Draft Dated 7/11/97
5,000,000 Shares
CENTRAL GARDEN & PET COMPANY
Common Stock
($0.01 Par Value)
UNDERWRITING AGREEMENT
----------------------
_______, 1997
Alex. Brown & Sons Incorporated
Hambrecht & Quist LLC
Merrill Lynch, Pierce, Fenner & Smith, Incorporated
Wasserstein Perella Securities, Inc.
As Representatives of the
Several Underwriters
c/o Alex. Brown & Sons Incorporated
1 South Street
Baltimore, Maryland 21202
Gentlemen:
Central Garden & Pet Company, a Delaware corporation (the "Company")
and certain stockholders of the Company (the "Selling Stockholders") named in
Schedule II hereto propose to sell to the several underwriters (the
"Underwriters") named in Schedule I hereto for whom you are acting as
representatives (the "Representatives") an aggregate of 5,000,000 shares of the
Company's Common Stock, $0.01 par value (the "Firm Shares"), of which 4,790,000
shares will be issued and sold by the Company and 210,000 shares will be sold by
the Selling Stockholders. The respective amounts of the Firm Shares to be so
purchased by the several Underwriters from the Company and the Selling
Stockholders are set forth opposite their names in Schedule I hereto. The
Company also proposes to sell at the Underwriters' option up to 750,000
additional shares of the Company's Common Stock (the "Option Shares") as set
forth below.
As the Representatives, you have advised the Company and the Selling
Stockholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their
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pro rata portion of the Option Shares if you elect to exercise the
Over-allotment option in whole or in part for the accounts of the several
Underwriters. The Firm Shares and the Option Shares (to the extent the
aforementioned option is exercised) are herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. (a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
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STOCKHOLDERS. The Company and the Selling Stockholders, jointly and severally,
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represent and warrant to each of the Underwriters as follows:
(i) A registration statement on Form S-3 (File No. 333-_____)
with respect to the Shares has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and has been
filed with the Commission. The Company meets all of the requirements for filing
on Form S-3. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial statements and
schedules, as finally amended and revised, have heretofore been delivered by the
Company to you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has become effective under the Act and no
post-effective amendment to the Registration Statement has been filed as of the
date of this Agreement. "Prospectus" means (a) the form of prospectus first
filed with the Commission pursuant to Rule 424(b) or (b) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Shares, together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus." Any reference herein to the
Registration Statement, any Preliminary Prospectus or the Prospectus, as the
case may be, shall be deemed to refer to and include the documents incorporated
by reference therein pursuant to Item 12 of Form S-3 which were filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(ii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and corporate authority to own or lease its
properties and conduct its business as described in the Registration Statement.
Each of the subsidiaries of the Company as listed in Exhibit A hereto
(collectively, the "Subsidiaries") has been duly organized and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
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its incorporation, with corporate power and corporate authority to own or lease
its properties and conduct its business as described in the Registration
Statement. The Company and each of the Subsidiaries are duly qualified to
transact business in all jurisdictions in which the conduct of their business
requires such qualification, except where such failure would not have a material
adverse effect on the Company and its Subsidiaries taken as a whole. The
outstanding shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and non-assessable and are owned
by the Company or another Subsidiary free and clear of all liens, encumbrances
and equities and claims; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in the
Subsidiaries are outstanding. The Company does not own, directly or indirectly,
any shares of stock or any other equity or long-term debt securities of any
corporation or have any equity interest in any firm, partnership, joint venture,
association or other entity, other than of its subsidiaries or as described in
the Registration Statement.
(iii) The outstanding shares of Common Stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; the Shares to be issued and sold by the Company have been duly
authorized and when issued and paid for as contemplated herein will be validly
issued, fully paid and non-assessable; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue and sale thereof. Neither
the filing of the Registration Statement nor the offering or sale of the Shares
as contemplated by this Agreement gives rise to any rights, other than those
which have been waived or satisfied, for or relating to the registration of any
shares of Common Stock.
(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of the Shares
conform to the description thereof contained in the Registration Statement. The
form of certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.
(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering of the
Shares nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all material statements which are required to be stated therein by, and
will in all material respects conform, to the requirements of the Act and the
Rules and Regulations. The Registration Statement and any amendment hereto do
not contain, and will not contain, any untrue statement of a material fact and
do not omit, and will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus and any amendments and supplements thereto do not contain, and will
not contain, any untrue statement of material fact; and do not omit, and will
not omit, to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from the
Registration Statement or the Prospectus,
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or any such amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any Underwriter
through the Representatives, specifically for use in the preparation thereof.
The documents incorporated by reference in the Registration Statement, any
Preliminary Prospectus and the Prospectus, when they were filed with the
Commission, conformed in all material respects to the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder, and
none of such documents contained 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.
(vi) The consolidated financial statements of the Company and
the Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the results of
operations and cash flows of the Company and the consolidated Subsidiaries, at
the indicated dates and for the indicated periods. Such financial statements and
related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed herein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data included in the Registration Statement presents fairly the
information shown therein and such data has been compiled on a basis consistent
with the financial statements presented therein and the books and records of the
Company. The pro forma financial information incorporated by reference in the
Registration Statement and the Prospectus present fairly the information shown
therein, have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, have been properly
compiled on the pro forma bases described therein, and, in the opinion of the
Company, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein. No other financial statements or schedules of
the Company or any other entity are required to be included in, or incorporated
into, the Registration Statement pursuant to any requirement of the Act or any
Rules and Regulations, including Rule 3-05 of Regulation S-X.
