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EXHIBIT 1.1
19,750,000 Shares
SAFEWAY INC.
Common Stock, Par Value $0.01 Per Share
UNDERWRITING AGREEMENT
February [*], 1999
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February [*], 1999
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇▇▇▇, Sachs & Co.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation
ING Baring ▇▇▇▇▇▇ ▇▇▇▇ LLC
▇▇▇▇▇▇ Brothers Inc.
▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Read LLC
c/o Morgan ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
Certain stockholders and warrantholders of Safeway Inc., a Delaware
corporation (the "Company"), named in Schedule I hereto (the "Selling
Stockholders") severally propose to sell to the several underwriters named in
Schedule II hereto (the "Underwriters"), for whom ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated, ▇▇▇▇▇▇▇, Sachs & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated, ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation, ING Baring
▇▇▇▇▇▇ ▇▇▇▇ LLC, ▇▇▇▇▇▇ Brothers Inc., ▇.▇. ▇▇▇▇▇▇ Securities Inc., ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ Inc. and Warburg Dillon Read LLC are acting as representatives (the
"Representatives"), 19,650,304 shares of the Common Stock, par value $0.01 per
share, of the Company (the "Firm Shares") and warrants (the "Warrants") for the
purchase of an aggregate of 99,696 shares of Common Stock, par value $0.01 per
share, of the Company (the "Warrant Shares").
KKR Associates, L.P. ("KKR Associates"), one of the Selling
Stockholders, also proposes to sell to the several Underwriters an aggregate of
not more than an additional 2,000,000 shares of Common Stock, par value $0.01
per share, of the Company (the "Additional Shares"), if and to the extent that
the Representatives shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such Additional Shares granted to the
Underwriters in Section 3 hereof.
The Firm Shares and the Additional Shares are hereinafter collectively
referred to as the Shares and the Shares and the Warrant Shares are hereinafter
collectively referred to as the Securities. The shares of Common Stock, par
value $0.01 per share, 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 (Registration No. 333-71231), including a
prospectus, relating to the Securities.
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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." 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. All references
herein to the Registration Statement and the Prospectus include the documents
incorporated or deemed to be incorporated by reference therein. The terms
"supplement," "amendment" and "amend" as used herein shall include all documents
deemed to be incorporated by reference in the Prospectus that are filed
subsequent to the date hereof by the Company with the Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement (other than a Rule 462
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 such Registration Statement, 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 1(b) do not apply 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 expressly for use therein.
(c) 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 applicable rules and regulations of the Commission thereunder
(except to the extent that any preliminary prospectus did not so comply
in a manner corrected in the Prospectus); and no order preventing or
suspending the use of any preliminary prospectus has been issued by the
Commission.
(d) The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder;
and any further documents so filed and incorporated by reference in the
Prospectus or any further amendment or supplement thereto, when such
documents become effective or are filed with the Commission, as the case
may be, will conform in all material respects to the requirements of the
Securities Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder.
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(e) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State
of Delaware, has the corporate power and authority to own its properties
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in the State of
California and in each other jurisdiction in which such qualification is
required, 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.
(f) Each subsidiary (each a "Significant Subsidiary"), if
any, of the Company which is a "significant subsidiary" as defined in
Rule 405 of Regulation C of the Securities Act has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation.
(g) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
(including, without limitation, the purchase and exercise by the
Underwriters of the Warrants) will not result in any violation of the
Restated Certificate of Incorporation or the By-Laws of the Company or
any agreement or other instrument (including, without limitation, the
Warrant Purchase Agreement dated as of November 28, 1986 between the
Company and SSI Equity Associates, L.P. (the "Warrant Purchase
Agreement")) binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
statute or any order, rule or regulation of any governmental body,
agency or court having jurisdiction over the Company or any
subsidiaries, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency having jurisdiction
over the Company is required for the performance by the Company of its
obligations under this Agreement, except such as may be required under
the Act and the rules and regulations thereunder, and the Exchange Act
and the rules and regulations thereunder, and the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Securities.
(h) The financial statements (together with the related
notes thereto) incorporated by reference in the Registration Statement
and the Prospectus present fairly the financial position of the Company
and its consolidated subsidiaries as of and at the dates indicated and
the results of their operations for the periods specified, except as
otherwise disclosed therein; and except as otherwise stated therein or
in the Registration Statement and the Prospectus, said financial
statements have been prepared in conformity with generally accepted
accounting principles in the United States applied on a consistent
basis.
(i) This Agreement has been duly authorized, executed and
delivered by the Company.
(j) The Warrant Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this Agreement and
the Warrants, will be validly issued, fully paid and non-assessable, and
the issuance of such shares will not be subject to any preemptive
rights.
