__________ Shares
ZANY BRAINY, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
__________, 1999
XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION
BT ALEX. XXXXX INCORPORATED
XXXXXXX XXXXX & COMPANY
U.S. BANCORP XXXXX XXXXXXX
As representatives of the several Underwriters
named in Schedule I hereto
c/x Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Zany Brainy, Inc., a Pennsylvania corporation (the "Company"), proposes to
issue and sell to the several underwriters named in Schedule I hereto (the
"Underwriters"), and certain shareholders of the Company named in Schedule II
hereto (the "Selling Shareholders") severally propose to sell to the several
Underwriters, an aggregate of _______________ shares of the Common Stock, $.01
par value), of the Company (the "Firm Shares"), of which _____________ shares
are to be issued and sold by the Company and _____________ shares are to be sold
by the Selling Shareholders, each Selling Shareholder selling the amount set
forth opposite such Selling Shareholder's name in Schedule II hereto. The
Company also proposes to issue and sell to the several Underwriters not more
than an additional _______ shares of its Common Stock, $.01 par value (the
"Additional Shares") if requested by the Underwriters as provided in Section 2
hereof. The Firm Shares and the Additional Shares are hereinafter referred to
collectively as the "Shares". The shares of common stock of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "Common Stock". The Company and the Selling Shareholders are
hereinafter sometimes referred to collectively as the "Sellers."
Section 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A under the Act, is hereinafter referred to as the "Registration Statement";
and the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "Prospectus". If the Company has filed or is
required pursuant to the terms hereof to file a registration statement pursuant
to Rule 462(b) under the Act registering additional shares of Common Stock (a
"Rule 462(b) Registration Statement"), then, unless otherwise specified, any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462(b) Registration Statement.
Section 2. Agreements to Sell and Purchase and Lock-Up Agreements . On
the basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, (i) the Company agrees to issue and sell
______________ Firm Shares, (ii) each Selling Shareholder agrees, severally and
not jointly, to sell the number of Firm Shares set forth opposite such Selling
Shareholder's name in Schedule II hereto and (iii) each Underwriter agrees,
severally and not jointly, to purchase from each Seller at a price per Share of
$______ (the "Purchase Price") the number of Firm Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Firm Shares to be sold by such Seller as
the number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto bears to the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares, and the Underwriters shall have the right to
purchase, severally and not jointly, up to _______ Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares. The Underwriters may exercise their right to purchase
Additional Shares in whole or in part from time to time by giving written notice
thereof to the Company within 30 days after the date of this Agreement. You
shall give any such notice on behalf of the Underwriters and such notice shall
specify the aggregate number of Additional Shares to be purchased pursuant to
such exercise and the date for payment and delivery thereof, which date shall be
a business day (i) no earlier than two business days after such notice has been
given (and, in any event, no earlier than the Closing Date (as hereinafter
defined)) and (ii) no later than ten business days after such notice has been
given. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you may determine) which bears the same proportion to the total number of
Additional Shares to be purchased from the Company as the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I bears to the total
number of Firm Shares.
Each Seller hereby agrees not to (i) 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, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions
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described in clause (i) or (ii) is to be settled by the delivery of Common
Stock, or such other securities, in cash or otherwise), except to the
Underwriters pursuant to this Agreement, for a period of 180 days after the date
of the Prospectus without the prior written consent of Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities Corporation. Notwithstanding the foregoing, during such
period (i) the Company may grant stock options pursuant to the Company's
existing stock option plan, (ii) the Company may issue shares of Common Stock
upon the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof, (iii) the Selling Shareholders may exercise
options to purchase Common Stock of the Company, and (iv) the Selling
Shareholders may transfer shares of Common Stock or options; provided that (A)
such transfer would be deemed a permitted transfer under Section 1(b) of the
Amended and Restated Shareholders' Agreement dated as of May 18, 1994, as
amended, (B) the Selling Shareholder delivers a notice to Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities Corporation within five business days of such transfer and
(C) such transferee executes and delivers to Xxxxxxxxx, Lufkin & Xxxxxxxx
Securities Corporation an agreement in substantially the same form and
containing substantially the same provisions as the lock-up agreement described
in the last sentence of this Section 2. The Company also agrees not to file any
registration statement with respect to any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock for
a period of 180 days after the date of the Prospectus without the prior written
consent of Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation. In addition,
each Selling Shareholder agrees that, for a period of 180 days after the date of
the Prospectus without the prior written consent of Xxxxxxxxx, Lufkin & Xxxxxxxx
Securities Corporation, it will not make any demand for, or exercise any right
with respect to, the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock. The
Company shall, prior to or concurrently with the execution of this Agreement,
deliver an agreement executed by (i) each Selling Shareholder, (ii) each of the
directors and officers of the Company who is not a Selling Shareholder and (iii)
each shareholder listed on Annex I hereto to the effect that such person will
not, during the period commencing on the date such person signs such agreement
and ending 180 days after the date of the Prospectus, without the prior written
consent of Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation, (A) engage in
any of the transactions described in the first sentence of this paragraph or (B)
make any demand for, or exercise any right with respect to, the registration of
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock.