(vii) Deloitte & Touche LLP, who have certified certain of the
financial statements filed with the Commission as part of the Registration
Statement, are independent public accountants as required by the Act and the
Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any of
the Subsidiaries before any court or administrative agency or otherwise which if
determined adversely to the Company or any of its Subsidiaries might result in
any material adverse change in the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects (so
far as the Company can reasonably foresee) of the Company and of the
Subsidiaries taken as a whole or to prevent the consummation of the transactions
contemplated hereby, except as set forth in the Registration Statement.
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(ix) The Company and the Subsidiaries have good and marketable
title to all of the properties and assets reflected in the financial statements
(or as described in the Registration Statement) hereinabove described, subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The Company and the Subsidiaries
occupy their leased properties under valid and binding leases conforming in all
material respects to the description thereof set forth in the Registration
Statement.
(x) The Company and the Subsidiaries have filed all Federal,
State, local and foreign income tax returns which have been required to be filed
and have paid all taxes indicated by said returns and all assessments received
by them or any of them to the extent that such taxes have become due and are not
being contested in good faith. All tax liabilities have been adequately provided
for in the financial statements of the Company.
(xi) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company and its Subsidiaries taken as a whole,
whether or not occurring in the ordinary course of business, and there has not
been any material transaction entered into or any material transaction that is
probable of being entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and transactions
described in the Registration Statement, as it may be amended or supplemented.
The Company and the Subsidiaries have no material contingent obligations which
are not disclosed in the Company's financial statements which are included in
the Registration Statement.
(xii) Except as disclosed in the Prospectus, neither the
Company nor any of the Subsidiaries is or with the giving of notice or lapse of
time or both, will be, in violation of or in default under its Charter or Bylaws
or under any agreement, lease, contract, indenture or other instrument or
obligation to which it is a party or by which it, or any of its properties, is
bound and which default is of material significance in respect of the condition,
financial or otherwise of the Company and its Subsidiaries taken as a whole or
the business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and the Subsidiaries taken
as a whole. The execution and delivery of this Agreement and the consummation of
the transactions herein contemplated and the fulfillment of the terms hereof
will not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any Subsidiary is a party,
or of the Charter or Bylaws of the Company or any order, rule or regulation
applicable to the Company or any Subsidiary of any court or of any regulatory
body or administrative agency or other governmental body having jurisdiction.
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(xiii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD") or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.
(xiv) The Company and each of the Subsidiaries holds all
material licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their businesses; and the Company has no
knowledge that either the Company or any of the Subsidiaries has infringed any
patents, patent rights, trade names, trademarks or copyrights, which
infringement is material to the business of the Company and the Subsidiaries
taken as a whole. The Company knows of no material infringement by others of
patents, patent rights, trade names, trademarks or copyrights owned by or
licensed to the Company.
(xv) Neither the Company nor the Selling Stockholders, and to
the Company's best knowledge, none of the Company's nor any Selling
Stockholder's affiliates, have taken or may take, directly or indirectly, any
action designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares. The Company acknowledges that the Underwriters may engage in passive
market making transactions in the Shares on the Nasdaq National Market in
accordance with Rule 103 of Regulation M under the Exchange Act.
(xvi) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company Act of
1940 and the rules and regulations of the Commission thereunder.
(xvii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xviii) The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar industries.
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(xix) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(xx) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 517.075, Florida Statutes relating to
doing business with the government of Cuba or with any person or affiliate
located in Cuba.
(xxi) To the Company's knowledge, the Company is (i) in
compliance with any and all applicable United States, state and local
environmental laws, rules, regulations, treaties, statutes and codes promulgated
by any and all governmental authorities relating to the protection of human
health and safety, the environment or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct
its business as currently conducted, and (iii) is in compliance with all terms
and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permit
licenses or other approvals (a) would not, individually or in the aggregate,
have a material adverse effect or (b) would be covered by indemnification
protection the Company receives in connection with certain of its acquisitions.
No action, proceeding, revocation proceeding, writ, injunction or claim is
pending or threatened relating to the Environmental Laws or to the Company's
activities involving Hazardous Materials. "Hazardous Materials" means any
material or substance (i) that is prohibited or regulated by any environmental
law, rule, regulation, order, treaty, statute or code promulgated by any
governmental authority, or any amendment or modification thereto, or (ii) that
has been designated or regulated by any governmental authority as radioactive,
toxic, hazardous or otherwise a danger to health, reproduction or the
environment.
(xxii) To the Company's knowledge, the Company has not engaged
in the generation, use, manufacture, transportation or storage of any Hazardous
Materials on any of the Company's properties or former properties, except (i)
where such use, manufacture, transportation or storage is in compliance with
Environmental Laws, (ii) to the extent such activity could be reasonably
expected not to have a material adverse effect on the Company, or (iii) to the
extent such activity is covered by indemnification protection the Company
receives in connection with certain of its acquisitions. To the Company's
knowledge, no Hazardous Materials have been treated or disposed of on any of the
Company's properties or on properties formerly owned or leased by the Company
during the time of such ownership or lease, except in compliance with
Environmental Laws, or those that could reasonably be expected not to have a
material adverse effect on the Company.
