Exhibit 1.1
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2,800,000 Shares/1/
ADVANTAGE LEARNING SYSTEMS, INC.
Common Stock
PURCHASE AGREEMENT
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September__ , 1997
XXXXX XXXXXXX INC.
XXXXXXXXXX SECURITIES
As Representatives of the several
Underwriters named in Schedule I hereto
c/o Xxxxx Xxxxxxx Inc.
Xxxxx Xxxxxxx Tower
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Gentlemen and Ladies:
Advantage Learning Systems, Inc., a Wisconsin corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters") an aggregate of 2,800,000 shares (the "Firm Shares")
of Common Stock, $0.01 par value per share (the "Common Stock"), of the Company.
The Company further proposes to grant to the several Underwriters an option to
purchase up to 420,000 additional shares of Common Stock, on the terms and for
the purposes set forth in Section 3 hereof (the "Option Shares"). The Firm
Shares and any Option Shares purchased pursuant to this Purchase Agreement are
herein collectively called the "Securities."
The Company hereby confirms its agreement with respect to the sale of the
Securities to the several Underwriters, for whom you are acting as
Representatives (the "Representatives").
1. Registration Statement. A registration statement on Form S-1 (File No.
333-22519) with respect to the Securities, including a preliminary form of
prospectus, has been prepared by the Company in conformity with the requirements
of the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations ("Rules and Regulations")
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/1/ Plus an option to purchase up to 420,000 additional shares to cover
over-allotments.
of the Securities and Exchange Commission (the "Commission") thereunder and has
been filed with the Commission; one or more amendments to such registration
statement have also been so prepared and have been, or will be, so filed. Copies
of such registration statement and amendments and each related preliminary
prospectus have been delivered to you.
If the Company has elected not to rely upon Rule 430A of the Rules and
Regulations, the Company has prepared and will promptly file an amendment to the
registration statement and an amended prospectus. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, it will prepare and file a
prospectus pursuant to Rule 424(b) that discloses the information previously
omitted from the prospectus in reliance upon Rule 430A. Such registration
statement as amended at the time it is or was declared effective by the
Commission, and, in the event of any amendment thereto after the effective date
and prior to the First Closing Date (as hereinafter defined), such registration
statement as so amended (but only from and after the effectiveness of such
amendment), including the information deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A(b), if applicable,
is hereinafter called the "Registration Statement." The prospectus included in
the Registration Statement at the time it is or was declared effective by the
Commission is hereinafter called the "Prospectus," except that if any prospectus
filed by the Company with the Commission pursuant to Rule 424(b) of the Rules
and Regulations or any other prospectus provided to the Underwriters by the
Company for use in connection with the offering of the Securities (whether or
not required to be filed by the Company with the Commission pursuant to Rule
424(b) of the Rules and Regulations) differs from the prospectus on file at the
time the Registration Statement is or was declared effective by the Commission,
the term "Prospectus" shall refer to such differing prospectus from and after
the time such prospectus is filed with the Commission or transmitted to the
Commission for filing pursuant to such Rule 424(b) or from and after the time it
is first provided to the Underwriters by the Company for such use. The term
"Preliminary Prospectus" as used herein means any preliminary prospectus
included in the Registration Statement prior to the time it becomes or became
effective under the Act and any prospectus subject to completion as described in
Rule 430A of the Rules and Regulations.
2. Representations and Warranties of the Company and the Principal
Shareholder.
(a) The Company represents and warrants to, and agrees with, the
several Underwriters as follows:
(i) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission and each Preliminary
Prospectus, at the time of filing thereof, did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; except
that the foregoing shall not apply to statements in or
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omissions from any Preliminary Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by you, or by
any Underwriter through you, specifically for use in the preparation
thereof. If the Registration Statement has been declared effective by the
Commission, no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceeding for that purpose has been
initiated or, to the Company's knowledge, threatened by the Commission.
(ii) As of the time the Registration Statement (or any post-effective
amendment thereto) is or was declared effective by the Commission, upon the
filing or first delivery to the Underwriters of the Prospectus (or any
supplement to the Prospectus) and at the First Closing Date and Second
Closing Date (as hereinafter defined), (A) the Registration Statement and
Prospectus (in each case, as so amended or supplemented) will conform or
conformed in all material respects to the requirements of the Act and the
Rules and Regulations, (B) the Registration Statement (as so amended) will
not and did not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (C) the Prospectus (as so
supplemented) will not and did not include an 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 in which they are or were made, not misleading; except that
the foregoing shall not apply to statements in or omissions from any such
document in reliance upon, and in conformity with, written information
furnished to the Company by you, or by any Underwriter through you,
specifically for use in the preparation thereof.
(iii) The financial statements of the Company, together with the notes
thereto, set forth in the Registration Statement and Prospectus comply in
all material respects with the requirements of the Act and fairly present
the financial condition of the Company as of the dates indicated and the
results of operations and changes in cash flows for the periods therein
specified in conformity with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise
stated therein); and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. No
other financial statements or schedules are required to be included in the
Registration Statement or Prospectus. Xxxxxx Xxxxxxxx LLP, which have
expressed their opinion with respect to the financial statements and
schedules filed as a part of the Registration Statement and included in the
Registration Statement and Prospectus, are independent public accountants
as required by the Act and the Rules and Regulations.
(iv) Each of the Company and its subsidiaries has been duly organized
and is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation. Each of the Company and its subsidiaries
has full corporate power and authority to own its properties and conduct
its business as
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currently being carried on and as described in the Registration Statement
and Prospectus, and is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which it owns or
leases real property or in which the conduct of its business makes such
qualification necessary and in which the failure to so qualify would cause
a material adverse change in the condition (financial or otherwise),
business, net worth or results of operations of the Company and its
subsidiaries, taken as a whole, or could reasonably be expected to have a
material adverse effect on the prospects of the Company and its
subsidiaries, taken as a whole (collectively, any such change being
referred to as a "Material Adverse Change").
(v) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, (A) neither the Company nor any of its
subsidiaries has incurred any material liabilities or obligations, direct
or contingent, or entered into any material transactions other than
transactions with customers in the ordinary course of business, or declared
or paid any dividends or made any distribution of any kind with respect to
its capital stock; and (B) there has not been any change in the capital
stock (other than a change in the number of outstanding shares of Common
Stock due to the issuance of shares upon the exercise of outstanding
options or warrants), or any material change in the short-term or long-term
debt, or any issuance of options, warrants, convertible securities or other
rights to purchase the capital stock, of the Company or any of its
subsidiaries, or any Material Adverse Change.
