EXHIBIT 1.4
CAPITAL SENIOR LIVING CORPORATION
5,000,000 Shares of Common Stock
Underwriting Agreement
January 28, 2004
Jefferies & Company, Inc.
Southwest Securities, Inc.
As Representatives of the
several Underwriters listed
in Schedule 1 hereto
c/o Jefferies & Company, Inc.
520 Madison Avenue, 12th Floor
New York, New York 10022
Ladies and Gentlemen:
Capital Senior Living Corporation, a Delaware corporation (the
"COMPANY"), proposes to issue and sell to the several Underwriters listed in
Schedule 1 hereto (the "UNDERWRITERS"), for whom you are acting as
representative (the "REPRESENTATIVE"), an aggregate of 5,000,000 shares of
common stock, par value $0.01 per share, of the Company (the "UNDERWRITTEN
SHARES") and, at the option of the Underwriters, up to an additional 750,000
shares of common stock, par value $0.01 per share, of the Company (the "OPTION
SHARES"). The Underwritten Shares and the Option Shares are herein referred to
as the "SHARES." The shares of common stock, par value $0.01 per share, of the
Company to be outstanding after giving effect to the sale of the Shares are
herein referred to as the "COMMON STOCK." The Common Stock, including the
Shares, will have attached thereto rights (the "RIGHTS") to purchase the
Company's Series A Junior Participating Preferred Stock. The Rights are to be
issued pursuant to that certain Rights Agreement (the "RIGHTS AGREEMENT") dated
as of March 9, 2000, between the Company and ChaseMellon Shareholder Services,
L.L.C.
The Company hereby confirms its agreement with the several Underwriters
concerning the purchase and sale of the Shares, as follows:
1. Registration Statement. The Company has prepared and filed with the
Securities and Exchange Commission (the "COMMISSION") under the Securities Act
of 1933, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "SECURITIES ACT"), a registration statement (File No.
333-110967), together with a prospectus relating to certain securities of the
Company, including the Shares and Rights (the "BASE PROSPECTUS"). Such
registration statement, as amended as of the date of this Agreement and, in the
event any post-
effective amendment thereto becomes effective prior to the Closing Date (as
defined in Section 2(d) hereof), is referred to herein as the "REGISTRATION
STATEMENT." As used herein, the term "PRELIMINARY PROSPECTUS" means any
preliminary prospectus supplement to the Base Prospectus relating to the Shares,
together with the Base Prospectus, and the term "FINAL PROSPECTUS" means the
final prospectus supplement to the Base Prospectus relating to the Shares in the
form first used to confirm sales of the Shares, together with the Base
Prospectus. If the Company has filed an abbreviated registration statement
pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION
STATEMENT"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement. Any reference
in this Agreement to the Registration Statement, any Preliminary Prospectus or
the Final Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Securities Act, and any reference to "amend", "amendment" or "supplement" with
respect to the Registration Statement, any Preliminary Prospectus or the Final
Prospectus shall be deemed to refer to and include any documents filed after
such date under the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder (collectively, the "Exchange Act")
that are deemed to be incorporated by reference therein. Capitalized terms used
but not defined herein shall have the meanings given to such terms in the
Registration Statement and the Final Prospectus, as applicable.
2. Purchase of the Shares by the Underwriters. (a) The Company agrees
to issue and sell the Shares to the several Underwriters as provided in this
Agreement, and each Underwriter, on the basis of the representations, warranties
and agreements set forth herein and subject to the conditions set forth herein,
agrees, severally and not jointly, to purchase from the Company the respective
number of Underwritten Shares set forth opposite such Underwriter's name in
Schedule 1 hereto at a price per share of $5.64 (the "PURCHASE PRICE").
In addition, the Company agrees to issue and sell the Option Shares to
the several Underwriters as provided in this Agreement, and the Underwriters, on
the basis of the representations, warranties and agreements set forth herein and
subject to the conditions set forth herein, shall have the option to purchase,
severally and not jointly, from the Company the Option Shares at the Purchase
Price.
If any Option Shares are to be purchased, the number of Option Shares
to be purchased by each Underwriter shall be the number of Option Shares which
bears the same ratio to the aggregate number of Option Shares being purchased as
the number of Underwritten Shares set forth opposite the name of such
Underwriter in Schedule 1 hereto (or such number increased as set forth in
Section 9 hereof) bears to the aggregate number of Underwritten Shares being
purchased from the Company by the several Underwriters, subject, however, to
such adjustments to eliminate any fractional Shares as the Representative in its
sole discretion shall make.
The Underwriters may exercise the option to purchase the Option Shares
at any time (but not more than once) on or before the thirtieth day following
the date of this Agreement, by written notice from the Representative to the
Company. Such notice shall set forth the aggregate number of Option Shares as to
which the option is being exercised and the date and time when the Option Shares
are to be delivered and paid for which may be the same date and time as the
2
Closing Date (as hereinafter defined) but shall not be earlier than the Closing
Date nor later than the tenth full business day (as hereinafter defined) after
the date of such notice (unless such time and date are postponed in accordance
with the provisions of Section 9 hereof). Any such notice shall be given at
least two Business Days prior to the date and time of delivery specified
therein.
(b) The Company understands that the Underwriters intend to make a
public offering of the Shares as soon after the effectiveness of this Agreement
as in the judgment of the Representative is advisable, and initially to offer
the Shares on the terms set forth in the Final Prospectus. The Company
acknowledges and agrees that the Underwriters may offer and sell Shares to or
through any affiliate of an Underwriter and that any such affiliate may offer
and sell Shares purchased by it to or through any Underwriter.
(c) Payment for the Shares shall be made by wire transfer in
immediately available funds to the account specified by the Company to the
Representative in the case of the Underwritten Shares, at the offices of
Morrison & Foerster LLP at 10:00 a.m. New York City time on February 3, 2004, or
at such other time or place on the same or such other date, not later than the
fifth business day thereafter, as the Representative and the Company may agree
upon in writing or, in the case of the Option Shares, on the date and at the
time and place specified by the Representative in the written notice of the
Underwriters' election to purchase such Option Shares. The time and date of such
payment for the Underwritten Shares is referred to herein as the "CLOSING DATE"
and the time and date for such payment for the Option Shares, if other than the
Closing Date, are herein referred to as the "ADDITIONAL CLOSING DATE."
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representative for the respective accounts of the several Underwriters of
the Shares to be purchased on such date in definitive form registered in such
names and in such denominations as the Representative shall request in writing
not later than two full business days prior to the Closing Date or the
Additional Closing Date, as the case may be, with any transfer taxes payable in
connection with the sale of the Shares duly paid by the Company.
3. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) Preliminary Prospectus. No order preventing or suspending the use
of any Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, complied in all material
respects with the Securities Act and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the
Company makes no representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by such Underwriter through
the Representative expressly for use in any Preliminary Prospectus.
