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Exhibit 1.1
$100,000,000
5.25% Senior Convertible
Notes Due 2028
FLOTEK INDUSTRIES,
INC.
UNDERWRITING
AGREEMENT
February 11,
2008
BEAR, STEARNS & CO.
INC.
383 Madison Avenue
New York, New York 10179
Ladies/Gentlemen:
Flotek Industries, Inc., a
corporation organized and existing under the laws of Delaware (the
“ Company ”), proposes, subject to the terms and
conditions stated herein, to issue and sell to Bear,
Stearns & Co. Inc. (“ Bear Stearns ” or
the “ Underwriter ”) $100,000,000 aggregate
principal amount (the “ Firm Securities ”) of
its 5.25% Senior Convertible Notes Due 2028 (the “
Notes ”), and, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Securities,
at the option of the Underwriter, up to an additional $15,000,000
aggregate principal amount (the “ Additional
Securities ”) of its 5.25% Senior Convertible Notes Due
2028. The Firm Securities and any Additional Securities purchased
by the Underwriter, together with the Guarantees (as defined below)
are referred to herein as the “ Securities ”.
The Securities will be irrevocably and unconditionally guaranteed
(the “ Guarantees ”) by the subsidiaries of the
Company listed in Exhibit A hereto that have signed this Agreement
(each a “ Guarantor ” and, collectively, the
“ Guarantors ”), and all to be issued under an
indenture, dated as of February 14, 2008 (the “ Base
Indenture ”), between the Company and American Stock
Transfer & Trust Company, as Trustee (the “
Trustee ”), as supplemented by a First Supplemental
Indenture thereto, to be dated as of the Closing Date (as defined
below) (the “ First Supplemental Indenture ”),
among the Company, the Guarantors and the Trustee. The Base
Indenture, as supplemented by the First Supplemental Indenture, is
hereafter called the “ Indenture ”. The
Securities will be convertible into shares (the “
Underlying Shares ”) of common stock of the Company,
par value $0.0001 per share (the “ Common Stock
”), subject to and in accordance with the terms of the
Securities. Bear Stearns is acting as the sole manager and
underwriter in connection with the offering and sale of the
Securities contemplated herein (the “ Offering
”).
Concurrently with the
Offering, the Company, subject to the terms and conditions stated
in the Common Stock Underwriting Agreement (as defined below) and
the Share Lending Agreement (the “ Share Lending
Agreement ”) dated February 11, 2008 between the
Company, Bear, Stearns International Limited (“ BSIL
”) and Bear Stearns, is issuing and lending to BSIL a share
loan up to 3,800,000 shares of its Common Stock, and Bear Stearns
proposes to offer (the “ Common Stock Offering
”) such number of loaned shares as Bear Stearns deems
advisable, in an offering registered under the Securities Act of
1933, as amended (the “ Act ”) by means of
a
prospectus supplement. Bear Stearns is
acting as the underwriter in the Convertible Notes Offering. The
Company and Bear Stearns will be entering into an Underwriting
Agreement (the “ Common Stock Underwriting Agreement
”) with respect to the Common Stock Offering.
1. Representations and
Warranties of the Company . The Company and each of the
Guarantors jointly and severally hereby represent, and warrant to,
and agree with, the Underwriter that:
(a) The Company has filed
with the Securities and Exchange Commission (the “
Commission ”) a registration statement under the
Securities Act of 1933, as amended (the “ Securities
Act ”), relating to the Securities, on Form S-3 (No.
333-148384) (the initial filing being referred to as the “
Initial Registration Statement ”); and such Initial
Registration Statement, and any post-effective amendment thereto,
each in the form previously delivered to you, became effective upon
filing, in such form. No document other than Post-Effective
Amendment No. 1 to the Initial Registration Statement and any
preliminary prospectus supplements with respect to the Initial
Registration Statement has heretofore been filed with the
Commission. The various parts of the Initial Registration Statement
including all exhibits thereto and including (i) the
information contained in the form of final prospectus filed with
the Commission pursuant to Rule 424(b) under the Securities Act in
accordance with Section 4(a) hereof and deemed by virtue of
Rule 430B under the Securities Act to be part of the Initial
Registration Statement at the time it became effective under the
Securities Act with respect to the Underwriter, and (ii) the
documents incorporated by reference in the prospectus contained in
the Initial Registration Statement at the time such part of the
Initial Registration Statement becomes effective, each as amended
at the time such part of the Initial Registration Statement became
or hereafter becomes effective under the Securities Act with
respect to the Underwriter, are hereafter collectively referred to
as the “ Registration Statement .” Any reference
to any amendment to the Registration Statement shall be deemed to
refer to and include any annual report of the Company filed
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended (the “ Exchange Act ”),
after the effective date of the Initial Registration Statement that
is incorporated by reference therein. No stop order suspending the
effectiveness of the Initial Registration Statement or any
post-effective amendment thereto has been issued and no proceeding
for that purpose has been initiated or, to the knowledge of the
Company, threatened by the Commission.