Section 3. Terms of Public Offering. The Sellers are advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
Of the shares of Common Stock to be offered by the Underwriters,
shares have been reserved (the "Reserved Shares") for sale to certain
individuals, including employees, officers and directors of the Company and
other parties associated with the Company and members of their families. The
number of shares available to the general public will be reduced to the extent
those persons purchase, or confirm the purchase (either orally or in writing)
of, Reserved Shares. Any Reserved Shares not so purchased or confirmed for
purchase will be offered in the Offering.
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Section 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
shall request no later than two business days prior to the Closing Date or the
applicable Option Closing Date (as defined below), as the case may be. The
Shares shall be delivered by or on behalf of the Sellers, with any transfer
taxes thereon duly paid by the respective Sellers, to Xxxxxxxxx, Lufkin &
Xxxxxxxx Securities Corporation through the facilities of The Depository Trust
Company ("DTC"), for the respective accounts of the several Underwriters,
against payment to the Sellers of the Purchase Price therefore by wire transfer
of Federal or other funds immediately available in New York City. The
certificates representing the Shares shall be made available for inspection not
later than 9:30 A.M., New York City time, on the business day prior to the
Closing Date or the applicable Option Closing Date (as defined below), as the
case may be, at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of delivery and payment for the Firm Shares shall
be 9:00 A.M., New York City time, on ________, 1999 or such other time on the
same or such other date as Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
and the Company shall agree in writing. The time and date of delivery and
payment for the Firm Shares are hereinafter referred to as the "Closing Date".
The time and date of delivery and payment for any Additional Shares to be
purchased by the Underwriters shall be 9:00 A.M., New York City time, on the
date specified in the applicable exercise notice given by you pursuant to
Section 2 or such other time on the same or such other date as Xxxxxxxxx, Lufkin
& Xxxxxxxx Securities Corporation and the Company shall agree in writing. The
time and date of delivery and payment for any Additional Shares are hereinafter
referred to as the "Option Closing Date". The documents to be delivered on the
Closing Date or any Option Closing Date on behalf of the parties hereto pursuant
to Section 9 of this Agreement shall be delivered at the offices of Xxxxxx &
Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 and the Shares shall be
delivered at the Designated Office, all on the Closing Date or such Option
Closing Date, as the case may be.
Section 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such advice
in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective and
(v) of the happening of any event during the period referred to in Section 5(d)
below which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires any additions to or changes
in the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the Company
will use its best efforts to obtain the withdrawal or lifting of such order at
the earliest possible time.
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(b) To furnish to you five signed copies of the Registration Statement as
first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the
Commission within the applicable period specified in Rule 424(b) under the Act;
during the period specified in Section 5(d) below, not to file any further
amendment to the Registration Statement and not to make any amendment or
supplement to the Prospectus of which you shall not previously have been advised
or to which you shall reasonably object after being so advised; and, during such
period, to prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or amendment or supplement
to the Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish in New York City to each Underwriter and any dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall occur
or condition shall exist as a result of which, in the opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Underwriters, it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you and
counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, any preliminary prospectus or the offering or sale of the Shares, in
any jurisdiction in which it is not now so subject.
5
(g) To mail and make generally available to its shareholders as soon as
practicable an earnings statement covering the twelve-month period ending July
31, 2000 that shall satisfy the provisions of Section 11(a) of the Act, and to
advise you in writing when such statement has been so made available.
(h) During the period of three years after the date of this Agreement, to
furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and its subsidiaries as you may reasonably
request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the Sellers' obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the Company's
counsel, the Company's accountants and any Selling Shareholder's counsel (in
addition to the Company's counsel) in connection with the registration and
delivery of the Shares under the Act and all other fees and expenses in
connection with the preparation, printing, filing and distribution of the
Registration Statement (including financial statements and exhibits), any
preliminary prospectus, the Prospectus and all amendments and supplements to any
of the foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers in the quantities specified herein, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement and any other agreements or documents in
connection with the offering, purchase, sale or delivery of the Shares, (iv) all
expenses in connection with the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the several states and
all costs of printing or producing any Preliminary and Supplemental Blue Sky
Memoranda in connection therewith (including the filing fees and fees and
disbursements of counsel for the Underwriters in connection with such
registration or qualification and memoranda relating thereto), (v) the filing
fees and disbursements of counsel for the Underwriters in connection with the
review and clearance of the offering of the Shares by the National Association
of Securities Dealers, Inc., (vi) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating to the
Common Stock and all costs and expenses incident to the listing of the Shares on
the Nasdaq National Market, (vii) the cost of printing certificates representing
the Shares, (viii) the costs and charges of any transfer agent, registrar and/or
depositary, and (ix) all other costs and expenses incident to the performance of
the obligations of the Company and the Selling Shareholders hereunder for which
provision is not otherwise made in this Section. The provisions of this Section
shall not supersede or otherwise affect any agreement that the Company and the
Selling Shareholders may otherwise have for allocation of such expenses among
themselves.
