2,700,000 Shares
COLLECTIBLES USA, INC.
Common Stock, $.01 par value
FORM OF UNDERWRITING AGREEMENT
, 1998
CRUTTENDEN XXXX INCORPORATED
[Co-Manager]
As Representatives of the several Underwriters
named in Schedule A hereto
c/o Cruttenden Xxxx Incorporated
00000 Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Dear Sirs:
1. Introductory. Collectibles USA, Inc., a Delaware corporation (the
"Company"), proposes to sell, pursuant to the terms of this Agreement, to the
several underwriters named in Schedule A hereto (the "Underwriters," or, each,
an "Underwriter"), an aggregate of 2,700,000 shares of common stock, $.01 par
value (the "Common Stock"), of the Company. The aggregate of 2,700,000 shares so
proposed to be sold is hereinafter referred to as the "Firm Stock." The Company
also proposes to sell to the Underwriters, upon the terms and conditions set
forth in Section 3 hereof, up to an additional 405,000 shares of Common Stock
(the "Option Stock"). The Firm Stock and the Option Stock are hereinafter
collectively referred to as the "Stock." Cruttenden Xxxx Incorporated
("Cruttenden"), and [Co-Manager] are acting as representatives of the several
Underwriters and in such capacity are hereinafter referred to as the
"Representatives."
You have advised us that simultaneously with the closing of the purchase of
the Firm Stock by the Underwriters, the Company will cause each of the Founding
Companies (as hereinafter defined) to be merged (collectively, the "Founding
Company
Mergers") with a wholly-owned subsidiary of the Company (each, an "Acquisition
Subsidiary and, together, the "Acquisition Subsidiaries"), in each case pursuant
to an agreement and plan of organization, as amended (each, an "Agreement and
Plan of Organization"), the consideration for which will be a combination of
cash and shares of Common Stock as described in the Registration Statement (as
hereinafter defined).
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333- 29181) in the
form in which it became or becomes effective and also in such form as it
may be when any post-effective amendment thereto shall become effective
with respect to the Stock, including any pre-effective prospectuses
included as part of the registration statement as originally filed or as
part of any amendment or supplement thereto, or filed pursuant to Rule 424
under the Securities Act of 1933, as amended (the "Securities Act"), and
the rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") thereunder, copies of which have
heretofore been delivered to you, has been carefully prepared by the
Company in conformity with the requirements of the Securities Act and has
been filed with the Commission under the Securities Act; one or more
amendments to such registration statement, including in each case an
amended pre-effective prospectus, copies of which amendments have
heretofore been delivered to you, have been so prepared and filed. Such
registration statement is referred to hereinafter as the "Registration
Statement." If it is contemplated, at the time this Agreement is executed,
that a post-effective amendment to the Registration Statement will be filed
and must be declared effective before the offering of the Stock may
commence, the term "Registration Statement" as used in this Agreement means
the Registration Statement as amended by said post-effective amendment. The
term "Registration Statement" as used in this Agreement shall also include
any registration statement relating to the Stock that is filed pursuant to
Rule 462(b) under the Securities Act. The term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement, or, (A) if the prospectus included in the Registration Statement
omits information in reliance on Rule 430A under the Securities Act and
such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act, the term "Prospectus" as
used in this Agreement means the prospectus in the form included in the
Registration Statement as supplemented by
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the addition of the Rule 430A information contained in the prospectus filed
with the Commission pursuant to Rule 424(b) and (B) if prospectuses that
meet the requirements of Section 10(a) of the Securities Act are delivered
pursuant to Rule 434 under the Securities Act, then (i) the term
"Prospectus" as used in this Agreement means the "prospectus subject to
completion" (as such term is defined in Rule 434(g) under the Securities
Act) as supplemented by (a) the addition of Rule 430A information or other
information contained in the form of prospectus delivered pursuant to Rule
434(b)(2) under the Securities Act or (b) the information contained in the
term sheets described in Rule 434(b)(3) under the Securities Act, and (ii)
the date of such prospectuses shall be deemed to be the date of the term
sheets. The term "Pre-effective Prospectus" as used in this Agreement means
the prospectus subject to completion in the form included in the
Registration Statement at the time of the initial filing of the
Registration Statement with the Commission, and as such prospectus shall
have been amended from time to time prior to the date of the Prospectus.
(b) The Commission has not issued or threatened to issue any order
preventing or suspending the use of any Pre-effective Prospectus, and, at
its date of issue, each Pre-effective Prospectus conformed in all material
respects with the requirements of the Securities Act and did not include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
and, when the Registration Statement becomes effective and at all times
subsequent thereto up to and including the Closing Dates (as hereinafter
defined), the Registration Statement and the Prospectus and any amendments
or supplements thereto contained and will contain all material statements
and information required to be included therein by the Securities Act and
conformed and will conform in all material respects to the requirements of
the Securities Act and neither the Registration Statement nor the
Prospectus, nor any amendment or supplement thereto, included or will
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing
representations, warranties and agreements shall not apply to information
contained in or omitted from any Pre-effective Prospectus or the
Registration Statement or the Prospectus or any such amendment or
supplement thereto in reliance
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upon, and in conformity with, written information furnished to the Company
by or on behalf of any Underwriter, directly or through you, specifically
for use in the preparation thereof; and each Pre-effective Prospectus and
Prospectus delivered to the Underwriters for use in connection with the
offering of the Stock will, at the time of such delivery, be identical to
the electronically transmitted copies thereof filed with the Commission
pursuant to XXXXX, except to the extent permitted by Regulation S-T under
the Securities Act; there is no franchise, lease, contract, agreement or
document required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which
is not described or filed therein as required; and all descriptions of any
such franchises, leases, contracts, agreements or documents contained in
the Registration Statement are accurate and complete descriptions of such
documents in all material respects.
(c) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as set forth
or contemplated in the Prospectus, the Company and the Founding Companies,
taken as a whole, have not incurred any liabilities or obligations, direct
or contingent, nor entered into any transactions not in the ordinary course
of business, and there has not been any material adverse change in the
condition (financial or otherwise), properties, business, management,
prospects, net worth or results of operations of the Company and the
Founding Companies considered as a whole (a "Material Adverse Effect"), or
any change in the capital stock, short-term or long-term debt of the
Company or any of the Founding Companies.
(d) The financial statements of the Company, the separate financial
statements of American Royal Arts Corp., Animation U.S.A., Inc., DKG
Enterprises, Inc., Xxxxxx Stores, Inc., Filmart Productions Inc. and
Stone's Shops, Inc. (the "Significant Founding Companies"), and the pro
forma combined financial statements of the Company and the Founding
Companies, in each case together with related notes and schedules, as set
forth in the Registration Statement, present fairly the financial position
and the results of operations and cash flows of the Company, of each of the
Significant Founding Companies and of the Company and the Founding
Companies pro forma combined, respectively, at the indicated dates and for
the indicated periods. Such financial statements and related schedules have
been prepared in
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accordance with generally accepted principles of accounting, consistently
applied throughout the periods involved, except as disclosed therein, and
all adjustments necessary for a fair presentation of results for such
periods have been made. The summary historical and statistical data
included in the Registration Statement present fairly the information shown
therein and such data have been compiled on a basis consistent with the
financial statements presented therein and the books and records of the
Company and the Founding Companies, as applicable. The pro forma combined
financial statements of the Company and the Founding Companies (including
the supplemental pro forma information shown therein), together with the
related notes, as set forth in the Registration Statement, present fairly
the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the pro forma bases described
therein, and in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein. The selected financial information included under the captions
"Capitalization" and "Selected Financial Data" in the Prospectus presents
fairly the information shown therein and has been compiled on a basis
consistent with that of the audited financial statements of the Company and
the Founding Companies. No other financial statements or schedules of the
Company or the Founding Companies are required by the Securities Act or the
Rules and Regulations to be included in the Registration Statement or
Prospectus. None of the Company, any of the Acquisition Subsidiaries or any
of the Founding Companies is currently planning any probable acquisition
for which disclosure of pro forma financial information would be required
by the Securities Act.
(e) Xxxxxx Xxxxxxxx LLP, who have expressed their opinions on the
audited financial statements included in the Registration Statement and the
Prospectus are independent public accountants as required by the Securities
Act and the Rules and Regulations.
(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its properties
and conduct its business as described in the Prospectus. Each of American
Royal Arts Corp., Animation U.S.A., Inc., DKG Enterprises, Inc., Xxxxxx
Stores, Inc., Filmart Productions Inc.,
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Stone's Shops, Inc. and St. Xxxxxx, Inc. (each, a "Founding Company" and,
together, the "Founding Companies") has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority
to own, lease and operate its properties and conduct its business as
described in the Prospectus. Each of the Acquisition Subsidiaries has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation with full power and
authority (corporate and other) to own, lease and operate its properties
and conduct its business. As of the Closing Date, after giving effect to
the Founding Company Mergers, all of the outstanding capital stock of each
of the Founding Companies will be owned by the Company, free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable
interest. The Company and each of the Founding Companies is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to be so qualified or be in good standing would not have a Material
Adverse Effect, and to the knowledge of the Company, no proceeding has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or
qualification. The Company does not own or control, directly or indirectly,
any corporation, association or other entity other than the subsidiaries
listed on Exhibit 21 to the Registration Statement. None of the Founding
Companies owns or controls, directly or indirectly, any corporation,
association or other entity other than a partnership formed by American
Royal Arts Corp. and Animation U.S.A., Inc. which has these two entities as
its only partners. Except as described in the Registration Statement and
the Prospectus, the Company is not engaged in any discussions or party to
any agreement or understanding, written or oral, regarding the acquisition
of, or of an interest in, any corporation, firm, partnership, joint
venture, association or other entity.
