of Amendment creating the Underwritten
Securities, the proposed form of which has been furnished to the
Representatives, will have been duly filed with the Secretary of State
of New Jersey on or before the Firm Closing Time (as defined in Section
2 hereof).
(j) The Underwritten Securities have been duly authorized, and,
when issued and delivered to and paid for by the Underwriters in
accordance with the provisions of this Agreement, will have been
validly issued and delivered and will be fully paid and non-assessable;
and the Underwritten Securities will conform in all material respects
to the descriptions thereof in the Prospectus.
(k) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign, is necessary or
required for the due authorization, execution and delivery by the
Company of this Agreement, for the use of proceeds by the Company
described in the Prospectus, or for the performance by the Company of
the transactions contemplated by this Agreement, except (1) such as
have been already made, obtained or rendered, as applicable, (2) as may
be required under state securities or blue sky laws, (3) as may be
required by any national securities exchange in connection with listing
of the Underwritten Securities and Common Stock issuable upon
conversion of the Underwritten Securities, (4) the filing of the
Certificate of Amendment with the Secretary of State of New Jersey, or
(5) as disclosed in or incorporated by reference into the Registration
Statement or the Prospectus.
(l) Except as disclosed in or incorporated by reference into the
Registration Statement or the Prospectus, there is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or to
the knowledge of the Company threatened in writing, against or
affecting the Company or any of its subsidiaries that is required to be
disclosed in the Registration Statement and the Prospectus (other than
as stated therein), or that would reasonably be expected to result in a
Material Adverse Effect, or that would reasonably be expected to
materially and adversely affect the consummation of the transactions
contemplated under this Agreement or the performance by the Company of
its obligations hereunder. Except for such proceedings, investigations
and claims disclosed in or incorporated by reference into the
Registration Statement or the Prospectus, the aggregate of all pending
legal or governmental proceedings to which the Company or any of its
subsidiaries is a party or of which any of their respective assets,
properties or operations is the subject would not reasonably be
expected to result in a Material Adverse Effect.
(m) Deloitte & Touche LLP are independent certified public
accountants as required by the 1933 Act and the Regulations.
(n) The Company is not, and upon issuance and sale of the
Underwritten Securities as herein contemplated and the application of
the net proceeds therefrom as described in the Prospectus will not be,
an "investment company" within the meaning of the Investment Company
Act of 1940, as amended (the "1940 ACT").
4
Any certificate signed by any officer of the Company and delivered to
the Representatives or counsel for the Underwriters in connection with an
offering of Underwritten Securities shall be deemed a representation and
warranty by the Company, as to the matters covered thereby and as of the date of
such certificate, to each Underwriter participating in such offering.
SECTION 2. PURCHASE AND SALE. The Company hereby agrees with the
Underwriters as follows:
(a) Subject to the terms and conditions herein set forth, (i)
the Company agrees to issue and sell the Underwritten Securities to the
several Underwriters as hereinafter provided, and each Underwriter
agrees to purchase, severally and not jointly, from the Company the
number of shares of Firm Securities set forth opposite such
Underwriter's name in SCHEDULE II hereto at the purchase price set
forth in SCHEDULE I hereto and (ii) in the event and to the extent that
the Underwriters shall exercise the election to purchase Optional
Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company up to 3,750,000 Optional
Securities, at the purchase price per share set forth in clause (i) of
this subsection (a), less an amount per share equal to any dividends or
distributions declared by the Company and payable on the Firm
Securities but not on the Optional Securities. If the option is
exercised as to all or any portion of the Optional Securities, each of
the Underwriters, acting severally and not jointly, will purchase that
portion of the total number of Optional Securities then being purchased
which the number of Firm Securities set forth in Schedule II opposite
the name of such Underwriter bears to the total number of Firm
Securities, subject in each case to such adjustments as the
Representatives, in their discretion, shall make to eliminate any sales
or purchases of fractional shares.
(b) In addition, the Company hereby grants to the Underwriters
the right to purchase at their election up to 3,750,000 Optional
Securities, at the purchase price per share set forth in subsection
(a)(i) above, for the sole purpose of covering sales of shares in
excess of the number of Firm Securities, provided that the purchase
price per Optional Security shall be reduced by an amount per share
equal to any dividends or distributions declared by the Company and
payable on the Firm Securities but not payable on the Optional
Securities. Such election, if any, to purchase Optional Securities may
be exercised no more than three times and only by written notice from
the Representatives to the Company, given within a period of 30
calendar days after the date of this Agreement, setting forth the
aggregate number of Optional Securities to be purchased and the date on
which such Optional Securities are to be delivered, as determined by
the Representatives but in no event earlier than the Firm Closing Time
(as defined below) or, unless the Representatives and the Company
otherwise agree in writing, earlier than two or later than ten Business
Days (as defined below) after the date of such notice.
