2,700,000 Shares
X.X. XXXXX ARTS & CRAFTS, INC.
Common Stock
UNDERWRITING AGREEMENT
_______________, 1997
BT ALEX. XXXXX INCORPORATED
XXXXXX XXXXXXXXXX XXXXX INC.
As Representatives of the
Several Underwriters
c/o BT Alex. Xxxxx Incorporated
Xxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Gentlemen:
X.X. Xxxxx Arts & Crafts, Inc., a Pennsylvania corporation (the
"Company"), proposes to sell to the several underwriters (the "Underwriters")
named in Schedule I hereto for whom you are acting as representatives (the
"Representatives") an aggregate of 2,700,000 shares of the Company's Common
Stock (the "Firm Shares"). The respective amounts of the Firm Shares to be so
purchased by the several Underwriters are set forth opposite their names in
Schedule I hereto. The Company also proposes to sell at the Underwriters'
option an aggregate of up to 405,000 additional shares of the Company's Common
Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the
Option Shares if you elect to exercise the over-allotment option in whole or
in part for the accounts of the several Underwriters. The Firm Shares and the
Option Shares (to the extent the aforementioned option is exercised) are
herein collectively called the "Shares."
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In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Underwriters
as follows:
(a) A registration statement on Form S-1 (File No. 333-32859)
with respect to the Shares has been carefully prepared by the Company,
in all material respects, in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the Rules and
Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed
with the Commission. Copies of such registration statement, including
any amendments thereto, the preliminary prospectuses (meeting the
requirements of the Rules and Regulations) contained therein and the
exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. Such
registration statement, together with any registration statement filed
by the Company which meets the requirements for becoming effective upon
filing with the Commission pursuant to Rule 462 (b) of the Act, herein
referred to as the "Registration Statement," which shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A
and contained in the Prospectus referred to below, has become effective
under the Act and no post-effective amendment to the Registration
Statement has been filed as of the date of this Agreement. "Prospectus"
means (a) the form of prospectus first filed with the Commission
pursuant to Rule 424(b) or (b) the last preliminary prospectus included
in the Registration Statement filed prior to the time it becomes
effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers
of the Shares, together with the term sheet or abbreviated term sheet
filed with the Commission pursuant to Rule 424(b)(7) under the Act.
Each preliminary prospectus included in the Registration Statement
prior to the time it becomes effective is herein referred to as a
"Preliminary Prospectus."
(b) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the Commonwealth of
Pennsylvania, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement. Each of the subsidiaries of the Company, as listed in
Exhibit A hereto, (collectively, the "Subsidiaries") has been duly
organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with corporate
power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. The Subsidiaries
are the only subsidiaries, direct or indirect, of the Company. The
Company and each of the Subsidiaries are duly qualified to transact
business in all jurisdictions in which the conduct of their business
requires such qualification, except where the failure to be so
qualified does not have a
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material adverse effect on the earnings, business, management,
properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries taken as a
whole. The outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable and are owned by the Company or another
Subsidiary free and clear of all liens, encumbrances and equities and
claims; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert
any obligations into shares of capital stock or ownership interests in
the Subsidiaries are outstanding.
(c) The outstanding shares of Common Stock of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable; the Shares to be issued and sold by the Company have
been duly authorized and when issued and paid for as contemplated
herein will be validly issued, fully paid and non-assessable; and no
preemptive rights of stockholders exist with respect to any of the
Shares or the issue and sale thereof. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights, other than
those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock.
(d) The information set forth under the caption "Capitalization"
in the Prospectus is true and correct. All of the Shares conform to the
description thereof contained in the Registration Statement. The form
of certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.
(e) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering
of the Shares nor instituted proceedings for that purpose. The
Registration Statement contains, and the Prospectus and any amendments
or supplements thereto will contain, all statements which are required
to be stated therein by, and will conform in all material respects to,
the requirements of the Act and the Rules and Regulations. The
Registration Statement and any amendment thereto do not contain, and
will not contain, any untrue statement of a material fact and do not
omit, and will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. The Prospectus and any amendments and supplements thereto
do not contain, and will not contain, any untrue statement of material
fact; and do not omit, and will not omit, to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted
from the Registration Statement or the Prospectus, or any such
amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any
Underwriter through the Representatives, specifically for use in the
preparation thereof.
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(f) The financial statements of the Company together with
related notes as set forth in the Registration Statement, present
fairly, in all material respects, the financial position and the
results of operations and cash flows of the Company and the
Subsidiaries, at the indicated dates and for the indicated periods.
Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied
throughout the periods involved, except as disclosed herein, and all
adjustments necessary for a fair presentation of results for such
periods have been made. The summary financial and statistical data
included in the Registration Statement presents fairly, in all material
respects, the information shown therein and such data has been compiled
on a basis consistent with the financial statements presented therein
and the books and records of the Company. The pro forma financial
information included in the Registration Statement and the Prospectus
present fairly the information shown therein, 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 appropriate to give effect to the transactions or
circumstances referred to therein.
(g) To the Company's knowledge, Price Waterhouse LLP, who have
audited certain of the financial statements filed with the Commission
as part of the Registration Statement, are independent accountants
within the meaning of the Act and the applicable published rules and
regulations thereunder.
(h) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of
the Subsidiaries before any court or administrative agency or otherwise
which if determined adversely to the Company or any of its Subsidiaries
might result in any material adverse change in the earnings, business,
management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and of the
Subsidiaries taken as a whole or to prevent the consummation of the
transactions contemplated hereby, except as set forth in the
Registration Statement.
(i) The Company and the Subsidiaries have good and marketable
title to all of the properties and assets reflected in the financial
statements (or as described in the Registration Statement) hereinabove
described, subject to no lien, mortgage, pledge, charge or encumbrance
of any kind except those reflected in such financial statements (or as
described in the Registration Statement) or which are not material in
amount. The Company and the Subsidiaries occupy their leased properties
under valid and binding leases.
(j) The Company and the Subsidiaries have filed all Federal,
state, local and foreign income tax returns which have been required to
be filed or have requested and obtained extensions thereof and have
paid all taxes indicated by said returns and all assessments received
by them or any of them to the extent that such taxes have become
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due, except for any such assessment that is currently being contested
in good faith or as described in or contemplated by the Registration
Statement or Prospectus. All tax liabilities have been adequately
provided for on a pro forms basis in the financial statements of the
Company.
(k) Since the respective dates as of which information is given
in the Registration Statement, as it may be amended or supplemented,
there has not been any material adverse change or any development
involving a prospective material adverse change in or affecting the
earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise), or prospects of the Company and its
Subsidiaries taken as a whole, whether or not occurring in the ordinary
course of business, and there has not been any material transaction
entered into or any material transaction that is probable of being
entered into by the Company or the Subsidiaries, other than
transactions in the ordinary course of business and changes and
transactions described in the Registration Statement, as it may be
amended or supplemented. The Company and the Subsidiaries have no
material contingent obligations which are not disclosed in the
Company's financial statements which are included in the Registration
Statement.
(l) Neither the Company nor any of the Subsidiaries is or with
the giving of notice or lapse of time or both, will be, in violation of
or in default under its Articles or By-Laws or under any agreement,
lease, contract, indenture or other instrument or obligation to which
it is a party or by which it, or any of its properties, is bound and
which default is of material significance in respect of the condition,
financial or otherwise of the Company and its Subsidiaries taken as a
whole or the business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the
Company and the Subsidiaries taken as a whole. The execution and
delivery of this Agreement and the consummation of the transactions
herein contemplated and the fulfillment of the terms hereof will not
conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust or other agreement or instrument to which the Company or any
Subsidiary is a party, or of the Articles or By-laws of the Company or
any order, rule or regulation applicable to the Company or any
Subsidiary of any court or of any regulatory body or administrative
agency or other governmental body having jurisdiction.
(m) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company of this Agreement and the consummation of the
transactions herein contemplated (except such additional steps as may
be required by the Commission, the National Association of Securities
Dealers, Inc. (the "NASD") or such additional steps as may be necessary
to qualify the Shares for public offering by the Underwriters under
state securities or Blue Sky laws) has been obtained or made and is in
full force and effect.
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(n) The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their businesses; and, to the Company's
knowledge, neither the Company nor any of the Subsidiaries has
infringed any patents, patent rights, trade names, trademarks or
copyrights, which infringement is material to the business of the
Company and the Subsidiaries taken as a whole. The Company knows of no
material infringement by others of patents, patent rights, trade names,
trademarks or copyrights owned by or licensed to the Company.
(o) Neither the Company, nor to the Company's best knowledge, any
of its affiliates, has taken or may take, directly or indirectly, any
action designed to cause or result in, or which has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate
the sale or resale of the Shares. The Company acknowledges that the
Underwriters may engage in passive market making transactions in the
Shares on The Nasdaq Stock Market in accordance with Rule 103 under the
Exchange Act.
(p) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company
Act of 1940 and the rules and regulations of the Commission
thereunder.
(q) 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.
(r) The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and the value
of their respective properties and as is customary for companies
engaged in similar industries.
(s) The Company does not sponsor or contribut to any "pension
plan" (as defined in the Employee Retirement Income Security Act of
1974, as amended, including the regulations and published
interpretations thereunder ("ERISA")).