(g) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and the authorized
and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" and
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conforms in all material respects to the statements relating thereto
contained in the Registration Statement and the Prospectus (and such
statements correctly state the substance of the instruments defining the
capitalization of the Company); the Firm Stock and the Option Stock to be
purchased from the Company hereunder have been duly and validly authorized
for issuance and sale to the Underwriters pursuant to this Agreement and,
when issued and delivered by the Company against payment therefor in
accordance with the terms of this Agreement, will be duly and validly
issued and fully paid and nonassessable, and will be sold free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable
interest; and no preemptive right, co-sale right, registration right, right
of first refusal or other similar right of stockholders exists with respect
to any shares of the Firm Stock or Option Stock to be purchased from the
Company hereunder or the issuance and sale thereof. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Stock except as may be
required under the Act, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or under state or other securities or blue sky laws.
Upon completion of the Founding Company Mergers in the manner described in
the Prospectus, the shares of Common Stock to be issued in such mergers
will be duly authorized, validly issued and fully paid and nonassessable.
Upon conversion of the Company's Series A Preferred Stock, $.01 par value
per share (the "Preferred Stock"), the Company's Restricted Voting Common
Stock, $.01 par value per share (the "Restricted Stock") and the Company's
$1,550,000 12% notes due February 28, 1999 (the "CUSA Notes"), the shares
of Common Stock to be issued in such conversions will be duly authorized,
validly issued and fully paid and nonassessable. Except as disclosed in the
Prospectus and the financial statements of the Company, and the related
notes thereto, included in the Prospectus, the Company does not have
outstanding any options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares
of its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's Long-Term Incentive Plan and
1997 Non- Employee Directors' Stock Plan (the "Option Plans"), and the
options or other rights granted and exercised thereunder, set forth in the
Prospectus accurately and fairly presents the information required to be
shown with respect to the Option Plans and the options granted thereunder.
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(h) All the issued and outstanding capital stock of each of the
Founding Companies and each of the Acquisition Subsidiaries has been duly
authorized and validly issued and is fully paid and nonassessable, and were
not issued in violation of or subject to any preemptive right, or other
rights to subscribe for or purchase shares and is owned of record and
beneficially, as of the date hereof, by the Company in the case of each of
the Acquisition Subsidiaries and, in the case of each of the Founding
Companies, as indicated in Schedule 1.4 of the Agreement and Plan of
Organization relating to such Founding Company, and will be owned of record
and beneficially by the Company at or prior to the closing of the issuance
of the Firm Stock, free and clear of any security interests, liens,
encumbrances, equities or other claims. There are no outstanding rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest in
any of the Acquisition Subsidiaries or any of the Founding Companies.
Except as described in the Registration Statement and the Prospectus or as
may be restricted by relevant state law with respect to the need for
sufficient surplus, none of the Acquisition Subsidiaries or the Founding
Companies is currently prohibited, directly or indirectly, from paying any
dividends to the Company, from making any other distribution on its capital
stock, or from transferring any of the property or assets of any such
Founding Company to the Company.
(i) The shares of Common Stock issuable upon exercise of the Warrants
(as hereinafter defined) have been duly authorized for issuance pursuant to
the Warrants and, when issued and delivered by the Company against payment
therefor in accordance with the terms thereof, will be duly and validly
issued and fully paid and nonassessable, and will be free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest.
(j) Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of the
Founding Companies is a party or of which any property of the Company or
any Founding Company is subject, which, if determined adversely to the
Company or any such Founding Company, might individually or in the
aggregate (i) prevent or adversely affect the transactions contemplated by
this Agreement or by any Agreement and Plan of Organization, (ii) suspend
the effectiveness of the Registration Statement, (iii) prevent or suspend
the use of the Pre-effective Prospectus in any jurisdiction or (iv) result
in a Material Adverse Effect; and to the
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best of the Company's knowledge no such proceedings are threatened against
the Company or any Founding Company by governmental authorities or others.
Neither the Company nor any Founding Company is a party or subject to the
provisions of any material injunction, judgment, decree or order of any
court, regulatory body or other governmental agency or body.
(k) The execution, delivery and performance of this Agreement and each
Agreement and Plan of Organization and the consummation of the transactions
herein and therein contemplated will not result in the creation of any lien
or in a breach or violation of any of the terms or provisions of, or
constitute a default under, (i) any material indenture, mortgage, deed of
trust, note agreement or other agreement or instrument to which the Company
or any of the Founding Companies is a party or by which it or any of them
or any of their properties is or may be bound, (ii) the charter, By-laws or
other organizational documents of the Company, any of the Founding
Companies or any of the Acquisition Subsidiaries or (iii) any law, statute,
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of the Founding Companies or
any of their properties.
(l) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the
Company, any of the Founding Companies or any of the Acquisition
Subsidiaries, of the transactions contemplated by this Agreement or any
Agreement and Plan of Organization, except such as may be required by the
National Association of Securities Dealers, Inc. (the "NASD") or under the
Securities Act or the securities or "Blue Sky" laws of any jurisdiction in
connection with the purchase and distribution of the Stock by the
Underwriters.
(m) The Company has the full corporate power and authority to enter
into this Agreement and to perform its obligations hereunder (including to
issue, sell and deliver the Stock), and this Agreement has been duly and
validly authorized, executed and delivered by the Company and is a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that rights to indemnity
and contribution hereunder may be limited by federal or state securities
laws or the public policy underlying such laws or by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
The Company has the full corporate power and authority to execute and
deliver the Warrants on the terms and conditions set forth in this
Agreement and in the Warrants, and such execution and delivery of the
Warrants has been duly and validly authorized, and when executed and
delivered pursuant to this Agreement, the Warrants will be enforceable
against the Company in accordance with their terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
the enforcement hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights
9
generally or by general equitable principles. The Company, each of the
Acquisition Subsidiaries, and each of the Founding Companies has full legal
right, power and authority to enter into the respective Agreement and Plan
Organization to which they are party and to perform the transactions
contemplated thereby. Each Agreement and Plan of Organization with respect
to the Company, each Acquisition Subsidiary and each Founding Company that
is a party thereto, has been duly authorized, executed and delivered by the
Company, such Acquisition Subsidiary and such Founding Company, and each
such agreement is a valid and binding agreement on the part of the Company,
such Acquisition Subsidiary and such Founding Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder
may be limited by applicable law and except as the enforcement hereof and
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.
(n) The Company and each of the Founding Companies possesses all
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from, and have made all declarations and filings with, all
regulatory or governmental officials, bodies and tribunals ("Permits") to
own, lease or operate their respective properties and to conduct their
respective businesses described in the Registration Statement and the
Prospectus, except where the failure to have obtained or made the same
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and the Founding Companies, taken as a whole, and neither the
Company nor any of the Founding Companies has received any notice of
proceedings relating to the revocation or modification of any such Permits.
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(o) The Company and each of the Founding Companies owns, or possesses
adequate rights to use, free and clear of all liens, charges, encumbrances,
pledges, security interests or defects, all patents, trademarks, service
marks, trade names, trade secrets, copyrights, proprietary technology and
licenses, and rights with respect to the foregoing (collectively,
"Intellectual Property"), used in the conduct of their respective
businesses as described in the Registration Statement and the Prospectus,
and none of the Intellectual Property presently owned, held or used by the
Company or any of the Founding Companies infringes or conflicts with any
Intellectual Property of any other person or entity or are in dispute, and
neither the Company nor any Founding Company has received a notice, or
knows of any basis, of any infringement of or conflict with the asserted
rights of others in any such respect that might have a Material Adverse
Effect.
(p) The Company and each of the Founding Companies owns and has the
right to use all trade secrets, know-how (including all other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), inventions, designs, processes, works of authorship, computer
programs and technical data and information that are material to its
business, properties and operations.
(q) The Company and each of the Founding Companies is in compliance
with, and conducts its business in conformity with, all applicable federal,
state, local and foreign laws, rules and regulations of each court or
governmental agency or body having jurisdiction over the Company or any of
the Founding Companies, except where the failure to be in compliance would
not have a Material Adverse Effect; to the knowledge of the Company,
otherwise than as set forth in the Registration Statement and the
Prospectus, no prospective change in any of such federal or state laws,
rules or regulations has been adopted which, when made effective, would
have a Material Adverse Effect.
(r) The Company and each of the Founding Companies is in compliance
with all federal, state, local or foreign laws or regulations relating to
pollution or protection of human health or the environment ("Environmental
Laws"), except where the failure to be in compliance would not have a
Material Adverse Effect. Neither the Company nor any of the Founding
Companies has authorized, conducted or generated, transported, stored,
used, treated, disposed or released any hazardous substance, hazardous
waste, hazardous material, hazardous constituent,
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toxic substance, pollutant, contaminant, petroleum product, natural gas,
liquified gas or synthetic gas, defined or regulated under any
Environmental Law on, in or under any property currently leased or owned or
by any means controlled by the Company or any of the Founding Companies
(the "Real Property") in violation of any applicable law, except for any
violation which would not have a Material Adverse Effect; there is no
pending or, to the Company's knowledge, threatened claim, action,
litigation or any administrative agency proceeding involving the Company,
any of the Founding Companies or their respective properties, nor has the
Company or any of the Founding Companies received any written notice, or
any oral notice to any executive officer of the Company or any other
employee responsible for receipt of any such notice, from any governmental
entity or third party, that (A) alleges a violation of any Environmental
Laws by the Company or any of the Founding Companies or any person or
entity whose liability for a violation of an Environmental Law the Company
or any of the Founding Companies has retained or assumed either
contractually or by operation of law, which liability or violation could be
reasonably expected to have a Material Adverse Effect, (B) alleges the
Company or any of the Founding Companies is a liable party under the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss. 9601 et seq., or any state superfund law, (C) alleges possible
contamination of the environment by the Company or any of the Founding
Companies or (D) alleges possible contamination of the Real Property.
(s) The Company and each of the Founding Companies has filed all
necessary federal, state, local and foreign income, payroll, franchise and
other tax returns and has paid all taxes shown as due thereon or with
respect to any of its properties, and there is no tax deficiency that has
been, or to the knowledge of the Company is likely to be, asserted against
the Company or any of the Founding Companies or any of their respective
properties or assets that might have a Material Adverse Effect, and all tax
liabilities are adequately provided for on the books of the Company and
each of the Founding Companies.