(j) To use its best efforts to list for quotation the Shares on the Nasdaq
National Market and to maintain the listing of the Shares on the Nasdaq National
Market for a period of three years after the date of this Agreement.
6
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of this
Agreement does not cover all of the Shares, to file a Rule 462(b) Registration
Statement with the Commission registering the Shares not so covered in
compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
Section 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the effectiveness
of this Agreement); any Rule 462(b) Registration Statement filed after the
effectiveness of this Agreement will become effective no later than 10:00 P.M.,
New York City time, on the date of this Agreement; and no stop order suspending
the effectiveness of the Registration Statement is in effect, and no proceedings
for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement (other than any Rule 462(b) Registration
Statement to be filed by the Company after the effectiveness of this Agreement),
when it became effective, did not contain and, as amended, if applicable, will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) the Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement) and the Prospectus comply and, as amended or supplemented, if
applicable, will comply in all material respects with the Act, (iii) if the
Company is required to file a Rule 462(b) Registration Statement after the
effectiveness of this Agreement, such Rule 462(b) Registration Statement and any
amendments thereto, when they become effective (A) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(B) will comply in all material respects with the Act and (iv) the Prospectus
does not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or omissions
in the Registration Statement or the Prospectus based upon information relating
to any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration statement
as originally filed or as part of any amendment thereto, or filed pursuant to
Rule 424 under the Act, complied when so filed in all material respects with the
Act, and did not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
7
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph do not apply to statements or omissions in any preliminary
prospectus based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.
(d) Each of the Company and its subsidiaries has been duly incorporated, is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to carry
on its business as described in the Prospectus and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company or any of its subsidiaries relating to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of the Company
or any of its subsidiaries, except as otherwise disclosed in the Registration
Statement.
(f) All the outstanding shares of capital stock of the Company (including
the Shares to be sold by the Selling Shareholders) have been duly authorized and
validly issued and are fully paid, non-assessable and not subject to any
preemptive or similar rights; and the Shares to be issued and sold by the
Company have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor as provided by this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such Shares
will not be subject to any preemptive or similar rights.
(g) All of the outstanding shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable, and are owned by the Company, directly or indirectly through one
or more subsidiaries, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation of its
respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound.
(j) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other
8
order of, or qualification with, any court or governmental body or agency
(except such as may be required under the securities or Blue Sky laws of the
various states), (ii) conflict with or constitute a breach of any of the terms
or provisions of, or a default under, the charter or by-laws of the Company or
any of its subsidiaries or any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to the Company and its
subsidiaries, taken as a whole, to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or their
respective property is bound, (iii) violate or conflict with any applicable law
or any rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the Company, any of its
subsidiaries or their respective property or (iv) result in the suspension,
termination or revocation of any Authorization (as defined below) of the Company
or any of its subsidiaries or any other impairment of the rights of the holder
of any such Authorization.
(k) There are no legal or governmental proceedings pending or threatened to
which the Company or any of its subsidiaries is or could be a party or to which
any of their respective property is or could be subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described; nor are there any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are not
so described or filed as required.
(l) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or any provisions
of the Foreign Corrupt Practices Act or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate, would
not have a material adverse effect on the business, prospects, financial
condition or results of operation of the Company and its subsidiaries, taken as
a whole.
(m) Each of the Company and its subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not,
singly or in the aggregate, have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole. Each such Authorization is valid and in full
force and effect and each of the Company and its subsidiaries is in compliance
with all the terms and conditions thereof and with the rules and regulations of
the authorities and governing bodies having jurisdiction with respect thereto;
and no event has occurred (including, without limitation, the receipt of any
notice from any authority or governing body) which allows or, after notice or
lapse of time or both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company
9
or any of its subsidiaries; except where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction would not, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
(n) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
(o) This Agreement has been duly authorized, executed and delivered by the
Company.
(p) Xxxxxx Xxxxxxxx LLP, are independent public accountants with respect to
the Company and its subsidiaries as required by the Act.
(q) The consolidated financial statements included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto), together
with related schedules and notes, present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiaries on the basis stated therein at the respective dates or for
the respective periods to which they apply; such statements and related
schedules and notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
except as disclosed therein; the supporting schedules, if any, included in the
Registration Statement present fairly in accordance with generally accepted
accounting principles the information required to be stated therein; and the
other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company.
(r) The Company is not and, after giving effect to the offering and sale of
the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(s) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with the Shares
registered pursuant to the Registration Statement which rights have not been
waived.