Payment of the purchase price for, and delivery of, any Firm Securities
to be purchased by the Underwriters shall be made at the office of Shearman &
Sterling LLP, 599 Lexington Avenue, New York, New York 10022, or at such other
place as shall be agreed upon by the Representatives and the Company, at 9:00
A.M., New York City time, on the third business day
5
(unless postponed in accordance with the provisions of Section 10) following
the date of this Agreement or such other time as shall be agreed upon by the
Representatives and the Company (each such time and date being referred to as
the "FIRM CLOSING TIME"). Payment for the Optional Securities shall be made on
the date specified by the Representatives in the written notice given by the
Representatives of the Underwriters' election to purchase such Optional
Securities, or such other time and date as the Representatives and the Company
may agree upon in writing. Such time and date for payment of the purchase price
for, and delivery of the Optional Securities, if not the Firm Closing Time, is
herein called the "OPTION CLOSING TIME", and each such time and date for payment
of the purchase price for, and delivery with respect to, the Underwritten
Securities is referred to herein as a "CLOSING TIME". As used herein, the term
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a legal holiday
or a day on which banking institutions or trust companies are permitted or
required by law to be closed in The City of New York. Unless otherwise specified
in this Agreement, payment shall be made to the Company by wire transfer of
immediately available funds to such account(s) as the Company may designate in
writing against delivery to the Representatives for the respective accounts of
the Underwriters of the Underwritten Securities to be purchased by them. The
Underwritten Securities or the certificates therefor shall be in such
denominations and registered in such names as the Representatives may request in
writing at least two business days prior to the applicable Closing Time. The
Underwritten Securities will be made available for examination and packaging by
the Representatives on or before the first business day prior to Closing Time.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with the
Representatives, and with each Underwriter participating in the offering of
Underwritten Securities, as follows:
(a) The Company will promptly transmit copies of the Prospectus
to the Commission for filing pursuant to Rule 424 of the Regulations
and will furnish to the Underwriters named therein as many copies of
the Prospectus as the Representatives shall reasonably request.
(b) If, at any time when the Prospectus is required by the 1933
Act to be delivered in connection with sales of the Underwritten
Securities, any event shall occur or condition exist as a result of
which it is necessary to further amend or supplement the Prospectus in
order that the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in the light of circumstances
existing at the time it is delivered to a purchaser or if it shall be
necessary at any such time to amend or supplement the Registration
Statement or the Prospectus in order to comply with the requirements of
the 1933 Act or the Regulations, the Company will promptly prepare and
file with the Commission such amendment or supplement, whether by
filing documents pursuant to the 1934 Act or otherwise, as may be
necessary so that such statements will not, in the light of the
circumstances at the time the Prospectus is so required to be
delivered, be misleading or so that the Registration Statement and
Prospectus comply with such requirements.
(c) With respect to the sale of Underwritten Securities, the
Company will make generally available to its security holders as soon
as practicable, but not later than 90 days after the close of the
period covered thereby, earning statements (in form complying with
6
the provisions of Rule 158, or any applicable successor rule, under the
1933 Act) covering 12-month periods beginning, in each case, not later
than the first day of the Company's fiscal quarter next following the
"effective date" (as defined in Rule 158) of the Registration Statement
relating to Underwritten Securities.
(d) At any time when the Prospectus is required by the 1933 Act
to be delivered in connection with sales of the Underwritten
Securities, the Company will give the Representatives notice of its
intention to file any amendment to the Registration Statement or any
amendment or supplement to the Prospectus, whether pursuant to the 1934
Act, the 1933 Act or otherwise, and will furnish the Representatives
with copies of any such amendment or supplement or other documents
proposed to be filed a reasonable time in advance of filing.
(e) At any time when the Prospectus is required by the 1933 Act
to be delivered in connection with sales of the Underwritten
Securities, the Company will notify the Representatives promptly of (i)
the effectiveness of any amendment to the Registration Statement, (ii)
the mailing or the delivery to the Commission for filing of any
supplement to the Prospectus or any document to be filed pursuant to
the 1934 Act, (iii) the receipt of any comments from the Commission
with respect to the Registration Statement, the Prospectus or any
supplement to the Prospectus, (iv) 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 (v) the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose. The Company will make every commercially
reasonable effort to prevent the issuance of any stop order and, if any
stop order is issued, to promptly obtain the lifting thereof.
(f) During the period specified in (b) above, the Company will
deliver to the Representatives as many signed and conformed copies of
the Registration Statement (as originally filed) and of each amendment
thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated by reference in the
Prospectus) as the Representatives may reasonably request, and in each
case as soon as practicable.
(g) The Company will endeavor in good faith to qualify the
Underwritten Securities for offer and sale under the applicable
securities laws of such jurisdictions as the Representatives may
reasonably designate; PROVIDED, HOWEVER, that the Company shall not be
obligated to file any general consent to service 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. The Company will maintain such qualifications in
effect for as long as may be reasonably required for the distribution
of the Underwritten Securities, provided, however, that the Company
shall not be obligated to file any general consent to service 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.
7
(h) The Company, during the period when the Prospectus is
required to be delivered under the 1933 Act in connection with the sale
of the Underwritten Securities, will file promptly all documents
required to be filed with the Commission pursuant to Section 13 or 14
of the 1934 Act.
(i) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, except as set forth below, the Company shall not offer,
sell, contract to sell, pledge, grant any option to purchase, make any
short sale or otherwise dispose of any shares of Common Stock of the
Company, or any options or warrants to purchase any shares of Common
Stock of the Company, or any securities of the Company that are
substantially similar to the Common Stock, including, but not limited
to, any securities that are convertible into or exchangeable for, or
that represent the right to receive, Common Stock or any substantially
similar securities, without the prior written consent of Goldman, Sachs
& Co., Banc of America Securities LLC and Citigroup Global Markets
Inc.; PROVIDED, HOWEVER, that (i) the Company may issue and sell Common
Stock or issue options for the purchase of its Common Stock, and file
related registration statements, pursuant to any employee or director
stock incentive or option plans, or dividend reinvestment plans of the
Company in effect as of the date of this Agreement, or stock or option
grants to current or prospective employees or directors, (ii) the
Company may issue Common Stock issuable upon the conversion or exchange
of securities or the exercise of warrants or options outstanding as of
the date of this Agreement, or hereafter granted under the Company's
stock incentive or option plans that exist as of the date of this
Agreement, or stock or option grants to current or prospective
employees or directors, and (iii) the Company may issue and sell the
Underwritten Securities and the Common Stock issuable upon conversion
of the Underwritten Securities and do other acts contemplated by this
Agreement. The foregoing restriction shall not apply to the filing of a
registration statement in respect of any securities of the Company,
including Common Stock, after the date hereof; PROVIDED that the
Company obtains the prior written consent of Goldman, Sachs & Co., Banc
of America Securities LLC and Citigroup Global Markets Inc.