The final prospectus
supplement together with the base prospectus included in the
Initial Registration Statement, in the form in which it has most
recently been filed with the Commission on or prior to the date of
this Agreement (the “ Base Prospectus ”)
relating to the Securities, in the form filed with the Commission
pursuant to Rule 424(b) under the Securities Act, is hereafter
referred to as the “ Prospectus ”. Any
preliminary prospectus supplement together with the Base Prospectus
included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424 under the Securities Act is
hereafter referred to as a “ Preliminary Prospectus
;” and the Preliminary Prospectus relating to the Securities
dated February 5, 2008, is hereafter referred to as the
“ Pricing Prospectus ”. Any “issuer free
writing prospectus” (as defined in Rule 433 under the
Securities Act) relating to the Securities is hereafter referred to
as an “ Issuer Free Writing Prospectus ”; and
the Pricing Prospectus, as supplemented by the Issuer Free Writing
Prospectuses, if any, attached and listed in Annex III hereto,
taken together, are hereafter referred to collectively as the
“ Pricing Disclosure
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Package ”. Any reference
herein to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 that were
filed under the Exchange Act on or before the date of such
Preliminary Prospectus or Prospectus, as the case may be; and any
reference herein to any “amendment” or
“supplement” to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include (i) the
filing of any document under the Exchange Act after the date of
such Preliminary Prospectus or Prospectus, as the case may be,
which is incorporated therein by reference and (ii) any such
document so filed.
The Company was not an
“ineligible issuer” (as defined in Rule 405 under the
Securities Act) as of the eligibility determination date for
purposes of Rules 164 and 433 under the Securities Act with respect
to the offering of the Securities contemplated hereby.
All references in this
Agreement to the Registration Statement, any Preliminary
Prospectus, Issuer Free Writing Prospectus, the Pricing Prospectus
or the Prospectus, or any amendments or supplements to any of the
foregoing, shall be deemed to include any copy thereof filed with
the Commission pursuant to its Electronic Data Gathering, Analysis
and Retrieval System.
(b) At the time of initial
filing of the Registration Statement the Company was a “well
known seasoned issuer” as defined in Rule 405 under the
Securities Act, including not having been an “ineligible
issuer” as defined in Rule 405 under the Securities Act. The
Registration Statement is an “automatic shelf registration
statement,” as defined in Rule 405 under the Securities Act.
Neither the Company nor any person acting on its behalf (within the
meaning for this clause only, of Rule 163(c)) has made any offer
relating to the Securities in reliance on the exemption of Rule
163.
If immediately prior to the
Renewal Deadline (as hereinafter defined), any of the Securities
remain unsold by the Underwriter and the Underwriter has so
informed the Company in writing, the Company will prior to the
Renewal Deadline file, if it has not already done so and is
eligible to do so, a new automatic shelf registration statement
relating to the Securities, in a form reasonably satisfactory to
the Underwriter. If the Company is no longer eligible to file an
automatic shelf registration statement, the Company will prior to
the Renewal Deadline, if it has not already done so, file a new
shelf registration statement relating to the Securities, in a form
reasonably satisfactory to the Underwriter, and will use its
commercially reasonable efforts to cause such registration
statement to be declared effective promptly thereafter. The Company
will take all other action reasonably necessary or appropriate to
permit the public offering and sale of the Securities to continue
as contemplated in the expired registration statement relating to
the Securities. References herein to the Registration Statement
shall include such new automatic shelf registration statement or
such new shelf registration statement, as the case may be. “
Renewal Deadline ” means the third anniversary of the
initial effective time of the Registration Statement.
The Company has not received
from the Commission any notice pursuant to Rule 401(g)(2) objecting
to use of the automatic shelf registration statement form. If at
any time when Securities remain unsold by the Underwriter the
Company receives from the Commission a notice pursuant to Rule
401(g)(2) or otherwise ceases to be eligible to use the automatic
shelf
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registration statement form, the Company
will (i) promptly notify the Underwriter, (ii) promptly
file a new registration statement or post-effective amendment on
the proper form relating to the Securities, in a form satisfactory
to the Underwriter, (iii) use its reasonable best efforts to
cause such registration statement or post-effective amendment to be
declared effective as soon as practicable, and (iv) promptly
notify the Underwriter of such effectiveness. The Company will take
all other action necessary or appropriate to permit the public
offering and sale of the Securities to continue as contemplated in
the registration statement that was the subject of the Rule
401(g)(2) notice or for which the Company has otherwise become
ineligible. References herein to the Registration Statement shall
include such new registration statement or post-effective
amendment, as the case may be.
The Company has paid or shall
pay the required Commission filing fees relating to the Securities
within the time required by Rule 456(b)(1) without regard to the
proviso therein and otherwise in accordance with Rules 456(b) and
457(r).
(c) The Registration
Statement complies and the Prospectus and any further amendments or
supplements to the Registration Statement or the Prospectus will
comply in all material respects with the applicable provisions of
the Securities Act, the Exchange Act, the Trust Indenture Act of
1939, as amended (the “ Trust Indenture Act ”)
and the rules and regulations of the Commission thereunder (the
“ Rules and Regulations ”), and do not and will
not, as of the applicable effective date as to each part of the
Registration Statement and as of the applicable filing date as to
the Prospectus and any amendment thereof or supplement thereto,
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein (i) in the case of the
Registration Statement, not misleading and (ii) in the case of
the Prospectus, in the light of the circumstances under which they
were made not misleading; provided, however, that this
representation and warranty shall not apply to any information
contained in or omitted from the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in
writing to the Company by the Underwriter specifically for use
therein. The parties hereto agree that such information provided by
the Underwriter consists solely of the material referred to in
Section 16 hereof.
