MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED $115,000,000 AGGREGATE PRINCIPAL AMOUNT CBIZ, INC. 4.875% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2015 PURCHASE AGREEMENT DATED SEPTEMBER 21, 2010
Exhibit 10.1
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
$115,000,000 AGGREGATE PRINCIPAL AMOUNT
4.875% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2015
DATED SEPTEMBER 21, 2010
September 21, 2010
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Incorporated
As Representative of the several Initial Purchasers
| c/▇ | ▇▇▇▇▇▇▇ Lynch, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated |
Ladies and Gentlemen:
CBIZ, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to the
several purchasers named in Schedule A (the “Initial Purchasers”) $115,000,000 in aggregate
principal amount of its 4.875% Convertible Senior Subordinated Notes due 2015 (the “Firm
Notes”). In addition, the Company has granted to the Initial Purchasers an option to purchase
up to an additional $15,000,000 in aggregate principal amount of its 4.875% Convertible Senior
Subordinated Notes due 2015 (the “Optional Notes” and, together with the Firm Notes, the
“Notes”). ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated (“▇▇▇▇▇▇▇ ▇▇▇▇▇”) has
agreed to act as representative of the several Initial Purchasers (in such capacity, the
“Representative”) in connection with the offering and sale of the Notes. To the extent
that there are no additional Initial Purchasers listed on Schedule A other than you, the terms
Representative and Initial Purchasers as used herein shall mean you, as Initial Purchasers. The
terms Representative and Initial Purchasers shall mean either the singular or plural as the context
requires.
The Notes will be convertible on the terms, and subject to the conditions, set forth in the
Indenture (as defined below). As used herein, “Conversion Shares” means the shares of
common stock, par value $0.01 per share, of the Company (the “Common Stock”) to be received
by the holders of the Notes upon conversion of the Notes pursuant to the terms of the Notes. The
Notes will be issued pursuant to an indenture (the “Indenture”) to be dated September 27,
2010, between the Company and U.S. Bank National Association, as trustee (the “Trustee”).
The Notes will be offered and sold to the Initial Purchasers without being registered under
the Securities Act of 1933, as amended, and the rules and regulations of the Securities and
Exchange Commission (the “Commission”) thereunder (the “Securities Act”), in
reliance upon an exemption therefrom.
This Agreement, the Indenture, and the Notes are referred to herein collectively as the
“Operative Documents.”
The Company understands that the Initial Purchasers propose to make an offering of the Notes
on the terms and in the manner set forth herein and in the Preliminary Offering Memorandum (as
defined below) and the Final Offering Memorandum (as defined below) and agrees that the Initial
Purchasers may resell, subject to the conditions set forth herein, all or a
portion of the Notes to purchasers (the “Subsequent Purchasers”) at any time after the
date of this Agreement.
1
The Company has prepared an offering memorandum, dated the date hereof, setting forth
information concerning the Company, the Notes, and the Common Stock, in form and substance
reasonably satisfactory to the Initial Purchasers. As used in this Agreement, “Offering
Memorandum” means, collectively, the Preliminary Offering Memorandum dated as of September 20,
2010 (the “Preliminary Offering Memorandum”) and the offering memorandum dated the date
hereof (the “Final Offering Memorandum”), each as then amended or supplemented by the
Company. As used herein, each of the terms “Offering Memorandum”, “Preliminary
Offering Memorandum” and “Final Offering Memorandum” shall include in each case the
documents incorporated or deemed to be incorporated by reference therein. The term “Disclosure
Package” shall mean (i) the Preliminary Offering Memorandum, as amended and supplemented as of
the Applicable Time (as defined herein) and (ii) the term sheet attached as Exhibit C hereto.
The Company hereby confirms its agreements with the Initial Purchasers as follows:
| SECTION 1. | REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. |
The Company hereby represents, warrants and covenants to each Initial Purchaser as follows:
(a) No Registration. Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in SECTION 6 and their compliance with the agreements set forth
therein, it is not necessary, in connection with the issuance and sale of the Notes to the Initial
Purchasers, the offer, resale and delivery of the Notes by the Initial Purchasers and the
conversion of the Notes into Conversion Shares, in each case in the manner contemplated by this
Agreement, the Indenture and the Offering Memorandum, to register the Notes or the Conversion
Shares under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939,
as amended (the “Trust Indenture Act”).
(b) No Integration. None of the Company or any of its subsidiaries has, directly or
through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any “security” (as defined in the Securities Act) that is or will be integrated with
the sale of the Notes or the Conversion Shares in a manner that would require registration under
the Securities Act of the Notes or the Conversion Shares.
(c) Rule 144A. No securities of the same class (within the meaning of Rule 144A(d)(3)
under the Securities Act) as the Notes are listed on any national securities exchange registered
under Section 6 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or
quoted on an automated inter-dealer quotation system.
(d) Exclusive Agreement. The Company has not paid or agreed to pay to any person any
compensation for soliciting another person to purchase any securities of the Company (other than
you and except as otherwise contemplated in this Agreement).
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(e) Offering Memoranda. The Company hereby confirms that it has authorized the use of
the Preliminary Offering Memorandum and the Final Offering Memorandum in connection with the offer
and sale of the Notes by the Initial Purchasers. Each document, if any, filed or to be filed
pursuant to the Exchange Act and incorporated by reference in the Preliminary Offering Memorandum
or the Final Offering Memorandum complied or will comply when it is filed in all material respects
with the Exchange Act and the rules and regulations of the Commission thereunder. The Preliminary
Offering Memorandum, at the date thereof, did not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. At the date of this Agreement, the
Closing Date and on any Subsequent Closing Date, the Final Offering Memorandum did not and will not
(and any amendment or supplement thereto, at the date thereof, at the Closing Date and on any
Subsequent Closing Date, will not) contain any untrue statement of a material fact or omit to state
any material fact 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 or warranty as to information contained in or omitted from the Preliminary Offering
Memorandum or the Final Offering Memorandum in reliance upon and in conformity with written
information furnished to the Company by or on the behalf of the Initial Purchasers specifically for
inclusion therein, it being understood and agreed that the only such information furnished by or on
the behalf of the Initial Purchasers consists of the information described as such in SECTION 8
hereof.
(f) Disclosure Package. The Disclosure Package as of [10:00 am/pm (Eastern time) on
the date hereof] (the “Applicable Time”) did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The preceding sentence does
not apply to statements in or omissions from the Disclosure Package in reliance upon and in
conformity with written information furnished to the Company by any Initial Purchaser through the
Representative specifically for use therein, it being understood and agreed that the only such
information furnished by or on behalf of any Initial Purchaser consists of the information
described as such in SECTION 8 hereof.
(g) Statements in Offering Memorandum. The statements (i) in each of the Disclosure
Package and the Final Offering Memorandum under the captions “Risk Factors — Restrictions imposed
by independence requirements and conflict of interest rules may limit our ability to provide
services to clients of the attest firms with which we have contractual relationships and the
ability of such attest firms to provide attestation services to our clients”, “Risk Factors —
Governmental regulations and interpretations are subject to changes”, “Description of Certain
Indebtedness — Credit Facility”, “Material U.S. Federal Income Tax Considerations”, “Description
of the Notes”, “Transfer Restrictions” (insofar as it relates to matters of Federal Law only) and
“Description of Capital Stock”, (ii) in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2009 under the headings “Business — Business Strategy — Services —
Financial Services”, “Business — Regulation”, “Risk Factors — Restrictions imposed by
independence requirements and conflict of interest rules may limit our ability to provide services
to clients of the attest firms with which we have contractual relationships and the ability of such
attest firms to provide attestation services to our clients”, “Risk Factors — Governmental
regulations and interpretations are subject to changes”, “Legal Proceedings”, and (iii) in the
Company’s Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2010 under the heading “Legal Proceedings” insofar as such statements summarize
legal matters, agreements, documents or proceedings discussed therein, are accurate and fair
summaries of such legal matters, agreements, documents or proceedings.
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(h) Offering Materials Furnished to Initial Purchasers. The Company has delivered to
the Representative copies of the Preliminary Offering Memorandum, and will deliver to the
Representatives copies of the Final Offering Memorandum, each as amended or supplemented, in such
quantities and at such places as the Representative has reasonably requested for each of the
Initial Purchasers.
(i) Distribution of Offering Material by the Company. The Company has not distributed
and will not distribute, prior to the later of the Closing Date (as defined below) and the
completion of the Initial Purchaser’s resale of the Notes, any offering material constituting
written communications under Rule 405 of the Securities Act in connection with the offering and
sale of the Notes other than the Offering Memorandum and the term sheet included in the Disclosure
Package.
(j) Authorization of the Purchase Agreement. This Agreement has been duly authorized,
executed and delivered by the Company.
(k) Authorization of the Indenture. The Indenture has been duly authorized by the
Company; on the Closing Date, the Indenture will have been duly executed and delivered by the
Company and, assuming due authorization, execution and delivery thereof by the Trustee, will
constitute a legally valid and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent transfer and conveyance, reorganization, moratorium or other similar laws relating to or
affecting the rights and remedies of creditors or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law); and, on the Closing
Date, the Indenture will conform in all material respects to the description thereof contained in
the Preliminary Offering Memorandum and the Final Offering Memorandum.
(l) Authorization of the Notes. The Notes have been duly authorized by the Company;
when the Notes are executed, authenticated and issued in accordance with the terms of the Indenture
and delivered to and paid for by the Initial Purchasers pursuant to this Agreement on the Closing
Date or any Subsequent Closing Date, as the case may be (assuming due authentication of the Notes
by the Trustee), such Notes will constitute legally valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the Company in accordance with
their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
transfer and conveyance, reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law); and, on the Closing Date, the
Notes will conform in all material respects to the description thereof contained in the Preliminary
Offering Memorandum and the Final Offering Memorandum.
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(m) Authorization of the Conversion Shares. The Conversion Shares have been duly
authorized and reserved and, when issued upon conversion of the Notes in accordance with the terms
of the Notes, will be validly issued, fully paid and non-assessable, and the issuance of any such
shares will not be subject to any preemptive or similar rights.
(n) No Material Adverse Change. Except as otherwise disclosed in the Disclosure
Package and the Final Offering Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), subsequent to the respective dates as of which
information is given in the Disclosure Package and the Final Offering Memorandum: (i) there has
been no material adverse change, or any development that could reasonably be expected to result in
a material adverse change, in the condition, financial or otherwise, or in the earnings, business,
properties, operations or prospects, whether or not arising from transactions in the ordinary
course of business, of the Company and its subsidiaries, considered as one entity (a “Material
Adverse Change”); (ii) the Company and its subsidiaries, considered as one entity, have not
incurred any material liability or obligation, indirect, direct or contingent, nor entered into any
material transaction or agreement; and (iii) there has been no dividend or distribution of any kind
declared, paid or made by the Company or, except for dividends paid to the Company or other
subsidiaries, any of its subsidiaries on any class of capital stock or repurchase or redemption by
the Company or any of its subsidiaries of any class of capital stock.