(t) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any action
designed or intended to stabilize or manipulate the price of any security
of the Company, or which caused or resulted in, or which might in the
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future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company.
(u) The Company has provided you with all financial statements for
each of the Founding Companies since January 1, 1994 to the date hereof.
(v) Neither the Company nor any of the Founding Companies is in
violation of its respective charter or by-laws. The Company and each of the
Founding Companies has performed all material obligations required to be
performed by the Company or any such Founding Company under any material
indenture, mortgage, deed of trust, note agreement or other agreement or
instrument to which it is a party or by which it is or any of its
properties may be bound, and neither the Company nor any of the Founding
Companies nor any other party to such material indenture, mortgage, deed of
trust, note agreement or other agreement or instrument is in default under
or in breach of any such obligations. Neither the Company nor any of the
Founding Companies has received any notice of such default or breach.
(w) Neither the Company nor any of the Founding Companies is involved
in any labor dispute nor, to their knowledge, is any such dispute
threatened. Neither the Company nor any of the Founding Companies is aware
that (A) any executive, key employee or significant group of employees of
the Company or any Founding Company plans to terminate employment with the
Company or any such Founding Company or (B) any such executive or key
employee is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreement that would be violated by the
present or proposed business activities of the Company or any of the
Founding Companies. Neither the Company nor any Founding Company has or
expects to have any liability for any prohibited transaction or funding
deficiency or any complete or partial withdrawal liability with respect to
any pension, profit sharing or other plan which is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), to which the
Company or any Founding Company makes or ever has made a contribution and
in which any employee of the Company or any Founding Company is or has ever
been a participant. With respect to such plans, the Company and each
Founding Company is in compliance in all material respects with all
applicable provisions of ERISA.
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(x) The Company has obtained the written agreement described in
Section 8(h) of this Agreement from each of its officers, directors,
director designees and holders of Common Stock listed on Schedule B hereto.
(y) The Company has obtained from each of the stockholders of each of
the Founding Companies their agreement not to sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint or otherwise dispose of any
shares of Common Stock received in the Founding Company Mergers other than
in accordance with the transfer restrictions provided for in Section 15.1
of each Agreement and Plan of Organization.
(z) The Company and each of the Founding Companies have, and as of the
Closing Dates will have, good and marketable title to all real property
free and clear of all liens, encumbrances and defects except such as are
described in the Prospectus or such as would not have a Material Adverse
Effect; and any real property and buildings held under lease by the Company
or any of the Founding Companies or proposed to be held after giving effect
to the transactions described in the Prospectus are, or will be as of the
Closing Dates, held by them under valid, subsisting and enforceable leases
with such exceptions as would not have a Material Adverse Effect, in each
case except as described in the Prospectus. All personal property used by
the Company and each of the Founding Companies in their business is either
owned or leased by the Company or the Founding Companies and is in good
working order and condition, ordinary wear and tear excepted.
(aa) The Company and each Founding Company is insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as is customary in the businesses in which it is engaged or
proposes to engage after giving effect to the transactions described in the
Prospectus; and neither the Company nor any Founding Company has any reason
to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue their business at a
cost that would not have a Material Adverse Effect.
(bb) Other than as contemplated by this Agreement, there is no broker,
finder or other party that is entitled to receive from the
14
Company any brokerage or finder's fee or other fee or commission as a
result of any of the transactions contemplated by this Agreement.
(cc) The inventory of the Company and the Founding Companies is in
merchantable condition and can be sold in the ordinary course of business
at the carrying value of such inventory, as shown in the Company's or the
Founding Companies' financial statements, subject to pricing reductions in
the ordinary course of business.
(dd) The Company and each of the Founding Companies maintains a system
of internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(ee) To the Company's knowledge, neither the Company nor any of the
Founding Companies nor any employee or agent of the Company or any of the
Founding Companies has made any payment of funds of the Company or any of
the Founding Companies or received or retained any funds in violation of
any law, rule or regulation, which payment, receipt or retention of funds
is of a character required to be disclosed in the Prospectus.
(ff) Neither the Company nor any of the Founding Companies is an
"investment company," or an entity "controlled" by an "investment company"
required to be registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as such terms are defined in the 1940 Act, and
neither the Company nor any of the Founding Companies expects to be treated
as such by reason of the receipt and application of the net proceeds from
the sale of the Stock.
(gg) The Stock has been duly approved for quotation on the Nasdaq
National Market, subject to official notice of issuance.
15
(hh) No holder of any security of the Company has the right to have
any security owned by such holder included in the Registration Statement
and, except as described in the Registration Statement and the Prospectus,
no holder of any security of the Company has the right to demand
registration of any security owned by such holder during the period ending
12 months after the date of the Prospectus.
(ii) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters pursuant to
this Agreement shall be deemed to be a representation and warranty by the
Company as to the matters covered thereby.
(jj) For all periods from its election under Subchapter S of the
Internal Revenue Code of 1986, as amended (the "Code"), until the Closing
Date, each of the Founding Companies that so elected was qualified as an S
Corporation pursuant to an election validly made under Subchapter S of the
Code (which election has not been and will not be revoked or terminated for
any such period) and the Company has not been and will not be subject to
federal corporate taxes for such periods. Any Subchapter S election was
duly terminated on the Closing Date.
3. Purchase by, and Sale and Delivery to, Underwriters--Closing Dates;
Independent Underwriter. (a) The Company agrees to sell to the Underwriters the
Firm Stock, and on the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Underwriters agree, severally and not jointly, to purchase the Firm
Stock from the Company, the number of shares of Firm Stock to be purchased by
each Underwriter being set opposite its name in Schedule A, subject to
adjustment in accordance with Section 12 hereof.
The purchase price per share to be paid by the Underwriters to the Company
will be $_________ per share (the "Purchase Price").
The Company will deliver the Firm Stock to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York City time, on the second full business day preceding the
First Closing Date (as defined below) or, if no such direction is received, in
the names of the respective Underwriters or in such other names as Cruttenden
may designate (solely for the purpose of administrative convenience) and in such
denominations as Cruttenden may determine), against
16
payment of the aggregate Purchase Price therefor by wire transfer of same-day
funds to an account specified by the Company in writing at least two (2)
business days prior to the First Closing Date, all at the offices of Fulbright &
Xxxxxxxx L.L.P., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The time and date
of the delivery and closing shall be at 10:00 A.M., New York City time, on
________, 1998, in accordance with Rule 15c6-1 of the Exchange Act. The time and
date of such payment and delivery are herein referred to as the "First Closing
Date." The First Closing Date and the location of delivery of, and the form of
payment for, the Firm Stock may be varied by agreement between the Company and
Cruttenden. The First Closing Date may be postponed pursuant to the provisions
of Section 12.
The Company shall make the certificates for the Stock available to the
Representatives for examination on behalf of the Underwriters not later than
10:00 A.M., New York City time, on the business day preceding the First Closing
Date at the offices of Cruttenden, 00000 Xxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx
00000.
It is understood that either of the Representatives, individually and not
as a Representative of the several Underwriters, may (but shall not be obligated
to) make payment to the Company on behalf of any Underwriter or Underwriters,
for the Stock to be purchased by such Underwriter or Underwriters. Any such
payment by either of the Representatives shall not relieve such Underwriter or
Underwriters from any of its or their other obligations hereunder.
The several Underwriters agree to make an initial public offering of the
Firm Stock at the initial public offering price as soon after the effectiveness
of the Registration Statement as in their judgment is advisable. The
Representatives shall promptly advise the Company of the making of the initial
public offering.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Company hereby grants to the Underwriters an option to purchase, severally and
not jointly, an aggregate of up to 405,000 shares of Common Stock. The price per
share to be paid for the Option Stock shall be the Purchase Price. The option
granted hereby may be exercised as to all or any part of the Option Stock at any
time, and from time to time, not more than forty-five (45) days subsequent to
the effective date of this Agreement. No Option Stock shall be sold and
delivered unless the Firm Stock previously has been, or simultaneously is, sold
and delivered. The right to purchase the Option Stock or any portion thereof may
be surrendered and terminated at any time upon notice by the Underwriters to the
Company.
17
The option granted hereby may be exercised by the Underwriters by giving
written notice from Cruttenden to the Company setting forth the number of shares
of the Option Stock to be purchased by them and the date and time for delivery
of and payment for the Option Stock. Each date and time for delivery of and
payment for the Option Stock (which may be the First Closing Date, but not
earlier) is herein called the "Option Closing Date" and shall in no event be
earlier than two (2) business days nor later than ten (10) business days after
written notice is given. (The Option Closing Date and the First Closing Date are
herein called the "Closing Dates.") All purchases of Option Stock from the
Company shall be made on a pro rata basis. Option Stock shall be purchased for
the account of each Underwriter in the same proportion as the number of shares
of Firm Stock set forth opposite such Underwriter's name in Schedule A hereto
bears to the total number of shares of Firm Stock (subject to adjustment by the
Underwriters to eliminate odd lots). Upon exercise of the option by the
Underwriters, the Company agrees to sell to the Underwriters the number of
shares of Option Stock set forth in the written notice of exercise and the
Underwriters agree, severally and not jointly and subject to the terms and
conditions herein set forth, to purchase the number of such shares determined as
aforesaid.
The Company will deliver the Option Stock to the Underwriters (in the form
of definitive certificates, issued in such names and in such denominations as
the Representatives may direct by notice in writing to the Company given at or
prior to 12:00 Noon, New York City time, on the second full business day
preceding the Option Closing Date or, if no such direction is received, in the
names of the respective Underwriters or in such other names as Cruttenden may
designate (solely for the purpose of administrative convenience) and in such
denominations as Cruttenden may determine), against payment of the aggregate
Purchase Price therefor by wire transfer of same-day funds to an account
specified by the Company in writing at least two (2) business days prior to the
Option Closing Date, all at the offices of Fulbright & Xxxxxxxx L.L.P., 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The Option Closing Date and the location
of delivery of, and the form of payment for, the Option Stock may be varied by
agreement between the Company and Cruttenden. The Option Closing Date may be
postponed pursuant to the provisions of Section 12.
