Exhibit 1.1
2,000,000 Shares
WILSONS THE LEATHER EXPERTS INC.
Common Stock, $.01 par value
FORM OF UNDERWRITING AGREEMENT
______________ _, 0000
XXXXXXXXX XXXXXXXX & CO. INC.
XXXXXXXX & COMPANY SECURITIES, INC.
XXXX X. XXXXXXX AND COMPANY, INCORPORATED
As Representatives of the several Underwriters
named in Schedule A hereto
x/x Xxxxxxxxx Xxxxxxxx & Co. Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
1. Introductory. Wilsons The Leather Experts Inc., a Minnesota corporation
(the "Company"), proposes to sell, pursuant to the terms of this Agreement, to
the several underwriters named in Schedule A hereto (the "Underwriters," or,
each, an "Underwriter"), an aggregate of 2,000,000 shares of common stock, $.01
par value (the "Common Stock"), of the Company. The aggregate of 2,000,000
shares so proposed to be sold is hereinafter referred to as the "Firm Stock." In
addition, solely for the purpose of covering over-allotments, the Company
proposes to grant the Underwriters, upon the terms and conditions set forth in
Section 4 hereof, up to an additional 300,000 shares of Common Stock (the
"Option Stock") of which the Company has granted to certain stockholders of the
Company named in Schedule C hereto (the "Selling Shareholders") the option to
sell to the Underwriters up to 300,000 shares of Common Stock from them. The
Firm Stock and the Option Stock are hereinafter collectively referred to as the
"Stock." Ladenburg Xxxxxxxx & Co. Inc. ("Ladenburg"), XxXxxxxx & Company
Securities, Inc. and Xxxx X. Xxxxxxx and Company, Incorporated are acting as
representatives of the several Underwriters and in such capacity are hereinafter
referred to as the "Representatives."
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement on Form S-3 (File No. 333- ) in the form
in which it became or becomes effective and also in such form as it may be
when any post-
effective amendment thereto shall become effective with respect to the
Stock, including any pre-effective prospectuses included as part of the
registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Securities Act
of 1933, as amended (the "Securities Act"), and the rules and regulations
of the Securities and Exchange Commission (the "Commission") thereunder,
copies of which have heretofore been delivered to you, has been carefully
prepared by the Company in conformity with the requirements of the
Securities Act and has been filed with the Commission under the Securities
Act; one or more amendments to such registration statement, including in
each case an amended pre-effective prospectus, copies of which amendments
have heretofore been delivered to you, have been so prepared and filed.
Such registration statement is referred to hereinafter as the "Registration
Statement." If it is contemplated, at the time this Agreement is executed,
that a post-effective amendment to the Registration Statement will be filed
and must be declared effective before the offering of the Stock may
commence, the term "Registration Statement" as used in this Agreement means
the Registration Statement as amended by said post-effective amendment. As
used in this Agreement, the term "Registration Statement" shall also
include any registration statement relating to the Stock that is filed
pursuant to Rule 462(b) under the Securities Act. The term "Prospectus" as
used in this Agreement means the prospectus in the form included in the
Registration Statement, or, (A) if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the
Securities Act and such information is included in a prospectus filed with
the Commission pursuant to Rule 424(b) under the Securities Act, the term
"Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement as supplemented by the addition of
the Rule 430A information contained in the prospectus filed with the
Commission pursuant to Rule 424(b) and (B) if prospectuses that meet the
requirements of Section 10(a) of the Securities Act are delivered pursuant
to Rule 434 under the Securities Act, then (i) the term "Prospectus" as
used in this Agreement means the "prospectus subject to completion" (as
such term is defined in Rule 434(g) under the Securities Act) as
supplemented by (a) the addition of Rule 430A information or other
information contained in the form of prospectus delivered pursuant to Rule
434(b)(2) under the Securities Act or (b) the information contained in the
term sheets described in Rule 434(b)(3) under the Securities Act, and (ii)
the date of such prospectuses shall be deemed to be the date of the term
sheets. The term "Pre-effective Prospectus" as used in this Agreement means
the prospectus subject to completion in the form included in the
Registration Statement at the time of the initial filing of the
Registration Statement with the Commission, and as such prospectus shall
have been amended from time to time prior to the date of the Prospectus.
Reference made herein to any Pre-effective Prospectus or to the Prospectus,
as amended or supplemented, shall include all documents and information
incorporated by reference therein and shall be deemed to refer to and
include any documents filed after the date of such Pre-effective Prospectus
or Prospectus, as the case may be, and so incorporated by reference, under
the Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"). For purposes of
this Agreement, the term "Rules and Regulations" means the rules and
regulations adopted by the Commission under either the Securities Act or
the Exchange Act, as applicable.
(b) The Commission has not issued or threatened to issue any order
preventing
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or suspending the use of any Pre-effective Prospectus, and, at its date of
issue, each Pre-effective Prospectus conformed in all material respects
with the requirements of the Securities Act and did not include any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, not
misleading; and, when the Registration Statement becomes effective and at
all times subsequent thereto up to and including the Closing Dates (as
hereinafter defined), the Registration Statement and the Prospectus and any
amendments or supplements thereto contained and will contain all material
statements and information required to be included therein by the
Securities Act and conformed and will conform in all material respects to
the requirements of the Securities Act and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto,
included or will include 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 not misleading, provided, however, that the
foregoing representations, warranties and agreements shall not apply to
information contained in or omitted from any Pre-effective Prospectus or
the Registration Statement or the Prospectus or any such amendment or
supplement thereto in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of any Underwriter,
directly or through you, specifically for use in the preparation thereof;
and each Pre-effective Prospectus and Prospectus delivered to the
Underwriters for use in connection with the offering of the Stock will, at
the time of such delivery, be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to XXXXX, except to the
extent permitted by Regulation S-T under the Securities Act. There is no
franchise, lease, contract, agreement or document required to be described
in the Registration Statement or Prospectus or to be filed as an exhibit to
the Registration Statement which is not described or filed therein as
required; and all descriptions of any such franchises, leases, contracts,
agreements or documents contained in the Registration Statement are
accurate and complete descriptions of such documents in all material
respects.
(c) The documents which are incorporated by reference in the
Prospectus or from which information is so incorporated by reference, when
they became effective or were filed with the Commission, as the case may
be, complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and the Rules and
Regulations, and any documents so filed and incorporated by reference
subsequent to the effective date of the Registration Statement shall, when
they are filed with the Commission, conform in all material respects with
the requirements of the Securities Act and the Exchange Act, as applicable,
and the Rules and Regulations. No such documents when they were filed (or,
if amendments with respect to such documents were filed, when such
amendments were filed), contained an untrue statement of a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(d) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and at each Closing
Date, except as is otherwise disclosed in the Registration Statement or
Prospectus, there has not been: any change in the capital stock, other than
issuance of Common Stock upon exercise of options granted under
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the 1996 Option Plan and the 1998 Option Plan (as those terms are defined
in the Registration Statement, and together, the "Option Plans") or
warrants outstanding on the date of this Agreement; any material increase
in the long-term debt (including any capitalized lease obligation) or
short-term debt of the Company or any Subsidiary, other than borrowings or
letters of credit under the Senior Credit Facility; any issuance of
options, warrants, convertible securities or other rights to purchase the
capital stock of the Company or any Subsidiary, other than options granted
under the Option Plans; any material adverse change, or any development
involving a material adverse change, in or affecting the condition
(financial or otherwise), earnings, operations, property, business, or
business prospects, management, financial position, stockholders' equity,
net worth, results of operations or general condition of the Company and/or
any of its Subsidiaries, individually or in the aggregate (a"Material
Adverse Effect"); any transaction entered into by the Company or any
Subsidiary that is material to the Company; any obligation, direct or
contingent, incurred by the Company or any Subsidiary that is material to
the Company, except obligations incurred in the ordinary course of business
that, in the aggregate, are not material; any dividend or distribution of
any kind declared, paid or made on the capital stock of the Company; or any
loss or damage (whether or not insured) to the property of the Company or
any Subsidiary which has been sustained which has a Material Adverse Effect
on the Company.
(e) Xxxxxx Xxxxxxxx LLP and KPMG Peat Marwick LLP, each of which has
expressed its opinion with respect to the financial statements filed as
part of the Registration Statement and included in the Registration
Statement, the Prospectus and the Pre-effective Prospectus, are independent
certified public accountants as required by the Securities Act and the
Rules and Regulations. The historical financial statements and schedules
(including the related notes) included or incorporated by reference in the
Registration Statement, and any Pre-effective Prospectus or Prospectus,
comply in all material respects with the requirements of the Securities Act
and fairly present the financial position, the results of operations and
changes in financial condition of the entities purported to be shown
thereby at the respective dates and/or for the respective periods to which
they apply in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (subject, in the case
of unaudited financial statements, to normal year-end adjustments which in
the opinion of management of the Company are not material, and except as
otherwise stated therein). The historical selected and summary financial
and statistical data included in the Registration Statement present fairly
the information shown therein and have been compiled on a basis consistent
with the audited financial statements presented therein. No other financial
statements or schedules are required by the Securities Act or the Rules and
Regulations to be included in the Registration Statement.
(f) The Company has no subsidiaries other than those identified in
Exhibit 21.1 to the Registration Statement (each one a "Subsidiary" and
collectively the "Subsidiaries") and is not affiliated with any other
company or business entity, except as disclosed in the Prospectus. Each of
the Company and its Subsidiaries has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate
and other) to own, lease and operate
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its properties and conduct its business as described in the Registration
Statement and Prospectus; except as otherwise disclosed in the Registration
Statement, the Company owns all of the outstanding capital stock of each of
the Subsidiaries free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; and no preemptive right, co-sale
right, registration right, right of first refusal or other similar right of
stockholders exists with respect to any shares of the Subsidiaries. The
Company and each Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its business
requires such qualification and in which the failure to be qualified or in
good standing would have a Material Adverse Effect; and no proceeding has
been instituted in any such jurisdiction revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or
qualification. Except as described in the Registration Statement and the
Prospectus, the Company is not party to any agreement or understanding,
written or oral, regarding the acquisition of, or an interest in, any
corporation, firm, partnership, joint venture, association or other entity.