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(b) REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS.
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The Selling Stockholders represent and warrant to, and agrees with, each of the
Underwriters as follows:
(i) Each of the Selling Stockholders has, and on the Closing
Date hereinafter mentioned will have, good and marketable title to the Shares
proposed to be sold by the Selling Stockholders hereunder on such Closing Date
and full right, power and authority to enter into this Agreement and to sell,
assign, transfer and deliver such Shares hereunder, free and clear of all voting
trust arrangements, liens, encumbrances, equities, security interests,
restrictions and claims whatsoever; and upon delivery of and payment for such
Shares hereunder, the Underwriters will acquire good and marketable title
thereto, free and clear of all liens, encumbrances, equities, claims,
restrictions, security interests, voting trusts or other defects of title
whatsoever.
(ii) Each of the Selling Stockholders has executed and
delivered a Power of Attorney and caused to be executed and delivered on his
behalf a Custody Agreement (hereinafter collectively referred to as the
"Stockholders' Agreement") and in connection herewith such Selling Stockholder
further represents, warrants and agrees that the Selling Stockholder has
deposited in custody, under the Stockholder's Agreement, with the agent named
therein (the "Agent") as custodian, certificates in negotiable form for the
Shares to be sold hereunder by the Selling Stockholder, for the purpose of
further delivery pursuant to this Agreement. The Selling Stockholder agrees that
the Shares to be sold by the Selling Stockholder on deposit with the Agent are
subject to the interests of the Company and the Underwriters, that the
arrangements made for such custody are to that extent irrevocable, and that the
obligations of the Selling Stockholder hereunder shall not be terminated, except
as provided in this Agreement or in the Stockholders' Agreement, by any act of
the Selling Stockholder, by operation of law, by the death or incapacity of the
Selling Stockholder or by the occurrence of any other event. If the Selling
Stockholder should die or become incapacitated, or if any other event should
occur, before the delivery of the Shares to be sold by the Selling Stockholder
hereunder, the documents evidencing Shares to be sold by the Selling Stockholder
then on deposit with the Agent shall be delivered by the Agent in accordance
with the terms and conditions of this Agreement as if such death, incapacity or
other event had not occurred, regardless of whether or not the Agent shall have
received notice thereof. This Agreement and the Stockholders' Agreement have
been duly executed and delivered by or on behalf of the Selling Stockholder and
the form of such Stockholders' Agreement has been delivered to you.
(iii) The performance of this Agreement and the Stockholders'
Agreement and the consummation of the transactions contemplated hereby and by
the Stockholders' Agreement will not result in a breach or violation by the
Selling Stockholder of any of the terms or provisions of, or constitute a
default by the Selling Stockholder under, any indenture, mortgage, deed of
trust, trust (constructive or other), loan agreement, lease, franchise, license
or other agreement or instrument to which the Selling Stockholder is a party or
by which the Selling Stockholder or any of his properties is bound, any statute,
or any judgment, decree, order, rule or regulation of any court or governmental
8
agency or body applicable to the Selling Stockholder or any of his properties.
(iv) Each of the Selling Stockholders has not taken and will
not take, directly or indirectly, any action designed to stabilize or
manipulate, or which has constituted or which might reasonably be expected to
cause or result in stabilization or manipulation, of the price of any security
of the Company to facilitate the sale or resale of the Shares to be sold by the
Selling Stockholder.
(v) The Registration Statement, each Preliminary Prospectus
and the Prospectus, insofar as it has related to the Selling Stockholder, has
conformed in all material respects to the requirements of the Act and the Rules
and Regulations and has not included any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made.
(vi) Each of the Selling Stockholder agrees with the Company
and the Underwriters not for a period of 90 days subsequent to the date of the
Final Prospectus offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock, any securities convertible into, derivative of, or
exercisable or exchangeable for such Common Stock of the Company, including
without limitation, shares of Common Stock that may be deemed to be beneficially
owned by such Selling Stockholder and shares of Common Stock that may be issued
upon exercise of stock options or warrants, without the prior written consent of
Alex. Brown & Sons Incorporated.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
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(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, (i) the
Company agrees to sell to the Underwriters 4,790,000 of the Firm Shares, and
(ii) the Selling Stockholders agree to sell to the Underwriters an aggregate of
210,000 of the Firm Shares. Each Underwriter agrees, severally and not jointly,
to purchase, from the Company and the Selling Stockholders at a price of $_____
per share, the number of Firm Shares set forth opposite the name of each
Underwriter in Schedule I hereof, subject to adjustments in accordance with
Section 9 hereof.