(vi) Except as set forth in the Prospectus, there is not pending or,
to the knowledge of the Company, threatened or contemplated, any action,
suit or proceeding to which the Company or any of its subsidiaries is a
party before or by any court or governmental agency, authority or body, or
any arbitrator, which could reasonably be expected to result in any
Material Adverse Change.
(vii) There are no contracts or documents of the Company or any of
its subsidiaries that are required to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations that have
not been so filed.
(viii) This Agreement has been duly authorized, executed and delivered
by the Company, and constitutes a valid, legal and binding obligation of
the Company, enforceable in accordance with its terms, except as rights to
indemnity hereunder may be limited by federal or state securities laws and
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity. The execution, delivery and
performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any statute, any
agreement or instrument to which the Company is a party or by which it is
bound or to which any of its property is subject, the Company's charter
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or by-laws, or any order, rule, regulation or decree of any court or
governmental agency or body having jurisdiction over the Company or any of
its properties; no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for the
execution, delivery and performance of this Agreement or for the
consummation of the transactions contemplated hereby, including the
issuance or sale of the Securities by the Company, except such as may be
required under the Act or state securities or blue sky laws; and the
Company has full power and authority to enter into this Agreement and to
authorize, issue and sell the Securities as contemplated by this Agreement.
(ix) All of the issued and outstanding shares of capital stock of the
Company, including the outstanding shares of Common Stock, are duly
authorized and validly issued, fully paid and nonassessable (except to the
extent provided under Wis. Stat. Section 180.0622(2)(b)), 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 holders thereof are not
subject to personal liability by reason of being such holders; the
Securities which may be sold hereunder by the Company have been duly
authorized and, when issued, delivered and paid for in accordance with the
terms hereof, will have been validly issued and will be fully paid and
nonassessable (except to the extent provided under Wis. Stat. Section
180.0622(2)(b)), and the holders thereof will not be subject to personal
liability by reason of being such holders (except to the extent provided
under Wis. Stat. Section 180.0622(2)(b)); and the capital stock of the
Company, including the Common Stock, conforms to the description thereof in
the Registration Statement and Prospectus. Except as otherwise stated in
the Registration Statement and Prospectus, there are no preemptive rights
or other rights to subscribe for or to purchase, or any restriction upon
the voting or transfer of, any shares of Common Stock pursuant to the
Company's charter, by-laws or any agreement or other instrument to which
the Company is a party or by which the Company is bound. Neither the filing
of the Registration Statement nor the offering or sale of the Securities as
contemplated by this Agreement gives rise to any rights for or relating to
the registration of any shares of Common Stock or other securities of the
Company. All of the issued and outstanding shares of capital stock of each
of the Company's subsidiaries have been duly and validly authorized and
issued and are fully paid and nonassessable (except, as to the subsidiaries
organized under Wisconsin law, to the extent provided under Wis. Stat.
Section 180.0622(2)(b)), and, except as otherwise described in the
Registration Statement and Prospectus, the Company owns of record and
beneficially, free and clear of any security interests, claims, liens,
proxies, equities or other encumbrances, all of the issued and outstanding
shares of such stock. Except as described in the Registration Statement and
the Prospectus, there are no options, warrants, agreements, contracts or
other rights in existence to purchase or acquire from the Company or any
subsidiary of the Company any shares of the capital stock of the Company or
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any subsidiary of the Company. The Company has an authorized and
outstanding capitalization as set forth in the Registration Statement and
the Prospectus.
(x) The Company and each of its subsidiaries holds, and is operating
in compliance in all material respects with, all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates and
orders of any governmental or self-regulatory body required for the conduct
of its business and all such franchises, grants, authorizations, licenses,
permits, easements, consents, certifications and orders are valid and in
full force and effect; and the Company and each of its subsidiaries is in
compliance in all material respects with all applicable federal, state,
local and foreign laws, regulations, orders and decrees.
(xi) The Company and its subsidiaries have good and marketable title
to all property described in the Registration Statement and Prospectus as
being owned by them, in each case free and clear of all liens, claims,
security interests or other encumbrances except such as are described in
the Registration Statement and the Prospectus; the property held under
lease by the Company and its subsidiaries is held by them under valid,
subsisting and enforceable leases with only such exceptions with respect to
any particular lease as do not interfere in any material respect with the
conduct of the business of the Company or its subsidiaries; the Company and
each of its subsidiaries owns or possesses the rights to use all patents,
patent applications, trademarks, service marks, trade names, trademark
registrations, service xxxx registrations, copyrights, licenses,
inventions, trade secrets and rights (collectively, "Intellectual
Property") necessary for the conduct of the business of the Company and its
subsidiaries as currently carried on and as described in the Registration
Statement and Prospectus, the absence of which could reasonably be expected
to result in a Material Adverse Change; except as stated in the
Registration Statement and Prospectus, and to the knowledge of the Company,
no name which the Company or any of its subsidiaries uses and no other
aspect of the business of the Company or any of its subsidiaries will
involve or give rise to any infringement of, or license or similar fees
for, any other party's Intellectual Property which is material to the
business of the Company and neither the Company nor any of its subsidiaries
has received any notice alleging any such infringement or fee.
(xii) Neither the Company nor any of its subsidiaries is in violation
of its respective charter or by-laws or in breach of or otherwise in
default in the performance of any material obligation, agreement or
condition contained in any bond, debenture, note, indenture, loan agreement
or any other material contract, lease or other instrument to which it is
subject or by which any of them may be bound, or to which any of the
material property or assets of the Company or any of its subsidiaries is
subject, except for breaches or which would not, individually or in the
aggregate, give rise to a Material Adverse Change.
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(xiii) The Company and its subsidiaries have filed all federal, state,
local and foreign income and franchise tax returns required to be filed,
except those returns as to which the failure to file would not,
individually or in the aggregate, give rise to a Material Adverse Change,
and are not in default in the payment of any taxes which were payable
pursuant to said returns or any assessments with respect thereto, other
than any which the Company or any of its subsidiaries is contesting in good
faith.
