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EXHIBIT 1.1
JAKKS PACIFIC, INC.
600,000 Shares1
Common Stock
UNDERWRITING AGREEMENT
April ___, 1997
CRUTTENDEN XXXX INCORPORATED
As Representative of the Several Underwriters
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Dear Sirs:
JAKKS Pacific, Inc., a Delaware corporation (the "Company"), the
persons named in Schedule 1-A hereto (the "Management Selling Stockholders")
and the persons named in Schedule 1-B hereto (the "Non-Management Selling
Stockholders") hereby confirm their agreement with the several underwriters
named in Schedule 2 hereto (the "Underwriters"), for whom you have been duly
authorized to act as representative (in such capacity, the "Representative"),
as set forth below. If you are the only Underwriters, all references herein to
the Representative shall be deemed to be to the Underwriters. The Management
Selling Stockholders and the Non-Management Selling Stockholder are each
referred to herein as a "Selling Stockholder" and are collectively referred to
herein as the "Selling Stockholders."
1. Securities. Subject to the terms and conditions
herein contained, the Company proposes to sell to the several Underwriters an
aggregate of 600,000 shares (the "Firm Securities") of the Company's Common
Stock, $.001 par value per share (the "Common Stock"). The Firm Securities
consist of 600,000 shares of Common Stock to be issued and sold by the Company
and no shares of Common Stock to be sold by the Selling Stockholders. The
Selling Stockholders also severally propose to sell to the several Underwriters
not more than 90,000 additional shares of Common Stock if requested by the
Representative as provided in Section 3 of this Agreement. Any and all shares
of Common Stock to be purchased by the Underwriters pursuant to such option are
referred to herein as the "Option Securities." The Option Securities, if any,
consist of up to 90,000 shares of Common Stock to be issued and sold by each of
the Selling Stockholders in the amounts set forth opposite the name of such
Selling Stockholder in Schedules 1-A or 1-B hereto. The Firm Securities and any
Option Securities are collectively referred to herein as the "Securities."
2. Representations and Warranties of the Company and
Selling Stockholders.
(a) The Company and each of the Management Selling
Stockholders jointly and severally represent and warrant to, and agree with,
each of the several Underwriters that:
__________________________________
(1) Plus an option to purchase up to 90,000 additional shares to cover
over-allotments, if any.
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(i) registration statement on Form SB-2 (File No. 333-22583) with
respect to the Securities, including a prospectus subject to completion, has
been filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and one
or more amendments to such registration statement may have been so filed.
After the execution of this Agreement, the Company will file with the
Commission either (A) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
either (1) if the Company relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Securities, that shall identify the
Preliminary Prospectus (as hereinafter defined) that it supplements containing
such information as is required or permitted by Rules 434, 430A and 424(b)
under the Act or (2) if the Company does not rely on Rule 434 under the Act, a
prospectus in the form most recently included in an amendment to such
registration statement (or, if no such amendment shall have been filed, in such
registration statement), with such changes or insertions as are required by
Rule 430A under the Act or permitted by Rule 424(b) under the Act, and in the
case of either clause (A)(1) or (A)(2) of this sentence, as have been provided
to and approved by the Representative prior to the execution of this Agreement,
or (B) if such registration statement, as it may have been amended, has not
been declared by the Commission to be effective under the Act, an amendment to
such registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by the Representative prior to the
execution of this Agreement. The Company may also file a related registration
statement with the Commission pursuant to Rule 462(b) under the Act for the
purpose of registering certain additional Securities, which registration
statement shall be effective upon filing with the Commission. As used in this
Agreement, the term "Original Registration Statement" means the registration
statement initially filed relating to the Securities, as amended at the time
when it was or is declared effective, including all financial schedules and
exhibits thereto and including any information omitted therefrom pursuant to
Rule 430A under the Act and included in the Prospectus (as hereinafter
defined); the term "Rule 462(b) Registration Statement" means any registration
statement filed with the Commission pursuant to Rule 462(b) under the Act
(including the Registration Statement and any Preliminary Prospectus or
Prospectus incorporated therein at the time such Registration Statement becomes
effective); the term "Registration Statement" includes both the Original
Registration Statement and any Rule 462(b) Registration Statement; the term
"Preliminary Prospectus" means each prospectus subject to completion filed with
such registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); the term
"Prospectus" means: (x) if the Company relies on Rule 434 under the Act, the
Term Sheet relating to the Securities that is first filed pursuant to Rule
424(b)(7) under the Act, together with the Preliminary Prospectus identified
therein that such Term Sheet supplements; (y) if the Company does not rely on
Rule 434 under the Act, the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act; or (z) if the Company does not rely on Rule 434
under the Act and if no prospectus is required to be filed pursuant to Rule
424(b) under the Act, the prospectus included in the Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies the requirements
of Rule 434 under the Act. Any reference herein to the "date" of a Prospectus
that includes a Term Sheet shall mean the date of such Term Sheet.
(ii) The Commission has not issued or, to the best knowledge of the
Company, threatened or contemplated any order preventing or suspending the use
of any Preliminary Prospectus; no stop order suspending the sale of the
Securities in any jurisdiction has been issued
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and no proceedings for that purpose are pending or, to the best knowledge of
the Company, threatened or contemplated, and any request of the Commission for
additional information (to be included in the Registration Statement, any
Preliminary Prospectus or the Prospectus or otherwise) has been complied with.
When any Preliminary Prospectus was filed with the Commission it (A) contained
all statements required to be stated therein in accordance with, and complied
in all material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (B) did not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. When the Registration Statement or any
amendment thereto was or is declared effective, it (A) contained or will
contain all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements of, the
Act and the rules and regulations of the Commission thereunder and (B) did not
or will not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. When
the Prospectus or any Term Sheet that is a part thereof or any amendment or
supplement to the Prospectus is filed with the Commission pursuant to Rule
424(b) (or, if the Prospectus or any part thereof or such amendment or
supplement is not required to be so filed, when the Registration Statement or
the amendment thereto containing such amendment or supplement to the Prospectus
was or is declared effective) and on the Firm Closing Date and any Option
Closing Date (both as hereinafter defined), the Prospectus, as amended or
supplemented at any such time, (A) contained or will contain all statements
required to be stated therein in accordance with, and complied or will comply
in all material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (B) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (ii) do not apply to statements or omissions made
in any Preliminary Prospectus, the Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representative specifically for use therein.
(iii) If the Company has elected to rely on Rule 462(b), (A) the
Company has filed a Rule 462(b) Registration Statement in compliance with Rule
462(b), which is effective upon filing pursuant to Rule 462(b), and has
received confirmation of its receipt and (B) the Company has given irrevocable
instructions for transmission of the applicable filing fee in connection with
the filing of the Rule 462(b) Registration Statement, in compliance with Rule
111 promulgated under the Act or the Commission has received payment of such
filing fee.
(iv) The Company and each of its subsidiaries have been duly
organized and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation and are duly qualified
to transact business as foreign corporations and are in good standing under the
laws of all other jurisdictions where the ownership or leasing of their
respective properties or the conduct of their respective businesses requires
such qualification, except where the failure to be so qualified does not result
in a material adverse change in the condition (financial or otherwise),
business, prospects, net worth or results of operations of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect").
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(v) The Company and each of its subsidiaries have full power
(corporate and other) to own or lease their respective properties and conduct
their respective businesses as described in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus); the Company has full power (corporate and other) and
authority to enter into this Agreement and to carry out all the terms and
Provisions hereof to be carried out by it; and the Company has full power
(corporate and other) and authority to execute and deliver the warrants to
purchase Common Stock to be issued and sold to the Representative under the
terms of the Warrant Agreement (as hereinafter defined) in accordance with
Section 5(o) hereto (the "Representative's Warrants").
(vi) The issued shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable and are owned beneficially by the Company free and clear of any
security interests, liens, encumbrances, equities or claims. The Warrant
Agreement and the Representative's Warrants, as of the Closing Date, will have
been duly authorized and validly issued, and when executed and delivered by the
Company will be valid and binding obligations enforceable against the Company
in accordance with their terms, 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.
The Common Stock issuable pursuant to the Representative's Warrants, when
issued in accordance with the terms thereof, will be duly authorized, validly
issued, fully paid and nonassessable. The Representative's Warrants and the
shares of Common Stock issuable thereunder were not and will not be issued in
violation of any preemptive rights of any security holder of the Company. The
Company has reserved a sufficient number of shares of Common Stock for issuance
pursuant to the Representative's Warrants. The holders of the Common Stock
issuable pursuant to the Representative's Warrants will not be subject to
personal liability solely by reason of being such holders. The issuance and
sale of the Common Stock pursuant to the Representative's Warrants will be made
in conformity with the applicable registration requirements or exemptions
therefrom under federal and applicable state securities law.
(vii) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). All of the issued shares
of capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. The Firm Securities and the Option
Securities have been duly authorized and at the Firm Closing Date or the
related Option Closing Date (as the case may be), after payment therefor in
accordance herewith, will be validly issued, fully paid and nonassessable. At
the Firm Closing Date or the Option Closing Date, no holders of outstanding
shares of capital stock of the Company will be entitled as such to any
preemptive or other rights to subscribe for any of the Securities, and no
holder of securities of the Company has any right which has not been fully
exercised or waived to require the Company to register the offer or sale of any
securities owned by such holder under the Act in the public offering
contemplated by this Agreement.
