EXHIBIT 10.2
4,000,000 Shares
DELCO REMY INTERNATIONAL, INC.
CLASS A COMMON STOCK ($.01 PAR VALUE)
UNDERWRITING AGREEMENT
December 17, 1997
December 17, 1997
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
Credit Suisse First Boston
Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
c/o Morgan ▇▇▇▇▇▇▇ & Co.
Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
Delco Remy International, Inc., a Delaware corporation (the
"COMPANY"), proposes to issue and sell to the several Underwriters named in
Schedule I hereto (the "UNDERWRITERS") 4,000,000 shares of its Class A Common
Stock ($.01 par value) (the "FIRM SHARES"). The Company also proposes to issue
and sell to the several Underwriters not more than an additional 600,000 shares
of its Class A Common Stock ($.01 par value) (the "ADDITIONAL SHARES") if and to
the extent that you shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such shares of common stock granted to the
Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "SHARES." The shares of Class A
Common Stock ($.01 par value) of the Company to be outstanding after giving
effect to the sales contemplated hereby are hereinafter referred to as the
"COMMON STOCK."
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b)
under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462 Registration Statement.
As part of the offering contemplated by this Agreement, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& Co. Incorporated ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇") has agreed to reserve out of the Shares
set forth opposite its name on Schedule I to this Agreement, up to 278,870
shares, for sale to the Company's employees, officers and directors and certain
other parties designated by the Board of Directors of the Company (collectively,
the "PARTICIPANTS"), as set forth in the Prospectus under the heading
"Underwriters" (the "DIRECTED SHARE PROGRAM"). The Shares to be sold by ▇▇▇▇▇▇
▇▇▇▇▇▇▇ pursuant to the Directed Share Program (the "DIRECTED SHARES") will be
sold by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ pursuant to this Agreement at the Public Offering Price
(as defined). Any Directed Shares not orally confirmed for purchase by any
Participants by the end of the first business day after the date on which this
Agreement is executed will be offered to the public by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as set
forth in the Prospectus.
1. Representations and Warranties. The Company represents and
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warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) The Registration Statement, when it became effective, did not
contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, (ii) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all material
respects with the Securities Act and the applicable rules and regulations
of the Commission thereunder and (iii) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply
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to statements or omissions in the Registration Statement or the Prospectus
based upon information relating to any Underwriter furnished to the Company
in writing by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole; all of the issued shares of capital stock of each subsidiary of the
Company have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly by the Company, free and clear of
all liens, encumbrances, equities or claims. As of the Closing Date (as
defined), references in this Agreement to "SUBSIDIARIES" of the Company
shall be deemed to include Ballantrae Corporation ("BALLANTRAE"), Tractech,
Inc. ("TRACTECH") and Kraftube, Inc. ("KRAFTUBE"), notwithstanding that the
Company may not have consummated its acquisition of Ballantrae prior to the
Closing Date.
(e) This Agreement has been duly authorized,
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executed and delivered by the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus; and the
Shares have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance.
(g) All shares of Common Stock and Class B Common Stock ($.01 par
value) of the Company (the "CLASS B COMMON STOCK" and, together with the
Common Stock, the "CAPITAL STOCK") outstanding prior to the issuance of the
Shares have been duly authorized and are validly issued, fully paid and
non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of applicable law or the certificate of incorporation or by-
laws of the Company or any agreement or other instrument binding upon the
Company or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the
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date of this Agreement).
(k) There are no legal or governmental proceedings pending or, to the
best of the Company's knowledge, threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described or any statutes, regulations, contracts or other documents that
are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed as required.
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries,
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taken as a whole.
(o) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(p) There are no contracts, agreements or understandings between the
Company or any of its subsidiaries and any person granting such person the
right to require the Company or any such subsidiary to file a registration
statement under the Securities Act with respect to any securities of the
Company or such subsidiary (except as described in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the date
of this Agreement)) or to require the Company or any such subsidiary to
include such securities with the Shares registered pursuant to the
Registration Statement.
(q) Except as expressly described in the Prospectus, subsequent to
the respective dates as of which information is given in the Registration
Statement and the Prospectus, (1) the Company and its subsidiaries have not
incurred any material liability or obligation, direct or contingent, nor
entered into any material transaction not in the ordinary course of
business; (2) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of
any kind on its capital stock other than ordinary and customary dividends;
and (3) there has not been any material change in the capital stock, short-
term debt or long-term debt of the Company and its consolidated
subsidiaries, except in each case as described in or contemplated by the
Prospectus.
(r) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and valid title to all personal property
owned by them which is material to the business of the Company and
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its subsidiaries, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or such as do
not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and
its subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries, in each case except as
described in or contemplated by the Prospectus.