(d) No order preventing or
suspending the use of any Preliminary Prospectus or any Issuer Free
Writing Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, complied in
all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the Rules and Regulations, and
did not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any information
contained in or omitted from any Preliminary Prospectus in reliance
upon and in conformity with information furnished in writing to the
Company by the Underwriter specifically for use therein. The
parties hereto agree that such information provided by the
Underwriter consists solely of the material referred to in
Section 16 hereof.
(e) For purposes of this
Agreement, the “ Applicable Time ” is 7:30 p.m.
New York time on February 11, 2008. The Pricing Disclosure
Package, as of the Applicable Time, did not, and as of the Closing
Date and the Additional Closing Date, if any (each as
hereinafter
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defined), will not, contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. Each Issuer Free Writing Prospectus complies in all
material respects with the applicable provisions of the Securities
Act and the Rules and Regulations, and does not include information
that conflicts with the information contained in the Registration
Statement, the Pricing Prospectus or the Prospectus, and each
Issuer Free Writing Prospectus not listed in Annex III hereto, as
supplemented by and taken together with the Pricing Disclosure
Package, as of the Applicable Time, did not, and as of the Closing
Date and the Additional Closing Date, if any, will not, contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading. No representation and warranty is made
in this Section 1(e) with respect to any information contained
in or omitted from the Pricing Disclosure Package or any Issuer
Free Writing Prospectus in reliance upon and in conformity with
information furnished in writing to the Company by the Underwriter
specifically for use therein. The parties hereto agree that such
information provided by the Underwriter consists solely of the
material referred to in Section 16 hereof.
(f) UHY LLP, who have
certified the financial statements and supporting schedules and
information of the Company and its subsidiaries that are included
or incorporated by reference in the Registration Statement, the
Pricing Prospectus or the Prospectus, and Elms, Faris &
Company, LLP, whose reports appear or are incorporated by reference
in the Registration Statement, the Pricing Prospectus or the
Prospectus, who have certified certain other financial statements
and supporting schedules and information of Teal Supply Co. (d/b/a
Triumph Drilling Tools, Inc.) that are included or incorporated in
the Registration Statement, the Pricing Prospectus or the
Prospectus, each are independent public accountants as required by
the Securities Act, the Exchange Act and the Rules and
Regulations.
(g) Subsequent to the
respective dates as of which information is given in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus, except as disclosed in the Pricing Disclosure Package,
(i) the Company has not declared or paid any dividends, or
made any other distribution of any kind, on or in respect of its
capital stock, (ii) there has not been any material change in
the capital stock or long-term or short-term debt of the Company or
any of its subsidiaries listed in Exhibit A hereto (each, a “
Subsidiary ” and, collectively, the “
Subsidiaries ”), (iii) neither the Company nor
any Subsidiary has sustained any material loss or interference with
its business or properties from fire, explosion, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding, and
(iv) there has not been any material adverse change or any
development involving a prospective material adverse change,
whether or not arising from transactions in the ordinary course of
business, in or affecting the business, financial condition,
results of operations, stockholders’ equity, properties or
prospects of the Company and the Subsidiaries, taken as a whole (a
“ Material Adverse Change ”). Since the date of
the latest balance sheet included, or incorporated by reference, in
the Registration Statement and the Pricing Disclosure Package,
neither the Company nor any Subsidiary has incurred or undertaken
any liabilities or obligations, whether direct or indirect,
liquidated or contingent, matured or unmatured, or entered into any
transactions, including any acquisition or disposition of any
business or asset, which are material to the Company and the
Subsidiaries, taken as a whole, except for liabilities, obligations
and transactions which are disclosed in the Pricing Disclosure
Package.
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(h) The Company has an
authorized capitalization as set forth in the Pricing Disclosure
Package, and all of the issued and outstanding shares of capital
stock of the Company are fully paid and non-assessable and have
been duly and validly authorized and issued, in compliance with all
applicable state, federal and foreign securities laws and were not
issued in violation of or subject to any preemptive or similar
right that entitles any person to acquire from the Company or any
Subsidiary any Common Stock or other equity security of the Company
or any security convertible into, or exercisable or exchangeable
for, Common Stock or any other such security (any “
Relevant Security ”), except for such rights as may
have been fully satisfied or waived prior to the effectiveness of
the Registration Statement.
(i) The Securities to be
delivered on the Closing Date and the Additional Closing Date (as
hereinafter defined), if any, have been duly and validly authorized
and, when issued and delivered in accordance with this Agreement
and duly authenticated pursuant to the Indenture, will be duly and
validly issued, fully paid and non-assessable, will have been
issued in compliance with all applicable state, federal and foreign
securities laws, will constitute valid and legally binding
obligations of the Company and the Guarantors entitled to the
benefits provided in the Indenture and will not have been issued in
violation of or subject to any preemptive or similar right that
entitles any person to acquire any Relevant Security from the
Company or the Guarantors. The Common Stock and the Securities
conform to the descriptions thereof contained in the Registration
Statement, the Pricing Prospectus and the Prospectus. Except as
disclosed in the Registration Statement and the Pricing Disclosure
Package, the Company has no outstanding warrants, options to
purchase, or any preemptive rights or other rights to subscribe for
or to purchase, or any contracts or commitments to issue or sell,
any Relevant Security, except for grants of options subsequent to
the date of this agreement pursuant to the Company’s employee
benefit plans, which plans are disclosed in the Pricing Disclosure
Package. Except as disclosed in the Registration Statement and the
Pricing Disclosure Package, no holder of any Relevant Security has
any rights to require registration under the Securities Act of any
Relevant Security in connection with the offer and sale of the
Securities contemplated hereby, and any such rights so disclosed
have either been fully complied with by the Company or effectively
waived by the holders thereof.