3
(b) Registration Statement and Final Prospectus. No order suspending
the effectiveness of the Registration Statement has been issued by the
Commission and, to the Company's knowledge, no proceeding for that purpose has
been initiated or threatened by the Commission; as of the applicable effective
date of the Registration Statement and any amendment thereto, the Registration
Statement complied and will comply in all material respects with the Securities
Act, and did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and as of the applicable filing date of
the Final Prospectus and any amendment or supplement thereto and as of the
Closing Date and as of the Additional Closing Date, as the case may be, the
Final Prospectus will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading; provided that the Company makes no
representation or warranty with respect to any statements or omissions made in
reliance upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by such Underwriter through the
Representative expressly for use in the Registration Statement or the Final
Prospectus and any amendment or supplement thereto.
(c) Incorporated Documents. The documents incorporated by reference in
the Final Prospectus, when they become effective or were filed with the
Commission, as the case may be, conformed in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, 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, in the light of the circumstances under which they were
made, not misleading; and any further documents so filed and incorporated by
reference in the Final Prospectus, when such documents become effective or are
filed with the Commission, as the case may be, will conform in all material
respects to the requirements of the Securities Act or the Exchange Act, as
applicable, and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made,
not misleading.
(d) Financial Statements. The financial statements and the related
notes thereto included or incorporated by reference in the Registration
Statement and the Final Prospectus comply in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as
applicable, and present fairly in all material respects the financial position
of the Company and its subsidiaries, on a consolidated basis, as of the dates
indicated and the results of their operations and the changes in their cash
flows for the periods specified; such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby. Any pro forma financial statements
or data included in the Registration Statement and the Final Prospectus comply
with the requirements of Regulation S-X of the Act and the Company believes that
the assumptions used in the preparation of such pro forma financial statements
and data were reasonable when made, the pro forma adjustments used therein are
appropriate to give effect in all material respects to the transactions or
circumstances described therein and the pro forma adjustments have been properly
applied in all material respects to the historical amounts in the
4
compilation of those statements and data. The other financial and statistical
data set forth in the Registration Statement and the Final Prospectus are
accurately presented in all material respects and prepared on a basis consistent
with the financial statements and/or books and records of the Company.
(e) No Material Adverse Change. Since the date of the most recent
financial statements of the Company included or incorporated by reference in the
Registration Statement and the Final Prospectus, except as a result of the
consolidation of Triad Senior Living I, L.P., (i) there has not been any
material change in the capital stock (other than pursuant to the exercise of
stock options or warrants to purchase Common Stock and purchases of Common Stock
pursuant to the Company's stock incentive plans) or material change in the
long-term debt of the Company or any of its subsidiaries, or any dividend or
distribution of any kind declared, set aside for payment, paid or made by the
Company on any class of capital stock, or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
financial position, stockholders' equity or results of operations of the Company
and its subsidiaries taken as a whole; (ii) neither the Company nor any of its
subsidiaries has entered into any transaction or agreement that is material to
the Company and its subsidiaries taken as a whole or incurred any liability or
obligation, direct or contingent, that is material to the Company and its
subsidiaries taken as a whole; and (iii) neither the Company nor any of its
subsidiaries has sustained any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor disturbance or dispute or any action, order or decree of any court or
arbitrator or governmental or regulatory authority, except in each case as
otherwise disclosed in the Registration Statement and the Final Prospectus or
that is not material to the Company and its subsidiaries taken as a whole.
(f) Organization and Good Standing. The Company and each Significant
Subsidiary have each been duly organized and are validly existing and in good
standing under the laws of their respective jurisdictions of organization, are
duly qualified as foreign corporations for doing business and are in good
standing in each jurisdiction in which their respective ownership or lease of
property or the conduct of their respective businesses requires such
qualification, and have all corporate power and authority necessary to own or
hold their respective properties and to conduct the businesses in which they are
engaged, except where the failure to be so qualified or have such power or
authority would not, individually or in the aggregate, have a material adverse
effect on the financial position, stockholders' equity or results of operations
of the Company and its subsidiaries taken as a whole (a "MATERIAL ADVERSE
Effect"). Use of the phrase "SIGNIFICANT SUBSIDIARY" herein is intended to refer
to the subsidiaries listed in Schedule 2 to this Agreement.
(g) Capitalization. The Company has an authorized capitalization as set
forth in the Final Prospectus under the heading "Capitalization" as of the date
set forth therein; all the shares of capital stock of the Company outstanding on
the date hereof have been duly authorized and validly issued and are fully paid
and non-assessable and are not subject to any pre-emptive or similar rights;
except as described in the Registration Statement on Form S-8 (File No.
333-92045), filed by the Company with the Commission or as described in or
expressly contemplated by the Final Prospectus, there are no outstanding rights
(including, without limitation, pre-emptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares of
5
capital stock or other equity interest in the Company or any of its Significant
Subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock of the
Company or any such subsidiary, any such convertible or exchangeable securities
or any such rights, warrants or options; the capital stock of the Company
conforms in all material respects to the description thereof contained in the
Registration Statement and the Final Prospectus; and all the outstanding shares
of capital stock or other equity interests of each Significant Subsidiary of the
Company have been duly authorized and validly issued, are fully paid and
non-assessable and are owned directly or indirectly by the Company, free and
clear of any lien, charge, encumbrance, security interest, restriction on voting
or transfer or any other claim of any third party, except for restrictions on
transfers arising in connection with the Company's and its Significant
Subsidiaries' debt obligations and related documentation.
(h) Due Authorization. The Company has all requisite right, power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder; and all action required to be taken by it for the due and proper
authorization, execution and delivery of this Agreement and the consummation by
it of the transactions contemplated hereby has been duly and validly taken.
(i) Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by the Company.
(j) The Shares. The Shares to be issued and sold by the Company
hereunder have been duly authorized by the Company and, when issued and
delivered and paid for as provided herein, will be duly and validly issued and
will be fully paid and nonassessable and will conform to the descriptions
thereof in the Final Prospectus; and the issuance of the Shares is not subject
to any preemptive or similar rights; the Rights Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid and
legally binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by equitable principles relating to enforceability; and the Rights have been
duly authorized by the Company and, when issued upon issuance of the Shares,
will be validly issued, and the Series A Junior Participating Preferred Stock
has been duly authorized by the Company and validly reserved for issuance upon
the exercise in accordance with the terms of the Rights Agreement, will be
validly issued, fully paid and non-assessable.
(k) No Violation or Default. Neither the Company nor any of its
Significant Subsidiaries is (i) in violation of its charter or by-laws or
similar organizational documents; (ii) in default, and no event has occurred
that, with notice or lapse of time or both, would constitute such a default, in
the due performance or observance of any term, covenant or condition contained
in any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its Significant Subsidiaries is a
party or by which the Company or any of its Significant Subsidiaries is bound or
to which any of the property or assets of the Company or any of its Significant
Subsidiaries is subject; or (iii) in violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or governmental
or regulatory authority, except, in the case of clauses (ii) and (iii) above,
for any such default or violation that has been described in
6
the Final Prospectus or that would not, individually or in the aggregate, have a
Material Adverse Effect.