(b) Delivery of certificates for the Firm Shares and the Option Shares
(if the option granted pursuant to Section 2(c) hereof shall have been exercised
not later than 12:00 p.m., Baltimore time, on the date at least two business
days preceding the Closing Date) to be sold hereunder shall be made against
receipt of a wire transfer reference number issued by the Federal Reserve System
evidencing payment of the purchase price therefor by the several Underwriters by
wire transfer of immediately available funds, to accounts specified in writing
by the Company and the Selling Stockholders, respectively, at the offices of
Alex. Brown & Sons Incorporated, 1 South Street, Baltimore, Maryland, at 10:00
a.m., Baltimore time, on the third (or if the Shares are priced, as contemplated
by Rule 15c6-1(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") after 4:30 P.M., Washington D.C. time, the fourth) business day
after the date
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of this Agreement or at such other time and date not later than five business
days thereafter as you and the Company shall agree upon, such time and date
being herein referred to as the "Closing Date." (As used herein, "business day"
means a day on which the New York Stock Exchange is open for trading and on
which banks in New York are open for business and are not permitted by law or
executive order to be closed.) The certificates for the Firm Shares will be
delivered in such denominations and in such registrations as the Representatives
request in writing not later than the second full business day prior to the
Closing Date, and will be made available for inspection by the Representatives
at least one business day prior to the Closing Date. If the Representatives so
elect, delivery of the Shares purchased from the Company and the Selling
Stockholders may be made by credit through full fast transfer to the accounts at
The Depository Trust Company designated by the Representatives.
(c) 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 several Underwriters to purchase the
Option Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be determined by the Representatives but shall not be earlier than three
nor later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein referred to
as the "Option Closing Date"). If the date of exercise of the option is two or
more days before the Closing Date, the notice of exercise shall set the Closing
Date as the Option Closing Date. The number of Option Shares to be purchased by
each Underwriter shall be in the same proportion to the total number of Option
Shares being purchased as the number of Firm Shares being purchased by such
Underwriter bears to 5,000,000, adjusted by you in such manner as to avoid
fractional shares. The option with respect to the Option Shares granted
hereunder may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriters. You, as Representatives of the several Underwriters,
may cancel such option at any time prior to its expiration by giving written
notice of such cancellation to the Company. If the option granted pursuant to
this Section shall be exercised after 12:00 p.m., Baltimore time, on the date
two business days preceding the Closing Date, and on or before the 30th day
after the date of this Agreement, delivery of certificates for the Option Shares
shall be made against receipt of a wire transfer reference number issued by the
Federal Reserve System evidencing payment of the purchase price therefor by the
several Underwriters by wire transfer of immediately available funds, to an
account specified in writing by the Company at the offices of Alex. Brown & Sons
Incorporated, 1 South Street, Baltimore, Maryland. If the Representatives so
elect, delivery of the Option Shares purchased from the Company may be made by
credit through full fast transfer to the accounts at The Depository Trust
Company designated
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by the Representatives.
3. OFFERING BY THE UNDERWRITERS.
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It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. COVENANTS OF THE COMPANY.
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(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule 430A of
the Rules and Regulations is followed, to prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form
approved by the Representatives containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations and (C) file on a timely basis all
reports and any definitive proxy or information statements required to be filed
by the Company with the Commission subsequent to the date of the Prospectus and
prior to the termination of the offering of the Shares by the Underwriters.
(ii) The Company will advise the Representatives promptly (A)
when the Registration Statement or any post-effective amendment thereto shall
have become effective, (B) of receipt of any comments from the Commission, (C)
of any request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, and (D) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus or of the institution of
any proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the Representatives in
11
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports, and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or before
the Closing Date, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representatives
may reasonably request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Exchange Act, and the rules and regulations of the
Commission thereunder, so as to permit the completion of the distribution of the
Shares as contemplated in this Agreement and the Prospectus. If during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, any event shall occur as a result of which, in the
judgment of the Company or the reasonable opinion of the Underwriters, it
becomes necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances existing at the time the
Prospectus is delivered to a purchaser, not misleading, or, if it is necessary
at any time to amend or supplement the Prospectus to comply with any law, the
Company promptly will prepare and file with the Commission an appropriate
amendment to the Registration Statement or supplement to the Prospectus so that
the Prospectus as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that the Prospectus
will comply with the law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earning
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made
12
available.
(vii) The Company will, for a period of five years from the
Closing Date, deliver to the Representatives copies of annual reports and copies
of all other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to the Representatives similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and Regulations,
which are not consolidated in the Company's financial statements.
(viii) No offering, sale, short sale or other disposition of
any shares of Common Stock of the Company or other securities convertible into
or exchangeable or exercisable for shares of Common Stock or derivative of
Common Stock (or agreement for such) will be made for a period of 90 days after
the date of this Agreement, directly or indirectly, by the Company otherwise
than hereunder or with the prior written consent of Alex. Brown & Sons
Incorporated. The foregoing sentence shall not apply to (A) options to purchase
Common Stock granted or Common Stock issued under the Company's presently
authorized employee benefit plans described in the Prospectus, (B) any shares of
Common Stock issued pursuant to any non-employee director stock plan or dividend
reinvestment plan, (C) up to an aggregate of 2,000,000 shares of Common Stock
issued as consideration in connection with mergers or acquisitions to which the
Company or any of its subsidiaries is a party, and (D) any shares of Common
Stock issued upon exercise of an option or warrant or the conversion of a
security outstanding on the date hereof and referred to in the Prospectus .
(ix) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on the Nasdaq National Market.
