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EXHIBIT 1
QUAKER FABRIC CORPORATION
3,400,000 Shares*
Common Stock
UNDERWRITING AGREEMENT
________ ___, 1997
PRUDENTIAL SECURITIES INCORPORATED
THE XXXXXXXX-XXXXXXXX COMPANY, INC.
WHEAT, FIRST SECURITIES, INC.
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Quaker Fabric Corporation, a Delaware corporation (the "Company"), MLGA
Fund II, L.P. (the "MLGA Fund"), Nortex Holdings, Inc. ("Nortex Holdings" and
together with the MLGA Fund, the "Selling Securityholders") and Xxxxx X.
Xxxxxxxx, J. Xxxxxx Xxxxxxxxx and Xxxxxxx Xxxxxxx (together, the "Nortex
Owners") hereby confirm their agreement with the several underwriters named in
Schedule 1 hereto (the "Underwriters"), for whom you have been duly authorized
to act as representatives (in such capacities, the "Representatives"), as set
forth below. If you are the only Underwriters, all references herein to the
Representatives shall be deemed to be to the Underwriters.
1. Securities. Subject to the terms and conditions herein contained, the
Company proposes to issue and sell to the several Underwriters an aggregate of
300,000 shares (the "Company Firm Securities") of the Company's Common Stock,
par value $0.01 per share ("Common Stock"), the MLGA Fund proposes to sell to
the several Underwriters 3,000,000 authorized and outstanding shares of Common
Stock and Nortex Holdings proposes to sell to the several Underwriters 100,000
authorized and outstanding shares of Common Stock (the "Selling Securityholder
Firm Securities" and together with the Company Firm Securities, the "Firm
Securities"). The MLGA Fund also proposes to sell to the several Underwriters
not more than 510,000 additional shares of Common Stock if requested by the
Representatives as provided in Section 3 of this Agreement. Any and all shares
of Common Stock to be purchased by the Underwriters pursuant to such option are
referred to herein as the "Option Securities," and the Firm Securities and any
Option Securities are collectively referred to herein as the "Securities".
2. Representations and Warranties. (a) The Company represents and
warrants to, and agrees with, each of the several Underwriters that:
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* Plus an option to purchase from MLGA Fund II, L.P. up to 510,000 additional
shares to cover over-allotments.
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(i) A registration statement on Form S-1 (File No. 333-21957)
with respect to the Securities, including a prospectus subject to
completion, has been filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Act"), and one or more amendments to such registration statement may
have been so filed. After the execution of this Agreement, the Company
will file with the Commission either (A) if such registration statement,
as it may have been amended, has been declared by the Commission to be
effective under the Act, either (1) if the Company relies on Rule 434
under the Act, a Term Sheet (as hereinafter defined) relating to the
Securities, that shall identify the Preliminary Prospectus (as hereinafter
defined) that it supplements containing such information as is required or
permitted by Rules 434, 430A and 424(b) under the Act or (2) if the
Company does not rely on Rule 434 under the Act, a prospectus in the form
most recently included in an amendment to such registration statement (or,
if no such amendment shall have been filed, in such registration
statement), with such changes or insertions as are required by Rule 430A
under the Act or permitted by Rule 424(b) under the Act, and in the case
of either clause (A)(1) or (A)(2) of this sentence as have been provided
to and approved by the Representatives prior to the execution of this
Agreement, or (B) if such registration statement, as it may have been
amended, has not been declared by the Commission to be effective under the
Act, an amendment to such registration statement, including a form of
prospectus, a copy of which amendment has been furnished to and approved
by the Representatives prior to the execution of this Agreement. The
Company may also file a related registration statement with the Commission
pursuant to Rule 462(b) under the Act for the purpose of registering
certain additional Securities, which registration shall be effective upon
filing with the Commission. As used in this Agreement, the term "Original
Registration Statement" means the registration statement initially filed
relating to the Securities, as amended at the time when it was or is
declared effective, including (A) all financial schedules and exhibits
thereto, (B) all exhibits incorporated by reference therein, and (C) and
including any information omitted therefrom pursuant to Rule 430A under
the Act and included in the Prospectus (as hereinafter defined); the term
"Rule 462(b) Registration Statement" means any registration statement
filed with the Commission pursuant to Rule 462(b) under the Act (including
the Registration Statement and any Preliminary Prospectus or Prospectus
incorporated therein at the time such Registration Statement becomes
effective); the term "Registration Statement" includes both the Original
Registration Statement and any Rule 462(b) Registration Statement; the
term "Preliminary Prospectus" means each prospectus subject to completion
filed with such registration statement or any amendment thereto (including
the prospectus subject to completion, if any, included in the Registration
Statement or any amendment thereto at the time it was or is declared
effective); the term "Prospectus" means:
(1) if the Company relies on Rule 434 under the Act, the Term
Sheet relating to the Securities that is first filed pursuant to
Rule 424(b)(7) under the Act, together with the Preliminary
Prospectus identified therein that such Term Sheet supplements;
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(2) if the Company does not rely on Rule 434 under the Act,
the prospectus first filed with the Commission pursuant to Rule
424(b) under the Act; or
(3) if the Company does not rely on Rule 434 under the Act and
if no prospectus is required to be filed pursuant to Rule 424(b)
under the Act, the prospectus included in the Registration
Statement;
and the term "Term Sheet" means any term sheet that satisfies the
requirements of Rule 434 under the Act. Any reference herein to the "date"
of a Prospectus that includes a Term Sheet shall mean the date of such
Term Sheet.
(ii) The Commission has not issued any order preventing or
suspending use of any Preliminary Prospectus. When any Preliminary
Prospectus was filed with the Commission it (A) contained all statements
required to be stated therein in accordance with, and complied in all
material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (B) did not include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. When the
Registration Statement or any amendment thereto was or is declared
effective, it (A) contained or will contain all statements required to be
stated therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (B) did not or will not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading.
When the Prospectus or any Term Sheet that is a part thereof or any
amendment or supplement to the Prospectus is filed with the Commission
pursuant to Rule 424(b) (or, if the Prospectus or part thereof or such
amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such amendment
or supplement to the Prospectus was or is declared effective) and on the
Firm Closing Date and any Option Closing Date (both as hereinafter
defined), the Prospectus, as amended or supplemented at any such time, (A)
contained or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects with
the requirements of, the Act and the rules and regulations of the
Commission thereunder and (B) did not or will not include any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The foregoing provisions of
this paragraph (ii) do not apply to statements or omissions made in any
Preliminary Prospectus, the Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representatives specifically for
use therein.
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(iii) If the Company has elected to rely on Rule 462(b) and
the Rule 462(b) Registration Statement has not been declared effective,
(A) the Company has filed a Rule 462(b) Registration Statement in
compliance with and that is effective upon filing pursuant to Rule 462(b)
and has received confirmation of its receipt and (B) the Company has given
irrevocable instructions for transmission of the applicable filing fee in
connection with the filing of the Rule 462(b) Registration Statement, in
compliance with Rule 111 promulgated under the Act or the Commission has
received payment of such filing fee.
(iv) The Company and each of its subsidiaries have been duly
organized and are validly existing as corporations in good standing under
the laws of their respective jurisdictions of incorporation and are duly
qualified to transact business as foreign corporations and are in good
standing under the laws of all other jurisdictions where the ownership or
leasing of their respective properties or the conduct of their respective
businesses requires such qualification, except where the failure to be so
qualified does not amount to a material liability or disability to the
Company and its subsidiaries, taken as a whole.
(v) The Company and each of its subsidiaries have full
corporate power to own or lease their respective properties and conduct
their respective businesses as described in the Registration Statement and
the Prospectus or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus; and the Company has full corporate power to enter
into this Agreement and to carry out all the terms and provisions hereof
to be carried out by it.
(vi) The issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and, except as otherwise set forth in the
Prospectus or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus, are owned beneficially by the Company free and
clear of any security interests, liens, encumbrances, equities or claims,
[except for shares of [Mexican subsidiary] owned by directors of such
corporation.]
(vii) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus. All of the issued
shares of capital stock of the Company, including the Selling
Securityholder Firm Securities and the Option Securities, have been duly
authorized and validly issued and are fully paid and nonassessable. The
Company Firm Securities have been duly authorized and at the Firm Closing
Date, after payment therefor in accordance herewith, will be validly
issued, fully paid and nonassessable. No holders of outstanding shares of
capital stock of the Company are entitled as such to any preemptive or
other rights to subscribe for any of the Securities, and no holder of
securities of the Company has any right which has not been fully exercised
or waived to require the Company to register the offer or sale of any
securities owned by such holder under the Act in the public offering
contemplated by this agreement.
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(viii) The capital stock of the Company conforms to the
description thereof contained in the Prospectus or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus.
(ix) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
there are no outstanding (A) securities or obligations of the Company or
any of its subsidiaries convertible into or exchangeable for any capital
stock of the Company or any such subsidiary, (B) warrants, rights or
options to subscribe for or purchase from the Company or any such
subsidiary any such capital stock or any such convertible or exchangeable
securities or obligations, or (C) obligations of the Company or any such
subsidiary to issue any shares of capital stock, any such convertible or
exchangeable securities or obligations, or any such warrants, rights or
options.