(l) No Conflicts. The execution, delivery and performance by the
Company of this Agreement, the issuance and sale of the Shares to be sold by the
Company hereunder and the consummation by the Company of the transactions
contemplated hereunder will not (i) conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of its subsidiaries pursuant to,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject; (ii)
result in any violation of the provisions of the charter or by-laws or similar
organizational documents of the Company or any of its subsidiaries; or (iii)
result in the violation of any law or statute or any judgment, order, rule or
regulation of any court or arbitrator or governmental or regulatory authority,
except, in the case of clauses (i) and (iii) above, for any such conflict,
breach, violation, creation or imposition that could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(m) No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority is required for the execution, delivery and performance
by the Company of this Agreement, the issuance and sale of the Shares to be sold
by the Company hereunder and the consummation by the Company of the transactions
contemplated hereby, except for the registration of the Shares under the
Securities Act, such consents, approvals, authorizations, orders and
registrations or qualifications as may be required under applicable state
securities laws in connection with the purchase and distribution of the Shares
by the Underwriters and the approval of the quotation of the Shares on the New
York Stock Exchange.
(n) Legal Proceedings. Except as described in the Final Prospectus,
there are no legal actions, suits or proceedings or, to the knowledge of the
Company, governmental or regulatory investigations, pending to which the Company
or any of its Significant Subsidiaries is or may be a party or to which any
property of the Company or any of its Significant Subsidiaries is or may be the
subject that, individually or in the aggregate, if determined adversely to the
Company or any of its subsidiaries, could reasonably be expected to have a
Material Adverse Effect or materially and adversely affect the ability of the
Company to perform its obligations hereunder; to the knowledge of the Company,
no investigations, actions, suits or proceedings are threatened or contemplated
by any governmental or regulatory authority or by others that if determined
adversely to the Company or any of its subsidiaries could reasonably be expected
to have a Material Adverse Effect; and (i) there are no current or pending
legal, governmental or regulatory actions, suits or proceedings that are
required under the Securities Act to be described in the Final Prospectus that
are not so described and (ii) there are no statutes, regulations or contracts or
other documents that are required under the Securities Act to be filed as
exhibits to the Registration Statement or described in the Registration
Statement or the Final Prospectus that are not so filed or described.
7
(o) Independent Accountants. Ernst & Young LLP, who have certified
certain financial statements of the Company and its subsidiaries, are
independent public accountants with respect to the Company and its subsidiaries
as required by the Securities Act.
(p) Title to Real and Personal Property. The Company and its
Significant Subsidiaries have good title to, or have valid rights to lease or
otherwise use, all real and personal property that are material to the
respective businesses of the Company and its Significant Subsidiaries, in each
case free and clear of all liens, encumbrances, claims and defects except for
those that (i) do not materially interfere with the use made and proposed to be
made of such property by the Company and its Significant Subsidiaries, (ii)
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect or (iii) that are described in the Final Prospectus.
(q) Title to Intellectual Property. (i) The Company and its Significant
Subsidiaries own or possess those rights to use all material patents, patent
applications, trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights, licenses and know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) necessary for the conduct of their
respective businesses; and, (ii) to the knowledge of the Company, the conduct of
their respective businesses will not conflict in any respect with any such
rights of others, and the Company and its subsidiaries have not received any
notice of any claim of infringement or conflict with any such rights of others,
except, in the case of clauses (i) and (ii) above, for any failure to own or
possess or for any conflict that has been described in the Final Prospectus or
that would not, individually or in the aggregate, result in a Material Adverse
Effect.
(r) No Undisclosed Relationships. No relationship, direct or indirect,
exists between or among the Company or any of its Significant Subsidiaries, on
the one hand, and the directors, officers, stockholders, customers or suppliers
of the Company or any of its Significant Subsidiaries, on the other, that is
required by the Securities Act to be described in the Registration Statement and
the Final Prospectus and that is not so described.
(s) Investment Company Act. The Company is not and, after giving effect
to the offering and sale of the Shares and the application of the net proceeds
thereof as described in the Final Prospectus, will not be an "investment
company" or an entity "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, and the rules and regulations
of the Commission thereunder (collectively, "INVESTMENT COMPANY ACT").
(t) Taxes. The Company and its Significant Subsidiaries have paid all
federal, state, local and foreign taxes and filed all tax returns required to be
paid or filed through the date hereof other than those which the Company is
contesting in good faith or those that could not, either individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect; and,
except as otherwise disclosed in the Final Prospectus or that could not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect,
8
there is no tax deficiency that has been, or could reasonably be expected to be,
asserted against the Company or any of its subsidiaries or any of their
respective properties or assets.
(u) Licenses and Permits. The Company and its Significant Subsidiaries
possess all licenses, certificates, permits and other authorizations issued by,
and have made all declarations and filings with, the appropriate federal, state,
local or foreign governmental or regulatory authorities that are necessary for
the ownership or lease of their respective properties or the conduct of their
respective businesses as described in the Registration Statement and the Final
Prospectus, except where the failure to possess or make the same could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; and except as described in the Final Prospectus or as could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, neither the Company nor any of its Significant Subsidiaries has
received notice of any revocation or modification of any such license,
certificate, permit or authorization.
(v) No Labor Disputes. No labor disturbance by or dispute with
employees of the Company or any of its subsidiaries exists or, to the knowledge
of the Company, is contemplated or threatened, except as could not reasonably be
expected, individually or in the aggregate, to materially and adversely affect
the operations of any community operated by the Company or any of its
subsidiaries or otherwise to have a material Adverse Effect.
(w) Compliance with Environmental Laws. The Company and its
subsidiaries (i) are in compliance with any and all applicable federal, state,
local and foreign laws, rules, regulations, decisions and orders relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (collectively, "ENVIRONMENTAL
LAWS"); (ii) have received and are in compliance with all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses; and (iii) have not received written notice of any
actual or potential liability for the investigation or remediation of any
disposal or release of hazardous or toxic substances or wastes, pollutants or
contaminants, except as described in the Final Prospectus or in any such case
for any such failure to comply, or failure to receive required permits, licenses
or approvals, or liability as could not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
(x) Compliance with ERISA. Except as could not reasonably be expected
to have a Material Adverse Effect, each employee benefit plan, within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is maintained, administered or contributed to by the
Company or any of its affiliates for employees or former employees of the
Company and its affiliates has been maintained in compliance with its terms and
the requirements of any applicable statutes, orders, rules and regulations,
including, but not limited to, ERISA and the Internal Revenue Code of 1986, as
amended (the "CODE"); no prohibited transaction, within the meaning of Section
406 of ERISA or Section 4975 of the Code, has occurred with respect to any such
plan excluding transactions effected pursuant to a statutory or administrative
exemption; and for each such plan that is subject to the funding rules of
Section 412 of the Code or Section 302 of ERISA, except as could not reasonably
be expected to have a Material Adverse Effect, no "accumulated funding
deficiency" as defined in Section 412 of the
9
Code has been incurred, whether or not waived, and the fair market value of the
assets of each such plan (excluding for these purposes accrued but unpaid
contributions) exceeds the present value of all benefits accrued under such plan
determined using reasonable actuarial assumptions.