(g) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable,
have been issued in compliance with all federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and the authorized
and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" and conforms in all material
respects to the statements relating thereto incorporated by reference into
the Registration Statement and the Prospectus (and such statements
correctly state the substance of the instruments defining the
capitalization of the Company); the Firm Stock and the Option Stock to be
purchased from the Company hereunder have been duly and validly authorized
for issuance and sale to the Underwriters pursuant to this Agreement and,
when issued and delivered by the Company against payment therefor in
accordance with the terms of this Agreement, will be duly and validly
issued and fully paid and nonassessable, and will be sold free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable
interest; and no preemptive right, co-sale right, registration right, right
of first refusal or other similar right of stockholders exists with respect
to any shares of the Firm Stock or Option Stock to be purchased from the
Company hereunder or the issuance and sale thereof. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Stock except as may be
required under state or other securities or blue sky laws. Except as
disclosed in the Prospectus and the audited consolidated financial
statements of the Company and the related notes thereto, included in the
Prospectus, the Company does not have outstanding any options to purchase,
or any preemptive rights or other rights to subscribe for or to purchase,
any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations.
(h) All the issued and outstanding capital stock of each of the
Subsidiaries has been duly authorized and validly issued, is fully paid and
nonassessable and, except for (i) directors qualifying shares, (ii) liens
or encumbrances contained in the Company's currently
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existing three-year senior credit facility that expires in May 1999 (the
"Senior Credit Facility"), and (iii) as otherwise disclosed in the
Prospectus, are directly or indirectly owned beneficially by the Company
free and clear of all liens, security interests, pledges, charges,
encumbrances, defects, shareholders' agreements, voting trusts, equities or
claims of any nature whatsoever. Other than the Subsidiaries and except for
short-term working capital cash investments, the Company does not own,
directly or indirectly, any capital stock or other equity securities of any
other corporation or any partnership interest in any partnership, joint
venture or other association other than as disclosed in the Prospectus.
(i) Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company, any Subsidiary or
any of their respective officers is a party or of which any property of the
Company or any Subsidiary is subject, which, if determined adversely to the
Company or any such Subsidiary, might individually or in the aggregate (i)
prevent or adversely affect the transactions contemplated by this
Agreement, (ii) suspend the effectiveness of the Registration Statement,
(iii) prevent or suspend the use of the Pre-effective Prospectus in any
jurisdiction or (iv) result in a Material Adverse Effect; and to the best
of the Company's knowledge no such proceedings are threatened against the
Company or any Subsidiary by governmental authorities or others. Neither
the Company nor any Subsidiary is a party or subject to the provisions of
any material injunction, judgment, decree or order of any court, regulatory
body or other governmental agency or body.
(j) The execution, delivery and performance of this Agreement and the
consummation of the transactions herein and therein contemplated, will not
result (with or without due notice or lapse of time or both) in the
creation of any lien or breach or violation of any of the terms and
provisions of, or constitute a default under any of the terms or provisions
of, or give rise to any right of termination, cancellation or acceleration
under any indenture, license, mortgage, deed of trust, loan agreement,
bond, debenture, note agreement or other evidence of indebtedness, any
lease, contract, joint venture or other material agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which it or
any of them or any of their properties is or may be bound, nor will such
action conflict with or violate any provision of the charter, By-laws or
other organizational documents of the Company or any of its Subsidiaries or
any law, statute, order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
Subsidiaries or any of their properties, except, in any such case, where
such breach, violation, default, or other conflict (other than in respect
of the charter, By-laws or other organizational documents of the Company or
any of its Subsidiaries) would not have a Material Adverse Effect.
(k) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company
or any of its Subsidiaries of the transactions contemplated by this
Agreement, except such as may be required by the National Association of
Securities Dealers, Inc. (the "NASD") or under the securities or blue sky
laws of any jurisdiction in connection with the purchase and distribution
of the Stock by the Underwriters.
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(l) The Company has the full power and authority (corporate and other)
to enter into this Agreement and to consummate the transactions
contemplated hereby (including to issue, sell and deliver the Stock), and
this Agreement has been duly and validly authorized, executed and delivered
by the Company and is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that rights to indemnity and contribution hereunder may be limited
by federal or state securities laws or the public policy underlying such
laws or by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or
by general equitable principles.
(m) The Company and each of its Subsidiaries possesses all
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from, and have made all declarations and filings with, all
regulatory or governmental officials, bodies and tribunals ("Permits") to
own, lease or operate their respective properties and to conduct their
respective businesses described in the Registration Statement and the
Prospectus, except where the failure to have obtained or made the same
would not have a Material Adverse Effect and neither the Company nor any of
its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Permits.
(n) The Company and each of its Subsidiaries owns, and/or possesses
adequate rights to use, free and clear of all liens, charges, encumbrances,
pledges, security interests or defects, all patents, trademarks, service
marks, logos, trade names, trade secrets, know how, copyrights, proprietary
technology and licenses, and rights with respect to the foregoing
(collectively, "Intellectual Property"), used in the conduct of their
respective businesses as described in the Registration Statement and the
Prospectus, and none of the Intellectual Property presently owned, held or
used by the Company or any of its Subsidiaries infringes or conflicts with
any Intellectual Property of any other person or entity or are in dispute,
and neither the Company nor any Subsidiary has received a notice, or knows
of any basis, of any infringement of or conflict with the asserted rights
of others in any such respect.
(o) The Company and each of its Subsidiaries owns and has the right to
use all other trade secrets, know-how (including all other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information that are material to its
business, properties and operations.
(p) The Company and each of its Subsidiaries is in compliance with,
and conducts its business in conformity with, all applicable federal,
state, local and foreign laws, rules and regulations of each court or
governmental agency or body having jurisdiction over the Company or any of
the Subsidiaries, except where the failure to be in compliance would not
have a Material Adverse Effect; to the knowledge of the Company, otherwise
than as set forth in the Registration Statement and the Prospectus, no
prospective change in any of such federal or state laws, rules or
regulations has been adopted which, when made effective, would
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have a Material Adverse Effect.
(q) The Company and each of its Subsidiaries is in compliance with all
federal, state, local or foreign laws or regulations relating to pollution
or protection of human health or the environment ("Environmental Laws"),
except where the failure to be in compliance would not have a Material
Adverse Effect. Neither the Company nor any of the Subsidiaries has
authorized, conducted or generated, transported, stored, used, treated,
disposed or released any hazardous substance, hazardous waste, hazardous
material, hazardous constituent, toxic substance, pollutant, contaminant,
petroleum product, natural gas, liquefied gas or synthetic gas, defined or
regulated under any Environmental Law on, in or under any property
currently leased or owned or by any means controlled by the Company or any
of its Subsidiaries (the "Real Property") in violation of any applicable
law, except for any violation which would not have a Material Adverse
Effect; there is no pending or, to the Company's knowledge, threatened
claim, action, litigation or any administrative agency proceeding involving
the Company, any of its Subsidiaries or their respective properties, nor
has the Company or any of its Subsidiaries received any written notice, or
any oral notice to any executive officer of the Company or any of its
Subsidiaries or any other employee responsible for receipt of any such
notice, from any governmental entity or third party, that (A) alleges a
violation of any Environmental Laws by the Company or any of its
Subsidiaries or any person or entity whose liability for a violation of an
Environmental Law the Company or any of its Subsidiaries has retained or
assumed either contractually or by operation of law, which liability or
violation could be reasonably expected to have a Material Adverse Effect,
(B) alleges the Company or any of its Subsidiaries is a liable party under
the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. ' 9601 ET SEQ., or any state superfund law, (C) alleges possible
contamination of the environment by the Company or any of its Subsidiaries
or (D) alleges possible contamination of the Real Property.
(r) The Company and each of its Subsidiaries has filed all necessary
federal, state, local and foreign income, payroll, franchise and other tax
returns and has paid all taxes shown as due thereon or with respect to any
of its properties, and there is no tax deficiency that has been, or to the
knowledge of the Company is likely to be, asserted against the Company or
any of its Subsidiaries or any of their respective properties or assets and
all tax liabilities are adequately provided for on the books of the Company
and each of its Subsidiaries.
(s) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any action
designed or intended to stabilize or manipulate the price of any security
of the Company, or which caused or resulted in, or which might in the
future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company.
(t) Neither the Company nor any of its Subsidiaries is in violation of
its respective charter or By-laws. Neither the Company nor any of its
Subsidiaries is in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness or in any contract,
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lease, indenture, mortgage, loan agreement, joint venture or other
agreement or instrument to which it is a party or by which it or its
respective properties are bound, which default would have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has
received or sent any notice of such default or breach.
(u) Neither the Company nor any of its Subsidiaries is involved in any
material labor dispute nor, to their knowledge, is any such dispute
threatened. Neither the Company nor any of its Subsidiaries is aware that
(A) any executive officer or significant group of employees of the Company
or any Subsidiary plans to terminate employment with the Company or any
such Subsidiary or (B) any such executive officer is subject to any
noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreement that would be violated by the present or proposed
business activities of the Company or any of its Subsidiaries. Neither the
Company nor any Subsidiary has or expects to have any liability for any
prohibited transaction or funding deficiency or any complete or partial
withdrawal liability with respect to any pension, profit sharing or other
plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or any Subsidiary makes or
ever has made a contribution and in which any employee of the Company or
any Subsidiary is or has ever been a participant. With respect to such
plans, the Company and each Subsidiary is in compliance in all material
respects with all applicable provisions of ERISA.
(v) The Company has obtained the written agreement described in
Section 10(i) of this Agreement from each of its officers, directors and
holders of Common Stock listed on Schedule B hereto.
(w) The Company and each of its Subsidiaries have, and as of the
Closing Dates will have, good and marketable title to all real property
free and clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as would not have a Material Adverse
Effect; and any real property and buildings held under lease by the Company
or any of its Subsidiaries or proposed to be held after giving effect to
the transactions described in the Prospectus are, or will be as of the
Closing Dates, held by them under valid, subsisting and enforceable leases
with such exceptions as would not have a Material Adverse Effect, in each
case except as described in the Prospectus. All personal property used by
the Company and each of its Subsidiaries in their business is either owned
or leased by the Company or its Subsidiaries and is in good working order
and condition, ordinary wear and tear excepted or such as would not have a
Material Adverse Effect.