(x) The consolidated financial statements and schedules of the
Company and its consolidated subsidiaries included in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) fairly present the financial
position of the Company and its consolidated subsidiaries and the results
of operations and changes in financial condition as of the dates and
periods therein specified. Such financial statements and schedules have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise
noted therein). The selected financial and operating data set forth under
the caption "Selected Consolidated Financial and Operating Data" in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present, on the basis stated in the
Prospectus (or such Preliminary Prospectus), the information included
therein.
(xi) Xxxxxx Xxxxxxxx LLP, which has certified the financial
statements of the Company and its consolidated subsidiaries and delivered
its report with respect to the audited consolidated financial statements
and schedules included in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), are independent public accountants as required by the Act and
the applicable rules and regulations thereunder.
(xii) The execution and delivery of this Agreement have been
duly authorized by the Company and this Agreement has been duly executed
and delivered by the Company, and is the valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms.
(xiii) No legal or governmental proceedings are pending to
which the Company or any of its subsidiaries is a party or to which the
property of the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the Prospectus
and are not described therein (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), and no such proceedings have been
threatened against the Company or any of its subsidiaries or with respect
to any of their respective properties;
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and no contract or other document is required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to
the Registration Statement that is not described therein (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) or
filed as required.
(xiv) The issuance, offering and sale of the Company Firm
Securities to the Underwriters by the Company pursuant to this Agreement,
the compliance by the Company with the other provisions of this Agreement
and the consummation of the other transactions herein contemplated do not
(A) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have
been obtained, such as may be required under state securities or blue sky
laws and, if the registration statement filed with respect to the
Securities (as amended) is not effective under the Act as of the time of
execution hereof, such as may be required (and shall be obtained as
provided in this Agreement) under the Act, or (B) conflict with or result
in a breach or violation of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, lease
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective properties are bound, or the charter documents
or by-laws of the Company or any of its subsidiaries, or any statute or
any judgment, decree, order, rule or regulation of any court or other
governmental authority or any arbitrator applicable to the Company or any
of its subsidiaries.
(xv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus, neither the Company nor any of its subsidiaries has sustained
any material loss or interference with their respective businesses or
properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any labor dispute or any
legal or governmental proceeding and there has not been any material
adverse change, or any development involving a prospective material
adverse change, in the condition (financial or otherwise), management,
business prospects, net worth, or results of the operations of the Company
or any of its subsidiaries, except in each case as described in or
contemplated by the Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus.
(xvi) The Company has not, directly or indirectly, (A) taken
any action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities or (B) since the filing of the
Registration Statement (1) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Securities or (2) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company (except for the sale of
Securities under this Agreement).
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(xvii) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus), (A) the Company and its subsidiaries have not incurred any
material liability or obligation, direct or contingent, other than in the
ordinary course of business, nor entered into any material transaction not
in the ordinary course of business; (B) the Company has not purchased any
of its outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock; and (C) there
has not been any material change in the capital stock, short-term debt or
long-term debt of the Company and its consolidated subsidiaries, except in
each case as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(xviii) The Company and each of its subsidiaries have good and
marketable title in fee simple to all items of real property and
marketable title to all personal property owned by each of them, in each
case free and clear of any security interests, liens, encumbrances,
equities, claims and other defects, except such as do not materially and
adversely affect the value of such properties taken as a whole and do not
materially interfere with the use made or proposed to be made of such
properties by the Company or such subsidiary, and any real property and
buildings held under lease by the Company or any such subsidiary are held
under valid, subsisting and enforceable leases, with such exceptions as
are not material and do not materially interfere with the use made or
proposed to be made of such property and buildings by the Company or such
subsidiary, in each case except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(xix) No labor dispute with the employees of the Company or
any of its subsidiaries exists or is threatened or imminent that could
reasonably be expected to result in a material adverse change in the
condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and its subsidiaries, except as
described in or contemplated by the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus).
(xx) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent applications,
trademarks, service marks, trade names, licenses, copyrights and
proprietary or other confidential information currently employed by them
in connection with their respective businesses, and neither the Company
nor any such subsidiary has received any notice of infringement of or
conflict with asserted rights of any third party with respect to any of
the foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material
adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company and its
subsidiaries, except as described in or contemplated by the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
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(xxi) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as the Company believes are prudent and
customary in the businesses in which they are engaged; neither the Company
nor any such subsidiary has been refused any insurance coverage sought or
applied for; and neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business at a
cost that would not materially and adversely affect the condition
(financial or otherwise), business prospects, net worth or results of
operations of the Company and its subsidiaries, taken as a whole, except
as described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus).
(xxii) No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distribution on such subsidiary's capital stock, from
repaying to the Company any loans or advances to such subsidiary from the
Company or from transferring any of such subsidiary's property or assets
to the Company or any other subsidiary of the Company, except as described
in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(xxiii) The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct
their respective businesses, except where the failure to possess any
certificate, authorization or permit would not materially and adversely
affect the condition (financial or otherwise), business prospects, net
worth or results of operations of the Company and its subsidiaries, taken
as a whole, and neither the Company nor any such subsidiary has received
any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company and its subsidiaries, taken as a whole except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
(xxiv) Each of the Company and its subsidiaries has timely
filed all foreign, federal, state and local tax returns that are required
to be filed or has requested extensions thereof (except in any case in
which the failure so to file would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole) and has paid all taxes
required to be paid by it and any other assessment, fine or penalty levied
against it, to the extent that any of the foregoing is due and payable,
except for any such assessment, fine or penalty that is currently being
contested in good faith or as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
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(xxv) Neither the Company nor any of its subsidiaries is in
violation of any foreign, federal or state law or regulation relating to
occupational safety and health or to the storage, handling or
transportation of hazardous or toxic materials and the Company and its
subsidiaries have received all permits, licenses or other approvals
required of them under applicable foreign, federal and state occupational
safety and health and environmental laws and regulations to conduct their
respective businesses, and the Company and each such subsidiary is in
compliance in all material respects with all terms and conditions of any
such permit, license or approval, except any such violation of law or
regulation, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such
permits, licenses or approvals which would not, singly or in the
aggregate, result in a material adverse change in the condition (financial
or otherwise), business prospects, net worth or results of operations of
the Company and its subsidiaries, taken as a whole, except as described in
or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(xxvi) Each certificate signed by any officer of the Company
and delivered to the Representatives or counsel for the Underwriters shall
be deemed to be a representation and warranty by the Company to each
Underwriter as to the matters covered thereby.
(xxvii) Except for the shares of capital stock of each of the
subsidiaries owned by the Company and such subsidiaries, neither the
Company nor any such subsidiary owns any shares of stock or any other
equity securities of any corporation or has any equity interest in any
firm, partnership, association or other entity, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
(xxviii) There are no holders of securities of the Company,
who, by reason of the filing of the Registration Statement, have the right
(and have not waived such right) to request the Company to register under
the Act, or to include in the Registration Statement, securities held by
them.
(xxix) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (A) transactions are executed in accordance with
management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (C) access to assets is permitted only in accordance
with management's general or specific authorization; and (D) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xxx) No default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any
indenture, mortgage,
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deed of trust, lease or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of their respective properties is bound or may be
affected in any material adverse respect with regard to property, business
or operations of the Company and its subsidiaries.
(xxxi) The Company has made all filings required to be made by
it under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(xxxii) The Company has not distributed and, prior to the
later of (A) the Closing Date and (B) the completion of the distribution
of the Securities, will not distribute any offering material in connection
with the offering and sale of the Securities other than the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or other materials, if
any permitted by the Act.
(b) Each Selling Securityholder represents and warrants to, and
agrees with, each of the several Underwriters that:
(i) Such Selling Securityholder has full corporate or limited
partnership power to enter into this Agreement and to sell, assign,
transfer and deliver to the Underwriters the Securities to be sold by such
Selling Securityholder hereunder in accordance with the terms of this
Agreement; the execution and delivery of this Agreement have been duly
authorized by all necessary corporate or limited partnership action of
such Selling Securityholder; and this Agreement has been duly executed and
delivered by such Selling Securityholder.
(ii) Such Selling Securityholder is the lawful owner of the
Securities to be sold by such Selling Securityholder hereunder and upon
sale and delivery of, and payment for, such Securities, as provided
herein, such Selling Securityholder will convey good and marketable title
to such Securities, free and clear of any security interests, liens,
encumbrances, equities, claims or other defects.
(iii) Such Selling Securityholder has not, directly or
indirectly, (i) taken any action designed to cause or result in, or that
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities or (ii) since the
filing of the Registration Statement (A) sold, bid for, purchased, or paid
anyone any compensation for soliciting purchases of, the Securities or (B)
paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of the Company (except for the
sale of Securities by the Selling Securityholders under this Agreement).
(iv) To the extent that any statements or omissions are made
in the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto in reliance upon and in conformity
with
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written information furnished to the Company by such Selling
Securityholder specifically for use therein, such Preliminary Prospectus
did, and the Registration Statement and the Prospectus and any amendments
or supplements thereto, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects to
the requirements of the Act, the Exchange Act and the respective rules and
regulations of the Commission thereunder and will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they are made, not misleading. Such
Selling Securityholder has reviewed the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) and the
Registration Statement, and the information regarding such Selling
Securityholder set forth therein under the caption "Principal and Selling
Stockholders" is complete and accurate.