In order to induce you to enter into this Agreement, the Company, in
consideration of the receipt of an aggregate of $270 and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, shall execute
and deliver to you, in your individual capacity and not as Representatives, or
your assignees, in compliance with the rules of the NASD, warrants exercisable
during the 5-year period commencing on the effective date of the Registration
Statement (the "Warrants") to purchase an aggregate of 270,000 shares of Common
Stock at an exercise price per share equal to 120% of the initial public
offering price per share set
18
forth on the cover page of the Prospectus. The Warrants shall be in the form of
Exhibit 10.5 to the Registration Statement. Execution and delivery of Warrants,
registered in your name or the names of such of your officers or such assignees
as you shall notify the Company in writing, shall be made to you, at your
offices at 00000 Xxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000, at the First
Closing Date. The cost of original issue tax stamps, if any, in connection with
the execution and delivery of the Warrants shall be borne by the Company.
(b) The Company hereby confirms its engagement, in consideration of
$25,000, of the services of Cruttenden as, and Cruttenden hereby confirms its
agreement with the Company to render services as, a "qualified independent
underwriter" (in such capacity, the "Independent Underwriter") within the
meaning of Rule 2720 of the Conduct Rules ("Rule 2720") of the NASD with respect
to the offering and sale of the Stock. Payment of such $25,000 fee shall be due
and payable at the time of payment for the Firm Stock.
(i) The Independent Underwriter hereby represents and warrants to, and
agrees with, the Company and [Co-Manager] and the other Underwriters that with
respect to the offering and sale of Stock as described in the Prospectus:
(A) the Independent Underwriter is a "qualified independent
underwriter" within the meaning of Rule 2720;
(B) the Independent Underwriter has participated in the preparation of
the Registration Statement and the Prospectus and has exercised the usual
standards of "due diligence" with respect thereto;
(C) the Independent Underwriter has undertaken the legal
responsibilities and liabilities of an underwriter under the Securities
Act, including those contained in Section 11 thereof, subject to the
limitations on such liabilities set forth herein (including without
limitation, the nature of Cruttenden's underwriting commitment as several
and not joint);
(D) based upon, among other factors, the information set forth in the
Preliminary Prospectus and its review of such other documents and the
taking of such other actions as the Independent Underwriter, in its sole
discretion, has deemed necessary or appropriate for the purposes of
delivering its recommendation hereunder, the Independent Underwriter
recommends, as of the date of the execution and delivery of this Agreement,
that the public offering price for the Stock not exceed the amount of
$_______ per share, which
19
price should in no way be considered or relied upon except as set forth
therein and in the letter referred to in clause (E) below; and
(E) the Independent Underwriter will furnish to the other Underwriters
on the date hereof a letter, dated the date hereof, substantially to the
effect set forth in Schedule C hereto.
(ii) The Company, the Independent Underwriter and the other
Underwriters agree to comply in all material respects with all of the
requirements of Rule 2720 applicable to them in connection with the offering and
sale of the Stock. The Company agrees to cooperate with Underwriters to enable
the Underwriters to comply with Rule 2720 and the Independent Underwriter to
perform the services contemplated by this Agreement.
(iii) The Independent Underwriter hereby consents to the references to
it as set forth under the caption "Underwriting" in the Prospectus.
(c) The Company hereby confirms its engagement, in consideration of
$450,000 (the "Financial Advisory Fee"), of the services of Cruttenden as, and
Cruttenden confirms its agreement with the Company to render services as, a
financial advisor to the Company. Payment of the first $225,000 of the Financial
Advisory Fee shall be due and payable at the time of payment for the Firm Stock
and the remaining portion of the Financial Advisory Fee shall be due and payable
within ninety (90) days thereafter.
4. Covenants and Agreements of the Company. The Company covenants and
agrees with the several Underwriters that:
(a) The Company will (i) if the Company and the Representatives have
determined not to proceed pursuant to Rule 430A, use its best efforts to
cause the Registration Statement to become effective, (ii) if the Company
and the Representatives have determined to proceed pursuant to Rule 430A,
use its best efforts to comply with the provisions of and make all
requisite filings with the Commission pursuant to Rule 430A and Rule 424 of
the Rules and Regulations and (iii) if the Company and the Representatives
have determined to deliver Prospectuses pursuant to Rule 434 of the Rules
and Regulations, to use its best efforts to comply with all the applicable
provisions thereof. The Company will advise the Representatives promptly as
to the time at which the Registration Statement becomes effective, will
advise the Representatives promptly of the issuance by the Commission of
any stop
20
order suspending the effectiveness of the Registration Statement or of the
institution of any proceedings for that purpose, and will use its best
efforts to prevent the issuance of any such stop order and to obtain as
soon as possible the lifting thereof, if issued. The Company will advise
the Representatives promptly of the receipt of any comments of the
Commission or any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for
additional information and will not at any time file any amendment to the
Registration Statement or supplement to the Prospectus which shall not
previously have been submitted to the Representatives a reasonable time
prior to the proposed filing thereof or to which the Representatives shall
reasonably object in writing or which is not in compliance with the
Securities Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon the request of the Representatives, any amendments or supplements to
the Registration Statement or the Prospectus which in the opinion of the
Representatives may be necessary to enable the several Underwriters to
continue the distribution of the Stock and will use its best efforts to
cause the same to become effective as promptly as possible.
(c) If at any time after the effective date of the Registration
Statement when a prospectus relating to the Stock is required to be
delivered under the Securities Act any event relating to or affecting the
Company or any of the Founding Companies occurs as a result of which the
Prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it is necessary at any
time to amend the Prospectus to comply with the Securities Act, the Company
will promptly notify the Representatives thereof and will prepare an
amended or supplemented prospectus which will correct such statement or
omission; and in case any Underwriter is required to deliver a prospectus
relating to the Stock nine (9) months or more after the effective date of
the Registration Statement, the Company upon the request of the
Representatives and at the expense of such Underwriter will prepare
promptly such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Securities Act.
21
(d) The Company will deliver to the Representatives, at or before the
Closing Dates, signed copies of the Registration Statement, as originally
filed with the Commission, and all amendments thereto including all
financial statements and exhibits thereto, and will deliver to the
Representatives such number of copies of the Registration Statement,
including such financial statements but without exhibits, and all
amendments thereto, as the Representatives may reasonably request. The
Company will deliver or mail to or upon the order of the Representatives,
from time to time until the effective date of the Registration Statement,
as many copies of the Pre-effective Prospectus as the Representatives may
reasonably request. The Company will deliver or mail to or upon the order
of the Representatives on the date of the initial public offering, and
thereafter from time to time during the period when delivery of a
prospectus relating to the Stock is required under the Securities Act, as
many copies of the Prospectus, in final form or as thereafter amended or
supplemented as the Representatives may reasonably request; provided,
however, that the expense of the preparation and delivery of any prospectus
required for use nine (9) months or more after the effective date of the
Registration Statement shall be borne by the Underwriters required to
deliver such prospectus.
(e) The Company will make generally available to its shareholders as
soon as practicable, but not later than fifteen (15) months after the
effective date of the Registration Statement, an earning statement which
will be in reasonable detail (but which need not be audited) and which will
comply with Section 11(a) of the Securities Act, covering a period of at
least twelve (12) months beginning after the "effective date" (as defined
in Rule 158 under the Securities Act) of the Registration Statement.
(f) The Company will cooperate with the Representatives to enable the
Stock to be registered or qualified for offering and sale by the
Underwriters and by dealers under the securities laws of such jurisdictions
as the Representatives may reasonably designate and at the request of the
Representatives will make such applications and furnish such consents to
service of process or other documents as may be required of it as the
issuer of the Stock for that purpose; provided, however, that the Company
shall not be required to qualify to do business or to file a general
consent (other than that arising out of the offering or sale of the Stock)
to service of process in any such jurisdiction where it is not now so
subject. The Company will, from time to time, prepare and file such
22
statements and reports as are or may be required of it as the issuer of the
Stock to continue such qualifications in effect for so long a period as the
Representatives may reasonably request for the distribution of the Stock.
The Company will advise the Representatives promptly after the Company
becomes aware of the suspension of the qualifications or registration of
(or any such exception relating to) the Common Stock of the Company for
offering, sale or trading in any jurisdiction or of any initiation or
threat of any proceeding for any such purpose, and in the event of the
issuance of any orders suspending such qualifications, registration or
exception, the Company will, with the cooperation of the Representatives
use its best efforts to obtain the withdrawal thereof.
(g) The Company will furnish to its stockholders annual reports
containing financial statements certified by independent public accountants
and with quarterly summary financial information in reasonable detail which
may be unaudited. During the period of five (5) years from the date hereof,
the Company will deliver to the Representatives, as soon as they are
available, copies of each annual report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and
statements of income, stockholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public
accountants and each other report or communication furnished by the Company
to its stockholders and will deliver to the Representatives, (i) as soon as
they are available, copies of any other reports or communication (financial
or other) which the Company shall publish or otherwise make available to
any of its stockholders as such and (ii) as soon as they are available,
copies of any reports and financial statements furnished to or filed with
the Commission, or the NASD or any national securities exchange. So long as
the Company has active subsidiaries, such financial statements will be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally. Separate financial statements shall be furnished for all
subsidiaries whose accounts are not consolidated but which at the time are
significant subsidiaries as defined in the Rules and Regulations.
(h) The Company will use its best efforts to quality for inclusion,
subject to official notice of issuance, on the Nasdaq National Market, the
Stock to be issued and sold by the Company.
23
(i) The Company will maintain a transfer agent and registrar for its
Common Stock.