(t) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of the Company and its
10
subsidiaries, taken as a whole, (ii) there has not been any material adverse
change or any development involving a prospective material adverse change in the
capital stock or in the long-term debt of the Company or any of its subsidiaries
and (iii) neither the Company nor any of its subsidiaries has incurred any
material liability or obligation, direct or contingent.
(u) The Company and its subsidiaries have good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries, in each case except as described in the
Prospectus.
(v) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, all patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks and trade names ("intellectual property") currently employed by
them in connection with the business now operated by them except where the
failure to own or possess or otherwise be able to acquire such intellectual
property would not, singly or in the aggregate, have a material adverse effect
on the business, prospects, financial condition or results of operation of the
Company and its subsidiaries, taken as a whole; and neither the Company nor any
of its subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any of such intellectual property
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(w) The Company and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; and neither the Company nor any of its subsidiaries (i) has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other material expenditures will have to be made in order to
continue such insurance or (ii) 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 at a cost that would not
have a material adverse effect on the business, prospects, financial conditions
or results of operations of the Company and its subsidiaries, taken as a whole.
(x) No relationship, direct or indirect, exists between or among the
Company or any of its subsidiaries on the one hand, and the directors, officers,
shareholders, customers or suppliers of the Company or any of its subsidiaries
on the other hand, which is required by the Act to be described in the
Registration Statement or the Prospectus which is not so described.
11
(y) The pro forma financial statements of the Company and its subsidiaries
and the related notes thereto set forth in the Registration Statement and the
Prospectus (and any supplement or amendment thereto) have been prepared on a
basis consistent with the historical financial statements of the Company and its
subsidiaries, give effect to the assumptions used in the preparation thereof on
a reasonable basis and in good faith and present fairly the historical and
proposed transactions contemplated by the Registration Statement and the
Prospectus. Such pro forma financial statements have been prepared in
accordance with the applicable requirements of Rule 11-02 of Regulation S-X
promulgated by the Commission. The other pro forma financial and statistical
information and data set forth in the Registration Statement and the Prospectus
(and any supplement or amendment thereto) are, in all material respects,
accurately presented and prepared on a basis consistent with the pro forma
financial statements.
(z) There is no (i) significant unfair labor practice complaint, grievance
or arbitration proceeding pending or threatened against the Company or any of
its subsidiaries before the National Labor Relations Board or any state or local
labor relations board, (ii) strike, labor dispute, slowdown or stoppage pending
or threatened against the Company or any of its subsidiaries or (iii) union
representation question existing with respect to the employees of the Company
and its subsidiaries, except for such actions specified in clause (i), (ii) or
(iii) above, which, singly or in the aggregate, would not have a material
adverse effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole. To the best
of the Company's knowledge, no collective bargaining organizing activities are
taking place with respect to the Company or any of its subsidiaries.
(aa) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (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
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(bb) All material tax returns required to be filed by the Company and each
of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
(cc) The software and hardware operated by the Company are capable of
providing or are being adapted to provide uninterrupted millennium functionality
to record, store, process and present calendar dates falling on or after January
1, 2000 and date-dependent data in substantially the same manner and with the
same functionality as such software records, stores, processes and presents such
calendar dates and date-dependent data as of the date hereof, except as would
not have a material adverse effect on the business, prospects, financial
condition or results of operations
12
of the Company and its subsidiaries, taken as a whole. To the knowledge of the
executive officers of the Company, the ability of the Company's significant
suppliers, customers and others with which it conducts business to identify and
resolve their own Year 2000 issues will not have material adverse effect on the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole.
(dd) Each certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
Section 7. Representations and Warranties of the Selling Shareholders.
Each Selling Shareholder represents and warrants to each Underwriter that:
(a) Such Selling Shareholder is the lawful owner of the Shares to be sold
by such Selling Shareholder pursuant to this Agreement and has, and on the
Closing Date will have, good and clear title to such Shares, free of all
restrictions on transfer, liens, encumbrances, security interests, equities and
claims whatsoever.
(b) The Shares to be sold by such Selling Shareholder have been duly
authorized and are validly issued, fully paid and non-assessable.
(c) Such Selling Shareholder has, and on the Closing Date will have, full
legal right, power and authority, and all authorization and approval required by
law, to enter into this Agreement, the Custody Agreement signed by such
Selling Shareholder and _________________________, as Custodian, relating to the
deposit of the Shares to be sold by such Selling Shareholder (the "Custody
Agreement") and the Power of Attorney of such Selling Shareholder appointing
certain individuals as such Selling Shareholder's attorneys-in-fact (the
"Attorneys") to the extent set forth therein, relating to the transactions
contemplated hereby and by the Registration Statement and the Custody Agreement
(the "Power of Attorney") and to sell, assign, transfer and deliver the Shares
to be sold by such Selling Shareholder in the manner provided herein and
therein.