(y) Accounting Controls. The Company and its Significant Subsidiaries
maintain systems of internal accounting controls sufficient to provide
reasonable assurance that (i) their transactions are executed in accordance with
management's general or specific authorizations; (ii) their 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 their assets is permitted only in accordance
with management's general or specific authorization; and (iv) the recorded
accountability for their physical assets is compared with the existing physical
assets at reasonable intervals and appropriate action is taken with respect to
any differences.
(z) Insurance. Except as described in the Final Prospectus, the Company
and its Significant Subsidiaries have insurance covering their respective
properties, operations, personnel and businesses, including business
interruption insurance, which insurance is in amounts and insures against such
losses and risks as are generally deemed adequate to protect the Company and its
Significant Subsidiaries and their respective businesses; and neither the
Company nor any of its Significant Subsidiaries has received written notice from
any insurer or agent of such insurer that capital improvements or other
expenditures are required or necessary to be made in order to continue such
insurance.
(aa) No Unlawful Payments. Neither the Company nor any of its
subsidiaries nor, to the knowledge of the Company, any director, officer,
employee or other person acting on behalf of the Company or any of its
Significant Subsidiaries has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.
(bb) No Broker's Fees. Neither the Company nor any of its subsidiaries
is a party to any contract, agreement or understanding with any person (other
than this Agreement) that would give rise to a valid claim against the Company
or any of its subsidiaries or any Underwriter for a brokerage commission,
finder's fee or like payment in connection with the offering and sale of the
Shares.
(cc) No Registration Rights. No person has the right to require the
Company to register any securities for sale under the Securities Act by reason
of the filing of the Registration Statement with the Commission or the issuance
and sale of the Shares that has not been waived.
(dd) No Stabilization. The Company has not taken, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Shares.
10
(ee) Margin Rules. Neither the issuance, sale and delivery of the
Shares nor the application of the proceeds thereof by the Company as described
in the Registration Statement and the Final Prospectus will violate Regulation
T, U or X of the Board of Governors of the Federal Reserve System in each case
as in effect on the date hereof.
(ff) Forward-Looking Statements. No forward-looking statement (within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Registration Statement and the Final Prospectus has been
made or reaffirmed without a reasonable basis or has been disclosed other than
in good faith.
(gg) Statistical and Market Data. Nothing has come to the attention of
the Company that has caused the Company to believe that the statistical and
industry-related data included in the Registration Statement and the Final
Prospectus is not based on or derived from sources that are reliable and
accurate in all material respects.
(hh) Stock Exchange Listing. The Shares have been approved for listing
on the New York Stock Exchange, subject only to official notice of issuance.
(ii) Disclosure Controls and Procedures; Deficiencies in or Changes to
Internal Control Over Financial Reporting. The Company has established and
maintains disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)), which (i) are designed to ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to the Company's principal executive officer and its principal
financial officer by others within those entities, particularly during the
periods in which the periodic reports required under the Exchange Act are being
prepared; (ii) have been evaluated for effectiveness as of the end of the period
covered by the Company's most recent quarterly report filed with the Commission;
and (iii) are effective in all material respects to perform the functions for
which they were established. Based on the most recent evaluation of its
disclosure controls and procedures, the Company is not aware of (i) any
significant deficiencies or material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the Company's ability to record, process, summarize and report
financial information or (ii) any fraud, whether or not material, that involves
management of the Company or other employees who have a significant role in the
registrant's internal control over financial reporting. The Company is not aware
of any change in its internal control over financial reporting that has occurred
during its most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
(jj) No Outstanding Loans or Other Extensions of Credit. Neither the
Company nor any of the Subsidiaries has extended or maintained credit, arranged
for the extension of credit, or renewed any extension of credit, in the form of
a personal loan, to or for any director or executive officer (or equivalent
thereof) of the Company and/or such Subsidiary except for such extensions of
credit as are (i) expressly permitted by Section 13(k) of the Exchange Act or
(ii) fully repaid,
11
discharged, forgiven or otherwise no longer outstanding or owing in any way on
the date of this Agreement.
4. Further Agreements of the Company. The Company covenants and agrees
with each Underwriter that:
(a) Filing of the Final Prospectus and Incorporated Documents. The
Company will file the Final Prospectus with the Commission within the time
periods specified by Rule 424(b) and will file promptly all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Final Prospectus and for so long as
the delivery of a prospectus is required in connection with the offering or sale
of the Shares; and the Company will furnish copies of the Final Prospectus to
the Underwriters in New York City prior to 10:00 A.M., New York City time, on
the business day next succeeding the date of this Agreement in such quantities
as the Representative may reasonably request.
(b) Delivery of Copies. The Company will deliver, without charge, (i)
to the Representative, a signed copy of the Registration Statement as originally
filed and each amendment thereto, in each case including all exhibits and
consents filed therewith and documents incorporated by reference therein; and
(ii) to each Underwriter (A) a conformed copy of the Registration Statement as
originally filed and each amendment thereto (without exhibits) and (B) during
the Prospectus Delivery Period, as many copies of the Final Prospectus
(including all amendments and supplements thereto) as the Representative may
reasonably request. As used herein, the term "PROSPECTUS DELIVERY PERIOD" means
such period of time after the first date of the public offering of the Shares as
in the opinion of counsel for the Underwriters a prospectus relating to the
Shares is required by law to be delivered in connection with sales of the Shares
by any Underwriter or dealer.
(c) Amendments or Supplements. Before filing any amendment or
supplement to the Registration Statement or the Final Prospectus the Company
will furnish to the Representative and counsel for the Underwriters a copy of
the proposed amendment or supplement for review and will not file any such
proposed amendment or supplement to which the Representative reasonably objects.
(d) Notice to the Representative. The Company will advise the
Representative promptly, and confirm such advice in writing, (i) when any
amendment to the Registration Statement has been filed or becomes effective;
(ii) when any supplement to the Final Prospectus or any amendment to the Final
Prospectus has been filed; (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Final Prospectus or the receipt of any comments from the Commission relating to
the Registration Statement or any other request by the Commission for any
additional information; (iv) of the issuance by the Commission of any order
suspending the effectiveness of the Registration Statement or preventing or
suspending the use of any Preliminary Prospectus or the Final Prospectus or the
initiation or threatening of any proceeding for that purpose; (v) of the
occurrence of any event within the Prospectus Delivery Period as a result of
which the Final
12
Prospectus as then amended or supplemented would include any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing when the Final
Prospectus is delivered to a purchaser, not misleading; and (vi) of the receipt
by the Company of any notice with respect to any suspension of the qualification
of the Shares for offer and sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and the Company will use its
best efforts to prevent the issuance of any such order suspending the
effectiveness of the Registration Statement, preventing or suspending the use of
any Preliminary Prospectus or the Final Prospectus or suspending any such
qualification of the Shares and, if any such order is issued, will obtain as
soon as possible the withdrawal thereof.
(e) Ongoing Compliance. If during the Prospectus Delivery Period (i)
any event shall occur or condition shall exist as a result of which the Final
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances existing when the Final Prospectus is delivered to a purchaser,
not misleading or (ii) it is necessary to amend or supplement the Final
Prospectus to comply with law, the Company will promptly notify the Underwriters
thereof and forthwith prepare and, subject to paragraph (c) above, file with the
Commission and furnish to the Underwriters and to such dealers as the
Representative may designate, such amendments or supplements to the Final
Prospectus as may be necessary so that the statements in the Final Prospectus as
so amended or supplemented will not, in the light of the circumstances existing
when the Final Prospectus is delivered to a purchaser, be misleading or so that
the Final Prospectus will comply with law.
