EXHIBIT 1.1
FORM OF UNDERWRITING AGREEMENT
March ___, 1998
Xxxxxx, Xxxxx Xxxxx, Incorporated
As Representative of the
Several Underwriters Identified
In Schedule A Annexed Hereto
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Gentlemen:
SECTION 1. Introduction. Champion Industries Inc., a West Virginia
corporation (the "Company"), has authorized capital stock consisting of
20,000,000 shares of Common Stock, $1.00 par value per share (the "Common
Stock"), of which 8,464,167 shares are issued and outstanding. The Company
proposes to sell an aggregate of 1,000,000 shares of Common Stock (the "Firm
Common Shares") to the several underwriters identified in Schedule A annexed
hereto (the "Underwriters"), who are acting severally and not jointly. In
addition, the Company has agreed to grant to the Underwriters an option to
purchase up to 150,000 additional shares of Common Stock (the "Optional
Common Shares") as provided in Section 4 hereof. The Firm Common Shares and,
to the extent such option is exercised, the Optional Common Shares, are
hereinafter collectively referred to as the "Common Shares."
You, as representative of the Underwriters (the "Representative"),
have advised the Company that the Underwriters propose to make a public
offering of the Common Shares on the effective date of the Registration
Statement, as defined in Section 2(f) hereof, or as soon thereafter as in
the Representative's judgment is advisable, and that the purchase price
of the Common Shares will be the public offering price of $_____ per share
less underwriting discounts and commissions of seven percent (7%) or
$_____ per share.
The Company hereby confirms its agreements with the Underwriters
as follows:
SECTION 2. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Company and its subsidiaries (collectively the
"Subsidiaries") are duly incorporated and validly existing as corporations
in good standing under the laws of their jurisdictions of incorporation,
with full corporate power and authority to own and/or lease their
properties and conduct their business as described in the Prospectus
(as defined in Section 2(f) hereof); the Company and its Subsidiaries are
duly qualified to do business as foreign corporations under the corporation
law of, and are in good standing as such in, each jurisdiction in which they
own or lease properties, have an office or conduct business and such
qualification is required, and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit
or curtail, such power and authority or qualification.
(b) The Company does not own or control any subsidiary and does
not own any interest in any other corporation, joint venture, proprietorship
or other commercial entity or organization except as described in the
Prospectus.
(c) The shares of Common Stock outstanding have been duly and
validly authorized and are validly issued, fully paid and nonassessable.
There are no pre-emptive, preferential or other rights to subscribe for or
purchase any of the Common Shares to be sold by the Company hereunder,
and no shares
of Common Stock have been issued in violation of such rights of stockholders.
There are no outstanding rights, warrants or options to acquire or instruments
convertible into or exchangeable for, any shares of Common Stock or other
equity interest in the Company, except as described in the Prospectus. No
holders of securities of the Company have any rights to the registration of
such securities under the Registration Statement, or such rights have been
waived with respect to the Registration Statement. The statements made in the
Prospectus under the caption "Description of Capital Stock" are accurate in
all material respects.
(d) The Common Shares to be sold by the Company have been duly
authorized, and when issued, delivered and paid for pursuant to this Agreement,
will be validly issued, fully paid and nonassessable, and will conform to
the description thereof contained in the Prospectus. Upon consummation of
the purchase of the Common Shares by the Underwriters under this Agreement,
the Underwriters will acquire good and marketable title thereto, free and
clear of any claim, security interest, community property right, or other
encumbrance or restriction on transfer.
(e) The Company has full corporate power and authority to enter
into and perform this Agreement, and the execution and delivery hereof and
the performance of the Company's obligations hereunder have been duly
authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by the Company and is the legal, valid and binding
agreement of the Company enforceable in accordance with its terms, except
that rights to indemnity or contributions may be limited by applicable law
and enforceability may be limited by bankruptcy, insolvency or similar
laws generally affecting the rights of creditors and by equitable principles
limiting the right to specific performance or other equitable relief. The
execution and performance by the Company of this Agreement, including
application of the net proceeds of the offering, if and when received, as
described in the Prospectus under "Prospectus Summary," "Capitalization" and
"Use of Proceeds," will not violate any provisions of the Certificate or
Articles of Incorporation or By-Laws of the Company, or its Subsidiaries, or
any law, rule or regulation applicable to the Company or its Subsidiaries of
any government, court, regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or its Subsidiaries
or any of its businesses or properties, and will not result in the breach,
or be in contravention, of any provision of any loan agreement, lease,
franchise, license, note, bond, other evidence of indebtedness, indenture,
mortgage, deed of trust, other instrument, permit or other contractual
obligation to which the Company or its Subsidiaries is a party or by which
the Company or its Subsidiaries or its property may be bound or affected,
or any order of any court or governmental agency or authority entered in any
proceeding to which the Company or its Subsidiaries was or is now a party
or by which it is bound except those, if any, described in the Prospectus
or which are not material to the Company and do not materially affect its
business. No consent, approval, authorization or other order of any court,
regulatory body, administrative agency, or other governmental body is
required for the execution and delivery of this Agreement by the Company
or the consummation by the Company of the transactions contemplated by this
Agreement, except for compliance with the Securities Act of 1933, as amended
(the "Act") and the state securities laws (the "Blue Sky Laws") applicable to
the public offering of the Common Shares by the Underwriters, and the
clearance of such offering with the National Association of Securities
Dealers, Inc. (the "NASD").
(f) A registration statement with respect to the Common Shares,
prepared by the Company in conformity with the requirements of the Act and
the rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") thereunder, has been filed with
the Commission, and the Company has prepared and has filed prior to the
effective date of such registration statement an amendment or amendments to
such registration statement as may be required. There have been delivered
to the Representative and its counsel two signed copies of such registration
statement, as initially filed with the Commission and for each of the
Underwriters conformed copies of such registration statement, as initially
filed with the Commission and each amendment thereto (but without exhibits)
and
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of each related preliminary prospectus included in the registration statement
prior to the time it becomes effective or filed with the Commission pursuant
to Rule 424(a) under the Act (each, a "Preliminary Prospectus").
Such registration statement, as finally amended and revised at the
time such registration statement becomes effective, which shall be deemed
to include all information omitted therefrom in reliance upon Rule
430A under the Act and contained in the Prospectus (hereafter defined),
and any amendments thereto, is herein referred to as the "Registration
Statement". The related final prospectus, including any information
incorporated by reference therein, filed by the Company with the Commission
pursuant to Rules 424(b) and 430A under the Act is herein referred to as the
"Prospectus."
(g) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed fully in all material respects with 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 required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are made,
not misleading. The Registration Statement and the Prospectus, and any
amendments or supplements thereto, contain all statements that are required
to be stated therein in accordance with the Act and the Rules and Regulations
and in all material respects conform to the requirements of the Act and the
Rules and Regulations, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, includes any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading; provided, however,
that the Company makes no representation or warranty as to information
contained in or omitted from any Preliminary Prospectus, the Registration
Statement, the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
or on behalf of any Underwriter through the Representative specifically for
use in the preparation thereof. There are no legal or governmental actions,
suits or legal proceedings, and there are no contracts or other documents,
transactions or relationships of or by the Company required to be described
in the Registration Statement or to be filed as exhibits to the Registration
Statement by the Act or by the Rules and Regulations which have not been
described or filed as required.
(h) Ernst & Young LLP, which has expressed its opinion with respect
to certain of the financial statements filed with the Commission as a part
of the Registration Statement and included in the Prospectus, are independent
certified public accountants as required by the Act and the Rules and
Regulations.
