Exhibit 1.1
EXECUTION COPY
SYNTROLEUM CORPORATION
(a Delaware corporation)
5,250,000 Shares of
Common Stock
Dated June 29, 2000
TABLE OF CONTENTS
PAGE
----
SECTION 1. REPRESENTATIONS AND WARRANTIES........................................ 3
(a) Representations and Warranties by the Company......................... 3
(1) Compliance with Registration Requirements.................... 3
(2) Incorporated Documents....................................... 4
(3) Independent Accountants...................................... 4
(4) Financial Statements......................................... 4
(5) No Material Adverse Change in Business....................... 4
(6) Good Standing of the Company................................. 5
(7) Good Standing of Subsidiaries................................ 5
(8) Capitalization............................................... 5
(9) Authorization of this Purchase Agreement..................... 6
(10) Authorization of Common Stock................................ 6
(11) Descriptions of the Securities............................... 6
(12) Absence of Defaults and Conflicts............................ 6
(13) Absence of Labor Dispute..................................... 7
(14) Absence of Proceedings....................................... 7
(15) Accuracy of Exhibits and Prospectus.......................... 7
(16) Absence of Further Requirements.............................. 7
(17) Possession of Intellectual Property.......................... 8
(18) Possession of Licenses and Permits........................... 9
(19) Title to Property............................................ 9
(20) Investment Company Act....................................... 10
(21) Environmental Laws........................................... 10
(22) Registration Rights.......................................... 10
(23) Transfer Taxes............................................... 11
(24) Tax Returns.................................................. 11
(25) Insurance.................................................... 11
(26) No Restrictions on Subsidiary Dividends...................... 11
(27) Internal Auditing Controls................................... 11
(28) No Manipulation of Price..................................... 12
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(29) ERISA........................................................ 12
(30) Absence of Certain Changes................................... 12
(b) Officers' Certificates................................................ 12
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS; CLOSING............................ 13
(a) Initial Securities.................................................... 13
(b) Option Securities..................................................... 13
(c) Payment............................................................... 13
(d) Denominations; Registration........................................... 14
SECTION 3. COVENANTS OF THE COMPANY.............................................. 14
(a) Compliance with Securities Regulations and Commission Requests........ 14
(b) Filing of Amendments.................................................. 14
(c) Delivery of Registration Statements................................... 15
(d) Delivery of Prospectuses.............................................. 15
(e) Continued Compliance with Securities Laws............................. 15
(f) Blue Sky Qualifications............................................... 16
(g) Earnings Statement.................................................... 16
(h) Use of Proceeds....................................................... 16
(i) Listing............................................................... 16
(j) Restriction on Sale of Securities..................................... 16
(l) Reporting Requirements................................................ 16
SECTION 4. PAYMENT OF EXPENSES................................................... 17
(a) Expenses.............................................................. 17
(b) Termination of Agreement.............................................. 17
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS............................... 17
(a) Effectiveness of Registration Statement............................... 17
(b) Opinion of Counsel for Company........................................ 18
(c) Opinion of Counsel for Underwriters................................... 18
(d) Officers' Certificate................................................. 18
(e) Accountant's Comfort Letter........................................... 18
(f) Bring-down Comfort Letter............................................. 19
(g) Approval of Listing................................................... 19
(h) Lock-up Agreements.................................................... 19
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(i) Over-Allotment Option................................................. 19
(j) Additional Documents.................................................. 20
(k) Termination of this Purchase Agreement................................ 20
SECTION 6. INDEMNIFICATION....................................................... 20
(a) Indemnification of Underwriters....................................... 20
(b) Indemnification of Company, Directors and Officers.................... 21
(c) Actions against Parties; Notification................................. 21
(d) Settlement without Consent if Failure to Reimburse.................... 22
SECTION 7. CONTRIBUTION.......................................................... 22
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY........ 24
SECTION 9. TERMINATION OF AGREEMENT.............................................. 24
(a) (a) Termination; General.............................................. 24
(c) Liabilities........................................................... 24
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS............................ 24
SECTION 11. NOTICES............................................................... 25
SECTION 12. PARTIES............................................................... 25
SECTION 13. GOVERNING LAW AND TIME................................................ 25
SECTION 14. EFFECT OF HEADINGS.................................................... 26
iii
SYNTROLEUM CORPORATION
(a Delaware corporation)
5,250,000 Shares of
Common Stock
PURCHASE AGREEMENT
June 29, 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Salomon Smith Barney Inc.
Petrie Parkman & Co., Inc.
as Representatives of the several Underwriters
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Syntroleum Corporation, a Delaware corporation (the "Company"), confirms
its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") 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 Merrill Lynch, Goldman, Sachs & Co., J.P. Morgan Securities
Inc., Salomon Smith Barney Inc. and Petrie Parkman & Co., Inc. are acting as
representatives (in such capacity, the "Representatives"), with respect to the
issue and sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective numbers of shares of Common Stock,
par value $0.01 per share, of the Company ("Common Stock") set forth in said
Schedule A, and with respect to the grant by the Company to the Underwriters,
acting severally and not jointly, of the option described in Section 2(b) hereof
to purchase all or any part of 787,500 additional shares of Common Stock to
cover over-allotments, if any. The aforesaid 5,250,000 shares of Common Stock
(the "Initial Securities") to be purchased by the Underwriters and all or any
part of the 787,500 shares of Common Stock subject to the option described in
Section 2(b) hereof (the "Option Securities") are hereinafter called,
collectively, the "Securities".
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The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Purchase Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-32968) and pre-
effective amendment no. 1 thereto for the registration of the Securities under
the Securities Act of 1933, as amended (the "1933 Act"), and the offering
thereof from time to time in accordance with Rule 415 of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regulations").
Such registration statement has been declared effective by the Commission and
the Company has filed such post-effective amendments thereto as may be required
prior to the execution hereof and each such post-effective amendment has been
declared effective by the Commission. Such registration statement (as so
amended, if applicable), including the information, if any, deemed to be a part
thereof pursuant to Rule 430A(b) of the 1933 Act Regulations (the "Rule 430A
Information") or Rule 434(d) of the 1933 Act Regulations (the "Rule 434
Information"), is referred to herein as the "Registration Statement"; and the
final prospectus and the final prospectus supplement relating to the offering of
the Securities, in the forms first furnished to the Underwriters by the Company
for use in connection with the offering of the Securities, are collectively
referred to herein as the "Prospectus"; provided, however, that all references
to the "Registration Statement" and the "Prospectus" shall also be deemed to
include all documents incorporated therein by reference pursuant to the
Securities Exchange Act of 1934, as amended (the "1934 Act"), prior to the
execution hereof; provided, further, that if the Company files a registration
statement with the Commission pursuant to Rule 462(b) of the 1933 Act
Regulations (the "Rule 462(b) Registration Statement"), then all references to
"Registration Statement" shall also be deemed to include the Rule 462 (b)
Registration Statement; and provided, further, that if the Company elects to
rely upon Rule 434 of the 1933 Act Regulations, then all references to
"Prospectus" shall also be deemed to include the final or preliminary prospectus
and the applicable term sheet or abbreviated term sheet (the "Term Sheet"), as
the case may be, in the forms first furnished to the Underwriters by the Company
in reliance upon Rule 434 of the 1933 Act Regulations, and all references to the
date of the Prospectus shall mean the date of the Term Sheet. A "preliminary
prospectus" shall be deemed to refer to the final prospectus and the preliminary
prospectus supplement relating to the offering of the Securities that omitted,
as applicable, the Rule 430A Information, the Rule 434 Information or other
information to be included upon pricing in a form of prospectus filed with the
Commission pursuant to Rule 424(b) of the 1933 Act Regulations and was used
after such effectiveness and prior to the initial delivery of the Prospectus to
the Underwriters by the Company. For purposes of this Purchase Agreement, all
references to the Registration Statement, Prospectus, Term Sheet or preliminary
prospectus or to any amendment or supplement to any of the foregoing shall be
deemed to include any copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Purchase Agreement to financial statements and
schedules and other information which is "contained," "included" or "stated" (or
other references of like import) in the Registration Statement, Prospectus or
preliminary prospectus shall be deemed to mean and include all such financial
statements and schedules and other information which is incorporated by
reference in the Registration Statement, Prospectus or preliminary prospectus,
as the case may
2
be, prior to the execution hereof; and all references in this Purchase Agreement
to amendments or supplements to the Registration Statement, Prospectus or
preliminary prospectus shall be deemed to include the filing of any document
under the 1934 Act which is incorporated by reference in the Registration
Statement, Prospectus or preliminary prospectus, as the case may be, after the
execution hereof.