(j) All of the issued shares
of capital stock of or other ownership interests in each Subsidiary
have been duly and validly authorized and issued and are fully paid
and non-assessable and except as disclosed in the Pricing
Disclosure Package are owned directly or indirectly by the Company
free and clear of any lien, charge, mortgage, pledge, security
interest, claim, equity, trust or other encumbrance, preferential
arrangement, defect or restriction of any kind whatsoever (any
“ Lien ”).
(k) The Subsidiaries listed
on Exhibit A are the only subsidiaries of the Company
(within the meaning of Rule 405 under the Securities Act) except
for Petrovalve International Inc. Each of the Company and each
Subsidiary has been duly organized and validly exists as a
corporation, partnership or limited liability company in good
standing under the laws of its jurisdiction of organization. Each
of the Company and each Subsidiary is duly qualified to do business
and is in good standing as a foreign corporation, partnership or
limited liability
6
company in each jurisdiction in which
the character or location of its properties (owned, leased or
licensed) or the nature or conduct of its business makes such
qualification necessary, except for those failures to be so
qualified or in good standing which taken as a whole could not
reasonably be expected to have (i) a material adverse effect
on the business, financial condition, results of operations,
stockholders’ equity, properties or prospects of the Company
and the Subsidiaries, taken as a whole; or (ii) an adverse
effect on the ability of the Company to consummate the Offering,
the pending acquisition of Teledrift Inc. or any other transaction
contemplated by this Agreement, the Share Lending Agreement and the
Common Stock Underwriting Agreement (a “ Material Adverse
Effect ”).
(l) Each of the Company and
each Subsidiary has all requisite power and authority, and all
necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses, filings and permits of,
with and from all judicial, regulatory and other legal or
governmental agencies and bodies and all third parties, foreign and
domestic (collectively, the “ Consents ”), to
own, lease and operate its properties and conduct its business as
it is now being conducted and as disclosed in the Registration
Statement and the Pricing Prospectus, and each such Consent is
valid and in full force and effect, except in each case as could
not reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any Subsidiary has received notice of any
investigation or proceedings which, if decided adversely to the
Company or any such Subsidiary, could reasonably be expected to
result in, the revocation of, or imposition of a materially
burdensome restriction on, any such Consent.
(m) This Agreement has been
duly and validly authorized, executed and delivered by the Company
and the Guarantors.
(n) The Indenture has been
duly authorized and, when executed and delivered by the Company and
the Guarantors (assuming the authorization, execution and delivery
by the Trustee), shall constitute a valid and legally binding
instrument of the Company and the Guarantors, enforceable against
the Company and the Guarantors in accordance with its terms, except
as (i) the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, fraudulent conveyance,
moratorium, reorganization and laws of general applicability
relating to or affecting creditors’ rights and general equity
principles (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (ii) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. The
Indenture conforms, in all material respects, to the description
thereof in the Registration Statement, the Pricing Disclosure
Package and the Prospectus.
(o) Upon issuance and
delivery of the Securities in accordance with this Agreement and
the Indenture, the Securities (except the Guarantees) will be
convertible at the option of the holder thereof into the Underlying
Shares in accordance with the terms of the Securities (except the
Guarantees); the Underlying Shares reserved for issuance upon
conversion of the Securities (except the Guarantees) have been duly
authorized and reserved and, when issued upon conversion of the
Securities in accordance with the terms of the Securities, will be
duly and validly issued, in compliance with all applicable state,
federal and foreign securities laws, and will be fully paid and non
assessable, and the issuance of the Underlying Shares will not be
subject to any preemptive or similar rights.
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(p) The issue and sale of the
Securities, the compliance by the Company and the Guarantors with
this Agreement, the Indenture and the terms of the Securities and
the consummation of the transactions herein contemplated do not and
will not (i) conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default (or
an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or
imposition of any Lien upon any property or assets of the Company
or any Subsidiary pursuant to, any indenture, mortgage, deed of
trust, loan agreement or other agreement, instrument, franchise,
license or permit to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary or their respective
properties, operations or assets may be bound or (ii) violate
or conflict with any provision of the certificate or articles of
incorporation, by-laws, certificate of formation, limited liability
company agreement, partnership agreement or other organizational
documents of the Company or any Subsidiary, or (iii) violate
or conflict with any statute, law, rule, regulation, ordinance,
directive, judgment, decree or order of any court or governmental
or regulatory agency or body having jurisdiction over the Company
and each Subsidiary, except, in the case of clauses (i) and
(iii) above, as could not reasonably be expected to have a
Material Adverse Effect.
(q) The certificates for the
Underlying Shares conform to the requirements of the New York Stock
Exchange and the Delaware General Corporation Law.
(r) No Consent of or with any
court, governmental or regulatory agency or body or any third party
having jurisdiction over the Company and each Subsidiary, is
required for the execution, delivery and performance of this
Agreement or consummation of the transactions contemplated by this
Agreement, except the registration under the Securities Act of the
Securities and such consents as may be required under state
securities or blue sky laws or the by-laws and rules of the
Financial Industry Regulatory Authority (the “ FINRA
”) in connection with the purchase and distribution of the
Securities by the Underwriter, each of which has been obtained and
is in full force and effect.