(i) The financial statements of the Company for the respective
periods covered thereby, and the related notes and schedules thereto included
in the Registration Statement and the Prospectus, present fairly the
financial position of the Company for the periods covered thereby as of the
respective dates of such financial statements, all in conformity with
generally accepted accounting principles consistently applied throughout the
periods involved. All adjustments for a fair presentation of results have
been made. The selected financial data included in the Registration Statement
present fairly the information shown therein and have been compiled on a
basis consistent with the financial statements presented therein. No other
financial statements are required by Form S-2 or otherwise to be included
in the Registration Statement.
(j) Neither the Company nor its Subsidiaries is in violation of its
Certificate or Articles of Incorporation or By-Laws, or in default under any
court or administrative order or decree, or in default with respect to any
provision of any material loan agreement, lease, franchise, license, note,
bond, other evidence of indebtedness, indenture, mortgage, deed of trust,
other instrument, permit or other contractual obligation to which the
Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries
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or any of its properties or businesses may be bound, and, to the knowledge of
the Company, there does not exist any state of facts which constitutes an
event of default as defined in such documents or which, upon notice or lapse of
time or both, would constitute such an event of default, except those, if any,
described in the Prospectus or which are not material to the Company and do
not materially affect its business.
(k) There are no governmental actions, suits or legal proceedings
pending or, to the Company's knowledge, threatened to which the Company or
its Subsidiaries is a party or to which the
business of the Company or its Subsidiaries or any material property owned
or leased by the Company or its Subsidiaries is subject, or related to
product liability, environmental or discrimination matters which are not
disclosed in the Registration Statement and the Prospectus, or which
question the validity of this Agreement or the Exchange Agreement or any
action taken or to be taken pursuant hereto and thereto except those, if any,
described in the Prospectus or which are not material to the Company and do
not materially affect its business.
(l) The Company and its Subsidiaries have good and marketable
title to all the properties and assets reflected as owned in the financial
statements hereinabove described (or elsewhere in the Prospectus), subject
to no lien, mortgage, pledge, charge or encumbrance of any kind or nature
whatsoever except those, if any, reflected in such financial statements
(or elsewhere in the Prospectus) or which, in the aggregate, are not material
to the Company, its Subsidiaries, and its business and do not materially
affect the value of such property and do not materially interfere with the
use made or proposed to be made of such property; all material properties
held or used by the Company, and its Subsidiaries under leases, licenses or
other agreements are held by them under valid, subsisting and enforceable
leases, franchises, or other agreements with respect to which they are not
in default, except to the extent that the enforceability of the rights and
remedies of the Company and its Subsidiaries under any such lease, franchise,
license or other agreement may be limited by bankruptcy, insolvency or
similar laws generally affecting the rights of creditors and by equitable
principles limiting the right to specific performance or other equitable
relief.
(m) The Company and its Subsidiaries will not take and have not
taken, directly or indirectly, any action (and does not know of any action
by their directors, officers or stockholders, or others) designed to or
which has constituted or which might reasonably be expected to cause or
result, under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or otherwise, in stabilization or manipulation of the price of the
Common Shares to facilitate the sale or resale of the Common Shares.
(n) Except as reflected in or contemplated by the Registration
Statement or any amendment thereto, since the respective dates as of which
information is given in the Registration Statement:
(i) the Company and its Subsidiaries have not incurred any
material liabilities or obligations, direct or contingent, nor
entered into any material transactions not in the ordinary course
of business;
(ii) the Company and its Subsidiaries have not paid or
declared any dividends or other distributions with respect to
their capital stock and is not delinquent in the payment of
principal or interest on any outstanding debt obligations; and
(iii) there has not been any change in the capital stock or
long-term debt of the Company and its Subsidiaries or any material
adverse change in the business (resulting from litigation or
otherwise), business prospects, properties, condition (financial
or otherwise), net worth or results of operations of the Company
and its Subsidiaries.
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(o) The Company and its Subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and paid all
taxes shown as due thereon; and the Company and its Subsidiaries have no
knowledge of any tax deficiency which has been asserted or threatened
against the Company and its Subsidiaries which would materially adversely
affect the business or operations or properties of the Company taken as a whole.
(p) The Company has an outstanding capitalization as set forth under
"Capitalization" in the Prospectus as of the date indicated therein and there
has been no material change therein except as disclosed in the Prospectus.
The financial and numerical information and data in the Prospectus under
"Prospectus Summary," "The Company," "Use of Proceeds," "Dividend Policy,"
"Selected Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," "Management," "Principal
Shareholder," "Certain Transactions" and "Description of Capital Stock" are
fairly presented and prepared on a basis consistent with the audited financial
statements of the Company.
(q) The Company and its Subsidiaries have obtained all material
licenses, permits, approvals and other governmental authorizations required
for the present and proposed conduct of their business as described in the
Prospectus. Such licenses, permits and other governmental authorizations
are in full force and effect, the Company and its Subsidiaries are in all
material respects complying therewith, and the Company and its Subsidiaries
have not received any notice of proceedings relating to the revocation or
modification of any such license, permit, approval or authorization. The
Company and its Subsidiaries are complying in all material respects with all
material laws, ordinances and regulations applicable to the Company and its
Subsidiaries, its properties and its business.
(r) The Company and its Subsidiaries have maintained its books of
account in accordance with generally accepted accounting principles
consistently applied in all material respects, and such books and records
are, and during periods covered by the financial statements included in the
Registration Statement and the Prospectus are, correct and complete in all
material respects, and fairly and accurately reflect the income, expenses,
assets and liabilities of the Company and provide a fair and materially
accurate basis for the preparation of such financial statements.
(s) The minute books of the Company and its Subsidiaries are
current and contain a materially correct and complete record of all corporate
action taken by the Board of Directors and the stockholder of the Company
and its Subsidiaries and all signatures contained therein are true signatures
of the persons whose signatures they purport to be.
(t) Except as described in the Prospectus, the Company and its
Subsidiaries are unaware of any loss or threatened loss of any key customer,
supplier, or account which is material to the Company.
(u) The Company and its Subsidiaries own or possess all patents,
patent rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade
names used by them or necessary in connection with the present and proposed
conduct of their business as described in the Prospectus, and the Company
and its Subsidiaries have not received any notice of infringement of or
conflict with asserted rights of others with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in any material adverse change in the
condition, financial or otherwise, or in the earnings, affairs or business
prospects of the Company and its Subsidiaries.
(v) The Company and its Subsidiaries are in substantial compliance
with all federal, state or local laws or ordinances, including orders, rules
and regulations thereunder, regulating or otherwise
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affecting employee health and safety or the environment, non-compliance with
which could have a material adverse effect on the Company. To their
knowledge, the Company and its Subsidiaries have disposed of all wastes in
substantial compliance with applicable laws, and they are not aware of any
existing condition that may form the basis for any present or future claim,
demand or action seeking clean-up of any site, location, or body of water,
surface or subsurface.
(w) The provisions of any qualified retirement plans sponsored by
the Company and its Subsidiaries are in compliance with the Employee
Retirement Income Security Act of 1974 ("ERISA"), and the Company and its
Subsidiaries are in material compliance with ERISA, including, without
limitation, ERISA's fiduciary and prohibited transaction rules, or the
funding requirements with respect to any such plan. The Company and its
Subsidiaries have timely filed the reports required to be filed by ERISA in
connection with the maintenance of plans sponsored by the Company and its
Subsidiaries,and no fact, including, without limitation, any "reportable
event" as defined by ERISA and the regulations thereunder, exists in
connection with any plan sponsored by the Company and its Subsidiaries which
might constitute grounds for the termination of such plan by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer any such plan. With respect
to multiemployer plans in which the Company and its Subsidiaries participates
on behalf of its employees who are members of collective bargaining units, the
Company and its Subsidiaries have no withdrawal liability except to the extent
set forth in the Prospectus. The provisions of any employee benefit welfare
plan, as defined in ERISA's Section 3(l), sponsored by the Company and its
Subsidiaries are in material compliance with ERISA's fiduciary and prohibited
transaction rules and reporting and disclosure requirements with respect to
any such plan.