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
(as defined in Section 2(c) hereof) and as of each Date of Delivery, if any, (as
defined in Section 2(b) hereof) (in each case, a "Representation Date"), and
agrees with each Underwriter, as follows:
(1) Compliance with Registration Requirements. The Company meets the
requirements for use of Form S-3 under the 1933 Act. The Registration
Statement (including 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 such 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 (including any Rule
462(b) Registration Statement) and any post-effective amendments thereto,
if any, became effective and at the Closing Time and the Date of Delivery,
if any, the Registration Statement (including any Rule 462(b) Registration
Statement) and any amendments 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
therein or necessary to make the statements therein not misleading. At the
date of the Prospectus, at the Closing Time and at each Date of Delivery,
if any, neither the Prospectus nor any amendments and supplements thereto
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. If the Company elects to rely upon Rule 434 of the
1933 Act Regulations, the Company will comply with the requirements of Rule
434. Notwithstanding the foregoing, 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 Merrill Lynch expressly for use in the Registration
Statement or the Prospectus.
Each preliminary prospectus and the Prospectus complied when filed
pursuant to Rule 424 under the 1933 Act, 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 the offering of
the Securities will, at the time of such delivery, be
3
substantially identical to any electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
(2) Incorporated Documents. The documents incorporated or deemed to be
incorporated by reference in the Registration Statement and the Prospectus,
at the time they were or hereafter are filed with the Commission, complied
and will comply in all material respects with the requirements of the 1934
Act and the rules and regulations of the Commission thereunder (the "1934
Act Regulations") and, when read together with the other information in the
Prospectus, at the date of the Prospectus, at the Closing Time and at each
Date of Delivery, if any, did not and will not include an untrue statement
of a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(3) Independent Accountants. The accountants who certified the
financial statements and any supporting schedules thereto included in the
Registration Statement and the Prospectus are independent public
accountants as required by the 1933 Act and the 1933 Act Regulations.
(4) Financial Statements. The financial statements of the Company
included in the Registration Statement and the Prospectus, together with
the related schedules and notes, as well as those financial statements,
schedules and notes of any other entity included therein, present fairly
the financial position of the Company and its consolidated Subsidiaries (as
defined in Section 1(a)(7) hereof), or such other entity, as the case may
be, at the dates indicated and the statement of operations, stockholders'
equity and cash flows of the Company and its consolidated Subsidiaries, or
such other entity, as the case may be, for the periods specified. Such
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules, if any, included
in the Registration Statement and the Prospectus 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 Registration Statement and 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 and the Prospectus.
(5) 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 arising 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.
4
(6) 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
Purchase Agreement. 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 conduct of business, except where the failure to
be so qualified or in good standing could not, individually or in the
aggregate, have a Material Adverse Effect.
(7) Good Standing of Subsidiaries . All of the subsidiaries of the
Company are listed on Schedule C attached hereto (each, a "Subsidiary" and,
collectively, the "Subsidiaries"). Each of the Subsidiaries has been duly
organized and is validly existing as a limited partnership, a limited
liability company, a corporation or other entity, as the case may be, in
good standing (or similarly certified to be in compliance with the
organizational requirements applicable to it) under the laws of the
jurisdiction of its organization or incorporation, as the case may be, has
corporate, partnership, limited liability company or other entity 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
limited partnership, limited liability company, corporation or other
entity, as applicable, to transact business and is in good standing (or
similarly certified to be in compliance with the organizational
requirements applicable to it) 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 to be so
qualified or in good standing could not, individually or in the aggregate,
have a Material Adverse Effect. Except as otherwise stated in the
Registration Statement and the Prospectus, all of the issued and
outstanding capital stock, membership interests or partnership interests,
as the case may be, of each Subsidiary have been duly authorized and are
validly issued, fully paid and non-assessable and are owned by the Company,
directly or through its 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 preemptive or other similar rights of any securityholder of
such Subsidiary.
(8) Capitalization. The authorized, issued and outstanding shares of
capital stock of the Company is as set forth under the caption "Description
of Capital Stock" in the Prospectus (except for subsequent issuances
thereof, if any, pursuant to this Purchase Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or options
referred to in the Prospectus). Such shares of capital stock have been duly
authorized and validly issued by the Company and are fully paid and non-
assessable, and none of such shares of capital stock were issued in
violation of preemptive or other similar rights of any securityholder of
the Company. Except as set forth in or contemplated by the Prospectus, no
options, warrants or other rights to purchase, agreements or other
obligations to issue, or rights to convert any obligations into or exchange
any securities for, shares of capital stock of or ownership interests in
the Company are outstanding.
5
(9) Authorization of this Purchase Agreement. This Purchase Agreement
has been duly authorized, executed and delivered by the Company.
(10) Authorization of Common Stock. The Securities have been duly
authorized by the Company for issuance and sale pursuant to this Purchase
Agreement and, when issued and delivered by the Company pursuant to this
Purchase Agreement against payment of the consideration set forth herein,
will be validly issued, fully paid and non-assessable and, except as set
forth in the Prospectus, will not be subject to preemptive or other similar
rights of any securityholder of the Company. No holder of the Securities is
or will be subject to personal liability by reason of being such a holder.
(11) Descriptions of the Securities. The Securities being sold
pursuant to this Purchase Agreement when issued and delivered in accordance
with the terms hereof, will conform to the statements relating thereto
contained in the Prospectus and the certificate representing such
Securities will be in substantially the form filed or incorporated by
reference, as the case may be, as an exhibit to the Registration Statement.
(12) Absence of Defaults and Conflicts. Neither the Company nor any of
its Subsidiaries is in violation of its charter, by-laws or other
organizational documents or any applicable law, statute, rule, regulation,
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 assets, properties or operations,
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
assets, properties or operations of the Company or any of its Subsidiaries
is subject (collectively, "Agreements and Instruments"), which violation or
default could, individually or in the aggregate, have a Material Adverse
Effect. The execution, delivery and performance of this Purchase Agreement
and the consummation of the transactions contemplated herein (including the
issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described under the caption "Use of Proceeds")
and compliance by the Company with its obligations hereunder 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 in this Section 1(a)(12)) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any assets, properties
or operations of the Company or any of its Subsidiaries pursuant to, any
Agreements and Instruments (except for such conflicts, breaches or defaults
or liens, charges or encumbrances as could not, individually or in the
aggregate, have a Material Adverse Effect), nor will such action result in
any violation of the provisions of the charter, by-laws or other
organizational documents of the Company or any of its Subsidiaries or any
applicable law, statute, rule, regulation, judgment, order, writ or decree
of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its Subsidiaries or
any of their assets, properties or operations. As used herein, a "Repayment
Event" means any event or
6
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 of its Subsidiaries.
(13) Absence of Labor Dispute. No labor problem or dispute with the
employees of the Company or any of its Subsidiaries exists or, to the
knowledge of the Company, is threatened or imminent, and the Company is not
aware of any existing or imminent labor disturbance by the employees of any
of its or any Subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to result in
a Material Adverse Effect.
(14) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or any arbitrator
or governmental agency, authority or body, domestic or foreign, now
pending, or to the knowledge of the Company threatened, against or
affecting the Company or any of its Subsidiaries which is required to be
disclosed in the Registration Statement and the Prospectus (other than as
stated 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 assets, properties or operations thereof or the
consummation of the transactions contemplated under the Prospectus, this
Purchase Agreement or the performance by the Company of its obligations
hereunder. 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 which
are not described in the Registration Statement and the Prospectus,
including ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(15) Accuracy of Exhibits and Prospectus. There are no contracts or
documents which are required to be described in the Registration Statement,
the Prospectus or the documents incorporated by reference therein or to be
filed as exhibits thereto which have not been so described and filed as
required. 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. The statements in the Prospectus under the
headings "Risk Factors--We could have indemnification liabilities to
licensees relating to the operation of GTL plants based on the Syntroleum
Process or intellectual property disputes," "Description of Capital Stock,"
"Business--Implementation of Syntroleum's Business Strategy--Licensing
Agreements,--Key Testing and Commercial Projects,--Government Regulation
and--Legal Proceedings" and "Shares Eligible for Future Sale--Options
and--Registration Rights Agreements" fairly summarize the matters therein
described in all material respects.
(16) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or any arbitrator or governmental
authority or agency, domestic or foreign, is necessary or required for the
performance by the Company of its obligations hereunder or the
7
consummation of the transactions contemplated by this Purchase Agreement,
other than those which have already been made or obtained or will be made
or obtained prior to the Closing Time under the 1933 Act, the 1933 Act
Regulations, and the state securities laws.