(s) Except as disclosed in
the Registration Statement, the Pricing Disclosure Package and the
Prospectus, there are no legal, governmental or regulatory
proceedings pending to which the Company or any Subsidiary is a
party or of which any property, operations or assets of the Company
or any Subsidiary is the subject which, taken as a whole, if
determined adversely to the Company or any Subsidiary, could
reasonably be expected to have a Material Adverse Effect; to the
Company’s knowledge, no such proceeding is threatened or
contemplated.
(t) The financial statements
and pro forma data, including the notes thereto, and the supporting
schedules included or incorporated by reference in the Registration
Statement, the Pricing Disclosure Package and the Prospectus
present fairly, in all material respects, the financial position as
of the dates indicated and the cash flows and results of operations
for the periods specified of the Company and its consolidated
subsidiaries and the other entities for which financial statements
are included or incorporated by reference in the Registration
Statement, the Pricing Disclosure Package and the Prospectus;
except as otherwise stated in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, said financial
statements have been prepared in conformity with United States
generally accepted accounting principles applied on a consistent
basis throughout the periods involved; and the supporting schedules
included in the Registration Statement, the Pricing Disclosure
Package and
8
the Prospectus present fairly, in all
material respects, the information required to be stated therein.
No other financial statements or supporting schedules are required
to be included in the Registration Statement, the Pricing
Disclosure Package or the Prospectus by the Securities Act, the
Exchange Act or the Rules and Regulations. The other financial and
statistical information included or incorporated by reference in
the Registration Statement, the Pricing Disclosure Package and the
Prospectus present fairly the information included therein and have
been prepared on a basis consistent with that of the financial
statements that are included or incorporated by reference in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus and the books and records of the respective entities
presented therein.
(u) The pro forma financial
statements included in the Registration Statement, the Pricing
Prospectus and the Prospectus have been properly compiled and
prepared in accordance with the applicable requirements of the
Securities Act, the Exchange Act and the Rules and Regulations and
include all adjustments necessary to present fairly in accordance
with United States generally accepted accounting principles the pro
forma financial position of the respective entity or entities
presented therein at the respective dates indicated and their cash
flows and the results of operations for the respective periods
specified.
(v) The statistical,
industry-related and market-related data included in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus are based on or derived from sources which the Company
reasonably and in good faith believes are reliable and
accurate.
(w) The Common Stock has been
registered pursuant to Section 12(b) of the Exchange Act. The
shares of Common Stock are listed on the New York Stock Exchange
(the “ NYSE ”), and the Company has taken no
action designed to, or likely to have the effect of, terminating
the registration of the Common Stock under the Exchange Act or
de-listing the Common Stock from the NYSE, nor has the Company
received any notification that the Commission or the NYSE is
contemplating terminating such registration or listing; the Company
will reserve and keep available at all times, free of pre-emptive
rights, shares of Common Stock for the purpose of enabling the
Company to satisfy all obligations to issue the Underlying Shares
upon any conversion of the Securities.
(x) The Company maintains a
system of internal accounting and other controls over the Company
and its Subsidiaries sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with
management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with United
States generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted
only in accordance with management’s general or specific
authorization, and (iv) the recorded accounting for assets is
compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
(y) The Company maintains a
system of internal control over financial reporting (as such term
is defined in Rule 13a-15(f) under the Exchange Act) that complies
with the requirements of the Exchange Act and has been designed by
the Company’s principal executive officer and principal
financial officer, or under their supervision, to provide
reasonable
9
assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles. Except as disclosed in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, the Company’s
internal control over financial reporting was effective as of
September 30, 2007, there have been no changes to such
internal controls since September 30, 2007 and, based on work
completed to date in the ordinary course of business, the Company
has no reason to believe its internal control over financial
reporting is not presently effective; and the Company is not aware
of any material weaknesses in its internal control over financial
reporting. Since the date of the latest audited financial
statements included or incorporated by reference in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus, there has been no change in the Company’s
internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the
Company’s internal control over financial
reporting.
(z) The Company maintains
disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the Exchange Act) that comply with the requirements
of the Exchange Act; such disclosure controls and procedures have
been designed to ensure that material information relating to the
Company and its subsidiaries is made known to the Company’s
principal executive officer and principal financial officer by
others within those entities; and such disclosure controls and
procedures are effective.
(aa) There is and has been no
failure on the part of the Company or any of its directors or
officers, in their capacities as such, to comply with any provision
of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith (the “ Sarbanes-Oxley
Act ”), including, without limitation, Section 402
related to loans and Sections 302 and 906 related to
certifications.
(bb) Neither the Company nor
any of its affiliates (within the meaning of Rule 144 under the
Securities Act) has taken, directly or indirectly, any action which
constitutes or is designed to cause or result in, or which could
reasonably be expected to constitute, cause or result in, the
stabilization or manipulation of the price of any security to
facilitate the sale or resale of the Securities.
(cc) Neither the Company nor
any of its affiliates (within the meaning of Rule 144 under
the Securities Act) has, prior to the date hereof, made any offer
or sale of any securities which could be “integrated”
(within the meaning of the Securities Act and the Rules and
Regulations) with the offer and sale of the Securities pursuant to
the Registration Statement.
(dd) The statements set forth
in the Registration Statement, the Pricing Disclosure Package and
Prospectus under the captions “Description of Debt
Securities”, “Description of the Notes” and
“Description of Capital Stock”, insofar as they purport
to constitute a summary of the terms of the Securities and the
Common Stock, and under the caption “U.S. Federal Income Tax
Considerations”, insofar as they purport to describe the
provisions of the laws and documents referred to therein, are
accurate, complete and fair in all material respects.