(s) The Company and its subsidiaries own or possess, or can acquire
on reasonable terms, all material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names currently
employed by them in connection with the business now operated by them, and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to
any of the foregoing which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in any material
adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken
as a whole.
(t) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in or contemplated by
the Prospectus, or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could result in any material adverse
change in the condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(u) The Company and each of its subsidiaries are
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insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied for;
and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, except as described in or contemplated by
the Prospectus.
(v) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate Federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received
any notice of proceedings relating to the revocation or modification of any
such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a material adverse change in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and
its subsidiaries, taken as a whole, except as described in or contemplated
by the Prospectus.
(w) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (1) transactions are executed in accordance with management's general
or specific authorizations; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (3)
access to assets is permitted only in accordance with management's general
or specific authorization; and (4) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
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(x) The fourth amended and restated financing agreement (together
with all other documents and agreements entered into in connection
therewith, the "CREDIT AGREEMENT") relating to the Senior Credit Facility
(as defined in the Prospectus) has been executed and delivered by the
parties thereto and is in full force and effect, and the Underwriters have
received conformed counterparts of the Credit Agreement. There exists, and
at and as of the Closing Date (after giving effect to the actions
contemplated hereby and to the other Transactions (as defined in the
Prospectus)) shall exist, no condition that would constitute a default (or
an event that with notice or lapse of time, or both, would constitute a
default) under the Senior Credit Facility.
Furthermore, the Company represents and warrants that (i) the
Registration Statement, the Prospectus and any preliminary prospectus comply,
and any further amendments or supplements thereto will comply, with any
applicable laws or regulations of foreign jurisdictions in which the Prospectus
or any preliminary prospectus, as amended or supplemented, if applicable, are
distributed in connection with the Directed Share Program, and (ii) no
authorization, approval, consent, license, order, registration or qualification
of or with any government, governmental instrumentality or court, other than
such as have been obtained, is necessary under the securities laws and
regulations of foreign jurisdictions in which the Directed Shares are offered
outside the United States.
2. Agreements To Sell and Purchase. The Company hereby agrees to
--------------------------------
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $11.16 a share (the "PURCHASE PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to 600,000 Additional
Shares at the Purchase Price. If you, on
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behalf of the Underwriters, elect to exercise such option, you shall so notify
the Company in writing not later than 30 days after the date of this Agreement,
which notice shall specify the number of Additional Shares to be purchased by
the Underwriters and the date on which such shares are to be purchased. Such
date may be the same as the Closing Date (as defined below) but not earlier than
the Closing Date nor later than ten business days after the date of such notice.
Additional Shares may be purchased as provided in Section 4 hereof solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares. If any Additional Shares are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of Firm Shares set forth in Schedule I
hereto opposite the name of such Underwriter bears to the total number of Firm
Shares.
The Company hereby agrees that, without the prior written consent of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Capital Stock or any securities convertible into or exercisable or
exchangeable for Capital Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Capital Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Capital Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder, (B) the issuance by the Company of
shares of Capital Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing, (C) any options granted or shares of
Capital Stock issued pursuant to benefit plans of the Company as in effect on
the date of this Agreement, (D) any issuances to officers or employees of the
Company of shares of Capital Stock pursuant to the Securities Purchase and
Holders Agreement dated July 29, 1994, by and among the Company and the
shareholders set
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forth therein or (E) the conversion, in accordance with the terms thereof, of
shares of Common Stock into shares of Class B Common Stock, or of shares of
Class B Common Stock into Common Stock.
3. Terms of Public Offering. The Company is advised by you that the
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Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$12.00 a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected by
you at a price that represents a concession not in excess of $0.47 a share under
the Public Offering Price, and that any Underwriter may allow, and such dealers
may reallow, a concession, not in excess of $0.10 a share, to any Underwriter or
to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made
---------------------
to the Company in Federal funds immediately available in New York City against
delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on December 22, 1997, or at such
other time on the same or such other date, not later than December 30, 1997, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE". The documents required to be
delivered by this Agreement shall be delivered on the Closing Date at the
offices of Dechert, Price & ▇▇▇▇▇▇, counsel for the Company, at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇.
Payment for any Additional Shares shall be made to the Company in
Federal funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters at
10:00 a.m., New York City time, on the date specified in the notice described in
Section 2 or at such other time on the same or on such other date, in any event
not later than February 2, 1998, as shall be designated in writing by you. The
time and date of such payment are hereinafter referred to as the "OPTION CLOSING
DATE".