(x) No labor dispute with the employees of the Company and its
Subsidiaries exist or, to the knowledge of the Company and its Subsidiaries,
is imminent, and they are not aware of any existing or imminent labor
disputes by the employees of any of their principal suppliers, manufacturers
or contractors which might be expected to result in any material adverse
change in the condition, financial or otherwise, or in the earnings, affairs
or business prospects of the Company and its Subsidiaries.
A certificate signed by any officer of the Company delivered to you
or to counsel for the Underwriters shall be deemed a representation and
warranty of the Company and its Subsidiaries to you as to the matters covered
thereby.
SECTION 3. Representation of Underwriters. You have been duly
authorized to act and will act as the Representative for the Underwriters
in connection with this financing, and any action under or in respect of
this Agreement taken by you, as such Representative, will be binding upon
all Underwriters. You may engage another representative to co-manage the
public offering, and from and after the date of any such engagement, the
term Representative, used herein, shall include such other representative.
SECTION 4. Purchase, Sale and Delivery of Common 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 1,000,000 Firm Common Shares to the Underwriters, and the
Underwriters agree, severally and not jointly, to purchase from the Company
the number of Firm Common Shares as hereinafter set forth at the price per
share set forth in Section 1 hereof. In addition, 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
an option to the Underwriters, severally and not jointly, to purchase from
the Company up to 150,000 Optional Common Shares at the same purchase price
per share to be paid for the Firm Common Shares, for use solely in covering
any overallotment made by the Underwriters in the sale and distribution of
the Firm Common Shares. The obligation of each Underwriter to the Company
shall be to purchase from the Company that number of full Optional Common
Shares which (as nearly as practicable in full shares as determined by the
Representative) bears to 1,000,000 the
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same proportion as the number of shares set forth opposite the name of such
Underwriter in Schedule A hereto bears to the total number of Firm Common
Shares to be purchased by all the Underwriters under this Agreement.
At 9:00 A.M., Baltimore time, on the third full business day after
the public offering, or at such other time not later than seven (7) full
business days after the public offering, as the Representative, and the
Company may agree, the Company will deliver to the Representative, at the
offices of Xxxxxx, Xxxxx Xxxxx, Incorporated, 0000 Xxx Xxxxxx, X.X.,
Xxxxxxxxxx, X.X., or through the facilities of The Depository Trust Company,
for the accounts of the Underwriters, certificates representing the Firm
Common Shares to be sold against payment in Baltimore, Maryland of the
purchase price therefor by certified or bank cashier's check or wire transfer
payable, as appropriate, to the order of the Company in respect of the Firm
Common Shares being sold by the Company. Such time of delivery and payment
is referred to throughout this Agreement as the "First Closing Date."
The certificates for the Firm Common Shares to be so delivered will be in
denominations and registered in such names as the Representative requests by
notice delivered to the Company prior to 9:00 A.M., Baltimore time, no later
than the second full business day preceding the First Closing Date, and,
if the certificates are to be physically delivered, will be made available for
checking and packaging at 9:00 A.M., Baltimore time, at least 24 hours prior
to the First Closing Date at a location to be designated by the Representative.
The overallotment option granted hereunder may be exercised at any time
(but not more than once) within thirty (30) days after the date the
Registration Statement becomes effective upon written notice by the
Representative to the Company setting forth the aggregate number of Optional
Common Shares as to which the Underwriters are exercising the option, the
names and denominations in which the certificates for such shares are to be
registered and the time and place at which such certificates will be
delivered. Such time of delivery (which may not be earlier than the First
Closing Date, as hereinafter defined), being herein referred to as the
"Second Closing Date," shall be determined by the Representative, but if at
any time other than the First Closing Date, shall not be earlier than three
(3) nor later than seven (7) full business days after delivery of such
notice of exercise to the Company. Certificates for the Optional Common
Shares will be made available for checking and packaging at 9:00 A.M.,
Baltimore time, at least 24 hours prior to the Second Closing Date at a
location to be designated by the Representative if the certificates are to be
physically delivered. The manner of payment for and delivery of (including
the denominations of and the names in which certificates are to be
registered) the Optional Common Shares shall be the same as for the Firm
Common Shares purchased from the Company. As Representative of the
Underwriters, you may cancel the option at any time prior to its expiration
by giving written notice of such cancellation to the Company.
The Representative has advised the Company that each Underwriter has
authorized the Representative to accept delivery of its Common Shares and
to make payment therefor. You, individually and not as the Representative
of the Underwriters, may make payment for any Common Shares to be purchased
by any Underwriter whose funds shall not have been received by you by the
First Closing Date or the Second Closing Date, as the case may be, for the
account of such Underwriter, but any such payment shall not relieve such
Underwriter from any obligation hereunder.
SECTION 5. Covenants of the Company. The Company covenants and
agrees with the several Underwriters as follows:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective at the earliest possible time and
upon notification from the Commission that the Registration Statement has
become effective, will so advise the Representative and its counsel promptly.
Thereafter, the Company will prepare and timely file with the Commission
pursuant to Rule 424(b) under the Act the Prospectus containing information
previously omitted in reliance on Rule 430A under the Act. The Company will
advise the Representative and its counsel promptly of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any
7
proceedings for that purpose, or of any notification of the initiation or
threatening of any proceedings for that purpose, and will also advise the
Representative and its counsel promptly of any request of the Commission for
amendment or supplement of the Registration Statement (either before or after
it becomes effective), of any Preliminary Prospectus or of the Prospectus, or
for additional information, and will not file or make any amendment or
supplement of the Registration Statement (either before or after it becomes
effective), to any Preliminary Prospectus or to the Prospectus of which the
Representative has not been furnished with a copy prior to such filing or
to which you object; and the Company will file promptly and will furnish to
the Representative at or prior to the filing thereof copies of all reports
and any definitive proxy or information statements required to be filed by
the Company with the Commission pursuant to Sections 13, 14 and 15 of the
Exchange Act subsequent to the date of the Prospectus, and for so long as the
delivery of a prospectus is required in connection with the offering or sale
of the Common Shares.
(b) If, at any time when a prospectus relating to the Common Shares
is required to be delivered under the Act, any event occurs as a result of
which the Prospectus, including any subsequent amendment or supplement,
would include an untrue statement of a material fact, or would omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the
Prospectus, including any amendment or supplement thereto, to comply with
the Act or the Rules and Regulations, the Company promptly will advise the
Representative and its counsel thereof and will promptly prepare and file
with the Commission an amendment or supplement which will correct such
statement or omission or an amendment which will effect such compliance;
and, in case any Underwriter is required to deliver a prospectus nine months
or more after the effective date of the Registration Statement, the Company
upon request, but at the expense such Underwriter, will prepare promptly
such prospectus or prospectuses as may be necessary to permit compliance
with the requirements of Section 10(a)(3) of the Act.
(c) Except as described in the Prospectus, the Company and its
Subsidiaries will not, prior to the Second Closing Date (or the expiration
of the thirty (30) day period within which the Representative is required
to exercise the over allotment option pursuant to Section 4 hereof if there
is no Second Closing Date), incur any liability or obligation, direct or
contingent, or enter into any material transaction, other than in the
ordinary course of business.