(ee) The Company is subject
to the reporting requirements of Section 13 or 15(d) of the
Exchange Act and files periodic reports with the Commission, and
the conditions for
10
use of Form S-3 to register and offer
the Securities under the Securities Act have been satisfied. The
documents incorporated or deemed to be incorporated by reference in
the Pricing Prospectus and the Prospectus, at the time they were or
hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the Securities
Act, the Exchange Act and the Rules and Regulations and, when read
together with the other information in the Pricing Prospectus or
the Prospectus, as applicable, do not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
(ff) Neither the Company nor
any Guarantor is and, at all times up to and including consummation
of the transactions contemplated by this Agreement, and after
giving effect to application of the net proceeds of the Offering as
described in the Registration Statement, the Pricing Prospectus and
the Prospectus, will not be, required to register as an
“investment company” under the Investment Company Act
of 1940, as amended, and is not and will not be an entity
“controlled” by an “investment company”
within the meaning of such act.
(gg) Except as disclosed in
the Registration Statement, the Pricing Disclosure Package and the
Prospectus, there are no contracts, agreements or understandings
between the Company and any person that would give rise to a valid
claim against the Company or the Underwriter for a brokerage
commission, finder’s fee or other like payment in connection
with the transactions contemplated by this Agreement or, to the
Company’s knowledge, any arrangements, agreements,
understandings, payments or issuance with respect to the Company or
any of its officers, directors, shareholders, partners, employees,
Subsidiaries or affiliates that may affect the Underwriter’s
compensation as determined by the FINRA.
(hh) Each of the Company and
each Subsidiary owns or leases all such properties as are necessary
to the conduct of its business as presently operated and as
proposed to be operated as described in the Registration Statement,
the Pricing Disclosure Package and the Prospectus. The Company and
the Subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all personal
property owned by them, in each case free and clear of any and all
Liens except such as are described in the Registration Statement,
the Pricing Disclosure Package and the Prospectus or such as do not
taken as a whole materially affect the value of such property or
materially interfere with the use made or proposed to be made of
such property by the Company and the Subsidiaries; and any real
property and buildings held under lease or sublease by the Company
and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material to, and
do not materially interfere with, the use made and proposed to be
made of such property and buildings by the Company and the
Subsidiaries. Neither the Company nor any Subsidiary has received
any notice of any claim adverse to its ownership of any real or
personal property or of any claim against the continued possession
of any real property, whether owned or held under lease or sublease
by the Company or any Subsidiary.
(ii) Each of the Company and
each Subsidiary (i) owns or possesses the right to use all
patents, patent applications, trademarks, service marks, domain
names, trade names, trademark registrations, service mark
registrations, copyrights, licenses, formulae, customer lists, and
know-how and other intellectual property (including trade secrets
and other unpatented
11
and/or unpatentable proprietary or
confidential information, systems or procedures, “
Intellectual Property ”) necessary for the conduct of
their respective businesses as presently conducted and as described
in the Registration Statement, the Pricing Disclosure Package and
the Prospectus and (ii) has no reason to believe that the
conduct of their respective businesses does or will conflict with,
and have not received any notice of any claim of conflict with, any
such right of others. The Company has taken and will maintain
reasonable measures to prevent the unauthorized dissemination or
publication of the confidential information of the Company or its
subsidiaries. To the Company’s knowledge, there is no
infringement by third parties of any such Intellectual Property;
there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others challenging
the Company’s or any Subsidiary’s rights in or to any
such Intellectual Property, and the Company is unaware of any facts
which would form a reasonable basis for any such claim; and there
is no pending or, to the Company’s knowledge, threatened
action, suit, proceeding or claim by others that the Company or any
Subsidiary infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary rights of others, and
the Company is unaware of any other fact which would form a
reasonable basis for any such claim.
(jj) The Company and the
Subsidiaries maintain insurance in such amounts and covering such
risks as the Company reasonably considers adequate for the conduct
of its business and the value of its properties and as is customary
for companies engaged in similar businesses in similar industries,
all of which insurance is in full force and effect, except where
the failure to maintain such insurance could not reasonably be
expected to have a Material Adverse Effect. There are no material
claims by the Company or any Subsidiary under any such policy or
instrument as to which any insurance company is denying liability
or defending under a reservation of rights clause. The Company
reasonably believes that it will be able to renew its existing
insurance as and when such coverage expires or will be able to
obtain replacement insurance adequate for the conduct of the
business and the value of its properties at a cost that would not
have a Material Adverse Effect.
(kk) Each of the Company and
each Subsidiary has accurately prepared and timely filed all
federal, state, foreign and other tax returns that are required to
be filed by it and has paid or made provision for the payment of
all taxes, assessments, governmental or other similar charges,
including without limitation, all sales and use taxes and all taxes
which the Company or any Subsidiary is obligated to withhold from
amounts owing to employees, creditors and third parties, with
respect to the periods covered by such tax returns (whether or not
such amounts are shown as due on any tax return) except such as are
immaterial in amount. No deficiency assessment with respect to a
proposed adjustment of the Company’s or any Subsidiary’
federal, state, local or foreign taxes is pending or, to the best
of the Company’s knowledge, threatened, except such as are
immaterial in amount. The accruals and reserves on the books and
records of the Company and the Subsidiaries in respect of tax
liabilities for any taxable period not finally determined are
adequate to meet any assessments and related liabilities for any
such period in all material respects and, since December 31,
2006, the Company and the Subsidiaries have not incurred any
liability for taxes other than in the ordinary course of its
business. There is no tax lien, whether imposed by any federal,
state, foreign or other taxing authority, outstanding against the
assets, properties or business of the Company or any
Subsidiary.