(k) The authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the Prospectus.
(l) The shares of Common Stock (including the Shares to be
sold by the Selling Stockholders hereunder) and the Warrants have been
duly authorized and validly issued and are fully paid and
non-assessable; none of such Shares or Warrants, when delivered to the
Underwriters, will be subject to any preemptive rights; the Shares and
Warrant Shares conform as
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to legal matters to the description of the Common Stock contained in the
Prospectus and the Warrants conform as to legal matters to the
description thereof contained in the Prospectus.
(m) The Warrants have been duly authorized, executed and
delivered by the Company and constitute valid and binding obligations of
the Company enforceable in accordance with their terms.
(n) Upon the Underwriters' purchase of the Warrants and
payment to the Company of the Warrant Exercise Price (as defined
herein), all of the requirements (whether under the Warrant Purchase
Agreement or otherwise) with respect to the Underwriters' exercise of
the Warrants for Warrant Shares will be satisfied, and the Company will
be unconditionally obligated to immediately issue duly and validly
authorized and issued, fully paid and nonassessable shares of Common
Stock in respect thereof.
(o) The Company is not an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended.
(p) 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.
(q) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending or, to 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.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
of the Selling Stockholders, severally and not jointly, represents and warrants
to and agrees with each of the Underwriters and the Company that:
(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder.
(b) The execution and delivery by such Selling Stockholder
of, and the performance by such Selling Stockholder of its obligations
under, this Agreement will not result in any violation of any material
agreement or other instrument binding upon such Selling Stockholder or
any statute or any order, rule or regulation of any governmental body,
agency or court having jurisdiction over such Selling Stockholder, and
no consent, approval, authorization or order of, or qualification with,
any governmental body or agency is required for the performance by such
Selling Stockholder of its obligations under this Agreement, except the
registration under the Securities Act of the Securities, and 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 Securities.
(c) Such Selling Stockholder has, and on the Closing Date
and any Option Closing Date (each, as defined in Section 5) will have,
valid title to all of the Shares or Warrants which may be sold by such
Selling Stockholder under this Agreement and the legal right and power,
and all authorization and approval required by law or other instruments
binding upon such Selling
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Stockholder, to enter into this Agreement and to sell, transfer and
deliver the Shares or Warrants to be sold by such Selling Stockholder.
(d) Upon delivery of the Shares or Warrants to be sold by
such Selling Stockholder and payment therefor pursuant to this
Agreement, the Underwriters will hold such Shares or Warrants (including
Warrant Shares issued upon exercise of the Warrants after payment of the
exercise price therefor) free and clear of any security interests,
claims, liens, equities and other encumbrances assuming that such
Underwriters have purchased such Shares, Warrants and Warrant Shares in
good faith and without notice of any security interest, claims, liens,
equities, encumbrances or any other adverse claims within the meaning of
the Uniform Commercial Code.
(e) The information (other than the percent of shares owned,
as to which such Selling Stockholder makes no representation) pertaining
to such Selling Stockholder under the caption "The Selling Stockholders"
in the Prospectus is complete and accurate in all material respects, and
any information pertaining to such Selling Stockholder or its affiliates
under the caption "Certain Relationships and Transactions" incorporated
by reference into the Prospectus from the Company's 1998 Proxy Statement
fairly presents the information required to be set forth therein and
contains no material misstatement or omission.
Each of KKR Associates, as the sole general partner of KKR Partners II,
L.P. ("KKR Partners"), and SSI Partners, L.P. ("SSI Partners"), as the sole
general partner of SSI Equity Associates, L.P. ("SSI Equity"), severally and not
jointly, represents and warrants to and agrees with each of the Underwriters and
the Company that with respect to any distributions of Common Stock by KKR
Partners or SSI Equity to any of their respective limited partners, each of them
will receive agreements, executed by such limited partners, which provide that
such limited partners will not sell such distributed shares for a period of 120
days following the date of the distribution.
Any certificate signed by any officer of the Company or by or on behalf
of any Selling Stockholder and delivered to the Underwriters or to counsel for
the Underwriters shall be deemed a representation and warranty by the Company or
such Selling Stockholder, as the case may be, to each Underwriter as to the
matters covered thereby.