(x) The Company and each of its Subsidiaries is insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as is customary in the businesses in which it is engaged or
proposes to engage after giving effect to the transactions described in the
Prospectus; and neither the Company nor any 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 their business at a cost
that would not have a Material Adverse Effect.
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(y) The Company is taking or has taken steps to replace/and or modify
its software systems to include the requisite design, performance and
functionality so that the Company does not reasonably expect to experience
invalid or incorrect results or abnormal software operation related to
calendar year 2000.
(z) Other than as contemplated by this Agreement, the Registration
Statement or the Prospectus, there is no broker, finder or other party that
is entitled to receive from the Company any brokerage or finder's fee or
other fee or commission as a result of any of the transactions contemplated
by this Agreement.
(aa) The inventory of the Company and each of its Subsidiaries is in
merchantable condition and can be sold in the ordinary course of business
at the carrying value of such inventory, as shown in the Company's or its
Subsidiaries' financial statements, subject to pricing reductions in the
ordinary course of business.
(bb) The Company and each of its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(cc) No Subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any
distributions on such Subsidiary's capital stock to the Company, from
repaying to the Company any loans or advances to such Subsidiary or from
transferring any of such Subsidiary's property or assets to the Company or
any other Subsidiary of the Company, except as disclosed in the Prospectus.
(dd) To the Company's knowledge, neither the Company nor any of its
Subsidiaries nor any employee or agent of the Company or any of its
Subsidiaries has made any payment of funds of the Company or any of its
Subsidiaries or received or retained any funds in violation of any law,
rule or regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectus.
(ee) Neither the Company nor any of its Subsidiaries is an "investment
company," or an entity "controlled" by an "investment company" required to
be registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as such terms are defined in the 1940 Act, and neither the
Company nor any of its Subsidiaries expects to be treated as such by reason
of the receipt and application of the net proceeds from the sale of the
Stock.
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(ff) The Stock is eligible for quotation on the Nasdaq National
Market.
(gg) No holder of any security of the Company has the right to have
any security owned by such holder included in the Registration Statement,
except those rights which have been received in writing, and, except as
described in the Registration Statement and the Prospectus or any document
incorporated by reference therein, no holder of any security of the Company
has the right to demand registration of any security owned by such holder
during the period ending 12 months after the date of the Prospectus.
(hh) Each certificate signed by any officer of the Company, or any
Subsidiary, and delivered to the Underwriters or counsel for the
Underwriters pursuant to this Agreement shall be deemed to be a
representation and warranty by the Company as to the matters covered
thereby.
(ii) The conditions for use of Form S-3, set forth in the General
Instructions thereto, have been satisfied.
3. Representations and Warranties of the Selling Shareholders. Each of the
Selling Shareholders, severally and not jointly, represents and warrants to, and
agrees with, each of the several Underwriters and the Company that:
(a) The Selling Shareholders have the full power and authority
(corporate and other) to enter into this Agreement, the Power of Attorney
and the Custody Agreement (as hereinafter defined) and to consummate the
transactions contemplated herein and therein (including to sell and deliver
the Stock), and this Agreement, the Power of Attorney and the Custody
Agreement have been duly and validly authorized, executed and delivered by
the Selling Shareholders and are the valid and binding obligation of the
Selling Shareholders, enforceable against the Selling Shareholders in
accordance with their terms, except to the extent that rights to indemnity
and contribution thereunder may be limited by federal or state securities
laws or the public policy underlying such laws or by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
(b) The execution, delivery and performance of this Agreement, the
Power of Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated, will not result (with or
without due notice or lapse of time or both) in the creation of any lien or
breach or violation of any of the terms and provisions of, or constitute a
default under any of the terms or provisions of, or give rise to any right
of termination, cancellation or acceleration under any indenture, license,
mortgage, deed of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, any lease, contract, joint venture or other
material agreement or instrument to which any such Selling Shareholder is a
party or by which it or any of its properties is or may be bound, nor will
such action conflict with or violate any law, statute, order, rule or
regulation of any court or
11
governmental agency or body having jurisdiction over any such Selling
Shareholder or any of its properties, except, in any such case, where such
breach, violation, default, or other conflict would not have a material
adverse effect on the ability of such Selling Shareholder to consummate the
transactions contemplated by this Agreement.
(c) Such Selling Shareholder has, or immediately prior to the First
Closing Date, such Selling Shareholder will have, good and valid title to
the Stock to be sold by such Selling Shareholder hereunder, without notice
of any adverse claim, free and clear of all liens, security interest,
pledges, charges, encumbrances, defects, shareholders' agreements, voting
trusts, equities or claims of any nature whatsoever; and, upon delivery of
such Stock against payment therefore as provided herein (assuming that such
Stock is purchased in good faith without notice of adverse claim) good and
valid title to such Stock, free and clear of all liens, security interests,
pledges, charges, encumbrances, defects, shareholders' agreements, voting
trusts, equities or claims of any nature whatsoever, will pass to the
several Underwriters.
(d) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Selling
Shareholders of the transactions contemplated by this Agreement, the Power
of Attorney and the Custody Agreement, except such as may be required by
the National Association of Securities Dealers, Inc. (the "NASD") or under
the securities or blue sky laws of any jurisdiction in connection with the
purchase and distribution of the Stock by the Underwriters.
(e) Such Selling Shareholder has not (A) taken directly or indirectly,
any action designed to cause or result in, or that has constituted or 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 Stock or (B) since the filing of the Registration Statement (i)
sold, bid for, purchased or paid anyone any compensation for soliciting
purchases of, the Stock or (ii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
(f) To the knowledge of each of the Selling Shareholders, neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, included or will include 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 not misleading, provided, however,
that the foregoing representations, warranties and agreements shall not
apply to information contained in or omitted from any Pre-effective
Prospectus or the Registration Statement or the Prospectus or any such
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any
Underwriter, specifically for use in the preparation thereof.
(g) All information furnished or to be furnished to the Company by or
on behalf of any of the Selling Shareholders for use in connection with the
preparation of the Registration Statement and the Prospectus and any
amendment or supplement thereto, does not and will not include any untrue
statement of material fact or omit to state any material fact
12
required to be stated therein or necessary to make the statements therein
not misleading.
Each of the Selling Shareholders represents and warrants that certificates
in negotiable form representing all of the Stock to be sold by such Selling
Shareholder hereunder have been placed in custody (or, in the case of the
contemplated exercise of stock options, a duly executed notice of exercise of
stock options to purchase the Stock to be sold by the Selling Shareholders
hereunder has been placed in custody) under a custody agreement, in the form
heretofore furnished to and approved by you (the "Custody Agreement"), duly
executed and delivered by such Selling Shareholder, and that such Selling
Shareholder has duly executed and delivered a Power of Attorney, in the form
heretofore furnished to and approved by you, appointing the persons indicated in
Schedule C hereto as such Selling Shareholder's attorney-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement on
behalf of such Selling Shareholder, to determine the purchase price to be paid
by the Underwriters to the Selling Shareholder, to determine the purchase price
to be paid by the Underwriters to the Selling Shareholders as provided in
Section 4 hereof, to authorize the delivery of the Stock to be sold by such
Selling Shareholder hereunder and otherwise to act on behalf of such Selling
Shareholder in connection with the transactions contemplated by this Agreement
and the Custody Agreement.
Each of the Selling Shareholders specifically agrees that Stock represented
by the certificates held in custody for such Selling Shareholder under the
Custody Agreement are subject to the interests of the Underwriters hereunder,
and that the arrangements made by such Selling Shareholder for such custody, and
the appointment by such Selling Shareholder of the Attorneys-in-Fact by the
Power of Attorney, are irrevocable. Each of the Selling Shareholders
specifically agrees that the obligations of the Selling Shareholders hereunder
shall not be terminated by operation of law, whether by the death or incapacity
of any Selling Shareholder, or by the occurrence of any other event.
4. Purchase by, and Sale and Delivery to, Underwriters-Closing Dates. The
Company agrees to sell to the Underwriters the Firm Stock, and on the basis of
the representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase the Firm Stock from the Company, the
number of Firm Stock to be purchased by each Underwriter being set opposite its
name in Schedule A, subject to adjustment in accordance with Section 14 hereof.
The purchase price per share to be paid by the Underwriters to the Company
will be $____ per share (the "Purchase Price").
The Company will deliver the Firm Stock to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York City time, on the second full business day preceding the
First Closing Date (as defined below) or, if no such direction is received, in
the names of the respective Underwriters or in such other names as Ladenburg may
designate (solely for the purpose of administrative convenience) and in such
denominations as Ladenburg may determine), against
13
payment of the aggregate Purchase Price therefor by wire transfer of same day
funds to an account specified by the Company in writing at least two (2)
business days prior to the First Closing Date, all at the offices of Xxxxxxx
Berlin Shereff Xxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or such
other place as the parties may designate. The time and date of the delivery and
closing shall be at 10:00 A.M., New York City time, on __________, 1998, in
accordance with Rule 15c6-1 of the Exchange Act. The time and date of such
payment and delivery are herein referred to as the "First Closing Date." The
First Closing Date and the location of delivery of, and the form of payment for,
the Firm Stock may be varied by agreement between the Company and Ladenburg. The
First Closing Date may be postponed pursuant to the provisions of Section 14.
The Company shall make the certificates for the Stock available to the
Representatives for examination on behalf of the Underwriters not later than
10:00 A.M., New York City time, on the business day preceding the First Closing
Date at the offices of Ladenburg, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
It is understood that any of the Representatives, individually and not as a
Representative of the several Underwriters, may (but shall not be obligated to)
make payment to the Company on behalf of any Underwriter or Underwriters, for
the Stock to be purchased by such Underwriter or Underwriters. Any such payment
by any of the Representatives shall not relieve such Underwriter or Underwriters
from any of its or their other obligations hereunder.
