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EXHIBIT 1.1
5,500,000 SHARES
ELEMENT K CORPORATION
CLASS A COMMON STOCK, $0.01 PAR VALUE
UNDERWRITING AGREEMENT
|X|, 2000
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
THOMAS WEISEL PARTNERS LLC,
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Element K Corporation, a Delaware corporation
("COMPANY"), proposes to issue and sell 5,500,000 shares ("FIRM SECURITIES") of
its Class A common Stock, $0.01 par value ("SECURITIES"), and also proposes to
issue and sell to the Underwriters, at the option of the Underwriters, an
aggregate of not more than 825,000 additional shares ("OPTIONAL SECURITIES") of
its Securities as set forth below. In the case of both the Firm Securities and
the Optional Securities, the Company proposes to use the proceeds to make a
capital contribution in the capital of Element K Holdings LLC, a Delaware
limited liability company ("HOLDINGS"), which will, in turn, use the proceeds of
such capital contribution to make a contribution to the capital of Element K
LLC, a Delaware limited liability company (the "OPERATING COMPANY"). The Firm
Securities and the Optional Securities are herein collectively called the
"OFFERED SECURITIES". As part of the offering contemplated by this Agreement,
Credit Suisse First Boston Corporation (the "DESIGNATED UNDERWRITER") has agreed
to reserve out of the Firm Securities purchased by it under this Agreement, up
to shares, for sale to the Company's directors, officers, employees and other
parties associated with the Company (collectively, "PARTICIPANTS"), as set forth
in the Prospectus (as defined herein) under the heading "Underwriting" (the
"DIRECTED SHARE PROGRAM"). The Firm Securities to be sold by the Designated
Underwriter pursuant to the Directed Share Program (the "DIRECTED SHARES") will
be sold by the Designated Underwriter pursuant to this Agreement at the public
offering price. Any Directed Shares not subscribed for by the end of the
business day on which this Agreement is executed will be offered to the public
by the Underwriters as set forth in the Prospectus. The Company hereby agrees
with the several Underwriters named in Schedule A hereto ("UNDERWRITERS") as
follows:
2. Representations and Warranties of the Company, Holdings and the
Operating Company. Each of the Company, Holdings and the Operating Company,
jointly and severally, represents and warrants to, and agrees with, the several
Underwriters that:
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(a) A registration statement (No. 333-36574) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission ("COMMISSION") and either (i)
has been declared effective under the Securities Act of 1933 ("ACT")
and is not proposed to be amended or (ii) is proposed to be amended by
amendment or post-effective amendment. If such registration statement
("INITIAL REGISTRATION STATEMENT") has been declared effective, either
(i) an additional registration statement ("ADDITIONAL REGISTRATION
STATEMENT") relating to the Offered Securities may have been filed with
the Commission pursuant to Rule 462(b) ("RULE 462(B)") under the Act
and, if so filed, has become effective upon filing pursuant to such
Rule and the Offered Securities all have been duly registered under the
Act pursuant to the initial registration statement and, if applicable,
the additional registration statement or (ii) such an additional
registration statement is proposed to be filed with the Commission
pursuant to Rule 462(b) and will become effective upon filing pursuant
to such Rule and upon such filing the Offered Securities will all have
been duly registered under the Act pursuant to the initial registration
statement and such additional registration statement. If the Company
does not propose to amend the initial registration statement or if an
additional registration statement has been filed and the Company does
not propose to amend it, and if any post-effective amendment to either
such registration statement has been filed with the Commission prior to
the execution and delivery of this Agreement, the most recent amendment
(if any) to each such registration statement has been declared
effective by the Commission or has become effective upon filing
pursuant to Rule 462(c) ("RULE 462(C)") under the Act or, in the case
of the additional registration statement, Rule 462(b). For purposes of
this Agreement, "EFFECTIVE TIME" with respect to the initial
registration statement or, if filed prior to the execution and delivery
of this Agreement, the additional registration statement means (i) if
the Company has advised the Representatives that it does not propose to
amend such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment
thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (ii) if the Company
has advised the Representatives that it proposes to file an amendment
or post-effective amendment to such registration statement, the date
and time as of which such registration statement, as amended by such
amendment or post-effective amendment, as the case may be, is declared
effective by the Commission. If an additional registration statement
has not been filed prior to the execution and delivery of this
Agreement but the Company has advised the Representatives that it
proposes to file one, "EFFECTIVE TIME" with respect to such additional
registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule
462(b). "EFFECTIVE DATE" with respect to the initial registration
statement or the additional registration statement (if any) means the
date of the Effective Time thereof. The initial registration statement,
as amended at its Effective Time, including all information contained
in the additional registration statement (if any) and deemed to be a
part of the initial registration statement as of the Effective Time of
the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("RULE
430A(B)") under the Act, is hereinafter referred to as the "INITIAL
REGISTRATION STATEMENT". The additional registration statement, as
amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including
all information (if any) deemed to be a part of the additional
registration statement as of its Effective Time pursuant to Rule
430A(b), is hereinafter referred to as the "ADDITIONAL REGISTRATION
STATEMENT". The Initial Registration Statement and the Additional
Registration Statement are herein referred to collectively as the
"REGISTRATION STATEMENTS" and individually as a "REGISTRATION
STATEMENT". The form of prospectus relating to the Offered Securities,
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("RULE 424(B)") under the Act or (if no such filing is
required) as included in a Registration Statement, is hereinafter
referred to as the "PROSPECTUS". No document has been or will be
prepared or distributed in reliance on Rule 434 under the Act.