(o) Independent Accountants. KPMG LLP, which has expressed its opinion with respect
to the financial statements (which term as used in this Agreement includes the related notes
thereto) and supporting schedules included in the Disclosure Package and the Final Offering
Memorandum, are independent registered public accountants with respect to the Company as required
by the Securities Act and the Exchange Act and the applicable rules and regulations thereunder.
(p) Preparation of the Financial Statements. The historical financial statements
included in the Disclosure Package and the Final Offering Memorandum present fairly in all material
respects the consolidated financial position of the Company and its consolidated subsidiaries as of
and at the dates indicated and the results of their operations and cash flows for the periods
specified. Such financial statements comply as to form with the applicable accounting requirements
of Regulation S-X and have been prepared in conformity with generally accepted accounting
principles as applied in the United States applied on a consistent basis throughout the periods
involved, except as may be expressly stated in the related notes thereto. No other financial
statements would be required to be included in the Preliminary Offering Memorandum and the Final
Offering Memorandum if they were a Registration Statement on Form S-3. The financial data set
forth in the Preliminary Offering Memorandum and the Final Offering Memorandum under the captions “
— Summary of Historical Consolidated Financial Information” and “Capitalization” fairly present in
all material respects the information set forth therein on a basis consistent with that of the
audited financial statements contained in the Preliminary Offering Memorandum and the Final
Offering Memorandum.
5
(q) Incorporation and Good Standing of the Company and its Subsidiaries. Each of the
Company and its subsidiaries has been duly incorporated or formed and is validly existing as a
corporation or limited liability company in good standing under the laws of the jurisdiction of its
incorporation or formation and has corporate or limited liability company power and authority
to own or lease, as the case may be, and operate its properties and to conduct its business as
described in the Disclosure Package and the Final Offering Memorandum and, in the case of the
Company, to enter into and perform its obligations under this Agreement. Each of the Company and
its subsidiaries is duly qualified as a foreign corporation or limited liability company, as
applicable, to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of property or the conduct
of business, except for such jurisdictions where the failure to so qualify or to be in good
standing would not, individually or in the aggregate, result in a material adverse effect on the
condition, financial or otherwise, or on the earnings, business, properties or operations, whether
or not arising from transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (a “Material Adverse Effect”). All of the issued
limited liability company interests or shares of capital stock, as applicable, of each subsidiary
have been duly authorized and validly issued in accordance with the organizational documents of
such subsidiary, and are fully paid (to the extent required under such subsidiary’s organizational
documents) and non-assessable, except as such non-assessability may be affected by Section 18-607
of the Delaware Limited Liability Company Act (the “Delaware LLC Act”) or Section 101.206
of the Texas Business Organizations Code; all shares of capital stock or limited liability company
interests (except for directors’ qualifying shares or interests) of the subsidiaries are owned
directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or
claims other than as described in the Preliminary Offering Memorandum. The subsidiaries listed in
Exhibit 21 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009
are the only “subsidiaries” (within the meaning of Rule 405 under the Securities Act) of the
Company (excluding those subsidiaries that may be omitted from such list pursuant to Form 10-K and
subsidiaries that may have been acquired since the date of Exhibit 21).
(r) Capitalization and Other Capital Stock Matters. The authorized, issued and
outstanding capital stock of the Company is as set forth in each of the Disclosure Package and the
Final Offering Memorandum under the caption “Capitalization” (other than for subsequent issuances,
if any, pursuant to employee benefit plans described in the Disclosure Package and the Final
Offering Memorandum or upon exercise of outstanding options or warrants or conversion of
outstanding convertible notes, as described in the Disclosure Package and the Final Offering
Memorandum, as the case may be). The Common Stock (including the Conversion Shares) conforms in
all material respects to the description thereof contained in the Disclosure Package and the Final
Offering Memorandum. All of the issued and outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable and have been issued in compliance
with federal and state securities laws. None of the outstanding shares of Common Stock were issued
in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe
for or purchase securities of the Company. There are no authorized or outstanding options,
warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable or exercisable for, any capital stock of the Company or
any of its subsidiaries other than those described in the Disclosure Package and the Final Offering
Memorandum. The description of the Company’s stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth in the Disclosure
Package and the Final Offering Memorandum accurately and fairly presents and summarizes in all
material respects such plans, arrangements, options and rights.
6
(s) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals
Required. Neither the Company nor any of its subsidiaries (i) is in violation of its charter
or by-laws, (ii) is (or, with the giving of notice or lapse of time, would be) in default
(“Default”) under any indenture, mortgage, loan or credit agreement, note, contract,
franchise, lease or other instrument to which the Company or any of its subsidiaries is a party or
by which it or any of them may be bound, or to which any of the property or assets of the Company
or any of its subsidiaries is subject (each, an “Existing Instrument”), or (iii) is in
violation of any statute, law, rule, regulation, judgment, order or decree of any court, regulatory
body, administrative agency, governmental body, arbitrator or other authority having jurisdiction
over the Company or such subsidiary or any of its properties, as applicable, except with respect to
clauses (ii) and (iii), for such Defaults as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
The Company’s execution, delivery and performance of the Operative Documents and consummation
of the transactions contemplated thereby, by the Disclosure Package and by the Final Offering
Memorandum (i) have been duly authorized by all necessary corporate action and will not result in
any violation of the charter or by-laws of the Company or any subsidiary, (ii) will not conflict
with or constitute a breach of, or 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, or require the consent of any other party to, any Existing Instrument and (iii) will
not result in any violation of any statute, law, rule, regulation, judgment, order or decree
applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having jurisdiction over the Company or
any of its subsidiaries or any of its or their properties, except in the case of clauses (ii) and
(iii), as would not reasonably be expected to have a Material Adverse Effect.
No consent, approval, authorization or other order of, or registration or filing with, any
court or other governmental or regulatory authority or agency is required for the Company’s
execution, delivery and performance of the Operative Documents and consummation of the transactions
contemplated thereby, by the Disclosure Package and the Final Offering Memorandum, except for such
consents, approvals, authorizations, orders, filings, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the purchase and distribution
of the Notes by the Initial Purchasers.
(t) No Stamp or Transfer Taxes. There are no stamp or other issuance or transfer
taxes or duties or other similar fees or charges required to be paid in connection with the
execution and delivery of this Agreement or the issuance or sale by the Company of the Notes or
upon the issuance of Common Stock upon the conversion thereof.
(u) No Material Actions or Proceedings. Except as otherwise disclosed in the
Preliminary Offering Memorandum and the Final Offering Memorandum, there are no legal or
governmental actions, suits or proceedings pending or, to the best of the Company’s knowledge,
threatened (i) against or affecting the Company or any of its subsidiaries, (ii) which has as the
subject thereof any officer or director of, or property owned or leased by, the Company or any of
its subsidiaries or (iii) relating to environmental or discrimination matters, where in any such
case (A) there is a reasonable possibility that such action, suit or proceeding might be determined
adversely to the Company or such subsidiary and (B) any such action, suit or proceeding, if so
determined adversely, would reasonably be expected to have a Material Adverse Effect or
adversely affect the consummation of the transactions contemplated by this Agreement.
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(v) Labor Matters. No material labor dispute with the employees of the Company or any
of its subsidiaries exists or to the knowledge of the Company is threatened or imminent.
(w) Intellectual Property Rights. The Company or its subsidiaries own or are licensed
or otherwise have the right to use all of the material patents, trademarks, service marks, trade
names, copyrights, contractual franchises, authorizations and other material rights that are
reasonably necessary for the operation of their respective businesses, without conflict with the
rights of any other person. To the best knowledge of the Company, no slogan or other advertising
device, product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Company or any subsidiary infringes upon any rights held by any
other person, and no claim or litigation regarding any of the foregoing is pending or threatened,
which, in any case, could reasonably be expected to have a Material Adverse Effect.
(x) All Necessary Permits, etc. The Company and each subsidiary possess such valid
and current licenses, certificates, authorizations or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses,
except where the failure to possess such licenses, certificates, authorizations or permits would
not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any
subsidiary has received any notice of proceedings relating to the revocation or modification of, or
non-compliance with, any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be
expected to have a Material Adverse Effect.
(y) Title to Properties. The Company and each of its subsidiaries has good and
defensible title to all the properties and assets reflected as owned in the financial statements
included in the Disclosure Package and the Final Offering Memorandum, in each case free and clear
of any security interests, mortgages, liens, encumbrances, equities, claims and other defects,
except such as may be described in the Offering Memorandum or such as do not, in the aggregate,
materially and adversely affect the value of such property and do not, in the aggregate, materially
interfere with the use made or proposed to be made of such property by the Company or such
subsidiary. The real property, improvements, equipment and personal property held under lease by
the Company or any subsidiary are held under valid and enforceable leases, with such exceptions as
may be described in the Offering Memorandum or are not material and do not, in the aggregate,
materially interfere with the use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company or such subsidiary.
(z) Tax Law Compliance. The Company and its subsidiaries have filed all necessary
federal, state, local and foreign income and franchise tax returns in a timely manner or have
properly requested extensions thereof and have paid all taxes required to be paid by any of them
and, if due and payable, any related or similar assessment, fine or penalty levied against any of
them, except for any taxes, assessments, fines or penalties as may be being contested in good faith
and by appropriate proceedings or which, if not paid, would not reasonably be expected to have a
Material Adverse Effect.
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(aa) Company Not an “Investment Company”. The Company has been advised of the rules
and requirements under the Investment Company Act of 1940, as amended (the “Investment Company
Act”). The Company is not, and, after receipt of payment for the Notes and application of the
proceeds as described under “Use of Proceeds” in the Disclosure Package and the Final Offering
Memorandum will not be, required to register as an “investment company” within the meaning of the
Investment Company Act and will conduct its business in a manner so that it will not become subject
to the Investment Company Act.
(bb) Compliance with Reporting Requirements. The Company is subject to and in full
compliance in all material respects with the reporting requirements of Section 13 or Section 15(d)
of the Exchange Act.
(cc) Insurance. The properties of the Company and its subsidiaries are insured with
financially sound and reputable insurance companies not affiliates of the Company, in such amounts,
with such deductibles and covering such risks as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where the Company or such
subsidiary operates, except to the extent the Company maintains reasonable self-insurance with
respect to such risks (through an affiliate or otherwise).
(dd) No Restriction on Distributions. No subsidiary of the Company is currently
prohibited under any agreement or instrument, directly or indirectly, from paying any dividends to
the Company, from making any other distribution on such subsidiary’s capital stock, from repaying
to the Company any loans or advances to such subsidiary from the Company or from transferring any
of such subsidiary’s property or assets to the Company or any other subsidiary of the Company,
except as described in or contemplated by the Disclosure Package and the Final Offering Memorandum.