(v) The sale by such Selling Securityholder of Securities
pursuant hereto is not prompted by any adverse information concerning the
Company that is not set forth in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(vi) The sale of the Securities to the Underwriters by such
Selling Securityholder pursuant to this Agreement, the compliance by such
Selling Securityholder with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do not (i)
require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as have
been obtained, such as may be required under state securities or blue sky
laws and, if the registration statement filed with respect to the
Securities (as amended) is not effective under the Act as of the time of
execution hereof, such as may be required (and shall be obtained as
provided in this Agreement) under the Act, or (ii) conflict with or result
in a breach or violation of any of the terms and provisions of, or
constitute a default under any indenture, mortgage, deed of trust, lease
or other agreement or instrument to which such Selling Securityholder or
any of its subsidiaries is a party or by which such Selling Securityholder
or any of its subsidiaries or any of their respective properties are
bound, or the charter documents or by-laws of such Selling Securityholder
or any of its subsidiaries or any statute or any judgment, decree, order,
rule or regulation of any court or other governmental authority or any
arbitrator applicable to such Selling Securityholder or any of its
subsidiaries.
(vii) Such Selling Securityholder has not distributed and,
prior to the later of (A) the Closing Date and (B) the completion of the
distribution of the Securities, will not distribute any offering material
in connection with the offering and sale of the Securities other than the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or
other materials, if any permitted by the Act.
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(c) Each Nortex Owner represents and warrants to, and agrees with,
each of the several Underwriters that the representations and warranties of
Nortex Holdings in Section 2(b) hereof are true and correct in all respects.
3. Purchase, Sale and Delivery of the Securities. (a) On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell the number of Firm Securities set forth next to its name on
Schedule 1 hereto to the Underwriters, and each Selling Securityholder,
severally and not jointly, agrees to sell the number of Firm Securities set
forth next to its name on Schedule 1 hereto to the Underwriters and each of the
Underwriters, severally and not jointly, agrees to purchase from the Company and
the Selling Securityholders, at a purchase price of $________ per share, the
number of Firm Securities set forth opposite the name of such Underwriter in
Schedule 2 hereto. The number of Firm Securities to be purchased from the
Company and each Selling Securityholder, respectively (as adjusted by the
Representatives to avoid fractions), by each of the Underwriters shall be
determined by multiplying the aggregate number of such Firm Securities to be
sold by the Company or such Selling Securityholder, as the case may be, as set
forth opposite the name of such Underwriter on Schedule 2 hereto and the
denominator of which is the total number of Firm Securities set forth on
Schedule 2 hereto. One or more certificates in definitive form for the Firm
Securities that the several Underwriters have agreed to purchase hereunder, and
in such denomination or denominations and registered in such name or names as
the Representatives request upon notice to the Company and the Selling
Securityholders at least 48 hours prior to the Firm Closing Date, shall be
delivered by or on behalf of the Company and the Selling Securityholders to the
Representatives for the respective accounts of the Underwriters, against payment
by or on behalf of the Underwriters of the purchase price therefor by wire
transfer in same-day funds to the respective accounts of the Company and the
Selling Securityholders. Such delivery of and payment for the Firm Securities
shall be made at the offices of Fulbright & Xxxxxxxx L.L.P., 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 at 9:30 A.M., New York time, on March ___, 1997, or at
such other place, time or date as the Representatives, the Company and the
Selling Securityholders may agree upon or as the Representatives may determine
pursuant to Section 10 hereof, such time and date of delivery against payment
being herein referred to as the "Firm Closing Date." Each of the Company and the
Selling Securityholders severally will make such certificate or certificates for
the Firm Securities to be sold by it available for checking and packaging by the
Representatives at the offices in New York, New York of the Company's transfer
agent or registrar or of Prudential Securities Incorporated at least 24 hours
prior to the Firm Closing Date.
(b) For the purpose of covering any over-allotments in connection
with the distribution and sale of the Firm Securities as contemplated by the
Prospectus, the MLGA Fund hereby grants to the several Underwriters an option to
purchase, severally and not jointly, the Option Securities. The purchase price
to be paid for any Option Securities shall be the same price per share as the
price per share for the Firm Securities set forth above in paragraph (a) of this
Section 3. The option granted hereby may be exercised as to all or any part of
the Option Securities from time to time within thirty days after the date of the
Prospectus (or, if such 30th day shall be a Saturday or Sunday or a holiday, on
the next business day thereafter when the New York Stock
13
Exchange is open for trading). The Underwriters shall not be under any
obligation to purchase any of the Option Securities prior to the exercise of
such option. The Representatives may from time to time exercise the option
granted hereby by giving notice in writing or by telephone (confirmed in
writing) to the MLGA Fund and the Company setting forth the aggregate number of
Option Securities as to which the several Underwriters are then exercising the
option and the date and time for delivery of and payment for such Option
Securities. Any such date of delivery shall be determined by the Representatives
but shall not be earlier than two business days or later than five business days
after such exercise of the option and, in any event, shall not be earlier than
the Firm Closing Date. The time and date set forth in such notice, or such other
time on such other date as the Representatives, the MLGA Fund and Company may
agree upon or as the Representatives may determine pursuant to Section 10
hereof, is herein called the "Option Closing Date" with respect to such Option
Securities. Upon exercise of the option as provided herein, the MLGA Fund shall
become obligated to sell to each of the several Underwriters, and, subject to
the terms and conditions herein set forth, each of the Underwriters (severally
and not jointly) shall become obligated to purchase from the MLGA Fund, the same
percentage of the total number of the Option Securities as to which the several
Underwriters are then exercising the option as such Underwriter is obligated to
purchase of the aggregate number of Firm Securities, as adjusted by the
Representatives in such manner as they deem advisable to avoid fractional
shares. If the option is exercised as to all or any portion of the Option
Securities, one or more certificates in definitive form for such Option
Securities, and payment therefor, shall be delivered on the related Option
Closing Date in the manner, and upon the terms and conditions, set forth in
paragraph (a) of this Section 3, except that reference therein to the Firm
Securities and the Firm Closing Date shall be deemed, for purposes of this
paragraph (b), to refer to such Option Securities and Option Closing Date,
respectively.
(c) Each of the Company and the Selling Securityholders hereby
acknowledges that the wire transfer by or on behalf of the Underwriters of the
purchase price for any Shares does not constitute closing of a purchase and sale
of the Shares. Only execution and delivery of a receipt for Shares by the
Underwriters indicates completion of the closing of a purchase of the Shares
from the Company and the Selling Securityholders. Furthermore, in the event that
the Underwriters wire funds to the Company and the Selling Securityholders prior
to the completion of the closing of a purchase of Shares, each of the Company
and the Selling Securityholders hereby acknowledges that until the Underwriters
execute and deliver a receipt for the Shares, by facsimile or otherwise, the
Company and the Selling Securityholders will not be entitled to the wired funds
and shall return the wired funds to the Underwriters as soon as practicable (by
wire transfer of same-day funds) upon demand. In the event that the closing of a
purchase of Shares is not completed and the wire funds are not returned by the
Company or the Selling Securityholders to the Underwriters on the same day the
wired funds were received by the Company and the Selling Securityholders, each
of the Company and the Selling Securityholders severally agree to pay to the
Underwriters in respect of each day the wire funds are not returned by it, in
same-day funds, interest on the amount of such wire funds in an amount
representing the Underwriters' cost of financing as reasonably determined by
Prudential Securities Incorporated.
14
(d) It is understood that any of you, individually and not as one of
the Representatives, may (but shall not be obligated to) make payment on behalf
of any Underwriter or Underwriters for any of the Securities to be purchased by
such Underwriter or Underwriters. No such payment shall relieve such Underwriter
or Underwriters from any of its or their obligations hereunder.
4. Independent Underwriter. (a) The Company hereby confirms its engagement
of the services of Wheat, First Securities, Inc. as, and Wheat, First
Securities, Inc. hereby confirms its agreement with the Company to render
services as, a "qualified independent underwriter" (in such capacity, the
"Independent Underwriter") within the meaning of Rule 2720 of the Conduct Rules
("Rule 2720") of the National Association of Securities Dealers, Inc. with
respect to the offering and sale of the Securities.
(b) The Independent Underwriter hereby represents and warrants to,
and agrees with, the Company, Prudential Securities Incorporated, and the other
Underwriters that with respect to the offering and sale of Securities as
described in the Prospectus:
(i) the Independent Underwriter is a "qualified independent
underwriter" within the meaning of Rule 2720;
(ii) the Independent Underwriter has participated in the
preparation of the Registration Statement and the Prospectus and has
exercised the usual standards of "due diligence" with respect thereto;
(iii) the Independent Underwriter has undertaken the legal
responsibilities and liabilities of an underwriter under the Act,
including those contained in Section 11 thereof, subject to the
limitations on such liabilities set forth herein (including without
limitation, the nature of Wheat, First Securities Inc.'s underwriting
commitment as several and not joint). It is specifically understood,
however, that Wheat, First Securities, Inc. will bear such legal
responsibilities and liabilities only to the extent, if any, that a court
of competent jurisdiction rules in a judgment which has become final, and
not subject to further appeal, that Wheat, First Securities, Inc., as
Independent Underwriter, bears the legal responsibilities and liabilities
of an "underwriter";
(iv) based upon, among other factors, the information set
forth in the Prospectus and its review of such other documents and the
taking of such other actions as the Independent Underwriter, in its sole
discretion, has deemed necessary or appropriate for the purposes of
delivering its recommendation hereunder, the Independent Underwriter
recommends, as of the date of the execution and delivery of this
Agreement, that the public offering price for the Securities not exceed
the amount of $________ per share, which price should in no way be
considered or relied upon except as set forth therein and in the letter
referred to in clause (v) below; and
15
(v) the Independent Underwriter will furnish to the other
Underwriters on the date hereof a letter, dated the date hereof,
substantially to the effect set forth in Schedule 3 hereto.