(b) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement: (i)
on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all material respects to
the requirements of the Act and the rules and regulations of the
Commission ("RULES AND REGULATIONS") and did not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary
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to make the statements therein not misleading, (ii) on the Effective
Date of the Additional Registration Statement (if any), each
Registration Statement conformed, or will conform, in all material
respects to the requirements of the Act and the Rules and Regulations
and did not include, or will not include, any untrue statement of a
material fact and did not omit, or will not omit, to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) on the date of this Agreement, the
Initial Registration Statement and, if the Effective Time of the
Additional Registration Statement is prior to the execution and
delivery of this Agreement, the Additional Registration Statement each
conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectus is included,
each Registration Statement and the Prospectus will conform, in all
material respects to the requirements of the Act and the Rules and
Regulations, and neither of such documents includes, or will include,
any untrue statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading. If the Effective Time of
the Initial Registration Statement is subsequent to the execution and
delivery of this Agreement: on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement and the
Prospectus will conform in all material respects to the requirements of
the Act and the Rules and Regulations, neither of such documents will
include any untrue statement of a material fact or will omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading, and no Additional Registration
Statement has been or will be filed. The two preceding sentences do not
apply to statements in or omissions from a Registration Statement or
the Prospectus based upon written information furnished to the Company
by any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information
is that described as such in Section 7(b) hereof.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or other), business, properties, or results of
operations of the Company and its subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT").
.
(d) Holdings has been duly formed and is an existing limited
liability company in good standing under the laws of the jurisdiction
of its formation, with power and authority to own its properties and
conduct its business as described in the Prospectus; and Holdings is
duly qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which its ownership or lease of property
or the conduct of its business requires such qualification, except
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect; all of the limited liability
company interests of Holdings (which are herein referred to as the
"HOLDINGS MEMBERSHIP UNITS") have been duly authorized and validly
issued and are fully paid and nonassessable; and are free from liens,
encumbrances and defects.
(e) Operating Company has been duly formed and is an existing
limited liability company in good standing under the laws of the
jurisdiction of its formation, with power and authority to own its
properties and conduct its business as described in the Prospectus; and
Operating Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect;
all of the limited liability company interests of Operating Company
(which are herein referred to as the "OPERATING COMPANY MEMBERSHIP
UNITS," and together with the Holding Membership Units, the "MEMBERSHIP
UNITS") have been duly authorized and validly issued and are fully paid
and nonassessable; and are free from liens, encumbrances and defects.
(f) Each subsidiary of the Company has been duly incorporated
(or formed) and is an existing corporation (or other legal entity) in
good standing under the laws of the jurisdiction of its incorporation
or formation, with power and authority (corporate and other) to own its
properties and
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conduct its business as described in the Prospectus; and each
subsidiary of the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires
such qualification , except where the failure to be so qualified would
not, individually or in the aggregate, have a Material Adverse Effect;
all of the issued and outstanding capital stock of each subsidiary of
the Company has been duly authorized and validly issued and is fully
paid and nonassessable; and the capital stock of each subsidiary owned
by the Company, directly or through subsidiaries, is owned free from
liens, encumbrances and defects.
(g) The Offered Securities and all other outstanding shares of
capital stock of the Company have been duly authorized; all outstanding
shares of capital stock of the Company are, and, when the Offered
Securities have been delivered and paid for in accordance with this
Agreement on each Closing Date (as defined below), such Offered
Securities will have been, validly issued, fully paid and nonassessable
and will conform to the description thereof contained in the
Prospectus; the Membership Units conform to the description thereof
contained in the Prospectus; and the stockholders of the Company have
no preemptive rights with respect to the Securities.
(h) There are no contracts, agreements or understandings
between the Company or any of its affiliates and any person that would
give rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finder's fee or other like payment in connection
with this offering.
(i) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to a Registration Statement or in any
securities being registered pursuant to any other registration
statement filed by the Company under the Act that have not been
satisfied or waived prior to the date hereof, as described in the
Prospectus.
(j) The Offered Securities have been approved for listing on
The Nasdaq Stock Market's National Market.
(k) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
for the consummation of the transactions contemplated by this Agreement
in connection with the issuance and sale of the Offered Securities by
the Company, except such as have been obtained and made under the Act
and such as may be required under state securities laws.
(l) The execution, delivery and performance of this Agreement,
and the issuance and sale of the Offered Securities will not result in
a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order
of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company or any subsidiary of the Company
or any of their properties, or any agreement or instrument to which the
Company or any such subsidiary is a party or by which the Company or
any such subsidiary is bound or to which any of the properties of the
Company or any such subsidiary is subject, or the charter or by-laws
(or other constitutive documents) of the Company or any such
subsidiary, and the Company has full power and authority to authorize,
issue and sell the Offered Securities as contemplated by this
Agreement.
(m) This Agreement has been duly authorized, executed and
delivered by each of the Company, Holdings and the Operating Company.