(viii) The capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), and
this Agreement, the Warrant Agreement and the Representative's Warrants conform
in all material respects to the descriptions thereof contained in
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the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(ix) Except as disclosed in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), there are no
outstanding (A) securities or obligations of the Company or any of its
subsidiaries convertible into or exchangeable for any capital stock of the
Company or any such subsidiary, (B) warrants, rights or options to subscribe
for or purchase from the Company or any such subsidiary any such capital stock
or any such convertible or exchangeable securities or obligations, or (C)
obligations of the Company or any such subsidiary to issue any shares of
capital stock, any such convertible or exchangeable securities or obligations,
or any such warrants, rights or options. The information in the Registration
Statement and the Prospectus insofar as it relates to the Representative's
Warrants, in each case as of the date on which the Registration Statement is
declared effective by the Commission, the Closing Date and any Option Closing
Date, is true, correct and complete in all material respects.
(x) The consolidated financial statements and schedules of the
Company and its consolidated subsidiaries included in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) fairly present the financial position of
the Company and its consolidated subsidiaries and the results of operations and
cash flows as of the dates and periods therein specified. The combined
financial statements and schedules of Road Champs, Inc., Die Cast Associates,
Inc. and their consolidated subsidiaries (collectively, "Road Champs") included
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) fairly present the
financial position of Road Champs and the results of operations and cash flows
as of the dates and periods therein specified. Such financial statements and
schedules have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods involved
(except as otherwise noted therein). The selected financial data set forth
under the captions "Summary Consolidated Financial Data" and "Capitalization"
in the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present, in accordance with GAAP, as applicable,
on the basis stated in the Prospectus (or such Preliminary Prospectus), the
information included therein. No other financial statements or schedules are
required to be included in the Registration Statement.
(xi) Xxxxxxx Xxxx Xxxxxxx, P.C., which has audited certain
financial statements of the Company and its consolidated subsidiaries and Road
Champs and its consolidated subsidiaries and delivered their report with
respect to the audited consolidated financial statements and audited combined
financial statements included in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), are independent public accountants as required by the Act and the
applicable rules and regulations thereunder.
(xii) The execution and delivery of this Agreement, the Warrant
Agreement and the Representative's Warrants have been duly authorized by the
Company; this Agreement, the Warrant Agreement and the Representative's
Warrants have been duly executed and delivered by the Company and are the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by the effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to rights and remedies of creditors or by general
equitable principles.
(xiii) No legal or governmental proceedings are pending to which the
Company or
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any of its subsidiaries is a party or to which the property of the Company or
any of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not described therein (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
and, to the Company's knowledge, no such proceedings have been threatened
against the Company or any of its subsidiaries or with respect to any of their
respective properties; and no contract or other document is required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement that is not described therein (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) or
filed as required.
(xiv) The issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement and of the
Representative's Warrants to the Representative by the Company pursuant to the
Warrant Agreement; the execution and delivery of this Agreement, the Warrant
Agreement and the Representative's Warrants by the Company; the compliance by
the Company with the provisions of this Agreement, the Warrant Agreement and
the Representative's Warrants; and the consummation of all transactions
contemplated therein do not (A) require the consent, approval, authorization,
registration or qualification of or with any court, government or governmental
authority, domestic or foreign, except such as have been obtained, such as may
be required under state securities or blue sky laws, such as may be required by
the National Association of Securities Dealers, Inc. (the "NASD") and, if the
Registration Statement filed with respect to the Securities (as amended) is not
effective under the Act as of the time of execution hereof, such as may be
required (and shall be obtained as provided in this Agreement) under the Act,
or (B) conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective properties are bound, or the charter documents or
by-laws of the Company or any of its subsidiaries, or any statute or any
judgment, decree, order, rule or regulation of any court or other governmental
authority or any arbitrator applicable to the Company or any of its
subsidiaries, which would have a Material Adverse Effect.
(xv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), neither the
Company nor any of its subsidiaries has sustained any loss or interference with
their respective businesses or properties having or resulting in a Material
Adverse Effect from fire, flood, hurricane, accident or other calamity, whether
or not covered by insurance, or from any labor dispute or any legal or
governmental proceeding and there has not been any event, circumstance, or
development that results in, or that the Company believes would result in, a
Material Adverse Effect, except in each case as described in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).
(xvi) The Company has not, directly or indirectly (except for the
sale of Securities under this Agreement), (i) taken any action designed to
cause or to result in, or that has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities or
(ii) since the filing of the Registration Statement (A) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases of, the
Securities or (B) paid or agreed to pay to any person
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any compensation for soliciting another to purchase any other securities of the
Company.
(xvii) (a) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses except
where the failure to possess any such item would not have a Material Adverse
Effect, and (b) neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit that, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect, except as described in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus).
(xviii) The Company is not an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and this transaction will not
cause the Company to become an investment company subject to registration under
the 1940 Act.
(xix) The Company has filed all foreign, federal, state and local
tax returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a Material
Adverse Effect) and has paid all taxes required to be paid by it and any other
assessment, fine or penalty levied against it, to the extent that any of the
foregoing is due and payable, except for any such assessment, fine or penalty
that is currently being contested in good faith or as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(xx) Except for the shares of capital stock of each of the
subsidiaries owned by the Company, neither the Company nor any such subsidiary
owns any shares of stock or any other equity securities of any corporation or
has any equity interest in any firm, partnership, association or other entity.
All shares of stock or other equity securities of the subsidiaries are
wholly-owned directly or indirectly by the Company.
(xxi) The books, records and accounts of the Company and each of its
subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in and dispositions of the assets of the Company and each of its
subsidiaries, respectively. The books, records and accounts of Road Champs and
each of its subsidiaries accurately and fairly reflect, in reasonable detail,
the transactions in and dispositions of the assets of Road Champs and each of
its subsidiaries, respectively. The Company, Road Champs and each of their
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (A) transactions are executed in accordance
with management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(xxii) Except as described in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), no default exists and no event has occurred that, with
notice or lapse of time or both, would constitute a default, in the due
performance and observance of any term, covenant or condition of any contract,
indenture, mortgage, deed of trust, lease or other agreement or instrument to
which the Company or any of
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its subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective properties is bound or may be affected, in any
respect that would have a Material Adverse Effect. The agreements to which the
Company or any of its subsidiaries is a party described in the Registration
Statements are valid agreements, enforceable by the Company or such subsidiary,
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 best of the Company's knowledge, the other contracting party or parties
thereto are not in material breach or material default under any of such
agreements.
(xxiii) The Company has not distributed and, prior to the later of (A)
the Firm Closing Date or any Option Closing Date and (B) the completion of the
distribution of the Securities, will not distribute any written offering
material in connection with the offering and sale of the Securities other than
the Registration Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or Term Sheet or any amendment or supplement
thereto, or other materials, if any, permitted by the Act.
(xxiv) The description of the Company's and its subsidiaries' real
property contained in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), is
true and complete in all material respects and the Company and its subsidiaries
have good and marketable title to all real and personal property owned by each
of them, in each case free and clear of any security interests, liens,
encumbrances, equities, claims and other defects, except for those relating to
debts of the Company or such subsidiary described in the Registration Statement
and the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and those that do not interfere with the use made or
proposed to be made of such property by the Company or such subsidiary, and any
real property and buildings held under lease by the Company or any such
subsidiary are held under valid, subsisting and enforceable leases (except as
enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to rights and
remedies of creditors or by general equitable principles), with such exceptions
as are not material and do not interfere with the use made or proposed to be
made of such property and buildings by the Company or such subsidiary, in each
case except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus). The
Company and its subsidiaries own or lease all such properties as are necessary
to its operations as now conducted and as described in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(xxv) No labor dispute with the employees of the Company or any of
its subsidiaries exists or to the Company's knowledge, is threatened or
imminent that could result in a Material Adverse Effect, except as described in
or contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), and the Company is not aware of an
existing, imminent or threatened labor disturbance by the employees of any
principal suppliers, manufacturers, contractors or others that that could
result in a Material Adverse Effect, except as described in or contemplated by
the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(xxvi) The Company and its subsidiaries own or possess all material
trademarks,
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service marks, trade names, licenses, copyrights and proprietary or other
confidential information currently employed by them in connection with their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of infringement of or conflict with asserted rights of any
third party with respect to any of the foregoing which, singly or in the
aggregate, if the subject of unfavorable decisions, rulings or findings, would
have a Material Adverse Effect, except as described in the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
The description of the Company's licensing and marketing agreements contained
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), is true and complete in
all material respects. All such licensing and marketing agreements are valid,
binding and in full force and effect and neither the Company nor any subsidiary
is, or has received any notice that it is, in default (or with the giving of
notice or lapse of time or both, would be in default) under any such licensing
or marketing agreements.