(f) Blue Sky Compliance. The Company will qualify the Shares for offer
and sale under the securities or Blue Sky laws of such jurisdictions as the
Representative shall reasonably request and will continue such qualifications in
effect so long as required for distribution of the Shares; provided that the
Company shall not be required to (i) qualify as a foreign corporation or other
entity or as a dealer in securities in any such jurisdiction where it would not
otherwise be required to so qualify, (ii) file any general consent to service of
process in any such jurisdiction or (iii) subject itself to taxation in any such
jurisdiction if it is not otherwise so subject.
(g) Earning Statement. The Company will make generally available to its
security holders and the Representative as soon as practicable an earning
statement that satisfies the provisions of Section 11(a) of the Securities Act
and Rule 158 of the Commission promulgated thereunder covering a period of at
least twelve months beginning with the first fiscal quarter of the Company
occurring after date of this Agreement.
(h) Clear Market. For a period of 90 days after the date of the public
offering of the Shares, the Company will not (i) offer, pledge, announce the
intention to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such
13
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, without the
prior written consent of the Representative, other than the (A) Shares to be
sold hereunder, (B) the grant of employee stock options or long-term incentive
awards pursuant to the terms of existing employee stock option plans and (C) any
shares of Common Stock of the Company issued upon the exercise of options
granted under existing employee stock option plans. The foregoing restrictions
shall not apply to (i) the sale of Stock pursuant to the Final Prospectus, (ii)
the issuance of Stock upon the exercise of options granted under the Company's
employee stock option plans or pursuant to the Company's 401(k) retirement plan
or employee stock purchase plan, all as in effect as of the date hereof, (iii)
the issuance of Rights in accordance with the terms of the Rights Agreement, and
(iv) to the issuance Stock in connection with any acquisition transaction, so
long as the terms of any such acquisition contractually prohibit the resale or
other disposition of such Stock through and including the date 90 days after the
date of the public offering of the Shares.
(i) Use of Proceeds. The Company will apply the net proceeds from the
sale of the Shares as described in the Final Prospectus under the heading "Use
of Proceeds."
(j) No Stabilization. The Company will not take, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Shares.
(k) Reports. During the twelve month period ending January 31, 2005,
the Company will furnish to the Representative, as soon as they are available,
copies of all reports or other communications (financial or other) furnished to
holders of the Shares, and copies of any reports and financial statements
furnished to or filed with the Commission or any national securities exchange or
automatic quotation system.
5. Conditions of Underwriters' Obligations. The obligation of each
Underwriter to purchase the Underwritten Shares on the Closing Date or the
Option Shares on the Additional Closing Date, as the case may be, as provided
herein is subject to the performance by the Company of its covenants and other
obligations hereunder and to the following additional conditions:
(a) Registration Compliance; No Stop Order. No order suspending the
effectiveness of the Registration Statement shall be in effect, and no
proceeding for such purpose shall be pending before or threatened by the
Commission; the Final Prospectus shall have been timely filed with the
Commission under the Securities Act and in accordance with Section 4(a) hereof;
and all requests by the Commission for additional information shall have been
complied with to the reasonable satisfaction of the Representative.
(b) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct on the date hereof and
on and as of the Closing Date or the Additional Closing Date, as the case may
be; and the statements of the Company and its officers made in any certificates
delivered pursuant to this Agreement shall be
14
true and correct on and as of the Closing Date or the Additional Closing Date,
as the case may be.
(c) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement, no event or condition of a type described in Section
3(e) hereof shall have occurred or shall exist, which event or condition is not
described in the Final Prospectus (excluding any amendment or supplement
thereto) and the effect of which in the reasonable judgment of the
Representative makes it impracticable or inadvisable to proceed with the
offering, sale or delivery of the Shares on the Closing Date or the Additional
Closing Date, as the case may be, on the terms and in the manner contemplated by
this Agreement and the Final Prospectus.
(d) Officer's Certificate. The Representative shall have received on
and as of the Closing Date or the Additional Closing Date, as the case may be, a
certificate of the chief financial officer or chief accounting officer of the
Company and one additional senior executive officer of the Company who is
satisfactory to the Representative (i) confirming that such officers have
carefully reviewed the Registration Statement and the Final Prospectus and, to
the knowledge of such officers, the representation set forth in Section 3(b)
hereof is true and correct, (ii) confirming that the other representations and
warranties of the Company in this Agreement are true and correct on the date
hereof and shall be true and correct in all material respects (except for any
such representation or warranty that is by its terms qualified by materiality,
material adverse change or Material Adverse Effect, which representation or
warranty shall be true and correct) on and as of the Closing Date or the
Additional Closing Date, as the case may be, and that the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to such Closing Date and (iii) to the effect set
forth in paragraphs (a) and (c) above.
(e) Comfort Letters. On the date of this Agreement and on the Closing
Date or the Additional Closing Date, as the case may be, each of Ernst & Young
LLP and Lane Gorman Trubitt, L.L.P., shall have furnished to the Representative,
at the request of the Company, letters, dated the respective dates of delivery
thereof and addressed to the Underwriters, in form and substance reasonably
satisfactory to the Representative, containing statements and information of the
type customarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
or incorporated by reference in the Registration Statement and the Final
Prospectus; provided that the letter delivered on the Closing Date or the
Additional Closing Date, as the case may be shall use a "cut-off" date no more
than three business days prior to such Closing Date or such Additional Closing
Date, as the case may be.
(f) Opinion of Outside Counsel for the Company. Jenkens & Gilchrist,
P.C., counsel for the Company, shall have furnished to the Representative, at
the request of the Company, their written opinion, dated the Closing Date or the
Additional Closing Date, as the case may be, and addressed to the Underwriters,
in form and substance reasonably satisfactory to the Representative, to the
effect set forth in Annex A hereto.
15
(g) Opinion of Counsel for the Underwriters. The Representative shall
have received on and as of the Closing Date or the Additional Closing Date, as
the case may be, an opinion of Morrison & Foerster LLP, counsel for the
Underwriters, with respect to such matters as the Representative may reasonably
request, and such counsel shall have received such documents and information as
they reasonably request to enable them to pass upon such matters.
(h) No Legal Impediment to Issuance. No action shall have been taken
and no statute, rule, regulation or order shall have been enacted, adopted or
issued by any federal, state or foreign governmental or regulatory authority
that would, as of the Closing Date or the Additional Closing Date, as the case
may be, prevent the issuance or sale of the Shares; and no injunction or order
of any federal, state or foreign court shall have been issued that would, as of
the Closing Date or the Additional Closing Date, as the case may be, prevent the
issuance or sale of the Shares.
(i) Good Standing. The Representative shall have received on and as of
the Closing Date or the Additional Closing Date, as the case may be,
satisfactory evidence of the good standing of the Company and its Significant
Subsidiaries in their respective jurisdictions of organization and their good
standing as foreign entities in such other jurisdictions as the Representative
may reasonably request, in each case in writing or any standard form of
telecommunication from the appropriate governmental authorities of such
jurisdictions.