(ee) No Price Stabilization or Manipulation. The Company has not taken and will not
take, directly or indirectly, any action designed to or that might be reasonably expected to cause
or result in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Notes.
(ff) Related Party Transactions. There are no material business relationships or
related party transactions involving the Company or any subsidiary or any other person that have
not been described in the Disclosure Package or the Final Offering Memorandum.
(gg) No General Solicitation. None of the Company or any of its affiliates (as
defined in Rule 501(b) of Regulation D under the Securities Act (“Regulation D”)), has, directly or
through an agent (other than you, as to whom the Company makes no representation), engaged in any
form of general solicitation or general advertising in connection with the offering of the Notes or
the Conversion Shares (as those terms are used in Regulation D) under the Securities Act or in any
manner involving a public offering within the meaning of Section 4(2) of the Securities Act; the
Company has not entered into any contractual arrangement with respect to the distribution of the
Notes or the Conversion Shares except for this Agreement and the agreements contemplated hereby,
and the Company will not enter into any such arrangement.
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(hh) Disclosure Controls and Procedures. The Company has established and maintains
disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-14 under the
Exchange Act); such disclosure controls and procedures are designed to ensure that material
information relating to the Company and its subsidiaries is made known to the chief executive
officer and chief financial officer of the Company by others within the Company or any of its
subsidiaries, and such disclosure controls and procedures are reasonably effective to perform the
functions for which they were established subject to the limitations of any such control system;
the Company’s auditors and the Audit Committee of the Board of Directors of the Company have been
advised of: (i) any significant deficiencies or material weaknesses in the design or operation of
internal controls which could adversely affect the Company’s ability to record, process, summarize,
and report financial data; and (ii) any fraud, whether or not material, that involves management or
other employees who have a role in the Company’s internal controls; and since the date of the most
recent evaluation of such disclosure controls and procedures, there have been no significant
changes in internal controls or in other factors that could significantly affect internal controls,
including any corrective actions with regard to significant deficiencies and material weaknesses.
(ii) No Unlawful Contributions or Other Payments. Neither the Company nor any of its
subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of its subsidiaries is aware of or has taken any action, directly
or indirectly, that would result in a violation by such persons of the FCPA (as defined below),
including, without limitation, making use of the mails or any means or instrumentality of
interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization
of the payment of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any
foreign political party or official thereof or any candidate for foreign political office, in
contravention of the FCPA and the Company, its subsidiaries and, to the knowledge of the Company,
its affiliates have conducted their businesses in compliance with the FCPA and have instituted and
maintain policies and procedures designed to ensure, and which are reasonably expected to continue
to ensure, continued compliance therewith. “FCPA” means Foreign Corrupt Practices Act of 1977, as
amended, and the rules and regulations thereunder.
(jj) No Conflict with Money Laundering Laws. The operations of the Company and its
subsidiaries are and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and
regulations thereunder and any related or similar rules, regulations or guidelines issued,
administered or enforced by any governmental agency (collectively, the “Money Laundering
Laws”) and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its subsidiaries with respect
to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
(kk) No Conflict with OFAC Laws. Neither the Company nor any of its subsidiaries nor,
to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company
or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not
directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise
make available such proceeds to any subsidiary, joint venture partner or other person or
entity, for the purpose of financing the activities of any person currently subject to any U.S.
sanctions administered by OFAC.
10
(ll) Compliance with Environmental Laws. Except as otherwise disclosed in the
Preliminary Offering Memorandum and the Final Offering Memorandum, (i) the on-going operations of
the Company and each of its subsidiaries comply in all material respects with all federal, state or
local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with
all administrative orders, directed duties, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authorities, in each case relating to environmental, health,
safety and land use matters (collectively, “Environmental Laws”), except such
non-compliance which would not (if enforced in accordance with applicable law) result in liability
in excess of $500,000 in the aggregate; (ii) the Company and each of its subsidiaries have obtained
all material licenses, permits, authorizations and registrations required under any Environmental
Law (“Environmental Permits”) and necessary for their respective ordinary course
operations, all such Environmental Permits are in good standing, and the Company and each of its
subsidiaries are in compliance with all material terms and conditions of such Environmental
Permits; (iii) none of the Company, any of its subsidiaries or any of their respective present
property or operations, is subject to any outstanding written order from or agreement with any
Governmental Authority, nor subject to any judicial or docketed administrative proceeding,
respecting any Environmental Law, Environmental Claim or Hazardous Material; and (iv) there are no
Hazardous Materials or other conditions or circumstances existing with respect to any property, or
arising from operations prior to the Closing Date, of the Company or any of its subsidiaries that
would reasonably be expected to give rise to Environmental Claims with a potential liability of the
Company and its subsidiaries in excess of $500,000 in the aggregate for any such condition,
circumstance or property. In addition, (i) neither the Company nor any of its subsidiaries has any
underground storage tanks (x) that are not properly registered or permitted under applicable
Environmental Laws, or (y) that are leaking or disposing of Hazardous Materials off-site, and (ii)
the Company and its subsidiaries have met all material notification requirements under Title III of
CERCLA and all other Environmental Laws. As used herein, “Governmental Authority” means any nation
or government, any state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government (including, without
limitation, any board of insurance, insurance department or insurance commissioner and any taxing
authority or political subdivision), and any corporation or other entity owned or controlled,
through stock or capital ownership or otherwise, by any of the foregoing; “Environmental
Claims” means all claims, however asserted, by any Governmental Authority or other person
alleging potential liability or responsibility for violation of any Environmental Law, or for
release or injury to the environment and “Hazardous Materials” means any toxic or hazardous
waste, substance or chemical or any pollutant, contaminant, chemical or other substance defined or
regulated pursuant to any Environmental Law, including, without limitation, asbestos, petroleum,
crude oil or any fraction thereof.
11
(mm) ERISA Compliance. None of the following events has occurred or exists: (i) a
failure to fulfill the obligations, if any, under the minimum funding standards of Section 302 of
the United States Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
and the regulations and published interpretations thereunder with respect to a Plan,
determined without regard to any waiver of such obligations or extension of any amortization
period; (ii) an audit or investigation by the Internal Revenue Service, the U.S. Department of
Labor, the Pension Benefit Guaranty Corporation or any other federal or state governmental agency
or any foreign regulatory agency with respect to the employment or compensation of employees by any
member of the Company that could have a Material Adverse Effect; (iii) any breach of any
contractual obligation, or any violation of law or applicable qualification standards, with respect
to the employment or compensation of employees by any member of the Company that could have a
Material Adverse Effect. None of the following events has occurred or is reasonably likely to
occur: (i) a material increase in the aggregate amount of contributions required to be made to all
Plans in the current fiscal year of the Company compared to the amount of such contributions made
in the Company’s most recently completed fiscal year; (ii) a material increase in the Company’s
“accumulated post-retirement benefit obligations” (within the meaning of Statement of Financial
Accounting Standards 106) compared to the amount of such obligations in the Company’s most recently
completed fiscal year; (iii) any event or condition giving rise to a liability under Title IV of
ERISA that could have a Material Adverse Effect; or (iv) the filing of a claim by one or more
employees or former employees of the Company related to their employment that could have a Material
Adverse Effect on the Company. For purposes of this paragraph, the term “Plan” means a plan
(within the meaning of Section 3(3) of ERISA) subject to Title IV of ERISA with respect to which
any member of the Company may have any liability.
(nn) Brokers. There is no broker, finder or other party (other than you) that is
entitled to receive from the Company any brokerage or finder’s fee or other fee or commission as a
result of any transactions contemplated by this Agreement.
(oo) ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Compliance. The Company and, to the Company’s knowledge, each of
the Company’s directors or officers, in their capacities as such, are in compliance in all material
respects with the applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the rules and
regulations promulgated in connection therewith (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act”).
(pp) Internal Controls and Procedures. The Company maintains a system of accounting
controls that is in compliance with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles, and
is sufficient to provide reasonable assurances that: (i) transactions are executed in accordance
with management’s general or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(qq) No Material Weakness in Internal Controls. Except as disclosed in the
Preliminary Offering Memorandum and the Final Offering Memorandum, since the end of the Company’s
most recent audited fiscal year, there has been (i) no material weakness in the Company’s internal
control over financial reporting (whether or not remediated) and (ii) no
change in the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal control over
financial reporting.
12
(rr) Lending Relationship. Except as disclosed in the Disclosure Package and the
Final Offering Memorandum, the Company does not have any material lending or other relationship
with any bank or lending affiliate of any Initial Purchaser.
Any certificate signed by an officer of the Company and delivered to the Representative or to
counsel for the Initial Purchasers shall be deemed to be a representation and warranty by the
Company to each Initial Purchaser as to the matters set forth therein.
| SECTION 2. | PURCHASE, SALE AND DELIVERY OF THE NOTES |
(a) The Firm Notes. The Company agrees to issue and sell to the several Initial
Purchasers the Firm Notes upon the terms herein set forth. On the basis of the representations,
warranties and agreements herein contained, and upon the terms but subject to the conditions herein
set forth, the Initial Purchasers agree, severally and not jointly, to purchase from the Company
the respective aggregate principal amount of Firm Notes set forth opposite their names on Schedule
A at a purchase price of 97.25% of the aggregate principal amount thereof.
(b) The Closing Date. Delivery of the Firm Notes to be purchased by the Initial
Purchasers and payment therefor shall be made at the offices of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or such other place as may be agreed to by the Company
and the Representatives) at 9:00 a.m. New York City time, on September 27, 2010, or such other time
and date not later than October 11, 2010 as the Representative shall designate by notice to the
Company (the time and date of such closing are called the “Closing Date”).
(c) The Optional Notes; any Subsequent Closing Date. In addition, on the basis of the
representations, warranties and agreements herein contained, and upon the terms but subject to the
conditions herein set forth, the Company hereby grants an option to the several Initial Purchasers
to purchase, severally and not jointly, up to $15,000,000 aggregate principal amount of Optional
Notes from the Company at the same price as the purchase price to be paid by the Initial Purchasers
for the Firm Notes. The option granted hereunder may be exercised at any time and from time to
time upon notice by the Representative to the Company, which notice may be given at any time within
30 days from the date of this Agreement. Such notice shall set forth (i) the amount (which shall
be an integral multiple of $1,000 in aggregate principal amount) of Optional Notes as to which the
Initial Purchasers are exercising the option, (ii) the names and denominations in which the
Optional Notes are to be registered and (iii) the time, date and place at which such Notes will be
delivered (which time and date may be simultaneous with, but not earlier than, the Closing Date;
and in such case the term “Closing Date” shall refer to the time and date of delivery of
the Firm Notes and the Optional Notes). Such time and date of delivery, if subsequent to the
Closing Date, is called a “Subsequent Closing Date” and shall be determined by the
Representative. A Subsequent Closing Date shall be within the 30-day period beginning on the
Closing Date. If any Optional Notes are to be purchased, each Initial Purchaser agrees, severally
and not jointly, to purchase the principal amount of Optional Notes (subject to such adjustments to
eliminate fractional amount as the Representative may determine) that bears the same proportion to
the total principal amount of Optional Notes to be purchased as the principal
amount of Firm Notes set forth on Schedule A opposite the name of such Initial Purchaser bears
to the total principal amount of Firm Notes.