(xiv) The Company has not distributed and will not distribute any
prospectus or other offering material in connection with the offering and
sale of the Securities other than any Preliminary Prospectus or the
Prospectus or other materials permitted by the Act to be distributed by the
Company.
(xv) The Securities have been conditionally approved for listing on
the Nasdaq National Market and, on the date the Registration Statement
became or becomes effective, the Company's Registration Statement on Form
8-A or other applicable form under the Securities Exchange Act of 1934
became or will become effective.
(xvi) Other than the subsidiaries of the Company listed in Exhibit 21
to the Registration Statement, the Company owns no capital stock or other
equity interest in any corporation, partnership, limited liability company,
association, trust or other entity.
(xvii) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific 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.
(xviii) Other than as contemplated by this Agreement, the Company has
not incurred any liability for any finder's or broker's fee or agent's
commission in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
(xix) Neither the Company nor any of its affiliates is presently
doing business with the government of Cuba or with any person or affiliate
located in Cuba.
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(b) Any certificate signed by any officer of the Company and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
(c) Xxxxxxxx X. Xxxx (the "Principal Shareholder") represents
to the Underwriters as follows:
Such Principal Shareholder has reviewed the Registration
Statement and Prospectus and, although such Principal Shareholder has not
independently verified the accuracy or completeness of all the information
contained therein and is not guaranteeing the accuracy thereof, nothing has
come to the attention of such Principal Shareholder that would lead such
Principal Shareholder to believe that on the Effective Date, the
Registration Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading, or that,
on the Effective Date, the Prospectus contained any untrue statement of a
material fact or omitted to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.
3. Purchase, Sale and Delivery of Securities.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to issue 2,800,000 Firm Shares, to the
several Underwriters, and each Underwriter agrees, severally and not
jointly, to purchase from the Company the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto. The purchase
price for each Firm Share shall be $ per share. In making this Agreement,
each Underwriter is contracting severally and not jointly; except as
provided in paragraph (c) of this Section 3 and in Section 8 hereof, the
agreement of each Underwriter is to purchase only the respective number of
Firm Shares specified in Schedule I.
The Firm Shares will be delivered by the Company to you for the
accounts of the several Underwriters against payment of the purchase price
therefor by certified or official bank check or other next day funds
payable to the order of the Company, at the offices of Xxxxx Xxxxxxx Inc.,
Xxxxx Xxxxxxx Tower, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, or
such other location as may be mutually acceptable, at 9:00 a.m.,
Minneapolis time, on the fourth full business day following the date
hereof, or at such other time as you and the Company determine, such time
and date of delivery being herein referred to as the "First Closing Date."
The Firm Shares, in definitive form and in such denominations and
registered in such names as you may request upon at least two business
days' prior notice to the Company, will be made available for checking and
packaging at the offices of Xxxxx Xxxxxxx Inc., Xxxxx Xxxxxxx Tower, 000
Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, or such other location as may
be mutually acceptable, at least one business day prior to the First
Closing Date.
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(b) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company hereby grants to the several Underwriters an option
to purchase all or any portion of the Option Shares at the same purchase
price as the Firm Shares, for use solely in covering any over-allotments
made by the Underwriters in the sale and distribution of the Firm Shares.
The option granted hereunder may be exercised at any time (but not more
than once) within 30 days after the effective date of this Agreement upon
notice (confirmed in writing) by the Representatives to the Company,
setting forth the aggregate number of Option Shares as to which the several
Underwriters are exercising the option, the names and denominations in
which the certificates for the Option Shares are to be registered and the
date and time, as determined by you, when the Option Shares are to be
delivered, such time and date being herein referred to as the "Second
Closing" and "Second Closing Date", respectively; provided, however, that
the Second Closing Date shall not be earlier than the First Closing Date,
nor earlier than the second business day after the date on which the option
shall have been exercised. If the option is exercised, the number of Option
Shares to be purchased by each Underwriter shall be the same percentage of
the total number of Option Shares to be purchased by the several
Underwriters as the number of Firm Shares to be purchased by such
Underwriter is of the total number of Firm Shares to be purchased by the
several Underwriters, as adjusted by the Representatives in such manner as
the Representatives deem advisable to avoid fractional shares. No Option
Shares shall be sold and delivered unless the Firm Shares previously have
been, or simultaneously are, sold and delivered.
The Option Shares will be delivered by the Company to you for the
accounts of the several Underwriters against payment of the purchase price
therefor by certified or official bank check or other next day funds
payable to the order of the Company at the offices of Xxxxx Xxxxxxx Inc.,
Xxxxx Xxxxxxx Tower, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, or
such other location as may be mutually acceptable at 9:00 a.m., Minneapolis
time, on the Second Closing Date. The Option Shares in definitive form and
in such denominations and registered in such names as you have set forth in
your notice of option exercise, will be made available for checking and
packaging at the office of Xxxxx Xxxxxxx Inc., Xxxxx Xxxxxxx Tower, 000
Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, or such other location as may
be mutually acceptable, at least one business day prior to the Second
Closing Date.
(c) It is understood that you, individually and not as
Representatives of the several Underwriters, may (but shall not be
obligated to) make payment to the Company on behalf of any Underwriter for
the Securities to be purchased by such Underwriter. Any such payment by you
shall not relieve any such Underwriter of any of its obligations hereunder.
Nothing herein contained shall constitute any of the Underwriters an
unincorporated association or partner with the Company.
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4. Covenants.
The Company covenants and agrees with the several Underwriters as
follows:
(i) If the Registration Statement has not already been declared
effective by the Commission, the Company will use its best efforts to cause
the Registration Statement and any post-effective amendments thereto to
become effective as promptly as possible; the Company will notify you
promptly of the time when the Registration Statement or any post-effective
amendment to the Registration Statement has become effective or any
supplement to the Prospectus has been filed and of any request by the
Commission for any amendment or supplement to the Registration Statement or
Prospectus or additional information; if the Company has elected to rely on
Rule 430A of the Rules and Regulations, the Company will file a Prospectus
containing the information omitted therefrom pursuant to such Rule 430A
with the Commission within the time period required by, and otherwise in
accordance with the provisions of, Rules 424(b) and 430A of the Rules and
Regulations; the Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the
Registration Statement or Prospectus that, in your opinion, may be
necessary or advisable in connection with the distribution of the
Securities by the Underwriters; and the Company will not file any amendment
or supplement to the Registration Statement or Prospectus to which you
shall reasonably object by notice to the Company after having been
furnished a copy a reasonable time prior to the filing.