(x) The Company has caused each officer and director of the
Company identified by the Representatives to furnish to you, on or prior to the
date of this agreement, a letter or letters, in form and substance satisfactory
to the Underwriters, pursuant to which each such person shall agree not to
offer, sell, sell short or otherwise dispose of any shares of Common Stock of
the Company or other capital stock of the Company, or any other securities
convertible, exchangeable or exercisable for Common Shares or derivative of
Common Shares owned by such person or request the registration for the offer or
sale of any of the foregoing (or as to which such person has the right to direct
the disposition of) for a period of 90 days after the date of this Agreement,
directly or indirectly, except with the prior written consent of Alex. Brown &
Sons Incorporated ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of
the Shares as set forth in the Prospectus.
(xii) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act").
(xiii) The Company will maintain a transfer agent and, if
necessary under
13
the jurisdiction of incorporation of the Company, a registrar for the Common
Stock.
(xiv) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
5. COSTS AND EXPENSES.
------------------
Whether or not the transactions contemplated hereunder are consummated
or this Agreement becomes effective or is terminated, the Company and, unless
otherwise paid by the Company, the Selling Stockholders, agree to pay, in such
proportions as they may agree among themselves all costs, expenses and fees
incident to the performance of the obligations of the Company under this
Agreement, including, without limiting the generality of the foregoing, the
following: accounting fees of the Company; the fees and disbursements of counsel
for the Company; the cost of printing and delivering to, or as requested by, the
Underwriters copies of the Registration Statement, Preliminary Prospectuses, the
Prospectus, this Agreement, the Underwriters' Selling Memorandum, the
Underwriters' Invitation Letter, the Additional Listing Application, the Blue
Sky Survey and any supplements or amendments thereto; the filing fees of the
Commission; the filing fees incident to securing any required review by the
National Association of Securities Dealers, Inc. (the "NASD") of the terms of
the sale of the Shares; and the expenses, including the fees and disbursements
of counsel for the Underwriters, incurred in connection with the qualification
of the Shares under State securities or Blue Sky laws. The Company agrees to pay
all costs and expenses of the Underwriters, including the fees and disbursements
of counsel for the Underwriters, incident to the offer and sale of directed
shares of the Common Stock by the Underwriters to employees and persons having
business relationships with the Company and its Subsidiaries. The Company shall
not, however, be required to pay for any of the Underwriters' expenses (other
than those related to qualification under NASD regulation and State securities
or Blue Sky laws). This Section 5 shall not affect any agreement relating to the
payment of expenses between the Company and the Selling Stockholders.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
---------------------------------------------
The several obligations of the Underwriters to purchase the Firm Shares
on the Closing Date and the Option Shares, if any, on the Option Closing Date
are subject to the accuracy, as of the Closing Date or the Option Closing Date,
as the case may be, of the representations and warranties of the Company
contained herein, and to the performance by the Company of its covenants and
obligations hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective amendment thereto
shall have become effective and any and all filings required by Rule 424 and
Rule 430A of the Rules and Regulations shall have been made, and any request of
the Commission for additional information (to be included in the Registration
Statement or otherwise) shall
14
have been disclosed to the Representatives and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no
proceedings for that purpose shall have been taken or, to the knowledge of the
Company, shall be contemplated by the Commission and no injunction, restraining
order, or order of any nature by a Federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would prevent
the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Orrick, Herrington &
Sutcliffe LLP, counsel for the Company, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters (and stating
that it may be relied upon by counsel to the Underwriters) to the effect that:
(i) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(ii) The Company has the full corporate power and corporate
authority to own, lease and operate its business as described in the
Prospectus; and the Company is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions in the
United States in which the Company is required to be qualified and in
which the failure so to qualify taken in the aggregate would have a
material adverse effect on the business, operations or financial
condition of the Company.
(iii) The outstanding shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
nonassessable and free of preemptive rights and issued in compliance
with all federal securities laws.
(iv) The Shares to be issued by the Company pursuant to the
terms of the Underwriting Agreement will be, when duly countersigned by
the Company's transfer agent and registrar and upon issuance and
delivery against payment therefor in accordance with the terms thereof,
duly authorized, validly issued and fully paid and nonassessable, and
the shareholders of the Company have no preemptive rights with respect
to the issuance of the Shares.
(v) The Underwriting Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly
executed and delivered by the Company.
(vi) The Registration Statement has become effective under the
1933 Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or, to
the best of such counsel's knowledge, are pending or contemplated under
the 1933 Act.
15
(vii) The documents incorporated by reference in the
Prospectus (except for any financial statements and schedules and
financial and statistical information included in such documents as to
which such counsel need express no opinion), when they were filed with
the Commission, complied as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
(viii) The terms and provisions of the capital stock of the
Company conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus and the form
of certificate evidencing the shares to be delivered hereunder are in
due and proper form under Delaware law.
(ix) To the best of such counsel's knowledge, no
authorization, consent, approval of or qualification with, any
governmental authority is required for the performance by the Company
of its obligations under the Underwriting Agreement, except such as
have been made or obtained under the 1933 Act or such as may be
required under state or other blue sky laws in connection with the
purchase and distribution of the Shares (on which we express no
opinion) by the Underwriters.
(x) To the best of such counsel's knowledge, all contracts,
indentures, mortgages, loan agreements, leases, or other documents that
are required to be filed as exhibits to the Registration Statement or
required to be described in the Registration Statement, have been filed
or incorporated by reference as Exhibits thereto or described therein.