(j) Prior to the Firm Closing Time, the Company shall file the
Certificate of Amendment creating the Underwritten Securities, the
proposed form of which has been furnished to the Representatives, with
the Secretary of State of New Jersey.
(k) The Company shall reserve and keep available at all times,
free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligations to issue shares of its
Common Stock upon conversion of the Underwritten Securities.
(l) The Company shall use all commercially reasonable efforts to
list, subject to notice of issuance, the Underwritten Securities and
the shares of Common Stock issuable upon conversion of the Underwritten
Securities on the New York Stock Exchange.
SECTION 4. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase Underwritten Securities pursuant to
this Agreement are subject to the accuracy of the representations and warranties
on the part of the Company contained herein or in
8
certificates of the Company's officers furnished pursuant to the provisions
hereof, to the performance by the Company of all of its covenants and other
obligations hereunder and to the following further conditions:
(a) At the applicable Closing Time, (i) 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, (ii) the Prospectus shall have been filed with the
Commission pursuant to Rule 424 within the applicable time period
prescribed for such filing by the rules and regulations under the 1933
Act and (iii) since the date hereof, there shall not have occurred any
downgrading in the rating accorded to the Company's debt securities by
Moody's Investors Service, Inc. or Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, Inc., nor shall any notice
have been given by any such organization of any intended or potential
decrease in any such rating or of a possible change in any such rating
that does not indicate an improvement in such rating.
(b) At the applicable Closing Time, the Representatives shall
have received:
(1) The opinion dated as of the applicable Closing Time,
of Wachtell, Lipton, Rosen & Katz, counsel for the Company, in
form and substance reasonably satisfactory to the
Representatives, to the effect that:
(i) This Agreement has been duly authorized,
executed and delivered by the Company.
(ii) The statements set forth in the
Prospectus under the captions "Description of Mandatory
Convertible Preferred Stock" and "Description of Capital
Stock", insofar as such statements constitute a summary
of the terms of the Preferred Stock, the Common Stock or
the Certificate of Amendment, and under the caption
"Certain United States Federal Income Tax Consequences",
insofar as such statements purport to summarize the
provisions of the laws referred to therein, have been
reviewed by such counsel and fairly summarize the
matters described therein in all material respects.
(iii) The Registration Statement is effective
under the 1933 Act and, to such counsel's knowledge, no
stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933
Act or proceedings therefor initiated or threatened by
the Commission.
(iv) Except where the failure to file or to
obtain such authorization, approval, consent, license,
order, registration, qualification or decree,
individually or in the aggregate, would not reasonably
be expected to result in a Material Adverse Effect or as
disclosed in or incorporated by reference into the
Registration Statement or Prospectus or as required
under state securities or blue sky laws or as may be
required by any national securities exchange in
connection with listing of the
9
Underwritten Securities and Common Stock issuable upon
conversion of the Underwritten Securities or the filing
of the Certificate of Amendment with the Secretary of
State of New Jersey, no filing with, or authorization,
approval, consent, license, order, registration,
qualification or decree of, any court or governmental
authority or agency, domestic or foreign, is necessary
or required for the due authorization, execution or
delivery by the Company of this Agreement or for the
performance by the Company of the transactions
contemplated under the Prospectus or this Agreement,
other than under the 1933 Act and the Regulations, which
have already been made, obtained or rendered, as
applicable.
(v) The Company is not and, after giving
effect to the offering and sale of the Underwritten
Securities, will not be an "investment company" or
entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act.
Such opinion shall also state that in the course of
such counsel's review and discussion in connection with the
preparation of the Registration Statement and Prospectus,
although such counsel has not independently verified, and is not
passing upon and assumes no responsibility for, the accuracy,
completeness or fairness of, or otherwise verified the
statements made therein, other than as mentioned in (ii) of this
subsection 4(b)(1), no facts have come to such counsel's
attention that lead such counsel to believe (x) that the
Registration Statement or any amendment thereto (except for the
financial statements and other financial data included therein
or omitted therefrom, as to which such counsel need not
comment), at the time the 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 (y) that the Prospectus (except for the financial
statements and other financial data included therein or omitted
therefrom, as to which such counsel need not comment), at the
time the 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 such opinion, such counsel may rely,
without independent verification, (A) as to matters involving
the application of laws of any jurisdiction other than the
States of Delaware and New York or the Federal laws of the
United States, to the extent they deem proper and specified in
such opinion, upon the opinion of other counsel of good standing
whom they believe to be reliable and who are reasonably
satisfactory to counsel for the Underwriters; and (B) as to
matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Company and public officials.
