Exhibit 1.1
________________ SHARES(1)
XXXXXX VINEYARDS INC.
COMMON STOCK
UNDERWRITING AGREEMENT
July ___, 1997
CRUTTENDEN XXXX INCORPORATED
As Representative of the several Underwriters
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
XXXXXXX EQUITIES, INC.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
XXXXXX & XXXXXXX, INC.
000 Xxxxxxx Xxxxxx
2 World Financial Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Dear Sirs:
Xxxxxx Vineyards Inc., a Delaware corporation (the "COMPANY"), addresses
you as the Representative of each of the parties listed in Schedule A hereto
(herein collectively called the "UNDERWRITERS") and hereby confirms its
agreement with the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
_____________ shares of its authorized and unissued Class A Common Stock, par
value $0.001 per share (the "FIRM SHARES") to the several Underwriters. The
Company also proposes to grant to the Underwriters an option to purchase up to
____________ additional shares of the Company's Class A Common Stock, par value
$0.001 per share (the "OPTION SHARES"), as provided in SECTION 7. The Company
also proposes to sell to the Representatives, at a purchase price of $0.001 per
warrant, warrants
---------------------
1 Plus an option to purchase up to _____________ additional shares from the
Company to cover over-allotments.
exercisable for a period of five years commencing one year after the effective
date of the Registration Statement (as defined below) to purchase up to an
aggregate of ________________ shares of Class A Common Stock at a price of
$__________ per share (the "REPRESENTATIVES' WARRANTS"), which exercise and
purchase shall be effected in accordance with the Representatives' Warrant
Agreement in the form attached hereto as Exhibit A and entered into between the
Company and you concurrently herewith (the "REPRESENTATIVES' WARRANT
AGREEMENT"). As used in this Agreement, the term "SHARES" shall include the
Firm Shares and the Option Shares. All shares of Class A Common Stock, par
value $0.001 per share, of the Company, including the Shares, are hereinafter
referred to as "CLASS A COMMON STOCK," and all shares of Class B Common Stock,
par value $.001 per share, of the Company are hereafter referred to as "CLASS B
COMMON STOCK." The Class A Common Stock and the Class B Common Stock is
referred to herein collectively as the "COMMON STOCK."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents and warrants to and agrees with each Underwriter
that:
(a) A registration statement on Form SB-2 (File No. 333-27871) with
respect to the Shares, including a prospectus, has been prepared by the Company
in material conformity with the requirements of the Securities Act of 1933, as
amended (the "ACT"), and the applicable rules and regulations (the "RULES AND
REGULATIONS") of the Securities and Exchange Commission (the "COMMISSION") under
the Act and has been filed with the Commission; such amendments to such
registration statement, such amended prospectuses and such abbreviated
registration statements pursuant to Rule 462(b) of the Rules and Regulations as
may have been required prior to the date hereof have been similarly prepared and
filed with the Commission; and the Company will file such additional amendments
to such registration statement, such amended prospectuses and such abbreviated
registration statements as may hereafter be required. Copies of such
registration statement and amendments together with each exhibit filed
therewith, of each related prospectus (the "PRELIMINARY PROSPECTUSES") and of
any abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations have been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and promptly
file with the Commission, pursuant to Rule 424(b) of the Rules and Regulations
or as part of a post-effective amendment to the registration statement
(including a final form of prospectus), the information omitted from the
registration statement pursuant to Rule 430A(a) of the Rules and Regulations or,
if Cruttenden Xxxx Incorporated, on behalf of the several Underwriters, shall
agree to the utilization of Rule 434 of the Rules and Regulations, the
information required to be included in any term sheet filed pursuant to Rule
434(b) or (c), as applicable, of the Rules and Regulations. If the registration
statement relating to the Shares has not been declared effective under the Act
by the Commission, the Company will prepare and promptly file an amendment to
the registration statement, including a final form of prospectus, or, if
Cruttenden Xxxx Incorporated, on behalf of the several Underwriters, shall agree
to the utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or (c),
as applicable, of the Rules and Regulations.
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The term "REGISTRATION STATEMENT" as used in this Agreement shall mean
such registration statement, including financial statements, schedules and
exhibits (including exhibits incorporated by reference), in the form in which it
became or becomes, as the case may be, effective (including, if the Company
omitted information from the registration statement pursuant to Rule 430A(a) of
the Rules and Regulations or files a term sheet pursuant to Rule 434 of the
Rules and Regulations, the information deemed to be a part of the registration
statement at the time it became effective pursuant to Rule 430A(b) or Rule
434(d) of the Rules and Regulations) and, in the event of any amendment thereto
or the filing of any abbreviated registration statement pursuant to Rule 462(b)
of the Rules and Regulations relating thereto after the effective date of such
registration statement, shall also mean (from and after the effectiveness of
such amendment or the filing of such abbreviated registration statement) such
registration statement as so amended, together with any such abbreviated
registration statement. The term "PROSPECTUS" as used in this Agreement shall
mean the prospectus relating to the Shares as included in such Registration
Statement at the time it becomes effective (including, if the Company omitted
information from the Registration Statement pursuant to Rule 430A(a) of the
Rules and Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the Rules
and Regulations); PROVIDED, HOWEVER, that if in reliance on Rule 434 of the
Rules and Regulations and with the consent of Cruttenden Xxxx Incorporated, on
behalf of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable, prior
to the time that a confirmation is sent or given for purposes of Section
2(10)(a) of the Act, the term "Prospectus" shall mean the "prospectus subject to
completion" (as defined in Rule 434(g) of the Rules and Regulations) last
provided to the Underwriters by the Company and circulated by the Underwriters
to all prospective purchasers of the Shares and the information deemed to be a
part of the Registration Statement at the time it became effective pursuant to
Rule 434(d) of the Rules and Regulations, and such Prospectus will not be
materially different from such prospectus subject to completion.
Notwithstanding the foregoing, if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the offering of the
Shares that differs from the prospectus referred to in the immediately preceding
sentence (whether or not such revised prospectus is required to be filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations), the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriters for such use.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which Option Shares are to be purchased,
(i) the Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained and will contain all material information
required to be included therein by the Act and the Rules and Regulations and
will in all material respects conform to the requirements of the Act and the
Rules and Regulations, (ii) the Registration Statement, and any amendments or
supplements thereto, did not and will not include any untrue statement of a
material fact or omit to state a material fact required to be
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stated therein or necessary to make the statements therein not misleading, and
(iii) the Prospectus, and any amendments or supplements thereto, did not and
will not include 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; PROVIDED, HOWEVER,
that none of the representations and warranties contained in this subparagraph
(b) shall apply to information contained in or omitted from the Registration
Statement or Prospectus, or any amendment or supplement thereto, in reliance
upon, and in conformity with, written information relating to any Underwriter
furnished to the Company by such Underwriter specifically for use in the
preparation thereof.
(c) The reincorporation of the Company in Delaware has been effected
through merger of the Company's predecessor, Xxxxxx Vineyards Inc., a California
corporation into its wholly owned subsidiary incorporated in Delaware for
purposes of the reincorporation and to such counsel's knowledge having no
business, operations or assets prior to the reincorporation, and the Company is
duly incorporated and validly existing as a corporation in good standing under
the laws of the State of Delaware with full power and authority (corporate and
other) to own, lease and operate its properties and conduct its business as
described in the Registration Statement and the Prospectus; the Company 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, except where the failure to
be so qualified or be in good standing would not have a material adverse effect
on the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company; 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; the Company is in possession
of and operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities that are material to the conduct of its business, all of which are
valid and in full force and effect; the Company is not in violation of or breach
of or default under (nor has any event occurred that with notice, lapse of time
or both would constitute a breach of or default under) its charter or bylaws or
any material obligation, agreement, covenant or condition contained in any
material bond, debenture, note or other evidence of indebtedness, or in any
material lease, contract, indenture, mortgage, deed of trust, loan agreement,
joint venture or other agreement or instrument to which the Company is a party
or by which its properties may be bound; and the Company is not in material
violation of any law, order, rule, regulation, writ, injunction, judgment or
decree of any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or its properties. The Company
does not directly or indirectly own any equity interest in or securities of, or
control, any corporation, association or other entity. All of the partners of
Vineyard Investors 1972 and Vineyard 405, each a California limited partnership,
and the members of Quadra Partners LLC, a California limited liability company
(together with Vineyard Investors 1972 and Vineyard 405, the "PARTNERSHIPS"),
have contributed all of their interests in the Partnerships to the Company, and
released the Company from any claims or liabilities in respect of their
interests in the Partnerships or the assets and business formerly owned and
conducted by the Partnerships or transfer thereof to the Company, in exchange
for Class B Common Stock and the Company now owns all of the assets and business
formerly owned and conducted by the Partnerships free of any adverse claims
except security interests and deeds of trust described in the Registration
Statement.