(xxvii) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which
they are engaged; and neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(xxviii) The Common Stock is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and is quoted on the Nasdaq Small Cap and, upon completion of the Offering,
will be quoted 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 Common Stock under the Exchange Act or delisting the Common
Stock from the Nasdaq Small Cap or that could in the future cause the Common
Stock to be delisted from the Nasdaq National Market, nor has the Company
received any notification that the Commission or NASD is contemplating
terminating such registration or listing. The Company has timely filed all
reports required to be filed by it under the Exchange Act.
(xxix) The Company has not at any time during the last five (5) years
(A) made any unlawful contribution to any candidate for foreign office or
failed to disclose fully any contribution in violation of law, or (B) made 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.
(xxx) Any pro forma financial or other information and related notes
included in the Registration Statement, each Preliminary Prospectus and the
Prospectus comply (or, if the Prospectus has not been filed with the
Commission, as to the Prospectus, will comply) in all material respects with
the requirements of the Act and the rules and regulations of the Commission
thereunder and present fairly the pro forma information shown, as of the dates
and for the periods covered by such pro forma information. Such pro forma
information, including any related notes and schedules, has been prepared on a
basis consistent with the historical financial statements and other historical
information, as applicable, included in the Registration
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Statement, the Preliminary Prospectus and the Prospectus, except for the pro
forma adjustments specified therein, and give effect to assumptions made on a
reasonable basis to give effect to historical and, if applicable, proposed
transactions described in the Registration Statement, each Preliminary
Prospectus and the Prospectus.
(xxxi) Except as set forth in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), there are no
outstanding loans, advances or guaranties of indebtedness by the Company or its
subsidiaries to or for the benefit of any of (i) its "affiliates," as such term
is defined in the Act and the rules and regulations thereof or (ii) any of the
members of the families of any of them.
(xxxii) The Company and its subsidiaries have no liability, absolute
or contingent, relating to: (A) public health or safety; (B) worker health or
safety; (C) product defect or warranty (except, as to product defect or
warranty, as is disclosed in the Registration Statement and Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus));
or (D) pollution, damage to or protection of the environment, including,
without limitation, relating to damage to natural resources, emissions,
discharges, releases or threatened releases of hazardous materials into the
environment (including, further without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, use, treatment, storage, generation, disposal,
transport or handling of any hazardous materials. As used herein, "hazardous
material" includes chemical substances, wastes, pollutants, contaminants,
hazardous or toxic substances, constituents, materials or wastes, whether
solid, gaseous or liquid in nature.
(b) Each of the Selling Stockholders represents and
warrants to, and agrees with, each Underwriter that:
(i) Such Selling Stockholder is the lawful owner of the
Securities to be sold by such Selling Stockholder hereunder and upon
sale and delivery of, and payment for, such Securities, as provided
herein, such Selling Stockholder will convey good and marketable title
to such Securities, free and clear of all liens, encumbrances, equities
and claims whatsoever.
(ii) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result,
under the Exchange Act or otherwise, in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Securities and has not effected any sales of shares of
Common Stock which, if effected by the issuer, would be required to be
disclosed in response to Item 701 of Regulation S-B.
(iii) The execution and delivery of this Agreement have been duly
authorized by such Selling Stockholder, and this Agreement has been
duly executed and delivered by such Selling Stockholder and is the
valid and binding agreement of such Selling Stockholder, enforceable
against such Selling Stockholder in accordance with its terms, except
as such enforceability may be limited by the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating
to rights and remedies of creditors or by general equitable
principles.
(iv) Certificates in negotiable form for such Selling Stockholder's
Securities have
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been placed in custody, for delivery pursuant to the terms of this
Agreement, under a Custody Agreement duly authorized, executed and
delivered by such Selling Stockholders, in the form heretofore
furnished to you (the "Custody Agreement") with US Stock Transfer
Corporation of Glendale, California, as Custodian (the "Custodian");
the Securities represented by the certificates so held in custody for
each of the Selling Stockholders are subject to the interests
hereunder of the Underwriters, the Company and the other Selling
Stockholders, if any; the arrangements for custody and delivery of
such certificates, made by such Selling Stockholder hereunder and
under the Custody Agreement, are not subject to termination by any
acts of such Selling Stockholder, or by operation of law, whether by
the death or incapacity of such Selling Stockholder or the occurrence
of any other event; and if any such death, incapacity or any other
such event shall occur before the delivery of such Securities
hereunder, certificates for the Securities will be delivered by the
Custodian in accordance with the terms and conditions of this
Agreement and the Custody Agreement as if such death, incapacity or
other event had not occurred, regardless of whether or not the
Custodian shall have received notice of such death, incapacity or
other event.
(v) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by such
Selling Stockholder of the transactions contemplated herein, except
such as may have been obtained under the Act and such as may be
required under the blue sky laws of any jurisdiction in connection
with the purchase and distribution of the Securities by the
Underwriters and such other approvals as have been obtained.
(vi) Neither the sale of the Securities being sold by such Selling
Stockholder nor the consummation of any other of the transactions
herein contemplated by such Selling Stockholder or the fulfillment of
the terms hereof by such Selling Stockholder will conflict with or
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
lease or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound,
or the charter documents or by-laws of such Selling Stockholder, or
any statute or any judgment, decree, order, rule or regulation of any
court or other governmental authority or any arbitrator applicable to
such Selling Stockholder.
(vii) Such Selling Stockholder has delivered to the Representative
an agreement to the effect that such person or entity will not, except
to the extent otherwise specifically permitted by the terms of each
such person's or entity's agreement, directly or indirectly, without
the prior written consent of the Representative, offer, sell, offer to
sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, grant of an option to purchase or other sale
or disposition) of any shares of Common Stock or any securities
convertible into, or exchangeable or exercisable for, shares of Common
Stock for a period of 45 days after the date of this Agreement;
provided, however, that intra-family transfers or transfers to trust
for estate planning purposes shall not be so restricted.
(c) Any certificate signed by any officer of the Company
or any Selling Stockholder and delivered to the Representative or to counsel
for the Underwriters shall be deemed a representation and warranty by the
Company or such Selling Stockholder, respectively, to each Underwriter, as to
the matters covered thereby.
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3. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, (i) the Company agrees to issue and sell 600,000
Firm Securities, and (ii) each of the Underwriters, severally and not jointly,
agrees to purchase from the Company, at a purchase price of [$ ] per share,
an aggregate number of Firm Securities set forth opposite the name of such
Underwriter in Schedule 2 hereto. One or more certificates in definitive form
for the Firm Securities that the several Underwriters have agreed to purchase
hereunder from the Company, in such denomination or denominations and registered
in such name or names as the Representative requests upon notice to the Company
at least 48 hours prior to the Firm Closing Date, shall be delivered by or on
behalf of the Company to the Representative for the respective accounts of the
Underwriters, against payment by or on behalf of the Underwriters of the
aggregate purchase price therefor by wire transfer in same day funds (the "Wired
Funds") to the account of the Company. The certificates for the Option
Securities that the several Underwriters have agreed to purchase hereunder from
the Selling Stockholders shall be delivered in accordance with the terms of the
custody agreement by or on behalf of the Selling Stockholders to the
Representative for the respective accounts of the Underwriters against payment
by or on behalf of the Underwriters of the aggregate purchase price therefor at
any such closing. Such delivery of and payment for the Firm Securities shall be
made at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 0000 Xxxxxxx Xxxx Xxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000, at 6:30 A.M., Pacific time, on April __, 1997, or at
such other place, time or date as the Representative and the Company may agree
upon or as the Representative may determine pursuant to Section 9 hereof, such
time and date of delivery against payment being herein referred to as the "Firm
Closing Date." The Company will make such certificate or certificates for the
Firm Securities available for checking and packaging by the Representative at
the offices of the Company's transfer agent or registrar at least 24 hours prior
to the Firm Closing Date or, if available, will coordinate the transfer of the
Firm Securities to the Underwriters through the facilities of the Depository
Trust Company.
(b) For the sole purpose of covering any over-allotments
in connection with the distribution and sale of the Firm Securities as
contemplated by the Prospectus, on the basis of the several (and not joint)
covenants and agreements of the Underwriters contained in this Agreement and
subject to the terms and conditions set forth in this Agreement, each of the
Selling Stockholders hereby grants to the several Underwriters an option to
purchase, severally and not jointly, so many of the Option Securities set forth
opposite the name of such Selling Stockholder in Schedules 1-A and 1-B. The
purchase price to be paid for any Option Securities shall be the same price per
share as the price per share for the Firm Securities set forth above in
paragraph (a) of this Section 3. The option granted hereby may be exercised as
to all or any part of the Option Securities from time to time within forty-five
days after the date of the Prospectus (or, if such 45th day shall be a Saturday
or Sunday or a holiday, on the next business day thereafter when the Nasdaq
National Market is open). The Underwriters shall not be under any obligation to
purchase any of the Option Securities prior to the exercise of such option. The
Representative may from time to time exercise the option granted hereby by
giving notice in writing or by telephone (confirmed within 24 hours in writing)
to the Company and each of the Selling Stockholders setting forth the aggregate
number of Option Securities as to which the several Underwriters are then
exercising the option and the date and time for delivery of and payment for such
Option Securities. Any such date of delivery shall be
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determined by the Representative but shall not be earlier than two business days
or later than five business days after such exercise of the option and, in any
event, shall not be earlier than the Firm Closing Date. The time and date set
forth in such notice, or such other time on such other date as the
Representative and the Company may agree upon or as the Representative may
determine pursuant to Section 9 hereof, is herein called the "Option Closing
Date" with respect to such Option Securities. Upon exercise of the option as
provided herein, each of the Selling Stockholders shall become obligated to sell
to each of the several Underwriters, and, subject to the terms and conditions
herein set forth, each of the Underwriters (severally and not jointly) shall
become obligated to purchase from each of the Selling Stockholders, the same
percentage of the total number of the Option Securities as to which the several
Underwriters are then exercising the option as such Underwriter is obligated to
purchase of the aggregate number of Firm Securities, as adjusted by the
Representative in such manner as it deems advisable to avoid fractional shares.