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
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(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the
Company agrees to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $_____ per share,
the number of Firm Shares set forth opposite the name of each
Underwriter in Schedule I hereof, subject to adjustments in accordance
with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be
made in New York Clearing House funds by certified or bank cashier's
checks drawn to the order of the Company against delivery of
certificates therefor to the Representatives for the several accounts
of the Underwriters. Such payment and delivery are to be made at the
offices of BT Alex. Xxxxx Incorporated, Xxx Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx, at 10:00 a.m., Baltimore time, on the third business day
after the date of this Agreement or at such other time and date not
later than five business days thereafter as you and the Company shall
agree upon, such time and date being herein referred to as the "Closing
Date." As used herein, "business day" means a day on which the New York
Stock Exchange is open for trading and on which banks in New York are
open for business and are not permitted by law or executive order to be
closed. The certificates for the Firm Shares will be delivered in such
denominations and in such registrations as the Representatives request
in writing not later than the second full business day prior to the
Closing Date, and will be made available for inspection by the
Representatives at least one business day prior to the Closing Date.
(c) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions
herein set forth, the Company hereby grants an option to the several
Underwriters to purchase the Option Shares at the price per share as
set forth in the first paragraph of this Section 2. The option granted
hereby may be exercised in whole or in part by giving written notice
(i) at any time before the Closing Date and (ii) only once thereafter
within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company setting
forth the number of Option Shares as to which the several Underwriters
are exercising the option, the names and denominations in which the
Option Shares are to be registered and the time and date at which such
certificates are to be delivered. The time and date at which
certificates for Option Shares are to be delivered shall be determined
by the Representatives but shall not be earlier than three nor later
than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein
referred to as the "Option Closing Date"). If the date of exercise of
the option is three or more days before the Closing Date, the notice of
exercise shall set the Closing Date as the Option Closing Date. The
number of Option Shares to be purchased by each Underwriter shall be in
the same proportion to the total number of Option Shares being
purchased as the number of Firm Shares being purchased by such
Underwriter bears to 2,700,000, adjusted by you in such manner as to
avoid fractional shares. The option with respect to the Option Shares
granted hereunder may be exercised only to
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cover over-allotments in the sale of the Firm Shares by the
Underwriters. You, as Representatives of the several Underwriters, may
cancel such option at any time prior to its expiration by giving
written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Shares shall
be made on the Option Closing Date in New York Clearing House funds by
certified or bank cashier's check drawn to the order of the Company
against delivery of certificates therefor at the offices of BT Alex.
Xxxxx Incorporated, Xxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a
public offering of the Firm Shares as soon as the Representatives deem
it advisable to do so. The Firm Shares are to be initially offered to
the public at the initial public offering price set forth in the
Prospectus. The Representatives may from time to time thereafter change
the public offering price and other selling terms. To the extent, if at
all, that any Option Shares are purchased pursuant to Section 2 hereof,
the Underwriters will offer them to the public on the foregoing terms.
It is further understood that you will act as the Representatives
for the Underwriters in the offering and sale of the Shares in
accordance with a Master Agreement Among Underwriters entered into by
you and the several other Underwriters.
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4. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the several Underwriters
that:
(a) The Company will (i) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely
file with the Commission under Rule 424(b) of the Rules and Regulations
a Prospectus in a form approved by the Representatives containing
information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and
Regulation and (ii) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives
shall not previously have been advised and furnished with a copy or
which is not in compliance with the Rules and Regulations.
(b) The Company will advise the Representatives promptly (i) when
the Registration Statement or any post-effective amendment thereto
shall have become effective, (ii) of receipt of any comments from the
Commission, (iii) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, and (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending
the use of the Prospectus and to obtain as soon as possible the lifting
thereof, if issued.
(c) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws
of such jurisdictions as the Representatives may reasonably have
designated in writing and will make such applications, file such
documents, and furnish such information as may be reasonably required
for that purpose, provided the Company shall not be required to
qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from
time to time, prepare and file such statements, reports, and other
documents, as are or may be required to continue such qualifications
in effect for so long a period as the Representatives may reasonably
request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company
will deliver to, or upon the order of, the Representatives during the
period when delivery of a Prospectus is required under the
Act, as many copies of the Prospectus in final form, or as thereafter
amended or supplemented, as the Representatives may reasonably request.
The Company will deliver to the Representatives at or before the
Closing Date, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will
deliver to the Representatives such number of copies of the
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Registration Statement (including such number of copies of the exhibits
filed therewith that may reasonably be requested), and of all
amendments thereto, as the Representatives may reasonably request.