(n) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from
liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or to be made thereof
by them; and except as disclosed in the Prospectus, the Company and its
subsidiaries hold any leased real or personal property under valid and
enforceable
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leases with no exceptions that would materially interfere with the use
made or to be made thereof by them.
(o) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by
them and have not received any written notice of proceedings relating
to the revocation or modification of any such certificate, authority or
permit that, if determined adversely to the Company or any of its
subsidiaries, would, individually or in the aggregate, have a Material
Adverse Effect.
(p) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a Material Adverse Effect.
(q) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how, patents, copyrights and other
intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS")
necessary to conduct the business now operated by them, or presently
employed by them, and have not received any written notice of
infringement of or conflict with asserted rights of others with respect
to any intellectual property rights that, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect.
(r) Neither the Company nor any of its subsidiaries is in
violation of any statute, any rule, regulation, decision or order of
any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances
(collectively, "ENVIRONMENTAL LAWS"), owns or operates any real
property contaminated with any substance that is subject to any
environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any
claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect; and the Company is not aware
of any pending investigation which might lead to such a claim.
(s) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the Company,
any of its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or
would materially and adversely affect the ability of the Company to
perform its obligations under this Agreement, or which are otherwise
material in the context of the sale of the Offered Securities; and no
such actions, suits or proceedings are threatened or, to the Company's
knowledge, contemplated.
(t) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of
(i) the Company and its consolidated subsidiaries, (ii) the Company's
predecessor businesses and (iii) the predecessor business of Element K
Content LLC, a Delaware limited liability company ("CONTENT"), 50% of
the voting interest and 95% of the common equity interest of which is
currently owned by the Operating Company and the remainder of the
common equity interest of which the Operating Company will purchase
with the proceeds of this offering that are contributed to the capital
of the Operating Company, in each case as of the dates shown and its
and their results of operations and cash flows for the periods shown,
and such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied
on a consistent basis; and the assumptions used in preparing the pro
forma financial statements included in each Registration Statement and
the Prospectus provide a reasonable basis for presenting the
significant effects directly attributable to the transactions or events
described therein, the related pro forma adjustments give appropriate
effect to those assumptions, and the pro forma columns therein reflect
the proper application of those adjustments to the corresponding
historical financial statement amounts.
(u) Except as disclosed in the Prospectus, since the date of
the latest audited financial statements included in the Prospectus
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole, and,
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except as disclosed in or contemplated by the Prospectus, there has
been no dividend or distribution of any kind declared, paid or made by
the Company, Holdings or the Operating Company on any class of their
respective capital stock.
(v) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of 1940.
(w) The Registration Statement, the Prospectus and any
preliminary prospectus comply, and any further amendments or
supplements thereto will comply in all material respects, with any
applicable laws or regulations of foreign jurisdictions in which the
Prospectus or any preliminary prospectus, as amended or supplemented,
if applicable, are distributed in connection with the Directed Share
Program; and no authorization, approval, consent, license, order,
registration or qualification of or with any government, governmental
instrumentality or court, other than such as have been obtained, is
necessary under the securities law and regulations of foreign
jurisdictions in which the Directed Shares are offered outside the
United States.
(x) The Company has not offered, or caused the Underwriters to
offer, any offered Securities to any person pursuant to the Directed
Share Program with the specific intent to unlawfully influence (i) a
customer or supplier of the Company or the Operating Company to alter
the customer's or supplier's level or type of business with the Company
or the Operating Company or (ii) a trade journalist or publication to
write or publish favorable information about the Company or the
Operating Company or its products or services.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Company, at a purchase price of $- per share, the respective numbers of
Firm Securities set forth opposite the names of the Underwriters in Schedule A
hereto.
The Company will deliver the Firm Securities to the Representatives for
the accounts of the Underwriters, against payment of the purchase price in
Federal (same day) funds by official bank check or checks or wire transfer to an
account at a bank acceptable to Credit Suisse First Boston Corporation ("CSFBC")
drawn to the order of Element K Corporation at the office of Cravath, Swaine &
Moore, at 10:00 A.M., New York time, on -, 2000, or at such other time not later
than seven full business days thereafter as CSFBC and the Company determine,
such time being herein referred to as the "FIRST CLOSING DATE". For purposes of
Rule 15c6-1 under the Securities Exchange Act of 1934, the First Closing Date
(if later than the otherwise applicable settlement date) shall be the settlement
date for payment of funds and delivery of securities for all the Offered
Securities sold pursuant to the offering. The certificates for the Firm
Securities so to be delivered will be in definitive form, in such denominations
and registered in such names as CSFBC requests and will be made available for
checking and packaging at the office of Cravath, Swaine & Moore at least 24
hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price per Security to be paid for the Firm Securities. The Company
agrees to sell to the Underwriters the number of shares of Optional Securities
specified in such notice and the Underwriters agree, severally and not jointly,
to purchase such Optional Securities. Such Optional Securities shall be
purchased for the account of each Underwriter in the same proportion as the
number of shares of Firm Securities set forth opposite such Underwriter's name
bears to the total number of shares of Firm Securities (subject to adjustment by
CSFBC to eliminate fractions) and may be purchased by the Underwriters only for
the purpose of covering over-allotments made in connection with the sale of the
Firm Securities. No Optional Securities shall be sold or delivered unless the
Firm Securities previously have been, or simultaneously are, sold and delivered.
The right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC to the Company.