(ii) The Company will advise you, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation
or threatening of any proceeding for any such purpose; and the Company will
promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such a stop order should be issued.
(iii) Within the time during which a prospectus relating to the
Securities is required to be delivered under the Act, the Company will
comply as far as it is able with all requirements imposed upon it by the
Act, as now and hereafter amended, and by the Rules and Regulations, as
from time to time in force, so far as necessary to permit the continuance
of sales of or dealings in the Securities as contemplated by the provisions
hereof and the Prospectus. If during such period any event occurs as a
result of which the Prospectus would include an untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances then existing, not
misleading, or if during such period it is necessary to amend the
Registration
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Statement or supplement the Prospectus to comply with the Act, the Company
will promptly notify you and will amend the Registration Statement or
supplement the Prospectus (at the expense of the Company) so as to correct
such statement or omission or effect such compliance.
(iv) The Company will use its best efforts to qualify the
Securities for sale under the securities laws of such jurisdictions as you
reasonably designate and to continue such qualifications in effect so long
as required for the distribution of the Securities, except that the Company
shall not be required in connection therewith to qualify as a foreign
corporation or to execute a general consent to service of process in any
state.
(v) The Company will furnish to the Underwriters copies of the
Registration Statement (three of which will be signed in conformity with
the Act and will include all exhibits), each Preliminary Prospectus, the
Prospectus, and all amendments and supplements to such documents, in each
case as soon as available and in such quantities as you may from time to
time reasonably request.
(vi) During a period of five years commencing with the date
hereof, the Company will furnish to the Representatives, and to each
Underwriter who may so request in writing, copies of all periodic and
special reports furnished to the shareholders of the Company and all
information, documents and reports filed with the Commission (other than
exhibits thereto), the Nasdaq National Market, the National Association of
Securities Dealers, Inc. ("NASD") or any securities exchange.
(vii) The Company will make generally available to its security
holders as soon as practicable, but in any event not later than 15 months
after the end of the Company's current fiscal quarter, an earnings
statement (which need not be audited) covering a 12-month period beginning
after the effective date of the Registration Statement that shall satisfy
the provisions of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations.
(viii) The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming
effective under the provisions of Section 9(a) hereof or is terminated,
will pay or cause to be paid (A) all expenses (including transfer taxes
allocated to the respective transferees) incurred in connection with the
delivery to the Underwriters of the Securities, (B) all expenses and fees
(including, without limitation, fees and expenses of the Company's
accountants and counsel but, except as otherwise provided below, not
including fees of the Underwriters' counsel) in connection with the
preparation, printing, filing, delivery, and shipping of the Registration
Statement (including the financial statements therein and all amendments,
schedules, and exhibits thereto), the Securities, each Preliminary
Prospectus, the Prospectus, and any amendment thereof or
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supplement thereto, and the printing, delivery, and shipping of this
Agreement and other underwriting documents, including Blue Sky Memoranda,
(C) all filing fees and fees and disbursements of the Underwriters' counsel
incurred in connection with the qualification of the Securities for
offering and sale by the Underwriters or by dealers under the securities or
blue sky laws of the states and other jurisdictions which you shall
designate in accordance with Section 4(d) hereof, which fees of
Underwriters' counsel shall not exceed $5,000 without the prior approval of
the Company, (D) the fees and expenses of any transfer agent or registrar,
(E) the filing fees incident to any required review by the NASD's Division
of Corporation Finance of the terms of the sale of the Securities, (F)
listing fees, if any, and (G) all other costs and expenses incident to the
performance of its obligations hereunder that are not otherwise
specifically provided for herein. If the sale of the Securities provided
for herein is not consummated by reason of action by the Company pursuant
to Section 9(a) hereof which prevents this Agreement from becoming
effective, or by reason of any failure, refusal or inability on the part of
the Company to perform any agreement on its part to be performed, or
because any other condition of the Underwriters' obligations hereunder
required to be fulfilled by the Company is not fulfilled, the Company will
reimburse the several Underwriters for all out-of-pocket disbursements
(including reasonable fees and disbursements of counsel) incurred by the
Underwriters in connection with their investigation, preparing to market
and marketing the Securities or in contemplation of performing their
obligations hereunder. The Company shall not in any event be liable to any
of the Underwriters for loss of anticipated profits from the transactions
covered by this Agreement.
(ix) The Company will apply the net proceeds from the sale of the
Securities to be sold by it hereunder for the purposes set forth in the
Prospectus and will file such reports with the Commission with respect to
the sale of the Securities and the application of the proceeds therefrom as
may be required in accordance with Rule 463 of the Rules and Regulations.
(x) The Company will not, for a period of 180 days after the
commencement of the public offering of the Securities by the Underwriters
(the "Lock-Up Period"), without the prior written consent of Xxxxx Xxxxxxx
Inc., offer for sale, sell, contract to sell, grant any option for the sale
of, pledge or otherwise directly or indirectly issue or dispose of
(collectively, a "Disposition"), any shares of Common Stock, securities
convertible into or exchangeable or any other rights to purchase or
acquire, Common Stock (collectively, including Common Stock, "Company
Securities"), provided that the foregoing provisions shall not prohibit (A)
the sale of the Securities to the Underwriters pursuant to this Agreement
or (B) the Company's grant, pursuant to its 1997 Stock Incentive Plan, of
any options to purchase stock, provided that such options are, by their
terms, not exercisable within the Lock-Up Period.
12
(xi) The Company either has caused to be delivered to you or will
cause to be delivered to you prior to the First Closing Date a letter from
each of the Company's directors, executive officers and shareholders owning
in excess of 1% of the Company's Common Stock immediately prior to the
First Closing Date, stating that such person agrees that he or she will
not, during the Lock-Up Period, without the prior written consent of Xxxxx
Xxxxxxx Inc., effect any Disposition of any Company Securities.
(xii) The Company has not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted, the stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities, and has not effected any sales of Common
Stock which are required to be disclosed in response to Item 701 of
Regulation S-K under the Act which have not been so disclosed in the
Registration Statement.