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in
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writing not later than one full business day prior to the Closing Date or the
Option Closing Date, as the case may be. The certificates evidencing the Firm
Shares and Additional Shares shall be delivered to you on the Closing Date or
the Option Closing Date, as the case may be, for the respective accounts of the
several Underwriters, with any transfer taxes payable in connection with the
transfer of the Shares to the Underwriters duly paid, against payment of the
Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The of obligations
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of the Company to sell the Shares to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Shares on the
Closing Date are subject to the condition that the Registration Statement shall
have become effective not later than 9:30 a.m. (New York City time) on the date
hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) 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 of the
Company's securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations of
the Company and its subsidiaries, taken as a whole, from that set
forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
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(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in Section 5(a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
The officer signing and delivering such certificate may rely upon
the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date the
opinion of Dechert Price & ▇▇▇▇▇▇, counsel for the Company, dated the
Closing Date, to the effect that:
(i) each of the Company and the domestic subsidiaries of the
Company (other than the Relevant Subsidiaries (as hereinafter
defined), the "SUBJECT SUBSIDIARIES") has been duly incorporated and
is validly existing as a corporation in good standing under the laws
of the jurisdiction in which it is chartered or organized, with full
corporate power and corporate authority to own its properties and
conduct its business as described in the Prospectus; and each of the
Company and the domestic subsidiaries of the Company (the "DOMESTIC
SUBSIDIARIES") is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction set forth in a schedule to such opinion (which schedule
shall identify, based solely on a certificate of an officer of the
Company, each jurisdiction in which the Company or any such Domestic
Subsidiary owns or leases material properties or conducts material
business);
(ii) the Company's authorized equity capitalization is as set
forth in the Prospectus; the Shares conform to the description thereof
contained in the Prospectus; and the Shares have
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been approved for listing on the New York Stock Exchange, subject to
official notice of issuance;
(iii) to the best knowledge of such counsel, there is no pending
or threatened action or suit or judicial, arbitral or other
administrative proceeding to which the Company or any of its
subsidiaries is a party or of which any property or assets of the
Company or any of its subsidiaries is the subject that, singly or in
the aggregate, (A) questions the validity of this Agreement or the
Credit Agreement or any action taken or to be taken pursuant hereto or
pursuant to the other Transactions, or (B) if determined adversely to
the Company or any of its subsidiaries, is reasonably likely to have a
material adverse effect on the condition (financial or otherwise),
properties, business, results of operations or prospects of the
Company and its subsidiaries, taken as a whole, or materially and
adversely affect the ability of the Company or any of its subsidiaries
to perform its obligations under this Agreement or the Credit
Agreement or to consummate the other Transactions (a "MATERIAL ADVERSE
EFFECT"), except as described in the Prospectus; and the summaries in
the Registration Statement or the Prospectus of statutes, legal and
governmental proceedings and contracts and other documents accurately
describe in all material respects the provisions purported to be so
summarized; and the statements in the Prospectus under the caption
"Certain United States Federal Tax Consequences to Non-United States
Holders" accurately reflect in all material respects the United States
tax consequences generally applicable to Non-United States Holders (as
defined in the Prospectus) (subject to the qualifications and
assumptions set forth in such discussion and assuming the accuracy of
the discussion in the Prospectus relating to the Company's business
and activities);
(iv) the shares of Capital Stock outstanding prior to the
issuance of the Shares have been duly authorized and validly issued,
fully paid and non-assessable;
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(v) the Shares have been duly authorized and, when delivered
in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares
will not be subject to any preemptive or similar rights;
(vi) the Registration Statement has become effective under the
Act; any required filing of the Prospectus, and any supplements
thereto, pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); to the best knowledge
of such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or threatened; and the Registration
Statement and the Prospectus (other than the financial statements and
other financial information contained therein, as to which such
counsel need express no opinion) comply as to form in all material
respects with the applicable requirements of the Securities Act and
the rules thereunder;
(vii) all the outstanding shares of capital stock of each
Subject Subsidiary have been duly and validly authorized and issued
and are fully paid and nonassessable, and, except as otherwise set
forth in the Prospectus, all outstanding shares of capital stock of
the Domestic Subsidiaries are owned by the Company either directly or
through wholly owned subsidiaries free and clear of any perfected
security interest and, to the knowledge of such counsel, after due
inquiry, any other security interests, claims, liens or encumbrances
other than the pledges of capital stock of the Domestic Subsidiaries
pursuant to the Senior Credit Facility;
(viii) the Credit Agreement has been duly authorized, executed
and delivered by the Company and each of the Subject Subsidiaries that
is a party thereto; and constitutes a valid and legally binding
agreement, enforceable in accordance with its terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors'
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rights and remedies generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity);
(ix) this Agreement has been duly authorized, executed and
delivered by the Company;
(x) neither the Company nor any of its subsidiaries is, before
or after the consummation of the actions contemplated by this
Agreement, the Credit Agreement or the other Transactions, an
"investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act and the rules
and regulations of the Commission thereunder, without taking account
of any exemption under the Investment Company Act arising out of the
number of holders of the Company's securities;
(xi) no authorization, approval, consent or order of, or filing
or registration with, any court, regulatory body, administrative
agency or other governmental body is required for the execution,
delivery and performance of this Agreement or the Credit Agreement or
for the consummation of the actions contemplated hereby or thereby or
of the other Transactions, except as contemplated by Section 6(e);
(xii) the execution, delivery and performance of this Agreement
and the Credit Agreement by the Company and each of the Domestic
Subsidiaries that is a party thereto and the consummation of the
actions contemplated hereby or thereby and of the other Transactions
will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under (A) the articles of
incorporation, by-laws or other organizational documents of the
Company or any Subject Subsidiary, (B) any material statute, rule or
regulation applicable to the Company or any Domestic Subsidiary or any
order of any court, regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties and which order is
known to such counsel or (C) any agreement or instrument known to
17
such counsel to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or
to which any of their respective properties is subject; and the
Company and each of the Subject Subsidiaries that is a party thereto
has full corporate right, power and authority to execute and deliver
this Agreement and the Credit Agreement and to perform its respective
obligations hereunder and thereunder and to consummate the other
Transactions; and all corporate action required to be taken for the
due and proper authorization, execution and delivery of this Agreement
and the Credit Agreement and the consummation of the actions
contemplated hereby and thereby and of the other Transactions have
been duly and validly taken; and
(xiii) no holders of securities of the Company or any of its
subsidiaries have rights to the registration of such securities under
the Registration Statement.
Such opinion may be limited to the laws of the United States of America,
the States of New York and New Jersey and the Delaware General Corporation
Law. In rendering such opinion, such counsel may rely as to matters of
fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Prospectus
in this paragraph (c) include any supplements thereto at the Closing Date.
Such counsel shall also state, in a separate letter, that, in the
course of preparation by the Company of the Prospectus, such counsel has
participated in conferences with directors, officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the Underwriters and
representatives of counsel for the Underwriters, at which conferences the
contents of the Prospectus and related matters were discussed and, although
such counsel has not independently verified and is not passing upon and
assumes no responsibility for the accuracy, completeness or fairness of the
statements
18
contained in the Prospectus (except as expressly provided above), and
noting that they have relied as to materiality to a large extent upon the
statements of directors, officers and other representatives of the Company,
no facts have come to such counsel's attention which have caused such
counsel to believe that at the date the Registration Statement became
effective it contained an untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading or that the Prospectus
includes an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no view with respect to the
financial statements and the notes related thereto and other financial and
accounting data included in the Prospectus).
The opinion and letter of such counsel shall be rendered to the
Underwriters at the request of the Company and shall so state therein.
(d) The Underwriters shall have received on the Closing Date the
opinions of the following local counsels, or such other local counsels as
shall be reasonably acceptable to the Underwriters: (1) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
Associates, local counsel to Power Investments, Inc., Franklin Power
Products, Inc., International Fuel Systems, Inc. and Marine Corporation of
America, each an Indiana corporation; (2) Young, Williams, ▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, local counsel to the A&B Group, Inc., A&B Enterprises, Inc.,
Dalex, Inc., A&B Cores, Inc., R&L Tool Company, Inc. and MCA, Inc. of
Mississippi, each a Mississippi corporation; (3) ▇▇▇▇▇▇▇▇ & White, local
counsel to Nabco, Inc., a Michigan corporation; (4) Jenkens and ▇▇▇▇▇▇▇▇▇,
local counsel to Powrbilt Products, Inc., a Texas corporation and (5)
Hunton & ▇▇▇▇▇▇▇▇, local counsel to World Wide Automotive, Inc., a Virginia
corporation (each such Domestic Subsidiary, with respect to the applicable
local counsel, a "RELEVANT SUBSIDIARY"), each dated the Closing Date and to
the effect that:
(i) each of the Relevant Subsidiaries has
19
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and corporate
authority to own its properties and conduct its business as described
in the Prospectus;
(ii) all the outstanding shares of capital stock of each
Relevant Subsidiary have been duly and validly authorized and issued
and are fully paid and nonassessable;
(iii) the Credit Agreement has been duly authorized, executed
and delivered by each of the Relevant Subsidiaries that is a party
thereto; and
(iv) the execution, delivery and performance of the Credit
Agreement by each Relevant Subsidiary that is a party thereto and the
consummation of the actions contemplated thereby and of the other
Transactions will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, the articles
of incorporation, by-laws or other organizational documents of the
Relevant Subsidiary; each of the Relevant Subsidiaries that is a party
thereto has full corporate power and corporate authority to execute
and deliver the Credit Agreement and to perform its respective
obligations thereunder and to consummate the other Transactions; and
all corporate action required to be taken by the Relevant Subsidiaries
party thereto for the due and proper authorization, execution and
delivery of the Credit Agreement and the consummation of the actions
contemplated thereby and of the other Transactions have been duly and
validly taken.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
jurisdiction in which the Relevant Subsidiaries are chartered or organized
or the United States, to the extent they deem proper and specified in such
opinion, upon the opinion of other counsel who are satisfactory to counsel
for the Underwriters, and (B) as to matters of fact, to the extent they
deem proper, on certificates of responsible
20
officers of the Relevant Subsidiaries and public officials. References to
the Prospectus in this paragraph (d) include any supplements thereto at the
Closing Date.