12
(ll) No labor disturbance by
the employees of the Company or any Subsidiary exists or, to the
best of the Company’s knowledge, is imminent and the Company
is not aware of any existing or imminent labor disturbances by the
employees of any of its or any Subsidiary’s principal
suppliers, manufacturers’, customers or contractors, which,
in either case (individually or in the aggregate), could reasonably
be expected to have a Material Adverse Effect.
(mm) No “prohibited
transaction” (as defined in either Section 406 of the
Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
(“ ERISA ”) or Section 4975 of the Internal
Revenue Code of 1986, as amended from time to time (the “
Code ”)), “accumulated funding deficiency”
(as defined in Section 302 of ERISA) or other event of the
kind described in Section 4043(b) of ERISA (other than events
with respect to which the 30-day notice requirement under
Section 4043 of ERISA has been waived) has occurred with
respect to any employee benefit plan for which the Company or any
Subsidiary would have any liability which could, taken as a whole,
reasonably be expected to have a Material Adverse Effect; each
employee benefit plan for which the Company or any Subsidiary would
have any liability is in compliance in all material respects with
applicable law, including (without limitation) ERISA and the Code;
the Company has not incurred and does not expect to incur liability
under Title IV of ERISA with respect to the termination of, or
withdrawal from any “pension plan”; and each plan for
which the Company would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified and
nothing has occurred, whether by action or by failure to act, which
could cause the loss of such qualification.
(nn) There has been no
storage, generation, transportation, handling, use, treatment,
disposal, discharge, emission, contamination, release or other
activity involving any kind of hazardous, toxic or other wastes,
pollutants, contaminants, petroleum products or other hazardous or
toxic substances, chemicals or materials (“ Hazardous
Substances ”) by, due to, on behalf of, or caused by the
Company or any Subsidiary (or, to the Company’s knowledge,
any other entity for whose acts or omissions the Company is or may
be liable) upon any property now or previously owned, operated,
used or leased by the Company or any Subsidiary, or upon any other
property, which would be a violation of or give rise to any
liability under any applicable law, rule, regulation, order,
judgment, decree or permit, common law provision or other legally
binding standard relating to pollution or protection of human
health and the environment (“ Environmental Law
”), except for violations and liabilities which, individually
or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. There has been no disposal, discharge,
emission contamination or other release of any kind at, onto or
from any such property or into the environment surrounding any such
property of any Hazardous Substances with respect to which the
Company or any Subsidiary has knowledge, except as could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any Subsidiary has
agreed to assume, undertake or provide indemnification for any
liability of any other person under any Environmental Law,
including any obligation for cleanup or remedial action, except as
could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. There is no pending or, to the
best of the Company’s knowledge, threatened administrative,
regulatory or judicial action, claim or notice of noncompliance or
violation, investigation or proceedings relating to any
Environmental Law against the Company or any Subsidiary. No
property of the Company or any Subsidiary is subject to any Lien
under any Environmental Law. Neither the Company nor any Subsidiary
is subject to any order, decree, agreement or other individualized
legal requirement related to any Environmental Law.
13
(oo) The Company has made
available to the Underwriter the Asset Purchase Agreement, dated as
of February 4, 2008, by and among the Company, Teledrift
Acquisition, Inc., Teledrift, Inc. and certain stockholders named
therein (the “ Teledrift Purchase Agreement ”).
The Teledrift Purchase Agreement is in full force and effect as of
the date hereof in the form heretofore provided to the Underwriter.
With respect to the acquisition contemplated by the Teledrift
Purchase Agreement (the “ Acquisition ”), the
Company represents that:
1. The Company is not
currently aware of any events, circumstances or facts that would
cause the representations or warranties of Teledrift in the
Teledrift Purchase Agreement to be inaccurate other than
inaccuracies which would not result in a Material Adverse Effect;
and
2. Other than consents and
approvals from governmental agencies referenced in the Teledrift
Purchase Agreement and receipt of the proceeds of this Offering,
the Company is not currently aware of any events, circumstances or
facts that would prevent the Company from consummating the
Acquisition.
(pp) None of the Company, any
Subsidiary or, to the Company’s knowledge, any of its
employees or agents, has at any time during the last five years
(i) made any unlawful contribution to any candidate for
foreign office, or failed to disclose fully any such contribution
in violation of law, or (ii) made any payment to any federal
or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States of any
jurisdiction thereof. The operations of the Company and each
Subsidiary are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the money laundering statutes of all applicable
jurisdictions, the rules and regulations thereunder and any related
or similar rules, regulations or guidelines issued, administered or
enforced by any governmental agency (collectively, the “
Money Laundering Laws ”) and no action, suit or
proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company or any Subsidiary
with respect to the Money Laundering Laws is pending or, to the
best knowledge of the Company, threatened. Neither the Company nor
any Subsidiary nor, to the knowledge of the Company, any director,
officer, agent, employee or affiliate of the Company or any
Subsidiary is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Treasury
Department (“ OFAC ”); and the Company will not
directly or indirectly use the proceeds of the offering, or lend,
contribute or otherwise make available such proceeds to any
subsidiary, joint venture partner or other person or entity, for
the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC.