(d) This Agreement has been duly authorized, executed and delivered by or
on behalf of such Selling Shareholder.
(e) The Custody Agreement of such Selling Shareholder has been duly
authorized, executed and delivered by such Selling Shareholder and is a valid
and binding agreement of such Selling Shareholder, enforceable in accordance
with its terms.
(f) The Power of Attorney of such Selling Shareholder has been duly
authorized, executed and delivered by such Selling Shareholder and is a valid
and binding instrument of such Selling Shareholder, enforceable in accordance
with its terms, and, pursuant to such Power of Attorney, such Selling
Shareholder has, among other things, authorized the Attorneys, or any one of
them, to execute and deliver on such Selling Shareholder's behalf this
Agreement and any other document that they, or any one of them, may deem
necessary or desirable in connection with the transactions contemplated hereby
and thereby and to deliver the Shares to be sold by such Selling Shareholder
pursuant to this Agreement.
13
(g) Upon delivery of and payment for the Shares to be sold by such Selling
Shareholder pursuant to this Agreement, good and clear title to such Shares will
pass to the Underwriters, free of all restrictions on transfer, liens,
encumbrances, security interests, equities and claims whatsoever.
(h) The execution, delivery and performance of this Agreement and the
Custody Agreement and Power of Attorney of such Selling Shareholder by or on
behalf of such Selling Shareholder, the compliance by such Selling Shareholder
with all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states), (ii) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the
organizational documents of such Selling Shareholder, if such Selling
Shareholder is not an individual, or any indenture, loan agreement, mortgage,
lease or other agreement or instrument to which such Selling Shareholder is a
party or by which such Selling Shareholder or any property of such Selling
Shareholder is bound or (iii) violate or conflict with any applicable law or any
rule, regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over such Selling Shareholder or any property
of such Selling Shareholder.
(i) The information in the Registration Statement under the caption
"Principal and Selling Shareholders" which specifically relates to such Selling
Shareholder does not, and will not on the Closing Date, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(j) At any time during the period described in Section 5(d), if there is
any change in the information referred to in Section 7(i), such Selling
Shareholder will immediately notify you of such change.
(k) Each certificate signed by or on behalf of such Selling Shareholder and
delivered to the Underwriters or counsel for the Underwriters shall be deemed to
be a representation and warranty by such Selling Shareholder to the Underwriters
as to the matters covered thereby.
Section 8. Indemnification. (a) The Sellers, jointly and severally, agree
to indemnify and hold harmless each Underwriter, its directors, its officers and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action, that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), the Prospectus (or any amendment or supplement thereto) or
any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by
14
any such untrue statement or omission or alleged untrue statement or omission
based upon information relating to any Underwriter furnished in writing to the
Company by such Underwriter through you expressly for use therein provided,
however, that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter who failed to
deliver a Prospectus (as then amended or supplemented, provided by the Company
to the several Underwriters in the requisite quantity and on a timely basis to
permit proper delivery on or prior to the Closing Date) to the person asserting
any losses, claims, damages and liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, if such material misstatement or omission or
alleged material misstatement or omission was cured in such Prospectus and such
Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person. Notwithstanding the foregoing, the
aggregate liability of any Selling Shareholder pursuant to this Section 8(a)
shall be limited to an amount equal to the total proceeds (before deducting
underwriting discounts and commissions and expenses) received by such Selling
Shareholder from the Underwriters for the sale of the Shares sold by such
Selling Shareholder hereunder.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each Selling
Shareholder and each person, if any, who controls such Selling Shareholder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Sellers to such Underwriter
but only with reference to information relating to such Underwriter furnished in
writing to the Company by such Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Underwriter). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by
15
such counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the indemnifying party
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of the indemnified party). In any such case,
the indemnifying party shall not, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for (i) the fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) for all Underwriters, their officers and directors and all
persons, if any, who control any Underwriter within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act, (ii) the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for the Company, its directors, its officers who sign the Registration
Statement and all persons, if any, who control the Company within the meaning of
either such Section and (iii) the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all Selling
Shareholders and all persons, if any, who control any Selling Shareholder within
the meaning of either such Section, and all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Underwriters, their officers and directors and such control persons of any
Underwriters, such firm shall be designated in writing by Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities Corporation. In the case of any such separate firm for the
Company and such directors, officers and control persons of the Company, such
firm shall be designated in writing by the Company. In the case of any such
separate firm for the Selling Shareholders and such control persons of any
Selling Shareholders, such firm shall be designated in writing by the Attorneys.