(d) The Company has full legal right, power and authority to enter
into this Agreement and the Representatives' Warrant Agreement and perform the
transactions contemplated
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hereby and thereby. This Agreement and the Representatives' Warrant Agreement
have been duly authorized, executed and delivered by the Company and are valid
and binding agreements on the part of the Company, enforceable in accordance
with their respective terms, except as rights to indemnification hereunder may
be limited by applicable law and except as the enforcement hereof of thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles; the making and performance of this Agreement and
the Representatives' Warrant Agreement by the Company and the consummation of
the transactions herein and therein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
(i) any bond, debenture, note or other evidence of indebtedness, or under any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company is a party or by
which its properties may be bound, (ii) the charter or bylaws of the Company or
(iii) any law, order, rule, regulation, writ, injunction, judgment or decree of
any court, administrative agency, regulatory body, government or governmental
agency or body, domestic or foreign, having jurisdiction over the Company or its
properties. No consent, approval, authorization or order of or qualification
with any court, government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or its properties is required for the
execution and delivery of this Agreement and the consummation by the Company of
the transactions herein contemplated, except such as may be required under the
Act, by the National Association of Securities Dealers, Inc. (the "NASD"), the
rules of the Nasdaq National Market, or under state or other securities or Blue
Sky laws, all of which requirements have been satisfied in all material
respects.
(e) There is not any pending or, to the Company's knowledge,
threatened, any action, suit, claim or proceeding against the Company, any of
its officers, directors, employees, or agents or any of its properties or assets
or rights, at law or in equity, before any court, administrative agency,
regulatory body, government or governmental agency or body, domestic or foreign,
which (i) might, individually or in the aggregate, result in any material
adverse change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company or might materially and adversely
affect the Company's properties, assets or rights, (ii) might prevent
consummation of the transactions contemplated hereby or (iii) is required to be
disclosed in the Registration Statement or Prospectus and is not so disclosed;
and there are no agreements, contracts, leases or documents of the Company of a
character required to be described or referred to in the Registration Statement
or Prospectus or to be filed as an exhibit to the Registration Statement by the
Act or the Rules and Regulations which have not been accurately described in all
material respects in the Registration Statement or Prospectus or filed as
exhibits to the Registration Statement. The Company is not a party or subject
to the provisions of any injunction, judgment, decree or order of any court,
regulatory body, administrative agency, government or governmental agency or
body domestic or foreign, that could be expected to result in a material adverse
change in the condition (financial or other), earnings, operations, business or
business prospects of the Company.
(f) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable, 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 conform in all material respects to the statements relating
thereto contained in the Registration Statement and the
5
Prospectus (and such statements correctly state the substance of the instruments
defining the capitalization of the Company); the capital stock of the Company,
including the Shares, conforms in all material respects to the description
thereof contained in the Registration Statement and the Prospectus; the Shares
and the Representatives' Warrants and the shares of Class A Common Stock
issuable upon exercise of the Representatives' Warrants have been duly
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 or the Representatives' Warrant
Agreement, as the case may be, 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; no preemptive right, co-sale
right, registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Shares or the issuance and sale
thereof or the Representatives' Warrants or the Class A Common Stock issuable
upon exercise thereof; and the certificates for the Shares are in due and proper
form and the holders of the Shares and the Representatives' Warrants and the
Class A Common Stock issuable upon exercise thereof, after making payment
therefor will not be subject to personal liability by reason of being such
holders. No further approval or authorization of any stockholder, the Board of
Directors of the Company or others is required for the issuance and sale or
transfer of the Shares or the Representatives' Warrants or the Class A Common
Stock issuable upon exercise thereof except as may be required under the Act or
under state or other securities or Blue Sky laws. Except as disclosed in the
Registration Statement, Prospectus and the financial statements of the Company,
and the related notes thereto included in the Prospectus, the Company has no
outstanding 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. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus fairly and accurately presents the information
required to be shown with respect to such plans, arrangements, options and
rights.
(g) Deloitte & Touche LLP whose reports on the combined financial
statements of the Company and the Partnerships are included in the Registration
Statement and the Prospectus, are independent accountants within the meaning of
the Act and the Rules and Regulations; the audited financial statements of the
Company, together with the related schedules and notes, and the unaudited
financial information, forming part of the Registration Statement and
Prospectus, fairly present the financial position and the results of operations
and cash flows of the Company at the respective dates and for the respective
periods to which they apply and have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved except as may be otherwise stated therein. The 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 to be included in the
Registration Statement.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (i) any
material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company, (ii) any transaction
that is material to the Company, except transactions entered into in the
ordinary course of business consistent with past practices, (iii) any
obligation, direct or contingent, that
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is material to the Company, incurred by the Company, except obligations incurred
in the ordinary course of business consistent with past practices, (iv) any
change in the capital stock of the Company, (v) any change in the outstanding
indebtedness of the Company that is material to the Company or is out of the
ordinary course of business of the Company, (vi) any dividend or distribution of
any kind declared, paid or made on the capital stock of the Company, (vii) any
default in the payment of principal of or interest on any outstanding debt
obligations, or (viii) any loss or damage (whether or not insured) to the
property of the Company which has been sustained or will have been sustained
which has a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company.
(i) The Company has good and marketable title to all properties and
assets described in the Registration Statement and Prospectus as owned by it,
and valid and subsisting interests in all of the real property described in the
Registration Statement and Prospectus as leased by it, in each case free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest, other than as set forth in the Registration Statement and Prospectus
or as would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company.
The agreements to which the Company is a party described in, or filed as
exhibits to, the Registration Statement and Prospectus are valid agreements,
enforceable by the Company, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles and, to the Company's knowledge, the other contracting
party or parties thereto are not in material breach or material default under
any of such agreements, and the Company has valid and enforceable leases for all
properties described in the Registration Statement and Prospectus as leased by
it, except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
Except as set forth in the Registration Statement and Prospectus, the Company
owns or leases all such properties as are necessary to its operations as now
conducted or as proposed to be conducted, and all such properties are free of
contractual or legal restrictions that would impair the Company's use of such
properties in its business for the purposes described in the Registration
Statement and the Prospectus.
(j) The Company and its subsidiaries have timely filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes shown thereon as due, and there is no tax deficiency that has been or, to
the Company's knowledge, might be asserted against the Company that might have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company; and all tax
liabilities are adequately provided for on the books of the Company.
(k) The Company maintains insurance with insurers of recognized
financial responsibility of the types and in the amounts generally deemed
prudent for its business and consistent with insurance coverage maintained by
similar companies in similar businesses, including, but not limited to,
insurance covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism, products liability,
errors and omissions, and all other risks customarily insured against, all of
which insurance is in full force and effect; the Company has not been refused
any insurance coverage sought or applied for; and the Company does not have any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage
7
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not materially and adversely
affect the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company.