Such counsel may further state that their opinion and belief are
based upon their participation in the preparation of the
Registration Statement and the Prospectus and any amendments or
supplements thereto and review and discussion of the contents
thereof, but are without
10
independent check or verification except as specified. Such
opinion may contain customary assumptions, exceptions,
limitations, qualifications and comments.
(2) The opinion, dated as of the applicable Closing
Time, of the General Counsel or the Vice President, Legal
Affairs of the Company to the effect that:
(i) The Company is duly qualified to transact
business and is in good standing in the states of
Arkansas, Georgia, Tennessee and Texas.
(ii) The execution and delivery of this
Agreement, the fulfillment of the terms herein and the
consummation of the transactions herein contemplated
will not conflict with or constitute a breach of, or
default under, the charter or by-laws of the Company or,
except for such conflicts, breaches or defaults that
individually or in the aggregate would not reasonably be
expected to result in a Material Adverse Effect, any
agreement, indenture or other instrument known to such
counsel of which the Company is a party or by which it
is bound, or any law, administrative regulation or
administrative or court order known to such counsel to
be applicable to the Company.
(iii) Except as disclosed in or incorporated by
reference into the Registration Statement or the
Prospectus, to such counsel's knowledge, there is not
pending or threatened any action, suit, proceeding,
inquiry or investigation to which the Company or any of
its subsidiaries thereof is a party or to which the
assets, properties or operations of the Company or any
of its subsidiaries thereof is subject, before or by any
court or governmental agency or body, domestic or
foreign, which would reasonably be expected to result in
a Material Adverse Effect or which would reasonably be
expected to materially and adversely affect the
consummation of the transactions contemplated under this
Agreement, or the performance by the Company of its
obligations hereunder.
(iv) The Registration Statement and
Prospectus, and each amendment or supplement thereto
(except for the financial statements and other financial
data included therein or omitted therefrom, as to which
such counsel need express no opinion), excluding the
documents incorporated by reference therein, as of their
respective effective or issue dates, appear on their
face to have been appropriately responsive in all
material respects to the requirements of the 1933 Act
and the Regulations.
(v) The documents incorporated by reference
in the Prospectus (except for the financial statements
and other financial data included therein or omitted
therefrom and the exhibits thereto, as to which such
counsel need express no opinion), as of the dates they
were filed with the Commission, appear on their face to
have been appropriately responsive in all material
respects to the requirements of the 1934 Act and the
rules and regulations of the Commission thereunder.
11
Such opinion shall also state that in the course of such
counsel's review and discussion in connection with the
preparation of the Registration Statement and Prospectus,
although such counsel has not independently verified, and is not
passing upon and assumes no responsibility for, the accuracy,
completeness or fairness of, or otherwise verified the
statements made or incorporated therein, no facts have come to
such counsel's attention that lead such counsel to believe (i)
that the Registration Statement or any amendment thereto (except
for the financial statements and other financial data included
therein or omitted therefrom, as to which such counsel need not
comment), at the time the 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 (ii) that the Prospectus (except for the financial
statements and other financial data included therein or omitted
therefrom, as to which such counsel need not comment), at the
time the 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.
(3) The opinion, dated as of the applicable Closing
Time, of Lowenstein Sandler PC, special counsel of the Company
to the effect that:
(i) The Company is a corporation duly
incorporated and validly existing in good standing under
the laws of the State of New Jersey.
(ii) This Agreement has been duly authorized,
executed and delivered by the Company.
(iii) The Underwritten Securities have been
duly authorized for issuance and sale by the Company
and, when issued and delivered to and paid for by the
Underwriters in accordance with the terms of this
Agreement, will be validly issued, fully paid and
non-assessable.
(iv) The Certificate of Amendment creating the
Underwritten Securities has been duly filed with the
Secretary of State of New Jersey on or before the Firm
Closing Time.
(v) The issue and sale of the Underwritten
Securities, the execution and delivery of this
Agreement, the fulfillment of the terms herein set forth
and the consummation of the transactions herein
contemplated will not conflict with or constitute a
breach of, or default under, the charter or by-laws of
the Company or, except for such conflicts, breaches or
defaults that individually or in the aggregate would not
reasonably be expected to result in a Material Adverse
Effect, any law, administrative regulation or
administrative or court order known to such counsel to
be applicable to the Company.
12
(vi) Except where the failure to file or to
obtain such authorization, approval, consent, license,
order, registration, qualification or decree,
individually or in the aggregate, would not reasonably
be expected to result in a Material Adverse Effect or as
disclosed in or incorporated by reference into the
Registration Statement or Prospectus or as required
under state securities or blue sky laws or as may be
required by any national securities exchange in
connection with listing of the Underwritten Securities
and the Common Stock issuable upon conversion of the
Underwritten Securities or the filing of the Certificate
of Amendment with the Secretary of State of New Jersey,
no filing with, or authorization, approval, consent,
license, order, registration, qualification or decree
of, any court or governmental authority or agency,
domestic or foreign, is necessary or required for the
due authorization, execution or delivery by the Company
of this Agreement or for the performance by the Company
of the transactions contemplated under the Prospectus,
this Agreement, and the Certificate of Amendment, other
than under the 1933 Act and the Regulations.
(vii) The Company has an authorized
capitalization as set forth in the Prospectus, and the
shares of Common Stock initially issuable upon
conversion of the Underwritten Securities have been duly
and validly authorized and reserved for issuance and,
when issued and delivered in accordance with the
provisions of the Certificate of Amendment, will be duly
and validly issued and fully paid and non-assessable.