(xiii) The Company will not incur any liability for any finder's or
broker's fee or agent's commission in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(xiv) The Company will inform the Florida Department of Banking
and Finance at any time prior to the consummation of the distribution of
the Securities by the Underwriters if it commences engaging in business
with the government of Cuba or with any person or affiliate located in
Cuba. Such information will be provided within 90 days after the
commencement thereof or after a change occurs with respect to previously
reported information.
5. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters hereunder are subject to the accuracy, as of the date
hereof and at each of the First Closing Date and the Second Closing Date (as if
made at such Closing Date), of and compliance with all representations,
warranties and agreements of the Company contained herein, to the performance by
the Company of its obligations hereunder and to the following additional
conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 p.m., Minneapolis time, on the date of this Agreement, or such
later time and date as you, as Representatives of the several Underwriters,
shall approve and all filings required by Rule 424 and Rule 430A of the Rules
and Regulations shall have been timely made; no stop order suspending the
effectiveness of the Registration Statement or any amendment thereof shall have
been issued; no proceedings for the issuance of such an order shall have been
initiated or threatened; and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to your satisfaction.
13
(b) No Underwriter shall have advised the Company that the
Registration Statement or the Prospectus, or any amendment thereof or supplement
thereto, contains an untrue statement of fact which, in your opinion, is
material, or omits to state a fact which, in your opinion, is material and is
required to be stated therein or necessary to make the statements therein not
misleading.
(c) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, neither the Company nor any of its subsidiaries shall have
incurred any material liabilities or obligations, direct or contingent, or
entered into any material transactions other than transactions with customers in
the ordinary course of business, or declared or paid any dividends or made any
distribution of any kind with respect to its capital stock; and there shall not
have been any change in the capital, or any material change in the short-term or
long-term debt of the Company, or except as described in the Prospectus, any
issuance of options, warrants, convertible securities or other rights to
purchase the capital stock of the Company or any of its subsidiaries, or any
Material Adverse Change (whether or not arising in the ordinary course of
business) that, in your judgment, makes it impractical or inadvisable to offer
or deliver the Securities on the terms and in the manner contemplated in the
Prospectus.
(d) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, the opinion of Xxxxxxx & Xxxx,
S.C., counsel for the Company, dated such Closing Date and addressed to you, to
the effect that:
(i) Each of the Company and its subsidiaries is validly existing as
a corporation in good standing (meaning in Wisconsin that such corporation
has filed its most recent annual report and has not filed articles of
dissolution) under the laws of its jurisdiction of incorporation. Each of
the Company and its subsidiaries has all requisite corporate power and
authority to own its properties and, to the best of such counsel's
knowledge, to conduct its business as currently being carried on and as
described in the Registration Statement and Prospectus. The Company's
subsidiary, the Institute for Academic Excellence, Inc., is duly qualified
to do business as a foreign corporation in the states of Florida, North
Carolina, Tennessee, Texas and California. Neither the Company nor its
other subsidiary, IPS Publishing, Inc., is qualified as a foreign
corporation in any state of the United States.
(ii) The capital stock of the Company conforms as to legal matters to
the description thereof contained in the Prospectus under the caption
"Description of Capital Stock." All of the issued and outstanding shares of
the capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable (except to the extent provided
for in Section 180.0622(2)(b) of the Wisconsin Business Corporation Law as
interpreted by applicable court decisions), and the holders thereof are not
subject to personal liability by reason of being such holders (except to
the extent provided for in Section 180.0622(2)(b) of the Wisconsin Business
Corporation Law as interpreted by applicable court
14
decisions). The Securities to be issued and sold by the Company hereunder
have been duly authorized and, when issued, delivered and paid for in
accordance with the terms of this Agreement, will have been validly issued
and will be fully paid and nonassessable (except to the extent provided for
in Section 180.0622(2)(b) of the Wisconsin Business Corporation Law as
interpreted by applicable court decisions), and the holders thereof will
not be subject to personal liability by reason of being such holders
(except to the extent provided for in Section 180.0622(2)(b) of the
Wisconsin Business Corporation Law as interpreted by applicable court
decisions). Except as otherwise stated in the Registration Statement and
Prospectus, there are no preemptive rights or other rights to subscribe for
or to purchase, or any restriction upon the voting or transfer of, any
shares of Common Stock pursuant to the Company's articles of incorporation
or by-laws or, to the best of such counsel's knowledge, any agreement or
other instrument to which the Company is a party or by which the Company is
bound. To the best of such counsel's knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Securities as
contemplated by this Agreement gives rise to any rights for or relating to
the registration of any shares of Common Stock or other securities of the
Company.
(iii) All of the issued and outstanding shares of capital stock of
each of the Company's subsidiaries have been duly authorized and validly
issued and are fully paid and nonassessable (except to the extent provided
for in Section 180.0622(2)(b) of the Wisconsin Business Corporation Law as
interpreted by applicable court decisions) and, to the best of such
counsel's knowledge, except as otherwise described in the Registration
Statement, the Company owns of record and beneficially, free and clear of
any security interests, claims, liens, proxies, equities or other
encumbrances, all of the issued and outstanding shares of such stock. To
the best of such counsel's knowledge, except as described in the
Registration Statement and Prospectus, there are no options, warrants,
agreements, contracts or other rights in existence to purchase or acquire
from the Company or any subsidiary any shares of the capital stock of the
Company or any subsidiary of the Company.
(iv) The Registration Statement has become effective under the 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 has been instituted or, to the knowledge of
such counsel, threatened by the Commission.
(v) The descriptions in the Registration Statement and Prospectus of
statutes, legal and governmental proceedings, and contracts are accurate
and fairly present the information required to be shown in all material
respects; and such counsel does not know of any statutes or legal or
governmental proceedings required to be described in the Prospectus that
are not described as required, or of any contracts or documents of a
character required to be described in the
15
Registration Statement or Prospectus or included as exhibits to the
Registration Statement that are not described or included as required.