3. AGREEMENTS TO SELL AND PURCHASE. Each Selling Stockholder,
severally and not jointly, 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 such Selling Stockholder (i) at
$[*] a Share (the "Share Purchase Price") and (ii) at $[*] a Warrant (the
"Warrant Purchase Price") (such Warrant Purchase Price representing the Share
Purchase Price less the exercise price of $.50 per Warrant (the "Warrant
Exercise Price") for each Warrant Share), the number of Firm Shares or Warrants,
as the case may be (subject to such adjustments to eliminate fractional shares
as you may determine), that bears the same proportion to the number of Firm
Shares or Warrants, as the case may be, to be sold by such Selling Stockholder
as the number of Firm Shares and Warrants, respectively, set forth in Schedule
II hereto opposite the name of such Underwriter bears to the total number of
Firm Shares and Warrants, respectively.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, KKR Associates 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 2,000,000
Additional Shares at the Share Purchase Price. If the Representatives, on behalf
of the Underwriters, elect to exercise such option, the Representatives shall so
notify KKR Associates 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 Additional Shares are
to be purchased. Such date may be
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the same as the Closing Date 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 5 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares and
Warrant Shares. If any Additional Shares are to be purchased, KKR Associates
agrees to sell the number of Additional Shares to be sold, and each Underwriter
agrees, severally and not jointly, to purchase the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Additional Shares to be purchased as the number of Firm Shares and
Warrants, respectively, set forth in Schedule II hereto opposite the name of
such Underwriter bears to the total number of Firm Shares and Warrants,
respectively.
At the Closing Date, simultaneous with (i) the purchase by the
Underwriters of Warrants and (ii) the payment to the Company of the Warrant
Exercise Price, the Underwriters will be deemed to have exercised such Warrants
and the Company will immediately issue to the Underwriters at the Closing Date,
the related Warrant Shares.
Each of the Company and the Selling Stockholders of the Company hereby
agrees that, without the prior written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated on behalf of the Underwriters, it will not, during a period of 90
days after the date of the Prospectus, (i) offer, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, provided that
the foregoing shall not apply to distributions of Common Stock by either KKR
Partners or SSI Equity to any of their respective limited partners or (ii) with
respect to the Company only, 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 Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities or Warrants to be sold hereunder, (B) any shares of Common Stock
issued by the Company pursuant to stock option plans in effect on the date of
the Prospectus, (C) option grants under stock option plans in effect on the date
of the Prospectus, (D) any agreement of the Company in connection with an
acquisition of assets or properties or any capital stock issuable pursuant to
the terms of such an agreement, (E) capital stock issuable upon the exercise of
warrants outstanding on the date of the Prospectus, or (F) the cancellation of
warrants. In addition, each Selling Stockholder agrees that, without the prior
written consent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated on behalf of the
Underwriters, it will not, during the period ending 90 days after the date of
the Prospectus, 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 any distributions
of shares by KKR Partners and SSI Equity, the limited partners who will receive
such shares will agree not to sell those shares for a period of 120 days
following the date of the distribution. KKR Associates, as the sole general
partner of KKR Partners, and SSI Partners, as the sole general partner of SSI
Equity, hereby agree with the Underwriters that they will not waive this sale
restriction for a period of 90 days from the date of this Agreement.
4. TERMS OF PUBLIC OFFERING. The Company and the Selling
Stockholders are advised by you that the Underwriters propose to make a public
offering of their respective portions of the Securities as soon after the
Registration Statement and this Agreement have become effective as in your
judgment is advisable. The Company and the Selling Stockholders are further
advised by you that the Securities are to be offered to the public initially at
$[*] a share (the "Public Offering Price") and to certain dealers selected by
you at a price that represents a concession not in excess of $.[*] a share
under the Public Offering Price, and that any Underwriter may allow, and such
dealers may reallow, a concession, not in excess of $.[*] a share, to any
Underwriter or to certain other dealers.
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5. PAYMENT AND DELIVERY. Payment for the Firm Shares and Warrants
to be sold by each Selling Stockholder shall be made in Federal or other
immediately available funds to an account designated by the Selling Stockholders
against delivery of such Firm Shares and Warrants for the respective accounts of
the several Underwriters at 7 a.m., California time on February [*], 1999, or
at such other time on the same or such other date, not later than [*], 1999,
as shall be designated in writing by you. Payment of the Warrant Exercise Price
for Warrant Shares shall be made in Federal or other immediately available funds
to an account designated by the Company on the same such date. The time and date
of such payment are hereinafter referred to as the "Closing Date."
Payment for any Additional Shares to be sold by KKR Associates shall be
made in Federal or other immediately available funds to an account designated by
KKR Associates against delivery of such Additional Shares for the respective
accounts of the several Underwriters at 7 a.m., California time on the date
specified in the notice described in Section 3 or on such other date, in any
event not later than March [*], 1999, 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, Warrant Shares and Additional Shares
shall be in definitive form and registered in such names and in such
denominations as you shall request in writing not later than two full business
days prior to the Closing Date or the Option Closing Date, as the case may be.
The certificates evidencing the Firm Shares, Warrant 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 Warrants
and Securities to the Underwriters duly paid (subject to the provisions of
Section 7 hereof), against payment of the Purchase Price, Warrant Purchase Price
and Warrant Exercise Price therefor.