(l) To the Company's knowledge, no labor disturbance by the employees
of the Company exists or is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its principal
suppliers, subcontractors, authorized dealers or international distributors that
might be expected to result in a material adverse change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company. The Company does not have any reason to believe that
renegotiation of its current Collective Bargaining Agreement with the United
Farm Workers, AFL-CIO ("UFW") which terminates December 31, 1997, will result in
a labor disturbance or a material increase in the salaries and related costs of
its UFW workers. There are no pending grievances or arbitration awards against
the Company pursuant to such Collective Bargaining Agreement. No Unfair Labor
Practice filings have been made with the Agricultural Labor Relations Board
("ALRB") against the Company within the past five years, and there are no
pending ALRB proceedings or ALRB orders that have been issued against the
Company.
(m) To the best of the Company's knowledge, the Company owns or
possesses exclusive rights to use all patents, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names and copyrights that
are necessary to conduct its business as now conducted and as described in the
Registration Statement and Prospectus; except as set forth in the Registration
Statement and the Prospectus, the expiration of any patents, patent rights,
trade secrets, trademarks, service marks, trade names or copyrights would not
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company; the Company
has not received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of the Company by others with respect to any
patent, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights; and the Company has not received any notice
of, and has no knowledge of, any infringement of or conflict with asserted
rights of others by the Company with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company.
(n) The Class A Common Stock is registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and is
approved for quotation on the Nasdaq National Market, and the Company has taken
no action designed to, or likely to have the effect of, terminating the
registration of the Class A Common Stock under the Exchange Act or delisting the
Common Stock from the Nasdaq National Market, nor has the Company received any
notification that the Commission or the NASD is contemplating terminating such
registration or listing.
(o) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 ACT"), and the rules and regulations
thereunder, and the Company and each of the Partnerships have in the past
conducted, and the Company intends in the future to conduct, its affairs in such
a manner as to ensure that it is not and will not become an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
1940 Act and such rules and regulations.
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(p) The Company has not distributed and will not distribute prior to
the later of (i) the Closing Date, or any date on which Option Shares are to be
purchased, as the case may be, and (ii) completion of the distribution of the
Shares, any offering material in connection with the offering and sale of the
Shares other than any Preliminary Prospectuses, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Act.
(q) None of the Company, the Partnerships, or their officers,
directors, employees or agents has at any time during the last five (5) years
made (i) any unlawful contribution to any candidate for foreign office or failed
to disclose fully any contribution in violation of law, or (ii) any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof, or
(iii) any other payment of funds of the Company or any of the Partnerships
prohibited by law, and no funds of the Company have been set aside for any
payment prohibited by law.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Class A Common
Stock to facilitate the sale or resale of the Shares (except for any action
taken by the Underwriters).
(s) Except as otherwise set forth in the Registration Statement and
the Prospectus, each officer, director and stockholder of the Company has agreed
in writing that such person will not, except as described below, for a period of
one year from the date of the final Prospectus (the "LOCK-UP PERIOD"), sell,
offer to sell, solicit an offer to buy, contract to sell, loan, pledge, grant
any option to purchase, or otherwise transfer or dispose of (collectively, a
"DISPOSITION"), any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock (collectively, "SECURITIES"),
now owned or hereafter acquired by such person or with respect to which such
person has or hereafter acquires the power of disposition otherwise than (i) on
the transfer of shares of Common Stock or Securities during such person's
lifetime by BONA FIDE gift or upon death by will or intestacy, provided that any
transferee agrees to be bound by the Lock-Up Agreement, and (ii) on the transfer
or other disposition of shares of Common Stock or Securities as a distribution
to limited partners or stockholders of such person, provided that the
distributees thereof agree to be bound by the terms of the Lock-Up Agreement.
The foregoing restriction has been expressly agreed to preclude the holder of
the Securities from engaging in any hedging, pledge or other transaction which
is designed to or may reasonably be expected to lead to or result in a
Disposition by any stockholder or any other person of any Securities, whether or
not owned by a Stockholder, during the Lock-up Period, even if such Securities
would be disposed of by someone other than such stockholder. Such prohibited
hedging, pledge or other transactions would include, without limitation, any
short sale (whether or not against the box), any pledge of shares covering an
obligation that matures, or could reasonably mature during the Lock-Up Period,
or any purchase, sale or grant of any right (including, without limitation, any
put or call option) with respect to any Securities or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from Securities.
Furthermore, each such person has also agreed and consented to the entry of stop
transfer instructions with the Company's transfer agent against the transfer of
the Securities held by such person except in compliance with this restriction.
The Company has provided to counsel for the Underwriters a complete and accurate
list of all securityholders of the Company as of
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July ___, 1997 and the number and type of securities held by each
securityholder. The Company has provided to counsel for the Underwriters true,
accurate and complete copies of all of the agreements pursuant to which its
officers, directors and stockholders have agreed to such or similar restrictions
(the "LOCK-UP AGREEMENTS") presently in effect. The Company hereby represents
and warrants that it will not purport to release any of its officers, directors
or other stockholders from any Lock-up Agreements currently existing or
hereafter effected without the prior written consent of Cruttenden Xxxx
Incorporated.
(t) The Company 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 authorizations,
(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.
(u) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers,
directors, employees, or consultants of the Company or any of the Partnerships
or any of the members of the families of any of them, except as disclosed in the
Registration Statement and the Prospectus.
(v) Other than Cruttenden Xxxx Incorporated, on behalf of the several
Underwriters, no person is or will be owed any finders fee or commission or
similar payment in connection with the transactions contemplated by this
Agreement.
(w) There are no persons with registration or other similar rights to
have any securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the Act, except that the Underwriters
have registration rights with respect to the Underwriters' Warrants and the
underlying Class A Common Stock as described in the Underwriters Warrant
Agreement.
(x) The Company has conducted and is conducting its businesses, and
the Partnerships conducted their businesses, in compliance with all applicable
federal, state, local and foreign statutes, laws, rules, regulations,
ordinances, codes, decisions, decrees, directives and orders, except where the
failure to do so would not, singly or in the aggregate, have a material adverse
effect on the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company.
(y) The Company has complied with all provisions of Florida
H.B. 1771, codified as Section 517.075 of the Florida statutes, and all
regulations promulgated thereunder relating to issuers doing business with Cuba.
(z) Except as described in the Prospectus, to the Company's
knowledge, there are no rulemaking or similar proceedings before any federal,
state, local or foreign government or regulatory bodies which involve or affect
the Company which, if the subject of an action unfavorable to
10
the Company would have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company.
(aa) To the knowledge of the Company, no officer, director, employee,
or consultant of the Company is in violation of any non-competition,
non-disclosure, confidentiality or other similar agreement with any party other
than the Company, and no such person is expected to be in violation thereof as a
result of the business conducted or expected to be conducted by the Company as
described in the Prospectus or such person's performance of his obligations to
the Company.
(bb) The Company has not 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"), or any federal or state law relating to
discrimination in the hiring, promotion or pay of employees or any applicable
federal or state wages and hours laws, or any provisions of the Employee
Retirement Income Security Act or the rules and regulations promulgated
thereunder, which in each case might result in any material adverse effect on
the properties, assets, operations, business, business prospects or condition
(financial or other) of the Company.
(cc) The Company has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("permits"), including
without limitation under any applicable Environmental Laws, as are necessary to
own, lease and operate its properties and to conduct its business; the Company
has fulfilled and performed all of its material obligations with respect to such
permits and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such permit; and, except as
described in the Prospectus, such permits contain no restrictions that are
materially burdensome to the Company.
(dd) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business, operations
and properties of the Company, in the course of which it identifies and
evaluates associated costs and liabilities (including without limitation any
capital or operating expenditure required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties). On the basis of such review, the Company reasonably has
concluded that such associated costs and liabilities, singly or in the
aggregate, would not have a material adverse effect on the properties, assets,
operations, business, business prospects or condition (financial or other) of
the Company.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $______ per share, the
respective number of Firm Shares set forth opposite the name of such Underwriter
in Schedule A hereto (subject to adjustment as provided in SECTION 10).