(j) Exchange Listing. The Shares to be delivered on the Closing Date or
Additional Closing Date, as the case may be, shall have been approved for
listing on the New York Stock Exchange, subject to official notice of issuance.
(k) Lock-Up Agreements. The "lock-up" agreements, each substantially in
the form of Exhibit A hereto, between the Representative and the officers and
directors of the Company set forth on Schedule 3 hereto relating to sales and
certain other dispositions of shares of or certain other securities, delivered
to the Representative on or before the date hereof, shall be in full force and
effect on the Closing Date or Additional Closing Date, as the case may be.
(l) Additional Documents. On or prior to the Closing Date or the
Additional Closing Date, as the case may be, the Company shall have furnished to
the Representative such further certificates and documents as the Representative
may reasonably request.
All opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
6. Indemnification.
(a) Indemnification of the Underwriters. The Company agrees to
indemnify and hold harmless each Underwriter, its officers and employees, and
each person, if any, who controls any Underwriter within the meaning of the
Securities Act and the Exchange Act against any loss, claim, damage, liability
or expense, as incurred, to which such Underwriter or such controlling person
may become subject, under the Securities Act, the Exchange Act or other federal
or state
16
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based (i) upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, or any amendment thereto,
including any information deemed to be a part thereof pursuant to Rule 430A or
Rule 434 under the Securities Act, 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 (ii) upon any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus or
the Final 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; and to reimburse each Underwriter and each such
controlling person for any and all expenses (including the reasonable fees and
disbursements of counsel chosen by the Representative) as such expenses are
reasonably incurred by such Underwriter or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the
foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of or
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representative expressly for use in
the Registration Statement, any preliminary prospectus or the Final Prospectus
(or any amendment or supplement thereto), it being understood and agreed that
the only such information furnished by the Representative to the Company
consists of the information described in subsection (b) below; and provided,
further, that with respect to any Preliminary Prospectus, the foregoing
indemnity agreement shall not inure to the benefit of any Underwriter from whom
the person asserting any loss, claim, damage, liability or expense purchased
Shares, or any person controlling such Underwriter, if copies of the Final
Prospectus were timely delivered to the Underwriter pursuant to Section 4 and a
copy of the Final Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Underwriter to such person, if required by law so
to have been delivered, at or prior to the written confirmation of the sale of
the Shares to such person, and if the Final Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. The indemnity agreement set forth in this Section
6(a) shall be in addition to any liabilities that the Company may otherwise
have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged
17
untrue statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Final Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon 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, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Final Prospectus (or any amendment or supplement thereto), in
reliance upon and in conformity with written information furnished to the
Company by the Representative expressly for use therein; and to reimburse the
Company, or any such director, officer or controlling person for any and all
expenses (including the reasonable fees and disbursement of counsel) as such
expenses are reasonably incurred by the Company, or any such director, officer
or controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. The Company hereby acknowledges that the only information that the
Underwriters have furnished to the Company expressly for use in the Registration
Statement, any preliminary prospectus or the Final Prospectus (or any amendment
or supplement thereto) are the statements set forth in the table in the first
paragraph and as the 13th paragraph and the first sentence in the 16th paragraph
under the caption "Underwriting" in the Final Prospectus. The indemnity
agreement set forth in this Section 6(b) shall be in addition to any liabilities
that each Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 6 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 6, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 6 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed
18
separate counsel in accordance with the proviso to the preceding sentence (it
being understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (together with local counsel),
approved by the indemnifying party, representing the indemnified parties who are
parties to such action) or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, in each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying party.
(d) Settlements. The indemnifying party under this Section 6 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 judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
6(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement, compromise or consent
to the entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party is or could have been a party and
indemnity was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the
Underwriters, on the other hand, from the offering of the Shares pursuant to
this Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and the Underwriters, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company, on the
one hand, and the Underwriters, on the other hand, in connection with the
offering of the Shares pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
Shares pursuant to this 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 front cover page of the Prospectus (or, if Rule
434
19
under the Securities Act is used, the corresponding location on the Term Sheet)
bear to the aggregate initial public offering price of the Shares 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, on the one hand, or the Underwriters, on
the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 6(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 6(c) with respect to notice of commencement of any action shall apply if
a claim for contribution is to be made under this Section 7; provided, however,
that no additional notice shall be required with respect to any action for which
notice has been given under Section 6(c) for purposes of indemnification.
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 in this Section 7.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Shares underwritten by it
and distributed to the public. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 7 are several, and not joint, in proportion to their respective
underwriting commitments as set forth opposite their names in Schedule 1. For
purposes of this Section 7, each officer and employee of an Underwriter and each
person, if any, who controls an Underwriter within the meaning of the Securities
Act and the Exchange 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 with the meaning of the Securities Act and the Exchange Act shall have
the same rights to contribution as the Company.
8. Effectiveness of Agreement. This Agreement shall become effective
upon the execution and delivery hereof by the parties hereto.
9. Termination. Prior to the Closing Date this Agreement may be
terminated by the Representative by notice given to the Company if at any time
(i) trading or quotation in any of the Company's securities shall have been
suspended by the Commission or by the New York Stock Exchange, or trading in
securities generally on either the Nasdaq Stock Market, the
20
American Stock Exchange or the New York Stock Exchange shall have been suspended
or materially limited; (ii) a general banking moratorium shall have been
declared by any of federal or New York State authorities; (iii) there shall have
occurred any event of the type described in Section 3(e) hereof; (iv) the
Company shall have sustained a loss by strike, fire, flood, earthquake, accident
or other calamity of such character as in the judgment of the Representative may
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured; or (v)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, as in the reasonable judgment of the
Representative is material and adverse and makes it impracticable to market the
Shares in the manner and on the terms described in the Final Prospectus or to
enforce contracts for the sale of securities. Any termination pursuant to this
Section 9 shall be without liability on the part of (a) the Company to any
Underwriter, (b) any Underwriter to the Company or (c) any party hereto to any
other party except that the provisions of Section 6 and Section 7 shall at all
times be effective and shall survive such termination.
10. Defaulting Underwriter. (a) If, on the Closing Date or the
Additional Closing Date, as the case may be, any Underwriter defaults on its
obligation to purchase the Shares that it has agreed to purchase hereunder on
such date, the non-defaulting Underwriters may in their discretion arrange for
the purchase of such Shares by other persons satisfactory to the Company on the
terms contained in this Agreement. If, within 36 hours after any such default by
any Underwriter, the non-defaulting Underwriters do not arrange for the purchase
of such Shares, then the Company shall be entitled to a further period of 36
hours within which to procure other persons satisfactory to the non-defaulting
Underwriters to purchase such Shares on such terms. If other persons become
obligated or agree to purchase the Shares of a defaulting Underwriter, either
the non-defaulting Underwriters or the Company may postpone the Closing Date or
the Additional Closing Date, as the case may be, for up to five full business
days in order to effect any changes that in the opinion of counsel for the
Company or counsel for the Underwriters may be necessary in the Registration
Statement and the Final Prospectus or in any other document or arrangement, and
the Company agrees to promptly prepare any amendment or supplement to the
Registration Statement and the Final Prospectus that effects any such changes.