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Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "CLOSING DATE"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, against payment of
the purchase price therefor in Federal (same day) funds by official bank check
or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to
the order of Element K Corporation, at the office of Cravath, Swaine & Moore.
The certificates for the Optional Securities being purchased on each Optional
Closing Date will be in definitive form, in such denominations and registered in
such names as CSFBC requests upon reasonable notice prior to such Optional
Closing Date and will be made available for checking and packaging at the office
of Cravath, Swaine & Moore at a reasonable time in advance of such Optional
Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company, Holdings and the Operating
Company. Each of the Company, Holdings and the Operating Company agrees with the
several Underwriters that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Company will file the Prospectus with the Commission pursuant to and in
accordance with subparagraph (1) (or, if applicable and if consented to
by CSFBC, subparagraph (4)) of Rule 424(b) not later than the earlier
of (A) the second business day following the execution and delivery of
this Agreement or (B) the fifteenth business day after the Effective
Date of the Initial Registration Statement. The Company will advise
CSFBC promptly of any such filing pursuant to Rule 424(b). If the
Effective Time of the Initial Registration Statement is prior to the
execution and delivery of this Agreement and an additional registration
statement is necessary to register a portion of the Offered Securities
under the Act but the Effective Time thereof has not occurred as of
such execution and delivery, the Company will file the additional
registration statement or, if filed, will file a post-effective
amendment thereto with the Commission pursuant to and in accordance
with Rule 462(b) on or prior to 9:00 A.M., New York time, on the first
business day following the date of this Agreement or, if earlier, on or
prior to the time the Prospectus is printed and distributed to any
Underwriter, or will make such filing at such later date as shall have
been consented to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration
statement as filed or the related prospectus or the Initial
Registration Statement, the Additional Registration Statement (if any)
or the Prospectus and will not effect such amendment or supplementation
without CSFBC's consent; and the Company will also advise CSFBC
promptly of the effectiveness of each Registration Statement (if its
Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration
Statement or the Prospectus and of the institution by the Commission of
any stop order proceedings in respect of a Registration Statement and
will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Act,
the Company will promptly notify CSFBC of such event and will promptly
prepare and file with the Commission, at its own expense, an amendment
or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's consent
to, nor the Underwriters' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section
6.
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(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally
available to its security holders an earnings statement covering a
period of at least 12 months beginning after the Effective Date of the
Initial Registration Statement (or, if later, the Effective Date of the
Additional Registration Statement) which will satisfy the provisions of
Section 11(a) of the Act. For the purpose of the preceding sentence,
"AVAILABILITY DATE" means the 45th day after the end of the fourth
fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "AVAILABILITY DATE" means the
90th day after the end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement (one of which will be manually signed and
will include all exhibits), each related preliminary prospectus, and,
so long as a prospectus relating to the Offered Securities is required
to be delivered under the Act in connection with sales by any
Underwriter or dealer, the Prospectus and all amendments and
supplements to such documents, in each case in such quantities as CSFBC
reasonably requests. The Prospectus shall be so furnished on or prior
to 3:00 P.M., New York time, on the business day following the later of
the execution and delivery of this Agreement or the Effective Time of
the Initial Registration Statement. All other documents shall be so
furnished as soon as available. The Company will pay the expenses of
printing and distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as
CSFBC designates and will continue such qualifications in effect so
long as required for the distribution.
(g) During the period of three years hereafter, the Company
will furnish to the Representatives and, upon request, to each of the
other Underwriters, as soon as practicable after the end of each fiscal
year, a copy of its annual report to stockholders for such year; and
the Company will furnish to the Representatives from time to time, such
other non-confidential information concerning the Company as CSFBC may
reasonably request.
(h) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, for any filing
fees and other expenses (including fees and disbursements of its
counsel) incurred in connection with qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and the printing of memoranda relating thereto, for the
filing fee incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the
National Association of Securities Dealers, Inc. (the "NASD") of the
Offered Securities, for any travel expenses of the Company's officers
and employees and any other expenses of the Company in connection with
attending or hosting meetings with prospective purchasers of the
Offered Securities and for expenses incurred in distributing
preliminary prospectuses and the Prospectus (including any amendments
and supplements thereto) to the Underwriters.
(i) For a period of 180 days after the date of the initial
public offering of the Offered Securities, the Company will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under
the Act relating to, any additional shares of its Securities or
securities convertible into or exchangeable or exercisable for any
shares of its Securities, or publicly disclose the intention to make
any such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFBC, except for (i) grants of stock options or
stock awards pursuant to the terms of any plan in effect on the date
hereof; (ii) issuances of Securities pursuant to the exercise of
employee stock options outstanding on the date hereof or employee stock
purchases pursuant to the term of any plan in effect on the date
hereof; (iii) the filing of registration statements on Form S-8 with
the Commission registering the shares of common stock issuable under
its stock option plans in effect on the date hereof; (iv) issuances of
Securities in connection with an exchange of membership units in
Holdings; (v) issuances of Securities in connection with a conversion
of the Company's Class B common stock, $0.01 par value per share, into
shares of Securities; (vi) issuances of Securities or securities
convertible into or exchangeable or exercisable for shares of
Securities in connection with any reorganization of the Company in
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accordance with the Holdings limited liability company agreement (the
"HOLDINGS LLC AGREEMENT") dated February 10, 2000 between U.S. Equity
Partners, L.P., WBT Corp. (now known as Element K Corporation), USEP
(Offshore) I Corp., the Management Members, the Non-Management Members,
the Co-Investors and U. S. Equity Group Affiliates, as each term is
defined in the Holdings LLC Agreement and as described in the
Prospectus; and (vii) issuances of Securities convertible into or
exchangeable or exercisable for shares of Securities in connection with
the acquisition of stock or assets of other companies so long as, in
each case, the recipient of the Securities agrees in writing to be
bound by the restrictions set forth in this Section 5(i) prior to the
receipt of such securities.