Delivery of definitive certificates for the Firm Shares to be purchased by
the several Underwriters pursuant to this SECTION 3 shall be made against
payment of the purchase price therefor
11
by the several Underwriters by certified or official bank check or checks drawn
in same day funds, payable to the order of the Company, at the offices of
Xxxxxx, Xxxx & Xxxxxxxx LLP, 0 Xxxx Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxxxx (or at
such other place as may be agreed upon between the Representative and the
Company), at 7:00 a.m. California time, (a) on the third (3rd) full business day
following the first day that Shares are traded or (b) if this Agreement is
executed and delivered after 1:30 p.m. California time, the fourth (4th) full
business day following the day that this Agreement is executed and delivered or
(c) at such other time and date not later than seven (7) full business days
following the first day that Shares are traded as the Representative and the
Company may determine (or at such time and date to which payment and delivery
shall have been postponed pursuant to SECTION 10), such time and date of payment
and delivery being herein called the "CLOSING DATE"; PROVIDED, HOWEVER, that if
the Company has not made available to the Representative copies of the
Prospectus within the time provided in SECTION 4(d), the Representative may, in
its sole discretion, postpone the Closing Date until no later than two (2) full
business days following delivery of copies of the Prospectus to the
Representative.
The certificates for the Firm Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the Closing Date and will be in such
names and denominations as you shall specify at least two (2) full business days
prior to the Closing Date. If the Representative so elects, delivery of the
Firm Shares may be made by credit through full fast transfer to the accounts at
The Depository Trust Company designated by the Representative.
It is understood that you, individually, and not as the Representative of
the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the Closing Date for the
Firm Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of any of
its or their obligations hereunder.
The Underwriters intend to make a public offering (as described in SECTION
11) of the Firm Shares at the public offering price of $______ per share. After
the public offering the Underwriters may from time to time, in their discretion,
vary the public offering price.
The information set forth on the inside front cover page of the Prospectus
(insofar as such information relates to the Underwriters) concerning
stabilization, syndicate short covering transactions and penalty bids, and under
the first (including the table listing the Underwriters), second, third, ninth
and tenth paragraphs under the caption "Underwriting" in any Preliminary
Prospectus and in the Prospectus constitutes the only information furnished by
the Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement, and you, on behalf of the respective
Underwriters, represent and warrant to the Company that the statements made
therein do 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, in the light of the circumstances under which they were
made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
12
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date that
this Agreement is executed and delivered by the parties hereto, to become
effective as promptly as possible; the Company will use its best efforts to
cause any abbreviated registration statement pursuant to Rule 462(b) of the
Rules and Regulations as may be required subsequent to the date the Registration
Statement is declared effective to become effective as promptly as possible; the
Company will notify you, promptly after it shall receive notice thereof, of the
time when the Registration Statement, any subsequent amendment to the
Registration Statement or any abbreviated registration statement has become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the Rules
and Regulations, the Company will provide evidence satisfactory to you that the
Prospectus and term sheet meeting the requirements of Rule 434(b) or (c), as
applicable, of the Rules and Regulations have been filed, within the time period
prescribed, with the Commission pursuant to Rule 424(b) of the Rules and
Regulations; if for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to you that the Prospectus contains such information and
has been filed with the Commission within the time period prescribed; it will
notify you promptly of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for additional
information; promptly upon your request, it will prepare and file with the
Commission any amendments or supplements to the Registration Statement or
Prospectus which, in the opinion of counsel for the several Underwriters
("UNDERWRITERS' COUNSEL"), may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters; it will promptly prepare and
file with the Commission, and promptly notify you of the filing of, and provide
you with copies of, any amendments or supplements to the Registration Statement
or Prospectus which may be necessary to correct any statements or omissions, if,
at any time when a prospectus relating to the Shares is required to be delivered
under the Act, any event shall have occurred as a result of which the Prospectus
or any other prospectus relating to the Shares as then in effect would include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; in case any Underwriter is required to
deliver a prospectus nine (9) months or more after the effective date of the
Registration Statement in connection with the sale of the Shares, it will
prepare promptly upon request, but at the expense of such Underwriter, such
amendment or amendments to the Registration Statement and such prospectus or
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act; and it will file no amendment or supplement to the
Registration Statement or Prospectus which shall not previously have been
submitted to you a reasonable time prior to the proposed filing thereof or to
which you shall reasonably object in writing, subject, however, to compliance
with the Act and the Rules and Regulations and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement, or suspension of the
qualification of the Shares for sale in any jurisdiction, or of
13
the initiation or threat of any proceeding for any such purpose; and it will
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order should
be issued.
(c) The Company will use its best efforts (including by providing
full cooperation with your counsel, whose services in this matter are required
and which you and the Company will seek to expedite) to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be required by the laws of such jurisdiction for such purpose.
(d) The Company will furnish to you, as soon as available, and, in
the case of the Prospectus and any term sheet or abbreviated term sheet under
Rule 434, in no event later than the first full business day following the first
day that Shares are traded, copies of the Registration Statement (two of which
will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Act, all in such quantities as you may from time to time reasonably request.
Notwithstanding the foregoing, if Cruttenden Xxxx Incorporated, on behalf of the
several Underwriters, shall agree to the utilization of Rule 434 of the Rules
and Regulations, the Company shall provide to you copies of a Preliminary
Prospectus updated in all respects through the date specified by you in such
quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its securityholders
as soon as practicable, but in any event not later than the forty-fifth (45th)
day following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Act and covering a twelve (12) month
period beginning after the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders as soon as practicable after the end of
each respective period, annual reports (including financial statements audited
by independent certified public accountants) and, upon request by a stockholder,
unaudited quarterly reports of operations for each of the first three quarters
of the fiscal year, and will furnish to you and the other several Underwriters
hereunder, upon request (i) concurrently with furnishing such reports to its
stockholders, statements of operations of the Company for each of the first
three (3) quarters in the form furnished to the Company's stockholders,
(ii) concurrently with furnishing to its stockholders, a balance sheet of the
Company as of the end of such fiscal year, together with statements of
operations, of stockholders' equity, and of cash flows of the Company for such
fiscal year, accompanied by a copy of the certificate or report thereon of
independent certified public accountants, (iii) as soon as they are available,
copies of all reports (financial or other) mailed to stockholders, (iv) as soon
as they are available, copies of all reports and
14
financial statements furnished to or filed with the Commission, any securities
exchange or the NASD, (v) every material press release and every material news
item or article in respect of the Company or its affairs which was generally
released to stockholders or prepared by the Company, and (vi) any additional
information of a public nature concerning the Company, or its business which you
may reasonably request. During such five (5) year period, if the Company shall
have active subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the accounts of the Company and such
subsidiaries are consolidated, and shall be accompanied by similar financial
statements for any significant subsidiary which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for its Class A Common Stock.
(i) The terms of Section 7 of that certain Letter Agreement dated
April 21, 1997 between you and the Company (the "LETTER AGREEMENT") are hereby
incorporated by reference and made obligations of the Company and Cruttenden
Xxxx Incorporated as part of this Agreement notwithstanding that the Letter
Agreement shall have ceased to be of full force or effect for any other purpose.
If the transactions contemplated hereby are not consummated by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed hereunder or to fulfill any condition of
the Underwriters' obligations hereunder, or if the Company shall terminate this
Agreement pursuant to SECTION 11(a), or if the Underwriters shall terminate this
Agreement pursuant to SECTION 11(a) or 11(b), then the provisions of Section 11
of the Letter Agreement shall govern payment and reimbursement obligations of
the parties notwithstanding that the Letter Agreement shall have ceased to be in
full force or effect for any other purpose.
(j) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Class A Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(k) During the Lock-up Period, the Company will not, without the
prior written consent of Cruttenden Xxxx Incorporated, effect the Disposition
of, directly or indirectly, any Securities other than the sale of the Firm
Shares and the Option Shares hereunder and the Company's issuance of options or
Common Stock under the Company's presently authorized stock option and stock
purchase plans described in the Registration Statement and the Prospectus.