(j) The Company will not, without the prior written consent of
Cruttenden, offer, sell, assign, transfer, encumber, contract to sell,
grant an option to purchase or otherwise dispose of any shares of Common
Stock or securities convertible into or exercisable or exchangeable for
Common Stock during the 180 days following the date of the Prospectus,
other than: (i) the Company's sale of Common Stock hereunder, (ii) the
issuance of the Warrants and the Company's issuance of Common Stock upon
the exercise of the Warrants, (iii) in connection with the Founding Company
Mergers as described in the Registration Statement, (iv) upon the exercise
of stock options or upon conversion of the Preferred Stock, the Restricted
Common Stock and the CUSA Notes, granted or issued prior to the date hereof
and as described in the Registration Statement, (v) 2,500,000 shares of
Common Stock to be used for the acquisition of companies in the
collectibles, gift or animation art industries, and (vi) the grant of stock
options pursuant to the Option Plans. The Company will not waive the
provisions of Section 15.1 of each Agreement and Plan of Organization
during the 180 days following the date of the Prospectus without the prior
written consent of Cruttenden.
(k) The Company will apply the net proceeds from the sale of the Stock
as set forth in the description under "Use of Proceeds" in the Prospectus,
which description complies in all respects with the requirements of Item
504 of Regulation S-K.
(l) The Company will supply you with copies of all correspondence to
and from, and all documents issued to and by, the Commission in connection
with the registration of the Stock under the Securities Act.
(m) Prior to the Closing Dates the Company will furnish to you, as
soon as they have been prepared, copies of any unaudited interim
consolidated financial statements of the Company and each of the Founding
Companies for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statement and the
Prospectus.
(n) Prior to the Closing Dates the Company will issue no press release
or other communications directly or indirectly and hold no press
24
conference with respect to the Company or any of the Founding Companies,
the financial condition, results of operation, business, prospects, assets
or liabilities of any of them, or the offering of the Stock, without your
prior written consent.
(o) The Company will not at any time, directly or indirectly, take any
action designed or intended to stabilize or manipulate the price of any
security of the Company, or which caused or resulted in, or which might in
the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company.
(p) The Company will file a Form SR in compliance with the
requirements of the Securities Act and the Rules and Regulations.
(q) The Company will (i) use its best efforts to satisfy all
conditions to the consummation of the Founding Company Mergers as set forth
in the applicable Agreement and Plan of Organization with respect thereto,
and (ii) promptly notify the Representatives of the occurrence of any event
which may result in the non-consummation of any of the Founding Company
Mergers.
5. Payment of Expenses. (a) The Company will pay (directly or by
reimbursement) all costs, fees and expenses incurred in connection with expenses
incident to the performance of its obligations of the Company under this
Agreement and in connection with the transactions contemplated hereby, including
but not limited to (i) all expenses and taxes incident to the issuance and
delivery of the Stock to the Representatives; (ii) all expenses incident to the
registration of the Stock under the Securities Act; (iii) the costs of preparing
stock certificates (including printing and engraving costs); (iv) all fees and
expenses of the registrar and transfer agent of the Stock; (v) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Stock to the Underwriters; (vi) fees and expenses of the Company's
counsel and the Company's independent accountants; (vii) all costs and expenses
incurred in connection with the preparation, printing, filing, shipping and
distribution of the Registration Statement, each Pre-effective Prospectus and
the Prospectus (including all exhibits and financial statements) and all
amendments and supplements provided for herein, the "Agreement Among
Underwriters" between the Representatives and the Underwriters, the Selling
Agreement, the Underwriters' Questionnaire and the Blue Sky memoranda, if any,
and this Agreement; (viii) all filing fees, attorneys' fees and expenses
incurred by the Company or the Underwriters in connection with exemptions from
the qualifying or registering (or obtaining qualification or registration of)
all or any part of the Stock for offer and sale and
25
determination of its eligibility for investment under the Blue Sky or other
securities laws of such jurisdictions as the Representatives may designate; (ix)
all fees and expenses in connection with qualifying the Stock for inclusion on
the Nasdaq National Market and all fees and expenses, including attorneys' fees,
paid or incurred in connection with filings made with the NASD; and (x) all
other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section 5,
including any and all costs and expenses associated with the Founding Company
Mergers, except for those costs which shall be borne by the Founding Companies.
(b) In addition to its other obligations under Section 6(a) hereof, the
Company agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
(i) any statement or omission or any alleged statement or omission or (ii) any
breach or inaccuracy in its representations and warranties, it will reimburse
each Underwriter on a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse each Underwriter for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Underwriter shall promptly return
it to the Company together with interest, compounded daily, determined on the
basis of the prime rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by Citibank, N.A., New
York, New York (the "Prime Rate"). Any such interim reimbursement payments which
are not made to an Underwriter in a timely manner as provided below shall bear
interest at the Prime Rate from the due date for such reimbursement. This
expense reimbursement agreement will be in addition to any other liability which
the Company may otherwise have. The request for reimbursement will be sent to
the Company.
(c) In addition to its other obligations under Section 6(b) hereof, each
Underwriter severally agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in Section 6(c) hereof which relates to written information furnished
to the Company by the Representatives on behalf of the Underwriters specifically
for inclusion in the Registration Statement and the Prospectus, it will
reimburse the Company (and, to the extent applicable, each officer, director or
controlling person) on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or
26
defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company (and, to
the extent applicable, each officer, director or controlling person) for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Company
(and, to the extent applicable, each officer, director or controlling person)
shall promptly return it to the Underwriters together with interest, compounded
daily, determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company within thirty (30) days of a request
for reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(d) It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in paragraph (b) and/or (c) of this
Section 5, including the amounts of any requested reimbursement payments and the
method of determining such amounts, shall be settled by arbitration conducted
under the provisions of the Constitution and Rules of the Board of Governors of
the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration
Procedure of the NASD. Any such arbitration must be commenced by service of a
written demand for arbitration or written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in paragraph (b) and/or (c) of
this Section 5 and would not resolve the ultimate propriety or enforceability of
the obligation to reimburse expenses which is created by the provisions of
Section 6.
6. Indemnification and Contribution. (a) The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls such
Underwriter within the meaning of the Securities Act and the respective
officers, directors, partners, employees, representatives and agents of each of
such Underwriter (collectively, the "Underwriter Indemnified Parties" and, each,
an "Underwriter Indemnified Party"), against any losses, claims, damages,
liabilities or expenses (including the reasonable cost of investigating and
defending against any claims therefor and counsel fees incurred in connection
therewith), joint or several, which may be based upon the Securities Act, or any
other statute or at common law, on the ground that any Pre-effective Prospectus,
the Registration Statement or the Prospectus (or any Pre-effective Prospectus,
the Registration Statement or the Prospectus as from time
27
to time amended or supplemented) includes or allegedly includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that such indemnity shall not inure to the benefit of any Underwriter (or any
person controlling such) on account of any losses, claims, damages, liabilities
or expenses arising from the sale of the Stock to any person by such Underwriter
(i) if such untrue statement or omission or alleged untrue statement or omission
was made in any Pre-effective Prospectus, the Registration Statement or the
Prospectus, or such amendment or supplement, in reliance upon and in conformity
with information furnished in writing to the Company by the Representatives on
behalf of any Underwriter specifically for use therein or (ii) as to any
Pre-effective Prospectus, with respect to any Underwriter, to the extent that
any such loss, claim, damage, liability or expense of such Underwriter results
from an untrue statement of a material fact contained in, or the omission of a
material fact from, such Pre-effective Prospectus, which untrue statement or
omission was corrected in the Prospectus, if such Underwriter sold Stock to the
person alleging such loss, claim, damage or liability without sending or giving,
at or prior to the written confirmation of such sale, a copy of the Prospectus,
unless such failure resulted from the failure of the Company to deliver copies
of the Prospectus to such Underwriter on a timely basis to permit such sending
or giving. The Company will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Company elects to assume the defense,
such defense shall be conducted by counsel chosen by it. In the event the
Company elects to assume the defense of any such suit and retain such counsel,
any Underwriter Indemnified Parties, defendant or defendants in the suit, may
retain additional counsel but shall bear the fees and expenses of such counsel
unless (i) the Company shall have specifically authorized the retaining of such
counsel or (ii) the parties to such suit include any such Underwriter
Indemnified Parties, and the Company and such Underwriter Indemnified Parties at
law or in equity have been advised by counsel to the Underwriters that one or
more legal defenses may be available to it or them which may not be available to
the Company, in which case the Company shall not be entitled to assume the
defense of such suit notwithstanding its obligation to bear the fees and
expenses of such counsel. This indemnity agreement is not exclusive and will be
in addition to any liability which the Company might otherwise have and shall
not limit any rights or remedies which may otherwise be available at law or in
equity to each Underwriter Indemnified Party. The Company agrees that the
statements with respect to the price and underwriting discount set forth on, and
the information contained in the last paragraph of, the cover page of the
Prospectus, the stabilization legend on the inside front cover page of the
Prospectus, and the table of Underwriters, the paragraph regarding price and
underwriting discount, the paragraph regarding the amounts of the selling
concession and
28
reallowance, all set forth under the caption "Underwriting" in the Prospectus,
constitute the only information provided in writing by the Representatives on
behalf of any Underwriter expressly for use in the Registration Statement or the
Prospectus.
(b) Each Underwriter severally and not jointly agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act (collectively, the "Company
Indemnified Parties") against any losses, claims, damages, liabilities or
expenses (including, unless the Underwriter or Underwriters elect to assume the
defense, the reasonable cost of investigating and defending against any claims
therefor and counsel fees incurred in connection therewith), joint or several,
which arise out of or are based in whole or in part upon the Securities Act, the
Exchange Act or any other federal, state, local or foreign statute or
regulation, or at common law, on the ground or alleged ground that any
Pre-effective Prospectus, the Registration Statement or the Prospectus (or any
Pre- effective Prospectus, the Registration Statement or the Prospectus, as from
time to time amended and supplemented) includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading, but only insofar as any such statement
or omission was made in reliance upon, and in conformity with, written
information furnished to the Company by such Underwriter, directly or through
the Representatives, specifically for use in the preparation thereof; provided,
however, that in no case is such Underwriter to be liable with respect to any
claims made against any Company Indemnified Party against whom the action is
brought unless such Company Indemnified Party shall have notified such
Underwriter in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Company Indemnified Party, but failure to notify such
Underwriter of such claim shall not relieve it from any liability which it may
have to any Company Indemnified Party otherwise than on account of its indemnity
agreement contained in this paragraph. Such Underwriter shall be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but, if such
Underwriter elects to assume the defense, such defense shall be conducted by
counsel chosen by it. In the event that any Underwriter elects to assume the
defense of any such suit and retain such counsel, the Company Indemnified
Parties and any other Underwriter or Underwriters or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, respectively. The Underwriter
against whom indemnity may be sought shall not be liable to indemnify any person
for any settlement of any such claim effected without such Underwriter's
consent. This indemnity agreement is not exclusive and will be in addition to
any liability which
29
such Underwriter might otherwise have and shall not limit any rights or remedies
which may otherwise be available at law or in equity to any Company Indemnified
Party.