(j) Upon the completion of a Qualified IPO (as such term is
defined in the credit agreement dated February 10, 2000 between
Training Media Operating LLC (now known as Element K Press LLC), Fleet
National Bank as Administrative Agent and Dresdner Bank AG, New York
and Grand Cayman Branches as Syndication Agent (the "CREDIT
AGREEMENT")), the Company has the right in certain circumstances to
request the release of the membership interests or other equity
interests in WBT Holdings LLC (now known as Element K Holdings LLC)
that are pledged pursuant to the Internet Investors Pledge Agreement
dated February 10, 2000 entered into in connection with the Credit
Agreement (the "PLEDGE AGREEMENT"). Such pledged interests are
convertible into shares of Securities on a one-for-one basis at any
time following the initial public offering of the Offered Securities.
In the event that such pledged interests become eligible to be released
under the Pledge Agreement at any time within 180 days after the
initial public offering of the Offered Securities, the Company will
promptly request the release of such pledged interests as contemplated
by the Pledge Agreement.
(k) In connection with the Directed Share Program, the Company
will ensure that the Directed Shares will be restricted to the extent
required by the NASD or the NASD rules from sale, transfer, assignment,
pledge or hypothecation for a period of three months following the date
of the effectiveness of the Registration Statement. The Designated
Underwriter will notify the Company as to which Participants will need
to be so restricted. The Company will direct the transfer agent to
place stop transfer restrictions upon such securities for such period
of time.
(l) The Company will pay all fees and disbursements of counsel
incurred by the Underwriters in connection with the Directed Shares
Program and stamp duties, similar taxes or duties or other taxes, if
any, incurred by the underwriters in connection with the Directed Share
Program.
(m) The Company will comply in all material respects with all
applicable securities and other applicable laws, rules and regulations
in each foreign jurisdiction in which the Directed Shares are offered
in connection with the Directed Share Program.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company, Holdings and the Operating Company
herein, to the accuracy of the statements of Company officers made pursuant to
the provisions hereof, to the performance by the Company, Holdings and the
Operating Company of their respective obligations hereunder and to the following
additional conditions precedent:
(a) The Representatives shall have received a letter, dated
the date of delivery thereof (which, if the Effective Time of the
Initial Registration Statement is prior to the execution and delivery
of this Agreement, shall be on or prior to the date of this Agreement
or, if the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement, shall be
prior to the filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective
Time), of Arthur Andersen LLP confirming that they are independent
public accountants within the meaning of the Act and the applicable
published Rules and Regulations thereunder and stating to the effect
that:
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(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statements
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published
Rules and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a
review of interim financial information as described in
Statement of Auditing Standards No. 71, Interim Financial
Information, on the unaudited financial statements included in
the Registration Statements;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial
statements of the Company, inquiries of officials of the
Company who have responsibility for financial and accounting
matters and other specified procedures, nothing came to their
attention that caused them to believe that:
(A) the unaudited financial statements included in
the Registration Statements do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the related published Rules and Regulations or
any material modifications should be made to such unaudited
financial statements for them to be in conformity with
generally accepted accounting principles;
(B) at the date of the latest available balance sheet
read by such accountants, or at a subsequent specified date
not more than three business days prior to the date of this
Agreement, there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt of the
Company and its consolidated subsidiaries or, at the date of
the latest available balance sheet read by such accountants,
there was any decrease in consolidated net current assets or
net assets, as compared with amounts shown on the latest
balance sheet included in the Prospectus; or
(C) for the period from the closing date of the
latest income statement included in the Prospectus to the
closing date of the latest available income statement read by
such accountants there were any decreases, as compared with
the corresponding period of the previous year and with the
period of corresponding length ended the date of the latest
income statement included in the Prospectus, in consolidated
net sales, operating income or in the total or per share
amounts of consolidated net income,
except in all cases set forth in clauses (A) (B) and (C) above
for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter;
(iv) (A) based on (I) a reading of the unaudited pro forma
balance sheet as of March 31, 2000 (the "PRO FORMA BALANCE
SHEET"), and the unaudited pro forma statement of operations
for the year ended December 31, 1999 and the three months
ended March 31, 2000 (the "PRO FORMA INCOME STATEMENTS" and,
together with the Pro Forma Balance Sheet, the "PRO FORMA
FINANCIAL STATEMENTS"), included in the Registration
Statements and (II) inquiries of certain officials of the
Company who have responsibility for financial and accounting
matters about the basis for their determination of the pro
forma adjustments and whether the Pro Forma Financial
Statements comply as to form in all material respects with the
applicable accounting requirements of rule 11-02 of Regulation
S-X of the Rules and Regulations; and (B) having proved the
arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the Pro Forma
Financial Statements, nothing came to their attention that
caused them to believe that the Pro Forma Financial Statements
included in the Registration Statements do not comply as to
form in all material respects with the applicable accounting
requirements of rule 11-02 of Regulation S-X of the Rules and
Regulations and that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation
of the Pro Forma Financial Statements; and
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(v) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statements
(in each case to the extent that such dollar amounts,
percentages and other financial information are derived from
the general accounting records of the Company and its
subsidiaries subject to the internal controls of the Company's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from
inquiries, a reading of such general accounting records and
other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to
be in agreement with such results, except as otherwise
specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the
Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, "REGISTRATION STATEMENTS" shall mean the
initial registration statement as proposed to be amended by the
amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement but
the Effective Time of the Additional Registration is subsequent to such
execution and delivery, "REGISTRATION STATEMENTS" shall mean the
Initial Registration Statement and the additional registration
statement as proposed to be filed or as proposed to be amended by the
post-effective amendment to be filed shortly prior to its Effective
Time, and (iii) "PROSPECTUS" shall mean the prospectus included in the
Registration Statements.