(viii) The statements set forth in the
Prospectus under the caption "Description of Mandatory
Convertible Preferred Stock" and "Description of Capital
Stock" and in the Registration Statement in Item 15,
insofar as such statements constitute a summary of the
terms of the Preferred Stock, the Common Stock, the
Certificate of Amendment, the Company's certificate of
incorporation, as amended, and the New Jersey Business
Corporation Act, as amended, have been reviewed by such
counsel and fairly summarize the matters described
therein in all material respects.
Such opinion may contain customary assumptions,
exceptions, limitations, qualifications and comments.
(4) The favorable opinion, dated as of the applicable
Closing Time, of Shearman & Sterling LLP, counsel for the
Underwriters, with respect to the matters as the Representatives
may reasonably request.
(c) At the applicable Closing Time, there shall not have been,
since the date of this Agreement or since the respective dates as of
which information is given in the Registration Statement, any Material
Adverse Effect or any development that would likely result in a
prospective material adverse change in the financial condition, or in
the results of operations, of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary
course of business, and the Representatives shall
13
have received a certificate of the President or a Vice President of the
Company, dated as of such Closing Time, to the effect that there has
been no such Material Adverse Effect or any development that would
likely result in a prospective material adverse change in the financial
condition, or in the results of operations, of the Company and its
subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business, and to the effect that the other
representations and warranties of the Company contained in Section 1
are true and correct with the same force and effect as if made on and
as of the Closing Time.
(d) The Representatives shall have received from Deloitte &
Touche LLP or other independent certified public accountants acceptable
to the Representatives a letter, dated as of the date of this Agreement
and delivered at such time, in form heretofore agreed to 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 or
incorporated by reference into the Registration Statement and the
Prospectus.
(e) The Representatives shall have received from Deloitte &
Touche LLP or other independent certified public accountants acceptable
to the Representatives a letter, dated as of the applicable Closing
Time, reconfirming or updating the letter required by subsection (d) of
this Section to the extent that may be reasonably requested by the
Representatives.
(f) At the applicable Closing Time, counsel for the Underwriters
shall have been furnished with such documents as they may reasonably
require for the purpose of enabling them to pass upon the issuance and
sale of the Underwritten Securities as herein contemplated and related
proceedings.
(g) The Company shall have obtained and delivered to the
Underwriters executed copies of the agreement attached hereto as
EXHIBIT A from the directors and officers listed on SCHEDULE III
hereto.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Representatives by notice to the Company at any time on or prior to the
applicable Closing Time, and such termination shall be without liability of any
party to any other party except as provided in Section 5.
SECTION 5. PAYMENT OF EXPENSES. The Company will pay all expenses
incident to the performance of its obligations under this Agreement, including
(i) the printing and filing of the Registration Statement and all amendments
thereto, (ii) the preparation, issuance and delivery of the Underwritten
Securities to the Underwriters and the shares of Common Stock issuable upon
conversion of the Underwritten Securities to the holders of such Underwritten
Securities, (iii) the fees and disbursements of the Company's counsel and
accountants, (iv) the qualification of the Underwritten Securities under
securities laws in accordance with the provisions of Section 3(g), including
filing fees and the fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of any Blue Sky
Surveys and Legal Investment Surveys, (v) the printing and delivery to the
Underwriters in quantities as
14
hereinabove stated of copies of the Registration Statement and any amendments
thereto, and of the Prospectus and any amendments or supplements thereto, (vi)
the printing and delivery to the Underwriters of copies this Agreement, any Blue
Sky Surveys and Legal Investment Surveys, (vii) the fees, if any, of rating
agencies for rating the Underwritten Securities, (viii) the costs and expenses
related to any filing with any national securities exchange, (ix) the costs and
expenses incident to the preparation of the Certificate of Amendment and the
filing of the Certificate of Amendment with the Secretary of State of New
Jersey, (x) any expenses incurred by the Company in connection with a "road
show" presentation to potential investors, (xi) the cost and charges of any
transfer agent and (xii) the fees and expenses, if any, incurred in connection
with the listing of the Underwritten Securities on any national securities
exchange.
If this Agreement is terminated by the Representatives in accordance
with the provisions of Section 4 or Section 9(i), the Company shall reimburse
the Underwriters named on SCHEDULE II hereto for all of their reasonable
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 6. INDEMNIFICATION. (a) The Company agrees 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 as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or any omission or
alleged omission therefrom, of a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or arising out
of any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus related to the 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, unless such untrue statement or
omission or such alleged untrue statement or omission was made in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through the
Representatives expressly for use in the Registration Statement (or any
amendment thereto), any preliminary prospectus related to the Prospectus
or the Prospectus (or any amendment or supplement thereto);
(ii) against any and all loss, liability, claim,
damage and expense whatsoever 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, if such settlement is
effected with the prior written consent of the Company; and
(iii) against any and all expense whatsoever
reasonably incurred 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
15
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 to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made based upon
written information furnished to the Company by any Underwriter through the
Representatives, expressly for use in the Registration Statement (or any
amendment thereto), or any preliminary prospectus related to the Prospectus or
the Prospectus (or any amendment or supplement thereto) and PROVIDED FURTHER
that the foregoing indemnity agreement with respect to any preliminary
prospectus related to the Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased Underwritten Securities, or any person controlling any
Underwriter, if a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Underwriter to such person, if required by law
so to have been delivered, within a reasonable period of time prior to the
written confirmation of the sale of the Underwritten Securities to such person,
and if the Prospectus (as so amended or supplemented) would have cured the
defect giving rise to such losses, claims, damages or liabilities, unless such
failure is the result of noncompliance by the Company with Sections 3(a) and
3(f) hereof.