(l) The Company shall pay to Cruttenden Xxxx Incorporated a
nonaccountable expense allowance equal to three percent (3%) of the total Price
to Public shown on the front cover of the Prospectus, including, if exercised,
with respect to the over-allotment option. Cruttenden Xxxx
15
Incorporated acknowledges that $30,000 of the amount payable pursuant to this
paragraph has already been paid.
(m) The Company will use its best efforts to cause the Shares to be
included in the Nasdaq National Market.
(n) The company will refrain from investing the proceeds of the sale
of the Shares in such a manner as to cause the Company to become an "investment
company" within the meaning of the 0000 Xxx.
(o) The company will furnish to you as early as practicable before
the Closing Date and any later date on which Option Shares are to be purchased,
as the case may be, but not later than two business days prior thereto, a copy
of the latest available unaudited interim consolidated financial statements, if
any, of the Company that have been read by the Company's independent certified
public accountants as stated in their letter to be furnished pursuant to SECTION
6(f).
(p) On the Closing Date, the Company will sell the Representatives'
Warrants to the Representatives.
5. EXPENSES.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus and any amendments or supplements thereto; the
printing of this Agreement, the Representatives' Warrant Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreement, the Preliminary
Blue Sky Survey and any Supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to any of the
foregoing; the issuance and delivery of the Shares hereunder to the several
Underwriters, including transfer taxes, if any; the cost of all certificates
representing the Shares and transfer agents' and registrars' fees; the fees and
disbursements of counsel for the Company; all fees and other charges of the
Company's independent certified public accountants; the cost of furnishing to
the several Underwriters copies of the Registration Statement (including
appropriate exhibits), Preliminary Prospectus and the Prospectus, and any
amendments or supplements to any of the foregoing; NASD filing fees and the cost
of qualifying the Shares under the laws of such jurisdictions as you may
designate (including fees up to a maximum of $30,000 and disbursements of
Underwriters' Counsel and filing fees in connection with such NASD filings and
Blue Sky qualifications); the cost of any listing of the Shares on any
securities exchange or qualification of the Share for inclusion in the Nasdaq
National Market; registration and other fees payable to the Commission; the cost
of preparing bound volumes of the public offering documents for the
Representatives and Underwriters' Counsel; and all other expenses directly
incurred by the Company in connection with the performance of its obligations
hereunder. The provisions of this SECTION 5(a)(i) are intended to relieve the
Underwriters from the payment of the expenses and costs which the Company hereby
agrees to pay.
16
(ii) In addition to its other obligations under SECTION 8(a), the
Company agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding described in SECTION 8(a), it
will reimburse the Underwriters on a monthly 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 the Underwriters 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 Underwriters shall
promptly return such payment to the Company together with interest, compounded
daily, determined on the basis of the prime rate (or other commercial lending
rate for borrowers of the highest credit standing) listed from time to time in
THE WALL STREET JOURNAL which represents the base rate on corporate loans posted
by a substantial majority of the nation's thirty (30) largest banks (the "PRIME
RATE"). Any such interim reimbursement payments which are not made to the
Underwriters within thirty (30) days of a request for reimbursement shall bear
interest at the Prime Rate from the date of such request.
(b) In addition to their other obligations under SECTION 8(b), the
Underwriters severally and not jointly agree that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
described in SECTION 8(b), they will reimburse the Company on a monthly 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 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 shall promptly return such payment 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.
(c) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in SECTIONS 5(a)(ii) and 5(b),
including the amounts of any requested reimbursement payments, the method of
determining such amounts and the basis on which such amounts shall be
apportioned among the reimbursing parties, 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 a 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. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in SECTIONS 5(a)(ii) and 5(b) and
will not resolve the ultimate propriety or enforceability of the obligation to
indemnify for expenses that is created by the provisions of SECTIONS 8(a) and
8(b) or the obligation to contribute to expenses that is created by the
provisions of SECTION 8(d).
17
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company herein, to the performance by
the Company of its obligations hereunder, and to the following additional
conditions:
(a) The Registration Statement shall have become effective not later
than 2:00 p.m., California time, on the date following the date of execution and
delivery of this Agreement, or such later date and time as shall be consented to
in writing by you; and no stop order suspending the effectiveness thereof shall
have been issued, no suspension of the qualification of the Shares for sale in
any jurisdiction shall have occurred, and no proceedings for any such purpose
shall have been initiated or, to the knowledge of the Company or any
Underwriter, threatened by the Commission or any other regulatory authority of
appropriate jurisdiction, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the satisfaction of Underwriters'
Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Shares, shall
have been reasonably satisfactory to the Underwriters' Counsel, and such counsel
shall have been furnished with such papers and information as they may
reasonably have requested to enable them to pass upon the matters referred to in
this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be, there shall not have been any (i) present or
prospective change in the condition (financial or otherwise), earnings,
operations, properties, assets, business or business prospects of the Company
from that set forth in the Registration Statement or Prospectus, which, in your
sole judgment, is material and adverse to the Company and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public offering
of the Shares as contemplated by the Prospectus; (ii) any transaction that is
material to the Company entered into or committed to by the Company other than
as described in the Registration Statement and the Prospectus; or (iii) any
material obligation, contingent or otherwise, directly or indirectly, incurred
by the Company other than as described in the Registration Statement and the
Prospectus.
(d) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, counsel for the Company, dated the
Closing Date or such later date on which Option Shares are to be purchased
addressed to the Underwriters and with reproduced copies or signed counterparts
thereof for each of the Underwriters, to the effect that:
(i) All of the partners (other than the Company) of Vineyard
Investors 1972 and Vineyard 405, each a California limited partnership, and the
members of Quadra Partners LLC, a California limited liability company (together
with Vineyard Investors 1972 and Vineyard 405, the "PARTNERSHIPS"), have
contributed all of their interests in the Partnerships to the Company, and
released the Company from any claims or liabilities in respect of their
interests in the Partnerships or the assets and business formerly owned and
conducted by the Partnerships
18
or transfer thereof to the Company, in exchange for Class B Common Stock and the
Company now owns all of the assets and business formerly owned and conducted by
the Partnerships free of any adverse claims except security interests and deeds
of trust described in the Registration Statement.
(ii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware; and the reincorporation of the Company in Delaware has been effected
through the completed and effective merger of the Company's predecessor, Xxxxxx
Vineyards Inc., a California corporation, into its wholly owned subsidiary
incorporated in Delaware for purposes of the reincorporation and to such
counsel's knowledge having no business, operations or assets prior to the
reincorporation.
(iii) To such counsel's knowledge, the Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction, if any, in which the ownership or leasing of its properties
or the conduct of its business requires such qualification, except where the
failure to be so qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company.
(iv) To such counsel's knowledge, the Company does not own or
control, directly or indirectly, any stock or other equity or ownership interest
in any corporation, association or other entity.