(vi) The Company has the requisite corporate power and authority to
enter into this Agreement, and this Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid, legal and
binding obligation of the Company enforceable in accordance with its terms
(except as rights to indemnity hereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the rights
of creditors generally and subject to general principles of equity); the
execution, delivery and performance of this Agreement and the consummation
of the transactions herein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any statute, rule or regulation of the United States or the state of
Wisconsin or otherwise known by such counsel to be applicable or under any
agreement or instrument filed as an Exhibit to the Registration Statement
or the Company's articles of incorporation or by-laws, or any order or
decree known to such counsel of any court or governmental agency or body
having jurisdiction over the Company, its subsidiaries or any of their
respective properties; and no consent, approval, authorization or order of,
or filing with, any court or governmental agency or body is required under
the laws of the United States or the state of Wisconsin or under any other
laws known by such counsel to be applicable for the execution, delivery and
performance of this Agreement or for the consummation of the transactions
contemplated hereby, including the issuance or sale of the Securities by
the Company, except such as may be required under the Act or state or other
applicable securities laws.
(vii) To the best of such counsel's knowledge, neither the Company
nor any of its subsidiaries is in violation of its respective articles of
incorporation or by-laws. To the best of such counsel's knowledge, neither
the Company nor any of its subsidiaries is in breach of or otherwise in
default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note, indenture, loan agreement or any
other contract filed as an Exhibit to the Registration Statement.
(viii) The Registration Statement and the Prospectus, and any
amendment thereof or supplement thereto, comply as to form in all material
16
respects with the requirements of the Act and the Rules and Regulations;
and on the basis of conferences with officers of the Company, examination
of documents referred to in the Registration Statement and Prospectus and
such other procedures as such counsel deemed appropriate, nothing has come
to the attention of such counsel that causes such counsel to believe that
the Registration Statement or any amendment thereof, at the time the
Registration Statement became effective and as of such Closing Date,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus (as of its date
and as of such Closing Date), as amended or supplemented, includes any
untrue statement of material fact or omits to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; it being understood that such
counsel need express no opinion as to the financial statements or other
financial data included in any of the documents mentioned in this clause.
(ix) Such other matters as you may reasonably request.
In rendering such opinion such counsel may rely (i) as to matters of
law other than Wisconsin and federal law, upon the opinion or opinions of local
counsel provided that the extent of such reliance is specified in such opinion
and that such counsel shall state that such opinion or opinions of local counsel
are satisfactory to them and that they believe they and you are justified in
relying thereon and (ii) as to matters of fact, to the extent such counsel deems
reasonable upon certificates of officers of the Company and its subsidiaries
provided that the extent of such reliance is specified in such opinion.
(e) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, such opinion or opinions Xxxxxxxx &
Xxxxxx, Ltd., counsel for the several Underwriters, dated such Closing Date and
addressed to you, with respect to the formation of the Company, the validity of
the Securities, the Registration Statement, the Prospectus and other related
matters as you reasonably may request, and such counsel shall have received such
papers and information as they request to enable them to pass upon such matters.
(f) On each Closing Date you, as Representatives of the several
Underwriters, shall have received a letter Xxxxxx Xxxxxxxx LLP, dated such
Closing Date and addressed to you, confirming that they are independent public
accountants within the meaning of the Act and are in compliance with the
applicable requirements relating to the qualifications of accountants under Rule
2-01 of Regulation S-X of the Commission, and stating, as of the date of such
letter (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the
Prospectus, as of a date not more than five days prior to the date of such
letter), the conclusions and findings of said firm with respect to the financial
information and other matters covered by its letter delivered to you
concurrently with the execution of
17
this Agreement, and the effect of the letter so to be delivered on such Closing
Date shall be to confirm the conclusions and findings set forth in such prior
letter.
(g) On each Closing Date, there shall have been furnished to you, as
Representatives of the Underwriters, a certificate, dated such Closing Date and
addressed to you, signed by the chief executive officer and by the chief
financial officer of the Company, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, in all material respects, as if made at and
as of such Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date;
(ii) No stop order or other order suspending the effectiveness of the
Registration Statement or any amendment thereof or the qualification of the
Securities for offering or sale has been issued, and no proceeding for that
purpose has been instituted or, to the best of their knowledge, is
contemplated by the Commission or any state or regulatory body; and
(iii) The signers of said certificate have carefully examined the
Registration Statement and the Prospectus, and any amendments thereof or
supplements thereto, and, to the best of their respective knowledge (A)
such documents contain all statements and information required to be
included therein, the Registration Statement, or any amendment thereof,
does not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Prospectus, as amended or
supplemented, does not include any untrue statement of material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, (B)
since the effective date of the Registration Statement there has occurred
no event required to be set forth in an amended or supplemented prospectus
which has not been so set forth, (C) subsequent to the respective dates as
of which information is given in the Registration Statement and the
Prospectus, neither the Company nor any of its subsidiaries has incurred
any material liabilities or obligations, direct or contingent, or entered
into any material transactions, not in the ordinary course of business, or
declared or paid any dividends or made any distribution of any kind with
respect to its capital stock, and except as disclosed in the Prospectus,
there has not been any change in the capital stock (other than a change in
the number of outstanding shares of Common Stock due to the issuance of
shares upon the exercise of outstanding options or warrants), or any
material change in the short-term or long-term debt, or any issuance of
options, warrants, convertible securities or other rights to purchase the
capital stock, of the Company, or any of its subsidiaries, or any Material
Adverse Change or any development involving a prospective material adverse
change
18
(whether or not arising in the ordinary course of business), in the general
affairs, condition (financial or otherwise), business, key personnel,
property, prospects, net worth or results of operations of the Company and
its subsidiaries, taken as a whole, and (D) except as stated in the
Registration Statement and the Prospectus, there is not pending, or, to the
knowledge of the Company, threatened or contemplated, any action, suit or
proceeding to which the Company or any of its subsidiaries is a party
before or by any court or governmental agency, authority or body, or any
arbitrator, which might result in any Material Adverse Change.
(h) The Company shall have furnished to you and counsel for the
Underwriters such additional documents, certificates and evidence as you or
they may have reasonably requested.
(i) Prior to the Closing Date, the shares to be issued and sold by
the Company shall have been duly authorized for listing by The Nasdaq
National Market upon official notice of issuance.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and counsel for the Underwriters.
The Company will furnish you with such conformed copies of such opinions,
certificates, letters and other documents as you shall reasonably request.