If the option is exercised as to all or any portion of the Option Securities,
one or more certificates in definitive form for such Option Securities, and
payment therefor, shall be delivered on the related Option Closing Date in the
manner, and upon the terms and conditions, set forth in paragraph (a) of this
Section 3, except that reference therein to the Firm Securities and the Firm
Closing Date shall be deemed, for purposes of this paragraph 3(b), to refer to
such Option Securities and Option Closing Date, respectively.
(c) It is understood that you, individually and not as
the Representative, may (but shall not be obligated to) make payment on behalf
of any Underwriter or Underwriters for any of the Securities to be purchased by
such Underwriter or Underwriters. No such payment shall relieve such
Underwriter or Underwriters from any of its or their obligations hereunder.
(d) The Company and each of the Selling Stockholders
hereby acknowledge that the wire transfer by or on behalf of the Underwriters
of the purchase price for any Securities does not constitute closing of a
purchase and sale of the Securities. Only execution and delivery of a receipt
(by facsimile or otherwise) for the Securities by the Underwriters indicates
completion of the closing of a purchase of the Securities from the Company or
the Selling Stockholders. Furthermore, in the event that the Underwriters wire
funds to the Company or the Selling Stockholders prior to the completion of the
closing of a purchase of Securities, the Company and each of the Selling
Stockholders hereby acknowledge that until the Underwriters execute and deliver
a receipt for the Securities, by facsimile or otherwise, the Company and each
of the Selling Stockholders will not be entitled to the wired funds and each
shall return the wired funds received by them to the Underwriters as soon as
practicable (by wire transfer of same-day funds) upon demand. In the event
that the closing of a purchase of Securities is not completed and the wire
funds are not returned by the Company or the Selling Stockholders to the
Underwriters on the same day the wired funds were received by the Company or
the Selling Stockholders, the Company and each of the Selling Stockholders
agree to pay to the underwriters in respect of each day the wire funds are not
returned by it, in same-day funds, interest at the Prime Rate as stated in the
Wall Street Journal on the date hereof on the amount of such wire funds
received by them.
4. Offering by the Underwriters. Upon your authorization of the
release of the Firm Securities, the several Underwriters propose to offer the
Firm Securities for sale to the public upon the terms set forth in the
Prospectus.
5. Covenants of the Company. The Company covenants and agrees
with each of the
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Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, to become effective as promptly as possible. If required, the
Company will file the Prospectus or any Term Sheet that constitutes a part
thereof and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rules 434 and 424(b) under the
Act. During any time when a prospectus relating to the Securities is required
to be delivered under the Act, the Company (i) will comply with all
requirements imposed upon it by the Act and the rules and regulations of the
Commission thereunder to the extent necessary to permit the continuance of
sales of or dealings in the Securities in accordance with the provisions hereof
and of the Prospectus, as then amended or supplemented, and (ii) will not file
with the Commission the Prospectus, Term Sheet or the amendment referred to in
the second sentence of Section 2(a)(i) hereof, any amendment or supplement to
such Prospectus, Term Sheet or any amendment to the Registration Statement or
any Rule 462(b) Registration Statement of which the Representative shall not
previously have been advised and furnished with a copy for a reasonable period
of time prior to the proposed filing and as to which filing the Representative
shall not have given its consent. The Company will prepare and file with the
Commission, in accordance with the rules and regulations of the Commission,
promptly upon request by the Representative or counsel for the Underwriters,
any amendments to the Registration Statement or amendments or supplements to
the Prospectus that may be deemed necessary or advisable in connection with the
distribution of the Securities by the several Underwriters, and will use its
best efforts to cause any such amendment to the Registration Statement to be
declared effective by the Commission as promptly as possible. The Company will
advise the Representative, promptly after receiving notice thereof, of the time
when the Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement thereto has
been filed and will provide to the Representative copies of each such filing.
(b) The Company will advise the Representative, promptly
after receiving notice or obtaining knowledge thereof, of (i) the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement or any
amendment thereto or any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, (ii) the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, (iii) the institution, threatening or
contemplation of any proceeding for any such purpose, or (iv) any request made
by the Commission for amending the Original Registration Statement or any Rule
462(b) Registration Statement, for amending or supplementing the Prospectus or
for additional information. The Company will use its best efforts to prevent
the issuance of any such stop order and, if any such stop order is issued, to
obtain the withdrawal thereof as promptly as possible.
(c) The Company will arrange for the qualification of the
Securities for offering and sale under the securities or blue sky laws of such
jurisdictions as the Representative may designate and will continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Securities; provided, however, that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction. If, after
the public offering of the Securities by the Underwriters and during such
period, the Underwriters propose to vary the terms of offering thereof by
reason of changes in general market conditions or otherwise, the Representative
will advise the Company in writing of the proposed
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variation and if, in the opinion either of counsel for the Company or counsel
for the Underwriters, such proposed variation requires that the Prospectus be
supplemented or amended, the Company will forthwith prepare and file with the
Commission a supplement to the Prospectus or an amended Prospectus setting
forth such variation. The Company authorizes the Underwriters and all dealers
to whom any of the Securities may be sold by the Underwriters to use the
Prospectus, as from time to time so amended or supplemented, in connection with
the sale of the Securities in accordance with the applicable provisions of the
Act and the rules and regulations thereunder for such period.
(d) If, at any time prior to the later of (i) the final
date when a prospectus relating to the Securities is required to be delivered
under the Act or (ii) the Option Closing Date, any event occurs as a result of
which the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Prospectus to comply with the
Act or the rules or regulations of the Commission thereunder, the Company will
promptly notify the Representative thereof and, subject to Section 5(a) hereof,
will prepare and file with the Commission, at the Company's expense, an
amendment to the Registration Statement or an amendment or supplement to the
Prospectus that corrects such statement or omission or effects such compliance.
(e) The Company will, without charge, provide (i) to the
Representative and to counsel for the Underwriters a signed copy of the
registration statement originally filed with respect to the Securities and each
amendment thereto (in each case including exhibits thereto) and any Rule 462(b)
Registration Statement, (ii) to each other Underwriter, a conformed copy of
such registration statement and any Rule 462(b) Registration Statement and each
amendment thereto (in each case without exhibits thereto) and (iii) so long as
a prospectus relating to the Securities is required to be delivered under the
Act, as many copies of each Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto as the Representative may reasonably request;
without limiting the application of clause (iii) of this sentence, the Company
shall, as soon as practicable following the determination of the public
offering price, deliver to the Underwriters, without charge, as many copies of
the Prospectus and any amendment or supplement thereto as the Representative
may reasonably request for purposes of confirming orders that are expected to
settle on the Firm Closing Date. The Company will provide or cause to be
provided to each of the Representative, and to each Underwriter that so
requests in writing, a copy of each report on Form SR filed by the Company as
required by Rule 463 under the Act.
(f) If the Company elects to rely on Rule 462(b), the
Company shall both transmit a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) and pay the applicable fees in
accordance with Rule 111 promulgated under the Act by the earlier of (i) 10:00
P.M., Eastern time on the date of this Agreement and (ii) the time
confirmations are sent or given, as specified by Rule 462(b)(2).
(g) The Company, as soon as practicable, will make
generally available to its security holders and to the Representative a
consolidated earnings statement of the Company and its subsidiaries that
satisfies the provisions of Section 11(a) of the Act and Rule 158 thereunder.
(h) The Company will apply the net proceeds from the sale
of the Securities as set forth under "Use of Proceeds" in the Prospectus.
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(i) The Company will not, directly or indirectly, without
the prior written consent of the Representative on behalf of the Underwriters,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, contract of sale, pledge, grant of any option to purchase or other sale
or disposition) of any shares of Common Stock or any securities convertible
into, or exchangeable or exercisable for, shares of Common Stock for a period
of 45 days after the date hereof, except pursuant to this Agreement, issuances
pursuant to warrants, options and convertible debentures outstanding prior to
the date hereof, stock options granted under the company's stock option plan to
officers, employees, directors and consultants at an exercise price equal to
fair market value and any stock issued on exercise thereof or issuances in
connection with an acquisition. If the Company plans to issue any Common Stock
or other securities in connection with an acquisition, the Company shall
provide the Representative with three days' advance written notice of its
intention to so issue such securities including the terms of any such proposed
transaction.