(d) The Company will not acquire any of the Company's capital stock
prior to the Second Closing Date (or the expiration of the thirty (30) day
period within which the Representative is required to exercise the over
allotment option pursuant to Section 4 hereof if there is no Second Closing
Date) nor will the Company declare or pay any dividend or make any other
distribution upon its capital stock payable to its holders of record on a
date prior to the Second Closing Date or, if there is no Second Closing Date,
then prior to the First Closing Date.
(e) Until the Underwriters have completed the offering referred to
in Section 1 above, the Company and its Subsidiaries will not take, directly
or indirectly, any action designed to or which might reasonably be expected
to cause or result, under the Exchange Act, or otherwise, in stabilization
or manipulation of the price of the Common Shares to facilitate the sale or
resale of the Common Shares.
(f) The Company will make generally available to the Representative
and to the Company's security holders an earnings statement (which need not
be audited) as soon as practicable, but in no event later than 15 months
after the end of the Company's current fiscal quarter, covering a period of
12 consecutive calendar months beginning after the effective date of the
Registration Statement, which will satisfy the provisions of the last
paragraph of Section 11(a) of the Act and Rule 158 promulgated thereunder.
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(g) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the Company
will furnish the Representative, at the Company's expense, with copies of
the Registration Statement, the Prospectus, the Preliminary Prospectus and
all amendments and supplements to any such documents in each case as soon
as available and in such quantities as the Representative may reasonably
request, for the purposes contemplated by the Act or Exchange Act.
(h) The Company will cooperate with the Representative, its
counsel and the Underwriters in qualifying or registering the Common Shares
if and as required for sale under the Blue Sky Laws of such jurisdictions
as the Representative shall designate, and will continue such qualifications
or registrations in effect so long as reasonably requested by the
Representative to effect the distribution of the Common Shares. The Company
shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any such jurisdiction where it is
not presently qualified to transact business.
(i) During the period of five years after the date hereof, as soon
as practicable after the end of each fiscal year, the Company will furnish
the Representative with two copies, and to each of the other Underwriters
who may so request, one copy, of the Annual Report of the Company containing
the balance sheet of the Company as of the close of such fiscal year and
corresponding statements of earnings, stockholders' equity and cash flows
for the year then ended, such financial statements to be under the
certificate or opinion of the Company's independent certified public
accountants. During such period the Company will also furnish the
Representative with one copy:
(i) as soon as practicable after the filing thereof, of each
report filed by the Company with the Commission; and
(ii) as soon as available, of each report of the Company
mailed to its stockholders.
(j) The Company will comply or cause to be complied with the
conditions to the obligations of the Underwriters set forth in Section 7
hereof.
(k) The Company shall take all necessary and appropriate action
such that the Common Shares are authorized for trading on the NASDAQ National
Market System as soon as practicable after the effectiveness of the
Registration Statement and the Common Shares shall remain so authorized for
at least thirty-six (36) months thereafter.
(l) The Company shall promptly prepare and file with the
Commission, from time to time, such reports as may be required to be filed by
the Rules and Regulations.
(m) The Company shall comply in all respects with the undertakings
given by the Company in connection with the qualification or registration of
the Common Shares for offering and sale under the Blue Sky Laws of one or
more jurisdictions.
(n) The Company shall apply the net proceeds from the sale of the
Common Shares to be sold by it hereunder for the purposes set forth in the
Prospectus.
(o) Except for the sale of Common Shares pursuant to this Agreement,
the Company shall not make any offering, sale or other disposition of any of
its Common Stock on the open market or otherwise within 180 days after the
effective date of the Registration Statement without the Representative's
prior written consent. The Company has obtained for the benefit of the
Underwriters, the agreement of all present officers, directors and principal
stockholders of the Company that for the period indicated in the foregoing
sentence, they will not offer, sell or otherwise dispose of any Common Stock
without the Representative's prior written consent.
9
SECTION 6. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective
or is terminated for any reason, except as otherwise set forth below, the
Company will pay the costs and expenses incurred in connection with the public
offering. Costs, fees and expenses to be paid by the Company include:
(a) All costs, fees and expenses incurred in connection with the
performance of the Company's obligations hereunder, including without
limiting the generality of the foregoing, all costs and expenses incurred
in connection with the preparation, printing, filing and distribution of
the Registration Statement, each Preliminary Prospectus and the Prospectus
(including all exhibits and financial statements) and all agreements and
supplements provided for herein, this Agreement, the Agreement Among
Underwriters, the Selected Dealers Agreement, the Underwriters'
Questionnaire, various letters from the Representative to the Underwriters
and the Preliminary and, if required, any Supplemental Blue Sky Memoranda.
(b) All costs, fees and expenses, including legal fees and
disbursements of counsel for the Underwriters, incurred by the Underwriters
in connection with qualifying or registering all or any part of the Common
Shares for offer and sale under the Blue Sky Laws, if required, including
the preparation of the Preliminary and any Supplemental Blue Sky Memoranda
relating to the Common Shares, and the clearing of such sales with the NASD.
(c) All fees and expenses of the Company's transfer agent,
printing of the certificates for the Common Shares, and all transfer taxes,
if any, with respect to the transfer, sale and delivery of the Common Shares
to the several Underwriters and all fees of the NASD and NASDAQ.
(d) Expenses incurred by the Underwriters, as follows:
(i) Actual, accountable, out-of-pocket expenses not to exceed
$_______ if this Agreement is terminated after the date on which
the Registration Statement is filed with the Commission but prior
to the date of closing of the Offering; or ____ percent (___%) of
the gross proceeds raised in the Offering upon the closing of the
Offering;
(ii) All costs and expenses customarily incurred by the
Underwriters associated with settlement in same day funds
(including, but not limited to, interest or cost of funds expenses),
if settlement in same day funds is requested by the Company;
(iii) All costs and expenses of advertising the public
offering, including any "tombstone" advertisements; provided,
however, that the Underwriters shall not be entitled to such
payment if the Underwriters terminates this Agreement except as
provided in Section 13(b) hereof or the Company terminates this
Agreement because of the negligence or material breach on the part
of the Underwriters which was the cause of the failure of the
offering to be completed.
SECTION 7. Conditions of the Obligations of the Underwriters. The
obligations of the Underwriters to purchase and pay for the Firm Common
Shares on the First Closing Date and the Optional Common Shares on the
Second Closing Date shall be subject to the accuracy of the representations
and warranties on the part of the Company herein set forth as of the date
hereof and as of the First Closing Date or the Second Closing Date, as the
case may be, to the accuracy of the statements of Company officers made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the following additional conditions:
10
(a) The Registration Statement shall have become effective not
later than 1:00 P.M., Baltimore time, on the date of this Agreement, or such
later time as shall have been consented to by the Representative but in no
event later than 1:00 P.M., Baltimore time, on the third full business day
following the date hereof; prior to each Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
instituted or shall be pending or, to the knowledge of the Company, or the
Representative, shall be contemplated by the Commission, and any request
of the Commission for additional information shall have been complied with
to the Representative's reasonable satisfaction.
(b) The Common Shares shall either be "covered securities" as
defined in the Act or shall have been qualified or registered for sale under
the Blue Sky Laws of such states as shall have been specified by the
Representative prior to the date hereof.
(c) The legality and sufficiency of the authorization, issuance
and sale of the Common Shares hereunder, the validity and form of the
certificates representing the Common Shares, the execution and delivery of
this Underwriting Agreement, and all corporate proceedings and other legal
matters incident thereto, and the form of the Registration Statement and the
Prospectus (except financial statements and other financial data included
therein) shall have been approved by Xxxxxxx and Xxxxxxx, Baltimore,
Maryland, counsel for the Representative and the Underwriters.