(v) 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; the issued and outstanding shares of capital stock
of the Company have been duly and validly issued and are fully paid and
nonassessable, and to such counsel's knowledge have not been issued in violation
of any registration right or in violation of or subject to any preemptive right,
co-sale right, right of first refusal or other similar right;
(vi) The capital stock of the Company, including the Shares,
conforms in all material respects to the description thereof contained in the
Registration Statement and the Prospectus;
(vii) The Firm Shares or the Option Shares, as the case may
be, to be issued by the Company pursuant to the terms of this Agreement, the
Representatives' Warrants, and the Class A Common Stock issuable upon exercise
of the Representatives' Warrants have been duly authorized and, upon issuance
and delivery against payment therefor in accordance with the terms hereof or the
Representatives' Warrant Agreement, as the case may be, will be duly and validly
issued and fully paid and nonassessable, free of any pledge, lien or other
encumbrance, and will not have been issued in violation of or subject to any
preemptive right, co-sale right, registration right, right of first refusal or,
to the best of such counsel's knowledge, other similar right contained in the
Company's charter or bylaws or in any other agreement or contract to which the
Company is a party; and the forms of certificates evidencing the Class A Common
Stock comply with applicable law;
(viii) The Company has the corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Prospectus; and to enter into this
19
Agreement and the Representatives' Warrant Agreement and to issue, sell and
deliver to the Underwriters the Shares to be issued and sold by it hereunder,
the Representatives' Warrants, and the Class A Common Stock issuable upon
exercise of the Representatives' Warrants;
(ix) This Agreement and the Representatives' Warrant Agreement
have been duly authorized by all necessary corporate action on the part of the
Company and have been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery by you, are valid and binding
agreements of the Company, enforceable in accordance with their respective
terms, except insofar as indemnification provisions may be limited by applicable
law and except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally or by general equitable principles;
(x) The Registration Statement has become effective under the
Act, any required filing of the Prospectus, or any Term Sheet that constitutes a
part thereof, pursuant to Rules 434 and 424(b) has been made in the manner and
within the time period required by Rules 434 and 424(b), and, to such counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(xi) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules), and financial data derived therefrom as to which such
counsel need express no opinion), as of the effective date of the Registration
Statement, comply as to form in all material respects with the requirements of
the Act and the applicable Rules and Regulations and if the company elects to
rely on Rule 434, the Prospectus is "materially different," as such term is used
in Rule 434, from the prospectus included in the Registration Statement at the
time of its effectiveness or a post-effective amendment thereto (including
information that is permitted to be omitted pursuant to Rule 430A);
(xii) The information in the Prospectus under the captions
"Risk Factors--Labor Relations and Union Contract," "Risk Factors--Government
Regulation: Taxes," "Risk Factors--Shares Eligible for Future Sale," "Risk
Factors--Former S Corporation Status and Shareholder Distributions: No Payment
of Dividends," "Risk Factors--Antitakeover Effects of Certificate of
Incorporation, Bylaws and Delaware Law; `Blank Check' Preferred Stock," "S
Corporation Conversion," "Business--the Company's Grape Production Operations--
Grape Sales," "Business--Additional Operating Matters--Crop Insurance,"
"Business--Vineyard Management Contracts," "Business--Trademarks and Labels,"
"Business--Employees and Labor Relations," "Business--Legal Proceedings,"
"Business--Properties," "Management--1997 Stock Option and /Stock Issuance
Plan," "Management--Limitation of Directors' Liability; Indemnification,"
"Management--Retirement Plans," "Management--Employment Agreements, Termination
of Employment and Change-in-Control Arrangements," "Management--Consulting
Agreements," "Certain Transactions," "Description of Capital Stock," and "Shares
Eligible For Future Sale" to the extent that it describes laws, regulations,
rules, legal or governmental proceedings, or contracts, or constitutes matters
of law or legal conclusions, has been reviewed by such counsel and is a fair and
accurate in all material respects;
20
(xiii) The descriptions in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes are accurate
and fairly present the information required to be presented by the Act and the
applicable Rules and Regulations;
(xiv) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which are
not described or referred to therein or filed as required;
(xv) The performance of this Agreement and the Representatives'
Warrant Agreement and the consummation of the transactions contemplated herein
and therein (other than performance of the Company's indemnification obligations
hereunder, concerning which no opinion need be expressed) do not and will not
(a) result in any violation of the charter or bylaws of the Company or
(b) result in a material breach or violation of any of the terms and provisions
of, or constitute a default under, of any event that with notice, lapse of time
or both would constitute a breach of or default under, any material bond,
debenture, note or other evidence of indebtedness, or any material lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument to which the Company is a party or by which its
properties are bound, or any applicable statute, rule or regulation or any
order, writ or decree of any court, government or governmental agency or body
having jurisdiction over the Company or any of its properties or operations;
provided, however, that such counsel need not express any opinion or belief with
respect to state securities or Blue Sky laws;
(xvi) No consent, approval, authorization or order of or
filing or qualification with any court, government or governmental agency or
body having jurisdiction over the Company or any of its properties or operations
is necessary in connection with the consummation by the Company of the
transactions contemplated in this Agreement or the Representatives' Warrant
Agreement, except such as have been obtained under the Act or such as may be
required under state or other securities or Blue Sky laws in connection with the
purchase and the distribution of the Shares by the Underwriters;
(xvii) To such counsel's best knowledge, there are no legal or
governmental proceedings pending or threatened against the Company of a
character required to be disclosed in the Registration Statement or the
Prospectus by the Act or the Rules and Regulations, other than those described
therein;
(xviii) To such counsel's knowledge, the Company is not in
violation of its respective charter or bylaws and is not in breach or violation
of any of the terms and provisions of, or in default under, and no event has
occurred that, with notice, lapse of time or both would constitute a breach of
or default under any material bond, debenture, note or other evidence of
indebtedness, or any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company is a party or by which its properties are bound, or any applicable
statute, rule or regulation or any order, writ or decree of any court,
government or governmental agency or body having jurisdiction over the Company
or any of its properties or operations;
21
(xix) To such counsel's best knowledge, except as set forth
in the Registration Statement and Prospectus, no holders of Common Stock or
other securities of the Company have registration rights or preemptive rights
with respect to securities of the Company and, except as set forth in the
Registration Statement and Prospectus, all holders of securities of the Company
having rights to registration of such shares of Common Stock or other
securities, because of the filing of the Registration Statement by the Company
have, with respect to the offering contemplated thereby, waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement.
(xx) The Company is not an "investment company" or a person
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(xxi) The sales of securities by the Company described in
Item 15 of the Registration Statement were exempt from the registration
requirements of the Act.
In addition, such counsel shall state that such counsel has acted as
outside corporate legal counsel to the Company and participated in conferences
with officials and other representatives of the Company, the Representatives,
Underwriters' Counsel and the independent certified public accountants of the
Company, at which such conferences the contents of the Registration Statement
and Prospectus and related matters were discussed, and although they have not
verified the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the attention of
such counsel which leads such counsel to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the Closing Date and on any later date on which Option Shares are to
be purchased, the Registration Statement and any amendment or supplement thereto
(other than the financial statements including supporting schedules and other
financial information derived therefrom, as to which such counsel need express
no opinion) 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
statements therein not misleading, or at the Closing Date or any later date on
which the Option Shares are to be purchased, as the case may be, the
Registration Statement, the Prospectus and any amendment or supplement thereto
(except as aforesaid) contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States or the State of California upon opinions
of local counsel, and as to questions of fact upon representations or
certificates of officers of the Company, 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 Representative of the
Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, an opinion of
Xxxxxx, Xxxx & Xxxxxxxx LLP, in form and substance reasonably satisfactory to
you, with respect to the sufficiency of all such corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such
22
counsel such documents as they may have requested for the purpose of enabling
them to pass upon such matters.
(f) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a letter from
Deloitte & Touche LLP, Independent Auditors ("DELOITTE"), addressed to the
Underwriters, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be (in each case, the "BRING DOWN LETTER"),
confirming that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations and based upon the procedures described in a letter delivered to
you concurrently with the execution of this Agreement (herein called the
"ORIGINAL LETTER"), but carried out to a date not more than five (5) business
days prior to the Closing Date or such later date on which Option Shares are to
be purchased, as the case may be, (i) confirming, to the extent true, that the
statements and conclusions set forth in the Original Letter are accurate as of
the Closing Date or such later date on which Option Shares are 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 Original Letter that are necessary
to reflect any changes in the facts described in the Original Letter since its
date, or to reflect the availability of more recent financial statements, data
or information. The Bring Down Letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company 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 Shares as contemplated by the Prospectus. The Original
Letter from Deloitte shall be addressed to or for the use of the Underwriters in
form and substance satisfactory to the Underwriters and shall (i) represent, to
the extent true, that they are independent certified public accountants with
respect to the Company 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 combined balance sheet of the Company as of
December 31, 1996 and related combined statements of operations, equity and cash
flows for the twelve (12) months ended December 31, 1996, (iii) state that
Deloitte has performed the procedures set out in Statement on Auditing Standards
No. 71 ("SAS 71") for a review of interim financial information and providing
the report of Deloitte as described in SAS 71 on the financial statements for
the one-quarter period ended March 31, 1997 (the "QUARTERLY FINANCIAL
STATEMENTS"), (iv) state that in the course of such review, nothing came to
their attention that leads them to believe that any material modifications need
to be made to any of the Quarterly Financial Statements in order for them to be
in compliance with generally accepted accounting principles consistently applied
across the periods presented, (v) state that nothing came to their attention
that caused them to believe that the financial statements included in the
Registration Statement and Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Rules and
Regulations and that any adjustments thereto have not been properly applied to
the historical amounts in the compilation of such statements, and (vi) address
other matters agreed upon by Deloitte and you. In addition, you shall have
received from Deloitte 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 Company's financial
statements as of December 31, 1996, did not disclose any weaknesses in internal
controls that they considered to be material weaknesses.