(xi) The execution and delivery by the Company of, and
performance by the Company of its obligations under, the Underwriting
Agreement, do not conflict with or violate the Company's Amended and
Restated Certificate of Incorporation or Bylaws, or to the best of such
counsel's knowledge (1) constitute a breach of or constitute a default
under, the affiliation arrangements, as defined in the Prospectus, and
any agreement or other instrument binding upon the Company or any of
its subsidiaries and identified to us by the Company as material, as
incorporated by reference into the Registration Statement, and (2) do
not conflict with or violate any judgment, order or decree of any court
or governmental authority against the Company or by which any of its
properties is bound.
(xii) To the best of such counsel's knowledge, and except as
disclosed in the Registration Statement and the Prospectus, there is no
action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency now pending or threatened
against or affecting the Company which would require disclosure in the
Prospectus.
(xiii) To the best of such counsel's knowledge, except as set
forth in the
16
Registration Statement and the Prospectus, no holders of securities of
the Company have registration rights with respect to such securities.
(xiv) Except as disclosed in or specifically contemplated by
the Prospectus, to the best of such counsel's knowledge, there are no
outstanding options, warrants or other rights calling for the issuance
of, and no commitments, plans or arrangements to issue, any shares of
capital stock of the Company or any security convertible into or
exchangeable for capital stock of the Company.
(xv) This Agreement and the Stockholders' Agreement have been
duly authorized, executed and delivered by or on behalf of each Selling
Stockholder; the Agent has been duly and validly authorized to act as
the custodian of the Common Shares to be sold by each Selling
Stockholder; to the best of such counsel's knowledge, the performance
of this Agreement and the Stockholders' Agreement and the consummation
of the transactions herein contemplated by each Selling Stockholder
will not result in a breach of, or constitute a default under, any
material indenture, mortgage, deed of trust, trust (constructive or
other), loan agreement, lease, franchise, license or other material
agreement or instrument to which each Selling Stockholder is a party or
by which each Selling Stockholder or any of his properties may be
bound, or violate any statute, judgment, decree, order, rule or
regulation known to such counsel of any court or governmental body
having jurisdiction over each Selling Stockholder or any of his
properties; and to the best of such counsel's knowledge, no approval,
authorization, order or consent of any court, regulatory body,
administrative agency or other governmental body is required for the
execution and delivery of this Agreement or the Stockholders' Agreement
or the consummation by each Selling Stockholder of the transactions
contemplated by this Agreement, except such as have been obtained and
are in full force and effect under the Act and such as may be required
under the rules of the NASD and applicable Blue Sky laws;
(xvi) To the best of such counsel's knowledge, each Selling
Stockholder has full right, power and authority to enter into this
Agreement and the Stockholders' Agreement and to sell, transfer and
deliver the Common Shares to be sold on such Closing Date by each
Selling Stockholder hereunder and good and marketable title to such
Shares so sold, free and clear of all liens encumbrances, equities,
claims, restrictions, security interests, voting trusts, or other
defects of title whatsoever, has been transferred to the Underwriters
(whom counsel may assume to be bona fide purchasers) who have purchased
such Shares hereunder; and
(xvii) To the best of such counsel's knowledge, the
Stockholders' Agreement are valid and binding agreements of each
Selling Stockholder, enforceable in accordance with their terms except
as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally.
17
In rendering such opinion, such counsel may rely as to matters
of local law on opinions of local counsel, and as to matters of fact, on
certificates of the Selling Stockholders and of officers of the Company and of
governmental officials, in which case their opinion is to state that they are so
doing and that the Underwriters are justified in relying on such opinions or
certificates and copies of said opinions or certificates are to be attached to
the opinion or delivered at the Closing. Such counsel shall also include
statements to the effect that (1) such counsel believes that, as of the
effective date of the Registration Statement, the Registration Statement and the
Prospectus complied as to form in all material respects with the requirements of
the 1933 Act; and (2) nothing has come to such counsel's attention that would
lead such counsel to believe that either at the effective date of the
Registration Statement or at the applicable Closing Date the Registration
Statement or the Prospectus, or any such amendment or supplement, contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that such
counsel need not express such an opinion as to the financial statements,
schedules and financial data contained in the Registration Statement or the
Prospectus.
(c) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Knox Ricksen, counsel
for the Company and its Subsidiaries, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters (and stating
that it may be relied upon by counsel to the Underwriters) to the effect that:
(i) Each of the Subsidiaries of the Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California.
(ii) Each of the Subsidiaries of the Company has the full
corporate power and corporate authority to own, lease and operate its business
as described in the Prospectus; and each of the Subsidiaries of the Company is
duly qualified to do business as a foreign corporation and is in good standing
in all jurisdictions in the United States in which such subsidiary is required
to be qualified and in which the failure so to qualify taken in the aggregate
would have a material adverse effect on the business, operations or financial
condition of the Company.
(iii) The outstanding shares of capital stock of each of the
Subsidiaries of the Company have been duly and validly authorized and issued and
are fully paid and nonassessable and free of preemptive rights and issued in
compliance with all federal securities laws.