(e) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange
Act"), and the rules and regulations of the Commission thereunder, so
as to permit the completion of the distribution of the Shares as
contemplated in this Agreement and the Prospectus. If during the period
in which a prospectus is required by law to be delivered by an
Underwriter or dealer, any event shall occur as a result of which, in
the judgment of the Company or in the reasonable opinion of the
Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend
or supplement the Prospectus to comply with any law, the Company
promptly will prepare and file with the Commission an appropriate
amendment to the Registration Statement or supplement to the Prospectus
so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or
so that the Prospectus will comply with the law.
(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not
later than March 31, 1999, an earning statement (which need not be
audited) in reasonable detail, covering a period of at least 12
consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations.
(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and
copies of all other documents, reports and information furnished by the
Company to its stockholders or filed with any securities exchange
pursuant to the requirements of such exchange or with the Commission
pursuant to the Act or the Securities Exchange Act of 1934, as amended.
The Company will deliver to the Representatives similar reports with
respect to significant subsidiaries, as that term is defined in the
Rules and Regulations, which are not consolidated in the Company's
financial statements.
(h) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other securities convertible
into or exchangeable or exercisable for shares of Common Stock or
derivative of Common Stock (or agreement for such) will be made for a
period of 180 days after the date of this Agreement, directly or
indirectly, by the Company otherwise than hereunder or with the prior
written consent of BT Alex. Xxxxx Incorporated.
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(i) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on the The Nasdaq Stock Market.
(j) The Company has caused each officer and director of the
Company to furnish to you, on or prior to the date of this Agreement, a
letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such person shall agree not to
offer, sell, sell short or otherwise dispose of any shares of Common
Stock of the Company or other capital stock of the Company, or any
other securities convertible, exchangeable or exercisable for Common
Shares or derivative of Common Shares owned by such person or request
the registration for the offer or sale of any of the foregoing (or as
to which such person has the right to direct the disposition of) for a
period of 180 days after the date of this Agreement, directly or
indirectly, except with the prior written consent of BT Alex. Xxxxx
Incorporated ("Lockup Agreements").
(k) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus.
(l) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company or any of the Subsidiaries to register as an
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act").
(m) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for
the Common Stock.
(n) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement,
including, without limiting the generality of the foregoing, the
following: accounting fees of the Company; the fees and disbursements
of counsel for the Company; the cost of printing and delivering to, or
as requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement, the
Underwriters' Invitation Letter, the Listing Application, the Blue Sky
Survey and any supplements or amendments thereto; the filing fees of
the Commission; the filing fees and expenses (including legal fees and
disbursements) incident to securing any required review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of
the sale of the Shares; the Listing
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Fee of the Nasdaq Stock Market; and the expenses, including the fees
and disbursements of counsel for the Underwriters, incurred in
connection with the qualification of the Shares under State securities
or Blue Sky laws. The Company shall not, however, be required to pay
for any of the Underwriters expenses (other than those related to
qualification under NASD regulation and State securities or Blue Sky
laws) except that, if this Agreement shall not be consummated because
the conditions in Section 6 hereof are not satisfied, or because this
Agreement is terminated by the Representatives pursuant to Section
11(b)(1) hereof, or by reason of any failure, refusal or inability on
the part of the Company to perform any undertaking or satisfy any
condition of this Agreement or to comply with any of the terms hereof
on its part to be performed, unless such failure to satisfy said
condition or to comply with said terms be due to the default or
omission of any Underwriter, then the Company shall reimburse the
several Underwriters for reasonable out-of-pocket expenses, including
fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the
Company shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits
from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option
Closing Date are subject to the accuracy, as of the Closing Date or the
Option Closing Date, as the case may be, of the representations and
warranties of the Company contained herein, and to the performance by
the Company of its covenants and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations shall have been
made, and any request of the Commission for additional information (to
be included in the Registration Statement or otherwise) shall have been
disclosed to the Representatives and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been
issued and no proceedings for that purpose shall have been taken or, to
the knowledge of the Company, shall be contemplated by the Commission
and no injunction, restraining order, or order of any nature by a
Federal or state court of competent jurisdiction shall have been issued
as of the Closing Date which would prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date
or the Option Closing Date, as the case may be, the opinion of Blank
Rome Xxxxxxx & XxXxxxxx, counsel for the Company, dated the Closing
Date or the Option Closing Date, as the case
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may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is
subsisting as a corporation in good standing under the laws of
the Commonwealth of Pennsylvania with corporate power and
authority to own or lease its properties and conduct its business
as described in the Registration Statement; each of the
Subsidiaries has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction
of its incorporation, with corporate power and authority to own
or lease its properties and conduct its business as described in
the Registration Statement; the Company and each of the
Subsidiaries are duly qualified to transact business in all
jurisdictions in which the conduct of their business requires
such qualification, and in which the failure to qualify would
have a materially adverse effect upon the business of the Company
and the Subsidiaries taken as a whole; and the outstanding shares
of capital stock of each of the Subsidiaries have been duly
authorized and validly issued and are fully paid and
non-assessable and are owned by the Company or a Subsidiary; and,
to such counsel's knowledge, the outstanding shares of capital
stock of each of the Subsidiaries is owned free and clear of all
liens, encumbrances and equities and claims, and no options,
warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations
into any shares of capital stock or of ownership interests in the
Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding
capital stock as set forth under the caption "Capitalization" in
the Prospectus; the authorized shares of the Company's Common
Stock have been duly authorized; the outstanding shares of the
Company's Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable; all of the Shares
conform to the description thereof contained in the Prospectus;
the certificates for the Shares, assuming they are in the form
filed with the Commission, are in due and proper form; the shares
of Common Stock, including the Option Shares, if any, to be sold
by the Company pursuant to this Agreement have been duly
authorized and will be validly issued, fully paid and
non-assessable when issued and paid for as
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contemplated by this Agreement; and no preemptive rights of
stockholders exist with respect to any of the Shares or the issue
or sale thereof.