(j) The Company will not, directly or indirectly, (i)
take any action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities or (ii) for a period of 45 days after the date
hereof (A) sell, bid for, purchase, or pay anyone any compensation for
soliciting purchases of, the Securities or (B) pay or agree to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company. The Company will not, directly or indirectly, without the
prior written consent of the Representative on behalf of the Underwriters,
offer, purchase, offer to purchase, contract to purchase, grant any option to
sell or otherwise purchase or acquire (or announce any offer, purchase, offer
of purchase, contract to purchase, grant of any option to sell or other
purchase or acquisition of) any shares of Common Stock or any securities
convertible into, or exchangeable or exercisable for, shares of Common Stock
for a period of 45 days after the date hereof.
(k) The Company will obtain the lockup agreements
described in Section 7(g) and Section 7(h) hereof prior to the Firm Closing
Date.
(l) The Company will cause the Securities to be duly
included for quotation on the Nasdaq National Market prior to the Firm Closing
Date. The Company will use its best efforts to ensure that the Securities
remain included for quotation on the Nasdaq National Market following the Firm
Closing Date.
(m) During a period of five years commencing with the
date of this Agreement, the Company will promptly furnish to the Representative
and to each Underwriter who may so request in writing copies of (i) all
periodic and special reports furnished by it to Stockholders of the Company,
(ii) all information, documents and reports filed by it with the Commission,
Nasdaq National Market, any securities exchange or the NASD, (iii) all press
releases and material news items or articles in respect of the Company, its
products or affairs released or prepared by the Company (other than promotional
and marketing materials disseminated solely to customers and potential
customers of the Company in the ordinary course of business) and (iv) any
additional information concerning the Company or its business which the
Representative may reasonably request.
(n) The Company will use its best efforts to maintain
insurance of the types and in the amounts which it deems adequate for its
business consistent with insurance coverage maintained by companies of similar
size and engaged in similar businesses including, but not limited to, general
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liability insurance covering all real and personal property owned or leased by
the Company and its subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against.
(o) On the Closing Date, the Company will sell to the
Representative, at a purchase price of $0.001 per warrant, warrants to purchase
42,000 shares of Common Stock. Such Representative's Warrants will be issued
pursuant to the terms of the Warrant Agreement and will have an exercise price
equal to [$_____], subject to adjustment, will be exercisable during the period
beginning on the first anniversary of the Effective Date and ending on the fifth
anniversary of the Effective Date and will contain customary anti-dilution and
registration rights provisions.
6. Expenses. The Company will pay all costs and expenses incident
to the performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 11 hereof, including all costs and expenses incident to (i)
the printing or other production of documents with respect to the transactions,
including any costs of printing the Registration Statement originally filed with
respect to the Securities and any amendment thereto, any Rule 462(b)
Registration Statement, any Preliminary Prospectus and the Prospectus and any
amendment or supplement thereto, this Agreement and any blue sky memoranda, (ii)
all arrangements relating to the delivery to the Underwriters of copies of the
foregoing documents, (iii) the fees and disbursements of the counsel, the
accountants and any other experts or advisors retained by the Company and the
fees and disbursements of counsel to the Representative, (iv) preparation,
issuance and delivery to the Underwriters of any certificates evidencing the
Securities, including transfer agent's and registrar's fees, (v) the
qualification of the Securities under state securities and blue sky laws,
including filing fees and fees and disbursements of counsel for the Underwriters
relating thereto, (vi) the filing fees of the Commission and the NASD relating
to the Securities; (vii) any quotation of the Securities on the Nasdaq National
Market; (viii) the Company's travel expenses in connection with meetings with
the brokerage community and institutional investors and expenses associated with
hosting such meetings, including meeting rooms, meals, facilities and ground
transportation expenses; and (ix) the cost of preparing two bound volumes of the
public offering documents for the Representative and its counsel; provided,
however, that if the Agreement is terminated in accordance with Section
11(a)(iv), the Company shall not pay the fees and disbursements of counsel to
the Representative. If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 7 hereof is not satisfied, because this Agreement is terminated
pursuant to Sections 11(a)(i), (a)(ii) or (a)(iii) hereof or because of any
failure, refusal or inability on the part of the Company to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder other than by reason of a default by any of the Underwriters, the
Company will reimburse the Representative upon demand for all reasonable
out-of-pocket expenses (including counsel fees and disbursements) that shall
have been incurred by it in connection with the proposed purchase and sale of
the Securities. The Company shall not in any event be liable to any of the
Underwriters for the loss of anticipated profits from the transactions covered
by this Agreement. If the sale of the Securities provided for herein is
consummated, the Underwriters shall pay all of their own out-of-pocket expenses
(other than fees and disbursements of counsel) and the Company shall have no
obligation therefor.
7. Conditions of the Underwriters' Obligations. The obligations
of the several Underwriters to purchase and pay for the Firm Securities shall
be subject, in the sole discretion of the Representative, to the accuracy of
the representations and warranties of the Company and the Selling Stockholders
contained herein as of the date hereof and as of the Firm Closing Date, as if
made on and as of the Firm Closing Date, to the accuracy of the statements of
the Company's officers made pursuant
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to the provisions hereof, to the performance by the Company and the Selling
Stockholders of their covenants and agreements hereunder and to the following
additional conditions:
(a) If the Original Registration Statement or any
amendment thereto filed prior to the Firm Closing Date has not been declared
effective as of the time of execution hereof, the Registration Statement or
such amendment, and if the Company has elected to rely upon Rule 462(b), the
Rule 462(b) Registration Statement, shall have been declared effective not
later than the earlier of (i) 11:00 A.M., Eastern time, on the date on which
the amendment to the Registration Statement originally filed with respect to
the Securities or to the Registration Statement, as the case may be, containing
information regarding the offering price of the Securities has been filed with
the Commission, and (ii) the time confirmations are sent or given as specified
by Rule 462(b) or, with respect to the Original Registration Statement, such
later time and date as shall have been consented to by the Representative; if
required, the Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto shall have been filed with the Commission
in the manner and within the time period required by Rules 434 and 424(b) under
the Act; no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto shall have been issued, and no proceedings
for that purpose shall have been instituted or threatened or, to the knowledge
of the Company or the Representative, shall be contemplated by the Commission;
and the Company shall have complied with any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise).
(b) The Representative shall have received an opinion,
dated the Firm Closing Date, of Feder, Kaszovitz, Isaacson, Weber, Xxxxx and
Bass LLP, counsel for the Company, dated the Closing Date (and stating that it
may be relied on by Xxxxxx, Xxxx & Xxxxxxxx LLP, Underwriter's Counsel, in
rendering their opinion), to the effect that:
(i) the Company and each of its subsidiaries listed in
Schedule 3 hereto (the "Subsidiaries") have been duly organized and are
validly existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation and are duly qualified to
transact business as foreign corporations and are in good standing under
the laws of all other jurisdictions where, to counsel's knowledge, the
ownership or leasing of their respective properties or the conduct of
their respective businesses requires such qualification, except where the
failure to be so qualified does not or would not have a Material Adverse
Effect;
(ii) the Company and each of the Subsidiaries have
corporate power to own or lease their respective properties and conduct
their respective businesses as described in the Registration Statement and
the Prospectus, and the Company has the corporate power to enter into this
Agreement and to carry out all the terms and provisions hereof to be
carried out by it;
(iii) the issued and outstanding shares of capital stock of
each of the Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and are owned by the Company free and clear
of any perfected security interests (other than those disclosed in the
Prospectus) and, to such counsel's knowledge, the Prospectus accurately
describes, to the extent so described, any material corporation,
association, or other entity owned or controlled, directly or indirectly,
by the Company;
(iv) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the issued and
outstanding shares of capital stock of the Company
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have been duly authorized and validly issued and are fully paid and
nonassessable, and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities;
the Firm Securities have been duly authorized by all necessary corporate
action of the Company and, when issued and delivered to and paid for by
the Underwriters pursuant to this Agreement, will be validly issued, fully
paid and nonassessable; to counsel's knowledge, no holders of outstanding
shares of capital stock of the Company are entitled as such to any
preemptive or other rights to subscribe for any of the Securities; and, to
such counsel's knowledge, no holders of securities of the Company are
entitled to have such securities registered under the Registration
Statement except for those which have been so registered; the statements
set forth under the heading "Description of Securities" in the Prospectus,
insofar as such statements purport to summarize certain provisions of the
capital stock and registration rights of the Company, provide a fair
summary of such provisions; and the statements set forth under the heading
"Business--License and Marketing Agreements," "Business--Government and
Industry Regulation," "Business--Acquisitions," "Indemnification of
Officers and Directors," "Amended and Restated 1995 Stock Option Plan,"
"Certain Relationships and Related Transactions," "Shares Eligible for
Future Sale," "Risk Factors--Shares Eligible for Future Sale" and "Risk
Factors--Government Regulation" in the Prospectus, insofar as such
statements constitute a summary of the legal matters, documents or
proceedings referred to therein, provide a fair summary of such legal
matters, documents and proceedings in all material respects;
(v) the execution and delivery of this Agreement and the
Warrant Agreement have been duly authorized by all necessary corporate
action of the Company, and this Agreement and the Warrant Agreement have
been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, are binding agreements
of the Company, enforceable in accordance with their terms, except insofar
as indemnification provisions may be limited by applicable law and to
which counsel need not express any opinion 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;
(vi) to counsel's knowledge, (A) no legal or governmental
proceedings are pending to which the Company or any of the Subsidiaries is
a party or to which the property of the Company or any of the Subsidiaries
is subject that are required to be described in the Registration Statement
or the Prospectus and are not described therein, and no such proceedings
have been threatened against the Company or any of the Subsidiaries or
with respect to any of their respective properties and (B) no contract or
other document is required to be described in the Registration Statement