(17) Possession of Intellectual Property. To the Company's best
knowledge, the Company and its Subsidiaries own, possess or have the right
to use, 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, the "Intellectual Property")
necessary to carry on the business as described in the Prospectus and have
taken all steps reasonably necessary to secure assignments of such
Intellectual Property from their employees and contractors. Except as set
forth in the Prospectus under the caption "Business--Intellectual Property"
or as would not, individually or in the aggregate, have a Material Adverse
Effect, (a) there are no rights of third parties to any such Intellectual
Property owned by the Company, except pursuant to agreements with the
Company; (b) to the Company's knowledge after due inquiry, there is no
infringement by third parties of any such Intellectual Property; (c) to the
Company's knowledge after due inquiry, there is no pending or threatened
action, suit, proceeding or claim by others challenging the Company's
rights in or to any such Intellectual Property, and the Company is unaware
of any facts which would form a reasonable basis for any such claim; (d) to
the Company's knowledge after due inquiry, there is no pending or
threatened action, suit, proceeding or claim by others challenging the
validity or scope of any such Intellectual Property, and the Company has
not received any notice and is unaware 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 form a reasonable basis for any
such claim or would render any Intellectual Property invalid or inadequate
to protect the interest of the Company or any of its Subsidiaries therein;
(e) to the Company's knowledge after due inquiry, there is no pending or
threatened action, suit, proceeding or claim by others that the Company
infringes, misappropriates or otherwise violates any valid, enforceable
patent, trademark, copyright, trade secret or other proprietary rights of
others, and the Company is unaware of any other fact which would form a
reasonable basis for any such claim; (f) to the Company's knowledge after
due inquiry, there is no U.S. patent or published U.S. patent application
which contains claims that dominate or may dominate any Intellectual
Property described in the Prospectus as being owned by or licensed to the
Company or that interferes with the issued or pending claims of any such
Intellectual Property; (g) there is no prior act of which the Company is
aware that may render any U.S. patent held by the Company invalid or any
U.S. patent application held by the Company unpatentable which has not been
disclosed to the U.S. Patent and Trademark Office; (h) none of the
Intellectual Property has been obtained or is being used by the Company or
any of its Subsidiaries in violation of any contractual or fiduciary
obligation binding on the Company, any of its Subsidiaries or any of their
respective directors, executive officers, employees or consultants; (i) the
Company and its Subsidiaries have taken and will maintain reasonable
measures to prevent the unauthorized dissemination or publication of the
Company's trade secrets; (j) to the Company's knowledge after due inquiry,
neither the Company nor
8
any of its Subsidiaries has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any valid,
enforceable Intellectual Property of third parties; and (k) to the
Company's knowledge after due inquiry, there are no legal or governmental
proceedings pending relating to the Intellectual Property other than the
prosecution by the Company and its Subsidiaries of their respective patent
applications before the United States Patent Office and appropriate foreign
government agencies, and, to the Company's knowledge after due inquiry, no
proceedings are threatened or contemplated by governmental authorities or
others relating to the Intellectual Property.
(18) Possession of Licenses and Permits. The Company and its
Subsidiaries possess such permits, licenses, certificates, approvals,
consents and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by them,
except where the failure to so possess would not, individually or in the
aggregate, have a Material Adverse Effect. The Company and its Subsidiaries
are in compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in the
aggregate, result in a Material Adverse Effect. All of the Governmental
Licenses are valid and in full force and effect, except where the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not result in a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries
has received any notice of proceedings relating to the revocation or
modification 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.
(19) Title to Property. Each of the Company and its Subsidiaries owns
or leases all such properties as are necessary to the conduct of its
operations as presently conducted. 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, defects or encumbrances of any kind, except (A) as
otherwise stated in the Registration Statement and the Prospectus or (B)
those which 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. 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
valid and in full force and effect and enforceable against the Company or
its Subsidiaries, as the case may be, and to the best of the Company's
knowledge, the other parties hereto, and neither the Company nor any of its
Subsidiaries has received any notice of any material claim of any sort that
has been asserted by anyone adverse to the rights of the Company or any of
its Subsidiaries under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such Subsidiary of
the continued possession of the leased or subleased premises under any such
lease or sublease.
9
(20) 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" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act").
(21) Environmental Laws. Except as otherwise stated in the
Registration Statement and the Prospectus 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 and safety,
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) neither the
Company nor any of its Subsidiaries fails to possess any permit,
authorization or approval required under any applicable Environmental Laws
or to be in compliance with their requirements, (C) there are no pending
or, to the Company's knowledge, 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) to
the Company's knowledge after due inquiry, 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. Except as set forth in the Prospectus, neither the
Company nor any of the Subsidiaries has been named as a "potentially
responsible party" under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended. In the ordinary course
of its business, the Company periodically reviews the effect of
Environmental Laws on the business, operations and properties of the
Company and its Subsidiaries, in the course of which it identifies and
evaluates associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws, or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities could not,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(22) Registration Rights. Except as otherwise disclosed in the
Prospectus, no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement.
10
(23) Transfer Taxes. There are no transfer taxes or other similar
fees or charges under federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Purchase Agreement or the issuance by the
Company or sale by the Company of the Securities.
(24) Tax Returns. The Company has filed all foreign, federal, state
and local tax returns that are required to be filed or has requested
extensions thereof (except in any case in which the failure so to file
could not, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect, and except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto)) and has paid all taxes
required to be paid by it and any other assessment, fine or penalty levied
against it, to the extent that any of the foregoing is due and payable,
except for any such assessment, fine or penalty that is currently being
contested in good faith or as could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect, and except as set
forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
(25) 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. All policies of insurance and fidelity or surety
bonds, if any, insuring the Company or any of its Subsidiaries or their
respective businesses, assets, employees, officers and directors are in
full force and effect. The Company and its Subsidiaries are in compliance
with the terms of such policies and instruments in all material respects,
and there are no claims by the Company or any of its Subsidiaries under any
such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause. Neither the
Company nor any Subsidiary has been refused any insurance coverage sought
or applied for, and neither the Company nor any Subsidiary has any reason
to believe that it 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 at a
cost that could not, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect, except as set forth in or contemplated in
the Prospectus (exclusive of any supplement thereto).
(26) No Restrictions on Dividends. No Subsidiary of the Company is
currently prohibited, directly or indirectly, from paying any dividends to
the Company, from making any other distribution on such Subsidiary's
capital stock, membership interest or limited partnership or other entity
interest, as the case may be, from repaying to the Company any loans or
advances to such Subsidiary from the Company or from transferring any of
such Subsidiary's property or assets to the Company or any other Subsidiary
of the Company, except as described in or contemplated by the Prospectus,
as provided in the charter and bylaws or other organizational documents of
such Subsidiary or as restricted by applicable law.
(27) Internal Auditing Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or
11
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(28) No Manipulation of Price. The Company has not taken, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities.
(29) ERISA. Each of the Company and its Subsidiaries has fulfilled its
obligations, if any, under the minimum funding standards of Section 302 of
the United States Employee Retirement Income Security Act of 1974 ("ERISA")
and the regulations and published interpretations thereunder with respect
to each "plan" (as defined in Section 3(3) of ERISA and such regulations
and published interpretations) in which employees of the Company and its
Subsidiaries are eligible to participate and each such plan is in
compliance in all material respects with the presently applicable
provisions of ERISA and such regulations and published interpretations. The
Company and its Subsidiaries have not incurred any unpaid liability to the
Pension Benefit Guaranty Corporation (other than for the payment of
premiums in the ordinary course) or to any such plan under Title IV of
ERISA.
(30) Absence of Certain Changes. Neither the Company nor any of its
Subsidiaries has sustained since the date of the latest audited financial
statements included in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus or could not, singly or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock (as contemplated in the
Prospectus) or long-term debt of the Company or its Subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its Subsidiaries, otherwise than as set forth or contemplated
in the Prospectus.
(b) Officers' Certificates. Any certificate signed by any officer of the
Company or any of its Subsidiaries and delivered to any Underwriter or to
counsel for the Underwriters in connection with the offering of the Securities
shall be deemed a representation and warranty by the Company to each Underwriter
as to the matters covered thereby on the date of such certificate and, unless
subsequently amended or supplemented, at each Representation Date subsequent
thereto.
12
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 agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company, at
the price per share set forth in Schedule B, 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.
(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 Company hereby grants an option to the Underwriters, severally and
not jointly, to purchase up to an additional 787,500 shares of Common Stock at
the price per share set forth in Schedule B, 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 written notice by the Representatives to the Company
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 (a "Date
of Delivery") shall be determined by the Representatives and specified in such
notice, but shall not be earlier than two nor later than seven full business
days after the exercise of said option, nor in any event prior to the Closing
Time (as defined in Section 2(c) hereof). 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 the
Representatives in their discretion shall make to eliminate any sales or
purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Cleary,
Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, NY 10006, or at such
other place as shall be agreed upon by the Representatives 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 Representatives 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 Representatives
and the Company, on each Date of Delivery as specified in the notice from the
Representatives to the Company.