(d) The Representative shall not have advised the Company that
the Registration Statement or Prospectus, or any amendment or supplement
thereto, contains an untrue statement of fact, which, in the opinion of
Xxxxxxx and Xxxxxxx, counsel for the Representative and the Underwriters,
is material or omits to state a fact which, in the written opinion of such
counsel, is material and is required to be stated therein or necessary to
make the statements therein not misleading.
(e) Since the dates as of which information is given in the
Registration Statement:
(i) the Company and its Subsidiaries shall not have sustained
any material loss or interference with its business from any labor
dispute, strike, fire, explosion, flood or other calamity (whether
or not insured), or from any court or governmental action, order
or decree; and
(ii) there shall not have been any change in the capital
stock, short-term debt or long-term debt of the Company or a change
or a development involving a prospective change in or affecting the
ability of the Company or its Subsidiaries to conduct their
business (whether by reason of any court, legislative, other
governmental action, order, decree, or otherwise), or in the
general affairs, management, financial position, stockholders'
equity or results of the operations of Company, whether or not
arising from transactions in the ordinary course of business, in
each case other than as set forth in or contemplated by the
Registration Statement and Prospectus.
The effect of which on the Company, in any such case described in
clause (i) or (ii), above, is in the Representative's opinion sufficiently
material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Common Shares on the terms
and in the manner contemplated in the Registration Statement and the
Prospectus.
(f) All formal and informal voting agreements, understandings and
arrangements with respect to the voting of Common Stock shall have been
terminated and shall be of no further force or effect except as disclosed in
the Prospectus.
(g) There shall have been furnished to you, as Representative of
the Underwriters, on each Closing Date:
11
(i) An opinion of Huddleston, Bolen, Xxxxxx, Xxxxxx & Xxxxx,
counsel for the Company, addressed to the Representative as such
and dated the First Closing Date or the Second Closing Date, as
the case may be, to the effect that:
(1) the Company and its Subsidiaries are duly
incorporated, validly existing and in good standing under the
laws of their jurisdiction of incorporation with full
corporate power and authority to own and/or lease their
properties and conduct their business as described in the
Prospectus; and the Company and its Subsidiaries are duly
qualified to do business as foreign corporations under the
corporation law of, and is in good standing as such in,
each state where such qualification is required, and do not
own or lease any property or have any employees situated in
any other state.
(2) the Company does not own or control any subsidiary
and does not, to such counsel's knowledge after due
investigation, own any interest in any other corporation,
joint venture, proprietorship or other commercial entity or
organization except as described in the Prospectus.
(3) the authorized capital stock of the Company consists
of 20,000,000 shares of Common Stock, $1.00 par value, and
all such capital stock conforms as to legal matters to the
description thereof in the Registration Statement and
Prospectus; the issued and outstanding shares have been duly
authorized and validly issued and are fully paid and
nonassessable and were issued in compliance with exemptions
from or were registered in accordance with the registration
provisions of Section 5 of the Act and comparable provisions
of applicable Blue Sky Laws; there are not preemptive,
preferential or other rights to subscribe for or purchase any
of the Common Shares to be sold by the Company hereunder and
no shares of Common Stock have been issued in violation of
such rights of stockholders; and, to such counsel's knowledge,
after due investigation, there are not outstanding rights,
warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of Common Stock or other
equity interest in the Company. Except as otherwise stated in
the Registration Statement, to such counsel's knowledge, after
due investigation, no holders of securities of the Company have
rights to the registration of such securities in the
Registration Statement. The statements made in the Prospectus
under the section entitled "Description of Capital Stock" are
accurate in all material respects.
(4) the Common Shares will be duly authorized and
validly issued, fully paid and nonassessable and, upon
consummation of the purchase by the Underwriters, and assuming
they have no knowledge of any liens, claims or encumbrances
affecting the Common Shares, the Underwriters will acquire
good and marketable title thereto, free and clear of any
claim, security interest, community property right, or other
encumbrance or restriction on transfer (except for
restrictions under the Act and under the Blue Sky Laws).
(5) the Company has full corporate power and authority
to enter into and perform this Agreement and this Agreement
the execution and delivery hereof, and the performance of the
Company's obligations hereunder have been duly executed and
delivered by and on behalf of the Company, and are legal,
valid, and binding agreements of the Company, enforceable in
accordance with their terms, except that rights to indemnity
or contribution may be limited by applicable law and
enforceability may be
12
limited by bankruptcy, insolvency or similar laws affecting the
rights of creditors and by equitable principles limiting the
right to specific performance or other equitable relief.
(6) the execution and performance by the Company of
this Agreement, including application of the net proceeds of
the offering, if and when received, as described in the
Prospectus under "Prospectus Summary," "Capitalization" and
"Use of Proceeds," will not violate any provisions of the
Company's or its Subsidiaries' Articles or Certificate of
Incorporation or By-Laws or, to such counsel's knowledge
after due investigation, any law, rule or regulation
applicable to the Company or its Subsidiaries of any
government, court, regulatory body, administrative agency or
other governmental body having jurisdiction over the Company
or its Subsidiaries or any of their properties, and will
not, to such counsel's knowledge after due investigation,
result in the breach, or be in contravention, of any
provision of any loan agreement, lease, franchise, license,
note, bond, other evidence of indebtedness, indenture,
mortgage, deed of trust, other instrument, permit or other
contractual obligation to which the Company or its
Subsidiaries is a party or by which the Company or its
Subsidiaries or their property may be bound, or any order
of any court or governmental agency or authority entered in
any proceeding to which the Company or its Subsidiaries was
or is now a party or by which they are bound.
(7) no consent, approval, authorization or other order
of any court, regulatory body, administrative agency or
other governmental body is required for the execution and
delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated by this
Agreement, except for compliance with the Act and Blue Sky
Laws applicable to the public offering of the Common Shares
by the Underwriters, and the clearance of such offering with
the NASD.
(8) the Registration Statement has become effective under
the Act, and, to the knowledge of such counsel, 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 contemplated under the Act, and
the Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects
with the requirements of the Act and the Rules and Regulations
(except that such counsel need express no opinion as to the
financial statements and other financial data included therein);
such counsel has no reason to believe that either the
Registration Statement or the Prospectus or any such amendment
or supplement thereto, or any document incorporated by reference
therein, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading (except
that such counsel need express no opinion as to the financial
statements and other financial data included therein); such
counsel, after due investigation, does not know of any legal or
governmental proceedings or of any contracts or other documents,
transactions or relationships of or by the Company or its
Subsidiaries required to be described in the Registration
Statement or to be filed as exhibits to the Registration
Statement by the Act or the Rules and Regulations which are not
described or filed, as required.
(9) except as described in the Prospectus, there are no
legal or governmental actions, suits or legal proceedings pending
or threatened to which the Company or its Subsidiaries is a party
or to which their respective businesses or material property
owned or leased by the Company or its Subsidiaries is subject, or
which
13
question the validity of this Agreement or any action taken
or to be taken pursuant hereto.
(10) to the knowledge of such counsel, the Company and its
Subsidiaries have good and marketable title except as otherwise
stated in the Prospectus, to all the real property owned by the
Company and its Subsidiaries as set forth in the Prospectus,
subject to no lien, mortgage, pledge, charge or encumbrance of
any kind or nature whatsoever except those, if any, referred to
in the Prospectus (or reflected in the financial statements
included therein) or which, in the aggregate, are not material
to the Company and its Subsidiaries and their business and do not
materially affect the value of such property; and the real
properties held or used, by the Company and its Subsidiaries
under leases or other agreements as set forth in the Prospectus
are, held by them under valid, subsisting and enforceable leases
or other agreements with respect to which, to such counsel's
knowledge after due investigation, the Company and its
Subsidiaries are not in default, except to the extent that the
enforceability of the rights and remedies of the Company and its
Subsidiaries under any such lease or other agreement may be
limited by bankruptcy, insolvency, or similar laws generally
affecting the rights of creditors and by equitable principles
limiting the right to specific performance or other equitable
relief.