or the Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein or filed as required;
(vii) to counsel's knowledge, subsequent to the respective
dates as of which information is given in the Registration Statement and
the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), (A) the Company and its Subsidiaries have not
incurred any material liability or obligation, direct or contingent, nor
entered into any material transaction not in the ordinary course of
business; and (B) the Company has not purchased any of its outstanding
capital stock, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock, except in each case as
described in or contemplated by the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus);
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(viii) the issuance, offering and sale of the Securities to
the Underwriters by the Company pursuant to this Agreement and of warrants
to the Representative by the Company pursuant to the Warrant Agreement;
the compliance by the Company with the other provisions of this Agreement
and the Warrant Agreement; and the consummation of the other transactions
contemplated in such agreements do not (A) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained and such as may be required
under state securities or blue sky laws and by the NASD, or (B) conflict
with or result in a breach or violation of any of the terms and provisions
of, or constitute a default under, any material contract, indenture,
mortgage, deed of trust, lease or other agreement or instrument known to
such counsel to which the Company or any of the Subsidiaries is a party or
by which the Company or any of the Subsidiaries or any of their respective
properties are bound, or the charter documents or by-laws of the Company
or any of the Subsidiaries, or, so far as it is known to such counsel, any
statute or any judgment, decree, order, rule or regulation of any court or
other governmental authority or any arbitrator having jurisdiction over
the Company or any of the Subsidiaries; and no further approval or
authorization of the stockholders or the Board of Directors of the Company
is required for (Y) the issuance and sale of the Securities to be sold by
the Company or the transfer and sale of the shares of Common Stock to be
sold by the Selling Stockholders pursuant to this Agreement or (Z) the
issuance and sale of the shares of Common Stock issuable upon exercise of
the Warrant Agreement;
(ix) the Registration Statement is effective under the
Act; any required filing of the Prospectus, or any Term Sheet that
constitutes a part thereof, pursuant to Rules 434 and 424(b) has been made
in the manner and within the time period required by Rules 434 and 424(b);
and, to such counsel's best knowledge, no stop order suspending the
effectiveness of the Registration Statement or any amendment thereto has
been issued, and no proceedings for that purpose have been instituted or
threatened or are contemplated by the Commission;
(x) the Registration Statement originally filed with
respect to the Securities and each amendment thereto, any Rule 462(b)
Registration Statement and the Prospectus (in each case, other than the
financial statements and other financial and statistical information
contained therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the applicable
requirements of the Act and the rules and regulations of the Commission
thereunder;
(xi) if the Company elects to rely on Rule 434, the
Prospectus is not "materially different," as such term is used in Rule
434, from the prospectus included in the Registration Statement at the
time of its effectiveness or an effective post-effective amendment thereto
(including such information that is permitted to be omitted pursuant to
Rule 430A);
(xii) the Company is not, and the transactions contemplated
by this Agreement will not cause the Company to become, an investment
company subject to registration under the 1940 Act;
(xiii) the specimen stock certificate of the Company filed
as an exhibit to the Registration Statement is in due and proper form to
evidence shares of Common Stock, has been duly authorized and approved by
the Board of Directors of the Company and complies with all legal
requirements applicable under the Delaware General Corporation Law;
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(xiv) 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 (provided that counsel
need not express any opinion as to their completeness);
(xv) to such counsel's knowledge, except as described in
the Prospectus, no holders of Common Stock or other securities of the
Company have registration rights with respect to securities of the
Company; and
(xvi) counsel has no reason to believe that the offer and
sale of all securities of the Company made within the last three years as
set forth in Item 26 of the Registration Statements were not exempt from
the registration requirements of the Securities Act, pursuant to the
provisions set forth in such Item, and from the registration or
qualification requirements of all relevant state securities laws.
Such counsel shall also state that such counsel has participated in conferences
with officers and other representatives of the Company, the independent public
accountants of the Company, the Representative and counsel to the Underwriters,
at which conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed and, they have no reason to
believe that the Registration Statement, as of its effective date, contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus, as of its date or the date of such opinion,
included or includes any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except such counsel need express no view as to the financial
statements and notes thereto, schedules and reports thereon, and other
financial and statistical data included or incorporated by reference in the
Registration Statement or Prospectus).
In rendering any such opinion, such counsel may rely, as to matters of fact, to
the extent such counsel deem(s) proper, on certificates or opinions of
responsible officers of the Company and public officials, and may limit its
opinions to the laws of the United States of America and the States of New York
and Delaware, as appropriate.
References to the Registration Statement and the Prospectus in this paragraph
(b) shall include any amendment or supplement thereto at the date of such
opinion.
(c) The Representative shall have received an opinion,
dated the Firm Closing Date, of Feder, Kaszovitz, Isaacson, Weber, Xxxxx and
Bass LLP, counsel for the Selling Stockholders, dated the Closing Date (and
stating that it may be relied on by Xxxxxx, Xxxx & Xxxxxxxx LLP, Underwriter's
Counsel, in rendering their opinion), to the effect that:
(i) this Agreement, the Custody Agreement and the
Power-of-Attorney have been duly authorized, executed and delivered by the
Selling Stockholders and constitute the legal, valid and binding agreement
of such Selling Stockholder, enforceable against such Selling Stockholder
in accordance with its terms, except as such enforceability may be limited
by the effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to rights and remedies of creditors or by
general equitable principles; and each of the Selling Stockholders has
full legal right and authority to sell, transfer and deliver in the manner
provided in this Agreement
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and the Custody Agreement the Securities being sold by such Selling
Stockholder hereunder;
(ii) the delivery by each of the Selling Stockholders to
the several Underwriters of certificates for the Securities being sold
hereunder by such Selling Stockholder against payment therefor as provided
herein will pass good and marketable title to such Securities to the
several Underwriters, free and clear of all liens, encumbrances, equities
and claims whatsoever;
(iii) no consent, approval, authorization or order of any
governmental agency or body or, to such counsel's knowledge, of any court,
is required for the consummation by any Selling Stockholder of the
transactions contemplated herein, except such as may have been obtained
under the Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals (specified in such
opinion) as have been obtained;
(iv) neither the sale of the Securities being sold by any
Selling Stockholder nor the consummation of any other of the transactions
herein contemplated by any Selling Stockholder nor the fulfillment of the
terms hereof by any Selling Stockholder will conflict with, result in a
breach or violation of, or constitute a default under any law or the terms
of any indenture or other agreement or instrument known to such counsel
and to which any Selling Stockholder is a party or bound, or any judgment,
order or decree known to such counsel to be applicable to any Selling
Stockholder of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over any Selling
Stockholder; and
(v) there are no transfer or other taxes (other than
income taxes) known to such counsel payable in connection with the sale
and delivery of the Securities.
In rendering any such opinion, such counsel may rely, as to matters of fact, to
the extent such counsel deem(s) proper, on certificates or opinions of the
Selling Stockholders and public officials, and may limit its opinions to the
laws of the United States of America and the States of New York and Delaware,
as appropriate.
References to the Registration Statement and the Prospectus in this paragraph
(c) shall include any amendment or supplement thereto at the date of such
opinion.
(d) The Representative shall have received from Xxxxxxx
Xxxx Xxxxxxx, P.C. a letter or letters dated, respectively, the date hereof and
the Firm Closing Date, in form and substance satisfactory to the
Representative, to the effect that:
(i) they are independent accountants with respect to the
Company and its consolidated subsidiaries and Road Champs within the
meaning of the Act and the applicable rules and regulations thereunder;
(ii) in their opinion, the audited consolidated financial
statements, the audited combined financial statements and the pro forma
financial statements examined by them and included in the Registration
Statement and the Prospectus comply in form in all material respects with
the applicable accounting requirements of the Act and the related
published rules and regulations;
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(iii) on the basis of carrying out certain specified
procedures (which do not constitute an examination made in accordance with
generally accepted auditing standards) that would not necessarily reveal
matters of significance with respect to the comments set forth in this
paragraph (iii), a reading of the minute books of the stockholders, the
board of directors and any committees thereof of the Company and each of
its consolidated subsidiaries and Road Champs, and inquiries of certain
officials of the Company and its consolidated subsidiaries and Road Champs
who have responsibility for financial and accounting matters, nothing came
to their attention that caused them to believe that at a specific date not
more than five business days prior to the date of such letter, there were
any changes in the capital stock or total debt of the Company and its
consolidated subsidiaries and Road Champs or any decreases in total assets
or stockholders' equity of the Company and its consolidated subsidiaries
and Road Champs, in each case compared with amounts shown on the December
31, 1996 consolidated balance sheet and on the December 31, 1996 combined
balance sheet included in the Registration Statement and the Prospectus,
or for the period from January 1, 1997 to such specified date there were
any decreases, as compared with the same period in the prior year, in
total revenues, net income or net income per share, respectively, of the
Company and its consolidated subsidiaries and Road Champs, except in all
instances for changes, decreases or increases set forth in such letter;
(iv) they have carried out certain specified procedures,
not constituting an audit, with respect to certain amounts, percentages
and financial information that are derived from the general accounting
records of the Company and its consolidated subsidiaries and Road Champs
and are included in the Registration Statement and the Prospectus, and
have compared such amounts, percentages and financial information with
such records of the Company and its consolidated subsidiaries and Road
Champs and with information derived from such records and have found them
to be in agreement, excluding any questions of legal interpretation; and
(v) their review of the system of internal controls of
the Company and its consolidated subsidiaries and Road Champs, to the
extent they deemed necessary in establishing the scope of their
examination of the Company's financial statements as of December 31, 1996
and the Road Champs combined financial statements as of December 31, 1996,
did not disclose any weaknesses in internal controls that they considered
to be material weaknesses.