As used in this Agreement, the term "Underwriter" includes, for all purposes of
this Agreement unless the context otherwise requires, any person not listed in
Schedule 1 hereto that, pursuant to this Section 9, purchases Shares that a
defaulting Underwriter agreed but failed to purchase.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters and the Company as provided in paragraph (a) above, the aggregate
number of Shares that remain unpurchased on the Closing Date or the Additional
Closing Date, as the case may be does not exceed one-tenth of the aggregate
number of Shares to be purchased on such date, then the Company shall have the
right to require each non-defaulting Underwriter to purchase the number of
Shares that such Underwriter agreed to purchase hereunder on such date plus such
Underwriter's pro rata share (based on the number of Shares that such
Underwriter agreed to purchase on such date) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made.
21
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters and the Company as provided in paragraph (a) above, the aggregate
number of Shares that remain unpurchased on the Closing Date or the Additional
Closing Date, as the case may be, exceeds one-tenth of the aggregate amount of
Shares to be purchased on such date, or if the Company shall not exercise the
right described in paragraph (b) above, then this Agreement or, with respect to
any Additional Closing Date, the obligation of the Underwriters to purchase
Shares on the Additional Closing Date, as the case may be, shall terminate
without liability on the part of the non-defaulting Underwriters. Any
termination of this Agreement pursuant to this Section 9 shall be without
liability on the part of the Company, except that the Company will continue to
be liable for the payment of expenses as set forth in Section 10 hereof and
except that the provisions of Section 6 hereof shall not terminate and shall
remain in effect.
(d) Nothing contained herein shall relieve a defaulting Underwriter of
any liability it may have to the Company or any non-defaulting Underwriter for
damages caused by its default.
11. Payment of Expenses. Whether or not the transactions contemplated
by this Agreement are consummated or this Agreement is terminated, the Company
will pay or cause to be paid all costs and expenses incident to the performance
of its obligations hereunder, including without limitation, (i) the costs
incident to the authorization, issuance, sale, preparation and delivery of the
Shares and any taxes payable in that connection; (ii) the costs incident to the
preparation, printing and filing under the Securities Act of the Registration
Statement, the Preliminary Prospectus and the Final Prospectus (including all
exhibits, amendments and supplements thereto) and the distribution thereof;
(iii) the costs of reproducing and distributing this Agreement; (iv) the fees
and expenses of the Company's counsel and independent accountants; (v) the fees
and expenses incurred in connection with the registration or qualification and
determination of eligibility for investment of the Shares under the laws of such
jurisdictions as the Representative may designate and the preparation, printing
and distribution of a Blue Sky Memorandum (including the related fees and
expenses of counsel for the Underwriters up to $1,000); (vi) the cost of
preparing stock certificates; (vii) the costs and charges of any transfer agent
and any registrar; (viii) all expenses and application fees incurred in
connection with any filing with, and clearance of the offering by, the National
Association of Securities Dealers, Inc.; (ix) all expenses incurred by the
Company in connection with any "road show" presentation to potential investors;
(x) all necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Shares; and (xi) all expenses and application fees
related to the listing of the Shares on the New York Stock Exchange.
12. Expenses. Except as set forth in Section 11 hereof, each party
hereto shall be responsible for all of the costs and expenses incurred by such
party in connection with the transactions contemplated by this Agreement;
provided, however, that if the sale to the Underwriters of the Shares on the
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or to comply with any
provision hereof, the Company agrees to reimburse the Representative and the
other Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all third-party out-of-pocket
expenses that shall have
22
been reasonably incurred by the Representative and the Underwriters in
connection with the proposed purchase and the offering and sale of the Shares,
including, but not limited to, reasonable fees and disbursements of counsel,
printing expenses, travel expenses, postage, facsimile and telephone charges.
13. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and any controlling persons
referred to in Section 6 hereof. Nothing in this Agreement is intended or shall
be construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
No purchaser of Shares from any Underwriter shall be deemed to be a successor
merely by reason of such purchase.
14. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company and the Underwriters
contained in this Agreement or made by or on behalf of the Company or the
Underwriters pursuant to this Agreement or any certificate delivered pursuant
hereto shall survive the delivery of and payment for the Shares and shall remain
in full force and effect, regardless of any termination of this Agreement or any
investigation made by or on behalf of the Company or the Underwriters.
15. Certain Defined Terms. For purposes of this Agreement, (a) except
where otherwise expressly provided, the term "affiliate" has the meaning set
forth in Rule 405 under the Securities Act; (b) the term "business day" means
any day other than a day on which banks are permitted or required to be closed
in New York City; and (c) the term "subsidiary" has the meaning set forth in
Rule 405 under the Securities Act.
16. Miscellaneous.
(a) Authority of the Representative. Any action by the Underwriters
hereunder may be taken by Jefferies & Company, Inc. on behalf of the
Underwriters, and any such action taken by Jefferies & Company, Inc. shall be
binding upon the Underwriters.
(b) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted and
confirmed by any standard form of telecommunication. Notices to the Underwriters
shall be given to the Representative c/o Jefferies & Company, Inc., 520 Madison
Avenue, 12th Floor, New York, New York 10022 (fax: (212) 284-2208); Attention:
Mike Simpson. Notices to the Company shall be given to it at 300 Park Avenue,
Suite 1700, New York, New York 10022 (fax: (212) 551-1774); Attention: Lawrence
A. Cohen, and at 14160 Dallas Parkway, Suite 300, Dallas, Texas 75254 (fax:
(972) 770-5666); Attention: David Brickman.
(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
23
(d) Counterparts. This Agreement may be signed in counterparts (which
may include counterparts delivered by any standard form of telecommunication),
each of which shall be an original and all of which together shall constitute
one and the same instrument.
(e) Amendments or Waivers. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.
(f) Headings. The headings herein are included for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
(g) Termination of the Engagement Letter. Upon the execution and
delivery of this Agreement, that certain Letter Agreement, dated as of December
23, 2003 (the "ENGAGEMENT LETTER"), by and between the Company and Jefferies &
Company, Inc., shall be deemed terminated and of no further force or effect.
24
If the foregoing is in accordance with your understanding, please
indicate your acceptance of this Agreement by signing in the space provided
below.
Very truly yours,
CAPITAL SENIOR LIVING CORPORATION
By: /s/ David R. Brickman
Name: David R. Brickman
Title: Vice President and General Counsel
Accepted: January 28, 2004
JEFFERIES & COMPANY, INC.
For itself and on behalf of
the several Underwriters listed
in Schedule 1 hereto.
BY: JEFFERIES & COMPANY, INC.
By: /s/ Catherine Gemmato-Smith
Name: Catherine Gemmato-Smith
Title: Managing Director
SOUTHWEST SECURITIES, INC.
For itself and on behalf of the
several Underwriters listed
in Schedule 1 hereto.
BY: SOUTHWEST SECURITIES, INC.