The several Underwriters agree to make a public offering of the Firm Stock
at the public offering price set forth on the cover page of the Prospectus as
soon after the effectiveness of the Registration Statement as in their judgment
is advisable. The Representatives shall promptly advise the Company of the
making of the public offering.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Company hereby grants to the Underwriters an option to purchase, severally and
not jointly, an aggregate of up to 300,000 shares of Common Stock. The price per
share to be paid for the Option Stock shall be the Purchase Price. The Company
has granted the Selling Shareholders an option to sell to the Underwriters, in
lieu of the Company, up to an aggregate of 300,000 shares of Common Stock for
purposes of satisfying the Underwriters' over-allotment option. The Option Stock
shall be purchased by the several Underwriters from the Company and, in the
event and to the extent they exercise their options, the Selling Shareholders as
provided herein. The option granted hereby may be exercised as to all or any
part of the Option Stock at any time, and from time to time, not more than
thirty (30) days subsequent to the effective date of this Agreement. No Option
Stock shall be sold and delivered unless the Firm Stock previously has been, or
simultaneously is, sold and delivered. The right to purchase the Option Stock or
any portion thereof may be surrendered and terminated at any time upon notice by
the Underwriters to the Company.
The option granted hereby may be exercised by the Underwriters by giving
written notice from Ladenburg to the Company (which shall be responsible for
notifying the Selling Shareholders) setting forth the number of shares of Option
Stock as to which the option is being
14
exercised and the date and time for delivery of and payment for the Option
Stock. Each date and time for delivery of and payment for the Option Stock
(which may be the First Closing Date, but not earlier) is herein called the
"Option Closing Date" and shall in no event be earlier than two (2) business
days nor later than ten (10) business days after written notice is given. (The
Option Closing Date and the First Closing Date are herein called the "Closing
Dates.") Option Stock shall be purchased for the account of each Underwriter in
the same proportion as the number of Firm Stock set forth opposite such
Underwriter's name in Schedule A hereto bears to the total number of Firm Stock
(subject to adjustment by the Underwriters to eliminate odd lots).The Company
shall notify the Underwriters not later than one business day prior to the
Option Closing Date if the Selling Shareholders have exercised all or a portion
of their options, and the exact number of shares of Option Stock the Selling
Shareholders will sell to the Underwriters. Upon exercise of the option by the
Underwriters, the Company agrees to sell to the Underwriters the number of
Option Stock set forth in the written notice of exercise and the Underwriters
agree, severally and not jointly and subject to the terms and conditions herein
set forth, to purchase the number of such determined as aforesaid.
The Company will deliver the Option Stock to the Underwriters (in the form
of definitive certificates, issued in such names and in such denominations as
the Representatives may direct by notice in writing to the Company given at or
prior to 12:00 Noon, New York City time, on the second full business day
preceding the Option Closing Date or, if no such direction is received, in the
names of the respective Underwriters or in such other names as Ladenburg may
designate (solely for the purpose of administrative convenience) and in such
denominations as Ladenburg may determine), against payment of the aggregate
Purchase Price therefor by wire transfer of same-day funds to an account
specified by the Company in writing at least two (2) business days prior to the
Option Closing Date, all at the offices of Xxxxxxx Berlin Shereff Xxxxxxxx, LLP,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The Option Closing Date and the
location of delivery of, and the form of payment for, the Option Stock may be
varied by agreement between the Company and Ladenburg. The Option Closing Date
may be postponed pursuant to the provisions of Section 14.
5 Covenants and Agreements of the Company. The Company covenants and agrees
with the several Underwriters that:
(a) The Company will (i) if the Company and the Representatives have
determined not to proceed pursuant to Rule 430A, use its best efforts to
cause the Registration Statement to become effective, (ii) if the Company
and the Representatives have determined to proceed pursuant to Rule 430A,
use its best efforts to comply with the provisions of and make all
requisite filings with the Commission pursuant to Rule 430A and Rule 424 of
the Rules and Regulations and will notify the Representatives promptly (in
writing if requested) of such filings, and (iii) if the Company and the
Representatives have determined to deliver Prospectuses pursuant to Rule
434 of the Rules and Regulations, to use its best efforts to comply with
all the applicable provisions thereof. The Company will advise the
Representatives promptly as to the time at which the Registration Statement
becomes effective, will advise the Representatives promptly of the issuance
by the Commission of any stop order or other order suspending the
effectiveness of the Registration Statement or of the
15
institution of any proceedings for that purpose, and will use its best
efforts to prevent the issuance of any such stop order or other such order
and to obtain as soon as possible the lifting thereof, if issued. The
Company will advise the Representatives promptly of the receipt of any
comments of the Commission or any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus
or for additional information and will not at any time file any amendment
to the Registration Statement or supplement to the Prospectus or file any
document under the Exchange Act before the termination of the offering of
the Stock by the Underwriters if such document would be deemed to be
incorporated by reference into the Pre-effective Prospectus or Prospectus,
which shall not previously have been submitted to the Representatives a
reasonable time prior to the proposed filing thereof or to which the
Representatives shall reasonably object in writing or which is not in
compliance with the Securities Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon the request of the Representatives, any amendments or supplements to
the Registration Statement or the Prospectus which in the opinion of the
Representatives may be necessary to enable the several Underwriters to
continue the distribution of the Stock and will use its best efforts to
cause the same to become effective as promptly as possible.
(c) If at any time after the effective date of the Registration
Statement when a prospectus relating to the Stock is required to be
delivered under the Securities Act any event relating to or affecting the
Company or any of its Subsidiaries occurs as a result of which the
Prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it is necessary at any
time to amend the Prospectus to comply with the Securities Act or to file
under the Exchange Act any document which would be deemed to be
incorporated by reference in the Prospectus in order to comply with the
Securities Act or the Exchange Act, the Company will promptly notify the
Representatives thereof and will prepare an amended or supplemented
prospectus or file such document which will correct such statement or
omission; and in case any Underwriter is required to deliver a prospectus
relating to the Stock nine (9) months or more after the effective date of
the Registration Statement, the Company upon the request of the
Representatives and at the expense of such Underwriter will prepare
promptly such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Securities Act.
(d) The Company will deliver to the Representatives, without charge,
at or before the Closing Dates, signed copies of the Registration
Statement, as originally filed with the Commission, and all amendments and
supplements thereto including all financial statements and exhibits thereto
(including any document filed under the Exchange Act and deemed to be
incorporated by reference into the Prospectus), and will deliver to the
Representatives such number of copies of the Registration Statement,
including such financial statements but without exhibits, and all
amendments thereto, as the Representatives may reasonably request. The
Company will deliver or mail to or upon the order of the
16
Representatives, from time to time until the effective date of the
Registration Statement, as many copies of the Pre-effective Prospectus as
the Representatives may reasonably request. The Company will deliver or
mail to or upon the order of the Representatives on the date of the public
offering, and thereafter from time to time during the period when delivery
of a prospectus relating to the Stock is required under the Securities Act,
as many copies of the Prospectus, in final form or as thereafter amended or
supplemented as the Representatives may reasonably request; provided,
however, that the expense of the preparation and delivery of any prospectus
required for use nine (9) months or more after the effective date of the
Registration Statement shall be borne by the Underwriters required to
deliver such prospectus.
(e) The Company will make generally available to its stockholders, in
the manner contemplated by Rule 158(b) under the Securities Act, as soon as
practicable, but not later than fifteen (15) months after the effective
date of the Registration Statement, an earnings statement which will be in
reasonable detail (but which need not be audited) and which will comply
with Section 11(a) of the Securities Act, covering a period of at least
twelve (12) consecutive months beginning after the "effective date" (as
defined in Rule 158 under the Securities Act) of the Registration
Statement.
(f) The Company will cooperate with the Representatives to enable the
Stock to be registered or qualified for offering and sale by the
Underwriters and by dealers under the securities laws of such jurisdictions
as the Representatives may reasonably designate and at the request of the
Representatives will make such applications and furnish such consents to
service of process or other documents as may be required of it as the
issuer of the Stock for that purpose; provided, however, that the Company
shall not be required to qualify to do business or to file a general
consent (other than that arising out of the offering or sale of the Stock)
to service of process in any such jurisdiction where it is not now so
subject. The Company will, from time to time, prepare and file such
statements and reports as are or may be required of it as the issuer of the
Stock to continue such qualifications in effect for so long a period as the
Representatives may reasonably request for the distribution of the Stock.
The Company will advise the Representatives promptly after the Company
becomes aware of the suspension of the qualifications or registration of
(or any such exception relating to) the Common Stock of the Company for
offering, sale or trading in any jurisdiction or of any initiation or
threat of any proceeding for any such purpose, and in the event of the
issuance of any orders suspending such qualifications, registration or
exception, the Company will, with the cooperation of the Representatives
use its best efforts to obtain the withdrawal thereof.
(g) The Company will furnish to its stockholders annual reports
containing financial statements certified by independent public accountants
and with quarterly summary financial information in reasonable detail which
may be unaudited. During the period of five (5) years from the date hereof,
the Company will deliver to the Representatives, as soon as they are
available, copies of each annual report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and
statements of income, stockholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public
accountants and each other report or communication furnished by the
17
Company to its stockholders and will deliver to the Representatives, (i) as
soon as they are available, copies of any other reports or communication
(financial or other) which the Company shall publish or otherwise make
available to any of its stockholders as such and (ii) as soon as they are
available, copies of any reports and financial statements furnished to or
filed with the Commission, or the NASD or any national securities exchange.
So long as the Company has active subsidiaries, such financial statements
will be on a consolidated basis to the extent the accounts of the Company
and its subsidiaries are consolidated in reports furnished to its
stockholders generally. Separate financial statements shall be furnished
for all subsidiaries whose accounts are not consolidated but which at the
time are significant subsidiaries as defined in the Rules and Regulations.
(h) The Company will use its best efforts to maintain the listing of
the Stock on the Nasdaq National Market.
(i) The Company will maintain a transfer agent and registrar for its
Common Stock.
(j) 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 of the Act by the earlier of (i) 10:00 P.M., New York City time,
on the date of this Agreement, and(ii) the time that confirmation are given
or sent, as specified by Rule 462(b)(2).