(c) If the indemnification provided for in this Section 6 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other from the offering of the Stock. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contribution were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating, defending, settling or compromising any
such claim. Notwithstanding the provisions of this subsection (c), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the shares of the Stock underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue
30
or alleged untrue statement or omission or alleged omission. The Underwriters'
obligations to contribute are several in proportion to their respective
underwriting obligations and not joint. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(d) The Company also agrees to indemnify and hold harmless Cruttenden and
each person, if any, who controls Cruttenden within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments incurred
as a result of Cruttenden's participation as a "qualified independent
underwriter" within the meaning of Rule 2720 in connection with the offering of
the Stock, except for any losses, claims, damages, liabilities and judgments
resulting from Cruttenden's, or such controlling person's, willful misconduct or
gross negligence.
7. Survival of Indemnities, Representations, Warranties, etc. The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by them respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter, the Company or any of its officers or directors or
any controlling person, and shall survive delivery of and payment for the Stock.
8. Conditions of Underwriters' Obligations. The respective obligations of
the several Underwriters hereunder shall be subject to the accuracy, at and
(except as otherwise stated herein) as of the date hereof and at and as of the
Closing Dates, of the representations and warranties made herein by the Company,
to compliance at and as of the Closing Dates by the Company with its covenants
and agreements herein contained and other provisions hereof to be satisfied at
or prior to the Closing Dates, and to the following additional conditions:
(a) The Registration Statement shall have become effective and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge
of the Company or the Representatives, shall be threatened by the
Commission, and any request for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the reasonable satisfaction
of the Representatives. Any filings of the Prospectus, or any supplement
thereto, required pursuant to Rule 424(b) or Rule 434 of the Rules and
Regulations, shall have been
31
made in the manner and within the time period required by Rule 424(b) and
Rule 434 of the Rules and Regulations, as the case may be.
(b) The Representatives shall have been satisfied that there shall not
have occurred any change, on a consolidated basis, prior to the Closing
Dates in the condition (financial or otherwise), properties, business,
management, prospects, net worth or results of operations of the Company
and the Founding Companies considered as a whole, or any change in the
capital stock, short-term or long-term debt of the Company and the Founding
Companies considered as a whole, such that (i) the Registration Statement
or the Prospectus, or any amendment or supplement thereto, contains an
untrue statement of fact which is material, or omits to state a fact which
is required to be stated therein or is necessary to make the statements
therein not misleading, or (ii) it is impracticable in the reasonable
judgment of the Representatives to proceed with the public offering or
purchase the Stock as contemplated hereby.
(c) At the time of execution of this Agreement and at each of the
Closing Dates, Xxxxxx Xxxxxxxx LLP shall have furnished to the Underwriters
a letter or letters, dated, respectively, the date of execution of this
Agreement and each of the Closing Dates, confirming that they are
independent certified public accountants with respect to the Company and
each of the Founding Companies within the meaning of the Securities Act and
the applicable published Rules and Regulations and based upon the
procedures described in such letter delivered to you concurrently with the
execution of this Agreement (herein called the "Comfort Letter"), but
carried out to a date not more than five (5) business days prior to the
First Closing Date or such later date on which the Option Stock is to be
purchased, as the case may be, (i) confirming, to the extent true, that the
statements and conclusions set forth in the Comfort Letter are accurate as
of the First Closing Date or such later date on which Option Stock is to be
purchased, as the case may be, and (ii) setting forth any revisions and
additions to the statements and conclusions set forth in the Comfort Letter
which are necessary to reflect any changes in the facts described in the
Comfort Letter since the date of such letter, or to reflect the
availability of more recent financial statements, data or information. The
letter shall not contain any disclosure relating to any change in the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and the Founding Companies considered as
a whole from that set forth in the
32
Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the
Stock as contemplated by the Prospectus. The Comfort Letter shall be
addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent that they are
independent certified public accountants with respect to the Company and
each of the Founding Companies within the meaning of the Act and the
applicable published Rules and Regulations, (ii) set forth their opinion
with respect to their examination of the balance sheet of the Company as of
January 31, 1997, each of the Significant Founding Companies as of the end
of their respective fiscal year ends, and related consolidated statements
of operations, shareholders' equity, and cash flows for the twelve (12)
months then ended, (iii) state that Xxxxxx Xxxxxxxx LLP has performed, with
respect to the interim financial statements of the Company and the
Significant Founding Companies included in the Registration Statement (the
"Quarterly Financial Statements"), the procedures set out in Statement on
Auditing Standards No. 71 ("SAS 71") for a review of interim financial
information and providing the report of Xxxxxx Xxxxxxxx LLP as described in
SAS 71 on the Quarterly Financial Statements, (iv) state that in the course
of such review, nothing came to their attention that leads them to believe
that any material modifications need to be made to any of the Quarterly
Financial Statements in order for them to be in compliance with generally
accepted accounting principles consistently applied across the periods
presented, (v) state that, on the basis of a reading of the pro forma
combined financial statements included in the Registration Statement and
the Prospectus, carrying out certain specified procedures that would not
necessarily reveal matters of significance with respect to the comments set
forth in this clause (v), inquiries of certain officials of the Company and
the Founding Companies who have responsibility for financial and accounting
matters and proving the arithmetic accuracy of the application of the pro
forma combined financial statements, nothing came to their attention that
caused them to believe that the pro forma combined financial statements do
not comply in form in all materials respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of such statements and (vi) address other matters agreed upon
by Xxxxxx Xxxxxxxx LLP and you. In addition, you shall have received from
Xxxxxx Xxxxxxxx LLP a letter addressed to the Company and made available to
you for the use of
33
the Underwriters stating that their review of the Company's system of
internal accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the above financial
statements as of January 31, 1998, did not disclose any weaknesses in
internal controls that they considered to be material weaknesses.
(d) The Representatives shall have received from Xxxxxx, Xxxxx &
Bockius LLP, counsel for the Company, an opinion, dated the Closing Dates,
to the effect set forth in Exhibit I hereto. Counsel rendering the
foregoing opinion may rely as to questions of law not involving the laws of
the United States or the State of New York and the General Corporation Law
of the State of Delaware upon opinions of local counsel, and as to
questions of fact upon representations or certificates of officers of the
Company and/or the Founding Companies, and of government officials, in
which case their opinion is to state that they are so relying and that they
have no knowledge of any material misstatement or inaccuracy in any such
opinion, representation or certificate. Counsel rendering the foregoing
opinion may also rely, with respect to matters concerning the Founding
Companies, upon an opinion or opinions, each dated the Closing Date and
addressed to the Underwriters, of counsel to the Founding Companies,
provided Xxxxxx, Xxxxx & Xxxxxxx LLP shall state that they believe, after
due inquiry, that both you and they are justified in relying upon such
opinion or opinions. Copies of any opinion, representation or certificate
so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) The Representatives shall have received from Fulbright & Xxxxxxxx
L.L.P., counsel for the Underwriters, their opinion or opinions dated the
Closing Dates with respect to the incorporation of the Company, the
validity of the Stock, the Registration Statement and the Prospectus and
such other related matters as it may reasonably request, and the Company
shall have furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters. In
rendering such opinion, Fulbright & Xxxxxxxx L.L.P. may rely as to all
matters governed other than by the laws of New York or federal laws on the
opinion of counsel referred to in paragraph (e) of this Section 8.
(f) The Representatives shall have received a certificate, dated the
Closing Dates, of the chief executive officer or the President and the
Chief Financial Officer of the Company to the effect that:
34
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and, to the best of the
knowledge of the signers, no proceedings for that purpose have been
instituted or are pending or contemplated under the Securities Act;
(ii) Neither any Pre-effective Prospectus, as of its date, nor
the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, as of the time when the Registration Statement
became effective and at all times subsequent thereto up to the
delivery of such certificate, included any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
(iii) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except
as set forth or contemplated in the Prospectus, neither the Company
nor any of the Founding Companies has incurred any material
liabilities or obligations, direct or contingent, nor entered into any
material transactions not in the ordinary course of business and there
has not been any material adverse change in the condition (financial
or otherwise), properties, business, management, prospects, net worth
or results of operations of the Company and the Founding Companies
considered as a whole, or any change in the capital stock, short-term
or long-term debt of the Company and the Founding Companies considered
as a whole;
(iv) The representations and warranties of the Company in this
Agreement are true and correct at and as of the Closing Dates, and the
Company has complied with all the agreements and performed or
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Dates; and
(v) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as
disclosed in or contemplated by the
35
Prospectus, (i) there has not been any material adverse change or a
development involving a material adverse change in the condition
(financial or otherwise), properties, business, management, prospects,
net worth or results of operations of the Company and the Founding
Companies considered as a whole; (ii) the business and operations
conducted by the Company and the Founding Companies have not sustained
a loss by strike, fire, flood, accident or other calamity (whether or
not insured) of such a character as to interfere materially with the
conduct of the business and operations of the Company and the Founding
Companies considered as a whole; (iii) no legal or governmental
action, suit or proceeding is pending or, to the knowledge of the
Company, threatened against the Company or any of the Founding
Companies which is material to the Company and the Founding Companies
considered as a whole, whether or not arising from transactions in the
ordinary course of business, or which may materially and adversely
affect the transactions contemplated by this Agreement; (iv) since
such dates and except as so disclosed, the Company has not incurred
any material liability or obligation, direct, contingent or indirect,
made any change in its capital stock (except pursuant to its stock
plans), made any material change in its short-term or funded debt or
repurchased or otherwise acquired any of the Company's capital stock;
and (v) the Company has not declared or paid any dividend, or made any
other distribution, upon its outstanding capital stock payable to
stockholders of record on a date prior to the Closing Dates.