(iii) Except as described in or contemplated by the
Prospectus, to the knowledge of such counsel, there are no
outstanding securities of the Company convertible or exchangeable
into or evidencing the right to purchase or subscribe for any
shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its
capital stock or any securities convertible or exchangeable into
or evidencing the right to purchase or subscribe for any shares
of such stock; and except as described in the Prospectus, to the
knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or
otherwise, which has not been satisfied or effectively waived, to
cause the Company to sell or otherwise issue to them, or to
permit them to underwrite the sale of, any of the Shares or the
right to have any Common Shares 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 Act of any shares of Common Stock or other
securities of the Company.
(iv) The Registration Statement has become effective
under the Act and, to the knowledge of such counsel, no stop
order proceedings with respect thereto have been instituted or
are pending or threatened under the Act.
(v) The Registration Statement, the Prospectus and
each amendment or supplement thereto comply as to form in all
material respects with the requirements of the Act and the
applicable rules and regulations thereunder (except that such
counsel need express no opinion as to the financial statements
and related schedules herein).
(vi) The statements under the captions
"Business-Litigation," "Management-Executive Compensation,"
"Management-Stock Option Plan," "Management-Severance
Arrangement," "Certain Transactions," "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus,
insofar as such statements constitute a summary of documents
referred to therein or matters of law, fairly summarize in all
material respects the information called for with respect to such
documents and matters.
(vii) Such counsel does not know of any contracts or
documents required to be filed as exhibits to the Registration
Statement or described in the Registration Statement or the
Prospectus which are not so filed or described as
-14-
required, and such contracts and documents as are summarized in
the Registration Statement or the Prospectus are fairly
summarized in all material respects.
(viii) Such counsel knows of no material legal or
governmental proceedings pending or threatened against the
Company or any of the Subsidiaries except as set forth in the
Prospectus.
(ix) The execution and delivery of this Agreement
and the consummation of the transactions herein contemplated do
not and will not conflict with or result in a breach of any of
the terms or provisions of, or constitute a default under, the
Articles of Incororation or By-laws of the Company, or any
agreement or instrument known to such counsel to which the
Company or any of the Subsidiaries is a party or by which the
Company or any of the Subsidiaries may be bound.
(x) This Agreement has been duly authorized,
executed and delivered by the Company.
(xi) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory,
administrative or other governmental body is necessary in
connection with the execution and delivery of this Agreement and
the consummation of the transactions herein contemplated (other
than as may be required by the NASD or as required by State
securities and Blue Sky laws as to which such counsel need
express no opinion) except such as have been obtained or made.
(xii) The Company is not, and will not become, as a
result of the consummation of the transactions contemplated by
this Agreement, and application of the net proceeds therefrom as
described in the Prospectus, required to register as an
investment company under the 1940 Act.