The opinion of such local counsel shall be rendered to the
Underwriters at the request of the Company and shall so state therein.
(e) The Underwriters shall have received on the Closing Date such
opinion or opinions of Cravath, Swaine & ▇▇▇▇▇, counsel for the
Underwriters, dated the Closing Date, with respect to the issuance and sale
of the Shares, the Registration Statement, the Prospectus (together with
any supplement thereto) and other related matters as the Underwriters 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.
(f) At the Execution Time and at the Closing Date, Ernst & Young LLP
shall have furnished to the Underwriters a letter or letters, dated
respectively as of the date hereof and as of the Closing Date, in form and
substance satisfactory to the Underwriters, stating in effect that:
(i) they are independent certified public accountants with
respect to the Company, World Wide Automotive, Inc. ("WORLD WIDE"),
the Tractech Division of Titan Wheel International, Inc. and
Ballantrae, in each case within the meaning of Rule 101 of the
American Institute of Certified Public Accountants' Code of
Professional Conduct and its interpretations and rulings;
(ii) in their opinion the audited consolidated financial
statements included in the Prospectus and reported on by them comply
in form in all material respects with the accounting requirements of
the Securities Act and the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and the related published rules and regulations
thereunder;
(iii) based upon a reading of the latest unaudited consolidated
financial statements made
21
available by the Company, the procedures of the American Institute of
Certified Public Accountants for a review of interim financial
information as described in Statement of Auditing Standards No. 71,
reading of minutes and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters and
certain other limited procedures requested by the Underwriters and
described in detail in such letter, nothing has come to their
attention that causes them to believe that:
(1) any unaudited financial statements included in the
Prospectus do not comply in form in all material respects with
applicable accounting requirements and with the published rules
and regulations of the Commission with respect to financial
statements included or incorporated by reference in quarterly
reports on Form 10-Q under the Exchange Act;
(2) said unaudited financial statements are not in
conformity with generally accepted accounting principles applied
on a basis substantially consistent with that of the audited
financial statements included in the Prospectus; or
(3) the consolidated financial and other information
included under the headings "Pro Forma Condensed Consolidated
Financial Data", "Selected Consolidated Historical Financial
Data", "Prospectus Summary--Summary Consolidated Historical and
Pro Forma Financial Data", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and
"Management" is not in conformity with the disclosure
requirements of Regulation S-K under the Securities Act;
(iv) based upon the procedures detailed in such letter with
respect to the period subsequent to the date of the last available
balance sheet, including reading of the minutes and inquiries of
certain officials of the Company who have responsibility for financial
and accounting
22
matters, nothing has come to their attention that causes them to
believe that:
(1) at a specified date not more than five days prior to the
date of the letter, there were any changes in the capital stock
of the Company, increases in the long-term debt of the Company or
decreases in the stockholders' equity or net current assets of
the Company, in each case on a consolidated basis, as compared
with the amounts shown in the October 31, 1997, unaudited
consolidated balance sheet included in the Prospectus; or
(2) for the period from October 31, 1997, to a specified
date not more than five days prior to the date of the letter,
there were any decreases, as compared with the corresponding
period in the immediately preceding quarter, in net sales, income
from continuing operations, net income or EBITDA (as defined
under "Prospectus Summary" in the Prospectus), or increases in
costs of goods sold, of the Company and its subsidiaries on a
consolidated basis, except in all instances for increases or
decreases that the Prospectus discloses have occurred or which
are set forth in such letter, in which case the letter shall be
accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed
necessary by the Underwriters;
(v) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Prospectus agrees with the accounting records of the
Company and its subsidiaries, excluding any questions of legal
interpretation; and
(vi) on the basis of a reading of the unaudited pro forma
financial statements included
23
in the Prospectus (the "PRO FORMA FINANCIAL STATEMENTS"); carrying out
certain specified procedures; reading of minutes and inquiries of
certain officials of the Company, World Wide, Tractech, Ballantrae and
Kraftube who have responsibility for financial and accounting matters;
and proving the arithmetic accuracy of the application of the pro
forma adjustments to the historical amounts in the pro forma financial
statements, nothing came to their attention which caused them to
believe that the pro forma financial statements do not comply in form
in all material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X or that such pro forma adjustments
have not been properly applied to the historical amounts in the
compilation of such statements.