In the event that the letters referred to above set forth any
such changes, decreases or increases which, in the reasonable discretion of the
Representative, are likely to result in a Material Adverse Effect, it shall be
a further condition to the obligations of the Underwriters that such letters
shall be accompanied by a written explanation of the Company as to the
significance thereof, unless the Representative deem such explanation
unnecessary.
References to the Registration Statement and the Prospectus in
this paragraph (d) with respect to either letter referred to above shall
include any amendment or supplement thereto by the date of such letter.
(e) The Representative shall have received a certificate,
dated the Firm Closing Date, of Xxxx Xxxxxxxx, Xxxxxxx Xxxxxx and Xxxx X.
Xxxxxxx in their capacities as the Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer, respectively, of the Company and as
Management Selling Stockholders to the effect that:
(i) the representations and warranties of the Company in
this Agreement are true
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and correct as if made on and as of the Firm Closing Date; the Registration
Statement, as amended as of the Firm Closing Date, does not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading, and the Prospectus, as amended or
supplemented as of the Firm Closing Date, does not include any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and the Company has performed all covenants and
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Firm Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or, to the best of the
Company's knowledge, threatened or, are contemplated by the Commission;
and
(iii) after the respective dates as of which
information is given in the Registration Statement and the Prospectus,
no material adverse change or development involving a prospective adverse
change in or affecting particularly the business, properties, condition
(financial or otherwise), results of operations or prospects of the
Company, whether or not arising in the ordinary course of business, has
occurred which would, in the Company's reasonable belief, make the
offering or the delivery of the Securities impracticable or inadvisable;
(f) The Representative shall have received a certificate,
dated the Firm Closing Date, of each of the Selling Stockholders, in such
capacity, to the effect that the representations and warranties of such Selling
Stockholder in this Agreement are true and correct as if made on and as of the
Firm Closing Date and that such Selling Stockholder has performed all covenants
and agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Firm Closing Date.
(g) The Representative shall have received from each
officer and director of the Company and the persons and entities listed in
Schedule 4 an agreement to the effect that such person or entity will not,
except to the extent otherwise specifically permitted by the terms of each such
person's or entity's agreement, directly or indirectly, without the prior
written consent of the Representative, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of an
option to purchase or other sale or disposition) of any shares of Common Stock
or any securities convertible into, or exchangeable or exercisable for, shares
of Common Stock for a period of 45 days after the date of this Agreement;
provided, however, that intra-family transfers or transfers to trust for estate
planning purposes shall not be so restricted.
(h) The Representative shall have received from each of
the Selling Stockholders an agreement to the effect that such person or entity
will not, except to the extent otherwise specifically permitted by the terms of
each such person's or entity's agreement, directly or indirectly, without the
prior written consent of the Representative, offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of an option to purchase or other sale or disposition) of any shares of
Common Stock or any securities convertible into, or exchangeable or exercisable
for, shares of Common Stock for a period of 45 days after the date of this
Agreement; provided, however, that intra-family transfers or transfers to trust
for estate planning purposes shall not be so restricted.
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(i) On or before the Firm Closing Date, the
Representative and counsel for the Underwriters shall have received such
further certificates, documents or other information as they may have
reasonably requested from the Company.
(j) Upon consummation of the offering of the Securities,
the Securities shall have been included for trading on the Nasdaq National
Market.
(k) The Representative shall have received an opinion,
dated the Firm Closing Date, of Xxxxxx, Xxxx & Xxxxxxxx LLP, counsel for the
Underwriters, with respect to the issuance and sale of the Firm Securities, the
Registration Statement and Prospectus, and such other related matters as the
Representative may reasonably require, and the Company shall have furnished to
such counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(l) The Company shall have executed and delivered a
Warrant Agreement in a form satisfactory to the Representative (the "Warrant
Agreement"), and there shall have been tendered to the Representative all of
the Representative's Warrants described in Section 5(o) hereof to be purchased
by the Representative on the Closing Date.
All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representative and
counsel for the Underwriters. The Company shall furnish to the Representative
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representative and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to purchase and
pay for any Option Securities shall be subject, in their discretion, to each of
the foregoing conditions to purchase the Firm Securities, except that all
references to the Firm Securities and the Firm Closing Date shall be deemed to
refer to such Option Securities and the related Option Closing Date,
respectively.
8. Indemnification and Contribution.
(a) The Company and the Management Selling Stockholders
jointly and severally agree to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which such Underwriter or such controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon:
(i) any breach by the Company or any Management Selling
Stockholder of its representations or warranties set forth in Section 2(a)
and (b) of this Agreement;
(ii) any untrue statement or alleged untrue statement of
any material fact contained in (A) the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or (B) any application or other document,
or any amendment or supplement thereto, executed by the Company or any
Management Selling Stockholder or based upon written information furnished
by or on behalf of the Company or any Management Selling Stockholder filed
in any jurisdiction in order to qualify the Securities under
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the securities or blue sky laws thereof or filed with the Commission or any
securities association or securities exchange (each, an "Application");
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or
any Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; or
(iv) any untrue statement or alleged untrue statement of
any material fact contained in any audio or visual materials produced by
the Company or any Management Selling Stockholder and used in connection
with the marketing of the Securities, including without limitation,
slides, videos, films, tape recordings, and, such party or parties, as the
case may be, will reimburse, as incurred, each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action;
provided, however, that the Company or such Management Selling Stockholder will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto or any Application in reliance upon and
in conformity with written information furnished to the Company or such
Management Selling Stockholder by any Underwriter through the Representative
specifically for use therein; and provided, further, that the Company or such
Management Selling Stockholder will not be liable to any Underwriter or any
person controlling such Underwriter with respect to any such untrue statement
or omission made in any Preliminary Prospectus that is corrected in the
Prospectus (or any amendment or supplement thereto) if the person asserting any
such loss, claim, damage or liability purchased Securities from such
Underwriter but was not sent or given a copy of the Prospectus (as amended or
supplemented) at or prior to the written confirmation of the sale of such
Securities to such person in any case where such delivery of the Prospectus (as
amended or supplemented) is required by the Act, unless such failure to deliver
the Prospectus (as amended or supplemented) was a result of noncompliance by
the Company with Section 5(d) and (e) of this Agreement. This indemnity
agreement will be in addition to any liability that the Company or any
Management Selling Stockholder may otherwise have. The Company and the
Management Selling Stockholders shall not, without the prior written consent of
the Representative, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not any
Underwriter or any person who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of all of the Underwriters and such
controlling persons from all liability arising out of such claim, action, suit
or proceeding.
Each Non-Management Selling Stockholders severally agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities to
which such Underwriter or such controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out
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of or are based upon any breach by such Non-Management Selling Stockholder of
its representations or warranties set forth in Section 2(b) of this Agreement.
(b) Each Underwriter, severally and not jointly,
will indemnify and hold harmless the Company, each of its directors, each of
its officers who signed the Registration Statement, each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act and each of the Selling Stockholders, against any losses,
claims, damages or liabilities to which the Company or any such director,
officer of the Company, controlling person of the Company or Selling
Stockholder may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or any Application or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any Application or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through the Representative specifically for use therein; and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person or Selling
Stockholder in connection with investigating or defending any such loss, claim,
damage, liability or any action in respect thereof. This indemnity agreement
will be in addition to any liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party of the
commencement thereof, but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates it has been
irreparably prejudiced by such failure to receive notice.
(d) In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded or shall have been advised by
its counsel that there may be one or more legal defenses available to it and/or
other indemnified parties that conflict with those available to the
indemnifying party, the indemnifying party shall not have the right to direct
the defense of such action on behalf of such indemnified party or parties and
such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 8 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense
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thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Representative in the case of
paragraph (a) of this Section 8, representing the indemnified parties under
such paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the
consent of the indemnifying party.
(e) In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 8 is unavailable or
insufficient, for any reason, to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof),
each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
(i) the relative benefits received by the indemnifying party or parties on the
one hand and the indemnified party on the other from the offering of the
Securities or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions
or alleged statements or omissions that resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters. The relative fault of
the parties shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or the Underwriters, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to above in this paragraph (d).