(c) The Company, the Independent Underwriter and the other
Underwriters agree to comply in all material respects with all of the
requirements of Rule 2720 applicable to them in connection with the offering and
sale of the Securities. The Company agrees to cooperate with Underwriters to
enable the Underwriters to comply with Rule 2720 and the Independent Underwriter
to perform the services contemplated by this Agreement.
(d) The Independent Underwriter hereby consents to the references to
it as set forth under the caption "Underwriting" in the Prospectus.
5. Offering by the Underwriters. Upon your authorization of the release of
the Firm Securities, the several Underwriters propose to offer the Firm
Securities for sale to the public upon the terms set forth in the Prospectus.
6. Covenants. (a) The Company covenants and agrees with each of the
Underwriters that:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto to become effective as promptly as
possible. If required, the Company will file the Prospectus or any Term
Sheet that constitutes a part thereof and any amendment or supplement
thereto with the Commission in the manner and within the time period
required by Rules 434 and 424(b) under the Act. During any time when a
prospectus relating to the Securities is required to be delivered under
the Act, the Company (A) will comply with all requirements imposed upon it
by the Act and the Exchange Act and the respective rules and regulations
of the Commission thereunder to the extent necessary to permit the
continuance of sales of or dealings in the Securities in accordance with
the provisions hereof and of the Prospectus, as then amended or
supplemented, and (B) will not file with the Commission the prospectus,
Term Sheet or the amendment referred to in the second sentence of Section
2(a) hereof, any amendment or supplement to such Prospectus, Term Sheet or
any amendment to the Registration Statement or any Rule 462(b)
Registration Statement of which the Representatives shall not previously
have been advised and furnished with a copy for a reasonable period of
time prior to the proposed filing and as to which filing the
Representatives shall not have given their consent, which consent will not
be unreasonably withheld. The Company will prepare and file with the
Commission, in accordance with the rules and regulations of the
Commission, promptly upon request by the Representatives or counsel for
the Underwriters, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary or
advisable in connection with the distribution of the Securities by the
several Underwriters, and will use its best efforts to cause any such
amendment to the Registration Statement to be declared effective by the
Commission as promptly as possible. The Company will advise the
Representatives, promptly after
16
receiving notice thereof, of the time when the Registration Statement or
any amendment thereto has been filed or declared effective or the
Prospectus or any amendment or supplement thereto has been filed and will
provide evidence satisfactory to the Representatives of each such filing
or effectiveness.
(ii) The Company will advise the Representatives, promptly
after receiving notice or obtaining knowledge thereof, of (A) the issuance
by the Commission of any stop order suspending the effectiveness of the
Original Registration Statement or any Rule 462(b) Registration Statement
or any amendment thereto or any order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, (B) the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, (C) the institution,
threatening or contemplation of any proceeding for any such purpose or (D)
any request made by the Commission for amending the Original Registration
Statement or any Rule 462(b) Registration Statement, for amending or
supplementing the Prospectus or for additional information. The Company
will use its best efforts to prevent the issuance of any such stop order
and, if any such stop order is issued, to obtain the withdrawal thereof as
promptly as possible.
(iii) The Company will arrange for the qualification of the
Securities for offering and sale under the securities or blue sky laws of
such jurisdictions as the Representatives may reasonably designate and to
continue such qualifications in effect for as long as may be necessary to
complete the distribution of the Securities, provided, however, that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to execute a general consent to service of process
in any jurisdiction.
(iv) If, at any time prior to the later of (A) the final date
when a prospectus relating to the Securities is required to be delivered
under the Act or (B) the Option Closing Date, any event occurs as a result
of which the Prospectus, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any
other reason it is necessary at any time to amend or supplement the
Prospectus to comply with the Act, the Exchange Act or the rules or
regulations of the Commission thereunder, the Company will promptly notify
the Representatives thereof and, subject to Section 6(a) hereof, will
prepare and file with the Commission, at the Company's expense, an
amendment to the Registration Statement or an amendment or supplement to
the Prospectus that corrects such statement or omission or effects such
compliance.
(v) The Company will, without charge, provide (A) to the
Representatives and to counsel for the Underwriters a conformed copy of
the registration statement originally filed with respect to the Securities
and each amendment thereto (in each case including exhibits thereto) or
any Rule 462(b) Registration Statement, certified by the Secretary or an
Assistant Secretary of the Company to be true and complete copies thereof
as filed with the
17
Commission by electronic transmission, (B) to each other Underwriter, a
conformed copy of such registration statement or any Rule 462(b)
Registration Statement and each amendment thereto (in each case without
exhibits thereto) and (C) so long as a prospectus relating to the
Securities is required to be delivered under the Act, as many copies of
each Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto as the Representatives may reasonably request; without
limiting the application of clause (C) of this sentence, the Company, not
later than (A) 6:00 PM, New York City time, on the date of determination
of the public offering price, if such determination occurred at or prior
to 10:00 A.M., New York City time, on such date or (B) 2:00 PM, New York
City time, on the business day following the date of determination of the
public offering price, if such determination occurred after 10:00 A.M.,
New York City time, on such date, will deliver in New York City to the
Underwriters, without charge, as many copies of the Prospectus and any
amendment or supplement thereto as the Representatives may reasonably
request for purposes of confirming orders that are expected to settle on
the Firm Closing Date.
(vi) The Company, as soon as practicable, will make generally
available to its securityholders and to the Representatives a consolidated
earnings statement of the Company and its subsidiaries that satisfies the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
(vii) The Company will apply the net proceeds from the sale of
the Company Firm Securities as set forth under "Use of Proceeds" in the
Prospectus.
(viii) The Company will not, directly or indirectly, without
the prior written consent of Prudential Securities Incorporated, on behalf
of the Underwriters, offer, sell, offer to sell, contract to sell, pledge,
grant any option to purchase or otherwise sell or dispose (or announce any
offer, sale, offer of sale, contract of sale, pledge, grant of any option
to purchase or other sale or disposition) of any shares of Common Stock or
any securities convertible into, or exchangeable or exercisable for,
shares of Common Stock for a period of 180 days after the date hereof,
except pursuant to this Agreement and except for issuances pursuant to the
exercise of outstanding employee stock options or pursuant to options
granted under the Company's stock option plans.
(ix) The Company will not, directly or indirectly, (A) take
any action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities or (B) (1) sell, bid for, purchase, or
pay anyone any compensation for soliciting purchases of, the Securities or
(2) pay or agree to pay to any person any compensation for soliciting
another to purchase any other securities of the Company (except for the
sale of Securities by the Selling Securityholders under this Agreement).
(x) The Company will obtain the agreements described in
Section 7(h) hereof prior to the Firm Closing Date.
18
(xi) If at any time during the 25-day period after the
Registration Statement becomes effective or the period prior to the Option
Closing Date, any rumor, publication or event relating to or affecting the
Company shall occur as a result of which in your opinion the market price
of the Common Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after
notice from you advising the Company to the effect set forth above,
forthwith prepare, consult with you concerning the substance of, and
disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor,
publication or event.
(xii) If the Company elects to rely on Rule 462(b), the
Company shall both file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) and pay the applicable fees in
accordance with Rule 111 promulgated under the Act by the earlier of (A)
10:00 P.M. Eastern time on the date of this Agreement and (B) the time
confirmations are sent or given, as specified by Rule 462(b)(2).
(xiii) The Company will ensure that the Securities remain
included for quotation on the Nasdaq National Market following the Firm
Closing Date.
(b) Each of the Selling Securityholders and the Nortex Owners
severally covenants and agrees with each of the Underwriters that:
(i) Such person will not, directly or indirectly, (A) take any
action designed to cause or result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities or (B) (1) sell, bid for, purchase, or
pay anyone any compensation for soliciting purchases of, the Securities or
(2) pay or agree to pay to any person any compensation for soliciting
another to purchase any other securities of the Company (except for the
sale of Securities under this Agreement).
(ii) Such person will not, directly or indirectly, without the
prior written consent of Prudential Securities Incorporated, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, grant of any option to purchase or other sale or
disposition) of any Securities legally or beneficially owned by such
person or any securities convertible into, or exchangeable or exercisable
for, Securities for a period of 180 days after the date hereof, except for
(a) up to 29,956 shares that may be sold by Nortex Holdings pursuant to
the Holdings Option (as defined in the Prospectus) and (b) _______ shares
subject to a pledge granted by Nortex Holdings.
(iii) As soon as such person is advised thereof, such person
will advise the Representatives (and immediately thereafter confirm such
advise in writing), (i) of receipt by such person or by any representative
or agent of such person, of any communication from the Commission relating
to the Registration
19
Statement, the Prospectus or any Preliminary Prospectus, or any notice or
order of the Commission relating to the Company or such person in
connection with the transactions contemplated by this Agreement and (ii)
of the happening of any event which makes or may make any statement made
in the Registration Statement, the Prospectus or any Preliminary
Prospectus relating to such person untrue or that requires the making of
any change in the Registration Statement, Prospectus or Preliminary
Prospectus, as the case may be, in order to make such statement, in light
of the circumstances in which it was made, not misleading.