In rendering such opinion Blank Rome Xxxxxxx & XxXxxxxx may rely
as to matters governed by the laws of states other than Pennsylvania or
Federal laws on local counsel in such jurisdictions, and as to matters
of fact on certificates of officers of the Company and of government
officials, provided that in each case Blank Rome Xxxxxxx & XxXxxxxx
shall state that they believe that they and the Underwriters are
justified in relying on such other counsel or certificates. 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, at the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to
Rule 430A under the Act) and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make
-15-
the statements therein not misleading, and (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are
made, not misleading (except that such counsel need express no view as
to financial statements, schedules and financial and statistical
information therein). With respect to such statement, Blank Rome
Xxxxxxxx & XxXxxxxx may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(c) The Representatives shall have received from Piper & Marbury
L.L.P., counsel for the Underwriters, an opinion dated the Closing Date
or the Option Closing Date, as the case may be, substantially to the
effect specified in subparagraphs (ii), (iii), (iv) and (xi) of
Paragraph (b) of this Section 6, and that the Company is a duly
organized and subsisting corporation under the laws of the Commonwealth
of Pennsylvania. In rendering such opinion Piper & Marbury L.L.P. may
rely as to all matters governed other than by the laws of the State of
Maryland or Federal laws on the opinion of counsel referred to in
Paragraph (b) of this Section 6. 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 Act (but after giving
effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement
of a material fact or omitted to state a material fact, necessary in
order to make the statements, in the light of the circumstances under
which they are made, not misleading (except that such counsel need
express no view as to financial statements, schedules and statistical
information therein). With respect to such statement, Piper & Marbury
L.L.P. may state that their belief is based upon the procedures set
forth therein, but is without independent check and verification.
(d) The Representatives shall have received at or prior to the
Closing Date from Piper & Marbury L.L.P. a memorandum or summary, in
form and substance satisfactory to the Representatives, with respect to
the qualification for offering and sale by the Underwriters of the
Shares under the State securities or Blue Sky laws of such
jurisdictions as the Representatives may reasonably have designated to
the Company.
(e) At the date of closing, Price Waterhouse LLP shall have
furnished to you a letter, dated the date of delivery thereof, in form
and substance satisfactory to you, to the effect that:
-16-
(i) They are independent accountants within the meaning of
the Act and the applicable published rules and regulations
thereunder;
(ii) In their opinion, the financial statements of the
Company audited by them and included in the Registration
Statement comply as to form in all material respects with the
applicable accounting requirements of the Act and the published
rules and regulations thereunder with respect to registration
statements on Form S-1;
(iii) On the basis of procedures (but not an audit in
accordance with generally accepted auditing standards) consisting
of:
a) Reading the minutes of meetings of the shareholders and
the Board of Directors of the Company since December
31, 1996 as set forth in the minute books through a
specified date not more than five business days prior
to the date of delivery of such letter;
b) Performing the procedures by American Institute of
Certified Public Accountants for a review of interim
financial information as described in SAS No. 71,
Interim Financial Information, on the unaudited interim
financial statements of the Company included in the
Registration Statement and reading the unaudited
interim financial data for the period from the date of
the latest balance sheet included in the Registration
Statement to the date of the latest available interim
financial data; and
c) Making inquiries of certain officials of the Company
who have responsibility for financial and accounting
matters regarding the specific items for which
representations are requested below;
nothing has come to their attention as a result of the
foregoing procedures that caused them to believe that:
(1) the unaudited interim financial statements,
included in the Registration Statement, do not
comply as to form in all material respects with
the applicable accounting requirements of the Act
and the published rules and regulations
thereunder;
(2) any material modifications should be made to the
unaudited interim financial statements, included
in the Registration Statement, for them to be in
conformity with generally accepted accounting
principles.
(3) (i) At the date of the latest available interim
financial data and at a specified date nor more
than five business days prior to the date of
-17-
delivery of such letter, there was any change in
the common stock, increase in long-term debt or
any decreases in net current assets (working
capital) or shareholders' equity of the Company as
compared with amounts shown in the latest balance
sheet included in the Registration Statement or
(ii) for the period from the date of the latest
available financial data to a specified date not
more than five business days prior to delivery of
such letter, there were any decreases, as compared
with the corresponding period in the preceding
year, in net sales or net income, except in all
instances for changes, increases or decreases
which the Registration Statement discloses have
occurred or may occur, or they shall state any
specific changes, increases or decreases.
(iv) The letter shall also state that the information set
forth under the captions "Summary Financial and Operating Data,"
Capitalization," "Dilution, "Selected Financial and Operating
Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Executive
Compensation," which is expressed in dollars (or percentages
derived from such dollar amounts) as has been obtained from
accounting records which are subject to the internal controls of
the Company's accounting system or which has been derived
directly from such accounting records by analysis or computation,
is in agreement with such records or computations made therefrom.