(g) The Company shall have furnished to the Representatives such
additional certificates as the Representatives may have reasonably
requested as to the accuracy, at and as of the Closing Dates, of the
representations and warranties made herein by it and as to compliance at
and as of the Closing Dates by it with its covenants and agreements herein
contained and other provisions hereof to be satisfied at or prior to the
Closing Dates, and as to satisfaction of the other conditions to the
obligations of the Underwriters hereunder.
(h) Cruttenden shall have received the written agreements of the
officers, directors, director nominees of the Company and the holders of
securities of the Company listed in Schedule B that each will not offer,
sell, assign, transfer, encumber, contract to sell, grant an option to
purchase or otherwise dispose of, any shares of Common
36
Stock (including, without limitation, Common Stock which may be deemed to
be beneficially owned by such officer, director, director nominee or holder
in accordance with the Rules and Regulations) or securities convertible
into or exercisable or exchangeable for Common Stock during the 180 days
following the date of the Prospectus.
(i) The Nasdaq National Market shall have approved the Stock for
inclusion, subject only to official notice of issuance.
(j) Each of the Founding Company Mergers shall have been consummated
as of the First Closing Date on the terms set forth in the Registration
Statement and in each Agreement and Plan of Organization.
All opinions, certificates, letters and other documents will be in
compliance with the provisions hereunder only if they are satisfactory in form
and substance to the Representatives. The Company will furnish to the
Representatives conformed copies of such opinions, certificates, letters and
other documents as the Representatives shall reasonably request. If any of the
conditions hereinabove provided for in this Section 8 shall not have been
satisfied when and as required by this Agreement, this Agreement may be
terminated by the Representatives by notifying the Company of such termination
in writing or by telegram at or prior to the Closing Dates, but Cruttenden shall
be entitled to waive any of such conditions.
9. Effective Date. This Agreement shall become effective immediately as to
Sections 5, 6, 7, 9, 10, 11, 13, 14, 15, 16, 17, 18 and 19 and, as to all other
provisions, at 11:00 A.M. New York City time on the first full business day
following the effectiveness of the Registration Statement or at such earlier
time after the Registration Statement becomes effective as the Representatives
may determine on and by notice to the Company or by release of any of the Stock
for sale to the public. For the purposes of this Section 9, the Stock shall be
deemed to have been so released upon the release for publication of any
newspaper advertisement relating to the Stock or upon the release by you of
telegrams (i) advising Underwriters that the shares of Stock are released for
public offering or (ii) offering the Stock for sale to securities dealers,
whichever may occur first.
10. Termination. This Agreement (except for the provisions of Section 5)
may be terminated by the Company at any time before it becomes effective in
accordance with Section 9 by notice to the Representatives and may be terminated
by the Representatives at any time before it becomes effective in accordance
with Section 9 by notice to the Company. In the event of any termination of this
Agreement
37
under this or any other provision of this Agreement, there shall be no liability
of any party to this Agreement to any other party, other than as provided in
Sections 5, 6 and 11 and other than as provided in Section 12 as to the
liability of defaulting Underwriters.
This Agreement may be terminated after it becomes effective by the
Representatives by notice to the Company (i) if at or prior to the First Closing
Date trading in securities on any of the New York Stock Exchange, American Stock
Exchange or Nasdaq National Market shall have been suspended or minimum or
maximum prices shall have been established and are then currently in effect on
any such exchange or market, or a banking moratorium shall have been declared by
New York or United States authorities; (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market; (iii) if at or prior to the First Closing Date there shall have been (A)
an outbreak or escalation of hostilities between the United States and any
foreign power or of any other insurrection or armed conflict involving the
United States or (B) any change in financial markets or any calamity or crisis
which, in the reasonable judgment of the Representatives, makes it impractical
or inadvisable to offer or sell the Firm Stock on the terms contemplated by the
Prospectus; (iv) if there shall have been any development or prospective
development involving particularly the business or properties or securities of
the Company or any of the Founding Companies or the transactions contemplated by
this Agreement or any Agreement and Plan of Organization, which, in the judgment
of the Representatives, makes it impracticable or inadvisable to offer or
deliver the Firm Stock on the terms contemplated by the Prospectus; (v) if there
shall be any litigation or proceeding, pending or threatened, which, in the
reasonable judgment of the Representatives, makes it impracticable or
inadvisable to offer or deliver the Firm Stock on the terms contemplated by the
Prospectus; or (vi) if there shall have occurred any of the events specified in
the immediately preceding clauses (i) - (v) together with any other such event
that makes it, in the reasonable judgment of the Representatives, impractical or
inadvisable to offer or deliver the Firm Stock on the terms contemplated by the
Prospectus.
11. Reimbursement of Underwriters. Notwithstanding any other provisions
hereof, if this Agreement shall not become effective by reason of any election
of the Company pursuant to the first paragraph of Section 10 or shall be
terminated by the Representatives under Section 8 or Section 10, the Company
will bear and pay the expenses specified in Section 5 hereof and, in addition to
its obligations pursuant to Section 6 hereof, the Company will reimburse the
reasonable out-of-pocket expenses of the several Underwriters (including
reasonable fees and disbursements of counsel for the Underwriters) incurred in
connection with this Agreement and the proposed
38
purchase of the Stock, up to a maximum of $100,000, and promptly upon demand the
Company will pay such amounts to you as Representatives.
12. Substitution of Underwriters. If on the First Closing Date or the
Option Closing Date, as the case may be, any Underwriter or Underwriters shall
default in its or their obligations to purchase shares of Stock hereunder
(otherwise than by reason of default on the part of the Company, you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 48 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and upon
the terms set forth herein, the shares of Stock which the defaulting Underwriter
or Underwriters failed to purchase. If during such 48 hours you, as such
Representatives, shall not have procured such other Underwriters, or any others,
to purchase the shares of Stock agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of shares which
such defaulting Underwriter or Underwriters agreed but failed to purchase does
not exceed ten percent (10%) of the total number of shares underwritten, the
other Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the shares of Stock which such
defaulting Underwriter or Underwriters agreed but failed to purchase, or (b) if
the aggregate number of shares of Stock with respect to which such default or
defaults occur is more than ten percent (10%) of the total number of shares
underwritten, the Company or you, as the Representatives of the Underwriters,
will have the right, by written notice given within the next 48-hour period to
the parties to this Agreement, to terminate this Agreement without liability on
the part of the non-defaulting Underwriters or the Company.
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a defaulting
Underwriter or Underwriters as provided in this Section 12, (i) the Company
shall have the right to postpone the Closing Dates for a period of not more than
five (5) full business days in order that the Company may effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (ii) the respective
numbers of shares to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken as the basis of their underwriting obligation for
all purposes of this Agreement. Nothing herein contained shall relieve any
defaulting Underwriter of its liability to the Company or the other Underwriters
for damages occasioned by its default hereunder. Any termination of this
Agreement pursuant to this Section 12 shall be without liability on the part of
any
39
non-defaulting Underwriter or the Company, except for expenses to be paid or
reimbursed pursuant to Section 5 and except for the provisions of Section 6.
13. Notices. All communications hereunder shall be in writing and, if sent
to the Underwriters shall be mailed, delivered or telegraphed and confirmed to
you, as their Representatives c/o Cruttenden Xxxx Incorporated, 00000 Xxx Xxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000, attention: Xxx Xxxxxxxx, except that notices
given to an Underwriter pursuant to Section 6 hereof shall be sent to such
Underwriter at the address furnished by the Representatives or, if sent to the
Company, shall be mailed, delivered or telegraphed and confirmed c/o Xxxxxxx X.
Xxxxx.
14. Successors. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters, the Company and their respective successors and
legal representatives. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person other than the persons
mentioned in the preceding sentence any legal or equitable right, remedy or
claim under or in respect of this Agreement, or any provisions herein contained,
this Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person; except that the representations, warranties, covenants,
agreements and indemnities of the Company contained in this Agreement shall also
be for the benefit of the person or persons, if any, who control any Underwriter
or Underwriters within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and the indemnities of the several Underwriters
shall also be for the benefit of each director of the Company, each of its
officers who has signed the Registration Statement and the person or persons, if
any, who control the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act.
15. Applicable Law and Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the choice of law principles thereof; provided that any suit, action
or proceeding arising in connection with this Agreement shall be brought in the
courts of the State of California, located in Orange County, or in the United
States District Court encompassing such county, and each party hereby submits to
the jurisdiction of such courts for the purpose of any such suit, action or
proceeding. The parties hereto hereby irrevocably waive any objections which
they may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement brought in the courts
located in the State California, Orange County, or in the United States District
Court encompassing such County, and hereby further irrevocably waive any claim
that any suit, action or proceeding brought in any such court has been brought
in an inconvenient forum.
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16. Authority of the Representatives. In connection with this Agreement,
you will act for and on behalf of the several Underwriters, and any action taken
under this Agreement by you, as Representatives, or individually as a
Representative, will be binding on all the Underwriters.
17. Partial Unenforceability. The invalidity or unenforceability of any
section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph or provision hereof. If any
section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
18. General. This Agreement constitutes the entire agreement of the parties
to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and the Representatives.
19. Counterparts. This Agreement may be signed in two or more counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
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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 and your acceptance shall constitute a binding agreement between us.
Very truly yours,
COLLECTIBLES USA, INC.
By:_________________________________
Name:
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Accepted and delivered in
___________________ as of the date first
above written.
CRUTTENDEN XXXX INCORPORATED
[Co-Manager]
Each acting on its own behalf and
as a Representative of the several
Underwriters referred to in the
foregoing Agreement.