6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The several
obligations of the Selling Stockholders to sell the Shares and Warrants to the
Underwriters and the several obligations of the Underwriters, to purchase and
pay for the Shares and Warrants on the Closing Date are subject to the condition
that that the Registration Statement shall have become effective not later than
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 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 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.
(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 clause (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 in
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all material respects with all of the agreements and satisfied in all
material respects 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 his or her knowledge as to
proceedings threatened).
(c) ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Company, shall have
furnished to you their written opinion dated the Closing Date, in form
and substance satisfactory to you, to the effect that:
(i) the Company has been duly incorporated and is
validly existing and in good standing under the laws of the
State of Delaware, with corporate power and authority to own,
lease and operate its properties and conduct its business as
described in the Prospectus;
(ii) the Company has authorized capital stock as set
forth in the Prospectus, and the Common Stock and Warrants
conform to the description thereof contained in the Prospectus;
(iii) the Shares to be sold by the Selling
Stockholders pursuant to the Underwriting Agreement have been
duly authorized and validly issued and are fully paid and
non-assessable; the Warrant Shares to be issued and sold by the
Company pursuant to the terms of the Warrants have been duly
authorized, and when issued to and paid for by you and the other
Underwriters in accordance with the terms of the Warrants will
be validly issued, fully paid and non-assessable;
(iv) this Agreement has been duly authorized,
executed and delivered by the Company;
(v) the Warrants have been duly authorized, executed
and delivered by the Company and constitute valid and binding
obligations of the Company enforceable in accordance with their
terms;
(vi) the issue and sale of the Warrant Shares being
delivered at the Closing Date by the Company and the compliance
by the Company with the provisions of this Agreement will not
result in the violation by the Company of its Restated
Certificate of Incorporation or By-laws or any federal, New York
or California statute, rule or regulation known to such counsel
to be applicable to the Company (other than federal securities
laws, which are specifically addressed elsewhere in such
counsel's opinion, or state securities laws, as to which such
counsel need not express an opinion) or result in a material
breach or violation of any of the terms or provisions of, or
constitute a default under, any of the indentures relating to
the 9.30% Senior Secured Debentures due 2007, 10% Senior Notes
due 2002, 10% Senior Subordinated Notes due 2001, 9.875% Senior
Subordinated Debentures due 2007, 9.65% Senior Subordinated
Debentures due 2004, 9.35% Senior Subordinated Notes due 1999,
6.85% Senior Notes due 2004, 7.00% Senior Notes due 2007, 7.45%
Senior Debentures due 2027, 5 3/4% Notes Due 2000, 5 7/8>%
Notes Due 2001, 6.05% Notes Due 2003 or 6 1/2% Notes Due 2008,
or the bank credit agreement between the Company and a
consortium of banks led by Bankers Trust Company;
(vii) no consent, approval, authorization or order of,
or filing with, any federal, New York or California court or
governmental agency or body is required for the issue of the
Warrant Shares except such as have been obtained under the
Securities Act
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and such as may be required under state securities laws in
connection with the purchase and distribution of the Securities
by the Underwriters as to which such counsel need not express an
opinion;
(viii) each document incorporated by reference in the
Prospectus or any further amendment or supplement thereto made
by the Company prior to the Closing Date (other than the
financial statements, schedules and other financial data
included or incorporated by reference therein, as to which such
counsel need express no opinion), when it became effective or
was filed with the Commission, as the case may be, appeared on
its face to comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations
of the Commission thereunder. In passing upon the compliance as
to form of each of such documents, such counsel may assume that
the statements made and incorporated by reference therein are
correct and complete;
(ix) the statements in the Prospectus under the
captions "Certain United States Tax Consequences to Non-United
States Holders" and "Description of Capital Stock," in each case
insofar as such statements constitute summaries of legal
matters, are accurate in all material respects;
(x) the Company is not an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended;
(xi) the Registration Statement and the Prospectus
(in each case excluding the documents incorporated by reference
therein, and except for financial statements, schedules and
other financial data included or incorporated by reference
therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements
for registration statements on Form S-3 under the Securities Act
and the applicable rules and regulations of the Commission
thereunder. In passing upon the compliance as to form of the
Registration Statement and the Prospectus, such counsel may
assume that the statements made and incorporated by reference
therein are correct and complete; and
(xii) the Registration Statement has become effective
under the Securities Act and, to such counsel's knowledge, no
stop order suspending the effectiveness of the Registration
Statement has been issued under the Securities Act and no
proceedings therefor have been initiated by the Commission; and
the Prospectus has been filed in accordance with Rule 424(b) and
430A under the Securities Act.