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than 10:00 P.M., New
York time, on the date of this Agreement or such later date as shall
have been consented to by CSFBC. If the Effective Time of the
Additional Registration Statement (if any) is not prior to the
execution and delivery of this Agreement, such Effective Time shall
have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later
date as shall have been consented to by CSFBC. If the Effective Time of
the Initial Registration Statement is prior to the execution and
delivery of this Agreement, the Prospectus shall have been filed with
the Commission in accordance with the Rules and Regulations and Section
5(a) of this Agreement. Prior to such Closing Date, no stop order
suspending the effectiveness of a Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company or the Representatives,
shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any
development or event involving a prospective change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as one enterprise which, in the
judgment of a majority in interest of the Underwriters including the
Representatives, is material and adverse and makes it impractical or
inadvisable to proceed with completion of the public offering or the
sale of and payment for the Offered Securities; (ii) any downgrading in
the rating of any debt securities of the Company by any "nationally
recognized statistical rating organization" (as defined for purposes of
Rule 436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt
securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) any material suspension or material
limitation of trading in securities generally on the New York Stock
Exchange, or any setting of minimum prices for trading on such
exchange, or any suspension of trading of any securities of the Company
on any exchange or in the over-the-counter market; (iv) any banking
moratorium declared by U.S. Federal or New York authorities; or (v) any
outbreak or escalation of major hostilities in which the United States
is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the
judgment of a majority in interest of the Underwriters including the
Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable
to proceed with completion of the public offering or the sale of and
payment for the Offered Securities.
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(d) The Representatives shall have received an opinion, dated
such Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel
for the Company, to the effect that:
(i) The Company has been duly incorporated and, based solely
upon an examination of a certificate of good standing issued
by the Delaware Secretary of State and dated within two days
of the date of such opinion, is an existing corporation in
good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and
conduct its business as described in the Prospectus; and each
of Holdings and Operating Company is a limited liability
company duly formed, validly existing and in good standing
under the laws of the State of Delaware, and each has all
requisite limited liability company power and authority to
own, lease and operate its properties and carry on its
business as described in the Prospectus;
(ii) The Offered Securities delivered on such Closing Date and
the outstanding share of Class B common stock, $0.01 par
value, of the Company have each been duly authorized and
validly issued and are fully paid and nonassessable, and each
such security conforms to the description thereof contained in
the Prospectus; the Membership Units conform to the
descriptions thereof contained in the Prospectus; and the
stockholders of the Company have no preemptive rights in
connection with the issuance of the Offered Securities under
the Company's Certificate of Incorporation, By-laws, the
Delaware General Corporation Law, the Delaware Limited
Liability Company Act or any agreement or instrument filed as
an exhibit to the Registration Statement ("APPLICABLE
CONTRACTS");
(iii) Except as described in the Prospectus, no holder of
equity securities of the Company has the right under any
Applicable Contract to require the Company to file a
registration statement under the Act with respect to such
securities or to require the Company to include such
securities in the securities registered pursuant to the
Registration Statement;
(iv) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the
Prospectus, will not be an "investment company" as defined in
the Investment Company Act of 1940.
(v) No consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required
under Applicable Law (as defined below) for the consummation
of the transactions contemplated by this Agreement in
connection with the issuance or sale of the Offered Securities
by the Company; for purposes of such opinion, the term
"APPLICABLE LAW" means the Delaware General Corporation Law,
the Delaware Limited Liability Company Act and those laws,
rules and regulations of the State of New York and the federal
laws of the United States of America, in each case, which, in
such counsel's experience, are applicable to transactions of
the type contemplated by this Agreement other than U.S.