13
(d) Payment for the Notes. Payment for the Notes shall be made at the Closing Date
(and, if applicable, at any Subsequent Closing Date) by wire transfer of immediately available
funds to the order of the Company.
It is understood that the Representative has been authorized, for its own account and the
accounts of the several Initial Purchasers, to accept delivery of and receipt for, and make payment
of the purchase price for, the Firm Notes and any Optional Notes the Initial Purchasers have agreed
to purchase. ▇▇▇▇▇▇▇ ▇▇▇▇▇, individually and not as the Representative of the Initial Purchasers,
may (but shall not be obligated to) make payment for any Notes to be purchased by any Initial
Purchaser whose funds shall not have been received by the Representative by the Closing Date or any
Subsequent Closing Date, as the case may be, for the account of such Initial Purchaser, but any
such payment shall not relieve such Initial Purchaser from any of its obligations under this
Agreement.
(e) Delivery of the Notes. The Company shall deliver, or cause to be delivered, to
the Representative for the accounts of the several Initial Purchasers the Firm Notes at the Closing
Date, against the irrevocable release of a wire transfer of immediately available funds for the
amount of the purchase price therefor. The Company shall also deliver, or cause to be delivered,
to the Representative for the accounts of the several Initial Purchasers, the Optional Notes the
Initial Purchasers have agreed to purchase at the Closing Date or any Subsequent Closing Date, as
the case may be, against the irrevocable release of a wire transfer of immediately available funds
for the amount of the purchase price therefor. Delivery of the Notes shall be made through the
facilities of The Depository Trust Company unless the Representative shall otherwise instruct.
Time shall be of the essence, and delivery at the time and place specified in this Agreement is a
further condition to the obligations of the Initial Purchasers.
| SECTION 3. | COVENANTS OF THE COMPANY |
The Company covenants and agrees with each Initial Purchaser as follows:
(a) Representative’s Review of Proposed Amendments and Supplements. During such
period beginning on the date hereof and ending on the date of the completion of the resale of the
Notes by the Initial Purchasers (as notified by the Initial Purchasers to the Company), prior to
amending or supplementing the Disclosure Package or the Final Offering Memorandum, the Company
shall furnish to the Representative for review a copy of each such proposed amendment or
supplement, and the Company shall not print, use or distribute such proposed amendment or
supplement to which the Representative reasonably objects.
14
(b) Amendments and Supplements to the Disclosure Package, the Offering Memorandum and
Other Securities Act Matters. If, at any time prior to the completion of the resale of the
Notes by the Initial Purchasers (as notified by the Initial Purchasers to the Company), any event
or development shall occur or condition exist as a result of which it is necessary to amend or
supplement the Disclosure Package or the Final Offering Memorandum in order that the Disclosure
Package or the Final Offering Memorandum will not include an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made or then
prevailing, as the case may be, not misleading, or if in the opinion of the Representative or
counsel for the Initial Purchasers it is otherwise necessary to amend or supplement the Disclosure
Package or the Final Offering Memorandum to comply with law, the Company shall promptly notify the
Initial Purchasers and prepare, subject to SECTION 3(a) hereof, and furnish at its own expense to
the Initial Purchasers and to dealers, amendments or supplements to the Disclosure Package or the
Final Offering Memorandum so that the statements in the Disclosure Package or the Final Offering
Memorandum as so amended or supplemented will not, in the light of the circumstances then
prevailing or under which they were made, as the case may be, be misleading or so that the
Disclosure Package or the Final Offering Memorandum, as amended or supplemented, will comply with
law.
(c) Copies of Offering Memorandum. The Company agrees to furnish to the
Representative, without charge, until the earlier of nine months after the date hereof or the
completion of the resale of the Notes by the Initial Purchasers (as notified by the Initial
Purchasers to the Company) as many copies of the Disclosure Package and the Final Offering
Memorandum and any amendments and supplements thereto as the Representative may reasonably request.
(d) Blue Sky Compliance. The Company shall cooperate with the Representative and
counsel for the Initial Purchasers, as the Initial Purchasers may reasonably request from time to
time, to qualify or register the Notes for sale under (or obtain exemptions from the application
of) the state securities or blue sky laws or Canadian provincial Securities laws of those
jurisdictions designated by the Representative, shall comply with such laws and shall continue such
qualifications, registrations and exemptions in effect so long as required for the distribution of
the Notes. The Company shall not be required to qualify as a foreign corporation or to take any
action that would subject it to general service of process in any such jurisdiction where it is not
presently qualified or where it would be subject to taxation as a foreign corporation. The Company
will advise the Representative promptly of the suspension of the qualification or registration of
(or any such exemption relating to) the Notes for offering, sale or trading in any jurisdiction or
any initiation or threat of any proceeding for any such purpose, and in the event of the issuance
of any order suspending such qualification, registration or exemption, the Company shall use its
best efforts to obtain the withdrawal thereof at the earliest possible moment.
(e) Rule 144A Information. For so long as any of the Notes are “restricted
securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Company shall
provide to any holder of the Notes or to any prospective purchaser of the Notes designated by any
holder, upon request of such holder or prospective purchaser, information required to be provided
by Rule 144A(d)(4) of the Securities Act if, at the time of such request, the Company is not
subject to the reporting requirements under Section 13 or 15(d) of the Exchange Act.
(f) Legends. Each of the Notes will bear, to the extent applicable, the legend
contained in “Notice to Investors” in the Preliminary Offering Memorandum and the Final Offering
Memorandum for the time period and upon the other terms stated therein.
15
(g) Written Information Concerning the Offering. Without the prior written consent of
the Representative, the Company will not give to any prospective purchaser of the Notes or any
other person not in its employ (and other than its professional advisors) any written information
concerning the offering of the Notes other than the Disclosure Package, the Final Offering
Memorandum or any other offering materials prepared by or with the prior consent of the
Representative.
(h) No General Solicitation. The Company will not, and will cause its subsidiaries
not to, solicit any offer to buy or offer to sell the Notes by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D under the Securities
Act) or in any manner involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(i) No Integration. The Company will not, and will cause its subsidiaries not to,
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any “security”
(as defined in the Securities Act) in a transaction that could be integrated with the sale of the
Notes in a manner that would require the registration under the Securities Act of the Notes.
(j) DTC. The Company will cooperate with the Representative and use its best efforts
to permit the Notes to be eligible for clearance and settlement through The Depository Trust
Company.
(k) Rule 144 Tolling. During the period of one year after the last Closing Date, the
Company will not, and will not permit any of its “affiliates” (as defined in Rule 144 under the
Securities Act) to, resell any of the Notes which constitute “restricted securities” under Rule 144
that have been reacquired by any of them.
(l) Use of Proceeds. The Company shall apply the net proceeds from the sale of the
Notes sold by it in the manner described under the caption “Use of Proceeds” in the Disclosure
Package and the Final Offering Memorandum.
(m) Available Conversion Shares. The Company will reserve and keep available at all
times, free of pre-emptive rights, the full number of Conversion Shares.
(n) Adjustment of Conversion Price. Between the date hereof and the Closing Date, the
Company will not do or authorize any act or thing that would result in an adjustment of the
conversion price of the Notes.
(o) Agreement Not to Offer or Sell Additional Notes. During the period commencing on
the date hereof and ending on the 90th day following the date of the Final Offering Memorandum, the
Company will not, without the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇ (which consent may be withheld
at the sole discretion of ▇▇▇▇▇▇▇ ▇▇▇▇▇), directly or indirectly, sell, offer, contract or grant
any option to sell, pledge, transfer or establish an open “put equivalent position” or liquidate or
decrease a “call equivalent position” within the meaning of Rule 16a-1(h) under the Exchange Act,
or otherwise dispose of or transfer (or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition of), or announce the offering of, or file any
registration statement under the Securities Act in respect of, any shares of Common Stock, options
or
16
warrants to acquire shares of the Common Stock or securities exchangeable or exercisable for or convertible into shares of Common Stock (other
than as contemplated by this Agreement with respect to the Notes, including any Conversion Shares);
provided, however, that the Company may (i) grant restricted stock and issue shares of its Common
Stock or options to purchase its Common Stock, or Common Stock upon exercise of options, or Common
Stock upon conversion of convertible notes, pursuant to any stock option, stock bonus or other
stock plan, warrant, note or arrangement outstanding or in effect on the date hereof and described
in the Preliminary Offering Memorandum and the Final Offering Memorandum, and (ii) issue shares of
its Common Stock in connection with any prior or future acquisition of businesses by the Company,
including in connection with related earn-out obligations, provided that (x) the aggregate value of
such stock, measured on the date of issuance, does not exceed $30,000,000 and (y) that any such
stock issued in connection with acquisitions consummated after the date hereof may not be
transferred, sold or otherwise disposed of prior to the date 90 days after the date hereof.
(p) Future Reports to the Representative. At any time when the Company is not subject
to the reporting requirements of Section 13 or 15 of the Exchange Act and any Notes remain
outstanding, the Company will furnish to the Representative and, upon request, to each of the other
Initial Purchasers: (i) as soon as practicable after the end of each fiscal year, copies of the
Annual Report of the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders’ equity and cash flows for the year then ended
and the opinion thereon of the Company’s independent public or certified public accountants; (ii)
as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on
Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the Financial Industry Regulatory Authority, Inc. (“FINRA”) or
any securities exchange; and (iii) as soon as available, copies of any report or communication of
the Company mailed generally to holders of its capital stock or debt securities (including the
holders of the Notes); provided that, if the Company is not subject to the reporting requirements
of Section 13 or 15 of the Exchange Act and the Company elects to voluntarily file such documents
with the Commission, the requirements of this SECTION 3(p) shall not apply if such documents are
filed with the Commission within the time periods specified by the Commission’s rules and
regulations under Section 13 or 15 of the Exchange Act.
(q) Investment Limitation. The Company shall not invest or otherwise use the proceeds
received by the Company from its sale of the Notes in such a manner as would require the Company or
any of its subsidiaries to register as an investment company under the Investment Company Act.
(r) No Manipulation of Price. The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or might reasonably be expected to
constitute, under the Exchange Act or otherwise, the stabilization or manipulation of the price of
any securities of the Company to facilitate the sale or resale of the Notes.
(s) New Lock-Up Agreements. The Company will enforce all agreements between the
Company and any of its security holders to be entered into pursuant to this agreement that prohibit
the sale, transfer, assignment, pledge or hypothecation of any of the Company’s securities. In
addition, the Company will direct the transfer agent to place stop transfer
restrictions upon any such securities of the Company that are bound by such “lock-up”
agreements for the duration of the periods contemplated in such agreements.