References to the Prospectus in this paragraph (f) include any
amendment or supplement thereof or thereto at the date of the letter.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and each of the shareholders (including the
holders of shares received or to be received pursuant to the Company's
acquisition of Ballantrae), warrantholders, senior officers and directors
of the Company relating to sales and certain other dispositions of shares
of Capital Stock or certain other securities, delivered to you on or before
the date hereof, shall be in full force and effect on the Closing Date, and
the Company shall have used its reasonable best efforts to obtain such
"lock-up" agreements from all its other shareholders (with any such
additional "lock-up" agreements being delivered to you at the Closing).
(h) The Notes Offering (as defined in the Prospectus), the Company's
acquisition of Ballantrae and each of the other Transactions shall have
been consummated on the terms described in the Prospectus.
(i) World Wide and Power Investments, Inc. shall have been
recapitalized so that all of their respective voting interests are owned by
the Company.
(j) All conditions precedent to the obligations
24
of the lenders to extend loans and issue letters of credit under the Credit
Agreement shall have been satisfied or waived.
(k) Prior to the Closing Date, the Company shall have furnished to
the Underwriters such further information, certificates and documents as
you, on behalf of the Underwriters, may reasonably request.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
6. Covenants of the Company. In further consideration of the
-------------------------
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 6(c) below, as many copies of the Prospectus and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to
which you reasonably object in writing within five business days after
receipt of a copy of such proposed amendment or supplement, and to file
with the Commission within the applicable period specified in Rule 424(b)
under the Securities Act any prospectus required to be filed pursuant to
such Rule.
(c) If, during such period after the first date
25
of the public offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement
the Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with applicable
law, forthwith to prepare, file with the Commission and furnish, at its own
expense, to the Underwriters and to the dealers (whose names and addresses
you will furnish to the Company) to which Shares may have been sold by you
on behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-
month period ending January 31, 1999, that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Securities Act and all
other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing,
26
including all printing costs associated therewith, and the mailing and
delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to
the transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or Legal Investment memorandum in connection with
the offer and sale of the Shares under state securities laws and all
expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 6(d) hereof,
including filing fees and the reasonable fees and disbursements of counsel
for the Underwriters in connection with such qualification and in
connection with the Blue Sky or Legal Investment memorandum, (iv) all
filing fees and the reasonable fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification of
the offering of the Shares by the National Association of Securities
Dealers, Inc. (the "NASD"), (v) all fees and expenses in connection with
the preparation and filing of the registration statement on Form 8-A
relating to the Common Stock and all costs and expenses incident to listing
the Shares on the New York Stock Exchange, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) the costs and expenses of
the Company relating to investor presentations on any "road show"
undertaken in connection with the marketing of the offering of the Shares,
including, without limitation, expenses associated with the production of
road show slides and graphics, fees and expenses of any consultants engaged
in connection with the road show presentations with the prior approval of
the Company, travel and lodging expenses of the representatives and
officers of the Company and any such consultants, and the cost of any
aircraft chartered in connection with the road show, and (ix) all other
costs and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 7 entitled "Indemnity and Contribution", and the last
paragraph of Section 9 below, the Underwriters will pay all of their costs
and
27
expenses, including fees and disbursements of their counsel, stock transfer
taxes payable on resale of any of the Shares by them and any advertising
expenses connected with any offers they may make.
(g) To apply the net proceeds from the sale of the Shares sold by it,
together with the net proceeds from the Notes Offering, substantially in
accordance with its statements under the caption "Use of Proceeds" in the
Prospectus.
(h) That, in connection with the Directed Share Program, the Company
will ensure that the Directed Shares will be restricted to the extent
required by the NASD or the NASD rules from sale, transfer, assignment,
pledge or hypothecation for a period of three months following the date of
the effectiveness of the Registration Statement. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ will
notify the Company as to which Directed Shares will need to be so
restricted. The Company will direct the transfer agent to place stop
transfer restrictions upon such Directed Shares for such period of time.