federal, state and foreign securities laws and Blue Sky laws
and the rules and regulations of the National Association of
Securities Dealers, Inc., but without such counsel having made
any special investigation with respect to any other laws,
rules or regulations;
(vi) The execution and delivery of this Agreement and the
consummation by the Company of the transactions contemplated
hereby, including the issuance and sale of the Offered
Securities, will not (a) conflict with the Certificate of
Incorporation or the By-laws of the Company, (b) constitute a
violation of, or breach or default under, the terms of any
Applicable Contract (except that such counsel need not express
any opinion as to any covenant, restriction or provision of
any such agreement or instrument with respect to financial
covenants, ratios or tests or any aspect of the financial
condition or results of operations of the Company or any of
its subsidiaries), (c) violate or conflict with, or result in
any contravention of, any Applicable Law or (d) constitute a
violation under any statute, any rule, regulation or order of
any governmental agency or body or any court having
jurisdiction over the Company or any subsidiary of the Company
or any of their properties
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and the Company has the requisite power and authority to
authorize, issue and sell the Offered Securities as
contemplated by this Agreement;
(vii) The Initial Registration Statement was declared
effective under the Act as of the date and time specified in
such opinion, the Additional Registration Statement (if any)
was filed and became effective under the Act as of the date
and time (if determinable) specified in such opinion, the
Prospectus either was filed with the Commission pursuant to
the subparagraph of Rule 424(b) specified in such opinion on
the date specified therein or was included in the Initial
Registration Statement or the Additional Registration
Statement (as the case may be), and, to the best of the
knowledge of such counsel, no stop order suspending the
effectiveness of a Registration Statement or any part thereof
has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act, and
each Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective
effective or issue dates, complied as to form in all material
respects with the requirements of the Act and the Rules and
Regulations; such counsel have no reason to believe that any
part of a Registration Statement or any amendment thereto, as
of its effective date or as of such Closing Date, contained
any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary
to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto, as of its
issue date or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; the descriptions in the Registration Statements
and Prospectus under the captions "Description of Capital
Stock and Membership Units" and "Important United States
Federal Tax Consequences to Non- U.S. Holders of our Class A
Common Stock" to the extent that they purport to describe or
summarize legal matters or certain provisions of the
agreements, statutes and regulations referred to therein,
fairly summarize such provisions in all material respects; and
based solely upon such counsel's review of contracts and
documents made available to it by the Company and inquiries of
officers of the Company, without further independent
investigation by such counsel, and without it having made any
other inquiries or investigations or any search of the public
docket records of any court, body or administrative agency,
such counsel do not know of any legal or governmental
proceedings required to be described in a Registration
Statement or the Prospectus which are not described as
required or of any contracts or documents of a character
required to be described in a Registration Statement or the
Prospectus or to be filed as exhibits to a Registration
Statement which are not described and filed as required; it
being understood that such counsel need express no opinion as
to the financial statements or schedules or other financial
data contained in the Registration Statements or the
Prospectus; and
(viii) This Agreement has been duly authorized, executed and
delivered by each of the Company, Holdings and the Operating
Company.
(e) The Representatives shall have received from Cravath,
Swaine & Moore, counsel for the Underwriters, such opinion or opinions,
dated such Closing Date, with respect to the incorporation of the
Company, the validity of the Offered Securities delivered on such
Closing Date, the Registration Statements, the Prospectus and other
related matters as the Representatives may require, and the Company
shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(f) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that: the representations and warranties of
the Company, Holdings and the Operating Company in this Agreement are
true and correct; each of the Company, Holdings and the Operating
Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at or prior to such
Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that
purpose have been instituted or
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are contemplated by the Commission; the Additional Registration
Statement (if any) satisfying the requirements of subparagraphs (1) and
(3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment
of the applicable filing fee in accordance with Rule 111(a) or (b)
under the Act, prior to the time the Prospectus was printed and
distributed to any Underwriter; and, subsequent to the date of the most
recent financial statements in the Prospectus, there has been no
material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company
and its subsidiaries taken as a whole except as set forth in or
contemplated by the Prospectus or as described in such certificate.
(g) The Representatives shall have received a letter, dated
such Closing Date, of Arthur Andersen LLP which meets the requirements
of subsection (a) of this Section, except that the specified date
referred to in such subsection will be of a date not more than three
days prior to such Closing Date for the purposes of this subsection.
(h) On or prior to the date of this Agreement, the
Representatives shall have received lockup letters from each of the
executive officers and directors of the Company, Wasserstein Perella
Group, Inc., U.S. Equity Partners, L.P. and each of the co-investors
(as such term is used in the Prospectus).
(i) All conditions to the purchase by the Operating Company of
the equity interests in Content that it does not currently own as
contemplated by the Prospectus (the "CONTENT ACQUISITION") shall have
been satisfied and the Representatives shall have received assurances
satisfactory to them from the Company that the Content Acquisition will
close on or substantially simultaneously with the First Closing Date.
The Company will furnish the Representatives with such conformed copies
of such opinions, certificates, letters and documents as the Representatives
reasonably request. CSFBC may in its sole discretion waive on behalf of the
Underwriters compliance with any conditions to the obligations of the
Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) Each of the Company, Holdings
and the Operating Company, jointly and severally, will indemnify and hold
harmless each Underwriter, its partners, directors and officers and each person,
if any, who controls such Underwriter within the meaning of Section 15 of the
Act, against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement, the Prospectus, or
any amendment or supplement thereto, or any related preliminary prospectus, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that none of the
Company, Holdings or the Operating Company will be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with written information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below; and provided, further,
that with respect to any untrue statement or alleged untrue statement in or
omission or alleged omission from any preliminary prospectus the indemnity
agreement contained in this subsection (a) shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased the Offered Securities concerned, to the extent that a
prospectus relating to such Offered Securities was required to be delivered by
such Underwriter under the Act in connection with such purchase and any such
loss, claim, damage or liability of such Underwriter results from the fact that
there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Offered Securities to such person, a copy of
the Prospectus if the Company and previously furnished copies thereof to such
Underwriter.