The indemnifying party shall indemnify and hold harmless the indemnified party
from and against any and all losses, claims, damages, liabilities and judgments
by reason of any settlement of any action (i) effected with its written consent
or (ii) effected without its written consent if the settlement is entered into
more than twenty business days after the indemnifying party shall have received
a request from the indemnified party for reimbursement for the fees and expenses
of counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Sellers on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 8(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Sellers on the one hand
16
and the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
benefits received by the Sellers on the one hand and the Underwriters on the
other hand shall be deemed to be in the same proportion as the total net
proceeds from the offering (after deducting underwriting discounts and
commissions, but before deducting expenses) received by the Sellers, and the
total underwriting discounts and commissions received by the Underwriters, bear
to the total price to the public of the Shares, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the Sellers on
the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Shareholders on
the one hand or the Underwriters on the other hand and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) 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 in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective number
of Shares purchased by each of the Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 8 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(f) Each Selling Shareholder hereby designates Zany Brainy, Inc., 000 Xxxx
Xxxxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000, as its authorized agent, upon which
process may be served in any action which may be instituted in any state or
federal court in the State of New York by any Underwriter, any director or
officer of any Underwriter or any person controlling any Underwriter asserting a
claim for indemnification or contribution under or pursuant to this Section 8,
and each Selling Shareholder will accept the jurisdiction of such court in such
action, and waives, to the fullest extent permitted by applicable law, any
defense based upon lack of personal jurisdiction or venue. A copy of any such
process shall be sent or given to such Selling Shareholder, at the address for
notices specified in Section 12 hereof.
17
Section 9. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in this
Agreement shall be true and correct on the Closing Date with the same force and
effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement shall have become effective by 10:00 P.M., New York City time, on the
date of this Agreement; and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or contemplated by
the Commission.
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Xxxxx Xxxxxxxx and Xxxxxx X. Xxxxxxx, in their
capacities as the Chief Executive Officer and Chief Financial Officer of the
Company, confirming the matters set forth in Sections 6(t), 9(a) and 9(b) and
that the Company has complied with all of the agreements and satisfied all of
the conditions herein contained and required to be complied with or satisfied by
the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken as
a whole, (ii) there shall not have been any change or any development involving
a prospective change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 9(d)(i),
9(d)(ii) or 9(d)(iii), in your judgment, is material and adverse and, in your
judgment, makes it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
(e) All the representations and warranties of each Selling Shareholder
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date and you shall
have received on the Closing Date a certificate dated the Closing Date from each
Selling Shareholder to such effect and to the effect that such Selling
Shareholder has complied with all of the agreements and satisfied all of the
conditions herein contained and required to be complied with or satisfied by
such Selling Shareholder on or prior to the Closing Date.
(f) You shall have received on the Closing Date an opinion (satisfactory to
you and counsel for the Underwriters), dated the Closing Date, of Xxxxxx, Xxxxx
& Bockius LLP, counsel for the Company to the effect that:
18
(i) each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power
and authority to carry on its business as described in the Prospectus and
to own, lease and operate its properties;
(ii) each of the Company and its subsidiaries is duly qualified and is
in good standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole;
(iii) all the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Shareholders) have been
duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights;
(iv) the Shares to be issued and sold by the Company hereunder have
been duly authorized and, when issued and delivered to the Underwriters
against payment therefor as provided by this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive or similar rights;
(v) all of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and are owned by the Company, directly or
indirectly through one or more subsidiaries, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature;
(vi) this Agreement has been duly authorized, executed and delivered by
the Company;
(vii) the authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus;
(viii) the Registration Statement has become effective under the Act,
no stop order suspending its effectiveness has been issued and no
proceedings for that purpose are, to the best of such counsel's knowledge
after due inquiry, pending before or contemplated by the Commission;
(ix) the statements under the captions "Certain Transactions",
"Management", "Use of Proceeds", "Description of Capital Stock" and "Shares
Eligible for Future Sale" in the Prospectus and Items 14 and 15 of Part II
of the Registration Statement, insofar as such statements constitute a
summary of the legal matters, documents or proceedings referred to therein,
fairly present the information called for with respect to such legal
matters, documents and proceedings;
19
(x) the execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and
the consummation of the transactions contemplated hereby will not (A)
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the various
states), (B) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company or
any of its subsidiaries or any indenture, loan agreement, mortgage, lease
or other agreement or instrument that is material to the Company and its
subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or their respective property is bound, (C) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any
court or any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property or (D) result
in the suspension, termination or revocation of any Authorization of the
Company or any of its subsidiaries or any other impairment of the rights of
the holder of any such Authorization;
(xi) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or any
of its subsidiaries is or could be a party or to which any of their
respective property is or could be subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described, or of any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that
are not so described or filed as required;
(xii) the Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended;
(xiii) to the best of such counsel's knowledge after due inquiry,
there are no contracts, agreements or understandings between the Company
and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities
of the Company or to require the Company to include such securities with
the Shares registered pursuant to the Registration Statement which rights
have not been waived; and
(xiv) (A) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for the financial statements and
other financial data included therein as to which no opinion need be
expressed) comply as to form with the Act, (B) such counsel has no reason
to believe that at the time the Registration Statement became effective or
on the date of this Agreement, the Registration Statement and the
prospectus included therein (except for the financial statements and other
financial data as to which such counsel need not express any belief)
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
20
statements therein not misleading and (C) such counsel has no reason to
believe that the Prospectus, as amended or supplemented, if applicable
(except for the financial statements and other financial data, as
aforesaid) contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The opinion of Xxxxxx, Xxxxx & Xxxxxxx, LLP described in Section 9(f) above
shall be rendered to you at the request of the Company and shall so state
therein.