(i) To pay all fees and disbursements of counsel incurred by the
Underwriters in connection with the Directed Share Program and stamp
duties, similar taxes or duties or other taxes, if any, incurred by the
Underwriters in connection with the Directed Share Program.
Furthermore, the Company covenants that it will comply with all
applicable securities and other applicable laws, rules and regulations in each
foreign jurisdiction in which the Directed Shares are offered in connection with
the Directed Share Program.
7. Indemnity and Contribution. (a) The Company agrees to indemnify
---------------------------
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any
28
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except (i) insofar as such losses, claims, damages or liabilities are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information relating to any Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use therein and (ii) that
such indemnity with respect to any preliminary prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages or liabilities purchased Shares, or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Underwriter to such person, if required by law
so to have been delivered, at or prior to the written confirmation of the sale
of the Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such losses, claims,
damages or liabilities, unless such failure is the result of noncompliance by
the Company with Section 6(a) hereof.
(b) The Company agrees to indemnify and hold harmless ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and each person, if any, who controls ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Ace
("▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in the prospectus wrapped material
prepared by or with the consent of the Company for distribution in foreign
jurisdictions in connection with the Directed Share Program attached to the
Prospectus or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein, when considered in conjunction with the
Prospectus or any applicable preliminary prospectus, not misleading; (ii) caused
by the failure of any Participant to pay for and accept delivery of
29
the Shares which, immediately following the effectiveness of the Registration
Statement, were subject to a properly confirmed agreement to purchase; or (iii)
related to, arising out of, or in connection with the Directed Shares Program,
provided that the Company shall not be responsible under this subparagraph (iii)
for any losses, claim, damages or liabilities (or expenses relating thereto)
that are finally judicially determined to have resulted from the bad faith or
gross negligence of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Entities.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 7(a), 7(b) or 7(c), such person (the "INDEMNIFIED
PARTY") shall promptly notify the person against whom such indemnity may be
sought (the "INDEMNIFYING PARTY") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not, in respect
of the legal expenses of any indemnified party in connection
30
with any proceeding or related proceedings in the same jurisdiction, be liable
for the fees and expenses of more than one separate firm (in addition to any
local counsel) for all such indemnified parties and that all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, in the case of parties
indemnified pursuant to Section 7(a) or 7(b), and by the Company, in the case of
parties indemnified pursuant to Section 7(c). Notwithstanding anything contained
herein to the contrary, if indemnity may be sought pursuant to Section 7(b)
hereof in respect of such proceeding, then in addition to such separate firm for
the indemnified parties, the indemnifying party shall be liable for the
reasonable fees and expenses of not more than one separate firm (in addition to
any local counsel) for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ for the defense of any losses, claims,
damages and liabilities arising out of the Directed Share Program, and all
persons, if any, who control ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. 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 the second
and third sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
31
(e) To the extent the indemnification provided for in Section 7(a),
7(b) or 7(c) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(e)(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
7(e)(i) above but also the relative fault of the Company on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares. The relative fault of the Company on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
(f) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does
32
not take account of the equitable considerations referred to in Section 7(e).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 7 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Shares.
8. Termination. This Agreement shall be subject to termination by
------------
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the NASD, the Chicago
Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board
of Trade, (ii) trading of any securities of the Company shall have been
suspended on any exchange or in any over-the-counter market, (iii) a general
moratorium on commercial banking activities in New York shall have been
33
declared by either Federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your judgment, is material
and adverse and (b) in the case of any of the events specified in clauses
8(a)(i) through 8(a)(iv), such event, singly or together with any other such
event, makes it, in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.
9. Effectiveness; Defaulting Underwriters. This Agreement shall
---------------------------------------
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule I bears to the
aggregate number of Firm Shares set forth opposite the names of all such non-
defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; provided that in no event shall the
--------
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 9 by an amount in excess of one-
ninth of such number of Shares without the written consent of such Underwriter.
If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased, and arrangements satisfactory to you and the Company for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the
34
Prospectus or in any other documents or arrangements may be effected. If, on
the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting Underwriters would have been obligated to purchase in
the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
10. Counterparts. This Agreement may be signed in two or more
-------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. Notices. All communications hereunder will be in writing and
--------
effective only on receipt, and, if sent to the Underwriters, will be mailed,
delivered or sent by fax (▇▇▇-▇▇▇-▇▇▇▇) and confirmed to them in care of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. Incorporated, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
General Counsel; or, if sent to the Company, will be mailed, delivered or sent
by fax (▇▇▇-▇▇▇-▇▇▇▇) and confirmed to it at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer, with a copy mailed, delivered
or sent by fax (▇▇▇-▇▇▇-▇▇▇▇) and confirmed to ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.,
Dechert Price & ▇▇▇▇▇▇, 4000 ▇▇▇▇ Atlantic Tower, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
35
12. Business Day. The term "business day" shall mean any day other
-------------
than a Saturday, a Sunday or a federal legal holiday.