13
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, 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. Merrill Lynch, 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 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 10:00 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
of the 1933 Act Regulations and/or Rule 434 of the 1933 Act Regulations, if and
as applicable, and will notify the Representatives immediately, and confirm the
notice in writing, of (i) the effectiveness of any post-effective amendment to
the Registration Statement or the filing of any supplement or amendment to the
Prospectus, (ii) the receipt of any comments from the Commission, (iii) 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) 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 and will
take such steps as it deems necessary to ascertain promptly whether the
Prospectus transmitted for filing under Rule 424 was received for filing by the
Commission and, in the event that it was not, it will promptly file the
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 Representatives notice
of its intention to file or prepare any amendment to the Registration Statement
(including any filing under Rule 462(b) of the 1933 Act Regulations), any Term
Sheet or any amendment, supplement or revision to either the prospectus included
in the Registration Statement at the time it became effective or to the
Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will
14
furnish the Representatives 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 Representatives or counsel
for the Underwriters shall reasonably 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 documents incorporated or deemed to be 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
Registration Statement and each amendment thereto furnished to the Underwriters
will be identical to any electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(d) Delivery of Prospectuses. The Company will deliver to each Underwriter,
without charge, as many copies of each preliminary prospectus as such
Underwriter may reasonably request, 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 such Underwriter may reasonably request. The
Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to any 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 and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Securities
as contemplated in this Purchase Agreement and in the Registration Statement and
the Prospectus. If at any time when the Prospectus is required by the 1933 Act
or the 1934 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
Registration Statement in order that the Registration Statement 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 not misleading
or to amend or supplement the Prospectus in order that the Prospectus will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein 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 the 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, without
charge, such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
15
(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
(domestic or foreign) as the Representatives may designate and to maintain such
qualifications in effect for a period of not less than one year from the date
hereof; 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 date
hereof.
(g) Earnings Statement. 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".
(i) Listing. The Company will use its best efforts to effect and maintain
the quotation of the Securities, prior to the Closing Time, on 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 Merrill Lynch, (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 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
pursuant to any options, rights or warrants outstanding on the date of this
Agreement or issued pursuant to employee benefit plans of the Company referred
to in the Prospectus or (C) shares of Common Stock or other securities issued in
connection with acquisitions and private placements by the Company approved by
Merrill Lynch, such approval not to be unreasonably withheld, provided that the
recipients of such shares or other securities agree in writing to be bound by
the restrictions contained in this Section 3(j) with respect to such shares or
other securities.
(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 1934 Act
Regulations.
16
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the performance
of its obligations under this Purchase 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 Purchase
Agreement 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 Securities to the Underwriters,
including any 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 or
agents (including transfer agents and registrars), (v) the qualification of the
Securities under state 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, printing and delivery of the Blue Sky Survey,
and any amendment thereto, (vi) the printing and delivery to the Underwriters of
copies of each preliminary prospectus, any Term Sheet, and the Prospectus and
any amendments or supplements thereto, (vii) the fees and expenses incurred with
respect to the listing of the Securities and (viii) the filing fees incident to,
and the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review, if any, by the National Association of Securities
Dealers, Inc. (the "NASD") of the terms of the sale of the Securities.
(b) Termination of Agreement. If this Purchase Agreement is terminated by
the Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Securities hereunder are
subject to the accuracy of the representations and warranties of the Company
contained in Section 1 hereof or in certificates of any officer of the Company
or any of its Subsidiaries 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 under the
1933 Act and no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act and no proceedings for that
purpose shall have been instituted or be pending 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 information relating to
the description of the Securities, the specific method of distribution and
similar matters shall have been filed with the Commission in accordance with
Rule 424(b)(1), (2), (3), (4) or (5), as applicable (or any required post-
effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A), or, if the
Company has elected to rely upon
17
Rule 434 of the 1933 Act Regulations, a Term Sheet including the Rule 434
Information shall have been filed with the Commission in accordance with Rule
424(b)(7).
(b) Opinion of Counsel for Company. At Closing Time, the Representatives
shall have received the favorable opinion, dated as of Closing Time, of:
(i) Baker Botts L.L.P., counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, to the effect set forth in
Exhibit B hereto and to such further effect as counsel to the Underwriters may
reasonably request and (ii) Eric Grimshaw, General Counsel of the Company, in
form and substance satisfactory to counsel for the Underwriters, to the effect
set forth in Exhibit C hereto and to such further effect as counsel to the
Underwriters may reasonably request, in each case, together with signed or
reproduced copies of such letter for each of the other Underwriters.
(c) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Cleary, Gottlieb, Steen & Hamilton, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the other
Underwriters, in form and substance satisfactory to the Representatives. In
giving such opinion, such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York, the federal
law of the United States and the General Corporation Law of the State of
Delaware, upon the opinions of counsel satisfactory to the Representatives. Such
counsel may also 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.
(d) Officers' Certificate. (i) 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 Chief Executive Officer and Chairman of the Board
or the President and Chief Operating 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 (A) there has been no such material adverse change, (B) the
representations and warranties in Section 1(a) are true and correct with the
same force and effect as though expressly made at and as of the Closing Time,
(C) the Company has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to the Closing Time under this
Agreement, and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted, are pending or, to the best of such officer's knowledge, are
threatened by the Commission.
(ii) At the Closing Time, the Representatives shall have received a
certificate of the General Counsel, dated as of the Closing Time, to the effect
set forth in Exhibit D hereto.
(e) Accountant's Comfort Letter. At the time of the execution of this
Purchase Agreement, the Representatives shall have received from Arthur Andersen
LLP a letter dated such date, substantially in the form as the draft letter set
forth in Annex A or otherwise in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of
18
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.
(f) Bring-down Comfort Letter. At Closing Time, the Representatives shall
have received from Arthur Anderson LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section 5, except that the specified date
referred to shall be a date not more than three business days prior to the
Closing Time.
(g) Approval of Listing. At Closing Time, the Securities shall have been
approved for inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
(h) Lock-up Agreements. At the date of this Purchase Agreement, the
Representatives shall have received an agreement, substantially in the form of
Exhibit A hereto signed by the persons listed on Schedule D hereto.
(i) Over-Allotment Option. In the event the Underwriters exercise their
option to purchase all or any portion of the Option Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company or any of its
Subsidiaries hereunder shall be true and correct as of each Date of Delivery,
and, at the relevant Date of Delivery, the Representatives shall have received:
(1) A certificate, dated such Date of Delivery, of each of (i) the
Chief Executive Officer and Chairman of the Board or the President and
Chief Operating Officer of the Company and the Vice President and Chief
Financial Officer and (ii) the General Counsel of the Company, confirming
that the certificate delivered by such parties at the Closing Time pursuant
to Section 5(d) hereof remains true and correct as of such Date of
Delivery.
(2) The favorable opinion of each of (i) Baker Botts L.L.P., counsel
for the Company and (ii) Eric Grimshaw, General Counsel of the Company, in
each case, 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 respectively required by Section 5(b) hereof.
(3) The favorable opinion of Cleary, Gottlieb, Steen & Hamilton,
counsel for the Underwriters, dated such Date of Delivery, relating to the
Option Securities and otherwise to the same effect as the opinion required
by Section 5(c) hereof.
(4) A letter from Arthur Andersen 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(f) hereof, except that the "specified
date" in the letter furnished pursuant to this paragraph shall be a date
not more than three business days prior to such Date of Delivery.
19
(j) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such other documents
and opinions as they may reasonably 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 in connection with the issuance and sale of the Securities
as herein contemplated shall be reasonably satisfactory in form and substance to
the Representatives and counsel for the Underwriters.
(k) Termination of this Purchase Agreement. If any condition specified in
this Section 5 shall not have been fulfilled when and as required to be
fulfilled, this Purchase Agreement (or, in the case of any condition to the
purchase of Option Securities on a Date of Delivery after the Closing Time, the
obligations of the Underwriters to purchase the Option Securities on such Date
of Delivery) may be terminated by the Representatives by notice to the Company
at any time at or prior to the Closing Time (or such Date of Delivery, as
applicable), 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.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. 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 or Section 20 of
the 1934 Act as follows:
(1) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of 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 and the
Rule 434 Information deemed to be a part thereof, if applicable, 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;
(2) 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 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
(3) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any
20
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 (1) or (2) 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 in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information deemed to be a part thereof, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); provided further, that with respect to any untrue statement or
omission of material fact made in any preliminary prospectus, this indemnity
shall not inure to the benefit of any Underwriter from whom the person asserting
any such loss, claim, damage or liability purchased the securities concerned, to
the extent that any such loss, claim, damage or liability of such Underwriter
occurs under the circumstance where it shall have been determined by a court of
competent jurisdiction by final and nonappealable judgment that (w) the Company
had previously furnished copies of the Prospectus to the Representatives, (x)
delivery of the Prospectus was required by the 1933 Act to be made to such
person, (y) the untrue statement or omission of a material fact contained in the
preliminary prospectus was corrected in the Prospectus and (z) there was not
sent or given to such person, at or prior to the written confirmation of the
sale of such securities to such person, a copy of the Prospectus.