(k) The Company will not, without the prior written consent of
Ladenburg, directly or indirectly, offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of , any shares of Common Stock of the Company or issue any
securities convertible or exercisable or exchangeable (except pursuant to
the terms of the Company's Options Plans) for Common Stock, or enter into
any swap or the agreement to do any of the foregoing, through March 8,
1999. These "lock-up" restrictions will not apply to the estate of any
person described above in the event such person dies during the "lock-up"
period, will not prohibit gifts to donees who agree in writing to be bound
by the same restrictions or that are qualified organizations under Section
501(c)(3) of the Internal Revenue Code of 1986, as amended, and will not
prohibit any person from exercising options (but would prohibit the sale
during the "lock-up" period of shares of Common Stock purchased upon the
exercise of such options).
(l) The Company will apply the net proceeds from the sale of the Stock
as set forth in the description under "Use of Proceeds" in the Prospectus,
which description complies in all respects with the requirements of Item
504 of Regulation S-K.
(m) The Company will supply you with copies of all correspondence to
and from, and all documents issued to and by, the Commission in connection
with the registration of the Stock under the Securities Act.
18
(n) Prior to the Closing Dates the Company will furnish to you, as
soon as they have been prepared, copies of any unaudited interim
consolidated financial statements of the Company and each of its
Subsidiaries for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statement and the
Prospectus.
(o) Prior to the Closing Dates the Company will issue no press release
or other communications directly or indirectly and hold no press conference
with respect to the Company or any of its Subsidiaries, the financial
condition, results of operation, business, prospects, assets or liabilities
of any of them, or the offering of the Stock, without your prior written
consent.
(p) The Company will not at any time directly or indirectly, take any
action designed or intended to stabilize or manipulate the price of any
security of the Company, or which caused or resulted in, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company.
(q) The Company will use the proceeds of the offering substantially as
set forth in the Prospectus under the caption "Use of Proceeds."
6. Covenants and Agreements of the Selling Shareholders. Each Selling
Shareholder, severally and not jointly, covenants and agrees with each of the
Underwriters:
(a) That he or she has executed the so-called "lock-up" agreement
described in Section 10(i) of this Agreement.
(b) That he or she will not, at any time, directly or indirectly, take
any action designed or intended to stabilize or manipulate the price of any
security of the Company, or which caused or resulted in, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company.
7. Payment of Expenses. (a) The Company will pay (directly or by
reimbursement) all costs, fees and expenses incurred in connection with expenses
incident to the performance of its obligations under this Agreement and in
connection with the transactions contemplated hereby, including but not limited
to (i) all expenses and taxes incident to the issuance and delivery of the Stock
to the Representatives; (ii) all expenses incident to the registration of the
Stock under the Securities Act; (iii) the costs of preparing stock certificates
(including printing and engraving costs); (iv) all fees and expenses of the
registrar and transfer agent of the Stock; (v) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Stock to the
Underwriters; (vi) fees and expenses of the Company's counsel and the Company's
independent accountants; (vii) all costs and expenses (excluding, however, fees
of the Underwriter's counsel) incurred in connection with the preparation,
printing, filing, shipping and distribution of the Registration Statement, each
Pre-effective Prospectus and the Prospectus (including all exhibits and
financial statements) and all amendments and supplements provided for herein,
the "Agreement Among Underwriters" between the Representatives and the
Underwriters, the Selling Agreement, the Underwriters' Questionnaire and the
Blue Sky memoranda, if any, and this Agreement; (viii) all filing fees,
attorneys' fees and expenses incurred by the Company or the Underwriters in
connection
19
with exemptions from the qualifying or registering (or obtaining qualification
or registration of) all or any part of the Stock for offer and sale and
determination of its eligibility for investment under the Blue Sky or other
securities laws of such jurisdictions as the Representatives may designate and
all fees and expenses, including attorneys' fees, paid or incurred in connection
with filings made with the NASD; (ix) all fees and expenses in connection with
qualifying the Stock for inclusion on the Nasdaq National Market and (x) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section 7.
In addition, each Selling Shareholder will pay all costs and expenses incident
to (i) the fees, disbursements and expenses of separate counsel for such Selling
Shareholder, and (ii) the sale and delivery of the Stock to be sold by such
Selling Shareholder to the Underwriters hereunder.
(b) In addition to its other obligations under Section 8(a) hereof, the
Company agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
(i) any statement or omission or any alleged statement or omission or (ii) any
breach or inaccuracy in its representations and warranties, it will reimburse
each Underwriter on a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse each Underwriter for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Underwriter shall promptly return
it to the Company together with interest, determined on the basis of the prime
rate (or other commercial lending rate for borrowers of the highest credit
standing) announced from time to time by Citibank, NA, New York, New York (the
"Prime Rate"). Any such interim reimbursement payments which are not made to an
Underwriter in a timely manner as provided below shall bear interest at the
Prime Rate from the due date for such reimbursement. This expense reimbursement
agreement will be in addition to any other liability which the Company may
otherwise have. The request for reimbursement will be sent to the Company.
(c) In addition to its other obligations under Section 8(b) hereof, each
Underwriter severally agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in Section 8(c) hereof which relates to written information furnished
to the Company by the Representatives on behalf of the Underwriters specifically
for inclusion in the Registration Statement and the Prospectus, it will
reimburse the Company (and, to the extent applicable, each officer, director or
controlling person) on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director or controlling person) for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company (and, to the
extent
20
applicable, each officer, director or controlling person) shall promptly return
it to the Underwriters together with interest, compounded daily, determined on
the basis of the Prime Rate. Any such interim reimbursement payments which are
not made to the Company within thirty (30) days of a request for reimbursement
shall bear interest at the Prime Rate from the date of such request. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(d) It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in paragraph (b) and/or (c) of this
Section 7, including the amounts of any requested reimbursement payments and the
method of determining amounts, shall be settled by arbitration conducted under
the provisions of the Constitution and Rules of the Board of Governors of the
New York Stock Exchange, Inc. or pursuant to the Code of Arbitration Procedure
of the NASD. Any such arbitration must be commenced by service of a written
demand for arbitration or written notice of intention to arbitrate, therein
electing the arbitration tribunal. In the event the party demanding arbitration
does not make such designation of an arbitration tribunal in such demand or
notice, then the party responding to said demand or notice is authorized to do
so. Such an arbitration would be limited to the operation of the interim
reimbursement provisions contained in paragraph (b) and/or (c) of this Section 7
and would not resolve the ultimate propriety or enforceability of the obligation
to reimburse expenses which is created by the provisions of Section 8.
8. Indemnification and Contribution. (a) The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls such
Underwriter within the meaning of the Securities Act and the respective
officers, directors, partners, employees, representatives and agents of each of
such Underwriter (collectively, the "Underwriter Indemnified Parties" and, each,
an "Underwriter Indemnified Party"), against any losses, claims, damages,
liabilities or expenses (including the reasonable cost of investigating and
defending against any claims therefor and counsel fees incurred in connection
therewith), joint or several, which may be based upon the Securities Act, the
Exchange Act, or any other statute or at common law, on the ground that any
Pre-effective Prospectus, the Registration Statement or the Prospectus (or any
Pre-effective Prospectus, the Registration Statement or the Prospectus as from
time to time amended or supplemented) includes or allegedly includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; provided, however, that such indemnity shall not inure to the
benefit of any Underwriter (or any person controlling such) on account of any
losses, claims, damages, liabilities or expenses arising from the sale of the
Stock to any person by such Underwriter (i) if such untrue statement or omission
or alleged untrue statement or omission was made in any Pre-effective
Prospectus, the Registration Statement or the Prospectus, or such amendment or
supplement, in reliance upon and in conformity with information furnished in
writing to the Company by the Representatives on behalf of any Underwriter
specifically for use therein or (ii) as to any Pre-effective Prospectus, with
respect to any Underwriter, to the extent that any such loss, claim, damage,
liability or expense of such Underwriter results from an untrue statement of a
material fact contained in, or the omission of a material fact from, such
Pre-effective Prospectus, which untrue statement or omission was corrected in
the Prospectus, if such Underwriter sold Stock to the person alleging such loss,
claim, damage or liability without sending or giving, at or prior to the written
confirmation of such sale, a copy of the
21
Prospectus, unless such failure resulted from the failure of the Company to
deliver copies of the Prospectus to such Underwriter on a timely basis to permit
such sending or giving. The Company will be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but if the Company elects to assume the
defense, such defense shall be conducted by counsel chosen by it. In the event
the Company elects to assume the defense of any such suit and retain such
counsel, any Underwriter Indemnified Parties, defendant or defendants in the
suit, may retain additional counsel but shall bear the fees and expenses of such
counsel unless (i) the Company shall have specifically authorized the retaining
of such counsel or (ii) the parties to such suit include any such Underwriter
Indemnified Parties, and the Company and such Underwriter Indemnified Parties at
law or in equity have been advised by counsel to the Underwriters that one or
more legal defenses may be available to it or them which may not be available to
the Company, in which case the Company shall not be entitled to assume the
defense of such suit notwithstanding its obligation to bear the fees and
expenses of such counsel. This indemnity agreement is not exclusive and will be
in addition to any liability which the Company might otherwise have and shall
not limit any rights or remedies which may otherwise be available at law or in
equity to each Underwriter Indemnified Party. The Company agrees that the
statements with respect to the price and underwriting discount set forth on, and
the information contained in the last paragraph of, the cover page of the
Prospectus, the stabilization legend on the inside front cover page of the
Prospectus, and the table of Underwriters, the paragraph regarding price and
underwriting discount, the paragraph regarding the amounts of the selling
concession and reallowance, all set forth under the caption "Underwriting" in
the Prospectus, constitute the only information provided in writing by the
Representatives on behalf of any Underwriter expressly for use in the
Registration Statement or the Prospectus.