23
(g) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a certificate of
the Company, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, signed by the Chief Executive Officer
and Chief Financial Officer of the Company, to the effect that, and you shall be
satisfied that:
(i) The representations and warranties of the Company in
this Agreement and the Representatives' Warrant Agreement are true and
correct, as if made on and as of the Closing Date or any later date on which
Option Shares are to be purchased, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions on its part
to be performed or satisfied at or prior to the Closing Date or any later date
on which Option Shares are to be purchased, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein by
the Act and the Rules and Regulations, and in all material respects conformed to
the requirements of the Act and the Rules and Regulations, the Registration
Statement, and any amendment or supplement thereto, did not and does 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, the Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has not
been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been any (a) present or prospective material adverse change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company, (b) any transaction that is material to the Company, except
transactions entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the Company, entered into
or committed to by the Company other than as described in the Registration
Statement and the Prospectus, (d) any change in the capital stock of the
Company, (e) any change in the outstanding indebtedness of the Company that is
material to the Company or is out of the ordinary course of business of the
Company, (f) any dividend or distribution of any kind declared, paid or made on
the capital stock of the Company, other than as described in the Registration
Statement and the Prospectus, or (g) any loss or damage (whether or not insured)
to the property of the Company which has been sustained or will have been
sustained which has a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company.
24
(h) The Company shall have obtained and delivered to you an agreement
from each officer, director and stockholder of the Company in writing prior to
the date hereof that such person will not, except as described below, during the
Lock-up Period, effect the Disposition of any Securities now owned or hereafter
acquired by such person or with respect to which such person has or hereafter
acquires the power of disposition, otherwise than (i) on the transfer of shares
of Common Stock or Securities during such person's lifetime by BONA FIDE gift or
upon death by will or intestacy, provided that any transferee agrees to be bound
by the Lock-Up Agreement, and (ii) on the transfer or other disposition of
shares of Common Stock or Securities as a distribution to limited partners or
stockholders of such person, provided that the distributees thereof agree to be
bound by the terms of the Lock-Up Agreement. The foregoing restriction shall
have been expressly agreed to preclude the holder of the Securities from
engaging in any hedging, pledge or other transaction which is designed to or may
reasonably be expected to lead to or result in a Disposition by any stockholder
or any other person of any Securities, whether or not owned by a stockholder,
during the Lock-Up Period, even if such Securities would be disposed of by
someone other than such holder. Such prohibited hedging, pledge or other
transactions would include, without limitation, any short sale (whether or not
against the box), any pledge of shares covering an obligation that matures or
could reasonably mature during the Lock-Up Period, or any purchase, sale or
grant of any right (including, without limitation, any put or call option) with
respect to any Securities or with respect to any security (other than a broad-
based market basket or index) that includes, relates to or derives any
significant part of its value from Securities. Furthermore, such person will
have also agreed and consented to the entry of stop transfer instructions with
the Company's transfer agent against the transfer of the Securities held by such
person except in compliance with this restriction.
(i) The Shares have been approved for inclusion in the Nasdaq
National Market.
(j) The Company shall have executed and delivered the
Representatives' Warrant Agreement and shall have tendered to the
Representatives the Representatives' Warrants.
(k) The Company shall have furnished to you such further certificates
and documents as you shall reasonably request (including certificates of
officers of the Company) as to the accuracy of the representations and
warranties of the Company herein, as to the performance by the Company of its
obligations hereunder and as to the other conditions concurrent and precedent to
the obligations of the Underwriters hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
7. OPTION SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to the several Underwriters, for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm Shares
only, a nontransferable option to purchase up to an aggregate of ______ Option
Shares at the purchase price per share for the Firm Shares set forth in
SECTION 3. Such option
25
may be exercised by the Representative on behalf of the several Underwriters on
one (1) or more occasions in whole or in part during the period of forty-five
(45) days after the date on which the Firm Shares are initially offered to the
public by giving written notice (the "OPTION NOTICE") to the Company. The
number of Option Shares to be purchased by each Underwriter upon the exercise of
such option shall be the same proportion of the total number of Option Shares to
be purchased by the several Underwriters pursuant to the exercise of such option
as the number of Firm Shares purchased by such Underwriter (set forth in
Schedule A hereto) bears to the total number of Firm Shares purchased by the
several Underwriters (set forth in Schedule A hereto), adjusted by the
Representative in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this SECTION 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in [NEXT DAY] [SAME-DAY] funds, payable to the order of the Company
(and the Company agrees not to deposit any such check in the bank on which it is
drawn, and not to take any other action with the purpose or effect of receiving
immediately available funds, until the business day following the date of its
delivery to the Company, and in the event of any breach of the foregoing the
Company shall reimburse the Underwriters for the interest lost and any other
expenses borne by them by reason of such breach). In the event of any breach of
such definitive certificate delivery obligations, the Company shall reimburse
the Underwriters for the interest lost and any other expenses borne by them by
reason of such breach. Such delivery and payment shall take place at the
offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 0 Xxxx Xxxxx, Xxxxx 0000, Xxxxxx,
Xxxxxxxxxx or at such other place as may be agreed upon between the
Representative and the Company (i) on the Closing Date, if written notice of the
exercise of such option is received by the Company at least two (2) full
business days prior to the Closing Date, or (ii) on a date which shall not be
later than the third (3rd) full business day following the date the Company
receives written notice of the exercise of such option, if such notice is
received by the Company after the date two (2) full business days prior to the
Closing Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you shall specify at least two (2)
full business days prior to such date of payment and delivery. If the
Representative so elects, delivery of the Option Shares may be made by credit
through full fast transfer to the accounts at The Depository Trust Company
designated by the Representative.
It is understood that you, individually, and not as the Representative
of the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the date of payment and
delivery for the Option Shares to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in SECTION 7(a), the
obligations of the several Underwriters to purchase such Option Shares will be
subject (as of the date hereof and as of the date of payment and delivery for
such Option Shares) to the accuracy of and compliance with the
26
representations, warranties and agreements of the Company herein, to the
accuracy of the statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, to the conditions set forth in SECTION 6, and to the
condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be
satisfactory in form and substance to you and to Underwriters' Counsel, and you
shall have been furnished with all such documents, certificates and opinions as
you may request in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any of the
covenants or agreements of the Company or the satisfaction of any of the
conditions herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Schedule E of the Bylaws of the NASD), under
the Act, the Exchange Act or otherwise, specifically including, but not limited
to, losses, claims, damages, judgments, liabilities and expenses (including the
fees and expenses of counsel and other expenses in connection with
investigating, defending or settling any such action or claim) (or actions in
respect thereof), as they are incurred and regardless of whether the Indemnitee
is a party to the litigation, if any, arising out of or based upon (i) any
breach of any representation, warranty, agreement or covenant of the Company
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; PROVIDED, HOWEVER, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, such Preliminary Prospectus or the Prospectus, or
any such amendment or supplement thereto, in reliance upon, and in conformity
with, written information relating to any Underwriter furnished to the Company
by such Underwriter, directly or through you, specifically for use in the
preparation thereof and, PROVIDED FURTHER, that the indemnity agreement provided
in this SECTION 8(a) with respect to any Preliminary Prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any losses,
claims, damages, liabilities or actions based upon any untrue statement or
alleged untrue statement of material fact or omission or alleged omission to
state therein a material fact purchased Shares, if a copy of the Prospectus in
which such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with SECTION 4(d).