(b) Each Underwriter severally agrees that it will indemnify and
hold harmless the Company and each of its officers who signs the Registration
Statement and each of its directors 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 to the same extent as the foregoing indemnity from the Company, but
only with respect to statements or omissions made in any preliminary prospectus
related to the Prospectus, the Prospectus (or any amendment or supplement
thereto) or the Registration Statement (or any amendment thereto) in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Underwriter through the Representatives expressly for use in
the Registration Statement (or any amendment thereto), any preliminary
prospectus related to the Prospectus or the Prospectus (or any amendment or
supplement thereto). In case any action shall be brought against the Company or
any person so indemnified based on the Registration Statement (or any amendment
thereto), any preliminary prospectus related to the Prospectus or the Prospectus
(or any amendment or supplement thereto) and in respect of which indemnity may
be sought against any Underwriter, such Underwriter shall have the rights and
duties given to the Company, and the Company and each person so indemnified
shall have the rights and duties given to the Underwriters, by the provisions of
subsection (a) of this Section.
(c) 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 the indemnifying party 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 the Representatives,
and, in the case of parties indemnified pursuant to Section 6(b) above,
16
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 (which consent will
not be unreasonably withheld) 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.
SECTION 7. CONTRIBUTION. If the indemnification provisions provided in
Section 6 above should under applicable law be unavailable to an indemnified
party or insufficient in respect of any losses, liabilities, claims, damages or
expenses (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, liabilities, claims, damages or
expenses (or actions in respect thereof) (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the
Underwritten Securities or (ii) if the allocation in 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) but also the relative fault of the
Company on the one hand and the Underwriters on the other hand in connection
with the statements or omissions which resulted in such losses, liabilities,
claims, damages or expenses (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth on the
cover of the Prospectus, bear to the aggregate public offering price of the
Underwritten Securities as set forth on such cover. The relative fault shall be
determined by reference to, among other things, whether the indemnified party
failed to give the notice required under Section 6 above including the
consequences of such failure, and whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission of the Company and the
Underwriters, directly or through the Representatives of the Underwriters. The
Company 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 amount paid or payable
by an indemnified party as a result of the losses, liabilities, claims,
17
damages or expenses (or actions in respect thereof) referred to above in this
Section 7 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section 7, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Underwritten 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 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. The Underwriters' obligations
in this Section 7 to contribute are several in proportion to their respective
underwriting obligations as set forth opposite their respective names in
SCHEDULE II hereto and not joint.
The obligations of the Company under this Section 7 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act; and the
obligations of the Underwriters under this Section 7 shall be in addition to any
liability which the respective Underwriters may otherwise have and shall extend,
upon the same terms and conditions, to each officer who signs the Registration
Statement and each director of the Company and to each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act.
SECTION 8. AGREEMENTS TO SURVIVE DELIVERY. All agreements contained in
this Agreement, or contained in certificates of officers of the Company
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any termination of this Agreement, or any investigation made by or
on behalf of any Underwriter or controlling person, or by or on behalf of the
Company, and shall survive delivery of any Underwritten Securities to the
Underwriters.
SECTION 9. TERMINATION. The Representatives may terminate this
Agreement, immediately upon notice to the Company, at any time prior to the
applicable Closing Time (i) if there has been, since the date of this Agreement
or since the respective dates as of which information is given in the
Registration Statement, any Material Adverse Effect or any development that
would likely result in a prospective material adverse change in the financial
condition, or in the results of operations, 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 in the international financial
markets, any outbreak of hostilities or escalation thereof or other calamity or
crisis or 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 reasonable judgment of the
Representatives, impracticable or inadvisable to market the Underwritten
Securities or enforce contracts for the sale of the Underwritten Securities, or
(iii) if trading on the New York Stock Exchange has been suspended or materially
limited and such suspension or limitation makes it, in the reasonable judgment
of the Representatives, impracticable or inadvisable to market the Underwritten
Securities or enforce contracts for the sale of the Underwritten Securities, or
(iv) if a banking moratorium has been declared by either
18
Federal or New York authorities, or (v) a material disruption has occurred in
commercial banking or securities settlement or clearance services in the United
States. In the event of any such termination, (x) the covenants set forth in
Section 3 with respect to any offering of Underwritten Securities shall remain
in effect so long as any Underwriter retains beneficial ownership of any such
Underwritten Securities purchased from the Company pursuant to this Agreement
and (y) the covenant set forth in Section 3(c) (to the extent there has been a
sale of Underwritten Securities), the provisions of Section 5, the indemnity
agreement set forth in Section 6, the contribution agreement set forth in
Section 7 and the provisions of Sections 8 and 13 shall remain in effect.
SECTION 10. DEFAULT. If one or more of the Underwriters participating
in an offering of Securities shall fail at the applicable Closing Time to
purchase the Underwritten Securities which it is or they are obligated to
purchase under this Agreement (the "DEFAULTED SECURITIES"), then 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, during such 24 hours the Representatives shall not have
completed such arrangements for the purchase of all of the Defaulted Securities,
then:
(a) if the aggregate liquidation preference amount of Defaulted Securities
does not exceed 10% of the aggregate liquidation preference amount of
the Underwritten Securities to be purchased pursuant to this Agreement,
the non-defaulting Underwriters named in SCHEDULE II to this Agreement
shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations thereunder
bear to the aggregate underwriting obligations of all such
non-defaulting Underwriters, or
(b) if the aggregate liquidation preference amount of Defaulted Securities
exceeds 10% of the aggregate liquidation preference amount of the
Underwritten Securities to be purchased pursuant to this Agreement and
arrangements satisfactory to the Representatives and the Company for
the purchase of such Defaulted Securities are not made within 24 hours
after such default, this Agreement shall terminate without any
liability on the part of any non-defaulting Underwriters or the
Company.