(b) Indemnification of Company, Directors and Officers. 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 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 and the Rule 434
Information deemed to be a part thereof, if applicable, 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 Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give written 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 Merrill
Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above,
counsel to the indemnified parties shall be selected by the
21
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 reasonably 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 in accordance with this
Section 6, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(2) 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.
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, on the one
hand, and the Underwriters, on the other hand, from the offering of the
Securities pursuant to this Purchase 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, 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, 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, in connection with the offering of the
Securities pursuant to this Purchase 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 Purchase Agreement (before deducting expenses)
received by the Company and the total underwriting discount received by the
Underwriters, in each case as set forth on the cover of the Prospectus, or, if
Rule 434 is used, the
22
corresponding location on the Term Sheet bear to the aggregate initial public
offering price of the Securities as set forth on such cover.
The relative fault of the Company, 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 fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company 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 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 an
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.
23
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Purchase
Agreement or in certificates of officers of the Company or any of its
Subsidiaries 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, and shall
survive delivery of and payment for the Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this Purchase
Agreement, by notice to the Company, at any time at or prior to the Closing Time
or any relevant Date of Delivery, if (i) there has been, since the time of
execution of this Purchase 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)
there has occurred since the time of execution of this Purchase Agreement any
material adverse change in the financial markets in the United States, 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) 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 New York Stock Exchange or the American 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 either of said exchanges or by such
system or by order of the Commission, the NASD or any other governmental
authority, or (iv) a banking moratorium has been declared by either Federal or
New York authorities.
(b) Liabilities. If this Purchase Agreement is terminated pursuant to this
Section 9, 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.
SECTION 10. Default by One or More of the Underwriters. If one or more of
the Underwriters shall fail at the Closing Time or the relevant Date of
Delivery, as the case may be, to purchase the Securities which it or they are
obligated to purchase under this Purchase 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, 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
24
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 Purchase 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 Company to sell,
the Option Securities to be purchased 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 Purchase 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 Company to sell with respect to the related
Option Securities, as the case may be, either the Representatives or the Company
shall have the right to postpone the 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 the 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. 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 World Financial Center,
North Tower, New York, New York 10281-1201, attention of .; and notices to the
Company shall be directed to it at Syntroleum Corporation, 1350 South Boulder,
Suite 1100, Tulsa, Oklahoma, 74103, attention of General Counsel.
SECTION 12. Parties. This Purchase Agreement shall inure to the benefit of
and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Purchase Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters and the Company 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 Purchase Agreement or any provision herein.
This Purchase Agreement and all conditions and provisions hereof are intended to
be for the sole and exclusive benefit of the parties hereto 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 13. GOVERNING LAW AND TIME. THIS PURCHASE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
25
THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein and
the Table of Contents are for convenience only and shall not affect the
construction hereof.
26
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
Purchase Agreement, along with all counterparts, will become a binding agreement
between the Underwriters and the Company in accordance with its terms.
Very truly yours,
SYNTROLEUM CORPORATION
By: /s/ RANDALL M. THOMPSON
----------------------------------------------
Name: Randall M. Thompson
Title: Vice President and Chief Operating
Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
SALOMON SMITH BARNEY INC.
PETRIE PARKMAN & CO., INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ CHRISTOPHER MIZE
-------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
27
SCHEDULE A
Number of
Initial
Name of Underwriter Securities
------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith 1,091,250
Incorporated......................................................
Goldman, Sachs & Co....................................................... 1,091,250
J.P. Morgan Securities Inc................................................ 1,091,250
Salomon Smith Barney Inc.................................................. 1,091,250
Petrie Parkman & Co., Inc................................................. 485,000
George K. Baum & Company.................................................. 200,000
Security Investment Company of Kansas City................................ 200,000
---------
Total..................................................................... 5,250,000
=========
Sch A-1
SCHEDULE B
SYNTROLEUM CORPORATION
5,250,000 Shares of Common Stock
(Par Value $0.01 Per Share)
1. The initial public offering price per share for the Securities shall be
$17.50.
2. The purchase price per share for the Securities to be paid by the several
Underwriters shall be $16.45, being an amount equal to the initial public
offering price set forth above less $1.05 per share; provided that the purchase
price per share for any Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by 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.
Sch B-1
SCHEDULE C
Subsidiaries of the Company
Syntroleum International Corporation (a Delaware corporation)
Syntroleum/Sweetwater Company, L.L.C. (a Delaware limited liability company)
Syntroleum International Holdings, Ltd. (a Cayman Islands exempted company)
Syntroleum Sweetwater Holdings, Ltd. (a Cayman Islands exempted company)
Syntroleum Sweetwater Operations, Ltd. (a Cayman Islands exempted company)
Syntroleum Australia Licensing Corporation (a Delaware corporation)
Syntroleum Australia Credit Corporation (a Delaware corporation)
Scout Development Corporation (a Missouri Corporation)
Scout Development Corporation of New Mexico (a Missouri Corporation)
BMA Resources, Inc. (a Missouri Corporation)
529 Partners, Ltd. (a Texas limited partnership)
Lot Development, Inc. (a Texas Corporation)
Carousel Apartment Homes, Inc. (a Georgia Corporation)
Sch C-1
SCHEDULE D
LIST OF PERSONS AND ENTITIES SUBJECT TO LOCK-UP
Kenneth L. Agee
Mark A. Agee
Charles A. Bayens
Carla S. Covey
Eric Grimshaw
Paul F. Schubert
Michael P. Stewart
Randall M. Thompson
Larry J. Weick
Alvin R. Albe, Jr.
Frank M. Bumstead
Robert A. Day
P. Anthony Jacobs
Robert Rosene, Jr.
James R. Seward
J. Edward Sheridan
William D. Grant
Sch D-1
FORM OF LOCK-UP FROM DIRECTORS,
OFFICERS OR OTHER STOCKHOLDERS
PURSUANT TO SECTION 5(H)
Exhibit A
., 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Salomon Smith Barney Inc.
Petrie Parkman & Co., Inc.
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by Syntroleum Corporation
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of
Syntroleum Corporation, a Delaware corporation (the "Company"), understands that
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Goldman, Sachs & Co., J.P. Morgan Securities Inc., Salomon
Smith Barney Inc. and Petrie Parkman & Co., Inc. propose to enter into a
Purchase Agreement (the "Purchase Agreement") with the Company providing for the
public offering of shares (the "Securities") of the Company's common stock, par
value $0.01 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 Purchase Agreement
that, during a period of 180 days from the date of the Purchase Agreement, the
undersigned will not, without the prior written consent of Merrill Lynch,
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 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
A-1
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; provided that the foregoing restriction
shall not apply to (i) bona fide pledges of securities existing on the date of
this letter and (ii) intra-family transfers or transfers to trusts for estate
planning purposes if the transferee of such securities agrees in writing to be
bound by the restrictions contained in this letter with respect to such
securities.
Very truly yours,
Signature:
-------------------------------
Print Name:
------------------------------
A-2
Exhibit B
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(1) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(2) 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 Purchase
Agreement.
(3) The authorized, issued and outstanding shares of capital stock of the
Company is as set forth in the Prospectus under the heading "Description of
Capital Stock" (except for (x) subsequent issuances thereof, if any, pursuant to
the Purchase Agreement or as contemplated by the Prospectus, (y) pursuant to
reservations, agreements or employee benefit plans referred to in the Prospectus
or (z) pursuant to the exercise of convertible securities or options referred to
in the Prospectus). Such shares of capital stock have been duly authorized and
validly issued by the Company and are fully paid and non-assessable, and, to our
knowledge, none of such shares of capital stock was issued in violation of
preemptive or other similar rights of any securityholder of the Company. To our
knowledge, except as set forth in the Prospectus, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or rights to
convert any obligations into or exchange any securities for, shares of capital
stock of or ownership interests in the Company are outstanding.