(d) The Representatives shall have received from Brobeck, Phleger &
Harrison LLP, counsel for the Underwriters, an opinion dated the Closing Date or
the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (iv), (v) and (vi) of subparagraph (b) of this
Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In rendering such opinion
Brobeck, Phleger & Harrison LLP may rely as
18
to all matters governed other than by the laws of the State of California or
Federal laws on the opinion of counsel referred to in Paragraph (b) of this
Section 6. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of such
counsel which leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Prospectus, or any supplement thereto, on
the date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements, in the light of the circumstances under which they
are made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein). With
respect to such statement, Brobeck, Phleger & Harrison LLP may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.
(e) The Representatives shall have received at or prior to the Closing
Date from Brobeck, Phleger & Harrison LLP a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the qualification
for offering and sale by the Underwriters of the Shares under the State
securities or Blue Sky laws of such jurisdictions as the Representatives may
reasonably have designated to the Company.
(f) The Representatives shall have received, on each of the dates
hereof, the Closing Date and the Option Closing Date, as the case may be, a
letter dated the date hereof, the Closing Date or the Option Closing Date, as
the case may be, in form and substance satisfactory to you, of Deloitte & Touche
LLP confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder and
stating that in their opinion the financial statements and schedules examined by
them and included in the Registration Statement comply in form in all material
respects with the applicable accounting requirements of the Act and the related
published Rules and Regulations; and containing such other statements and
information as is ordinarily included in accountants' "comfort letters" to
Underwriters with respect to the financial statements and certain financial and
statistical information contained in the Registration Statement and Prospectus.
(g) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and
19
no stop order suspending the effectiveness of the Registrations
Statement has been issued, and no proceedings for such purpose have
been taken or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing
Date or the Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration
Statement and the Prospectus and, in his or her opinion and to the best
of his or her knowledge, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement were
true and correct in all material respects, and such Registration
Statement and Prospectus did not omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which
has not been so set forth in such supplement or amendment;
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been
any material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the
earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects (so far as the Company
can reasonably foresee) of the Company and the Subsidiaries taken as a
whole, whether or not arising in the ordinary course of business.
(h) The Representatives shall have received, on each of the dates
hereof, the Closing Date and the Option Closing Date, as the case may be, in
form and substance satisfactory to the Representatives, a certificate, dated
such Closing Date and addressed to the Representatives, signed by or on behalf
of each of the Selling Stockholders to the effect that the representations and
warranties of the Selling Stockholders in this Agreement are true and correct,
as if made at and as of such Closing Date, and the Selling Stockholders have
complied with all the agreements and satisfied all the conditions on his part to
be performed or satisfied prior to such Closing Date.
(i) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representatives may reasonably have requested.
(j) The Firm Shares and Option Shares, if any, have been approved for
20
designation upon notice of issuance on the Nasdaq National Market.
(k) The Lockup Agreements described in Section 4(a)(x) are in full
force and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Brobeck, Phleger &
Harrison LLP, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by noting the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case
may be.
In such an event, the Company and the Underwriters shall not be under
any obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
--------------------------------------------
The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
---------------
(a) The Company and the Selling Stockholders, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Act, against any losses,
claims, damages or liabilities to which such Underwriter or such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and will reimburse each Underwriter and each such controlling person
for any legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Shares, whether or not such
Underwriter or controlling person is a party to any action or proceeding;
provided, however, that neither the Company nor the Selling Stockholders will be
liable in any such case to the extent that any such loss, claim,
21
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement, or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. The Underwriters acknowledge
that the Company and the Selling Stockholders intend to agree, as among
themselves and without limiting the rights of the Underwriters under this
Agreement, as to their respective amounts of such liability for which they each
shall be responsible. This indemnity agreement will be in addition to any
liability which the Company or the Selling Stockholders may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, each person, if any, who controls the Company
within the meaning of the Act and the Selling Stockholders, against any losses,
claims, damages or liabilities to which the Company, the Selling Stockholders or
any such director, officer, or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances under
which they were made; and will reimburse any legal or other expenses reasonably
incurred by the Company, the Selling Stockholders or any such director, officer,
or controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided, however, that
each Underwriter will be liable in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or through
the Representatives specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought
22
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with such
consent or if there be a final judgement for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, (or actions or
23
proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Stockholders bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company and the Selling Stockholders on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
8(d) 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 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 8(d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court already having jurisdiction over the
Company or any Selling Stockholder.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company and the Selling Stockholders set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers
or any persons controlling the Company or any Selling Stockholders, (ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination
24
of this Agreement. A successor to any Underwriter, to the Company, its directors
or officers, or any person controlling the Company or any Selling Stockholders,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.
(g) The liability of each Selling Stockholder under the indemnity
agreements contained in the provisions of this Section 8 shall be limited to an
amount equal to the public offering price of the Shares to be sold by such
Selling Stockholder to the Underwriters minus the amount of the underwriting
discount paid thereon to the Underwriters by such Selling Stockholder. The
Company and such Selling Stockholders may agree, as among themselves and without
limiting the rights of the Underwriters under this Agreement, as to the
respective amounts of such liability for which they each shall be responsible.