Notwithstanding any other provision of this paragraph (e), no Underwriter shall
be obligated to make contributions hereunder that in the aggregate exceed the
total public offering price of the Securities purchased by such Underwriter
under this Agreement, less the aggregate amount of any damages that such
Underwriter has otherwise been required to pay in respect of the same or any
substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute hereunder are
several in proportion to their respective underwriting obligations and not
joint, and as between themselves, contributions among Underwriters shall be
governed by the provisions of the Representative's Agreement Among
Underwriters. For the purposes of this paragraph 8(e), each person, if any,
who controls an
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Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Company.
9. Default of Underwriters. If one or more Underwriters default
in their obligations to purchase Firm Securities or Option Securities hereunder
and the aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, then the other Underwriters may
make arrangements satisfactory to the Representative for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representative), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Securities or
Option Securities that such defaulting Underwriter or Underwriters agreed but
failed to purchase. If one or more Underwriters so default with respect to an
aggregate number of Securities that is more than ten percent of the aggregate
number of Firm Securities or Option Securities, as the case may be, to be
purchased by all of the Underwriters at such time hereunder, and if
arrangements satisfactory to the Representative are not made within 36 hours
after such default for the purchase by other persons (who may include one or
more of the non-defaulting Underwriters, including the Representative) of the
Securities with respect to which such default occurs, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or
the Company other than as provided in Section 10 hereof. In the event of any
default by one or more Underwriters as described in this Section 9, the
Representative shall have the right to postpone the Firm Closing Date or the
Option Closing Date, as the case may be, established as provided in Section 3
hereof for not more than seven business days in order that any necessary
changes may be made in the arrangements or documents for the purchase and
delivery of the Firm Securities or Option Securities, as the case may be. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section 9. Nothing herein shall relieve any
defaulting Underwriter from liability for its default.
10. Survival. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers, the Selling Stockholders and the several Underwriters set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, any Selling Stockholders, any Underwriter or any controlling person
referred to in Section 8 hereof and (ii) delivery of and payment for the
Securities. The respective agreements, covenants, indemnities and other
statements set forth in Sections 6 and 8 hereof shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement.
11. Termination.
(a) This Agreement may be terminated with respect to the
Firm Securities or any Option Securities in the sole discretion of the
Representative by notice to the Company and the Selling Stockholders given
prior to the Firm Closing Date or the related Option Closing Date,
respectively, in
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the event that the Company or any Selling Stockholders shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder at or prior thereto or, if at
or prior to the Firm Closing Date or, such Option Closing Date, respectively,
(i) after the respective dates as of which information is
given in the Registration Statement and the Prospectus, any material
adverse change or development involving a prospective adverse change in or
affecting particularly the business, properties, condition (financial or
otherwise), results of operations or prospects of the Company, whether or
not arising in the ordinary course of business, occurs which would, in the
Representative's sole judgment, make the offering or the delivery of the
Securities impracticable or inadvisable;
(ii) trading in the Common Stock shall have been suspended
by the Commission or the Nasdaq National Market or minimum or maximum
prices shall have been established on the Nasdaq National Market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities; or
(iv) there shall have been (A) an outbreak or escalation
of hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or material
adverse change in general economic, political or financial conditions
having an effect on the U.S. financial markets that, in the sole judgment
of the Representative, makes it impractical or inadvisable to proceed with
the public offering or the delivery of the Securities as contemplated by
the Registration Statement, as amended as of the date hereof.
(b) Termination of this Agreement pursuant to this
Section 11 shall be without liability of any party to any other party except as
provided in Section 10 hereof.
12. Information Supplied by Underwriters. The statements set
forth in (a) the last paragraph on the front cover page of any Preliminary
Prospectus or the Prospectus, (b) under the heading "Underwriting" in any
Preliminary Prospectus or the Prospectus and (c) on page 2 in any Preliminary
Prospectus or the Prospectus pertaining to stabilization (to the extent such
statements relate to the Underwriters) constitute the only information
furnished by any Underwriter through the Representative to the Company for the
purposes of Section 8 hereof. The Underwriters confirm that such statements
(to such extent) are correct.
13. Notices. All communications hereunder shall be in writing
and, if sent to any of the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission and confirmed in writing to Cruttenden Xxxx
Incorporated, 00000 Xxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000; if sent
to the Company, shall be delivered or sent by mail, telex or facsimile
transmission and confirmed in writing to the Company at 00000 Xxxxxxx Xxxxx
Xxxxxxx, #X000 Xxxxxx, Xxxxxxxxxx 00000, Attention: Chief Executive Officer;
and if sent to a Selling Stockholder, shall be delivered or sent by mail, telex
or facsimile transmission and confirmed in writing to such Selling Stockholder
at the address listed opposite such Selling Stockholder's name in Schedules 1-A
or 1-B hereto.
14. Successors. This Agreement shall inure to the benefit of and
shall be binding upon the several Underwriters, the Company, the Selling
Stockholders and their respective successors and legal
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representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (a) the indemnities of the
Company and the Selling Stockholders contained in Section 8 of this Agreement
shall also be for the benefit of any person or persons who control any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (b) the indemnities of the Underwriters contained in Section 8
of this Agreement shall also be for the benefit of the directors of the
Company, the officers of the Company who have signed the Registration Statement
and any person or persons who control the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act and the Selling Stockholders.
No purchaser of Securities from any Underwriter shall be deemed a successor
because of such purchase.
15. Applicable Law. The validity and interpretation of this
Agreement, and the terms and conditions set forth herein, shall be governed by
and construed in accordance with the laws of the State of California, without
giving effect to any provisions relating to conflicts of laws.
16. Consent to Jurisdiction and Service of Process. All judicial
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of California,
and by execution and delivery of this Agreement, the Company and the Selling
Stockholders accept for theirself and in connection with their respective
properties, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts and waives any defense of forum non conveniens and irrevocably
agree to be bound by any judgment rendered thereby in connection with this
Agreement. The Company designates and appoints Xxxx Xxxxxxxx and such other
persons as may hereafter be selected by the Company irrevocably agreeing in
writing to so serve, as its agent to receive on its behalf service of all
process in any such proceedings in any such court, such service being hereby
acknowledged by the Company to be effective and binding service in every
respect. A copy of any such process so served shall be mailed by registered
mail to the Company at its address provided in Section 13 hereof; provided,
however, that, unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of such process. If any
agent appointed by the Company refuses to accept service, the Company hereby
agrees that service of process sufficient for personal jurisdiction in any
action against the Company in the State of California may be made by registered
or certified mail, return receipt requested, to the Company at its address
provided in Section 13 hereof, and the Company hereby acknowledges that such
service shall be effective and binding in every respect. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of any Underwriter to bring proceedings against the Company in
the courts of any other jurisdiction.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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If the foregoing correctly sets forth our understanding please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company, each
of the Selling Stockholders and each of the several Underwriters.
Very truly yours,
JAKKS PACIFIC, INC.
By: _________________________________
Xxxx Xxxxxxxx
Chief Executive Officer
_________________________________
Xxxx Xxxxxxxx
_________________________________
Xxxxxxx Xxxxxx
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The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
CRUTTENDEN XXXX INCORPORATED
By: _________________________________
Name: ___________________________
Title: _________________________
For itself and as Representative.
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Schedule 1-A
MANAGEMENT SELLING STOCKHOLDERS
Number of Shares of
Management Underwritten Option Securities
Selling Stockholder to be Sold Address
-------------------------------------- ------------------------------- -----------------------------------
Xxxx Xxxxxxxx 70,000 00000 Xxxxxxx Xxxxx Xxxxxxx, X#000
Xxxxxx, Xxxxxxxxxx 00000
Xxxxxxx Xxxxxx 20,000 00000 Xxxxxxx Xxxxx Xxxxxxx, X#000
Xxxxxx, Xxxxxxxxxx 00000
35
Schedule 1-B
NON-MANAGEMENT SELLING STOCKHOLDERS
Number of Shares of
Non-Management Underwritten Option Securities
Selling Stockholder to be Sold Address
-------------------------------------- ------------------------------- -----------------------------------
None.
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Schedule 2
UNDERWRITERS
NUMBER OF
FIRM SECURITIES
UNDERWRITERS TO BE PURCHASED
------------------------------------------------------------------------ ----------------
Cruttenden Xxxx Incorporated . . . . . . . . . . . . . . . . . . . . . .
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
=========
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Schedule 3
SUBSIDIARIES
Name Jurisdiction of Incorporation
---------------------------- --------------------------------------
Road Champs, Inc. Pennsylvania corporation
JAXXS (HK) Limited Hong Kong corporation
JP (HK) Limited Hong Kong corporation
J-X Enterprises, Inc. New York corporation
JAKKS Acquisition Corp. Delaware corporation
Road Champs Ltd. Hong Kong corporation
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Schedule 4
PERSONS AND ENTITIES SUBJECT TO LOCK-UP AGREEMENTS,
OTHER THAN THE COMPANY'S OFFICERS AND DIRECTORS
Name
---------------------------------------------
Xxxxxxx Xxxxxxxx
Trust for Xxxxxx Xxxxxxxx
Trust for Xxxx Xxxxxxxx
Education Trust for Xxxx Xxxxxxxx