Each of the Company, Holdings and the Operating Company agrees to
indemnify and hold harmless the Designated Underwriter and each person, if any,
who controls the Designated Underwriter within the
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meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act (the "DESIGNATED ENTITIES"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in any material (A) prepared by the
Company or (B) prepared with the consent of the Company and which material, as
prepared by such party other than the Company, was approved by the Company for
distribution to Participants in connection with the Directed Share Program 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; (ii) caused by the failure of any Participant to pay for and accept
delivery of Directed Shares that the Participant agreed to purchase; or (iii)
related to, arising out of, or in connection with the Directed Share Program,
other than losses, claims, damages or liabilities (or expenses relating thereto)
that are finally judicially determined to have resulted from the bad faith or
gross negligence of the Designated Entities.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, Holdings and the Operating Company, their respective
directors and officers and each person, if any, who controls the Company,
Holdings or the Operating Company within the meaning of Section 15 of the Act,
against any losses, claims, damages or liabilities to which any such person may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
any such person in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred, it being
understood and agreed that the only such information furnished by any
Underwriter consists of the following information in the Prospectus furnished on
behalf of each Underwriter: the concession and reallowance figures appearing in
the fourth paragraph under the caption "Underwriting" and the information
contained in the [sixth and thirteenth] paragraphs under the caption
"Underwriting".
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. Notwithstanding anything contained herein to
the contrary, if indemnity may be sought pursuant to the last paragraph in
Section 7 (a) hereof in respect of such action or proceeding, then in addition
to such separate firm for the indemnified parties, the indemnifying party shall
be liable for the reasonable fees and expenses of not more than one separate
firm (in addition to any local counsel) for the Designated Underwriter for the
defense of any losses, claims, damages and liabilities arising out of the
Directed Share Program, and all persons, if any, who control the Designated
Underwriter within the meaning of either Section 15 of the Act of Section 20 of
the Exchange Act. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action 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 (i) includes an unconditional release of such indemnified party
from all liability on any claims that are the subject matter of such action and
(ii) does not include a statement as to, or an admission of, fault, culpability
or a failure to act by or on behalf of an indemnified party.
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(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company,
Holdings and the Operating Company on the one hand and the Underwriters on the
other 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 Company, Holdings and the Operating
Company on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The relative
benefits received by the Company, Holdings and the Operating Company on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), 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 which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company, Holdings and the Operating Company
under this Section shall be in addition to any liability which the Company,
Holdings or the Operating Company may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each director of the Company, to each officer of the Company who
has signed a Registration Statement and to each person, if any, who controls the
Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
as provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
16
<PAGE> 17
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company, Holdings, the Operating Company or their respective officers and of the
several Underwriters set forth in or made pursuant to this Agreement will remain
in full force and effect, regardless of any investigation, or statement as to
the results thereof, made by or on behalf of any Underwriter, the Company,
Holdings, the Operating Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company, Holdings, the Operating Company and the Underwriters
pursuant to Section 7 shall remain in effect, and if any Offered Securities have
been purchased hereunder the representations and warranties in Section 2 and all
obligations under Section 5 shall also remain in effect. If the purchase of the
Offered Securities by the Underwriters is not consummated for any reason other
than solely because of the termination of this Agreement pursuant to Section 8
or the occurrence of any event specified in clause (iii), (iv) or (v) of Section
6(c), the Company will reimburse the Underwriters for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by them in
connection with the offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Company, Holdings or
the Operating Company will be mailed, delivered or telegraphed and confirmed to
it at Element K Corporation, 500 Canal View Boulevard, Rochester, N.Y. 14623,
Attention: Lance E. D'Amico, Esq., Vice President, Secretary and General
Counsel; provided, however, that any notice to an Underwriter pursuant to
Section 7 will be mailed, delivered or telegraphed and confirmed to such
Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
12. Representation of Underwriters. The Representatives will act for
the several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly or by CSFBC will be binding
upon all the Underwriters.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
Each of the Company, Holdings and the Operating Company hereby submits
to the non-exclusive jurisdiction of the Federal and state courts in the Borough
of Manhattan in The City of New York in any suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
17
<PAGE> 18
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement among the
Company, Holdings, the Operating Company and the several Underwriters in
accordance with its terms.
Very truly yours,
ELEMENT K CORPORATION
By
Name:
Title:
ELEMENT K HOLDINGS LLC
By
Name:
Title:
ELEMENT K LLC
By
Name:
Title:
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
CHASE SECURITIES INC.
THOMAS WEISEL PARTNERS, LLC
Acting on behalf of themselves and as the
Representatives of the several Underwriters
By CREDIT SUISSE FIRST BOSTON CORPORATION
By
Name:
Title:
18
<PAGE> 19
SCHEDULE A
<TABLE>
<CAPTION>
UNDERWRITER
NUMBER OF
FIRM
SECURITIES
----------
<S> <C>
Credit Suisse First Boston Corporation...........................................
Chase Securities Inc.............................................................
Thomas Weisel Partners LLC.......................................................
Total................................................................... ----------
----------
</TABLE>
19