17
| SECTION 4. | PAYMENT OF EXPENSES |
The Company agrees to pay all costs, fees and expenses incurred in connection with the
performance of its obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the issuance and delivery of the
Notes (including all printing and engraving costs), (ii) all fees and expenses of the Trustee under
the Indenture, (iii) all necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Notes to the Initial Purchasers, (iv) all fees and expenses of the
Company’s counsel, independent public or certified public accountants and other advisors, (v) all
costs and expenses incurred in connection with the preparation, printing, shipping and distribution
of the Preliminary Offering Memorandum and the Final Offering Memorandum, all amendments and
supplements thereto, the Disclosure Package and this Agreement, (vi) all filing fees, attorneys’
fees and expenses incurred by the Company or the Initial Purchasers in connection with qualifying
or registering (or obtaining exemptions from the qualification or registration of) all or any part
of the Notes for offer and sale under the state securities or blue sky laws or the provincial
securities laws of Canada, and, if requested by the Representative, preparing and printing a “Blue
Sky Survey” or memorandum, and any supplements thereto, advising the Initial Purchasers of such
qualifications, registrations and exemptions, (vii) the expenses of the Company and the Initial
Purchasers in connection with the marketing and offering of the Notes, including all transportation
and other expenses incurred in connection with presentations to prospective purchasers of the
Notes, except that the Company and the Initial Purchasers will each pay 50% of the cost of
privately chartered airplanes used for such purposes, (viii) the fees and expenses associated with
approving the Conversion Shares for quotation on the New York Stock Exchange and (ix) all expenses
and fees in connection with admitting the Notes for trading in the PORTAL Market. Except as
provided in this SECTION 4, SECTION 7, SECTION 10 and SECTION 11 hereof, the Initial Purchasers
shall pay their own expenses, including the fees and disbursements of their counsel.
| SECTION 5. | CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASERS |
The obligations of the several Initial Purchasers to purchase and pay for the Notes as
provided herein on the Closing Date and, with respect to the Optional Notes, any Subsequent Closing
Date, shall be subject to the accuracy of the representations, warranties and agreements on the
part of the Company set forth in SECTION 1 hereof as of the date hereof and as of the Closing Date
as though then made and, with respect to the Optional Notes, as of the related Subsequent Closing
Date as though then made, to the accuracy of the statements of the Company made in any certificates
pursuant to the provisions hereof, to the timely performance by the Company of its covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Accountants’ Comfort Letter. On the date hereof, the Representative shall have
received from KPMG LLP, independent registered public accounting firm for the Company, a letter
dated the date hereof addressed to the Initial Purchasers, in form and substance satisfactory
to the Representative, containing statements and information of the type ordinarily included
in accountant’s “comfort letters” to initial purchasers with respect to the audited and unaudited
financial statements and certain financial information contained in the Preliminary Offering
Memorandum and the Final Offering Memorandum.
18
(b) No Material Adverse Change or Rating Agency Change. For the period from and after
the date of this Agreement and prior to the Closing Date and, with respect to the Optional Notes,
any Subsequent Closing Date:
(i) in the judgment of the Representative there shall not have occurred any Material
Adverse Change;
(ii) there shall not have been any change or decrease specified in the letter or
letters referred to in paragraph (a) of this SECTION 5 which is, in the sole judgment of the
Representative, so material and adverse as to make it impractical or inadvisable to proceed
with the offering or delivery of the Notes as contemplated by the Disclosure Package and the
Final Offering Memorandum; and
(iii) there shall not have occurred any downgrading, nor shall any notice have been
given of any intended or potential downgrading or of any review for a possible change that
does not indicate the direction of the possible change, in the rating accorded any
securities of the Company or any of its subsidiaries by any “nationally recognized
statistical rating organization” as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act.
(c) Opinion 10b-5 Statement of Counsel for the Company. On each of the Closing Date
and any Subsequent Closing Date, the Representative shall have received the favorable opinion and
10b-5 statement of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP, counsel for the Company, and the favorable
opinion of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, General Counsel of the Company, in each case dated as of such
Closing Date, the forms of which are attached as Exhibit A-1, A-2 and Exhibit A-3, respectively.
(d) Opinion of Counsel for the Initial Purchasers. On each of the Closing Date and
any Subsequent Closing Date, the Representative shall have received the favorable opinion of ▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the Initial Purchasers, dated as of such Closing Date, in form and
substance satisfactory to, and addressed to, the Representative, with respect to the issuance and
sale of the Notes, the Preliminary Offering Memorandum, the Final Offering Memorandum and other
related matters as the Representative may reasonably require, and the Company shall have furnished
to such counsel such documents as they request for the purpose of enabling them to pass upon such
matters.
19
(e) Officers’ Certificate. On each of the Closing Date and any Subsequent Closing
Date, the Representative shall have received a written certificate executed by the Chairman of the
Board, Chief Executive Officer or President of the Company and the Chief Financial Officer or Chief
Accounting Officer of the Company, dated as of such Closing Date, to the effect that the signers of
such certificate have carefully examined the Preliminary Offering Memorandum, the Disclosure
Package, the Final Offering Memorandum, any amendments or supplements thereto,
and this Agreement, to the effect set forth in subsection (b)(iii) of this SECTION 5, and
further to the effect that:
(i) for the period from and after the date of this Agreement and prior to such Closing
Date or such Subsequent Closing Date, as the case may be, there has not occurred any
Material Adverse Change;
(ii) the representations, warranties and covenants of the Company set forth in SECTION
1 of this Agreement are true and correct on and as of the Closing Date or the Subsequent
Closing Date, as the case may be, with the same force and effect as though expressly made on
and as of such Closing Date or such Subsequent Closing Date, as the case may be; and
(iii) the Company has complied with all the agreements hereunder and satisfied all the
conditions on its part to be performed or satisfied hereunder at or prior to such Closing
Date or such Subsequent Closing Date, as the case may be.
(f) Bring-down Comfort Letter. On each of the Closing Date and any Subsequent Closing
Date, the Representative shall have received from KPMG LLP, independent registered public
accounting firm for the Company, a letter dated such date, in form and substance satisfactory to
the Representative, to the effect that they reaffirm the statements made in the letter furnished by
them pursuant to subsection (a) of this SECTION 5, except that the specified date referred to
therein for the carrying out of procedures shall be no more than three business days prior to the
Closing Date or Subsequent Closing Date, as the case may be.
(g) Lock-Up Agreement from Certain Securityholders of the Company. On or prior to the
date hereof, the Company shall have furnished to the Representative an agreement in the form of
Exhibit B hereto from each of the Company’s directors and executive officers, and such agreement
shall be in full force and effect on each of the Closing Date and any Subsequent Closing Date.
(h) Listing of Conversion Shares. The Company shall have taken all action necessary
to cause the Conversion Shares to be approved for listing on the New York Stock Exchange, subject
to official notice of issuance.
(i) Additional Documents. On or before each of the Closing Date and any Subsequent
Closing Date, the Representative and counsel for the Initial Purchasers shall have received such
information, documents and opinions as they may reasonably require for the purposes of enabling
them to pass upon the issuance and sale of the Notes as contemplated herein, or in order to
evidence the accuracy of any of the representations and warranties, or the satisfaction of any of
the conditions or agreements, herein contained.
If any condition specified in this SECTION 5 (other than the condition specified in SECTION
5(d)) is not satisfied when and as required to be satisfied, this Agreement may be terminated by
the Representative by notice to the Company at any time on or prior to the Closing Date and, with
respect to the Optional Notes, at any time prior to the applicable Subsequent Closing Date, which
termination shall be without liability on the part of any party to any other
party, except that SECTION 4, SECTION 7, SECTION 8, SECTION 9, and SECTION 12 shall at all
times be effective and shall survive such termination.
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| SECTION 6. | REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF INITIAL PURCHASERS |
Each of the Initial Purchasers represents and warrants that it is a “qualified institutional
buyer”, as defined in Rule 144A of the Securities Act. Each Initial Purchaser agrees with the
Company that:
(a) it has not offered or sold, and will not offer or sell, any Notes within the United States
or to, or for the account or benefit of, U.S. persons (x) as part of its distribution at any time
or (y) otherwise until one year after the later of the commencement of the offering and the date of
closing of the offering except to those it reasonably believes to be “qualified institutional
buyers” (as defined in Rule 144A under the Act);
(b) neither it nor any person acting on its behalf has made or will make offers or sales of
the Notes in the United States by means of any form of general solicitation or general advertising
(within the meaning of Regulation D) in the United States;
(c) in connection with each sale pursuant to (a), it has taken or will take reasonable steps
to ensure that the purchaser of such Notes is aware that such sale is being made in reliance on
Rule 144A;
(d) any information provided by the Initial Purchasers to publishers of publicly available
databases about the terms of the Notes shall include a statement that the Notes have not been
registered under the Act and are subject to restrictions under Rule 144A under the Act;
(e) it acknowledges that additional restrictions on the offer and sale of the Notes and the
Conversion Shares are described in the Preliminary Offering Memorandum and the Final Offering
Memorandum.
The Initial Purchasers acknowledge that the Company and, for purposes of the opinions to be
delivered to the Initial Purchasers pursuant to SECTION 5(c) and SECTION 5(d) hereof, counsel for
the Company and counsel for the Initial Purchasers will rely upon the accuracy and truth of the
foregoing representations and hereby consent to such reliance.
| SECTION 7. | REIMBURSEMENT OF INITIAL PURCHASERS’ EXPENSES |
If this Agreement is terminated by the Representative pursuant to SECTION 5, SECTION 10 or
SECTION 11, or if the sale to the Initial Purchasers of the Notes 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 Initial Purchasers (or such Initial Purchasers as have terminated this
Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses that
shall have been reasonably incurred by the Representative and the Initial Purchasers in connection
with the proposed purchase and the offering and sale of the Notes,
including but not limited to reasonable fees and disbursements of counsel, printing expenses,
travel expenses, postage, facsimile and telephone charges.