(f) The Representatives shall have received on the Closing Date
or the Option Closing Date, as the case may be, a certificate or
certificates of the Chief Executive Officer and the Chief Financial
Officer of the Company (each on behalf of the Company and not in an
individual capacity) to the effect that, as of the Closing Date or the
Option Closing Date, as the case may be, each of them severally
represents as follows:
(i) The Registration Statement has become effective under
the Act and no stop order suspending the effectiveness of the
Registrations Statement has been issued, and no proceedings for
such purpose have been taken or are, to his knowledge,
contemplated by the Commission;
(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct in all
material respects as of the Closing Date or the Option Closing
Date, as the case may be;
(iii) All filings required to have been made pursuant to
Rules 424 or 430A under the Act have been made;
(iv) As of the effective date of the Registration
Statement, the statements contained in the Registration Statement
were true and correct, and such Registration Statement and
Prospectus did not omit to state a material fact
-18-
required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date
of the Registration Statement, no event has occurred which should
have been set forth in a supplement to or an amendment of the
Prospectus which has not been so set forth in such supplement or
amendment; and
(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not
been any material adverse change or any development involving a
prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole or the earnings, business,
management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and the
Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business.
(g) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related
matters as the Representatives may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, have been approved
for designation upon notice of issuance on the Nasdaq Stock Market.
(i) The Lockup Agreements described in Section 4 (j) are in full
force and effect.
The opinions and certificates mentioned in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they
are in all material respects reasonably satisfactory to the
Representatives and to Piper & Marbury L.L.P., counsel for the
Underwriters.
If any of the conditions hereinabove provided for in this Section
6 shall not have been fulfilled when and as required by this Agreement
to be fulfilled, the obligations of the Underwriters hereunder may be
terminated by the Representatives by notifying the Company of such
termination in writing or by telegram at or prior to the Closing Date
or the Option Closing Date, as the case may be.
In such event, the Company and the Underwriters shall not be
under any obligation to each other (except to the extent provided in
Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to sell and deliver the portion of
the Shares required to be delivered as and when specified in this
Agreement are subject to the
-19-
conditions that at the Closing Date or the Option Closing Date, as the
case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or
proceedings therefor initiated or threatened.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of the Act, against any losses, claims, damages or
liabilities to which such Underwriter or any such controlling person
may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or (ii) 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 will
reimburse each Underwriter and each such controlling person upon demand
for any legal or other expenses reasonably incurred by such Underwriter
or such controlling person in connection with investigating or
defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter
or controlling person is a party to any action or proceeding; provided,
however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement, or
omission or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with written information
furnished to the Company by or through the Representatives specifically
for use in the preparation thereof. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally and not jointly will 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 Act, against any losses,
claims, damages or liabilities to which the Company or any such
director, officer, or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of
or are based upon (i) any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto, or (ii) the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
under which they were made; and will reimburse any legal or other
expenses reasonably incurred by the Company or any such director,
officer, or controlling person in
-20-
connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission has been made in the Registration
Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by or through the
Representatives specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to this Section 8, such person
(the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available
to any party who shall fail to give notice as provided in this Section
8(c) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was materially
prejudiced by the failure to give such notice, but the failure to give
such notice shall not relieve the indemnifying party or parties from
any liability which it or they may have to the indemnified party for
contribution or otherwise than on account of the provisions of Section
8(a) or (b). In case any such proceeding 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 therein 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 shall
pay as incurred the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the indemnifying party shall pay as
incurred (or within 30 days of presentation) the fees and expenses of
the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them or (iii) the indemnifying
party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time
after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm for all
such indemnified parties. Such firm shall be designated in writing by
you in the case of parties indemnified pursuant to Section 8(a) and by
the Company in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but if settled with
such
-21-
consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or
judgment. In addition, the indemnifying party will not, without the
prior written consent of the indemnified party, settle or compromise
or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding of which indemnification may be sought
hereunder (whether or not any indemnified party is an actual or
potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of
each indemnified party from all liability arising out of such claim,
action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities (or actions or proceedings
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 Shares. 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 or
liabilities, (or actions or proceedings 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 on the one hand or the Underwriters on the other 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 contributions pursuant to this Section 8(d) 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 in this Section 8(d). The amount paid or payable by
an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
above in this Section 8(d) shall be deemed to include any legal or
other
-22-
expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no