(11) (i) the Company and its Subsidiaries possess all
licenses, permits, approvals and other governmental
authorizations required for the conduct of its business, as
described in the Prospectus; (ii) such licenses, permits and
other governmental authorizations are in full force and effect
and the Company and its Subsidiaries are in all material respects
complying therewith; (iii) the Company and its Subsidiaries are
complying in all respects with all laws, ordinances and
regulations applicable to the Company and its Subsidiaries, their
properties and business, the noncompliance or violation of which
would have a material adverse effect on the Company.
(12) to the knowledge of such counsel, the Company and
its Subsidiaries own or possess all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks,
service marks, and trade names used by them or necessary in
connection with the conduct of their business, as described in
the Prospectus.
It is understood that the opinion of such counsel may state that such
counsel is relying as to factual matters on certificates of officers of the
Company and its Subsidiaries and of state officials and, as to legal matters
in jurisdictions other than in which they are domiciled, on opinions of local
counsel or of other counsel retained or having rendered legal services with
respect to specific matters, in which case their opinion is to state that they
are so doing and they believe such reliance is reasonable, and copies of said
certificates and/or opinions are to be attached to the opinion.
(ii) An opinion of Xxxxxxx and Xxxxxxx, counsel for the
Representative and the Underwriters, addressed to the Representative
in such capacity and dated the First Closing Date or the Second
Closing Date, as the case may be, with respect to the validity of the
Common Shares, the Registration Statement and the Prospectus and other
related matters as you may reasonably require, and the Company shall
have furnished to such counsel such documents and shall have exhibited
to them such papers and records as they request for the purpose of
enabling them to pass upon such matters.
14
(iii) A certificate of the chief executive officer and the
principal financial officer and the chief accountant of the Company
dated the First Closing Date or the Second Closing Date, as the case
may be, to the effect that:
(1) the representations and warranties of the Company set
forth in Section 2 of this Agreement are true and correct as of
the date of this Agreement and as of the First Closing Date or
the Second Closing Date, as the case may be, as if again made on
and as of such Closing Date, and the Company has complied with
all the agreements and satisfied all the conditions to be
performed or satisfied by it at or prior to such Closing Date.
(2) the Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or the
Prospectus filed as a part of the Registration Statement or any
amendment thereto; 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
contemplated under the Act.
(3) each of the respective signatories of the certificate
for the Company has carefully examined the Registration Statement
and the Prospectus, and any amendment or supplement thereto, and,
in the opinion of such signatory and to his knowledge, the
Registration Statement and the Prospectus and any amendment or
supplement thereto contain all statements that are required to
be stated therein, and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, includes any
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which
they are made, not misleading, and, since the date on which the
Registration Statement was first filed with the Commission, there
has occurred no event required to be set forth in an amended or
supplemented prospectus or in an amendment to the Registration
Statement which has not been so set forth.
(4) since the date on which said Registration Statement
was initially filed, there has not been any material adverse
change or a development involving a prospective material adverse
change in the business, properties, financial condition or
earnings of the Company or its Subsidiaries, whether or not
arising from transactions in the ordinary course of business,
except as disclosed in said Registration Statement as heretofore
amended including the proposed amendment thereto delivered to the
Representative prior to or contemporaneously with the execution
of this Agreement or (but only if the Representative expressly
consents thereto in writing) delivered to the Representative
thereafter; since such date and except as so disclosed or in the
ordinary course of business, the Company and its Subsidiaries
have not incurred any liability or obligation, direct or
indirect, or entered into any material transaction since such
date and except as so disclosed there has not been any material
change in the capital stock, short-term debt or long-term debt
of the Company and its Subsidiaries and the Company has not
acquired any of the Common Shares nor has the Company declared
or paid any dividend, or made any other distribution, upon its
outstanding shares of Common Stock payable to stockholders of
record on a date prior to the First Closing Date or Second
Closing Date, as the case may be; since such date and except as
so disclosed, the Company and its Subsidiaries have not incurred
any material contingent obligations, and no material litigation
is pending or threatened against the Company and its
Subsidiaries; and, since such date and except as so disclosed the
Company and its Subsidiaries have not sustained a material loss
or interference by strike, labor dispute, fire, explosion, flood,
windstorm, accident or other calamity (whether or not insured) or
from any court or governmental action, order or decree.
15
The delivery of the certificate provided for in this subparagraph (iii)
shall be and constitute a representation and warranty of the Company as to the
facts required in the immediately foregoing clauses (1), (2), (3) and (4) of
this subparagraph (iii) to be set forth in said certificate.
(iv) A written agreement or agreements signed by each
director, officer and principal stockholder of the Company to the
effect that such persons will not make any offering, sale or
other disposition of any Common Stock in the open market or
otherwise for a period of 180 days after the commencement of the
public offering of the Common Shares by the Underwriters, except
with the prior written consent of the Representative.
(v) At the time this Agreement is executed and also on the
First Closing Date and the Second Closing Date, there shall be
delivered to the Representative a letter addressed to the
Representative, as Representative of the Underwriters, from
Ernst & Young LLP, independent certified public accountants, the
first letter to be dated the date of this Agreement, the second
letter to be dated the First Closing Date and the third letter
(in the event of a Second Closing) to be dated the Second Closing
Date, to the effect set forth in Schedule B annexed hereto and
containing the information set forth therein and such other
information as may be requested by the Representative as of a
date within five days of the date of such letter. There shall
not have been any change or decrease specified in any of the
letters referred to in this subparagraph (vi) which makes it
impractical or inadvisable in the Representative's judgment to
proceed with the initial public offering or the purchase of the
Common Shares as contemplated hereby.
(vi) Such further certificates and documents as the
Representative may reasonably request.
All such opinions, certificates, letters and documents shall be
in compliance with the provisions hereof only if they are satisfactory
to the Representative and to Xxxxxxx and Xxxxxxx, counsel for the
Representative and the Underwriters. The Company shall furnish the
Representative with such manually signed or conformed copies of such
opinions, certificates, letters and documents as the Representative may
reasonably request.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at either Closing Date is not so satisfied, this
Agreement at the Representative's election will terminate upon
notification to the Company without liability on the part of any
Underwriter (including the Representative), or the Company except for
the expenses to be paid by the Company pursuant to Section 6 hereof or
reimbursed by the Company pursuant to Section 8 hereof and except to the
extent provided in Section 10 hereof.
SECTION 8. Reimbursement of Underwriters' Expenses. If the sale to the
Underwriters of the Common Shares at the First Closing Date or the Second
Closing Date is not consummated because any condition to the Underwriters'
obligations hereunder is not satisfied, because the Company terminates this
Agreement pursuant to Section 13, or because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or comply
with any provision hereof, the Company agrees to reimburse the Representative
and the other Underwriters upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by the Representative and them in connection with the proposed
purchase and the sale of the Common Shares. Any such termination shall be
without liability of any party to any other party except that the provisions
of this Section, Section 6 and Section 10 shall at all times be effective and
shall apply.
16
SECTION 9. Effectiveness of Registration Statement. The Representative
and the Company will each use their respective best efforts to cause the
Registration Statement to become effective, to prevent the issuance of any
stop order suspending the effectiveness of the Registration Statement, and, if
such stop order is issued, to obtain as soon as possible the lifting thereof.