(4) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(5) The Securities have been duly authorized by the Company for issuance
and sale pursuant to the Purchase Agreement. The Securities, when issued and
delivered by the Company pursuant to the Purchase Agreement against payment of
the consideration therefor specified in the Purchase Agreement, will be validly
issued, fully paid and non-assessable and, to our knowledge, such issuance of
the Securities will not be subject to preemptive or other similar rights of any
securityholder of the Company. The form of certificate used to evidence the
Securities complies in all material respects with the applicable statutory
requirements, with any applicable requirements of the charter or by-laws of the
Company and with the requirements of the Nasdaq National Market.
(6) The Securities being sold pursuant to this Purchase Agreement conform
in all material respects as to legal matters to the description thereof
contained in the Prospectus under the heading "Description of Capital Stock".
(7) The information set forth in the Prospectus under the heading
"Description of Capital Stock," and in the Registration Statement under Item 15,
to the extent that it constitutes matters of law, summaries of legal matters,
agreements, documents, legal proceedings or legal conclusions or the Company's
charter or bylaws or purports to describe the provisions of laws
B-1
and documents, has been reviewed by us and is an accurate and fair summary in
all material respects.
(8) The execution, delivery and performance of the Purchase Agreement and
the consummation of the transactions contemplated in the Purchase Agreement
(including the issuance and sale of the Securities and the application of the
net proceeds from the sale of the Securities as described in the Prospectus) and
compliance by the Company with its obligations thereunder have been duly
authorized by all necessary corporate action and (a) 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 in Section 1(a)(12) of the Purchase Agreement) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any assets,
properties or operations of the Company or any of its Subsidiaries pursuant to,
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or any other agreement or instrument filed as an exhibit to any
filing of the Company with the SEC since August 7, 1998 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 assets, properties or operations of the Company or any of
its Subsidiaries is subject, (b) will not result in any violation of the
provisions of the charter or by-laws of the Company or (c) will not result in
any violation of any applicable law, statute, rule, regulation, judgment, order,
writ or decree, known to us, of any government, government instrumentality or
court, of the United States or the States of Delaware or Texas, having
jurisdiction over the Company or any of its Subsidiaries or any of their assets,
properties or operations, except in the cases of clauses (a) and (c) as would
not, individually or in the aggregate, have a Material Adverse Effect.
(9) To our knowledge, there are no contracts or documents required to be
described or referred to in the Registration Statement, the Prospectus or the
documents incorporated by reference therein or to be filed as exhibits thereto
other than those described or referred to therein or filed or incorporated by
reference as exhibits thereto. All descriptions in the Prospectus of contracts
and other documents to which the Company or its Subsidiaries are a party under
the captions "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Overview--Real Estate Revenues", "--Results of Operation
- --Overview", "--Liquidity and Capital Resources--Initial Specialty Product GTL
Plant", "Business--Implementation of Syntroleum's Business Strategy--Key
Testing and Commercial Projects--Sweetwater Project", "Management--Executive
Employment Agreements" and "Shares Eligible for Future Sale--Registration
Rights Agreements" are accurate in all material respects.
(10) To our knowledge, there are no statutes or regulations that are
required to be described in the Prospectus that are not described as required.
(11) 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 the manner and within
the time period required by Rule 424(b). To our knowledge, no stop order
suspending the effectiveness of the Registration Statement (or such Rule 462(b)
Registration Statement) has been issued under the 1933 Act and no proceedings
for that purpose have been initiated or are pending or threatened by the
Commission.
B-2
(12) The Registration Statement (including any Rule 462(b) Registration
Statement) and the Prospectus, excluding the documents incorporated by reference
therein, and each amendment or supplement to the Registration Statement
(including any Rule 462(b) Registration Statement) and Prospectus, excluding the
documents incorporated by reference therein, as of their respective effective or
issue dates (other than (i) the financial statements and supporting schedules
contained or incorporated by reference therein or omitted therefrom (including
the notes thereto and the auditors' reports thereon) or (ii) the other
accounting or financial information contained or incorporated by reference
therein or omitted therefrom, as to which we express no opinion), appear on
their face to comply as to form in all material respects with the requirements
of the 1933 Act and the 1933 Act Regulations.
(13) The documents incorporated or deemed to be incorporated by reference
in the Registration Statement and the Prospectus (other than (i) the financial
statements and supporting schedules contained or incorporated by reference
therein or omitted therefrom (including the notes thereto and the auditors'
reports thereon) or (ii) the other accounting or financial information contained
or incorporated by reference therein or omitted therefrom, as to which we
express no opinion), when they were filed with the Commission, appear on their
face to comply as to form in all material respects with the requirements of the
1934 Act and the 1934 Act Regulations.
(14) 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 performance by the
Company of the transactions contemplated by this Purchase Agreement, other than
under the 1933 Act and the 1933 Act Regulations which have already been made,
obtained or rendered, as applicable, and under state securities laws, as to
which we have not been asked to express an opinion.
(15) 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" within the
meaning of the Investment Company Act of 1940, as amended.
(16) To our knowledge, except as otherwise disclosed in the Prospectus, no
holders of securities of the Company have rights to the registration of such
securities under the Registration Statement.
We have participated in conferences with certain officers and other
representatives of the Company, representatives of the independent public
accountants of the Company, representatives of the Underwriters and counsel for
the Underwriters at which the contents of the Registration Statement and the
Prospectus and related matters were discussed. Although we did not
independently verify such information and are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus (except as otherwise
expressly provided in clauses (6) and (7) of such opinion), we advise you that,
on the basis of the foregoing, no facts have come to our attention that lead us
to believe that the Registration Statement (except for (i) financial statements
and supporting schedules contained or incorporated by reference therein or
omitted therefrom (including the notes thereto and the auditors' reports
thereon) or (ii) the other
B-3
accounting or financial information contained or incorporated by reference
therein or omitted therefrom, as to which we have not been asked to comment) on
the effective date of the Registration Statement and any post-effective
amendment thereto included any 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 (i) the financial statements and supporting
schedules contained or incorporated by reference therein or omitted therefrom
(including the notes thereto and the auditors' report thereon) or (ii) the other
accounting or financial information contained or incorporated by reference
therein, as to which we have not been asked to comment) as of the date it was
issued, at the time any such amended or supplemented Prospectus was issued or at
the Closing Time, included or includes any untrue statement of a material fact
or omitted or omits to state a material fact necessary 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 (a) state that their opinion is
limited to matters governed by the Federal laws of the United States of America,
the corporate laws of the State of Delaware and the laws of the State of Texas,
(b) 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 other sources believed by them to be responsible, and (c)
assume that the signatures on all documents examined by them are genuine, all
documents submitted to them are authentic, and all documents submitted as
certified or photostatic copies or translations conform with the originals.
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). In rendering such opinion,
Baker Botts L.L.P. may state that their letter is furnished as counsel for the
Company to the Underwriters and is solely for the benefit of the several
Underwriters.
B-4
Exhibit C
FORM OF OPINION OF COMPANY'S GENERAL COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(1) 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 to be so qualified
or in good standing would not, individually or in the aggregate, have a Material
Adverse Effect.
(2) Each Subsidiary has been duly organized or incorporated, as the case
may be, and is validly existing as a limited partnership, a limited liability
company, a corporation or other entity, as the case may be, in good standing (or
similarly certified to be in compliance with the organizational requirements
applicable to it) under the laws of the jurisdiction of its organization or
incorporation, has partnership, limited liability company, corporate or other
entity 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 limited partnership, limited liability company, corporation or other
entity, as applicable, to transact business and is in good standing (or
similarly certified to be in compliance with the organizational requirements
applicable to it) 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 to be so qualified or in good standing would
not, individually or in the aggregate, have a Material Adverse Effect. Except
as otherwise described in the Prospectus, all of the issued and outstanding
membership interests, partnership interests or capital stock, as applicable, of
each Subsidiary has been duly authorized and is validly issued, fully paid and
non-assessable and, to 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 Lot Development Inc., 75% of the
outstanding capital stock of which is so owned by the Company, directly or
through Subsidiaries. To my knowledge, none of the outstanding shares of
capital stock of any Subsidiary was issued in violation of preemptive or other
similar rights of any securityholder of such Subsidiary.
(3) To my knowledge, (a) neither the Company nor any of its Subsidiaries
is in violation of its charter, by-laws or other organizational documents or any
applicable law, statute, rule, regulation, 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 assets,
properties or operations, and (b) no default by the Company or any of its
Subsidiaries exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan 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 assets, properties
or operations of the Company or any of its Subsidiaries is subject, except for
such defaults as would not, individually or in the aggregate, have a Material
Adverse Effect.