7. Expenses. The Company will pay all costs and expenses incident to the
performance of its obligations and those of the Selling Securityholders under
this Agreement, whether or not the transactions contemplated herein are
consummated or this Agreement is terminated pursuant to Section 12 hereof,
including all costs and expenses incident to (i) the printing or other
production of documents with respect to the transactions, including any costs of
printing the registration statement originally filed with respect to the
Securities and any amendment thereto, any Rule 462(b) Registration Statement,
any Preliminary Prospectus and the Prospectus and any amendment or supplement
thereto, this Agreement and any blue sky memoranda, (ii) all arrangements
relating to the delivery to the Underwriters of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (iv) preparation,
issuance and delivery to the Underwriters of any certificates evidencing the
Securities, including transfer agent's and registrar's fees, (v) the
qualification of the Securities under state securities and blue sky laws,
including filing fees and fees and disbursements of counsel for the Underwriters
relating thereto, (vi) the filing fees of the Commission and the National
Association of Securities Dealers, Inc. relating to the Securities, (vii) the
quotation of the Securities on the Nasdaq National Market, (viii) any meetings
with prospective investors in the Securities (other than as shall have been
specifically approved by the Representatives to be paid for by the Underwriters)
and (ix) advertising relating to the offering of the Securities approved by the
Company (other than as shall have been specifically approved by the
Representatives to be paid for by the Underwriters). If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 8 hereof is not satisfied,
because this Agreement is terminated pursuant to Section 12 hereof or because of
any failure, refusal or inability on the part of the Company, any Selling
Securityholder or any Nortex Owner to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder other than by
reason of a default by any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
counsel fees and disbursements) that shall have been incurred by them in
connection with the proposed purchase and sale of the Securities. The Company
shall not in any event be liable to any of the Underwriters for the loss of
anticipated profits from the transactions covered by this Agreement.
8. Conditions of the Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company, the Selling Securityholders and
the Nortex Owners contained herein as of the date hereof and as of the Firm
Closing Date, as if made on
20
and as of the Firm Closing Date, to the accuracy of the statements of the
Company's officers made pursuant to the provisions hereof, to the performance by
the Company, the Selling Securityholders and the Nortex Owners of their
respective covenants and agreements hereunder and to the following additional
conditions:
(a) If the Original Registration Statement or any amendment thereto
filed prior to the Firm Closing Date has not been declared effective as of the
time of execution hereof, the Original Registration Statement or such amendment
and, if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have been declared effective not later than the
earlier of (i) 11:00 A.M., New York time, on the date on which the amendment to
the registration statement originally filed with respect to the Securities or to
the Registration Statement, as the case may be, containing information regarding
the initial public offering price of the Securities has been filed with the
Commission and (ii) the time confirmations are sent or given as specified by
Rule 462(b)(2), or with respect to the Original Registration Statement, or such
later time and date as shall have been consented to by the Representatives; if
required, the Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto shall have been filed with the Commission in
the manner and within the time period required by Rules 434 and 424(b) under the
Act; no stop order suspending the effectiveness of the Registration Statement or
any amendment thereto shall have been issued, and no proceedings for that
purpose shall have been instituted or threatened or, to the knowledge of the
Company or the Representatives, shall be contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
(b) The Representatives shall have received an opinion, dated the
Firm Closing Date, of Proskauer Xxxx Xxxxx & Xxxxxxxxxx LLP, counsel for the
Company, to the effect that:
(i) the Company and each of its subsidiaries listed in Exhibit
22 to the Registration Statement (the "Subsidiaries") have been duly
organized and are validly existing as corporations in good standing under
the laws of their respective jurisdictions of incorporation and are duly
qualified to transact business as foreign corporations and are in good
standing under the laws of the jurisdictions listed on Schedule 4 to this
Agreement;
(ii) the Company and each of the Subsidiaries have corporate
power to own or lease their respective properties and conduct their
respective businesses as described in the Registration Statement and the
Prospectus, and the Company has corporate power to enter into this
Agreement and to carry out all the terms and provisions hereof to be
carried out by it;
(iii) the issued shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable and are owned beneficially by the Company, to such
counsel's knowledge free and clear of any adverse claims (within the
meaning of Section 8-302 of the New York Uniform Commercial Code);
21
(iv) the Company has authorized, issued and outstanding
capital stock as set forth in the Prospectus; all of the issued shares of
capital stock of the Company, including the Selling Securityholder Firm
Securities and the Option Securities, have been duly authorized and
validly issued and are fully paid and nonassessable, have been issued in
compliance with all applicable federal and state securities laws and were
not issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities created by statute or the
Company's certificate of incorporation; the Company Firm Securities have
been duly authorized by all necessary corporate action of the Company and,
when issued and delivered to and paid for by the Underwriters pursuant to
this Agreement, will be validly issued, fully paid and nonassessable; the
Securities have been duly included for trading on the Nasdaq National
Market; no holders of outstanding shares of capital stock of the Company
are entitled under statute or the Company's certificate of incorporation
as such to any preemptive or other rights to subscribe for any of the
Securities; and, to such counsel's knowledge, no holders of securities of
the Company are entitled to have such securities registered under the
Registration Statement;
(v) the statements set forth under the heading "Description of
Securities" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company, provide
a fair summary of such provisions; and the statements set forth under the
headings "Business - Trademarks, Patents, Copyrights", "Business --
Environmental Matters", "Business -- Legal Proceedings" and "Description
of Securities" in the Prospectus, insofar as such statements constitute a
summary of the legal matters, documents or proceedings referred to
therein, provide a fair summary of such legal matters, documents and
proceedings;
(vi) the execution and delivery of this Agreement have been
duly authorized by all necessary corporate action of the Company and this
Agreement has been duly executed and delivered by the Company;
(vii) to the knowledge of such counsel, (A) no legal or
governmental proceedings are pending to which the Company or any of the
Subsidiaries is a party or to which the property of the Company or any of
the Subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not described therein,
and, to the best knowledge of such counsel, no such proceedings have been
threatened against the Company or any of the Subsidiaries or with respect
to any of their respective properties and (B) no contract or other
document is required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement or
incorporated therein by reference that is not described therein or filed
or incorporated as required;
(viii) the issuance, offering and sale of the Securities to
the Underwriters by the Company pursuant to this Agreement, the compliance
by the Company with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do not (A)
require the consent, approval, authorization, registration or
qualification of or with any governmental
22
authority, except such as have been obtained and such as may be required
under state securities or blue sky laws, or (B) conflict with or result in
a breach or violation of any of the terms and provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, lease or other
agreement or instrument, known to such counsel, to which the Company or
any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries or any of their respective properties are bound, or the
charter documents or by-laws of the Company or any of the Subsidiaries, or
any statute or any judgment, decree, order, rule or regulation of any
court or other governmental authority or any arbitrator known to such
counsel and applicable to the Company or any of the Subsidiaries;
(ix) the records of the United States Patent and Trademark
office indicate that the Company is the owner of U.S. Patent no. _____; to
the knowledge of such counsel, there are no asserted or unasserted claims
of any person relating to the scope or ownership of such patent, nor liens
which have been filed against the patent; and in the course of such
counsel's review such counsel noted no material defect of form in the
preparation or filing of the application for such patent;
(x) the Registration Statement is effective under the Act; any
required filing of the Prospectus, or any Term Sheet that constitutes a
part thereof, pursuant to Rules 434 and 424(b) has been made in the manner
and within the time period required by Rules 434 and 424(b); and to the
best knowledge of such counsel, no stop order suspending the effectiveness
of the Registration Statement or any amendment thereto has been issued,
and no proceedings for that purpose have been instituted or threatened or
by the Commission;
(xi) the Registration Statement originally filed with respect
to the Securities and each amendment thereto, any Rule 462(b) Registration
Statement and the Prospectus (in each case, other than the financial
statements and other financial information contained therein, as to which
such counsel need express no opinion) comply as to form in all material
respects with the applicable requirements of the Act, the Exchange Act and
the rules and regulations of the Commission thereunder; and
(xii) if the Company elects to rely on Rule 434, the
Prospectus is not "materially different", as such term is used in Rule
434, from the prospectus included in the Registration Statement at the
time of its effectiveness or an effective post-effective amendment thereto
(including such information that is permitted to be omitted pursuant to
Rule 430A).