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| SECTION 8. | INDEMNIFICATION |
(a) Indemnification of the Initial Purchasers. The Company agrees to indemnify and
hold harmless each Initial Purchaser, its affiliates, directors, officers and employees, agents,
and each person, if any, who controls any Initial Purchaser within the meaning of the Securities
Act and the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to
which such Initial Purchaser, affiliate, director, officer, employee, agent or such controlling
person may become subject, 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 statement or
alleged untrue statement of a material fact contained or incorporated by reference in the
Preliminary Offering Memorandum, the Final Offering Memorandum, the Disclosure Package or the
investor presentation attached hereto as Exhibit D (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact, in each case, 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 Initial Purchaser, its affiliates, officers, directors,
employees, agents and each such controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by ▇▇▇▇▇▇▇ ▇▇▇▇▇) as such expenses are reasonably incurred by such
Initial Purchaser, its affiliates, officers, directors, employees, agents 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 Preliminary Offering
Memorandum, the Final Offering Memorandum or the Disclosure Package (or any amendment or supplement
thereto). The indemnity agreement set forth in this SECTION 8(a) shall be in addition to any
liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each Initial
Purchaser agrees, severally and not jointly, to indemnify and hold harmless the Company, each of
its directors, each of its officers and employees, agents, 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,
employee, agent or controlling person may become subject, 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 untrue statement of a material fact contained in the Preliminary
Offering Memorandum, the Final Offering Memorandum or the Disclosure Package (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 necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the extent, and only to
the extent, that such untrue statement or alleged untrue statement or omission or alleged omission
was made in the Preliminary Offering Memorandum, the Final Offering Memorandum or the Disclosure
Package (or any amendment or supplement thereto),
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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, employee, agent or controlling person for any legal and other expense reasonably incurred
by the Company, or any such director, officer, employee, agent 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
Initial Purchasers have furnished to the Company expressly for use in the Preliminary Offering
Memorandum, the Final Offering Memorandum or the Disclosure Package (or any amendment or supplement
thereto) are the statements set forth in Schedule B hereto. The indemnity agreement set forth in
this SECTION 8(b) shall be in addition to any liabilities that each Initial Purchaser may otherwise
have.
(c) Notifications and Other Indemnification Procedures. Promptly after receipt by an
indemnified party under this SECTION 8 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 8, notify the indemnifying party in writing of the commencement thereof, but the
failure to so notify the indemnifying party (i) will not relieve it from liability under paragraph
(a) or (b) above unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial rights and defenses and
(ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b) above. 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 that 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 8
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 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 (other
than local counsel), reasonably approved by the indemnifying party (or by ▇▇▇▇▇▇▇ ▇▇▇▇▇ in the case
of (b), representing the indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel 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.
23
(d) Settlements. The indemnifying party under this SECTION 8 shall not be liable for
any settlement of any proceeding effected without its written consent, which shall not be withheld
unreasonably, but if settled with such consent or if there is 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 (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; provided that the indemnifying party shall not be liable for any such settlement if the
indemnifying party has reimbursed the indemnified party for such fees and expenses other than that
portion which the indemnifying party is contesting in good faith as being unreasonable. 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 (x) includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such action, suit or proceeding and (y)
does not include a statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.
| SECTION 9. | CONTRIBUTION |
If the indemnification provided for in SECTION 8 is for any reason 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
Initial Purchasers, on the other hand, from the offering of the Notes 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 Initial Purchasers, on
the other hand, in connection with the statements or omissions or alleged statements or alleged
omissions that 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 Initial Purchasers, on the other hand, in connection with the offering of the Notes
pursuant to this Agreement shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Notes pursuant to this Agreement (before deducting expenses)
received by the Company, and the total discount received by the Initial Purchasers bear to the
aggregate initial offering price of the Notes. The relative fault of the Company, on the one hand,
and the Initial Purchasers, 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 Initial Purchasers, on the other hand, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such statement
or omission.
24
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 8(c), any legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim.
The Company and the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this SECTION 9 were determined by pro rata allocation (even if the Initial
Purchasers 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 9.
Notwithstanding the provisions of this SECTION 9, no Initial Purchaser shall be required to
contribute any amount in excess of the purchase discount or commission received by such Initial
Purchaser in connection with the Notes purchased by it hereunder. 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 Initial
Purchasers’ obligations to contribute pursuant to this SECTION 9 are several, and not joint, in
proportion to their respective commitments as set forth opposite their names in Schedule A. For
purposes of this SECTION 9, each affiliate, director, officer, employee and agent of an Initial
Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of the
Securities Act and the Exchange Act shall have the same rights to contribution as such Initial
Purchaser, and each director of the Company, each officer of the Company, and each person, if any,
who controls the Company within the meaning of the Securities Act and the Exchange Act shall have
the same rights to contribution as the Company.
| SECTION 10. | DEFAULT OF ONE OR MORE OF THE SEVERAL INITIAL PURCHASERS |
If, on the Closing Date or any Subsequent Closing Date, as the case may be, any one or more of
the several Initial Purchasers shall fail or refuse to purchase Notes that it or they have agreed
to purchase hereunder on such date, and the aggregate principal amount of Notes which such
defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused to purchase does
not exceed 10% of the aggregate principal amount of the Notes to be purchased on such date, the
other Initial Purchasers shall be obligated, severally, in the proportions that the principal
amount of Firm Notes set forth opposite their respective names on Schedule A bears to the aggregate
principal amount of Firm Notes set forth opposite the names of all such non-defaulting Initial
Purchasers, or in such other proportions as may be specified by the Representative with the consent
of the non-defaulting Initial Purchasers, to purchase the Notes which such defaulting Initial
Purchaser or Initial Purchasers agreed but failed or refused to purchase on such date. If, on the
Closing Date or any Subsequent Closing Date, as the case may be, any one or more of the Initial
Purchasers shall fail or refuse to purchase Notes and the aggregate principal amount of Notes with
respect to which such default occurs exceeds 10% of the aggregate principal amount of Notes to be
purchased on such date, and arrangements satisfactory to the Representative and the Company for the
purchase of such Notes are not made within 48 hours after such
25
default, this Agreement shall terminate without liability of any party (other than a defaulting Initial
Purchaser) to any other party except that the provisions of SECTION 4, SECTION 7, SECTION 8 and
SECTION 9 shall at all times be effective and shall survive such termination. In any such case
either the Representative or the Company shall have the right to postpone the Closing Date or any
Subsequent Closing Date, as the case may be, but in no event for longer than seven full business
days in order that the required changes, if any, to the Final Offering Memorandum or any other
documents or arrangements may be effected; provided that any Subsequent Closing Date, as postponed,
shall be on a date within a 30-day period beginning on the Closing Date. Nothing contained herein
shall relieve a defaulting Initial Purchaser of any liability it may have to the Company for
damages caused by its default.
As used in this Agreement, the term “Initial Purchaser” shall be deemed to include any person
substituted for a defaulting Initial Purchaser under this SECTION 10. Any action taken under this
SECTION 10 shall not relieve any defaulting Initial Purchaser from liability in respect of any
default of such Initial Purchaser under this Agreement.
| SECTION 11. | TERMINATION OF THIS AGREEMENT |
On or 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 or limited by the Commission or by the New York Stock
Exchange, or trading in securities generally on either The New York Stock Exchange or The Nasdaq
Stock Market shall have been suspended or limited, or minimum or maximum prices shall have been
generally established on any of such stock exchanges by the Commission or FINRA; (ii) a general
banking moratorium shall have been declared by any federal or New York authority or a material
disruption in commercial banking or securities settlement or clearance services in the United
States has occurred; or (iii) 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, or any substantial change or development involving a prospective
substantial change in United States’ or international political, financial or economic conditions,
as in the judgment of the Representative is material and adverse and makes it impracticable or
inadvisable to market the Notes in the manner and on the terms described in the Final Offering
Memorandum or to enforce contracts for the sale of securities. Any termination pursuant to this
SECTION 11 shall be without liability on the part of (A) the Company to any Initial Purchaser,
except that the Company shall be obligated to reimburse the expenses of the Representative and the
Initial Purchasers pursuant to SECTION 4 and SECTION 7 hereof or (B) any Initial Purchaser to the
Company, and the provisions of SECTION 8 and SECTION 9 hereof shall at all times be effective and
shall survive such termination.
| SECTION 12. | NO ADVISORY OR FIDUCIARY RESPONSIBILITY |
The Company acknowledges and agrees that: (i) the purchase and sale of the Notes pursuant to
this Agreement, including the determination of the offering price of the Notes and any related
discounts and commissions, is an arm’s-length commercial transaction between the Company, on the
one hand, and the several Initial Purchasers, on the other hand, and the Company is capable of
evaluating and understanding and understands and accepts the terms, risks and conditions of the
transactions
26
contemplated by this Agreement; (ii) in connection with each transaction contemplated hereby and the process leading to such transaction each Initial
Purchaser is and has been acting solely as a principal and is not the financial advisor, agent or
fiduciary of the Company or its affiliates, stockholders, creditors or employees or any other
party; (iii) no Initial Purchaser has assumed or will assume an advisory, agency or fiduciary
responsibility in favor of the Company with respect to any of the transactions contemplated hereby
or the process leading thereto (irrespective of whether such Initial Purchaser has advised or is
currently advising the Company on other matters) and no Initial Purchaser has any obligation to the
Company with respect to the offering contemplated hereby except the obligations expressly set forth
in this Agreement; (iv) the several Initial Purchasers and their respective affiliates may be
engaged in a broad range of transactions that involve interests that differ from those of the
Company and that the several Initial Purchasers have no obligation to disclose any of such
interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Initial
Purchasers have not provided any legal, accounting, regulatory or tax advice with respect to the
offering contemplated hereby and the Company has consulted its own legal, accounting, regulatory
and tax advisors to the extent it deemed appropriate.
This Agreement supersedes all prior agreements and understandings (whether written or oral)
between the Company and the several Initial Purchasers, or any of them, with respect to the subject
matter hereof. The Company hereby waives and releases, to the fullest extent permitted by law, any
claims that the Company may have against the several Initial Purchasers with respect to any breach
or alleged breach of agency or fiduciary duty.
| SECTION 13. | REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY |
The respective indemnities, contribution, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Initial Purchasers set forth in or
made pursuant to this Agreement shall remain operative and in full force and effect, regardless of
(i) any investigation, or statement as to the result hereof, made by or on behalf of any Initial
Purchaser or the Company or any of its or their partners, officers, directors, employees, agents or
any controlling person, as the case may be, (ii) acceptance of the Notes and payment for them
hereunder or (iii) any termination of this Agreement.
| SECTION 14. | NOTICES |
All communications hereunder shall be in writing and shall be mailed, hand delivered or
telecopied and confirmed to the parties hereto as follows:
If to the Representative:
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
27
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
with a copy to:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
If to the Company:
CBIZ, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Any party hereto may change the address for receipt of communications by giving written notice to
the others.
| SECTION 15. | SUCCESSORS |
This Agreement will inure to the benefit of and be binding upon the parties hereto, including
any substitute Initial Purchasers pursuant to SECTION 10 hereof, and to the benefit of the
affiliates, employees, officers and directors and controlling persons referred to in SECTION 8 and
SECTION 9, and in each case their respective successors, and no other person will have any right or
obligation hereunder. The term “successors” shall not include any purchaser of the Notes as such
from any of the Initial Purchasers merely by reason of such purchase.