In addition, such counsel shall state that they have
participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company, and your
representatives, at which the contents of the Registration
Statement and the Prospectus and related matters were discussed
and, although such counsel is not passing upon, and does not
assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration
Statement and the Prospectus and such counsel has not made any
independent check or verification thereof (except as set forth
in paragraph (ix) above), during the course of such
participation, no facts came to such counsel's attention that
have caused such counsel to believe that the Registration
Statement (including the documents incorporated by reference
therein), at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, or that the
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Prospectus (including the documents incorporated by reference
therein), as of its date or as of the Closing Date, contained or
contains an untrue statement of a material fact or omitted or
omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; it being understood that such counsel need
express no belief with respect to the financial statements,
schedules and other financial data included in the Registration
Statement or the Prospectus or incorporated by reference
therein.
In rendering such opinion, such counsel may state that
they express an opinion only as to federal securities laws, New
York and California law and the General Corporation Law of
Delaware.
(d) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Senior Vice President, General Counsel and Secretary
of the Company, shall have furnished to you his written opinion, dated
the Closing Date, in form and substance satisfactory to you, to the
effect that:
(i) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each jurisdiction in which its
ownership or lease of substantial properties or the conduct of
its business requires such qualification, and in which the
failure to be so qualified and in good standing would have a
material adverse effect upon the Company and its subsidiaries
considered as a whole;
(ii) based solely on certificates from public
officials, each Significant Subsidiary of the Company has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation; has corporate power and authority to own, lease
and operate its properties and conduct its business as described
in the Prospectus; to the best of his knowledge has been duly
qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which its ownership or lease of substantial
properties or the conduct of its business requires such
qualification, and in which failure to be so qualified and in
good standing would have a material adverse effect upon the
Company and its subsidiaries considered as a whole; and all of
the issued and outstanding capital stock of each such
Significant Subsidiary has been duly authorized and validly
issued and is fully paid and nonassessable, and the capital
stock owned by the Company in such subsidiary is owned by the
Company free and clear of any mortgage, pledge, lien,
encumbrance, claim or equity;
(iii) to the best of such counsel's knowledge there
are no legal or governmental proceedings pending or threatened
to which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries is
the subject, required to be described in the Prospectus, which
are not described as required;
(iv) the issue and sale of the Warrant Shares being
delivered at the Closing Date by the Company and the compliance
by the Company with all of the provisions of this Agreement will
not conflict with or result in a material breach or violation of
any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument relating to indebtedness in excess
of $25 million to which the Company or any of its subsidiaries
is a party or by which the
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Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries
is subject; and
(v) the issued and outstanding shares of capital
stock of the Company and warrants to purchase capital stock of
the Company have been duly authorized and validly issued and are
fully paid and non-assessable.
(e) ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for the Selling Stockholders,
shall have furnished to you their written opinion, dated the Closing
Date, in form and substance satisfactory to you, to the effect that:
(i) this Agreement has been duly authorized,
executed and delivered by or on behalf of each of the Selling
Stockholders;
(ii) each Selling Stockholder has full right, power
and authority to enter into the Underwriting Agreement; the sale
of the Shares or the Warrants, as applicable, by each Selling
Stockholder will not result in the violation by such Selling
Stockholder of its partnership agreement or any federal or New
York statute, rule or regulation known to such counsel to be
applicable to such Selling Stockholder (other than federal
securities laws which are specifically addressed elsewhere in
such counsel's opinion, or state securities laws, as to which
such counsel need not express an opinion); no consent, approval,
authorization or order of, or filing with, any federal or New
York governmental body or agency is required for the sale of the
Shares or the Warrants, as applicable, except such as have been
obtained under the Securities Act and except such as may be
required under state securities laws in connection with the
purchase and distribution of the Securities by the Underwriters,
as to which such counsel need not express an opinion; and
(iii) Upon (i) payment for the Shares and the Warrants
and payment of the exercise price for the Warrant Shares in
accordance with the terms of the Underwriting Agreement, (ii)
(A) physical delivery by KKR Associates, SSI Associates, L.P.
and KKR Partners of the Shares to First Chicago Trust Company of
New York (the "Transfer Agent") and (B) instructions from the
Company to the Transfer Agent to issue the Warrant Shares in
accordance with the terms of the Underwriting Agreement, and
registration of the Securities in the name of The Depository
Trust Company ("DTC") upon registration of transfer by the
Company, (iii) physical delivery of the Securities to DTC, and
registration of the Securities in the name of DTC upon
registration of transfer by the Company, and (iv) registration
by book-entry of the credit to the Underwriters' securities
accounts with DTC of the purchase of Securities in the records
of DTC and any other "securities intermediary" (as defined in
Section 8-102(a)(14) of the New York Uniform Commercial Code
(the "New York UCC")) which acts as a "clearing corporation" (as
defined in Section 8-102(a)(5) of the New York UCC) or maintains
"securities accounts" (as defined in Section 8-501(a) of the New
York UCC) with respect to the transfer of the Securities to the
Underwriters, then the Underwriters will become the "entitlement
holders" (as defined in Section 8-102(a)(7) of the New York UCC)
of the Securities, free of any "adverse claims" (as defined in
Section 8-102(a)(1) of the New York UCC).