C-1
(4) To my 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 any arbitrator or governmental agency, authority or body, domestic or
foreign, which might reasonably be expected to result in a Material Adverse
Effect or which might reasonably be expected to materially and adversely affect
the assets, properties or operations thereof or the consummation of the
transactions contemplated under the Purchase Agreement or the performance by the
Company of its obligations thereunder. 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 which are not described in the Registration Statement and the
Prospectus, including ordinary routine litigation incidental to the business,
could not reasonably be expected to result in a Material Adverse Effect.
(5) The Company and its Subsidiaries possess such Governmental Licenses (as
defined in Section 1(a)(18) of the Purchase Agreement) issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies necessary to
conduct the business now operated by them, except where the failure to so
possess would not, individually or in the aggregate, have a Material Adverse
Effect. The Company and its Subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, 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, except
when the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a Material
Adverse Effect. To my knowledge, neither the Company nor any of its
Subsidiaries has received any notice of proceedings relating to the revocation
or modification 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.
(6) (a) The Company and its Subsidiaries own and possess each of the
patents, trademarks, service marks and trade names set forth on Exhibit A to
this opinion; (b) to my knowledge, there is no pending or threatened action,
suit, proceeding or claim by others challenging the Company's rights in or to
any Intellectual Property; (c) to my knowledge, there is no pending or
threatened action, suit, proceeding or claim by others challenging the validity
or scope of any Intellectual Property and the Company has not received any
notice of any infringement of or conflict with asserted rights of others with
respect to any Intellectual Property; (d) to my knowledge, there is no pending
or threatened action, suit, proceeding or claim by others that the Company
infringes, misappropriates or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary rights of others; and (e) to my
knowledge, there are no legal or governmental proceedings pending relating to
the Intellectual Property other than the prosecution by the Company and its
Subsidiaries of their respective patent applications before the United States
Patent Office and appropriate foreign government agencies, and no proceedings
are threatened or contemplated by governmental authorities or others relating to
the Intellectual Property.
I have participated in conferences with certain officers and other
representatives of the Company, representatives of the independent public
accountants of the Company, representatives of the Underwriters and counsel for
the Underwriters at which the contents of the Registration
C-2
Statement and the Prospectus and related matters were discussed. Although I did
not independently verify such information and am not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus, I advise
you that, on the basis of the foregoing, no facts have come to my attention that
lead me to believe that the Registration Statement (except for (i) financial
statements and supporting schedules contained or incorporated by reference
therein or omitted therefrom (including the notes thereto and the auditors'
reports thereon) or (ii) the other accounting or financial information contained
or incorporated by reference therein or omitted therefrom, as to which I have
not been asked to comment) on the effective date of the Registration Statement
and any post-effective amendment thereto included any 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 (i) the financial
statements and supporting schedules contained or incorporated by reference
therein or omitted therefrom (including the notes thereto and the auditors'
report thereon) or (ii) the other accounting or financial information contained
or incorporated by reference therein, as to which I have not been asked to
comment) as of the date it was issued, at the time any such amended or
supplemented prospectus was issued or at the Closing Time, included or includes
any untrue statement of a material fact or omitted or omits to state a material
fact necessary 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 (a) state that his opinion is
limited to matters governed by the Federal laws of the United States of America,
the corporate laws of the State of Delaware and the laws of the State of
Oklahoma, (b) 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 and other sources believed by him to be
responsible, and (c) assume that the signatures on all documents examined by him
are genuine, all documents submitted to him are authentic, and all documents
submitted as certified or photostatic copies or translations conform with the
originals. 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). In rendering such
opinion, Mr. Grimshaw may state that his letter is furnished as General Counsel
of the Company to the Underwriters and is solely for the benefit of the several
Underwriters.
C-3
Exhibit D
FORM OF CERTIFICATE OF GENERAL COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(D)
Reference is made to the Purchase Agreement, dated ________, 2000, by and
among Syntroleum Corporation, a Delaware corporation (the "Company"), Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs &
Co., J.P. Morgan Securities Inc., Salomon Smith Barney Inc. and Petrie Parkman &
Co., Inc as representatives of the other Underwriters named in Schedule A
thereto (the "Purchase Agreement"). All capitalized terms used herein which are
not defined herein have the meanings given to them in the Purchase Agreement.
The undersigned hereby certifies that he is the duly elected or duly
appointed General Counsel of the Company.
Pursuant to Section 5(d)(ii) of the Purchase Agreement, the undersigned
hereby certifies to the Underwriters as follows:
(1) To the Company's best knowledge, the Company and its Subsidiaries
own, possess or have the right to use, or can acquire on reasonable terms,
the Intellectual Property necessary to carry on the business as described
in the Prospectus and have taken all steps reasonably necessary to secure
assignments of such Intellectual Property from their employees and
contractors. Except as set forth in the Prospectus under the caption
"Business--Intellectual Property" or as would not, individually or in the
aggregate, have a Material Adverse Effect, (a) there are no rights of third
parties to any such Intellectual Property owned by the Company, except
pursuant to agreements with the Company; (b) to the Company's knowledge
after due inquiry, there is no infringement by third parties of any such
Intellectual Property; (c) to the Company's knowledge after due inquiry,
there is no pending or threatened action, suit, proceeding or claim by
others challenging the Company's rights in or to any such Intellectual
Property, and the Company is unaware of any facts which would form a
reasonable basis for any such claim; (d) to the Company's knowledge after
due inquiry, there is no pending or threatened action, suit, proceeding or
claim by others challenging the validity or scope of any such Intellectual
Property, and the Company has not received any notice and is unaware 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 form
a reasonable basis for any such claim or would render any Intellectual
Property invalid or inadequate to protect the interest of the Company or
any of its Subsidiaries therein; (e) to the Company's knowledge after due
inquiry, there is no pending or threatened action, suit, proceeding or
claim by others that the Company infringes, misappropriates or otherwise
violates any valid, enforceable patent, trademark, copyright, trade secret
or other proprietary rights of others, and the Company is unaware of any
other fact which would form a reasonable basis for any such claim; (f) to
the Company's knowledge after due inquiry, there is no U.S. patent or
published U.S. patent application which contains claims that dominate or
may dominate any Intellectual Property described in the Prospectus as being
owned by or licensed to the Company or that interferes with the issued or
pending claims of any such Intellectual Property; (g) there is no prior act
of
D-1
which the Company is aware that may render any U.S. patent held by the
Company invalid or any U.S. patent application held by the Company
unpatentable which has not been disclosed to the U.S. Patent and Trademark
Office; (h) none of the Intellectual Property has been obtained or is being
used by the Company or any of its Subsidiaries in violation of any
contractual or fiduciary obligation binding on the Company, any of its
Subsidiaries or any of their respective directors, executive officers,
employees or consultants; (i) the Company and its Subsidiaries have taken
and will maintain reasonable measures to prevent the unauthorized
dissemination or publication of the Company's trade secrets; (j) to the
Company's knowledge after due inquiry, neither the Company nor any of its
Subsidiaries has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any valid, enforceable Intellectual
Property of third parties; and (k) to the Company's knowledge after due
inquiry, there are no legal or governmental proceedings pending relating to
the Intellectual Property other than the prosecution by the Company and its
Subsidiaries of their respective patent applications before the United
States Patent Office and appropriate foreign government agencies, and, to
the Company's knowledge after due inquiry, no proceedings are threatened or
contemplated by governmental authorities or others relating to the
Intellectual Property.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as of
this _____ day of __________, 2000.
_____________________________
Name: Eric Grimshaw
Title: General Counsel
D-2
Annex A
DRAFT OF ACCOUNTANTS' COMFORT LETTER PURSUANT TO SECTION 5(e)
June 29, 2000
Syntroleum Corporation
1350 South Boulder, Suite 1100
Tulsa, Oklahoma 74119
and
Merrill Lynch Pierce, Fenner & Smith Incorporated ) As Representatives of
Goldman, Sachs & Co. ) the Several Underwriters
J. P. Morgan Securities Inc. )
Salomon Smith Barney Inc. )
Petrie Parkman & Co., Inc.
Dear Sirs:
We have audited the consolidated balance sheets of Syntroleum Corporation and
subsidiaries (the Company) as of December 31, 1999 and 1998, and the
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999, included in the
registration statement (no. 333-32968) on Form S-3 filed by the Company under
the Securities Act of 1933 (the Act); our report with respect thereto is also
included in that registration statement. The registration statement and the
related prospectus supplement, as amended on June 29, 2000, are herein referred
to as the registration statement.
In connection with the registration statement--
1. We are independent certified public accountants with respect to the Company
within the meaning of the Act and the applicable rules and regulations
thereunder adopted by the SEC.
2. In our opinion, the consolidated financial statements audited by us and
included in the registration statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related rules and regulations adopted by the SEC.