SECTION 10. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act or the Exchange Act against any losses, claims,
damages, or liabilities, joint or several, to which such Underwriter or
each such controlling person may become subject under the Act, the
Exchange Act, Blue Sky Laws or other federal or state securities laws
or regulations, at common law or otherwise (including in settlement of
any litigation, if such settlement is effected with the written consent
of the Company), insofar as such losses, claims, damages or liabilities
(or actions in respect thereof, arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, or in any
application filed under any Blue Sky Law or other document executed by
the Company specifically for that purpose or filed in any state or
other jurisdiction in order to qualify any or all of the Common Shares
under the securities laws thereof (any such application or document
being hereinafter referred to as a "Blue Sky Application") or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are
made, not misleading; the Company agrees, to reimburse each Underwriter
and each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter and each such controlling person
for any legal or other expenses reasonably incurred by such Underwriter
or any such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the
extent that:
(i) any such loss, claim, damage, liability arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto or in any Blue Sky Application in reliance upon
and in conformity with written information furnished to the Company
by or on behalf of any Underwriter through the Representative
specifically for use therein; or
(ii) if such statement or omission was contained or made in
any Preliminary Prospectus and corrected in the Prospectus and
(1) any such loss, claim, damage or liability suffered or incurred
by any Underwriter (or any person who controls any Underwriter)
resulted from an action, claim or suit by any person who purchased
Common Shares which are the subject thereof from such Underwriter
in the offering, and (2) such Underwriter failed to deliver or
provide a copy of the Prospectus to such person at or prior to the
confirmation of the sale of such Common Shares in any case where
such delivery is required by the Act unless such failure was due to
failure by the Company to provide copies of the Prospectus to the
Underwriters as required by this Agreement.
The indemnification obligations of the Company as provided above are in
addition to any liabilities the Company may otherwise have under other
agreements, under common law or otherwise.
(b) Each Underwriter will severally and not jointly indemnify and
hold harmless the Company, each of its directors and each of its officers
who sign the Registration Statement, and each person, if any, who
controls the Company within the meaning of the Act or the Exchange Act,
against any losses, claims, damages or liabilities to which the Company,
or any such director, officer or controlling person may become subject
under the Act, the Exchange Act, Blue Sky Laws or other federal or state
statutory laws or regulations, at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the
written consent of such Underwriter and the Representative, which shall
not be unreasonably withheld), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus,
or any amendment or supplement thereto, or in any Blue Sky Application,
or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement thereto, or in any Blue Sky Application, in
reliance upon and in conformity with any written information furnished to
the Company by such Underwriter through the Representative specifically
for use in the preparation thereof; each Underwriter will severally
reimburse any legal or other expenses reasonably incurred by the Company,
or any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action. The indemnification obligations of each Underwriter as provided
above are in addition to any liabilities any such Underwriter may
otherwise have under other agreements, under common law or otherwise.
Notwithstanding the provisions of this Section, no Underwriter shall be
required to indemnify the Company, or any officer, director or controlling
person of the Company in any amount in excess of the total price at which
the Common Shares purchased by any such Underwriter hereunder were offered
to the public, plus reimbursement for reasonable legal fees and other
reasonable expenses incurred. For all purposes of this Agreement,
the name of each Underwriter, and the amounts of the selling concession
and reallowance set forth in the Prospectus constitute the only
information furnished in writing by or on behalf of any Underwriter for
inclusion in the Preliminary Prospectus, Registration Statement,
Prospectus (as amended or supplemented from time to time) or Blue Sky
Application.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section, notify the indemnifying party in
writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve any indemnifying party from any
liability which it or he may have to any indemnified party otherwise
than under this Section. In case any such action is brought against any
indemnified party and such indemnified party notifies an indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it or he may wish,
jointly with all other indemnifying parties, similarly notified, to
assume the
17
defense thereof, with counsel reasonably satisfactory to such indemnified
party, provided, however, if the defendants in any such action include
both the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal defenses
available to it or he and/or other indemnified parties 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 its election to assume the defense of such
action and upon approval by the indemnified party of counsel to the
indemnifying party, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof, unless:
(i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses 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, approved by the
Representative in the event that one or more of the Underwriters,
their directors, officers or controlling persons, are the
indemnified parties);
(ii) the indemnifying party shall not have employed counsel
reasonable 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 at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section is
unavailable to an indemnified party under subparagraphs (a) or (b)
hereof in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall, subject to the limitations hereinafter set
forth, contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities:
(i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Underwriters from
the offering of the Common Shares; or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause
(i) above, but also the relative fault of the Company and the
Underwriters in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as
any other relevant equitable considerations.
The respective relative benefits received by the Company and the
Underwriters shall be deemed to be in such proportion so that the
Underwriters are responsible for the portion of the losses, claims,
damages or liabilities represented by the percentage that the
underwriting discount per share appearing on the cover page of the
Prospectus bears to the initial public offering price per share
appearing thereon, and the Company is responsible for the remaining
portion. The relative fault of the Company and the Underwriters
shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
the information supplied by the Company or by the Underwriters and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
amount paid or payable by a party as a result of the losses, claims,
damages and liabilities referred to above shall be deemed to include,
subject to the limitations set forth in paragraph (d) of this Section,
any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or claim.
18
The Company, and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section were determined
by pro rata or per capita allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method or
allocation which does not take into account the equitable considerations
referred to in the immediately preceding paragraph. Notwithstanding the
provisions of this Section, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Common Shares underwritten by it and distributed to the public exceeds
the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section are several in
proportion to their respective underwriting commitments and not joint.
SECTION 11. Default of Underwriters. It shall be a condition to this
Agreement and the obligation of the Company to sell and deliver the Common
Shares hereunder, and of each Underwriter to purchase the Common Shares
hereunder in the manner as described herein, that, except as hereinafter in
this paragraph provided, each of the Underwriters shall purchase and pay for
all of the Common Shares agreed to be purchased by such Underwriter hereunder
upon tender to the Representative of all such Common Shares in accordance with
the terms hereof. If any Underwriter or Underwriters default in their
obligations to purchase Common Shares hereunder on either the First or Second
Closing Date and the aggregate number of Common Shares which such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed ten
percent (10%) of the total number of Common Shares which the Underwriters are
obligated to purchase on such Closing Date, the Representative may make
arrangements satisfactory to the Company for the purchase of such Common Shares
by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date the nondefaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Common Shares which such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of Common Shares with respect
to such default or defaults occur is greater than the above percentage and
arrangements satisfactory to the Representative and the Company for the
purchase of such Common Shares by other persons are not made with 36 hours
after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter or the Company except for the expenses
to be paid by the Company pursuant to Section 6 hereof and except to the
extent provided in Section 10 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties,
the Representative or the Company shall have the right to postpone the First
or Second Closing Date, as the case may be, for not more than seven business
days in order that the necessary changes in the Registration Statement,
Prospectus and any other documents, as well as any other arrangements, may be
effected. Nothing herein will relieve a defaulting Underwriter from liability
for its default.
As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section.
SECTION 12. Effective Date. This Agreement shall become effective
immediately as to Sections 6, 8, 10 and 13 and, as to all other provisions,
at 9:00 A.M., Baltimore time, on the day following the date upon which the
Registration Statement becomes effective, unless such a day is a Saturday,
Sunday or holiday (in which event this Agreement shall become effective at
such hour on the business day next succeeding such Saturday, Sunday or
holiday); notwithstanding the foregoing, this Agreement shall nevertheless
become effective at such earlier time after the Registration Statement becomes
effective as the Representative may determine on and by notice to the Company
or by release of any of the Common Shares for sale to the public. For the
purposes of this Section, the Common Shares shall be deemed to have been
released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by the Representative of
telegrams:
(a) advising the Underwriters that the Common Shares are released
for public offering; or
19
(b) offering the Common Shares for sale to securities dealers,
whichever may occur first.