(b) Each Underwriter severally and not jointly agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who shall have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act (collectively, the "Company
Indemnified Parties") against any losses, claims, damages, liabilities or
expenses (including, unless the Underwriter or Underwriters elect to assume the
defense, the reasonable cost of investigating and defending against any claims
therefor and counsel fees incurred in connection therewith), joint or several,
which arise out of or are based in whole or in part upon the Securities Act, the
Exchange Act or any other federal, state, local or foreign statute or
regulation, or at common law, on the ground or alleged ground that any
Pre-effective Prospectus, the Registration Statement or the Prospectus (or any
Pre-effective Prospectus, the Registration Statement or the Prospectus, as from
time to time amended and supplemented) includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, but only
insofar as any such statement or omission was made in reliance upon, and in
conformity with, written information furnished to the Company by such
Underwriter, directly or through the Representatives, specifically for use in
the preparation thereof; provided, however, that in no case is such Underwriter
to be liable with respect to any claims made against any Company Indemnified
Party against whom the action is brought unless such Company Indemnified Party
shall have notified such Underwriter in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon the Company Indemnified Party, but failure to
notify
22
such Underwriter of such claim shall not relieve it from any liability which it
may have to any Company Indemnified Party otherwise than on account of its
indemnity agreement contained in this paragraph. Such Underwriter shall be
entitled to participate at its own expense in the defense, or, if it so elects,
to assume the defense of any suit brought to enforce any such liability, but, if
such Underwriter elects to assume the defense, such defense shall be conducted
by counsel chosen by it. In the event that any Underwriter elects to assume the
defense of any such suit and retain such counsel, the Company Indemnified
Parties and any other Underwriter or Underwriters or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, respectively. The Underwriter
against whom indemnity may be sought shall not be liable to indemnify any person
for any settlement of any such claim effected without such Underwriter's
consent. This indemnity agreement is not exclusive and will be in addition to
any liability which such Underwriter might otherwise have and shall not limit
any rights or remedies which may otherwise be available at law or in equity to
any Company Indemnified Party.
(c) Each of the Selling Shareholders severally and not jointly agrees to
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who shall have signed the Registration Statement, each
Underwriter and each person, if any, who controls the Company or any Underwriter
within the meaning of the Securities Act (collectively, the "Company and
Underwriter Indemnified Parties"), to the same extent as the foregoing indemnity
from the Company to the several Underwriters in Section 8(a), but only (i) on
the ground or alleged ground that any Pre-effective Prospectus, the Registration
Statement or the Prospectus (or any Pre-effective Prospectus, the Registration
Statement or the Prospectus, as from time to time amended and supplemented)
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, and only insofar as any such statement or omission was
made in reliance upon, and in conformity with, written information furnished to
the Company by or on behalf of the Selling Shareholders, specifically for use in
the preparation thereof, or (ii) with respect to any breach of any
representation, warranty, covenant, or agreement of the Selling Shareholders
contained in this Agreement. In case any action shall be brought against the
Company, any Underwriter, or any Company and Underwriter Indemnified Parties in
respect of which indemnity may be sought against the Selling Shareholders, the
Selling Shareholders shall have the rights and duties given to the indemnifying
parties, and the Company, the Underwriters, and each other person so indemnified
shall have the rights and duties given to the indemnified parties, by the
provisions of Section 8(a).
(d) If the indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a), (b) or
(c) above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof referred to herein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company, the Selling Shareholders and the Underwriters
from the offering of the Stock. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault
23
of the Company, the Selling Shareholders and the Underwriters in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company, the Selling Shareholders and the Underwriters shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and/or the Selling Shareholders on
the one hand, bear to the total underwriting discounts and commissions received
by the Underwriters on the other hand, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Shareholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company,
the Selling Shareholders and the Underwriters agree that it would not be just
and equitable if contribution were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses (or actions in
respect thereof) referred to above shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating, defending, settling or compromising any such claim.
Notwithstanding the provisions of this subsection (c), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the shares of the Stock underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Underwriters'
obligations to contribute are several in proportion to their respective
underwriting obligations and not joint. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
9. Survival of Indemnities, Representations, Warranties, etc. The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company, the Selling Shareholders and the several
Underwriters, as set forth in this Agreement or made by them respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation made by or on behalf of any Underwriter, the Selling
Shareholders, the Company or any of the Company's officers or directors or any
controlling person, and shall survive delivery of and payment for the Stock.
10. Conditions of Underwriters' Obligations. The respective obligations of
the several Underwriters hereunder shall be subject to the accuracy, at and
(except as otherwise stated herein) as of the date hereof and at and as of the
Closing Dates, of the representations and warranties made herein by the Company
and the Selling Shareholders, to compliance at and as of the Closing Dates by
the Company and the Selling Shareholders with their covenants and agreements
herein contained and other provisions hereof to be satisfied at or prior to the
Closing Dates, and to the following additional conditions:
24
(a) The Registration Statement shall have become effective and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge
of the Company or the Representatives, shall be threatened by the
Commission, and any request for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the reasonable satisfaction
of the Representatives. Any filings of the Prospectus, or any supplement
thereto, required pursuant to Rule 424(b) or Rule 434 of the Rules and
Regulations, shall have been made in the manner and within the time period
required by Rule 424(b) and Rule 434 of the Rules and Regulations, as the
case may be.
(b) The Representatives shall have been satisfied that there shall not
have occurred any change, on a consolidated basis, prior to the Closing
Dates in the condition (financial or otherwise), properties, business,
management, prospects, net worth or results of operations of the Company
and its Subsidiaries, or any change in the capital stock, short-term or
long-term debt of the Company and its Subsidiaries, taken as a whole, such
that (i) the Registration Statement or the Prospectus, or any amendment or
supplement thereto, contains an untrue statement of fact which is material,
or omits to state a fact which is required to be stated therein or is
necessary to make the statements therein not misleading, or (ii) it is
impracticable in the reasonable judgment of the Representatives to proceed
with the public offering or purchase the Stock as contemplated hereby.
(c) At the time of execution of this Agreement and at each of the
Closing Dates, each of Xxxxxx Xxxxxxxx LLP and KPMG Peat Marwick LLP shall
have furnished to the Underwriters a letter or letters, dated,
respectively, the date of execution of this Agreement and each of the
Closing Dates, confirming that they are independent certified public
accountants with respect to the Company and each of its Subsidiaries within
the meaning of the Securities Act and the applicable published Rules and
Regulations and based upon the procedures described in such letter
delivered to you concurrently with the execution of this Agreement (herein
called the "Comfort Letter"), but carried out to a date not more than five
(5) business days prior to the First Closing Date or such later date on
which the Option Stock is to be purchased, as the case may be, (i)
confirming, to the extent true, that the statements and conclusions set
forth in the Comfort Letter are accurate as of the First Closing Date or
such later date on which Option Stock is to be purchased, as the case may
be, and (ii) setting forth any revisions and additions to the statements
and conclusions set forth in the Comfort Letter which are necessary to
reflect any changes in the facts described in the Comfort Letter since the
date of such letter, or to reflect the availability of more recent
financial statements, data or information. The letter shall not contain any
disclosure relating to any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company or any of its Subsidiaries from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and
adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Stock as
contemplated by the Prospectus. The Comfort Letter shall be addressed to or
for the use of
25
the Underwriters in form and substance satisfactory to the Underwriters and
shall (i) represent that they are independent certified public accountants
with respect to the Company and each of the Subsidiaries within the meaning
of the Act and the applicable published Rules and Regulations, (ii) set
forth their opinion with respect to their examination of the consolidated
balance sheets of the Company as of February 1, 1997 and January 31, 1998
(in the case of Xxxxxx Xxxxxxxx LLP), and December 31, 1995 and May 25,
1996 (in the case of KPMG Peat Marwick LLP), and related consolidated
statements of operations, shareholders' equity, and cash flows for the
twelve (12) months (or five months in the case of the period ended May 25,
1996), then ended, and (ii) address other matters agreed upon by Xxxxxx
Xxxxxxxx LLP and KPMG Peat Marwick LLP and you. In addition, you shall have
received from Xxxxxx Xxxxxxxx LLP at the time of execution of this
Agreement, if requested by the Representatives, a letter addressed to the
Company and made available to you for the use of the Underwriters stating
that their review of the Company's system of internal accounting controls,
to the extent they deemed necessary in establishing the scope of their
examination of the above financial statements as of February 1, 1997 and
January 31, 1998, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses.
(d) The Representatives shall have received from Faegre & Xxxxxx LLP,
counsel for the Company, an opinion, dated each of the Effective Date and
the Closing Dates, to the effect set forth in Exhibit I hereto. Counsel
rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or the State of Minnesota upon
opinions of local counsel, and as to questions of fact upon representations
or certificates of officers of the Company and/or its Subsidiaries, and of
government officials, in which case their opinion is to state that they are
so relying and that they have no knowledge of any material misstatement or
inaccuracy in any such opinion, representation or certificate. Copies of
any opinion, representation or certificate so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to
Underwriters' Counsel.
(e) The Representatives shall have received from Xxxxxxx Berlin
Shereff Xxxxxxxx, LLP, counsel for the Underwriters, their opinion or
opinions dated the Closing Dates with respect to the incorporation of the
Company, the validity of the Stock, the Registration Statement and the
Prospectus and such other related matters as it may reasonably request, 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. In rendering such opinion, Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
may rely as to all matters governed other than by the laws of New York or
federal laws on the opinion of counsel referred to in paragraph (d) of this
Section 10.