3. We have not audited any financial statements of the company as of any date or
for any period subsequent to December 31, 1999; although we have conducted an
audit for the year ended December 31, 1999, the purpose (and therefore the
scope) of the audit was to enable us to express our opinion on the
consolidated financial statements as of December 31, 1999, and for the year
then ended, but not on the consolidated financial statements for any interim
period within that year. Therefore, we are unable to and do not express any
opinion on the unaudited consolidated balance sheet as of March 31, 2000, and
the unaudited consolidated statements of operations, stockholders' equity,
and cash flows for the three-month periods ended March 31, 2000 and 1999,
included in the registration statement, or on the financial position, results
of operations, or cash flows as of any date or for any period subsequent to
December 31, 1999.
Syntroleum Corporation
and
Merrill Lynch Pierce, Fenner & Smith Incorporated
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Salomon Smith Barney Inc.
Petrie Parkman & Co., Inc.
Page 2
June 29, 2000
4. For purposes of this letter we have read the 2000 minutes of meetings of the
stockholders and the board of directors of the Company and its subsidiaries
as set forth in the minute books at June 28, 2000, officials of the Company
having advised us that the minutes of all such meetings through that date
were set forth therein; we have carried out other procedures to June 28,
2000, as follows (our work did not extend to the period from June 28, 2000,
to June 29, 2000, inclusive):
a. With respect to the three-month periods ended March 31, 2000 and 1999, we
have--
(i) Performed the procedures specified by the American Institute of
Certified Public Accountants for a review of interim financial
information as described in SAS No. 71, Interim Financial Information,
on the unaudited consolidated balance sheet as of March 31, 2000, and
unaudited consolidated statements of operations, stockholders' equity,
and cash flows for the three-month periods ended March 31, 2000 and
1999, included in the registration statement.
(ii) Inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether the
unaudited consolidated financial statements referred to in a(i) comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related rules and regulations adopted by
the SEC.
b. With respect to the period from April 1, 2000, to May 31, 2000, we have--
(i) Read the unaudited consolidated financial statements of the Company
and subsidiaries for April and May of both 1999 and 2000 furnished us by
the Company, officials of the Company having advised us that no such
financial statements as of any date or for any period subsequent to May
31, 2000, were available. The financial information for April and May
1999 and 2000 is incomplete in that it omits the statements of cash
flows and other disclosures.
(ii) Inquired of certain officials of the Company who have
responsibility for financial and accounting matters whether the
unaudited consolidated financial statements referred to in b(i) are
stated on a basis substantially consistent with that of the audited
consolidated financial statements included in the registration
statement.
The foregoing procedures do not constitute an audit conducted in accordance with
auditing standards generally accepted in the United States. Also, they would
not necessarily reveal matters of significance with respect to the comments in
the following paragraph. Accordingly, we make no representations regarding the
sufficiency of the foregoing procedures for your purposes.
Syntroleum Corporation
and
Merrill Lynch Pierce, Fenner & Smith Incorporated
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Salomon Smith Barney Inc.
Petrie Parkman & Co., Inc.
Page 3
June 29, 2000
5. Nothing came to our attention as a result of the foregoing procedures,
however, that caused us to believe that--
a. (i) Any material modifications should be made to the unaudited
consolidated financial statements described in 4a(i), included in the
registration statement, for them to be in conformity with accounting
principles generally accepted in the United States.
(ii) The unaudited consolidated financial statements described in 4a(i) do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related rules and regulations
adopted by the SEC.
b. (i) At May 31, 2000, there was any change in the capital stock, increase
in long-term debt, or decrease in consolidated net current assets or
stockholders' equity of the consolidated companies as compared with
amounts shown in the March 31, 2000, unaudited consolidated balance sheet
included in the registration statement, or
(ii) for the period from April 1, 2000, to May 31, 2000, there were any
decreases, as compared to the corresponding period in the preceding year,
in consolidated total revenues or in the total or per-share amounts of net
income (loss), except in all instances for changes, increases, or
decreases that the registration statement discloses have occurred or may
occur, except for the decreases and changes we noted as follows:
. Consolidated net current assets were $17,983,000 at May 31, 2000, a
decrease of $1,464,000 from $19,447,000 at March 31, 2000.
. Consolidated stockholders' equity was $19,901,000 at May 31, 2000, a
decrease of $1,394,000 from $21,295,000 at March 31, 2000.
6. As mentioned in 4b, company officials have advised us that no consolidated
financial statements as of any date or for any period subsequent to May 31,
2000, are available; accordingly, the procedures carried out by us with
respect to changes in financial statement items after May 31, 2000, have, of
necessity, been even more limited than those with respect to the periods
referred to in 4. We have inquired of certain officials of the company who
have responsibility for financial accounting matters whether (a) at June 28,
2000, there was any change in the capital stock, increase in long-term debt
or any decreases in consolidated net current assets or stockholders' equity
of the Company as compared with amounts shown on the March 31, 2000,
unaudited consolidated balance sheet included in the registration statement
or (b) for the period from April 1, 2000, to June 28, 2000, there were any
decreases, as compared with the corresponding period in the preceding year,
in consolidated total revenues or in the total or per-share amounts of net
income (loss). On the basis of these
Syntroleum Corporation
and
Merrill Lynch Pierce, Fenner & Smith Incorporated
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Salomon Smith Barney Inc.
Petrie Parkman & Co., Inc.
Page 4
June 29, 2000
inquiries and our reading of the minutes as described in 4, nothing came to
our attention that caused us to believe that there was any such change,
increase, or decrease, except in all instances for changes, increases, or
decreases that the registration statement discloses have occurred or may
occur, except for the decreases and changes as follows:
. At June 28, 2000, we were informed that stockholders' equity decreased by
the approximate amount of the net loss for the period from April 1, 2000 to
June 28, 2000.
. We were informed that consolidated net current assets decreased from
April 1, 2000 to June 28, 2000.
7. For purposes of this letter, we have also read certain items identified by
you on the attached portion of the Prospectus Supplement, Form 10-K/A
(Amendment No. 1) for the year ended December 31, 1999 and the Form 10-Q for
the three-months ended March 31, 2000, all included in Exhibit II and have
performed certain additional procedures, which were applied as indicated
through the use of letter symbols explained in Exhibit I.
8. Based on the procedures we performed, we noted that certain amounts did not
agree to the amounts shown in Exhibit II, as described below:
. Page 24 of the Company's annual report on Form 10-K/A for the year ended
December 31, 1999 states that the Company's property in Gillette, Wyoming
is subject to industrial revenue refunding bonds in the amount of $6
million. Our review of the Company's accounting records indicates that the
industrial revenue refunding bonds are $5.8 million.
. Page 45 of the Company's annual report on Form 10-K/A for the year ended
December 31, 1999, states that as of March 1, 2000, Mr. Agee owed, pursuant
to such promissory note, $678,854. Our review of the Company's accounting
records indicates that Mr. Agee owed, pursuant to such promissory note,
$679,854.
. Page 46 of the Company's annual report on Form 10-K/A for the year ended
December 31, 1999, states that during 1999, the Company paid Seward &
Company, L.L.C. approximately $78,000 for consulting services rendered. Our
review of the Company's accounting records indicates that the Company paid
Seward & Company approximately $75,000 for consulting services rendered.
. Page 46 of the Company's annual report on Form 10-K/A for the year ended
December 31, 1999, states that in February 2000, the Company loaned
Paul F. Schubert, Vice President of Research and Development $29,335. Our
review of the Company's accounting records indicates that the Company
loaned Mr. Schubert $29,335 in February 1999.
Syntroleum Corporation
and
Merrill Lynch Pierce, Fenner & Smith Incorporated
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Salomon Smith Barney Inc.
Petrie Parkman & Co., Inc.
Page 5
June 29, 2000
9. It should be understood that we make no representations regarding questions
of legal interpretation or regarding the sufficiency for your purposes of
the procedures enumerated in the preceding paragraphs; also, such procedures
would not necessarily reveal any material misstatement of the amounts or
percentages listed above. Further, we have addressed ourselves solely to the
foregoing data as set forth in the registration statement and make no
representations regarding the adequacy of disclosure or regarding whether
any material facts have been omitted.
10. This letter is solely for the information of the addressees and to assist
the underwriters in conducting and documenting their investigation of the
affairs of the Company in connection with the offering of the securities
covered by the registration statement, and it is not to be used, circulated,
quoted, or otherwise referred to within or without the underwriting group
for any purpose, including but not limited to the registration, purchase, or
sale of securities, nor is it to be filed with or referred to in whole or in
part in the registration statement or any other document, except that
reference may be made to it in the underwriting agreement or in any list of
closing documents pertaining to the offering of the securities covered by
the registration statement.