28
| SECTION 16. | PARTIAL UNENFORCEABILITY |
The invalidity or unenforceability of any Section, paragraph or provision of this Agreement
shall not affect the validity or enforceability of any other Section, paragraph or provision
hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to
be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such
minor changes) as are necessary to make it valid and enforceable.
| SECTION 17. | GOVERNING LAW PROVISIONS |
(a) Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or
based upon this Agreement or the transactions contemplated hereby (“Related Proceedings”) may be
instituted in the federal courts of the United States of America located in the City and County of
New York, Borough of Manhattan or the courts of the State of New York in each case located in the
City and County of New York, Borough of Manhattan (collectively, the “Specified Courts”), and each
party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a “Related Judgment”), as to which such
jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of
any process, summons, notice or document by mail to such party’s address set forth above shall be
effective service of process for any suit, action or other proceeding brought in any such court.
The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit,
action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and
agree not to plead or claim in any such court that any such suit, action or other proceeding
brought in any such court has been brought in an inconvenient forum.
| SECTION 18. | GENERAL PROVISIONS |
This Agreement constitutes the entire agreement of the parties to this Agreement and
supersedes all prior written or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may be executed in two or
more counterparts, each one of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or
modified unless in writing by all of the parties hereto. The Section headings herein are for the
convenience of the parties only and shall not affect the construction or interpretation of this
Agreement.
[SIGNATURE PAGE FOLLOWS]
29
If the foregoing is in accordance with your understanding of our agreement, kindly sign and
return to the Company the enclosed copies hereof, whereupon this instrument, along with all
counterparts hereof, shall become a binding agreement in accordance with its terms.
| Very truly yours, CBIZ, INC. |
||||
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇ | |||
| Name: | ▇▇▇▇ ▇. ▇▇▇▇▇ | |||
| Title: | Chief Financial Officer | |||
[Signature Page to the Purchase Agreement]
The foregoing Purchase Agreement is hereby confirmed and accepted by the Representative as of
the date first above written.
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
Acting as Representative of the
several Initial Purchasers named in
the attached Schedule ▇.
several Initial Purchasers named in
the attached Schedule ▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By:
|
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ | |||||
| Name: | ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ | |||||
| Title: | Managing Director | |||||
[Signature Page to the Purchase Agreement]
SCHEDULE A
| AGGREGATE PRINCIPAL AMOUNT OF FIRM | ||||
| INITIAL PURCHASERS | NOTES TO BE PURCHASED | |||
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated |
$ | 98,274,000 | ||
KeyBanc Capital Markets Inc. |
8,363,000 | |||
U.S. Bancorp Investments, Inc. |
8,363,000 | |||
Total |
$ | 115,000,000 | ||
A-1
SCHEDULE B
The last paragraph on the cover page of the Offering Memorandum and the first sentence of the fifth
paragraph, the third sentence of the tenth paragraph and the thirteenth paragraph of the section of
the Offering Memorandum entitled “Plan of Distribution.”
B-1
EXHIBIT B
Form of Lock-Up Agreements
September , 2010
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
One Bryant Park
New York, New York 10036
New York, New York 10036
Re: CBIZ, Inc. (the “Company”)
Ladies and Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of common stock, $0.01
par value, of the Company (“Common Stock”) or securities convertible into or exchangeable or
exercisable for Common Stock. The Company proposes to carry out an offering of its Convertible
Senior Subordinated Notes due 2015, which will be convertible into cash and in certain
circumstances Common Stock (the “Offering”) for which you will act as the initial purchaser. The
undersigned recognizes that the Offering will be of benefit to the undersigned and will benefit the
Company by, among other things, raising additional capital for its operations. The undersigned
acknowledges that you are relying on the representations and agreements of the undersigned
contained in this letter in carrying out the Offering and in entering into purchase arrangements
with the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the undersigned will not
(and will cause any spouse or immediate family member of the spouse or the undersigned living in
the undersigned’s household not to), without the prior written consent of ▇▇▇▇▇▇▇ Lynch, ▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated (“▇▇▇▇▇▇▇ ▇▇▇▇▇”) (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option to sell (including
without limitation any short sale), pledge, transfer, establish an open “put equivalent position”
or liquidate or decrease a “call equivalent position” within the meaning of Rule 16a-1(h) under the
Securities Exchange Act of 1934, as amended, or otherwise dispose of or transfer (or enter into any
transaction which is designed to, or might reasonably be expected to, result in the disposition
of), including the filing (or participation in the filing of) of a registration statement with the
Securities and Exchange Commission in respect of, any shares of Common Stock, options or warrants
to acquire shares of Common Stock, or securities exchangeable or exercisable for or convertible
into shares of Common Stock currently or hereafter owned either of record or beneficially (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by the undersigned (or
such spouse or family member), or publicly announce an intention to do
any of the foregoing, for a period commencing on the date hereof and continuing through the
close of trading on the date 90 days after the date of the offering memorandum relating to the
Offering (the “Lock-Up Period”).
B-1
The foregoing sentence shall not apply to (i) bona fide gifts, provided that the transferee
agrees in writing with you to be bound by the terms of this letter agreement, (ii) dispositions to
any trust for the direct or indirect benefit of the undersigned and/or immediate family members of
the undersigned, provided that such trust agrees in writing with you to be bound by the terms of
this letter agreement, and (iii) sales or other dispositions made upon exercise of options in an
amount not to exceed the aggregate exercise price of such options plus any tax liability associated
with the exercise of the options.
The undersigned also agrees and consents to the entry of stop transfer instructions with the
Company’s transfer agent and registrar against the transfer of shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock held by the undersigned except in
compliance with the foregoing restrictions.
In addition, the undersigned agrees that, without the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇,
it will not, during the Lock-Up Period, make any demand for or exercise any right with respect to,
the registration of any shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock. With respect to the Offering only, the undersigned waives any
registration rights relating to registration under the Securities Act of any Common Stock owned
either of record or beneficially by the undersigned, including any rights to receive notice of the
Offering.
[signature page follows]
B-2
This agreement is irrevocable and will be binding on the undersigned and the respective
successors, heirs, personal representatives, and assigns of the undersigned.
By: |
||||
| (indicate capacity of person signing if signing as custodian, trustee, or on behalf of an entity) | ||||
B-3
EXHIBIT C
Term Sheet
PRICING TERM SHEET
Dated September 21, 2010
Dated September 21, 2010
CBIZ, Inc.
4.875% Convertible Senior Subordinated Notes due 2015
4.875% Convertible Senior Subordinated Notes due 2015
The information in this pricing term sheet supplements CBIZ, Inc.’s preliminary offering
memorandum, dated September 20, 2010 (the “Preliminary Offering Memorandum”), and supersedes the
information in the Preliminary Offering Memorandum to the extent inconsistent with the information
in the Preliminary Offering Memorandum. In all other respects, this term sheet is qualified in its
entirety by reference to the Preliminary Offering Memorandum. Terms used herein but not defined
herein shall have the respective meanings as set forth in the Preliminary Offering Memorandum. All
references to dollar amounts are references to U.S. dollars.
Issuer:
|
CBIZ, Inc. (NYSE: CBZ) | |
Title of securities:
|
4.875% Convertible Senior Subordinated Notes due 2015 (the “notes”) | |
Issue price:
|
100% | |
Aggregate principal amount offered:
|
$115,000,000 ($130,000,000 after giving effect to the exercise of the option to purchase additional notes in full) | |
Use of proceeds:
|
The Issuer estimates that the net proceeds from this offering will be approximately $111,600,000 after deducting the initial purchasers’ discount and estimated offering expenses (approximately $126,200,000 if the initial purchasers exercise in full their option to purchase additional notes). The Issuer intends to use proceeds from the issuance of the notes to repurchase, from time to time, a portion of its 2006 Notes, for general corporate purposes, including repayment of a portion of the existing balances outstanding under its senior credit facility, and will use approximately $25,000,000 of the proceeds to repurchase shares of its common stock. | |
Maturity date:
|
October 1, 2015 | |
Interest rate:
|
4.875% per annum, plus additional interest, if any. | |
Interest payment dates:
|
April 1 and October 1, commencing on April 1, 2011 | |
Initial conversion price:
|
Approximately $7.41 per share of the Issuer’s common stock | |
Initial conversion rate:
|
134.9255 shares of common stock per $1,000 aggregate principal amount of notes | |
The last reported sale price of
the Issuer’s common stock on The
New York Stock Exchange on
September 21, 2010:
|
$5.49 |
C-1
Sole book-running manager:
|
▇▇▇▇▇▇▇, Lynch, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated | |
Co-managers:
|
KeyBanc Capital Markets Inc. and U.S. Bancorp Investments, Inc. | |
Trade date:
|
September 21, 2010 | |
Settlement date:
|
September 27, 2010 | |
CUSIP / ISIN:
|
124805 AC6 / US124805AC68 | |
Make-Whole Amount upon certain corporate transactions:
|
The following table sets forth the number of additional shares per $1,000 principal amount of notes, if any, by which the conversion rate will be increased for each stock price and effective date set forth below: |
| Stock Price | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effective Date | $5.49 | $5.75 | $6.00 | $6.50 | $7.00 | $8.00 | $9.00 | $10.00 | $12.50 | $15.00 | $17.50 | $20.00 | $22.50 | $25.00 | ||||||||||||||||||||||||||||||||||||||||||
September 27, 2010 |
47.2238 | 45.8696 | 42.4271 | 36.7761 | 32.3832 | 26.1184 | 21.9422 | 18.9798 | 14.2990 | 11.5345 | 9.6226 | 8.2065 | 7.1103 | 6.2354 | ||||||||||||||||||||||||||||||||||||||||||
October 1, 2011 |
47.2238 | 43.7152 | 39.9539 | 33.8549 | 29.2114 | 22.8213 | 18.7737 | 16.0327 | 11.9901 | 9.6587 | 8.0633 | 6.8839 | 5.9707 | 5.2415 | ||||||||||||||||||||||||||||||||||||||||||
October 1, 2012 |
47.2238 | 41.6260 | 37.4258 | 30.6956 | 25.6904 | 19.0975 | 15.2107 | 12.7571 | 9.4111 | 7.5855 | 6.3437 | 5.4250 | 4.7129 | 4.1438 | ||||||||||||||||||||||||||||||||||||||||||
October 1, 2013 |
47.2238 | 39.3885 | 34.5695 | 26.9367 | 21.4082 | 14.5610 | 10.9567 | 8.9369 | 6.4992 | 5.2512 | 4.3990 | 3.7646 | 3.2716 | 2.8773 | ||||||||||||||||||||||||||||||||||||||||||
October 1, 2014 |
47.2238 | 39.1880 | 33.1553 | 22.0823 | 15.7054 | 8.6437 | 5.7498 | 4.5206 | 3.3751 | 2.7541 | 2.3154 | 1.9865 | 1.7308 | 1.5261 | ||||||||||||||||||||||||||||||||||||||||||
October 1, 2015 |
47.2238 | 38.9875 | 31.7412 | 18.9207 | 7.9316 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | 0.0000 | ||||||||||||||||||||||||||||||||||||||||||
The exact stock price and effective date may not be set forth on the table, in which case:
| • | if the stock price is between two stock price amounts in the table or the effective date is between two effective dates in the table the number of additional shares will be determined by straight-line interpolation between the number of additional shares set forth for the higher and lower stock price amounts and the two dates, as applicable, based on a 365-day year; | ||
| • | if the stock price is in excess of $25.00 per share (subject to adjustment), no additional shares will be added to the conversion rate; and | ||
| • | if the stock price is less than $5.49 per share (subject to adjustment), no additional shares will be added to the conversion rate. |
Notwithstanding the foregoing, in no event will the conversion rate exceed 182.1493 per $1,000
principal amount of notes, subject to adjustments in the same manner as the conversion rate.