Such counsel shall also deliver a separate letter to the effect that they
have no reason to believe that the Registration Statement, as of its effective
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, as of its date or the date of
such opinion, included or includes any untrue statement of a material fact or
omitted or omits to state a material fact necessary in
23
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials and, as to matters involving the
application of laws of any jurisdiction other than the State of New York, the
General Corporation Law of the State of Delaware or the United States, to the
extent satisfactory in form and scope to counsel for the Underwriters, upon the
opinion of [insert name of local counsel]. The foregoing opinion shall also
state that the Underwriters are justified in relying upon such opinion of
[insert name of local counsel], and copies of such opinion shall be delivered to
the Representatives and counsel for the Underwriters.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
(c) The Selling Securityholders and the Nortex Owners shall have
furnished to the Representatives the opinion of Proskauer Xxxx Xxxxx &
Xxxxxxxxxx LLP, counsel for the Selling Securityholders and the Nortex Owners,
dated the Closing Date, to the effect that:
(i) each Selling Securityholder has full corporate power or
partnership authority to enter into this Agreement and to sell, transfer
and deliver the Securities being sold by such Selling Securityholder
hereunder in the manner provided in this Agreement; the execution and
delivery of this Agreement have been duly authorized by all necessary
corporate or partnership action of each Selling Securityholder; this
Agreement has been duly executed and delivered by each Selling
Securityholder and Nortex Owner;
(ii) the delivery by each Selling Securityholder to the
several Underwriters of certificates for the Securities being sold
hereunder by such Selling Securityholder against payment therefor as
provided herein, will convey good and marketable title to such Securities
to the several Underwriters, free and clear of all security interests,
liens, encumbrances, equities, claims or other defects; and
(iii) the sale of the Securities to the Underwriters by each
Selling Securityholder pursuant to this Agreement, the compliance by each
Selling Securityholder and Nortex Owner with the other provisions of this
Agreement and the consummation of the other transactions herein
contemplated do not (i) require the consent, approval, authorization,
registration or qualification of or with any governmental authority,
except such as have been obtained and such as may be required under state
securities or blue sky laws, or (ii) conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a
default under any indenture, mortgage, deed of trust, lease or other
agreement or instrument to which such Selling Securityholder or any of its
subsidiaries is a party or by which such Selling Securityholder or any of
its subsidiaries or any of their respective properties are bound, or the
charter documents, by-laws or partnership agreement of such Selling
Securityholder or
24
any of its subsidiaries or any statute or, to the knowledge of such
counsel, any judgment, decree, order, rule or regulation of any court or
other governmental authority or any arbitrator applicable to such Selling
Securityholder or any of its subsidiaries or any Nortex Owner.
In rendering such opinion, such counsel may rely, as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible officers
of the Company and public officials and, as to matters involving the application
of laws of any jurisdiction other than the State of New York, the General
Corporation Law of the State of Delaware or the United States, to the extent
satisfactory in form and scope to counsel for the Underwriters, upon the opinion
of [insert name of local counsel]. The foregoing opinion shall also state that
the Underwriters are justified in relying upon such opinion of [insert name of
local counsel], and copies of such opinion shall be delivered to the
Representatives and counsel for the Underwriters.
References to the Registration Statement and the Prospectus in this
paragraph (c) shall include any amendment or supplement thereto at the date of
such opinion.
(d) The Representatives shall have received an opinion, dated the
Firm Closing Date, of Fulbright & Xxxxxxxx L.L.P., New York, New York, counsel
for the Underwriters, with respect to the issuance and sale of the Firm
Securities, the Registration Statement and the Prospectus, and such other
related matters as the Representatives may reasonably require, and the Company
shall have furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters.
(e) The Representatives shall have received from Xxxxxx Xxxxxxxx LLP
a letter or letters dated, respectively, the date hereof and the Firm Closing
Date, in form and substance satisfactory to the Representatives, to the effect
that:
(i) they are independent accountants with respect to the
Company and its consolidated subsidiaries within the meaning of the Act,
the Exchange Act and the applicable rules and regulations thereunder;
(ii) in their opinion, the audited consolidated financial
statements and schedules examined by them and included in the Registration
Statement and the Prospectus comply in form in all material respects with
the applicable accounting requirements of the Act and the related
published rules and regulations;
(iii) on the basis of a reading of the latest available
interim unaudited financial statements of the Company, carrying out
certain specified procedures (which do not constitute an examination made
in accordance with generally accepted auditing standards) that would not
necessarily reveal matters of significance with respect to the comments
set forth in this paragraph (iii), a reading of the minute books of the
shareholders, the board of directors and any committees thereof of the
Company and each of its consolidated subsidiaries, and inquiries of
certain officials of the Company and its consolidated subsidiaries who
have responsibility for financial and accounting matters, nothing came to
25
their attention that caused them to believe that at a specific date not
more than five business days prior to the date of such letter, there were
any changes in the capital stock or long-term debt of the Company and its
consolidated subsidiaries or any decreases in net current assets or
stockholders' equity of the Company and its consolidated subsidiaries, in
each case compared with amounts shown on the January 4, 1997 consolidated
balance sheet included in the Registration Statement and the Prospectus,
or for the period from January 5, 1997 to such specified date in net
sales, net income and earnings per share of the Company and its
consolidated subsidiaries were not at least 115%, 200% and 200%,
respectively, of the comparable amounts for the comparable period in the
prior year, except in all instances for changes, decreases or increases
set forth in such letter; and
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records
of the Company and its consolidated subsidiaries and are included in the
Registration Statement and the Prospectus under the captions "Prospectus
Summary," "Risk Factors," "The Company," "Use of Proceeds,"
"Capitalization," "Selected Consolidated Financial and Operating Data,"
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Business," "Management," "Principal and Selling
Stockholders," "Certain Transactions" and "Description of Securities," and
have compared such amounts, percentages and financial information with
such records of the Company and its consolidated subsidiaries and with
information derived from such records and have found them to be in
agreement, excluding any questions of legal interpretation.
In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (B) such changes,
decreases or increases do not, in the sole judgment of the Representatives, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Securities as contemplated by the Registration Statement, as amended as of the
date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (e) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.
(f) The Representatives shall have received a certificate, dated the
Firm Closing Date, of the principal executive officer and the principal
financial or accounting officer of the Company, on behalf of the Company, to the
effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Firm Closing
Date; the Registration Statement, as amended as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading,
and the Prospectus,
26
as amended or supplemented as of the Firm Closing Date, does not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company
has performed all covenants and agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to the Firm Closing
Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to the
best of the Company's knowledge, are contemplated by the Commission; and
(iii) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
neither the Company nor any of its subsidiaries has sustained any material
loss or interference with their respective businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any labor dispute or any legal or governmental
proceeding, and there has not been any material adverse change, or any
development involving a prospective material adverse change, in the
condition (financial or otherwise), management, business prospects, net
worth or results of operations of the Company or any of its subsidiaries,
except in each case as described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto).
(g) The Representatives shall have received a certificate from each
Selling Securityholder, signed by the principal executive officer and the
principal financial or accounting officer of such Selling Securityholder, and
each Nortex Owner, dated the Closing Date, to the effect that:
(i) the representations and warranties of such Selling
Securityholder or Nortex Owner in this Agreement are true and correct as
if made on and as of the Closing Date;
(ii) to the extent that any statements or omissions are made
in the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto in reliance upon and in conformity
with written information furnished to the Company by such Selling
Securityholder or Nortex Owner specifically for use therein, the
Registration Statement, as amended as of the Closing Date, does not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading, and
the Prospectus, as amended or supplemented as of the Closing Date, does
not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; and
(iii) such Selling Securityholder or Nortex Owner has
performed all covenants and agreements on its or his part to be performed
or satisfied at or prior to the Closing Date.
27
(h) The Representatives shall have received from each person who is
a director or officer of the Company, and from each affiliate of Xxxxxx Xxxxx
Xxxxxxx & Xxx, Inc. that owns shares of Common Stock, an agreement to the effect
that such person will not, directly or indirectly, without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, contract of sale, pledge, grant of an option to purchase or other sale or
disposition) of any shares of Common Stock or any securities convertible into,
or exchangeable or exercisable for, shares of Common Stock for a period of 180
days after the date of this Agreement; provided, however, that the period for
any officer of the Company who is not a Nortex Owner shall be 90 days.
(i) On or before the Firm Closing Date, the Representatives and
counsel for the Underwriters shall have received such further certificates,
documents or other information as they may have reasonably requested from the
Company, the Selling Securityholders and the Nortex Owners.
(j) Prior to the commencement of the offering of the Securities, the
Securities shall have been included for trading on the Nasdaq National Market.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company, the Selling Securityholders and the
Nortex Owners shall furnish to the Representatives such conformed copies of such
opinions, certificates, letters and documents in such quantities as the
Representatives and counsel for the Underwriters shall reasonably request.
The respective obligations of the several Underwriters to purchase and pay
for any Option Securities shall be subject, in their discretion, to each of the
foregoing conditions to purchase the Firm Securities, except that all references
to the Firm Securities and the Firm Closing Date shall be deemed to refer to
such Option Securities and the related Option Closing Date, respectively.
9. Indemnification and Contribution.
(a) The Company and Xxxxx X. Xxxxxxxx ("Xxxxxxxx"), jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter or such controlling
person may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by
the Company in Section 2 of this Agreement,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any amendment
28
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto or (B) any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify the Securities under the securities or
blue sky laws thereof or filed with the Commission or any securities
association or securities exchange (each an "Application"),
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or
any Application a material fact required to be stated therein or necessary
to make the statements therein not misleading or
(iv) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials used in
connection with the marketing of the Securities, including without
limitation, slides, videos, films, tape recordings,
and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating, defending against
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company and Xxxxxxxx
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement or any amendment thereto, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto or any Application in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein; and
provided, further, that the Company and Xxxxxxxx will not be liable to any
Underwriter or any person controlling such Underwriter with respect to any such
untrue statement or omission made in any Preliminary Prospectus that is
corrected in the Prospectus (or any amendment or supplement thereto) if the
person asserting any such loss, claim, damage or liability purchased Securities
from such Underwriter but was not sent or given a copy of the Prospectus (as
amended or supplemented) at or prior to the written confirmation of the sale of
such Securities to such person in any case where such delivery of the Prospectus
(as amended or supplemented) is required by the Act, unless such failure to
deliver the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5(a)(iv) and (v) of this Agreement.