(g) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Underwriters), dated the Closing Date, of Xxxxxx
Xxxxxxx, counsel for the Company, to the effect that:
(i) neither the Company nor any of its subsidiaries is in violation
of its respective charter or by-laws and, to the best of such counsel's
knowledge after due inquiry, neither the Company nor any of its
subsidiaries is in default in the performance of any obligation, agreement,
covenant or condition contained in any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is material to the Company and
its subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or their respective property is bound;
(ii) neither the Company nor any of its subsidiaries has violated any
Environmental Law, any provisions of the Employee Retirement Income
Security Act of 1974, as amended, or any provisions of the Foreign Corrupt
Practices Act or the rules and regulations promulgated thereunder, except
for such violations which, singly or in the aggregate, would not have a
material adverse effect on the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole;
and
(iii) each of the Company and its subsidiaries has such Authorizations
of, and has made all filings with and notices to, all governmental or
regulatory authorities and self-regulatory organizations and all courts and
other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure
to have any such Authorization or to make any such filing or notice would
not, singly or in the aggregate, have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole; each such Authorization is
valid and in full force and effect and each of the Company and its
subsidiaries is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies
having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time
or both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company or any of its subsidiaries; except where
21
such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
(h) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Underwriters), dated the Closing Date, of Xxxxxx,
Xxxxx & Xxxxxxx LLP, counsel for the Selling Shareholders to the effect that:
(i) this Agreement has been duly authorized, executed and delivered
by or on behalf of each Selling Shareholder;
(ii) each Selling Shareholder is the lawful owner of the Shares to be
sold by such Selling Shareholder pursuant to this Agreement and has good
and clear title to such Shares, free of all restrictions on transfer,
liens, encumbrances, security interests, equities and claims whatsoever;
(iii) each Selling Shareholder has full legal right, power and
authority, and all authorization and approval required by law, to enter
into this Agreement and the Custody Agreement and the Power of Attorney of
such Selling Shareholder and to sell, assign, transfer and deliver the
Shares to be sold by such Selling Shareholder in the manner provided herein
and therein;
(iv) the Custody Agreement of each Selling Shareholder has been duly
authorized, executed and delivered by such Selling Shareholder and is a
valid and binding agreement of such Selling Shareholder, enforceable in
accordance with its terms;
(v) the Power of Attorney of each Selling Shareholder has been duly
authorized, executed and delivered by such Selling Shareholder and is a
valid and binding instrument of such Selling Shareholder, enforceable in
accordance with its terms, and, pursuant to such Power of Attorney, such
Selling Shareholder has, among other things, authorized the Attorneys, or
any one of them, to execute and deliver on such Selling Shareholder's
behalf this Agreement and any other document they, or any one of them, may
deem necessary or desirable in connection with the transactions
contemplated hereby and thereby and to deliver the Shares to be sold by
such Selling Shareholder pursuant to this Agreement;
(vi) upon delivery of and payment for the Shares to be sold by each
Selling Shareholder pursuant to this Agreement, good and clear title to
such Shares will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests, equities and claims
whatsoever;
(vii) the execution, delivery and performance of this Agreement and
the Custody Agreement and Power of Attorney of each Selling Shareholder by
such Selling Shareholder, the compliance by such Selling Shareholder with
all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (A) require any
consent, approval, authorization or other order of, or qualification with,
any court or
22
governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states), (B) conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, the organizational documents of such Selling Shareholder, if such
Selling Shareholder is not an individual, or any indenture, loan agreement,
mortgage, lease or other agreement or instrument to which such Selling
Shareholder is a party or by which any property of such Selling Shareholder
is bound or (C) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body
or agency having jurisdiction over such Selling Shareholder or any property
of such Selling Shareholder.
The opinion of Xxxxxx, Xxxxx & Xxxxxxx, LLP described in Section 9(h) above
shall be rendered to you at the request of the Selling Shareholders and shall so
state therein. In giving such opinions with respect to the matters covered by
Section 9(h), Xxxxxx, Xxxxx & Bockius LLP may rely on the opinions of counsel
for the various Selling Shareholders, which counsel are reasonably acceptable to
the Underwriters.
(i) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Xxxxxx & Xxxxxxx counsel for the Underwriters, as to such
matters as you may request.