General
This communication is intended for the sole use of the person to whom it is provided by the sender.
This material is confidential and is for your information only and is not intended to be used by
anyone other than you. This information does not purport to be a complete description of the notes
or the offering.
C-2
This communication does not constitute an offer to sell or the solicitation of an offer to buy any
notes in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation
in such jurisdiction.
The offer and sale of the notes and the common stock issuable upon conversion thereof, if any, have
not been registered, and will not be registered, under the Securities Act of 1933, as amended, and
the notes may not be offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. Accordingly, the notes are being offered and sold
only to “qualified institutional buyers” (as defined in Rule 144A under the Securities Act).
ANY DISCLAIMER OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO THIS COMMUNICATION AND
SHOULD BE DISREGARDED. SUCH DISCLAIMERS OR OTHER NOTICES WERE AUTOMATICALLY GENERATED AS A RESULT
OF THIS COMMUNICATION BEING SENT VIA BLOOMBERG OR ANOTHER EMAIL SYSTEM.
C-3
EXHIBIT D
Investor Presentation
Investor Presentation
D-1
| CBIZ, Inc. $100 Million Convertible Senior Subordinated Notes Offering ▇▇▇▇▇ ▇▇▇▇▇▇, Chairman & CEO Ware Grove, SVP & CFO September 21, 2010 |
| 2 Safe Harbor Provisions Forward-looking statements in this presentation are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, but are not limited to, CBIZ's dependence on the current trend of outsourcing business services; CBIZ's dependence on the services of its CEO and other key employees; competitive pricing pressures; general business and economic conditions; and changes in governmental regulation and tax laws affecting its operations. A more detailed description of such risks and uncertainties may be found in the Company's filings with the Securities and Exchange Commission. All forward-looking statements made in this presentation are made only as of the date of its presentation. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur or of which we hereafter become aware. |
| 3 Issuer: CBIZ, Inc. (NYSE: CBZ) Securities: Convertible Senior Subordinated Notes Proposed Offering Size: $100 million Over-Allotment Option: $15 million Coupon: 5.00% - 5.50% Conversion Premium: 30.0% - 35.0% Maturity: 5 Years Call Feature: Non Call Life Put Features: None Settlement: Net Share Settlement Offering Format: 144A Use of Proceeds: Up to 25% of proceeds will be used for share repurchases with the balance of proceeds used to repay outstanding debt Offering Summary |
| 4 Company Profile CBIZ, Inc. |
| 5 Company Profile CBIZ is a leading provider of professional services to clients throughout the U.S. and helps clients succeed by enabling them to better manage their finances and employees. |
| 6 TTM Revenue and Headcount by Segment at 6/30/10 Headcount - 5,250 Revenue Mix (from continuing operations) |
| 7 Company Profile National scale and resources with local presence 5,250 associates 15 integrated markets + NYC & Boston 150+ offices in 36 states (includes 75 MMP offices) Target clients for core services mid-sized companies in each local market 100-2,000 employees $5-$200 million in revenue 90,000+ clients (includes 50,000+ business clients) CBIZ is one of the nation's largest... accounting providers as ranked by Accounting Today, April, 2010 benefit specialists as ranked by Business Insurance, July, 2009 brokers of business insurance as ranked by Business Insurance, July, 2009 valuation companies medical practice management companies |
| 8 Core Services & Attributes Key Attributes Small / Mid-Market Clients Rely on Outside Experts/Services Recurring Business Services High Retention Rates Cross-Serving Opportunities Highly Fragmented Competition Core Services Tax Compliance / Advisory Accounting / Financial Consulting Group Health Insurance Property & Casualty Insurance Payroll Services Flex Benefit Services Wealth Management Human Capital Services Core services are provided in local and regional markets supported by national resources, experts, & services |
| Financial Services 9 Accounting services include revenue of $93 million derived through administrative agreements with CPA firms to provide audit & attest services 1,970 Employees 25 business units and 35 offices |
| Employee Services 10 Employee benefits (group health, P&C) services are delivered through local market offices 980 employees 16 business units and 36 offices |
| 11 Medical Management Professionals (MMP) Coding, billing, accounts receivable management and full practice management service provider for hospital-based physician practices 1,700 employees and 370 clients 75 offices in 24 states |
| 12 History Growth 2003-2009 Eight years of growth in revenue, earnings, earnings per share and cash earnings Continued strong cash flow $100MM Convertible Senior Subordinated Notes Active share repurchase program 25 acquisitions NYSE listing New management team Built infrastructure Divested >30 non-core operations Began integration of business Resolved litigation Generated positive cash flow Reduced debt Stabilization 2000-02 Formation 1996-99 Founded 1996 145 acquisitions |
| 13 CBIZ Recurring Revenue Mergers & Acquisitions Valuation Financial consulting Special Risk Insurance Recruiting Compensation studies Project-based work 20% Annual tax compliance Group health benefits Property & casualty insurance Payroll services Retirement plan advisory Medical practice management Long-term technology support services for ▇▇▇▇▇▇ ▇▇▇▇▇ Human Resource Outsourcing Recurring Revenue 80% |
| 14 Valuation services Internal Audit, SOX 404 Compliance A Sample of National Clients Largest client: 2.5% of revenue CBIZ provides complete outsourced IT staffing services for ▇▇▇▇▇▇ ▇▇▇▇▇ ASC 805 and 350 ASC 350 Tax-related valuations (formerly SFAS 141/142) |
| 15 Growth Strategies CBIZ, Inc. |
| 16 ^ Cross-serving represents 3% of 2009 total revenue. 4.3% of revenue for core Financial & Employee service units ^ Less than 10% of business clients utilize more than three services or more than one service across different business segments Cross-Serving Growth Opportunities Key Drivers Trust Co-location Training Recognition / reward |
| 17 Acquisition Strategy Acquisitions must be immediately accretive to shareholders Targeted opportunities - Focus on core services and medical management practices Target 3-5 transactions per year Full integration into CBIZ infrastructure upon closing Typical payment structure optimizes return and reduces risk 30%-50% consideration paid up front balance paid on a 2-3 year earnout contingent upon achieving targets approx. 75% cash / 25% stock CBIZ has completed 25 acquisitions since Q4 2002 adding approximately $214MM to annualized revenue |
| 18 Financial Overview CBIZ, Inc. |
| 19 Eight years of growth in revenue, earnings, earnings per share and cash earnings Free cash flow is approximately $50MM per year 2009 EBITDA was $84.8MM up 11.0% over 2008 2009 Cash EPS was $0.99 up 13.8% over 2008 Invested $256MM in strategic and accretive acquisitions since 2002 Invested $274MM to repurchase 46.8MM shares of common stock since 2002 Financial Highlights |
| 20 Same-unit revenue growth 2005 = 6.5% $30.5MM 2006 = 6.1% $31.4MM 2007 = 8.2% $46.1MM 2008 = 5.7% $35.5MM 2009 = (5.3%) ($35.9MM) 2Q10 = (5.4%) ($21.7MM) YTD Revenue Trend (Restated to reflect the impact of discontinued operations) CAGR 9.6% |
| 21 (1) Includes non-recurring gain of $0.07 per share from the sale of an investment (2) Excludes a restructuring charge of ($0.02) related to the integration of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ in Boca Raton, Florida Earnings per Share CAGR 17.8% |
| 22 EBITDA (Restated to reflect the impact of discontinued operations) Excludes non-recurring gain from the sale of a long-term investment of $7.3MM Excludes the non-cash restructuring charge of $1.1MM related to the integration of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ in Boca Raton, Florida $59.2 $55.5 |
| 23 Cash Earnings Cash Earnings |
| 24 Historical Cash Flow Historical Cash Flow |
| 25 Operating Leverage Opportunities Opportunities Opportunities Gross Margin Expand margins in operating units by managing compensation costs and leveraging other expenses. (1) Excludes non-recurring gain from the sale of a long-term investment (1) Excludes non-recurring gain from the sale of a long-term investment |
| 26 26 Balance Sheet Highlights (1) 2010 Pro Forma includes Westbury transaction (2) The balance sheet highlights do not give pro forma effect to the Notes offered hereby. Debt includes the amount outstanding on the credit facility, the carrying value of 2006 Convertible Senior Subordinated Notes, and Other Senior Indebtedness as defined in the Offering Memorandum. 2Q2010 debt balance is pro forma for the Westbury transaction. In the Westbury transaction, CBIZ purchased approximately 7.7 million shares of the Company's common stock at a price of $6.25 per share from Westbury Ltd. The Company also purchased an option for $5.0 million expiring on September 30, 2013 to purchase approximately 7.7 million shares of the Company's common stock held by Westbury at a price of $7.25 per share. Providing for the purchase of the shares and the option, the amount outstanding on the Company's credit facility is $168.2 million. Prior period restated to reflect the implementation of FASB ASC Topic 470.20 "Debt with Conversion and Other Options". Shareholders' equity is pro forma for the Westbury transaction. On a pro forma basis, shareholders' equity has been reduced by $53.2 million. Adjusted to include pro forma EBITDA from acquisitions of $0.3 million and $3.2 million for the trailing twelve months ended June 30, 2010 and June 30, 2009, respectively. |
| 27 Capital Structure & Debt $275MM unsecured credit facility (expires June, 2014) $100MM Convertible Notes (closed May 30, 2006) Notes have a Net Share Settlement feature Principal is repaid in cash Conversion "gain" above $10.63 per share is settled in either cash or shares 3.125% interest rate coupon rate - 7.8% imputed rate Callable/puttable in June 2011 |
| 28 Shareholder Composition Shares Outstanding 12/02 06/10 Basic 94.8MM 54.0MM Diluted weighted average 97.0MM 54.3MM Share count is pro forma for the Westbury transaction as if the transaction occurred January 1, 2010. As part of the Westbury transaction, CBIZ purchased approximately 7.7 million shares of the Company's common stock at a price of $6.25 per share from Westbury Ltd. (1) (1) (CHART) |
| 29 Investment Highlights Operational Established national platform with investment in infrastructure and organization already established Underserved/fragmented market Long-standing large client base Broad geographic/industry/client exposure mitigates risk 80% recurring revenue Strong and stable management team Financial Eight years of growth in revenue, earnings, earnings per share and cash earnings Strong balance sheet Strong and consistent cash flow Low capital expenditure requirements Operating leverage potential |