27
The indemnity agreement in this SECTION 8(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the Exchange
Act and each of the agents, employees, officers and directors of each
Underwriter and person who so controls any Underwriter. This indemnity
agreement shall be in addition to any liabilities which the Company may
otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under the
Act or otherwise, specifically including, but not limited to, losses, claims,
damages, judgments liabilities and expenses (including the fees and expenses of
counsel and other expenses in connection with investigating, defending or
settling any such action or claim) (or actions in respect thereof), as they are
incurred and regardless of whether the Indemnitee is a party to the litigation,
if any, arising out of or based upon (i) any breach of any representation,
warranty, agreement or covenant of such Underwriter herein contained, (ii) any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any untrue statement or alleged untrue statement of any material fact
contained in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in the case of
subparagraphs (ii) and (iii) of this SECTION 8(b) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter, directly or through
you, specifically for use in the preparation thereof, and agrees to reimburse
the Company for any legal or other expenses reasonably incurred by the Company
in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred.
The indemnity agreement in this SECTION 8(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer of
the Company who signed the Registration Statement and each director of the
Company, and each person, if any, who controls the Company within the meaning of
the Act or the Exchange Act. This indemnity agreement shall be in addition to
any liabilities which each Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
SECTION 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this SECTION 8, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this SECTION 8 except to the extent that it has been
prejudiced by such omission. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it shall elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; PROVIDED, HOWEVER, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded
28
that there may be legal defenses available to it which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of the indemnifying party's election so to
assume the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified party
hereunder for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under SECTION 8(a)
or 8(b) hereof who are parties to such action), (ii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
party shall have approved the terms of such settlement; PROVIDED that such
consent shall not be unreasonably withheld. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnification could have
been sought hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all liability on all
claims that are the subject matter of such proceeding.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this SECTION 8
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this SECTION 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the public offering
price, and the Company is responsible for the remaining portion, PROVIDED,
HOWEVER, that (i) no Underwriter shall be required to contribute any amount in
excess of the amount by which the underwriting discount applicable to the Shares
purchased by such Underwriter exceeds the amount of damages which such
Underwriter has otherwise been required to pay and (ii) no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The contribution agreement in this SECTION 8(d)
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter or the Company
within the meaning of the Act or the Exchange Act and each officer of the
Company who signed the Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this SECTION 8, and are fully informed regarding
29
said provisions. They further acknowledge that the provisions of this SECTION 8
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement and Prospectus as required by the Act and the
Exchange Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in SECTION 8
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter within the meaning of the Act or the Exchange Act, or by or on
behalf of the Company, or any of its officers, directors or controlling persons
within the meaning of the Act or the Exchange Act, and shall survive the
delivery of the Shares to the several Underwriters hereunder or termination of
this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate number of
Firm Shares which such defaulting Underwriter or Underwriters agreed but failed
to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for twenty-
four (24) hours to allow the several Underwriters the privilege of substituting
within twenty-four (24) hours (including non-business hours) another underwriter
or underwriters (which may include any nondefaulting Underwriter) satisfactory
to the Company. If no such underwriter or underwriters shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for a further twenty-four (24) hours,
if necessary, to allow the Company the privilege of finding another underwriter
or underwriters, satisfactory to you, to purchase the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If it
shall be arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this SECTION 10, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven (7)
full business days, in order to 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, supplements to the Prospectus or other
such documents which may thereby be made necessary, and (ii) the respective
number of Firm Shares to be purchased by the remaining Underwriters and
substituted underwriter or underwriters shall be taken as the basis of their
underwriting obligation. If the remaining Underwriters shall not take up and
pay for all such Firm Shares so agreed to be purchased by the defaulting
30
Underwriter or Underwriters or substitute another underwriter or underwriters as
aforesaid and the Company shall not find or shall not elect to seek another
underwriter or underwriters for such Firm Shares as aforesaid, then this
Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the preceding
paragraph of this SECTION 10, then, other than as set forth in the Letter
Agreement, the Company shall not be liable to any Underwriter (except as
provided in SECTIONS 5 and 8 hereof) nor shall any Underwriter (other than an
Underwriter who shall have failed, otherwise than for some reason permitted
under this Agreement, to purchase the number of Firm Shares agreed by such
Underwriter to be purchased hereunder, which Underwriter shall remain liable to
the Company and the other Underwriters for damages, if any, resulting from such
default) be liable to the Company (except to the extent provided in SECTIONS 5
and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this SECTION 10.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., California time, on the first full business day following the effective
date of the Registration Statement, or (ii) the time of the public offering of
any of the Shares by the Underwriters after the Registration Statement becomes
effective. The time of the public offering shall mean the time of the release
by you, for publication, of the first newspaper advertisement relating to the
Shares, or the time at which the Shares are first generally offered by the
Underwriters to the public by letter, telephone, telegram or telecopy, whichever
shall first occur. By giving notice as set forth in SECTION 12 before the time
this Agreement becomes effective, you, as Representative of the several
Underwriters, or the Company, may prevent this Agreement from becoming effective
without liability of any party to any other party, except as provided in
SECTIONS 4(i) and 8.
(b) You, as Representative of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
shall have failed, refused or been unable to perform any agreement on its part
to be performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled is not fulfilled, including, without
limitation, any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company from that set forth in
the Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse, or (ii) if additional governmental restrictions, not in
force and effect on the date hereof, shall have been imposed upon trading in
securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock Exchange or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse
31
change in the general political or economic conditions or financial markets as
in your judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency which,
in the opinion of the Representative, makes it impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus. In the event of termination pursuant to subparagraph (i) above, the
Company shall remain obligated to pay costs and expenses pursuant to
SECTIONS [4(i), 5 and 8]. Any termination pursuant to any of subparagraphs (ii)
through (v) above shall be without liability of any party to any other party
except as provided in [SECTIONS 4(i) and 8].
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o Cruttenden Xxxx Incorporated, 00000 Xxx Xxxxxx,
Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, telecopier number (000) 000-0000,
Attention: General Counsel; if sent to the Company, such notice shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to 00000 Xxxxxxxxxx Xxxx., Xxxxx 000, Xxxxxx xxx Xxx,
Xxxxxxxxxx 00000, telecopier number (000) 000-0000, Attention: President.
13. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and their respective executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or entity, other
than the parties hereto and their respective executors, administrators,
successors and assigns, and the controlling persons within the meaning of the
Act or the Exchange Act, officers and directors referred to in SECTION 8, any
legal or equitable right, remedy or claim 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 the
parties hereto and their respective executors, administrators, successors and
assigns and said controlling persons and said officers and directors, and for
the benefit of no other person or entity. No purchaser of any of the Shares
from any Underwriter shall be construed a successor or assign by reason merely
of such purchase.
In all dealings with the Company under this Agreement, you shall act on
behalf of each of the several Underwriters, and the Company shall be entitled to
act and rely upon any statement, request, notice or agreement made or given by
you jointly or by Cruttenden Xxxx Incorporated on behalf of you.
14. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California.
32
15. COUNTERPARTS. This Agreement may be signed in several counterparts,
each of which will constitute an original.
If the foregoing correctly sets forth the understanding among the Company
and the several Underwriters, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
the Company and the several Underwriters.
Very truly yours,
XXXXXX VINEYARDS INC.
By: _______________________________
Accepted as of the date first above written:
CRUTTENDEN XXXX INCORPORATED
XXXXXXX EQUITIES, INC.
XXXXXX & XXXXXXX, INC.
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By CRUTTENDEN XXXX INCORPORATED
By: ___________________________________________
Authorized Signatory
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SCHEDULE A
Number of Firm Shares
Underwriters to be Purchased
Cruttenden Xxxx Incorporated
Xxxxxxx Equities, Inc.
Xxxxxx & Xxxxxxx Inc.
Total
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