By: /s/ Patrick M. Jaeckle
Name: Patrick M. Jaeckle
Title: Managing Director
25
SCHEDULE 1
<Table>
<Caption>
Underwriter Number of Shares
- ----------- ----------------
Jefferies & Company, Inc. 3,750,000
Southwest Securities, Inc. 1,250,000
----------------
Total 5,000,000
</Table>
ANNEX A
Form of Opinion of
Jenkens & Gilchrist, P.C.
(i) each of the Company and its Significant Subsidiaries has
been duly incorporated and is validly existing as a corporation or
other organization in good standing under the laws of its respective
jurisdiction of incorporation or formation with the requisite corporate
or other power and authority to own, lease, license and operate its
respective assets and properties and to conduct its respective business
as described in the Registration Statement and Final Prospectus and, in
the case of the Company, to execute and deliver this Agreement and to
consummate the transactions described in this Agreement;
(ii) each of the Company and each Significant Subsidiary is
duly qualified or licensed to do business as a foreign corporation or
other organization by each jurisdiction certified to such counsel in
which the nature of the business conducted by it or the location of the
assets or properties owned, leased, licensed or operated by it requires
such qualification or license and in which the failure, individually or
in the aggregate, to be so qualified or licensed would have a Material
Adverse Effect;
(iii) to such counsel's knowledge, neither the Company nor any
of its Significant Subsidiaries is in breach or violation of, or in
default under (nor has any event occurred which with notice, lapse of
time, or both would constitute a breach of, or default under) its
respective articles or certificate of incorporation, charter (or other
organizational documents) or by-laws (or other governing documents);
(iv) the execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated by this Agreement (including the issuance of the Shares)
do not and will not (A) give rise to a right to terminate or accelerate
the due date of any payment due under, or conflict with, or result in
any breach or violation of, or constitute a default under (nor
constitute any event which with notice, lapse of time, or both would
constitute a breach of or default under), or require any consent or
waiver under (i) any provisions of the articles or certificate of
incorporation, charter (or other organizational documents) or by-laws
(or other governing documents) of the Company or any Significant
Subsidiary, (ii) any provision of any franchise, permit, license,
indenture, mortgage, deed of trust, loan, credit or other agreement or
instrument certified to such counsel as material to the Company and its
subsidiaries, taken as a whole, to which the Company or any Significant
Subsidiary is a party or by which any of them or their respective
properties or assets may be bound or affected, (iii) any law or
regulation binding upon or applicable to the Company or any Significant
Subsidiary or any of their respective properties or assets, or (iv) any
decree, judgment or order certified to such counsel and applicable to
the Company or any
A-1
Significant Subsidiary; or (B) result in the creation or imposition of
any lien, charge, claim or encumbrance upon any property or assets of
the Company or its Significant Subsidiaries;
(v) this Agreement has been duly and validly authorized,
executed and delivered by the Company;
(vi) when the Shares have been issued and duly delivered
against payment therefore as contemplated by this Agreement, such
Shares will be validly issued, fully paid and nonassessable, and will
have been issued in compliance with all federal and state securities
laws;
(vii) the shares of the outstanding capital stock of each of
the Significant Subsidiaries have been validly issued and are fully
paid and nonassessable;
(viii) no approval, authorization, consent, license, permit,
certificate or order of or filing by or with any federal or state
governmental or regulatory commission, board, body, authority or agency
is required in connection with the execution, delivery and performance
of this Agreement, the consummation of the transaction contemplated
hereby and the sale and delivery of the Shares by the Company as
contemplated hereby, other than such as have been obtained or made and
are in full force and effect under the Securities Act and the
regulations promulgated thereunder and such approvals as have been
obtained and are in full force and effect in connection with the
approval of the listing of the Shares on the New York Stock Exchange,
and except that such counsel need express no opinion in this clause
(viii) as to (A) any necessary qualification under the state securities
or blue sky laws of the various jurisdictions in which the Shares are
being offered by the Underwriters, and (B) any approval of the
underwriting terms and arrangements by the NASD;
(ix) the issuance and sale of the Shares is not subject to
preemptive or other similar rights arising by operation of law, under
the certificate of incorporation or by-laws of the Company, or, to such
counsel's knowledge, under any other agreement to which the Company or
any of its subsidiaries is a party or otherwise;
(x) to such counsel's knowledge, there are no persons with
registration or other similar rights to have any equity securities,
including securities that are convertible into or exchangeable for
equity securities, registered pursuant to the Registration Statement or
otherwise registered by the Company under the Securities Act, other
than as set forth in the Final Prospectus;
(xi) the Registration Statement has become effective under the
Securities Act and to such counsel's knowledge (A) no stop order
preventing or suspending the effectiveness of the Registration
Statement or the use of the Final Prospectus has been issued and (B) no
proceedings with respect thereto have been commenced or threatened; any
required filing of the Final Prospectus and any supplement thereto
pursuant to Rule 424(b) under
A-2
the Securities Act has been made in the manner and within the time
period required by such Rule 424(b);
(xii) the Registration Statement, each amendment thereto, any
Rule 462(b) Registration Statement, and the Final Prospectus and each
amendment or supplement thereto (except as to the financial statements
and other financial and statistical data contained therein, as to which
such counsel need express no opinion) on the date it was declared
effective and on the date of the Final Prospectus complied as to form
in all material respects with the requirements of the Securities Act
and the regulations promulgated thereunder;
(xiii) the statements under the captions "Capitalization," and
"Description of Capital Stock", insofar as such statements constitute a
summary of the documents or legal matters referred to therein,
constitute accurate summaries thereof in all material respects and
accurately present the information called for with respect to such
documents or matters;
(xiv) to such counsel's knowledge, there are no actions, suits
or proceedings, inquiries, or investigations pending, threatened
against, affecting or reasonably likely to affect the Company or any of
its subsidiaries or any of their respective officers and directors or
to which the properties, assets or rights of any such entity are
subject, at law or in equity, before or by any federal, state, local or
foreign governmental or regulatory commission, board, body, authority,
arbitral panel or agency which are required to be described in the
Final Prospectus but are not so described;
(xv) neither the Company nor any subsidiary is or, after
giving effect to the offering and sale of the Shares by the Company and
the application of the net proceeds therefrom as described in the Final
Prospectus, will be an "investment company" or an entity "controlled
by" an "investment company", as such terms are defined in the
Investment Company Act of 1940; and
(xvi) the Shares have been approved for listing on the New
York Stock Exchange.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company, independent
public accountants of the Company and representatives of the Underwriters, at
which the contents of the Registration Statement and Final Prospectus and
related matters were discussed and, although such counsel is not passing upon
and does not assume responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement or Final Prospectus
(except as and to the extent stated in subparagraphs (xii) and (xiii) above), on
the basis of the foregoing, no facts have come to the attention of such counsel
that lead them to believe that the Registration Statement or any amendment
thereto at the time it became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the Final
Prospectus, as amended or supplemented, as of its date, and as of the date of
such counsel's opinion, contained or contains an untrue
A-3
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading (it
being understood that, in each case, such counsel need express no view with
respect to the financial statements and other financial and statistical data
included in the Registration Statement or Final Prospectus).
A-4