SECTION 13. Termination. Without limiting the right to terminate this
Agreement pursuant to any other provisions hereof:
(a) This Agreement may be terminated by the Company by notice to
the Representative or by the Representative by notice to the Company at
any time prior to the time this Agreement shall become effective as to
all its provisions, and any such termination shall be without liability
on the part of the Company to any Underwriter (except for the expenses
to be paid by the Company pursuant to Section 6 hereof or reimbursed by
the Company pursuant to Section 8 hereof and except to the extent
provided in Section 10 hereof) or of any Underwriter to the Company.
(b) This Agreement may also be terminated by the Representative
prior to the First Closing Date, and the option from the Company referred
to in Section 4 hereof, if exercised, may be canceled at any time prior
to the Second Closing Date, if in the Representative's judgment payment
for and delivery of the Common Shares is rendered impracticable or
inadvisable because:
(i) additional material 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, the American
Stock Exchange, the NASDAQ National Market or over-the-counter market,
or trading in securities generally shall have been suspended on either
such exchange or over-the-counter market or a general banking moratorium
shall have been established by federal, or New York or West Virginia
authorities;
(ii) any event shall have occurred or shall exist which makes
untrue or incorrect in any material respect any statement or
information contained in the Registration Statement or which is not
reflected in the Registration Statement but should be reflected
therein in order to make the statements or information contained
therein, in light of the circumstances in which they are made, not
misleading in any material respect;
(iii) an outbreak or escalation of major hostilities or other
national or international emergency or calamity or any substantial
change in political, financial or economic conditions shall have
occurred or shall have accelerated to such extent, as in your
judgment, to have a material adverse effect on the general
securities market or make it impractical or inadvisable to proceed
with completion of the sale of and payment for the Common Shares; or
(iv) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, a material
adverse change has occurred in the business, financial condition,
results of operations, properties or business prospects of the
Company and its Subsidiaries, whether or not in the ordinary course
of business.
Any termination pursuant to subsection (b) shall be without
liability on the part of any Underwriter to the Company or on the part
of the Company to any Underwriter (except for expenses to be paid by the
Company pursuant to Section 6 hereof or reimbursed by the Company
pursuant to Section 8 hereof and except as to indemnification to the
extent provided in Section 10 hereof).
SECTION 14. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties, and other
statements of the Company, of its officers or directors, and of the
Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation made by or on behalf
of any Underwriter or the Company or any of its or their partners, officers,
20
directors or any controlling person, as the case may be, and will survive
delivery of and payment for the Common Shares sold hereunder.
SECTION 15. Notices. All communications hereunder will be in writing
and, if sent to the Underwriters or the Representative will be mailed,
delivered or telegraphed and confirmed to you c/x Xxxxxx, Xxxxx Xxxxx,
Incorporated, 000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxx Xxxx, Senior Vice President,
With a copy to:
Xxxxxxx and Xxxxxxx
20th Floor
00 X. Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: A. Xxxxx Xxxxxxx
If sent to the Company will be mailed, delivered or telegraphed and
confirmed to the Company at:
Champion Industries, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxx, President
With a copy to:
Huddleston, Bolen, Xxxxxx, Xxxxxx & Xxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
SECTION 16. Successors. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors,
personal representatives and assigns, and to the benefit of the officers and
directors and controlling persons referred to in Section 10, and no other
person will have any right or obligations hereunder. The term "successors"
shall not include any purchaser of the Common Shares as such from any of the
Underwriters merely by reason of such purchase.
SECTION 17. Partial Unenforceability. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
SECTION 18. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, except in
regard to its choice of law.
21
SECTION 19. Counterparts. This Agreement may be signed in counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the
several Underwriters, including you, all in accordance with its terms.
Very truly yours,
Champion Industries, Inc.
By:
------------------------------------
Xxxxxxxx X. Xxxxxxxx, President
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
XXXXXX, XXXXX XXXXX, INCORPORATED
By:
---------------------------------
Acting as Representative of the
several Underwriters (including
itself) named in Schedule A
hereto.
22
SCHEDULE A
----------
Number of
Name of Underwriter Shares
------------------- ---------
Total............................................................. 1,000,000
=========
SCHEDULE B
(1) They are independent public accountants with respect to the Company
within the meaning of the Act and the applicable rules and regulations
thereunder, and the answer to Item _ of the Form S-_ Registration Statement,
insofar as it relates to them, is correct.
(2) In their opinion, the financial statements of the Company included
in the Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the rules and
regulations thereunder.
(3) They have not examined any financial statements of the Company as of
any date or for any period subsequent to October 31, 1997.
(4) For purposes of their letter, they have read the minutes of meetings
of the stockholders and Board of Directors of the Company as set forth in the
respective minute books at February _, 1998, officials of the Company having
advised them that the minutes of all such meetings through that date were set
forth therein, and have carried out other procedures to February _, 1998, as
follows:
(a) With respect to the period from November 1, 1997 to
February , 1998, they have:
(i) Read the unaudited, internally prepared financial statements
of the Company for November and December of 1997 and January of 1998
furnished by the Company, officials of the Company having advised them
that no such financial statements as of any later date were available;
and
(ii) Made inquiries of certain officials of the Company who have
responsibility for financial and accounting matters regarding whether
the unaudited financial statements referred to under (4)(a)(i) are
stated on a basis substantially consistent with that of the audited
financial statements included in the Registration Statement; and
(iii) Read the unaudited financial statements of the Company for
November and December of 1997, and January of 1998, furnished by the
Company, officials of the Company having advised them that no such
financial statements as of any date or for any period subsequent to
January 31, 1998 were available; and
(iv) Made inquiries of certain officials of the Company who have
responsibility for financial and accounting matters regarding whether
the unaudited financial statements referred to under (4)(a)(iii) are
stated on a basis substantially consistent with that of the audited
balance sheet included in the Registration Statement.
(5) Nothing came to their attention as a result of the foregoing
procedures, however, that caused them to believe that
(a) at February _, 1998, there was any change in the long-term debt of
the Company or any decreases in net current assets or net assets as
compared with amounts shown in the October 31, 1997 audited balance sheet
included in the Registration Statement or (ii) for the period from
November 1, 1997 to February _, 1998, there were any decreases, as compared
with the corresponding period in the preceding year, in - revenues or in
the total amounts of net income of the Company; or
B-1
(6) They have made inquiries of certain officials have responsibility for
financial and accounting matters regarding whether (a) there was any change at
February _, 1998, in the long-term debt of the Company or any decreases in net
current assets or Net assets as compared with amounts shown on the October
31, 1997 balance sheet included in the Registration Statement or (b) for the
period from November 1, 1997 to February _, 1998, there were any decreases, as
compared with the corresponding period in the preceding year, in revenues or in
the total amounts of net income. They have made inquiries of certain Company
officials who have responsibility for financial and accounting matters
regarding whether there was any change at February _, 1998, in the capital
stock of the Company or any decreases in total stockholders' equity as
compared with amounts shown on the October 31, 1997 audited balance sheet
included in the Registration Statement. On the basis of these inquiries and
their reading of the minutes as described in 4 above, nothing came to their
attention that caused them to believe that there was any such change or
decrease except in all instances for changes or decreases that the
Registration Statement discloses have occurred or may occur.
(7) In addition to the procedures referred to in 4, 5 and 6 above, they
have carried out certain specified procedures, not constituting an audit, with
respect to certain amounts, percentages, numerical data and financial
information appearing in the Registration Statement, which have previously been
specified by the Representative and which are specified in their letter, and
have compared certain of such items with, and have found such amounts,
percentages, numerical data and financial information to be in agreement with,
the accounting, financial and other records of the Company.
B-2