As used in this Section only, the aggregate amount or aggregate
liquidation preference amount of Underwritten Securities shall mean the
aggregate liquidation preference amount of any Preferred Stock.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
In the event of a default by any Underwriter or Underwriters as set
forth in this Section, either the Representatives or the Company shall have the
right to postpone the applicable Closing Time for a period ending as soon as
practicable after the original Closing Time, but in any event not exceeding
seven days after the original Closing Time, in order that any required changes,
if any, in the Registration Statement or Prospectus or in any other documents or
arrangements may be effected.
19
SECTION 11. 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; c/o Goldman, Sachs & Co.,
85 Broad Street, New York, New York 10004; notices to the Company shall be
directed to it at 2000 Galloping Hill Road, Kenilworth, New Jersey 07033,
Attention: Mr. Joseph LaRosa, Vice President, Legal Affairs.
SECTION 12. PARTIES. This Agreement shall inure to the benefit of and
be binding upon the Company and the Underwriters, 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
parties hereto 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 parties 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 Underwritten Securities from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State.
SECTION 14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be an original, and if executed in more than
one counterpart the executed counterparts shall constitute a single instrument
with the same effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 15. EFFECT OF HEADINGS. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
[SIGNATURE PAGE FOLLOWS]
20
Very truly yours,
SCHERING-PLOUGH CORPORATION
By: /s/ Robert Bertolini
---------------------------------------
Name: Robert Bertolini
Title: Executive Vice President and
Chief Financial Officer
Accepted: August 10, 2004
GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
CITIGROUP GLOBAL MARKETS INC.
As Representatives of the Underwriters
named in SCHEDULE II hereto
GOLDMAN, SACHS & CO.
By: /s/ Goldman, Sachs & Co.
-----------------------------------
(Goldman, Sachs & Co.)
BANC OF AMERICA SECURITIES LLC
By: /s/ Derek Dillon
-----------------------------------
Name: Derek Dillon
Title: Managing Director
CITIGROUP GLOBAL MARKETS INC.
By: /s/ Scott Daniel
-----------------------------------
Name: Scott Daniel
Title: Director
21
SCHEDULE I
Representatives: Goldman, Sachs & Co., Banc of America
Securities LLC and Citigroup Global
Markets Inc.
Underwriting Agreement dated: August 4, 2004
Registration Statement No.: 333-113222
Title of Securities: 6.00% Mandatory Convertible Preferred
Stock
Certificate of Amendment: Executed by the Company and to be
filed with the Secretary of State of
New Jersey on or before the Firm
Closing Time.
Issue size: $1,250,000,000 (plus $187,500,000
option)
Price to public: $50.00 per share of Preferred Stock
Gross spread: 3.00%
Purchase price paid by
the Underwriter: $48.50 per share
Option: To the extent the underwriters sell
more than 25,000,000 shares of
Preferred Stock, the underwriters
have the option to purchase up to an
additional 3,750,000 shares of
Preferred Stock from us at the
purchase price paid by the
Underwriter, within 30 days from the
date of the Prospectus Supplement.
Other Provisions: As set forth in the Prospectus
Supplement dated August 4, 2004
Firm Closing Time: August 10, 2004
Closing Location: Shearman & Sterling LLP
Address for Notices to
Underwriters: 85 Broad Street
New York, New York 10004
Attention: Prospectus Department
22
SCHEDULE II
Number of Firm
Securities to be
Purchased
Goldman, Sachs & Co. .............................. 6,000,000
Banc of America Securities LLC .................... 6,000,000
Citigroup Global Markets Inc ...................... 6,000,000
Credit Suisse First Boston LLC .................... 3,000,000
Morgan Stanley & Co. Incorporated ................. 3,000,000
BNP Paribas Securities Corp. ...................... 267,500
BNY Capital Markets, Inc. ......................... 200,000
ING Financial Markets LLC ......................... 200,000
Mellon Financial Markets, LLC ..................... 200,000
The Williams Capital Group, L.P. .................. 132,500
Total..................................... 25,000,000
==========
23
SCHEDULE III
OFFICERS AND DIRECTORS OF THE COMPANY SUBJECT TO 90-DAY LOCK-UP
NAME TITLE
Fred Hassan Chairman, Chief Executive Officer & President
Philip Leder, M.D. Director
Eugene R. McGrath Director
Richard de J. Osborne Director
Hans W. Becherer Director
Kathryn C. Turner Director
Robert F. W. van Oordt Director
Carl E. Mundy, Jr. Director
Patricia F. Russo Director
Arthur F. Weinbach Director
Robert J. Bertolini Executive Vice President and Chief Financial
Officer
C. Ron Cheeley Senior Vice President, Global Human Resources
Carrie S. Cox Executive Vice President and President,
Global Pharmaceuticals
Douglas J. Gingerella Vice President and Controller
Raul E. Kohan President, Animal Health and Group Head,
Global Specialty Operations
Cecil B. Pickett Vice President and President, Schering-Plough
Research Institute
Thomas J. Sabatino, Jr. Executive Vice President and General Counsel
Brenton Saunders Senior Vice President, Global Compliance and
Business Practices
24
EXHIBIT A
SCHERING-PLOUGH CORPORATION
LOCK-UP AGREEMENT
AUGUST ___, 2004
Goldman, Sachs & Co.