Notwithstanding anything to the contrary in this paragraph (a), including the
joint and several nature of the obligations of the Company and Xxxxxxxx, each
Underwriter and each person who controls such Underwriter agrees not to assert
its rights to indemnity under this paragraph (a) against Xxxxxxxx for losses,
claims, damages or liabilities (or actions in respect thereof) unless and until
(i) such Underwriter or controlling person has requested indemnification and
reimbursement from the Company for such losses, claims, damages or liabilities
(including any legal or other expenses reasonably incurred) and (ii) the Company
does not within 30 days of such request (A) agree to so indemnify such
Underwriter or controlling person and (B)
29
reimburse in full such Underwriter or controlling person for any such losses,
damages or liabilities (including legal and other expenses) incurred. In the
event that litigation between the parties with respect to this paragraph (a)
results in a joint or joint and several judgment against the Company and
Xxxxxxxx, each Underwriter, and each person who controls such Underwriter,
agrees that it will not attempt to enforce such judgment against Xxxxxxxx unless
and until any part of such judgment shall remain unsatisfied by the Company for
more than 30 days. This indemnity agreement will be in addition to any liability
which the Company or Xxxxxxxx may otherwise have. The Company will not, without
the prior written consent of the Underwriter or Underwriters purchasing, in the
aggregate, more than fifty percent (50%) of the Securities, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not any such Underwriter or any person who controls any
such Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act is a party to such claim, action, suit or proceeding), unless
such settlement, compromise or consent includes an unconditional release of all
of the Underwriters and such controlling persons from all liability arising out
of such claim, action, suit or proceeding.
(b) Each Selling Securityholder and the Nortex Owners severally
agree to indemnify and hold harmless the Company, each of its directors, each of
its officers who signs the Registration Statement, each Underwriter and each
person who controls the Company or any Underwriter within the meaning of the Act
or the Exchange Act and each other Selling Securityholder or Nortex Owner
against any losses, claims, damages or liabilities to which the Company, any
such director, officer, such Underwriter or any such controlling person may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement made
by such Selling Securityholder or such Nortex Owner in Section 2 of this
Agreement, (ii) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or any Application or (iii) the omission or the alleged omission to state
therein a material fact required to be stated in the Registration Statement or
any amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or any Application or necessary to make the
statements therein not misleading, provided, that, with respect to clauses (ii)
and (iii), 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 Selling Securityholder or Nortex Owner for use therein; and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company, any such director, officer, such Underwriter or any such controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or any action in respect thereof. This indemnity agreement
will be in addition to any liability which any Selling Securityholder or Nortex
Owner may otherwise have. Each Selling Securityholder or Nortex Owner will not,
without the prior written consent of the Underwriter or Underwriters purchasing,
in the aggregate, more than fifty percent (50%) of the Securities, settle or
comprise or consent to the entry of any
30
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not any
such Underwriter or any person who controls any such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a party to
such claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of all of the Underwriters and such
controlling persons from all liability arising out of such claim, action, suit
or proceeding.
(c) The Company also agrees to indemnify and hold harmless Wheat,
First Securities, Inc. and each person, if any, who controls Wheat, First
Securities, Inc. within the meaning of either Section 15 of the Act or Section
20 of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments incurred as a result of Wheat, First Securities,
Inc.'s participation as a "qualified independent underwriter" within the meaning
of Rule 2720 in connection with the offering of the Securities, except for any
losses, claims, damages, liabilities and judgments resulting from Wheat, First
Securities, Inc.'s, or such controlling person's, willful misconduct or gross
negligence.
(d) Each Underwriter will, severally and not jointly, indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, each Selling Securityholder, each Nortex
Owner and each person, if any, who controls the Company, such Selling
Securityholder or Nortex Owner within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act against any losses, claims, damages or
liabilities to which the Company, any such director or officer of the Company,
such Selling Securityholder, such Nortex Owner or any such controlling person of
the Company, such Selling Securityholder or such Nortex Owner may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or any Application or (ii) the omission or the alleged omission to state therein
a material fact required to be stated in the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto, or any Application 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 any Underwriter through the Representatives
specifically for use therein; and, subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses reasonably incurred by the Company, any such director, officer or
controlling person, such Selling Securityholder or such Nortex Owner in
connection with investigating or defending any such loss, claim, damage,
liability or any action in respect thereof. This indemnity agreement will be in
addition to any liability which such Underwriter may otherwise have.
(e) Promptly after receipt by an indemnified party under this
Section 9 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 this Section 9,
31
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 this Section 9. 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; provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or parties
and such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by such indemnified party
of counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 9 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local counsel) in any
one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated by the Representatives in the case of paragraph (a) of this Section
9, representing the indemnified parties under such paragraph (a) who are parties
to such action or actions) or (ii) the indemnifying party does not promptly
retain counsel satisfactory to the indemnified party or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. After such notice from the indemnifying party
to such indemnified party, the indemnifying party will not be liable for the
costs and expenses of any settlement of such action effected by such indemnified
party without the consent of the indemnifying party.
(f) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section is unavailable or insufficient, for
any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other
32
relevant equitable considerations. The relative benefits received by the
Company, the Selling Securityholders and the Nortex Owners on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total proceeds from the offering (before deducting expenses) received by the
Company and the Selling Securityholders bear to the total underwriting discounts
and commissions received by the Underwriters. The relative fault of the parties
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, the
Selling Securityholders, the Nortex Owners or the Underwriters, the parties'
relative intents, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances. The Company, the Selling Securityholders, the
Nortex Owners and the Underwriters agree that it would not be equitable if the
amount of such contribution were determined by pro rata or per capita allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take into account the equitable
considerations referred to above in this paragraph (f). Notwithstanding any
other provision of this paragraph (f), no Underwriter shall be obligated to make
contributions hereunder that in the aggregate exceed the total public offering
price of the Securities purchased by such Underwriter under this Agreement, less
the aggregate amount of any damages that such Underwriter has otherwise been
required to pay in respect of the same or any substantially similar claim, and
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 to
contribute hereunder are several in proportion to their respective underwriting
obligations and not joint, and contributions among Underwriters shall be
governed by the provisions of the Prudential Securities Incorporated Master
Agreement Among Underwriters. For purposes of this paragraph (f), each person,
if any, who controls an Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
such Underwriter, and each director of the Company, each officer of the Company
who signed the Registration Statement and each person, if any, who controls the
Company or any Selling Securityholder within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, shall have the same rights to
contribution as the Company or such Selling Securityholder, as the case may be.
(g) The liability of each Selling Securityholder under this Section
9 shall not exceed an amount equal to the public offering price of the
Securities sold by such Selling Securityholder to the Underwriters and the
aggregate liability of Nortex Owners under this Section 9 shall not exceed an
amount equal to the public offering price of the Securities sold by Nortex
Holdings; provided, however, that if Nortex Holdings shall distribute all of the
proceeds of the sale of Securities pursuant to this Agreement to the Nortex
Owners, Nortex Holdings shall have no liability under this Section 9 and the
liability of each Nortex Owner shall be equal to the amount of such proceeds
distributed to him. Notwithstanding the provisions of this Section 9, Xxxxxxxx
shall have no liability under this Section 9 if, within seven months after the
Closing Date, he shall purchase additional shares of Nortex Holdings from the
other Nortex Owners for an aggregate purchase price equal to the net proceeds
from the sale of securities by Nortex Holdings distributed to him, after
deducting taxes paid at the
33
highest marginal federal and state ordinary income tax rates paid by Xxxxxxxx
with respect to 1997.
10. Default of Underwriters. If one or more Underwriters default in their
obligations to purchase Firm Securities or Option Securities hereunder and the
aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Securities or Option
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase. If one or more Underwriters so default with respect to an aggregate
number of Securities that is more than ten percent of the aggregate number of
Firm Securities or Option Securities, as the case may be, to be purchased by all
of the Underwriters at such time hereunder, and if arrangements satisfactory to
the Representatives are not made within 36 hours after such default for the
purchase by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives) of the Securities with respect to
which such default occurs, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter or the Company other than as provided
in Section 11 hereof. In the event of any default by one or more Underwriters as
described in this Section 10, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case may be,
established as provided in Section 3 hereof for not more than seven business
days in order that any necessary changes may be made in the arrangements or
documents for the purchase and delivery of the Firm Securities or Option
Securities, as the case may be. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10. Nothing herein shall relieve any defaulting Underwriter from
liability for its default.
11. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, its officers, the
Selling Securityholders, the Nortex Owners and the several Underwriters set
forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, the Selling Securityholders, the Nortex Owners, any Underwriter or
any controlling person referred to in Section 9 hereof and (ii) delivery of and
payment for the Securities. The respective agreements, covenants, indemnities
and other statements set forth in Sections 7 and 9 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
12. Termination. (a) This Agreement may be terminated with respect to the
Firm Securities or any Option Securities in the sole discretion of the
Representatives by notice to the Company and the Selling Securityholders given
prior to the Firm Closing Date or the related Option Closing Date, respectively,
in the event that the
34
Company or the Selling Securityholders shall have failed, refused or been unable
to perform all obligations and satisfy all conditions on their part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Firm Closing Date or such Option Closing Date, respectively,
(i) the Company or any of its subsidiaries shall have, in the
sole judgment of the Representatives, sustained any material loss or
interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding or there shall have been any material adverse change, or any
development involving a prospective material adverse change (including
without limitation a change in management or control of the Company), in
the condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and its subsidiaries, taken as a
whole, except in each case as described in or contemplated by the
Prospectus (exclusive of any amendment or supplement thereto);
(ii) trading in the Common Stock shall have been suspended by
the Commission or the Nasdaq National Market or trading in securities
generally on the New York Stock Exchange or the Nasdaq National Market
shall have been suspended or minimum or maximum prices shall have been
established on any such exchange or market system;
(iii) a banking moratorium shall have been declared by New
York or United States authorities; or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or
material adverse change in general economic, political or financial
conditions having an effect on the U.S. financial markets that, in the
sole judgment of the Representatives, makes it impractical or inadvisable
to proceed with the public offering or the delivery of the Securities as
contemplated by the Registration Statement, as amended as of the date
hereof.