In giving such opinions with respect to the matters covered by Section
9(f)(xiv), Xxxxxx, Xxxxx & Bockius and Xxxxxx & Xxxxxxx may state that their
opinion and belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements thereto
and review and discussion of the contents thereof, but are without independent
check or verification except as specified.
(j) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from Xxxxxx Xxxxxxxx, LLP, independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(k) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(l) The Shares shall have been duly listed for quotation on the Nasdaq
National Market.
(m) The Company and the Selling Shareholders shall not have failed on or
prior to the Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company or the
Selling Shareholders, as the case may be, on or prior to the Closing Date.
(n) You shall have received on the Closing Date, a certificate of each
Selling Shareholder who is not a U.S. Person (as defined under applicable U.S.
federal tax legislation) to the effect that such Selling Shareholder is not a
U.S. Person, which certificate may be in the form of
23
a properly completed and executed United States Treasury Department Form W-8 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
Section 10. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Sellers if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each non-
defaulting Underwriter shall be obligated severally, in the proportion which the
number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the number of Firm Shares or Additional
Shares, as the case may be, which any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 10 by an
amount in excess of one-ninth of such number
24
of Firm Shares or Additional Shares, as the case may be, without the written
consent of such Underwriter. If on the Closing Date any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased by all
Underwriters and arrangements satisfactory to you, the Company and the Selling
Shareholders for purchase of such Firm Shares are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Shareholders. In any such
case which does not result in termination of this Agreement, either you or the
Sellers shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. If, on an Option Closing Date, any Underwriter or Underwriters
shall fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such default occurs is more than one-
tenth of the aggregate number of Additional Shares to be purchased on such date,
the non-defaulting Underwriters shall have the option to (i) terminate their
obligation hereunder to purchase such Additional Shares or (ii) purchase not
less than the number of Additional Shares that such non-defaulting Underwriters
would have been obligated to purchase on such date in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of any such Underwriter
under this Agreement.
Section 11. Agreements of the Selling Shareholders. Each Selling
Shareholder agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes payable in connection
with the transfer of the Shares to be sold by such Selling Shareholder to the
Underwriters.
(b) To do and perform all things to be done and performed by such Selling
Shareholder under this Agreement prior to the Closing Date and to satisfy all
conditions precedent to the delivery of the Shares to be sold by such Selling
Shareholder pursuant to this Agreement.
Section 12. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to Zany
Brainy, Inc. 000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000, (ii) if to the
Selling Shareholders, to [NAME OF ATTORNEY-IN-FACT], c/o [ADDRESS OF ATTORNEY-
IN-FACT] and (iii) if to any Underwriter or to you, to you c/x Xxxxxxxxx,
Xxxxxx & Xxxxxxxx Securities Corporation, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Syndicate Department, or in any case to such other address as
the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Selling Shareholders and the
several Underwriters set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Shares, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any Underwriter, the officers or
directors of any Underwriter, any person controlling any Underwriter, the
Company, the officers or directors of the Company, any person controlling the
Company, any Selling Shareholder or any person controlling
25
such Selling Shareholder, (ii) acceptance of the Shares and payment for them
hereunder and (iii) termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of any
Seller as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), the Sellers agree, jointly and severally, to
reimburse the several Underwriters for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i) hereof. The Sellers also
agree, jointly and severally, to reimburse the several Underwriters, their
directors and officers and any persons controlling any of the Underwriters for
any and all fees and expenses (including, without limitation, the fees
disbursements of counsel) incurred by them in connection with enforcing their
rights hereunder (including, without limitation, pursuant to Section 8 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Selling
Shareholders, the Underwriters, the Underwriters' directors and officers, any
controlling persons referred to herein, the Company's directors and the
Company's officers who sign the Registration Statement and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
26
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Selling Shareholders and the several Underwriters.
Very truly yours,
ZANY BRAINY, INC.
By:__________________________________
Title:
THE SELLING SHAREHOLDERS
NAMED IN SCHEDULE II
HERETO, ACTING
SEVERALLY
By:__________________________________
Attorney-in-fact
XXXXXXXXX, LUFKIN & XXXXXXXX
SECURITIES CORPORATION
BT ALEX. XXXXX INCORPORATED
XXXXXXX XXXXX & COMPANY
U.S. BANCORP XXXXX XXXXXXX
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By XXXXXXXXX, LUFKIN & XXXXXXXX
SECURITIES CORPORATION
By:__________________________________
27
SCHEDULE I
----------
Underwriters Number of Firm Shares
------------ to be Purchased
---------------
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities
Corporation
BT Alex. Xxxxx Incorporated
Xxxxxxx Xxxxx & Company
U.S. Bancorp Xxxxx Xxxxxxx
Total
28
SCHEDULE II
-----------
Selling Shareholders
--------------------
Number of Firm [Number of Additional
Name Shares Being Sold Shares Being Sold]
---- ----------------- -----------------
Total
29
Annex I
[Insert names of shareholders of the Company who will be required to sign lock
ups]
30