(qq) Neither the Company nor
any Subsidiary (i) is in violation of its certificate or
articles of incorporation, by-laws, certificate of formation,
limited liability company agreement, partnership agreement or other
organizational documents, (ii) is in default under,
and
14
no event has occurred which, with notice
or lapse of time or both, would constitute a default under or
result in the creation or imposition of any Lien upon any property
or assets of the Company or any Subsidiary pursuant to, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is
bound or to which any of its property or assets is subject, or
(iii) is in violation of any statute, law, rule, regulation,
ordinance, directive, judgment, decree or order of any court, or
governmental or regulatory agency or body, having jurisdiction over
the Company and any of its Subsidiaries, except (in the case
clauses (ii) and (iii) above) for violations or defaults
that could not (individually or in the aggregate), reasonably be
expected to have a Material Adverse Effect.
(rr) The Company has complied
with the requirements of Rule 433 under the Securities Act with
respect to each Issuer Free Writing Prospectus including, without
limitation, all prospectus delivery, filing, record retention and
legending requirements applicable to any such Issuer Free Writing
Prospectus. The Company has not (i) distributed any offering
material in connection with the Offering other than the Pricing
Prospectus, the Prospectus, and any Issuer Free Writing Prospectus
set forth on Annex III hereto, or (ii) filed, referred to,
approved, used or authorized the use of any “free writing
prospectus” as defined in Rule 405 under the Securities Act
with respect to the Offering or the Securities, except for any
Issuer Free Writing Prospectus set forth in Annex III hereto and
any electronic road show previously approved by Bear
Stearns.
(ss) Any certificate signed
by or on behalf of the Company and delivered to the Underwriter or
to counsel for the Underwriter shall be deemed to be a
representation and warranty by the Company to the Underwriter as to
the matters covered thereby.
2. Purchase, Sale and
Delivery of the Securities .
(a) On the basis of the
representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriter and the
Underwriter agrees to purchase from the Company the Firm Securities
at a purchase price of 97.25% of the principal amount thereof (the
“ Purchase Price ”) plus accrued interest, if
any, from February 14, 2008 to the date of payment and
delivery.
(b) Payment of the purchase
price for, and delivery of certificates representing, the Firm
Securities shall be made at the office of Davis Polk &
Wardwell, (“ Underwriter’s Counsel ”) in
Menlo Park, California, or at such other place as shall be agreed
upon by the Underwriter and the Company, at 10:00 A.M., New York
City time, on February 14, 2008, or such other time and date
as Bear Stearns and the Company may agree upon in writing (such
time and date of payment and delivery being herein called the
“ Closing Date ”). Payment of the purchase price
for the Firm Securities shall be made by wire transfer in same day
funds to or as directed in writing by the Company upon delivery of
certificates for the Firm Securities to the Underwriter through the
facilities of The Depository Trust Company (“ DTC
”) for the respective accounts of the Underwriter.
Certificates for the Firm Securities shall be registered in such
name or names and shall be in such denominations as the Underwriter
may request. The Company will permit the Underwriter to examine and
package such certificates for delivery at least one full business
day prior to the Closing Date.
15
(c) In addition, on the basis
of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the Underwriter, acting
severally and not jointly, the option to purchase up to $15,000,000
aggregate principal amount of Additional Securities, for the sole
purpose of covering over-allotments in the sale of Firm Securities
by the Underwriter. This option may be exercised at any time and
from time to time, in whole or in part on one or more occasions, on
or before the thirteenth day following the date of the Prospectus,
by written notice from the Underwriter to the Company. Such notice
shall set forth the aggregate principal amount of Additional
Securities as to which the option is being exercised and the date
and time, as reasonably determined by Bear Stearns, when the
Additional Securities are to be delivered (any such date and time
being herein sometimes referred to as the “ Additional
Closing Date ”); provided , however , that
no Additional Closing Date shall occur earlier than the Closing
Date or earlier than the second full business day after the date on
which the option shall have been exercised nor later than the
eighth full business day after the date on which the option shall
have been exercised. Notwithstanding the foregoing, any Additional
Closing Date must be within the 13-day period beginning on and
including the Closing Date. Upon any exercise of the option as to
all or any portion of the Additional Securities, the Underwriter
agrees to purchase from the Company the Additional Securities
specified in the exercise notice at the Purchase Price plus accrued
interest, if any, from the Closing Date to the date of payment and
delivery.
(d) Payment of the purchase
price for and delivery of the Additional Securities shall be made
at the office of Underwriter’s Counsel, or at such other
place as shall be agreed upon by the Underwriter and the Company,
at 10:00 A.M., New York City time, on the Additional Closing Date,
or such other time as shall be agreed upon by Bear Stearns and the
Company. Payment of the purchase price for the Additional
Securities shall be made by wire transfer in same day funds to or
as directed in writing by the Company upon delivery of the
Additional Securities to the Underwriter through the facilities of
DTC for the respective accounts of the Underwriter.
(e) The Firm Securities and
Additional Securities, as the case may be, to be purchased by the
Underwriter hereunder will be represented by one or more definitive
global certificates in book-entry form which will be deposited by
or on behalf of the Company with DTC or its designated
custodian.
(f) The Company and the
Guarantors acknowledge and agree that (i) the terms of this
Agreement and the Offering (including the pricing terms of the
Offering) were negotiated at arm’s length between
sophistica
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