13. Applicable Law. This Agreement shall be governed by and
---------------
construed in accordance with the internal laws of the State of New York.
14. Headings. The headings of the sections of this Agreement have
---------
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
DELCO REMY INTERNATIONAL, INC.
By:___________________________
Name:
Title:
Accepted as of the date hereof,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
Credit Suisse First Boston Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INCORPORATED
By:__________________________
Name:
Title:
SCHEDULE I
Underwriter Number of
Firm Shares
To Be Purchased
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated 816,668
Credit Suisse First Boston Corporation 816,666
▇▇▇▇▇ ▇▇▇▇▇▇ Inc. 816,666
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C. 50,000
CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp. 100,000
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities
Corporation 100,000
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. 100,000
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, Inc. 50,000
▇▇▇▇▇▇ ▇▇▇▇ LLC 100,000
Gabelli & Company, Inc. 50,000
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. 100,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc. 50,000
▇▇▇▇▇▇▇▇▇ & Company, Inc. 50,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co., L.P. 50,000
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated 50,000
▇▇▇▇▇▇ Brothers Inc. 100,000
▇▇▇▇▇▇▇▇ & Company Securities, Inc. 50,000
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated 100,000
Mesirow Financial, Inc. 50,000
▇.▇. ▇▇▇▇▇▇ Securities Inc. 100,000
NatCity Investments, Inc. 50,000
Prudential Securities Incorporated 100,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Incorporated 50,000
▇▇▇▇▇▇▇▇ & Co. Inc. 100,000
---------
Total ................. 4,000,000
=========
[FORM OF LOCK-UP LETTER]
[ ], 1997
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
Credit Suisse First Boston Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
c/o Morgan ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
The undersigned understands that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
("▇▇▇▇▇▇ ▇▇▇▇▇▇▇") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Delco Remy International, Inc., a Delaware
corporation (the "COMPANY"), providing for the public offering (the "PUBLIC
OFFERING") by the several Underwriters, including ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the
"UNDERWRITERS"), of 4,000,000 shares (the "SHARES") of the Class A Common Stock
($.01 par value) of the Company (the "CLASS A COMMON STOCK"). The Class A
Common Stock is, together with the Class B Common Stock ($.01 par value) of the
Company (the "CLASS B COMMON STOCK"), referred to herein as the "CAPITAL STOCK".
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 180 days after the date of the final prospectus
relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Capital
Stock or any securities convertible into or exercisable or exchangeable for
Capital Stock or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Capital Stock, whether any such transaction described in
2
clause (1) or (2) above is to be settled by delivery of Capital Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (a) the sale of any Shares to the Underwriters pursuant to the Underwriting
Agreement, (b) the exercise of an option or warrant or the conversion of a
security outstanding on the date of the Underwriting Agreement of which the
Underwriters have been advised in writing, provided that only Capital Stock is
received by the holder of such option, warrant or security upon such exercise or
conversion, (c) any options granted or shares of Capital Stock issued pursuant
to benefit plans of the Company as in effect on the date of the Underwriting
Agreement, (d) transactions relating to shares of Capital Stock or other
securities acquired in open market transactions after the completion of the
Public Offering, (e) any purchases from any person by the Company of shares of
Capital Stock pursuant to the Securities Purchase and Holders Agreement dated
July 29, 1994, by and among the Company and the shareholders set forth therein
or (f) the conversion, in accordance with the terms thereof, of shares of Class
A Common Stock into shares of Class B Common Stock, or of shares of Class B
Common Stock into shares of Class A Common Stock. In addition, the undersigned
agrees that, without the prior written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ on behalf of
the Underwriters, it will not, during the period commencing on the date hereof
and ending 180 days after the date of the Prospectus, make any demand for, or
exercise any right with respect to, the registration of any shares of Capital
Stock or any security convertible into or exercisable or exchangeable for
Capital Stock, that results in the filing of a registration statement for such
shares or securities with the Securities and Exchange Commission prior to the
end of such 180-day period.
It is understood that if the Underwriting Agreement shall terminate or
be terminated prior to the payment for and delivery of the Shares, the
undersigned will automatically, and without further action, be released from its
obligations under this letter agreement.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
3
_________________________
(Name)
_________________________
(Address)