Banc of America Securities LLC
Citigroup Global Markets Inc.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Re: SCHERING-PLOUGH CORPORATION - LOCK-UP AGREEMENT
Ladies and Gentlemen:
The undersigned understands that you, as representatives (the
"REPRESENTATIVES"), propose to enter into an Underwriting Agreement on behalf of
the several Underwriters named in SCHEDULE II to such agreement (collectively,
the "UNDERWRITERS"), with Schering-Plough Corporation, a New Jersey corporation
(the "COMPANY"), providing for a public offering (the "PUBLIC OFFERING") of the
Mandatory Convertible Preferred Stock, par value $1.00 per share, of the Company
(the "SHARES") pursuant to a Registration Statement on Form S-3 to be filed with
the Securities and Exchange Commission.
In consideration of the agreement by the Underwriters to offer and sell
the Shares, and of other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the undersigned agrees that, during
the period beginning from the date of the supplemental Preliminary Prospectus to
be filed in connection with the announcement of commencement of the Public
Offering and continuing to and including the date 90 days after the date of the
final prospectus covering the public offering of the Shares (the "LOCK-UP
PERIOD"), the undersigned will not offer, sell, contract to sell, pledge, grant
any option to purchase, make any short sale or otherwise dispose of any common
shares, par value $0.50 per share, of the Company (the "COMMON STOCK"), or any
options or warrants to purchase any shares of Common Stock of the Company, or
any securities convertible into, exchangeable for or that represent the right to
receive shares of Common Stock of the Company, in each case, whether now
beneficially owned or hereinafter acquired by the undersigned (including holding
as a custodian) (collectively the "UNDERSIGNED'S SHARES").
The foregoing restriction is expressly agreed to preclude the
undersigned from engaging in any hedging or other transaction which is designed
to or which reasonably could be expected to lead to or result in a sale or
disposition of the Undersigned's Shares even if such Shares would be disposed of
by someone other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale or any purchase,
sale or grant of any right (including without limitation any put or call option)
with respect to any of the Undersigned's
Shares or with respect to any security that includes, relates to, or derives any
significant part of its value from such Shares.
Notwithstanding the foregoing, the undersigned may transfer the
Undersigned's Shares (i) as a BONA FIDE gift or gifts, provided that the donee
or donees thereof agree to be bound in writing by the restrictions set forth
herein, (ii) to any trust for the direct or indirect benefit of the undersigned
or the immediate family of the undersigned, provided that the trustee of the
trust agrees to be bound in writing by the restrictions set forth herein, and
provided further that any such transfer shall not involve a disposition for
value, (iii) to any corporation, limited liability company, limited partnership
or general partnership of which all of the equity interest is owned by the
undersigned, or the immediate family of the undersigned and/or one or more
trusts, described in clause (ii) above, provided the transferee agrees to be
bound in writing by the restrictions set forth herein, and provided further that
any such transfer shall not involve a disposition for value, (iv) if the
transfer of such Undersigned's Shares occurs by operation of law, such as rules
of intestate succession or statutes governing the effects of a merger, provided
that the transferee agrees to be bound in writing by the restrictions set forth
herein, or (v) with the prior written consent of Goldman, Sachs & Co., Banc of
America Securities LLC and Citigroup Global Markets Inc. For purposes of this
Lock-Up Agreement, "immediate family" shall mean any relationship by blood,
marriage or adoption, not more remote than first cousin. In addition,
notwithstanding the foregoing, if the undersigned is a corporation, partnership,
trust or similar entity, it may transfer the capital stock of the Company to any
wholly-owned subsidiary of such entity, or to its partners, members or
shareholders; PROVIDED, HOWEVER, that in any such case, it shall be a condition
to the transfer that the transferee execute an agreement stating that the
transferee is receiving and holding such capital stock subject to the provisions
of this Agreement and there shall be no further transfer of such capital stock
except in accordance with this Agreement, and provided further that any such
transfer shall not involve a disposition for value. Except as otherwise
disclosed on Exhibit 1 hereto, if any, the undersigned now has, and, except as
contemplated by clause (i), (ii), (iii), (iv) or (v) above, for the duration of
this Lock-Up Agreement will have, good and marketable title to the Undersigned's
Shares, free and clear of all liens, encumbrances, and claims whatsoever. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of the
Undersigned's Shares except in compliance with the foregoing restrictions during
the Lock-Up Period.
The undersigned understands that the Company and the Underwriters are
relying upon this Lock-Up Agreement in proceeding toward consummation of the
Public Offering. The undersigned further understands that this Lock-Up Agreement
is irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors, and assigns. This Lock-Up Agreement shall lapse and
become null and void if the Public Offering is not consummated on or before
September 15, 2004, or, if earlier, the date the Underwriting Agreement (other
than provisions thereof which survive termination) shall terminate or be
terminated for any reason, prior to the payment for and delivery of the Shares.
This Lock-Up Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to be
performed in said State.
Very truly yours,
----------------------------------------
Exact Name of Shareholder
----------------------------------------
Authorized Signature
----------------------------------------
Title
EXHIBIT 1
[To be completed by Shareholder.]