(f) The Underwriters shall have received on the Closing Date
an opinion of ▇▇▇▇▇ & Wood LLP, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in the first clause of
subparagraph (i), the second clause of subparagraph (iii),
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subparagraphs (iv), (xi) and (xii) and the penultimate subparagraph of
paragraph (c) above and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon
such matters.
With respect to subparagraph (xi) of paragraph (c) above, ▇▇▇▇▇
& Wood may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto (other than the
documents incorporated by reference) and review and discussion of the
contents thereof, but are without independent check or verification,
except as specified. With respect to paragraph (e) above, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ may rely upon an opinion or opinions of counsel for any Selling
Stockholder and, to the extent such counsel deems appropriate, upon the
representations of each Selling Stockholder contained herein and in
other documents and instruments, provided that (A) each such counsel for
the Selling Stockholders is satisfactory to your counsel, (B) a copy of
each opinion so relied upon is delivered to you and is in form and
substance satisfactory to your counsel, (C) copies of such other
documents and instruments, if any, shall be delivered to you and shall
be in form and substance satisfactory to your counsel and (D) ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ shall state in their opinion that they are justified in relying
on each such other opinion.
The opinions of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ described in paragraphs (c) and
(e) above shall be rendered to the Underwriters at the request of the
Company or the Selling Stockholders, as the case may be, and shall so
state therein.
(g) The Underwriters shall have received on the Closing Date
a certificate, dated the Closing Date and signed on behalf of each of
the Selling Stockholders, to the effect that the representations and
warranties of such Selling Stockholders contained herein are true and
correct on and as of the Closing Date and that such Selling Stockholders
have complied in all material respects with all of the agreements and
satisfied in all material respects all of the conditions on their part
to be performed or satisfied hereunder on or before the Closing Date.
(h) The Underwriters shall have received, on each of the
date hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Deloitte & Touche LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a
"cut-off date" not earlier than the date hereof.
(i) At the date of this Agreement, the Company and the
Selling Stockholders shall have furnished for review by the Underwriters
copies of such further information, certificates and documents as they
may reasonably request.
(j) Simultaneous with the purchase of the Warrants and the
payment of the Warrant Exercise Price by the Underwriters, the Company
will issue Warrant Shares.
(k) If the Company has elected to rely upon Rule 462(b), the
Rule 462(b) Registration Statement shall have become effective by 10:00
p.m., Washington, D.C. time, on the date of this Agreement.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the delivery to the
Underwriters on the Option Closing Date of such documents as they
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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 thereto.
7. 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, a signed copy of the
Registration Statement (including exhibits thereto and documents
incorporated by reference) and to each Underwriter a copy of the
Registration Statement (without exhibits thereto but including documents
incorporated by reference) and to furnish to you in New York City
without charge prior to 5:00 p.m. local time on the business day next
succeeding the date of this Agreement, and during the period mentioned
in paragraph (c) below, as many copies of the Prospectus, any documents
incorporated therein by reference, and any supplements and amendments
thereto or to the Registration Statement as you may reasonably request.
The terms "supplement" and "amendment" or "amend" as used in this
Agreement shall include all documents subsequently filed by the Company
with the Commission pursuant to the Exchange Act that are deemed to be
incorporated by reference in the Prospectus.
(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, 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 of the
public offering of the Securities 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 Securities 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 Securities 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 earnings statement 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 Securities under
the Securities Act and all other fees or expenses
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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, 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) the cost of printing or producing any Blue Sky
memorandum in connection with the offer and sale of the Securities under
state securities laws and all expenses in connection with the
qualification of the Securities for offer and sale under state
securities laws as provided in Section 7(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 memorandum, (iii) the cost of printing certificates
representing the Securities, (iv) the costs and charges of any transfer
agent, registrar or depositary, (v) the costs and expenses of the
Company relating to investor presentations on any "road show" undertaken
in connection with the marketing of the offering, 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 expense of the representatives and officers of the
Company and any such consultants, and the cost of any aircraft chartered
by the Company in connection with the road show, (vi) all other costs
and expenses of the Company in connection with the performance of its
obligations hereunder for which provision is not otherwise made in this
Section, and (vii) any other costs and expenses of others in connection
with the performance of the Company's obligations hereunder which have
been previously approved by the Company. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated agrees to pay New York State stock transfer taxes incurred
in connection with the sale of the Securities pursuant hereto, if any,
and the Selling Stockholders agree to reimburse ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated for any associated carrying costs if such tax payment is
not rebated on the day of payment and for any portion of such tax
payment not rebated. It is understood, however, that except as provided
in this Section, Section 8 entitled "Indemnity and Contribution", and
the last paragraph of Section 10 below, the Underwriters will pay all of
their costs and expenses, including fees and disbursements of their
counsel, stock transfer taxes payable on resale of any of the Securities
by them, the costs and expenses of the Underwriters relating to investor
presentations on any "road shows" undertaken in connection with the
marketing of the Shares and any advertising expenses connected with any
offers they may make.