9. DEFAULT BY UNDERWRITERS.
-----------------------
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company or the
Selling Stockholders, you, as Representatives of the Underwriters, shall use
your reasonable efforts to procure within 36 hours thereafter one or more of the
other Underwriters, or any others, to purchase from the Company or the Selling
Stockholders such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company, the
Selling Stockholders or you as the Representatives of the Underwriters will have
the right, by written notice given within the next 36-hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part of
the non-defaulting Underwriters or of the Company except to the extent provided
in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option Closing
Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representatives, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes any
person substituted for a defaulting
25
Underwriter. Any action taken under this Section 9 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
10. NOTICES.
-------
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 101 California Street, 46th Floor, San Francisco, California
94111, Attention: Peter B. Breck; with a copy (i) to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention:
General Counsel and (ii) Brobeck, Phleger & Harrison LLP, Two Embarcadero Place,
2200 Geng Road, Palo Alto, California, 94303 Attention: Thomas A. Bevilacqua,
Esq.; if to the Company or the Selling Stockholders, to Central Garden & Pet
Company, 3697 Mount Diablo Boulevard, Suite 310, P.O. Box 899, Lafayette,
California 94549, Attention: William E. Brown, with a copy to Orrick, Herrington
& Sutcliffe LLP, Old Federal Reserve Bank Building, 400 Sansome Street, San
Francisco, California 94111, Attention John F. Seegal, Esq.
11. TERMINATION.
-----------
Without limiting the right to terminate this Agreement pursuant to any
other provision hereof:
(a) This Agreement may be terminated by the Company or any Selling
Stockholder by notice to you or by you by notice to the Company or any such
Selling Stockholder at any time prior to the earlier of (i) the time the Shares
are released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;
(b) This Agreement may also be terminated by you at any time prior to
the Closing Date if any of the following has occurred: (i) since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, any material adverse change or any development involving a
prospective material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries taken
as a whole, whether or not arising in the ordinary course of business, (ii) any
outbreak or escalation of hostilities or declaration of war or national
emergency or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, escalation,
declaration, emergency, calamity, crisis or change on the financial markets of
the United States would, in your reasonable judgment, make it impracticable to
market the Shares or to enforce contracts for the sale of the Shares, (iii)
suspension of trading in securities generally on the New York Stock Exchange or
the American Stock Exchange or limitation on prices (other than limitations on
hours or numbers of days of trading) for securities on either such Exchange,
(iv) the
26
enactment, publication, decree or other promulgation of any statute, regulation,
rule or order of any court or other governmental authority which in your opinion
materially and adversely affects or may materially and adversely affect the
business or operations of the Company, (v) declaration of a banking moratorium
by United States or New York State authorities, (vi) the suspension of trading
of the Company's common stock by the Commission on the Nasdaq National Market or
(vii) the taking of any action by any government body or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. FAILURE OF THE SELLING STOCKHOLDER TO SELL AND DELIVER.
------------------------------------------------------
If any of the Selling Stockholders shall fail to sell and deliver to
the Underwriters the Shares to be sold and delivered by such Selling Stockholder
at the Closing Date under the terms of this Agreement, then the Underwriters
may, at their option, by written notice from you to the Company and the Selling
Stockholders, either (i) terminate this Agreement without any liability on the
part of any Underwriter or, except as provided in Sections 5 and 8 hereof, the
Company or the Selling Stockholders, or (ii) purchase the shares which the
Company has agreed to sell and deliver in accordance with the terms hereof. In
the event of a failure by the Selling Stockholders to sell and deliver as
referred to in this Section, either you or the Company shall have the right to
postpone the Closing Date for a period not exceeding seven business days in
order that the necessary changes in the Registration Statement, Prospectus and
any other documents, as well as any other arrangements, may be effected.
13. SUCCESSORS.
----------
This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.
14. INFORMATION PROVIDED BY UNDERWRITERS.
------------------------------------
The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
27
15. MISCELLANEOUS.
-------------
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Shares under
this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
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If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters in accordance with its terms.
Very truly yours,
CENTRAL GARDEN & PET COMPANY
By
---------------------------
William E. Brown
Chief Executive Officer
THE SELLING STOCKHOLDERS
By:
---------------------------
The foregoing Underwriting Agreement
is hereby confirmed and accepted
as of the date first above written.
ALEX. BROWN & SONS INCORPORATED
HAMBRECHT & QUIST LLC
MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED
WASSERSTEIN PERELLA SECURITIES, INC.
As Representatives of the several
Underwriters listed on Schedule I
By: Alex. Brown & Sons Incorporated
By:
------------------------
Authorized Officer
29
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Underwriter Number of Firm Shares Number of Firm Shares
----------- to be Purchased to be Purchased From
From the Company the Selling Stockholders
---------------- ------------------------
Alex. Brown & Sons Incorporated......................
Hambrecht & Quist LLC ...............................
Merrill Lynch, Pierce, Fenner & Smith,
Incorporated.......................................
Wasserstein Perella Securities, Inc.................
--------- -------
TOTAL 4,790,000 210,000
========= =======
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SCHEDULE II
SCHEDULE OF SELLING STOCKHOLDERS
William E. Brown
Robert B. Jones
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EXHIBIT A
MATERIALS SUBSIDIARIES
Four Paws Products Limited, Inc.
Kenlin Pet Supply, Inc.
Wellmark International
32