(f) The Representatives shall have received a certificate, dated the
Closing Dates, of the chief executive officer or the president, and the
chief financial officer of the Company to the effect that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and, to the best of the
knowledge of the signers, no
26
proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act;
(ii) Neither any Pre-effective Prospectus, as of its date, nor
the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto (including any documents filed under the Exchange
Act and deemed to be incorporated by reference into the Pre-effective
Prospectus and the Prospectus), as of the time when the Registration
Statement became effective and at all times subsequent thereto up to
the delivery of such certificate, included 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;
(iii) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except
as set forth or contemplated in the Prospectus, neither the Company
nor any of its Subsidiaries has incurred any material liabilities or
obligations, direct or contingent, nor entered into any material
transactions not in the ordinary course of business and there has not
been any material adverse change in the condition (financial or
otherwise), properties, business, management, prospects, net worth or
results of operations of the Company and its Subsidiaries, or any
change in the capital stock, short-term or long-term debt of the
Company and any of its Subsidiaries;
(iv) The representations and warranties of the Company in this
Agreement are true and correct at and as of the Closing Dates, and the
Company has complied with all the agreements and performed or
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Dates; and
(v) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as
disclosed in or contemplated by the Prospectus, (i) there has not been
any material adverse change or a development involving a material
adverse change in the condition (financial or otherwise), properties,
business, management, prospects, net worth or results of operations of
the Company and its Subsidiaries considered as a whole; (ii) the
business and operations conducted by the Company and its Subsidiaries
have not sustained a loss by strike, fire, flood, accident or other
calamity (whether or not insured) of such a character as to interfere
materially with the conduct of the business and operations of the
Company and its Subsidiaries considered as a whole; (iii) no legal or
governmental action, suit or proceeding is pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries which is material to the Company and its Subsidiaries
considered as a whole, whether or not arising from transactions in the
ordinary course of business, or which may materially and adversely
affect the transactions contemplated by this Agreement; (iv) since
such dates and except as so disclosed, the Company has not incurred
any material liability or obligation, direct, contingent or indirect,
made any change in its capital stock (except pursuant to its Option
Plans), made any material
27
change in its short-term or funded debt or repurchased or otherwise
acquired any of the Company's capital stock; and (v) the Company has
not declared or paid any dividend, or made any other distribution,
upon its outstanding capital stock payable to stockholders of record
on a date prior to the Closing Dates.
(g) The Representatives shall have received a certificate, dated the
Closing Dates, of each of the Selling Shareholders to the effect that the
representations and warranties of each such Selling Shareholder in this
Agreement are true and correct as of the Closing Dates, and that each such
Selling Shareholder has complied with all the agreements and performed or
satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Dates.
(h) The Company shall have furnished to the Representatives such
additional certificates as the Representatives may have reasonably
requested as to the accuracy, at and as of the Closing Dates, of the
representations and warranties made herein by it and as to compliance at
and as of the Closing Dates by it with its covenants and agreements herein
contained and other provisions hereof to be satisfied at or prior to the
Closing Dates, and as to satisfaction of the other conditions to the
obligations of the Underwriters hereunder.
(i) Ladenburg shall have received the written agreements of the
officers and directors of the Company and the holders of securities of the
Company listed on Schedule B, and listed on Schedule C, that each will not
directly or indirectly, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer or
dispose of , any shares of Common Stock of the Company or issue any
securities convertible or exercisable or exchangeable (except pursuant to
the terms of the Company's Options Plans) for Common Stock, or enter into
any swap or the agreement to do any of the foregoing, through March 8,
1999. These "lock-up" restrictions will not apply to the estate of any
person described above in the event such person dies during the "lock-up"
period, will not prohibit gifts to donees who agree in writing to be bound
by the same restrictions, or that are qualified organizations under Section
501(c)(3) of the Internal Revenue Code of 1986, as amended, and will not
prohibit any person from exercising options (but would prohibit the sale
during the "lock-up" period of shares of Common Stock purchased upon the
exercise of such options).
(j) The Stock shall be listed on the Nasdaq National Market.
(k) All opinions, certificates, letters and other documents will be in
compliance with the provisions hereunder only if they are satisfactory in
form and substance to the Representatives. The Company and the Selling
Shareholders will furnish to the Representatives conformed copies of such
opinions, certificates, letters and other documents as the Representatives
shall reasonably request. If any of the conditions hereinabove provided for
in this Section 10 shall not have been satisfied when and as required by
this Agreement, this Agreement may be terminated by the Representatives by
notifying the Company of such termination in writing or by telegram at or
prior to the Closing Dates, but Ladenburg shall be
28
entitled to waive any of such conditions.
(l) Ladenburg shall have received such additional opinions of counsel
as shall be reasonably satisfactory to Ladenburg in its sole discretion.
11. Effective Date. This Agreement shall become effective immediately as to
Sections 7, 8, 9, 11, 12, 13, 15, 16, 17, 18, 19, 20 and 21 and, as to all other
provisions, at 11:00 A.M. New York City time on the first full business day
following the effectiveness of the Registration Statement or at such earlier
time after the Registration Statement becomes effective as the Representatives
may determine on and by notice to the Company or by release of any of the Stock
for sale to the public. For the purposes of this Section 11, the Stock shall be
deemed to have been so released upon the release for publication of any
newspaper advertisement relating to the Stock or upon the release by you of
telegrams (i) advising Underwriters that the shares of Stock are released for
public offering or (ii) offering the Stock for sale to securities dealers,
whichever may occur first.
12. Termination. This Agreement (except for the provisions of Section 7)
may be terminated by the Company at any time before it becomes effective in
accordance with Section 11 by notice to the Representatives and may be
terminated by the Representatives at any time before it becomes effective in
accordance with Section 11 by notice to the Company. In the event of any
termination of this Agreement under this or any other provision of this
Agreement, there shall be no liability of any party to this Agreement to any
other party, other than as provided in Sections 7, 8 and 13 and other than as
provided in Section 14 as to the liability of defaulting Underwriters.
This Agreement may be terminated after it becomes effective by the
Representatives by notice to the Company (i) if at or prior to any First Closing
Date trading in securities on any of the New York Stock Exchange, American Stock
Exchange or Nasdaq National Market shall have been suspended or minimum or
maximum prices shall have been established and are then currently in effect on
any such exchange or market, or a banking moratorium shall have been declared by
New York or United States authorities; (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market; (iii) if at or prior to any Closing Date there shall have been (A) an
outbreak or escalation of hostilities between the United States and any foreign
power or of any other insurrection or armed conflict involving the United States
or (B) any change in financial markets or any calamity or crisis which, in the
reasonable judgment of the Representatives, makes it impractical or inadvisable
to offer or sell the Firm Stock on the terms contemplated by the Prospectus;
(iv) if there shall have been any development or prospective development
involving particularly the business or properties or securities of the Company
or any of its Subsidiaries or the transactions contemplated by this Agreement
which, in the reasonable judgment of the Representatives, makes it impracticable
or inadvisable to offer or deliver the Firm Stock on the terms contemplated by
the Prospectus; (v) if there shall be any litigation or proceeding, pending or
threatened, which, in the reasonable judgment of the Representatives, makes it
impracticable or inadvisable to offer or deliver the Firm Stock on the terms
contemplated by the Prospectus; or (vi) if there shall have occurred any of the
events specified in the immediately preceding clauses (i) - (v) together with
any other such event that makes it, in the reasonable judgment of the
Representatives, impractical or inadvisable to offer or deliver the Firm Stock
on the
29
terms contemplated by the Prospectus.
13. Reimbursement of Underwriters. Notwithstanding any other provisions
hereof, if this Agreement shall not become effective by reason of any election
of the Company pursuant to the first paragraph of Section 12 or shall be
terminated by the Representatives under Section 10 or Section 12, the Company
will bear and pay the expenses specified in Section 7 hereof and, in addition to
its obligations pursuant to Section 8 hereof, the Company will reimburse the
reasonable out-of-pocket expenses of the several Underwriters (including
reasonable fees and disbursements of counsel for the Underwriters) incurred in
connection with this Agreement and the proposed purchase of the Stock, and
promptly upon demand the Company will pay such amounts to you as
Representatives.
14. Substitution of Underwriters. If on the First Closing Date or the
Option Closing Date, as the case may be, any Underwriter or Underwriters shall
default in its or their obligations to purchase shares of Stock hereunder
(otherwise than by reason of default on the part of the Company, you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 48 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and upon
the terms set forth herein, the shares of Stock which the defaulting Underwriter
or Underwriters failed to purchase. If during such 48 hours you, as such
Representatives, shall not have procured such other Underwriters, or any others,
to purchase the shares of Stock agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of shares which
such defaulting Underwriter or Underwriters agreed but failed to purchase does
not exceed ten percent (10%) of the total number of shares underwritten, the
other Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the shares of Stock which such
defaulting Underwriter or Underwriters agreed but failed to purchase, or (b) if
the aggregate number of shares of Stock with respect to which such default or
defaults occur is more than ten percent (10%) of the total number of shares
underwritten, the Company or you, as the Representatives of the Underwriters,
will have the right, by written notice given within the next 48-hour period to
the parties to this Agreement, to terminate this Agreement without liability on
the part of the non-defaulting Underwriters or the Company.
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a defaulting
Underwriter or Underwriters as provided in this Section 14, (i) the Company
shall have the right to postpone the Closing Dates for a period of not more than
five (5) full business days in order that the Company may effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (ii) the respective
numbers of shares to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken as the basis of their underwriting obligation for
all purposes of this Agreement. Nothing herein contained shall relieve any
defaulting Underwriter of its liability to the Company or the other Underwriters
for damages occasioned by its default hereunder. Any termination of this
Agreement pursuant to this Section 14 shall be without liability on the part of
any non-defaulting Underwriter or the Company, except for expenses to be paid or
reimbursed pursuant
30
to Section 7 and except for the provisions of Section 8.
15. Notices. All communications hereunder shall be in writing and, if sent
to the Underwriters shall be mailed, delivered or telegraphed and confirmed to
you, as their Representatives x/x Xxxxxxxxx Xxxxxxxx & Co. Inc. at 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, attention: Mr. Xxxxxxx Xxxxx, except that
notices given to an Underwriter pursuant to Section 8 hereof shall be sent to
such Underwriter at the address furnished by the Representatives or, if sent to
the Company, shall be mailed, delivered or telegraphed and confirmed c/o Wilsons
the Leather Experts Inc., 0000 Xxxxx Xxxxxx Xxxxx, Xxxxxxxx Xxxx, Xxxxxxxxx
00000, Attention: Xx. Xxxxx X. Xxxxxx.
16. Successors. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters, the Company, the Selling Shareholders and their
respective successors and legal representatives. Nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any person other
than the persons mentioned in the preceding sentence 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 the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the person or persons, if any, who control any
Underwriter or Underwriters within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, and the indemnities of the several
Underwriters shall also be for the benefit of each director of the Company, each
of its officers who has signed the Registration Statement and the person or
persons, if any, who control the Company or the Selling Shareholders within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act.
17. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
choice of law principles thereof.