(b) Termination of this Agreement pursuant to this Section 12 shall
be without liability of any party to any other party except as provided in
Section 11 hereof.
13. Information Supplied by Underwriters. The stabilization legends in the
inside front cover page of the Preliminary Prospectus and the statements set
forth in the last paragraph on the front cover page and under the heading
"Underwriting" in any Preliminary Prospectus or the Prospectus (to the extent
such statements relate to the Underwriters) constitute the only information
furnished by any Underwriter through the Representatives to the Company for the
purposes of Sections 2(b) and 9 hereof. The Underwriters confirm that such
statements (to such extent) are correct.
14. Notices. All communications hereunder shall be in writing and, if sent
to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile
35
transmission and confirmed in writing to Prudential Securities Incorporated, Xxx
Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Equity Transactions Group;
if sent to the Company, Nortex Holdings or the Nortex Owners, shall be delivered
or sent by mail, telex or facsimile transmission and confirmed in writing to the
Company, Nortex Holdings or the Nortex Owners at 000 Xxxxxxxx Xxxxxx, Xxxx
Xxxxx, Xxxxxxxxxxxxx 00000; with a copy of Proskauer Xxxx Xxxxx & Xxxxxxxxxx
LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxx, Esq.
and if sent to the MLGA Fund, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to the MLGA Fund c/o Xxxxxx
Xxxxx Xxxxxxx & Xxx at Two Xxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000 with a
copy of Proskauer Xxxx Xxxxx & Xxxxxxxxxx LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxx X.
Xxxxxx, Esq.
15. Successors. This Agreement shall inure to the benefit of and shall be
binding upon the several Underwriters, the Company, the Selling Securityholders,
the Nortex Owners and their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of this Agreement, or any provisions herein contained, this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnities of the Company, the Selling
Securityholders and the Nortex Owners contained in Section 9 of this Agreement
shall also be for the benefit of any person or persons who control any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Underwriters contained in Section 9
of this Agreement shall also be for the benefit of the directors of the Company,
the officers of the Company who have signed the Registration Statement and any
person or persons who control the Company or a Selling Securityholder within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, the Selling
Securityholders and the Nortex Owners. No purchaser of Securities from any
Underwriter shall be deemed a successor because of such purchase.
16. Applicable Law. The validity and interpretation of this Agreement, and
the terms and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
provisions relating to conflicts of laws.
17. Consent to Jurisdiction and Service of Process. All judicial
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of New York, and
by execution and delivery of this Agreement, the Company, each Selling
Securityholder and each Nortex Owner accepts for itself and in connection with
its properties, generally and unconditionally, the nonexclusive jurisdiction of
the aforesaid courts and waives any defense of forum non conveniens and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Each Selling Securityholder and each Nortex Owner
designates and appoints Xxxxx X. Xxxxxxxx, and such other persons as may
hereafter be selected by the Selling Securityholder or Nortex Owner irrevocably
agreeing in writing to so serve, as its agent to receive on its behalf service
of all process in any such proceedings in any such court, such service being
hereby acknowledged by
36
each Selling Securityholder and Nortex Owner to be effective and binding service
in every respect. A copy of any such process so served shall be mailed by
registered mail to the Selling Securityholder or Nortex Owner at its or his
address provided in Section 14 hereof; provided, however, that, unless otherwise
provided by applicable law, any failure to mail such copy shall not affect the
validity of service of such process. If any agent appointed by a Selling
Securityholder or Nortex Owner refuses to accept service, the Selling
Securityholder or Nortex Owner hereby agrees that service of process sufficient
for personal jurisdiction in any action against the Selling Securityholder or
Nortex Owner in the State of New York may be made by registered or certified
mail, return receipt requested, to the Selling Securityholder or Nortex Owner at
its or his address provided in Section 14 hereof, and the Selling Securityholder
or Nortex Owner hereby acknowledges that such service shall be effective and
binding in every respect. Nothing herein shall affect the right to serve process
in any other manner permitted by law or shall limit the right of any Underwriter
to bring proceedings against any Selling Securityholder or Nortex Owner in the
courts of any other jurisdiction.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company and each of the
several Underwriters.
Very truly yours,
QUAKER FABRIC CORPORATION
By ________________________
President
MLGA FUND II, L.P.
By MLGAL Partners, L.P., its General Partner
By ________________________
General Partner
NORTEX HOLDINGS, INC.
By ________________________
President
___________________________
Xxxxx X. Xxxxxxxx
37
___________________________
Xxxxxxx Xxxxxxx
___________________________
J. Xxxxxx Xxxxxxxxx
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
PRUDENTIAL SECURITIES INCORPORATED
THE XXXXXXXX-XXXXXXXX COMPANY, INC.
WHEAT, FIRST SECURITIES, INC.
By PRUDENTIAL SECURITIES INCORPORATED
By _____________________
Xxxx-Xxxxxx Canfin
Managing Director
For itself and on behalf of the Representatives.
38
SCHEDULE 1
Total Number of Maximum Number of
Firm Securities Option Securities
to be Sold to be Sold
------
Quaker Fabric Corporation 300,000
MLGA Fund II, L.P. 3,000,000 510,000
Nortex Holdings, Inc. 100,000 ------
39
SCHEDULE 2
UNDERWRITERS
Number of Firm
Securities to
Underwriter be Purchased
Prudential Securities Incorporated................................
The Xxxxxxxx-Xxxxxxxx Company, Inc................................
Wheat, First Securities, Inc. ....................................
----------
Total.............................. 3,400,000
==========
40
SCHEDULE 3
Form of Pricing Opinion
Prudential Securities Incorporated
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx
Quaker Fabric Corporation
000 Xxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxxxxxxxx 00000
Pricing Opinion
Ladies and Gentlemen:
Quaker Fabric Corporation, a Delaware corporation (the "Corporation"), has filed
with the Securities and Exchange Commission a registration statement on Form S-1
(Reg. No. 333-21957) relating to the offering of 3,400,000 shares of common
stock (plus up to 510,000 shares of common stock subject to the underwriters'
over-allotment option), par value $.01 per share (the "Common Stock"), of which
300,000 are being sold by the Corporation and 3,100,000 are being sold by
certain selling stockholders of the Corporation (the "Selling Stockholders").
Wheat, First Securities, Inc. is acting as one of the several underwriters of
the offering to the public of the Common Stock (the "Offering"). The Prudential
Life Insurance Company of America ("The Prudential"), an affiliate of Prudential
Securities Incorporated, one of the several underwriters of the Offering, is a
limited partner of MLGA Fund II, L.P. ("MLGA Fund"), one of the Selling
Stockholders, and holds an approximately 16.9% interest in MLGA Fund's holdings
of Common Stock. MLGA Fund is selling 3,000,000 shares of Common Stock in this
offering (3,510,000 shares if the underwriters' over-allotment option is
exercised in full). As a result, an affiliate of Prudential Securities
Incorporated will receive more than 10% of the proceeds of this offering. In
addition, The Prudential and one or more of its affiliates hold the entire
$30,000,000 in principal amount of the Corporation's Series A Notes.
Under the Conduct Rules of the National Association of Securities Dealers, Inc.
("NASD"), due to the ownership interest in the Corporation of The Prudential,
the Corporation may be deemed to be an affiliate of Prudential Securities
Incorporated. Accordingly, the public offering price can be no higher than that
recommended by a "qualified independent underwriter" meeting certain standards.
We have been retained as a Qualified Independent Underwriter to recommend to you
the maximum offering price for the Common Stock as required by the NASD Conduct
Rules.
We have participated in the preparation of the Registration Statement and the
Prospectus (as such terms are defined in the Agreement) and have exercised the
usual standards of "due diligence" with respect thereto. Assuming that the
Offering is commenced on March ___, 1997, we recommend that the offering price
of the
41
Common Stock be no higher than $____, which price should in no event be
considered or relied upon as an indication of the actual value of the Common
Stock.
Our recommendations are based on economic, market, financial and other
conditions as they exist at the date hereof and on other conditions and
circumstances relating to the Corporation as described in the Registration
Statement. Changes in the conditions and circumstances relating to the
Corporation from those described in the Registration Statement and events
occurring after the date hereof, including changes in the markets in which the
Corporation operates, could materially affect the conclusions stated in this
letter. We shall not be obligated or required to reaffirm or revise these
recommendations or otherwise to comment on any events occurring after the date
hereof or on any change to the conditions or circumstances relating to the
Corporation from those so described.
Very truly yours,
WHEAT, FIRST SECURITIES, INC.
By:______________________________________
Name:
Title:
42
Schedule 4
Subsidiaries