6. Indemnification and Contribution.
(a) The Company and the Principal Shareholder jointly and severally
agree to indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter
may become subject, under the Act or otherwise (including in settlement of any
litigation if such settlement is effected with the written consent of the
Company and the Principal Shareholder), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, including the information deemed to
be a part of the Registration Statement at the time of effectiveness pursuant
to Rule 430A, if applicable, any Preliminary Prospectus, the Prospectus, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
jointly and severally agree to reimburse each Underwriter for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending against such loss, claim, damage, liability or action; provided,
however, (i) that neither the Company nor the Principal Shareholder shall be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
such amendment or supplement, in reliance upon and in conformity with written
information furnished to the
19
Company by you, or by any Underwriter through you, specifically for use in
the preparation thereof and (ii) the Principal Shareholder shall only be
liable under this paragraph with respect to (A) information pertaining to
Xxxxxxxx X. Xxxx or Xxxxxx X. Xxxx furnished by them or on their behalf
expressly for use in any Preliminary Prospectus or the Registration
Statement or the Prospectus or any such amendment thereof or supplement
thereto or (B) facts what would constitute or demonstrate a breach of any
representation or warranty of the Principal Shareholder set forth in
Section 2(c) hereof.
In addition to its other obligations under this Section 6(a), 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 any statement or omission, or any alleged statement or omission,
described in this Section 6(a), it will reimburse each Underwriter on a
monthly basis for all reasonable legal fees or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of
a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriters for such expenses and
the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the
Underwriter that received such payment shall promptly return it to the
party or parties that made such payment, 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 First Bank Minneapolis N.A. (the "Prime Rate"). Any such
interim reimbursement payments which are not made to an Underwriter within
30 days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request. This indemnity agreement shall be in
addition to any liabilities which the Company may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the
Company may become subject, under the Act or otherwise (including in
settlement of any litigation, if such settlement is effected with the
written consent of such Underwriter), insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by you, or by such Underwriter through you, specifically for use in
the preparation thereof, and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in
20
connection with investigating or defending against any such loss, claim,
damage, liability or action.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party shall not relieve the indemnifying
party from any liability that it may have to any indemnified party. In case
any such action shall be brought against any indemnified party, and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of the indemnifying party's election so to assume the
defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that if, in the sole judgment of the Representatives, it is
advisable for the Underwriters to be represented as a group by separate
counsel, the Representatives shall have the right to employ a single
counsel, reasonably acceptable to the Company and the Principal
Shareholder, to represent the Representatives and all Underwriters who may
be subject to liability arising from any claim in respect of which
indemnity may be sought by the Underwriters under subsection (a) of this
Section 6, in which event the reasonable fees and expenses of such separate
counsel shall be borne by the indemnifying party or parties and reimbursed
to the Underwriters as incurred (in accordance with the provisions of the
second paragraph in subsection (a) above). An indemnifying party shall not
be obligated under any settlement agreement relating to any action under
this Section 6 to which it has not agreed in writing.
(d) 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, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or (b)
above, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Principal Shareholder on the one
hand and the Underwriters on the other from the offering of the Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Principal Shareholder on the one hand and the
Underwriters on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as
any other relevant equitable considerations. The relative benefits received
by the Company and the Principal Shareholder 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
21
expenses) received by the Company, or paid to the Principal Shareholder,
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, the Principal Shareholder
or the Underwriters and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company, the Principal Shareholder and the Underwriters
agree that it would not be just and equitable if contributions pursuant to
this subsection (d) were to be determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this subsection (d).
The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection
(d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending against any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount
of any damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several
in proportion to their respective underwriting obligations and not joint.
(e) The obligations of under this Section 6 shall be in addition
to any liability which the Company or the Principal Shareholder may
otherwise have and shall extend, upon the same terms and conditions, to
each person, if any, who controls any Underwriter within the meaning of the
Act; and the obligations of the Underwriters under this Section 6 shall be
in addition to any liability that the respective Underwriters may otherwise
have and shall extend, upon the same terms and conditions, to each director
of the Company (including any person who, with his consent, is named in the
Registration Statement as about to become a director of the Company), to
each officer of the Company who has signed the Registration Statement and
to each person, if any, who controls the Company within the meaning of the
Act.
(f) Notwithstanding any other provision hereof, the liability of
the Principal Shareholder under his representations and warranties
contained in subparagraph (c) of Section 2 hereof and under the related
indemnity and reimbursement agreements contained in the provisions of this
Section 6 shall be limited to an amount equal to one half of the total cash
dividend of undistributed S corporation earnings which is paid by the
Company after the date of this Agreement from the proceeds of the sale of
the Securities. The Company and the Principal Shareholder may agree, as
among themselves and without limiting the rights of the
22
Underwriters under this Agreement, as to the respective amounts of such
liability for which they each shall be responsible. Further, the
Underwriters agree that they will not seek indemnification and contribution
against the Principal Shareholder under this Agreement unless and until the
Company (and its insurers if any and if applicable) is unable to provide
indemnification due to the Underwriters hereunder.
7. Representations and Agreements to Survive Delivery. All
representations, warranties, and agreements of the Company and the
Principal Shareholders herein or in certificates delivered pursuant hereto,
and the agreements of the several Underwriters, the Principal Shareholders
and the Company contained in Section 6 hereof, shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of any Underwriter or any controlling person thereof, or the Company
or any of its officers, directors, or controlling persons, and shall
survive delivery of, and payment for, the Securities to and by the
Underwriters hereunder.
8. Substitution of Underwriters.
(a) If any Underwriter or Underwriters shall fail to take up and
pay for the amount of Firm Shares agreed by such Underwriter or
Underwriters to be purchased hereunder, upon tender of such Firm Shares in
accordance with the terms hereof, and the amount of Firm Shares not
purchased does not aggregate more than 10% of the total amount of Firm
Shares set forth in Schedule I hereto, the remaining Underwriters shall be
obligated to take up and pay for (in proportion to their respective
underwriting obligations hereunder as set forth in Schedule I hereto except
as may otherwise be determined by you) the Firm Shares that the withdrawing
or defaulting Underwriters agreed but failed to purchase.