18. Authority of the Representatives. In connection with this Agreement,
you will act for and on behalf of the several Underwriters, and any action taken
under this Agreement by you, as Representatives, or individually as a
Representative, will be binding on all the Underwriters.
19. Partial Unenforceability. The invalidity or unenforceability of any
section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph or provision hereof. If any
section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
20. General. This Agreement constitutes the entire agreement of the parties
to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
31
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and the Representatives.
21. Counterparts. This Agreement may be signed in two or more counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
32
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
WILSONS THE LEATHER EXPERTS INC.
By:
---------------------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman of the Board and Chief
Executive Officer
SELLING SHAREHOLDERS
By:
---------------------------------------
Name:
Title:
Accepted and delivered in New York, New York
as of the date first above written.
LADENBURG XXXXXXXX & CO. INC.
XxXXXXXX & COMPANY SECURITIES, INC.
XXXX X. XXXXXXX AND COMPANY, INCORPORATED
By: Ladenburg Xxxxxxxx & Co. Inc.
By:_________________________________
(Authorized Representative)
On behalf of each of the Underwriters
33
SCHEDULE A
Name Number of
Firm Stock to be Purchased
---------------
Ladenburg Xxxxxxxx & Co. Inc.
XxXxxxxx & Company Securities, Inc.
Xxxx X. Xxxxxxx and Company, Incorporated
Total. 2,000,000
=========
SCHEDULE B
LIST OF OFFICERS, DIRECTORS, AND SHAREHOLDERS
SUBJECT TO LOCK UP PROVISION
SCHEDULE C
LIST OF SELLING SHAREHOLDERS
EXHIBIT I
Matters to be covered in
opinion of Counsel to the Company(1)
------------------------------------
1. The Company is validly existing as a corporation in good standing
under the laws of the State of Minnesota; each of its Subsidiaries is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation;
2. The Company has all requisite corporate power and authority
necessary to own or hold its properties and to conduct its business as described
in the Prospectus; each of the Subsidiaries has all requisite corporate power
and authority necessary to own or hold its properties and to conduct their
respective businesses as described in the Prospectus;
3. The Company and each of its Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in each of the
jurisdictions set forth on a Schedule to the opinion; to such counsel' s
knowledge, the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than its Subsidiaries;
4. The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated therein; have not been issued in violation of or subject to any
statutory preemptive right, and, to such counsel's knowledge, have not been
issued in violation of or subject to any contractual preemptive right, co-sale
right, registration right, right of first refusal or other similar right and,
except as set forth in the Registration Statement, to such counsel's knowledge,
there are no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in the Company; based solely on a review of stock ledgers and
relying upon such ledgers to be complete, true and accurate, all the issued and
outstanding shares of capital stock of each of the Subsidiaries are owned of
record and beneficially by the Company, free and clear of any security
interests, liens, encumbrances, equities or other claims and there are no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of capital stock or other equity interest
in any of the Subsidiaries;
5. The Stock has been duly and validly authorized by the Company for
issuance, and the Company has full corporate power and authority to issue, sell
and deliver the Stock, and, when the Stock is issued and delivered against
payment therefor in accordance with the terms hereof, they will be fully paid
and nonassessable, and will not have been issued in violation of or subject to
any statutory preemptive right, or to such counsel's knowledge, any contractual
preemptive right, co-sale right, registration right, right of first refusal or
other similar right; and there are no restrictions upon the voting or transfer
of, any of the Stock pursuant to the Articles of Incorporation (as hereinafter
defined) or Restated By-laws, or pursuant to any agreement or other instrument
of the
------------------
(1) Capitalized terms used herein but not defined shall have the
meanings given such terms in the Underwriting Agreement.
Company known to such counsel.
6. To such counsel's knowledge, there are no legal or governmental
proceedings pending against the Company or any of its Subsidiaries or of which
any property or assets of the Company or any of its Subsidiaries is the subject
which are of a character required to be disclosed in the Registration Statement
or the Prospectus by the Securities Act or the Rules and Regulations, other than
those described therein; and, to such counsel's knowledge, no such proceedings
are threatened by governmental authorities or other third parties.
7. This Agreement has been duly and validly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming due authorization, execution and delivery
of this Agreement by you, is a valid and binding agreement of the parties; the
Company has full requisite corporate power and authority to enter into this
Agreement.
8. This Agreement, the Power of Attorney and the Custody Agreement have
been duly and validly authorized executed and delivered by the Selling
Shareholders and are the valid and binding obligation of the parties; the
Selling Shareholders have the full power and authority (corporate and other) to
enter into this Agreement, the Power of Attorney and the Custody Agreement and
to consummate the transaction contemplated hereby and thereby (including to sell
and deliver the Stock).
9. All sales of the Company's capital stock by the Company during the
period of time since its inception were at the time of each sale duly registered
under the Act or exempt from the registration requirements of the Act.
10. The execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions herein contemplated will not
result, with or without due notice or lapse of time or both, in any breach or
violation of the charter or By-laws of the Company or any of its Subsidiaries,
or result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other evidence of
indebtedness, or any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other material agreement or instrument
known to such counsel to which the Company or any of its Subsidiaries is a party
or by which the their properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to the best of such counsel's knowledge,
any order, writ or decree of any court, government or governmental agency or
body having jurisdiction over the Company, its Subsidiaries or any of their
material properties or operations;
11. To such counsel's knowledge, the Company and its Subsidiaries, are
not presently (a) in violation of their charter or By-laws, or (b), to such
counsel's knowledge, in breach or default under any lease, contract, indenture,
mortgage, deed of trust, instrument, license, permit or any other agreement to
which the Company or any of its Subsidiaries is bound or to which any property
or assets of the Company or any of its Subsidiaries is the subject, where the
consequences of such violation, breach or default would have a Material Adverse
Effect;
12. The execution, delivery and performance of this Agreement, the
Power of Attorney and the Custody Agreement, and the consummation of the
transactions herein and therein contemplated, will not result (with or without
due notice or lapse of time or both) in the creation of any lien or breach or
violation of any of the terms and provisions of, or constitute a default under
any of the terms or provisions of, or give rise to any right of termination,
cancellation or acceleration under any indenture, license, mortgage, deed of
trust, loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, any lease, contract, joint venture or other material agreement or
instrument to which any such Selling Shareholder is a party or by which it or
any of its properties is or may be bound, nor will such action conflict with or
violate any law, statute, order, rule or regulation of any court or governmental
agency or body having jurisdiction over any such Selling Shareholder or any of
its properties, except, in any such case, where such breach, violation, default,
or other conflict would not have a material adverse effect on the ability of
such Selling Shareholder to consummate the transactions contemplated by this
Agreement .
13. Each Selling Shareholder has good and valid title to the Stock to
be sold by such Selling Shareholder hereunder, without notice of any adverse
claim, free and clear of all liens, security interest, pledges, charges,
encumbrances, defects, shareholders' agreements, voting trusts, equities or
claims of any nature whatsoever; and, upon delivery of such Stock against
payment therefore as provided herein (assuming that such Stock is purchased in
good faith without notice of adverse claim) good and valid title to such Stock,
free and clear of all liens, security interests, pledges, charges, encumbrances,
defects, shareholders' agreements, voting trusts, equities or claims of any
nature whatsoever, will pass to the several Underwriters.
14. No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company or
by each the Selling Shareholders of the transactions contemplated by the
Underwriting Agreement (except such as may be required by the NASD or as
required by the securities or "Blue Sky" laws of any jurisdiction as to which
such counsel need express no opinion), and in the case of the Selling
Shareholders, the transactions contemplated by the Power of Attorney and the
Custody Agreement, in connection with the purchase and distribution of the Stock
by the Underwriters except such as have been obtained or made, specifying the
same.
15. The Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding for that purpose is pending or threatened by the Commission.
16. The Registration Statement and the Prospectus and any amendments or
supplements thereto (except for the financial statements and notes thereto and
related schedules and other financial information as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations.
17. The documents which are incorporated by reference in the Prospectus
or from
which information is so incorporated by reference, when they became effective or
were filed with the Commission, as the case may be, complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
applicable, and the Rules and Regulations, and any documents so filed and
incorporated by reference subsequent to the effective date of the Registration
Statement shall, when they are filed with the Commission, conform in all
material respects with the requirements of the Securities Act and the Exchange
Act, as applicable, and the Rules and Regulations.
18. There are no contracts, agreements or other documents, known to
such counsel, required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which are
not described or filed therein as required. All descriptions of any such
contracts, agreements or documents contained in the Registration Statement are
accurate and complete descriptions of such documents in all material respects.
19. The statements in the Prospectus under the caption "Management
Buyout" to the extent they constitute a summary of documents referred to therein
or matters of law accurately summarize and fairly present in all material
respects the legal and regulatory matters described therein.
20. Neither the Company nor any of its Subsidiaries is an "investment
company," or an entity "controlled" by an "investment company" required to be
registered under the 1940 Act, as such terms are defined in the 1940 Act.
21. To such counsel's knowledge, the Company and each of its
Subsidiaries possess all authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from, and have made all declarations
and filings with, all regulatory or governmental officials, bodies and tribunals
("Permits") to own, lease or operate their respective properties and to conduct
their respective businesses described in the Registration Statement and the
Prospectus, except where the failure to have obtained or made the same would not
have a Material Adverse Effect and to the knowledge of such counsel neither the
Company nor any of its Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such Permits.
22. To such counsel's knowledge, the Company and each of its
Subsidiaries is in compliance with, and conducts its business in conformity
with, all applicable federal, state, local and foreign laws, rules and
regulations of each court or governmental agency or body having jurisdiction
over the Company or any of its Subsidiaries, except where the failure to be in
compliance would not have a Material Adverse Effect.
In addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement or any amendment
thereto, as of the time it became effective under the Securities Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Securities Act), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not
misleading, or (ii) that the Prospectus, or any supplement thereto, on the date
it was filed pursuant to the Rules and Regulations and as of the First Closing
Date or the Option Closing Date, as the case may be, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading (except that such counsel need express no view as to financial
statements and notes thereto and schedules or other financial or statistical
information therein). With respect to such statement, such counsel may state
that their belief is based upon the procedures set forth therein, but is without
independent check and verification.