By: Cruttenden Xxxx Incorporated
By:______________________________
Name:
Title:
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SCHEDULE A
Number of shares of
Name Firm Stock to be Purchased
Cruttenden Xxxx Incorporated........
[Co-Manager]........................
---------
Total............................... 2,700,000
=========
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SCHEDULE B
Xxxxxx X. Xxxxxxxx
RGR Financial Group LLC
Xxxxxxx X. Xxxxx
Xxxx X. XxXxxxxx, Xx.
Xxx X. Xxxxxx
Xxxxx Xxxxxxxxx
Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
The Incline Group
Wasatch Capital Corporation
MT Partners
Xxxx X. Xxxxxxx
Xxxxxxx Family Trust
Xxxxx X. Xxxxxx
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SCHEDULE C
46
EXHIBIT I
Matters to be covered in
opinion of Counsel to the Company 1/
1. The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware; each of
the Acquisition Subsidiaries has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware; each of
the Founding Companies has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation;
2. The Company has all corporate power and authority necessary to own or
hold its properties and to conduct its business as described in the Prospectus;
each of the Founding Companies has all corporate power and authority necessary
to own or hold its properties and to conduct their respective businesses as
described in the Prospectus;
3. The Company and each of the Founding Companies is duly qualified to do
business and is in good standing as a foreign corporation in each of the
jurisdictions set forth on a Schedule to the opinion; to such counsel's
knowledge, the Company does not own or control, and immediately after the
consummation of the Founding Company Mergers will not own or control, directly
or indirectly, any corporation, association or other entity other than the
Acquisition Subsidiaries, the Founding Companies and a partnership formed by
American Royal Arts Corp. and Animation USA, Inc. which has these two entities
as its only partners;
4. The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated therein; the issued and outstanding shares of capital stock of the
Company have been duly and validly issued and are fully paid and nonassessable,
and, to such counsel's knowledge, have not been issued in violation of or
subject to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right and, except as set forth in the
--------
1/ Capitalized terms used herein but not defined shall have the meanings given
such terms in the Underwriting Agreement.
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Registration Statement, to such counsel's knowledge, there are no outstanding
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest in the
Company; the issued and outstanding shares of capital stock of each of the
Acquisition Subsidiaries have been duly and validly issued and are fully paid
and nonassessable, and, to such counsel's knowledge, have not been issued in
violation of or subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right; all the issued and
outstanding shares of capital stock of each of the Acquisition Subsidiaries are
owned of record and beneficially by the Company, free and clear of any security
interests, liens, encumbrances, equities or other claims;
5. Upon completion of the Founding Company Mergers, all the outstanding
shares of capital stock of each of the Founding Companies will be owned by the
Company, to such counsel knowledge, free and clear of any security interests,
liens, encumbrances, equities or other claims and there are no outstanding
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest in the
Founding Companies;
6. The Stock, the shares of Common Stock to be issued in connection with
the Founding Company Mergers and the shares to be issued in connection with the
conversion of the Preferred Stock, Restricted Common Stock and the CUSA Notes,
have been duly and validly authorized by the Company for issuance, and the
Company has full corporate power and authority to issue, sell and deliver such
shares, and, when such shares are issued and delivered against payment therefor
in accordance with the terms hereof, each Agreement and Plan of Organization, or
the Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"), as the case may be, they will be fully paid and
nonassessable, and will not have been issued in violation of or subject to any
statutory preemptive right, or to such counsel's knowledge, any contractual
preemptive right, co-sale right, registration right, right of first refusal or
other similar right; there are no restrictions upon the voting or transfer of,
any of the Stock pursuant to the Certificate of Incorporation or Bylaws, or any
agreement or other instrument of the Company known to such counsel.
7. All of the shares of Common Stock to be issued upon exercise of the
Warrants have been duly and validly authorized by the Company for issuance and,
when issued and delivered against payment therefor in accordance with the terms
of the Warrants, will be duly and validly issued, fully paid and
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nonassessable and will not have been issued in violation of or subject to any
statutory preemptive right, or to such counsel's knowledge, any contractual
preemptive right, co-sale right, registration right, right of first refusal or
other similar right.
8. To such counsel's knowledge, except as set forth in the Prospectus,
there are no legal or governmental proceedings pending to which the Company or
any of the Founding Companies is a party or of which any property or assets of
the Company or any of the Founding Companies is the subject which, if determined
adversely to the Company or any of the Founding Companies, could have a Material
Adverse Effect or prevent or adversely affect the transactions contemplated by
the Underwriting Agreement or any Agreement and Plan of Organization; and, to
such counsel's knowledge, no such proceedings are threatened by governmental
authorities or other third parties.
9. This Agreement and the Warrant with respect to the Company, and each
Agreement and Plan of Organization, with respect to the Company, each of the
Acquisition Subsidiaries and each of the Founding Companies, have been duly
authorized by all necessary corporate action on the part of each of the parties
thereto and have been duly executed and delivered by such parties and, assuming
due authorization, execution and delivery of this Agreement by you, are valid
and binding agreements of such parties; the certificates or articles of merger
referred to in each Agreement and Plan of Organization, assuming the due filing
thereof with the appropriate regulatory authorities, will cause the statutory
merger of each Founding Company with the Acquisition Subsidiary that is party to
such Agreement and Plan of Organization; the Company has full corporate power
and authority to enter into this Agreement and each Agreement and Plan of
Organization and each of the Founding Companies has full corporate power and
authority to enter into the Agreement and Plan of Organization to which it is
party;
10. All offers and sales of the Company's capital stock prior to the date
hereof were at all relevant times, and the capital stock to be issued by the
Company in the Founding Company Mergers will be, exempt from the registration
requirements of the Securities Act;
11. The Company has the full corporate power and authority to execute and
deliver the Warrants on the terms and conditions set forth in the Underwriting
Agreement and in the Warrants, and such execution and delivery of the Warrants
has been duly and validly authorized, and when executed and delivered pursuant
to the Underwriting Agreement, the Warrants will be
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enforceable against the Company in accordance with their terms (except to the
extent rights to indemnity thereunder may be limited by federal and state
securities laws or public policy underlying such laws and except to the extent,
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting creditors' rights generally or by
general equitable principles).
12. The execution, delivery and performance of the Underwriting Agreement,
the Warrant and each Agreement and Plan of Organization and the consummation of
the transactions therein contemplated will not result in a breach or violation
of any of the terms or provisions of or constitute a default under the charter,
by-laws or other organizational documents of the Company or any of the Founding
Companies, or any material indenture, mortgage, deed of trust, note agreement or
other agreement or instrument known to such counsel to which the Company or any
of the Founding Companies is a party or by which it or any of them or any of
their properties is or may be bound and, with respect to the Underwriting
Agreement and the Warrant, will not result in a breach or violation of any law,
statute, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of the Founding Companies or any of
their properties or result in the creation of a lien.
13. To such counsel's knowledge, neither the Company nor any of the
Founding Companies is presently (a) in violation of their respective charter or
by-laws, or (b), to such counsel's knowledge, in breach or default under any
lease, instrument, license, permit or any other agreement to which the Company
or any of the Founding Companies is bound or to which any property or assets of
the Company or any of the Founding Companies is the subject, where the
consequences of such violation, breach or default would have a Material Adverse
Effect;
14. No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company of
the transactions contemplated by the Underwriting Agreement or pursuant to any
Agreement and Plan of Organization (except such as may be required by the NASD
or as required by the securities or "Blue Sky" laws of any jurisdiction as to
which such counsel need express no opinion) in connection with the purchase and
distribution of the Stock by the Underwriters except such as have been obtained
or made, specifying the same.
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15. The Registration Statement has become effective under the Securities
Act and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose is pending or threatened by the Commission.
16. The Registration Statement and the Prospectus and any amendments or
supplements thereto (except for the financial statements and notes thereto and
related schedules and other financial information as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations.
17. To such counsel's knowledge, there are no contracts, agreements or
other documents required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which is
not described or filed therein as required. All descriptions of any such
contracts, agreements or documents contained in the Registration Statement are
accurate and complete descriptions of such documents in all material respects.
18. The statements in the Prospectus under the captions "Business-
Animation Art Galleries--Merchandising" "Business--Licenses,"
"Management--Employment Agreements," -- "1997 Long-Term Incentive Plan," "--1997
Non-Employee Directors' Stock Plan," "Description of Capital Stock" and "Shares
Eligible for Future Sale," to the extent they constitute a summary of documents
referred to therein or matters of law accurately summarize and fairly present in
all material respects the information called for with respect to such documents
and matter and the legal and regulatory matters described therein.
19. Neither the Company nor any of the Founding Companies is an "investment
company," or an entity "controlled" by an "investment company" required to be
registered under the 1940 Act, as such terms are defined in the 1940 Act.
20. To such counsel's knowledge, none of the licenses, trademarks, service
marks or trade names presently owned, held or used by the Company or any of the
Founding Companies infringes or conflicts with any licenses, trademarks, service
marks or trade names of any other person or entity or are in dispute, and such
counsel is not aware of any notice of any infringement of or conflict with the
asserted rights of others in any such respect that might have a Material Adverse
Effect.
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21. To such counsel's knowledge, except as set forth in the Registration
Statement and the Prospectus, no holder of any securities of the Company or any
other person has the right, contractual or otherwise, to cause the Company to
sell or otherwise issue to such person, or to permit such person to underwrite
the sale of, any of the Stock or the right to have any Common Stock or other
securities of the Company included in the Registration Statement or the right,
as a result of the filing of the Registration Statement, to require registration
under the Securities Act of any shares of Common Stock or other securities of
the Company that has not been waived or lapsed.
In addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement or any amendment
thereto, as of the time it became effective under the Securities Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Securities Act), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or (ii) that the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the First Closing Date or the Option Closing
Date, as the case may be, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading (except that such counsel need express no view as
to financial statements and notes thereto and schedules or other financial
information therein). With respect to such statement, such counsel may state
that their belief is based upon the procedures set forth therein, but is without
independent check and verification.
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