Underwriter shall be required to contribute any amount in excess of
the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) 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 Section 8(d) to contribute are several in proportion to their
respective underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process
issuing from such court may be served upon him or it by any other
contributing party and consents to the service of such process and
agrees that any other contributing party may join him or it as an
additional defendant in any such proceeding in which such other
contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or
contribution under this Section 8 shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred. The indemnity and contribution
agreements contained in this Section 8 and the representations and
warranties of the Company set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or
any persons controlling the Company, (ii) acceptance of any Shares and
payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case
may be, any Underwriter shall fail to purchase and pay for the portion
of the Shares which such Underwriter has agreed to purchase and pay for
on such date (otherwise than by reason of any default on the part of
the Company), you, as Representatives of the Underwriters, shall use
your reasonable efforts to procure within 36 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 Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If
-23-
during such 36 hours you, as such Representatives, shall not have
procured such other Underwriters, or any others, to purchase the Firm
Shares or Option Shares, as the case may be, agreed to be purchased by
the defaulting Underwriter or Underwriters, then (a) if the aggregate
number of shares with respect to which such default shall occur does
not exceed 10% of the Firm Shares or Option Shares, as the case may
be, covered hereby, the other Underwriters shall be obligated,
severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to
purchase hereunder, to purchase the Firm Shares or Option Shares, as
the case may be, which such defaulting Underwriter or Underwriters
failed to purchase, or (b) if the aggregate number of shares of Firm
Shares or Option Shares, as the case may be, with respect to which
such default shall occur exceeds 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the Company or you as the
Representatives of the Underwriters will have the right, by written
notice given within the next 36-hour period to the parties to this
Agreement, to terminate this Agreement without liability on the part
of the non-defaulting Underwriters or of the Company except to the
extent provided in Section 8 hereof. In the event of a default by any
Underwriter or Underwriters, as set forth in this Section 9, the
Closing Date or Option Closing Date, as the case may be, may be
postponed for such period, not exceeding seven days, as you, as
Representatives, may determine in order that the required changes in
the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter"
includes any person substituted for a defaulting Underwriter. Any
action taken under this Section 9 shall not relieve any defaulting
Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: if to the Underwriters, to BT
Alex. Xxxxx Incorporated, 1290 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxxxxxx; with a copy to
BT Alex. Xxxxx Incorporated, Xxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx
00000. Attention: General Counsel; if to the Company, to X.X. Xxxxx
Arts & Crafts, Inc., 000 Xxxxxxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxxxx,
00000, Attention: Xxxx X. Xxxxxx; with a copy to Blank Rome Xxxxxxx &
XxXxxxxx, 0000 Xxxx Xxxx Xxxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx
00000, Attention: Xxx Xxxxxxx.
11. TERMINATION.
This Agreement may be terminated by you by notice to the Company
as follows:
(a) at any time prior to the earlier of (i) the time the Shares
are released by you for sale by notice to the Underwriters, or (ii)
11:30 a.m. on the day of this Agreement;
-24-
(b) at any time prior to the Closing Date if any of the following
has occurred: (i) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, any material
adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise,
of the Company and its Subsidiaries taken as a whole or the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company and its
Subsidiaries taken as a whole, whether or not arising in the ordinary
course of business, (ii) any outbreak or escalation of hostilities or
declaration of war or national emergency or other national or
international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, escalation, declaration,
emergency, calamity, crisis or change on the financial markets of the
United States would, in your reasonable judgment, make it impracticable
to market the Shares or to enforce contracts for the sale of the
Shares, or (iii) suspension of trading in securities generally on the
New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading)
for securities on either such Exchange, (iv) the enactment,
publication, decree or other promulgation of any statute, regulation,
rule or order of any court or other governmental authority which in
your opinion materially and adversely affects or may materially and
adversely affect the business or operations of the Company, (v)
declaration of a banking moratorium by United States or New York State
authorities, (vi) the suspension of trading of the Company's common
stock by the Commission on the Nasdaq Stock Market or (vii) the taking
of any action by any governmental body or agency in respect of its
monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States;
or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors,
executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. No purchaser of any
of the Shares from any Underwriter shall be deemed a successor or
assign merely because of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company and the Underwriters acknowledge and agree that the
only information furnished or to be furnished by any Underwriter to the
Company for inclusion in any Prospectus or the Registration Statement
consists of the information set forth in the last paragraph on the
front cover page (insofar as such information relates to
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the Underwriters), legends required by Item 502(d) of Regulation S-K
under the Act and the information under the caption "Underwriting" in
the Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any
investigation made by or on behalf of any Underwriter or controlling
person thereof, or by or on behalf of the Company or its directors or
officers and (c) delivery of and payment for the Shares under this
Agreement.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Maryland.
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If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
X.X. XXXXX ARTS & CRAFTS, INC.
___________________________________
By: Xxxx X. Xxxxxx
President
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. XXXXX INCORPORATED
XXXXXX XXXXXXXXXX XXXXX INC.
As Representatives of the several
Underwriters listed on Schedule I
By: BT Alex. Xxxxx Incorporated
By:____________________________________
Authorized Officer
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SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
BT Alex. Xxxxx Incorporated
Xxxxxx Xxxxxxxxxx Xxxxx Inc.
---------
Total 2,700,000
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