(g) Upon payment of the purchase price for any or all of the
Warrants to the Selling Stockholders, to deem any and all requirements
for the transfer of such Warrants to be satisfied.
(h) Simultaneous with the purchase from the Selling
Stockholders of, and payment for, the Warrants and the payment to the
Company of the Warrant Exercise Price by the Underwriters, the Company
will issue the Warrant Shares, all as contemplated by this Agreement.
8. 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 by any Underwriter or any such controlling
person 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 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 insofar as such
losses, claims, damages or liabilities are caused
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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; provided, however, that the foregoing indemnity agreement 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 Securities, 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
Securities 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. The Company reaffirms its
indemnification of the Selling Stockholders pursuant to that certain
Registration Rights Agreement entered into by the Company, KKR
Associates, SSI Equity and certain other parties named therein, dated as
of November 25, 1986 (the "Registration Rights Agreement").
(b) Each Selling Stockholder agrees, severally and not
jointly, 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 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, but only
with reference to information relating to such Selling Stockholder
furnished in writing by or on behalf of such Selling Stockholder
expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto;
provided, however, that the foregoing indemnity agreement 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 Securities, 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
Securities to such person, and if the Prospectus (as to amended or
supplemented) would have cured the defect giving rise to such losses,
claims, damages or liabilities. The Selling Stockholders reaffirm their
indemnification of the Company pursuant to the Registration Rights
Agreement.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Selling Stockholders, the
directors of the Company, the officers of the Company who sign the
Registration Statement and each person, if any, who controls the Company
or any Selling Stockholder 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 in
paragraph 8(a) above, 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 paragraph (a), (b) or (c) of
this Section 8, such person (the "indemnified party") shall promptly
notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing 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
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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. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (a) the fees and
expenses of more than one separate firm (in addition to any local
counsel) for all Underwriters and all persons, if any, who control any
Underwriter within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, (b) the fees and expenses of more
than one separate firm (in addition to any local counsel) for 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 such Section and (c) the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Selling
Stockholders and all persons, if any, who control any Selling
Stockholder within the meaning of either such Section, and that all such
fees and expenses shall be reimbursed as they are incurred. In the case
of any such separate firm for the Underwriters and such control persons
of Underwriters, such firm shall be designated in writing by ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. Incorporated. In the case of any such separate firm for
the Company, and such directors, officers and control persons of the
Company, such firm shall be designated in writing by the Company. In the
case of any such separate firm for the Selling Stockholders and such
controlling persons of Selling Stockholders, such firm shall be
designated in writing by the Selling Stockholders. 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.
(e) To the extent the indemnification provided for in
paragraph (a), (b) or (c) of this Section 8 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 indemnifying party or parties on the
one hand and the indemnified party or parties on the other hand from the
offering of the Securities 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 indemnifying party
or parties on the one hand and of the indemnified party or parties 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 and the Selling Stockholders on the one hand and the
Underwriters on the other hand in connection with the offering of the
Securities shall be deemed to be in the same respective proportions as
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the net proceeds from the offering of the Securities received by the
Selling Stockholders and the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in
the table (including the footnotes thereto) on the cover of the
Prospectus, bear to the aggregate Public Offering Price of the Shares.
The relative fault of the Company and the Selling Stockholders 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 and
the Selling Stockholders 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 8 are
several in proportion to the respective number of Shares and Warrants
they have purchased hereunder, and not joint.
(f) The Company, the Selling Stockholders and the
Underwriters agree that it would not be just or equitable if
contribution pursuant to this Section 8 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 not take account
of the equitable considerations referred to in paragraph (e) of this
Section 8. 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 8, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Securities underwritten by it and distributed to the public were offered
to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission and no Selling
Stockholder shall be required to contribute any amount in excess of the
amount by which the proceeds received by such Selling Stockholder from
the Shares or Warrant Shares sold by it pursuant to this Agreement
exceeds the amount of any damages that such Selling Stockholder 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 8 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 8 and the representations, warranties and other statements
of the Company and the Selling Stockholders 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, any
Selling Stockholder or any person controlling any Selling Stockholder,
or the Company, its officers or directors or any person controlling the
Company and (iii) acceptance of and payment for any of the Securities.
9. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company and the Selling Stockholders, 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, either of the New York Stock Exchange or the National
Association of Securities Dealers, Inc., (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
or California shall have been declared by either Federal or New York State or
California 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 (a)(i) through (iv), such event, singly
or together with any other such event,
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makes it, in your judgment, impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus.
10. 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 or
Warrants that it has or they have agreed to purchase hereunder on such date, and
the aggregate number of Shares and Warrants 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 and Warrants to be purchased on such date,
the other Underwriters shall be obligated severally in the proportions that the
aggregate number of Firm Shares and Warrants set forth opposite their respective
names in Schedule II bears to the aggregate number of Firm Shares and Warrants
set forth opposite the names of all such non-defaulting Underwriters, or in such
other proportions as you may specify, to purchase the Shares and Warrants which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the aggregate number of
Shares and Warrants that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 10 by an amount in excess of
one-ninth of such aggregate number of Firm Shares and Warrants without the
written consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares or Warrants and the
aggregate number of Firm Shares and Warrants with respect to which such default
occurs is more than one-tenth of the aggregate number of Firm Shares and
Warrants to be purchased, and arrangements satisfactory to you, the Company and
the Selling Stockholders for the purchase of such Firm Shares and Warrants are
not made within 36 hours after such default, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter, the Company or
the Selling Stockholders. In any such case either you or the Company or the
Selling Stockholders 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 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 or any
Selling Stockholder to comply with the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company or any Selling Stockholder
shall be unable to perform its obligations under this Agreement, the Company and
the Selling Stockholders 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; provided, however, that no such
reimbursement shall be required with respect to a termination of this Agreement
by the Underwriters pursuant to Section 9 or Section 10.
11. 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.
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12. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
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13. 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,
SAFEWAY INC.
By: __________________________________________
Name:
Title:
SELLING STOCKHOLDERS
KKR Associates, L.P.
By: __________________________________________
Name:
Title: General Partner
KKR Partners II, L.P.
By: KKR Associates, L.P.
the General Partner
By: __________________________________________
Name:
Title: General Partner
SSI Associates, L.P.
By: KKR Associates, L.P.
the General Partner
By: __________________________________________
Name:
Title: General Partner
SSI Equity Associates, L.P.
By: SSI Partners, L.P.
the General Partner
By: __________________________________________
Name:
Title: General Partner
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Accepted as of the date hereof
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INCORPORATED
▇▇▇▇▇▇▇, SACHS & CO.
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
▇▇▇▇▇▇▇▇▇, LUFKIN & ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION
ING BARING ▇▇▇▇▇▇ ▇▇▇▇ LLC
▇▇▇▇▇▇ BROTHERS INC.
▇.▇. ▇▇▇▇▇▇ SECURITIES INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ READ LLC
Acting severally on behalf of themselves
and the several Underwriters named in
Schedule II hereto
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
By: __________________________________________
Name:
Title:
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SCHEDULE I
TOTAL NUMBER OF
TOTAL NUMBER OF ADDITIONAL SHARES
TOTAL NUMBER OF WARRANTS TO BE TO BE SOLD IF
FIRM SHARES SOLD (EXPRESSED AS MAXIMUM OPTION
SELLING STOCKHOLDERS TO BE SOLD WARRANT SHARES) EXERCISED
-------------------- --------------- ------------------ -----------------
KKR Associates, L.P. 4,261,158 2,000,000
SSI Associates, L.P. 14,862,296
KKR Partners II, L.P. 526,850
SSI Equity Associates, L.P. 99,696
========== ====== =========
TOTAL 19,650,304 99,696 2,000,000
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SCHEDULE II
TOTAL NUMBER OF
TOTAL NUMBER OF ADDITIONAL
WARRANTS TO BE SHARES TO BE
TOTAL NUMBER OF PURCHASED PURCHASED IF
FIRM SHARES TO BE (EXPRESSED AS MAXIMUM OPTION
UNDERWRITERS PURCHASED WARRANT SHARES) EXERCISED
------------ ----------------- --------------- ---------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇▇▇▇, Sachs & Co.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities
Corporation
ING Baring ▇▇▇▇▇▇ ▇▇▇▇ LLC
▇▇▇▇▇▇ Brothers Inc.
▇.▇. ▇▇▇▇▇▇ Securities Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Read LLC
========== ====== =========
TOTAL 19,650,304 99,696 2,000,000
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