(b) If any Underwriter or Underwriters shall fail to take up and
pay for the amount of Firm Shares agreed by such Underwriter or
Underwriters to be purchased hereunder, upon tender of such Firm Shares in
accordance with the terms hereof, and the amount of Firm Shares not
purchased aggregates more than 10% of the total amount of Firm Shares set
forth in Schedule I hereto, and arrangements satisfactory to you for the
purchase of such Firm Shares by other persons are not made within 36 hours
thereafter, this Agreement shall terminate. In the event of any such
termination, the Company shall not be under any liability to any
Underwriter (except to the extent provided in Section 4(a)(viii), Section
4(b)(ii) and Section 6 hereof) nor shall any Underwriter (other than an
Underwriter who shall have failed, otherwise than for some reason permitted
under this Agreement, to purchase the amount of Firm Shares agreed by such
Underwriter to be purchased hereunder) be under any liability to the
Company (except to the extent provided in Section 6 hereof).
If Firm Shares to which a default relates are to be purchased by
the non-defaulting Underwriters or by any other party or parties, the
Representatives or the Company shall have the right to postpone the First
Closing Date for not more than seven business days in order that the
necessary changes in the Registration Statement,
23
Prospectus and any other documents, as well as any other arrangements, may
be effected. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 8.
9. Effective Date of this Agreement and Termination.
(a) If this Registration Statement is not effective at the time
this Agreement is executed, this Agreement shall become effective at the
time the Registration Statement is declared effective; provided, that if
the Registration Statement is effective at the time this Agreement is
executed, this Agreement shall become effective at such time. By giving
notice as hereinafter specified before the time this Agreement becomes
effective, you, as Representatives of the several Underwriters, or the
Company may prevent this Agreement from becoming effective without
liability of any party to any other party, except that the provisions of
Section 4(viii) and Section 6 hereof shall at all times be effective.
(b) You, as Representatives of the several Underwriters,
shall have the right to terminate this Agreement by giving notice as
hereinafter specified at any time at or prior to the First Closing Date,
and the option referred to in Section 3(b), if exercised, may be canceled
at any time prior to the Second Closing Date, if (i) the Company shall have
failed, refused or been unable, at or prior to such Closing Date, to
perform any agreement on its part to be performed hereunder, (ii) any other
condition of the Underwriters' obligations hereunder is not fulfilled,
(iii) trading on the New York Stock Exchange, the American Stock Exchange
or the Nasdaq National Market shall have been wholly suspended for a period
of at least one trading day, (iv) minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall
have been required, on the New York Stock Exchange or the American Stock
Exchange, by such Exchange or by order of the Commission or any other
governmental authority having jurisdiction, (v) a banking moratorium shall
have been declared by Federal or New York authorities, or (vi) there has
occurred and is continuing any material adverse change in the financial
markets in the United States or an outbreak of major hostilities (or an
escalation thereof) in which the United States is involved, a declaration
of war by Congress, any other substantial national or international
calamity or any other event or occurrence of a similar character shall have
occurred since the execution of this Agreement that, in your reasonable
judgment, makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for the Securities. Any such
termination shall be without liability of any party to any other party
except that the provisions of Section 4(viii) and Section 6 hereof shall at
all times be effective.
24
(c) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section, the
Company shall be notified promptly by you by telephone or telegram,
confirmed by letter. If the Company elects to prevent this Agreement from
becoming effective, you shall be notified by the Company by telephone or
telegram, confirmed by letter.
10. Information Furnished by Underwriters. The statements set forth
in the last paragraph of the cover page and under the caption
"Underwriting" in any Preliminary Prospectus and in the Prospectus
constitute the written information furnished by or on behalf of the
Underwriters referred to in Section 2 and Section 6 hereof.
11. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters,
shall be mailed, telegraphed or delivered to the Representatives c/o Xxxxx
Xxxxxxx Inc., Xxxxx Xxxxxxx Tower, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000, except that notices given to an Underwriter pursuant to
Section 6 hereof shall be sent to such Underwriter at the address stated in
the Underwriters' Questionnaire furnished by such Underwriter in connection
with this offering; if to the Company, shall be mailed, telegraphed or
delivered to it 0000 Xxxxx Xxxxxx, Xxxxxxxxx Xxxxxx, XX 00000 Attention:
Chief Executive Officer; if to the Principal Shareholder, shall be mailed,
telegraphed or delivered to Xxxxxxxx X. Xxxx, 0000 Xxxxx Xxxxxx, Xxxxxxxxx
Xxxxxx, XX 00000; or in any case to such other address as the person to be
notified may have requested in writing. All notices given by telegram shall
be promptly confirmed by letter. Any party to this Agreement may change
such address for notices by sending to the parties to this Agreement
written notice of a new address for such purpose.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns and the controlling persons, officers and
directors referred to in Section 6. Nothing in this Agreement is intended
or shall be construed to give to any other person, firm or corporation any
legal or equitable remedy or claim under or in respect of this Agreement or
any provision herein contained. The term "successors and assigns" as herein
used shall not include any purchaser, as such purchaser, of any of the
Securities from any of the several Underwriters.
25
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
Please sign and return to the Company the enclosed duplicates of this
letter whereupon this letter will become a binding agreement between the Company
and the several Underwriters in accordance with its terms.
Very truly yours,
ADVANTAGE LEARNING
SYSTEMS, INC.
By:
-----------------------------------
[Title]
--------------------------------------
Xxxxxxxx X. Xxxx
Xxxxxxxx X. Xxxx is executing this Agreement solely with respect to his
representations and warranties set forth in subparagraph (c) of Section 2, and
the notice provision in Section 11, and for the purposes of evidencing his
related obligations as provided in Sections 6 and 7 hereof, and in order to
induce the Underwriters to enter into and perform this Agreement.
Confirmed as of the date first above
mentioned, on behalf of themselves and
the other several Underwriters named
in Schedule I hereto.
XXXXX XXXXXXX INC.
XXXXXXXXXX SECURITIES
BY: XXXXX XXXXXXX INC.
By:
------------------------
Managing Director
26
SCHEDULE I
Number of
Underwriter Firm Shares /(1)/
----------- -----------------
Xxxxx Xxxxxxx Inc......................................
Xxxxxxxxxx Securities..................................
---------
Total............................................... 2,800,000
=========
_________________
(1) The Underwriters may purchase up to an additional 420,000 Option Shares, to
the extent the option described in Section 3 of the Agreement is exercised, in
the proportions and in the manner described in the Agreement.
