1
TH&T DRAFT JUNE 5, 1998
-----------------------
2,710,000 SHARES
TWEETER HOME ENTERTAINMENT GROUP, INC.
COMMON STOCK
($.01 Par Value)
UNDERWRITING AGREEMENT
----------------------
June __, 1998
BT Alex. Xxxxx Incorporated
PaineWebber Incorporated
Xxxx Xxxxxxxx Incorporated
As Representatives of the
Several Underwriters
c/o BT Alex. Xxxxx Incorporated
Xxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Tweeter Home Entertainment Group, Inc., a Delaware corporation (the
"Company"), and certain shareholders and warrant holders of the Company (the
"Selling Shareholders") propose to sell to the several underwriters (the
"Underwriters") named in SCHEDULE I hereto for whom you are acting as
representatives (the "Representatives") (a) an aggregate of 2,450,144 shares of
the Company's Common Stock, $.01 par value (the "Firm Shares"), of which
2,200,000 shares will be sold by the Company and 250,144 shares will be sold by
the Selling Shareholders and (b) warrants to purchase an aggregate of 259,856
shares of Common Stock (the "Firm Warrants"), all of which will be sold by the
Selling Shareholders. The Company proposes to sell to the Underwriters 259,856
shares of its authorized but unissued Common Stock (the "Warrant Shares") upon
exercise by the Underwriters of the Firm Warrants. The respective amounts of the
Firm Shares and Firm Warrants to be so purchased by the several Underwriters are
set forth opposite their names in SCHEDULE I hereto, and the respective amounts
of Firm Shares and Firm Warrants to be sold by the Selling Shareholders are set
forth opposite their names in SCHEDULE II hereto. The Company and the Selling
Shareholders are sometimes referred to herein collectively as the "Sellers." The
Company also proposes to sell at the Underwriters' option an aggregate of up to
406,500 additional shares of the Company's Common Stock (the "Option Shares") as
set forth below.
2
-2-
As the Representatives, you have advised the Company and the Selling
Shareholders (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 and
Warrant 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, the Warrant Shares and the Option Shares (to the
extent the aforementioned option is exercised) are herein collectively called
the "Shares."
The Company has advised the Underwriters that the reorganization referred
to in the Notes to the Company's Consolidated Financial Statements included in
the Prospectus (as hereinafter defined) has taken place, and the Company's
wholly owned subsidiary, New England Audio Co., Inc., a Massachusetts
corporation (the "Operating Subsidiary"), has become a party to this Agreement.
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 AND THE SELLING
SHAREHOLDERS.
(a) The Company and the Operating Subsidiary jointly and severally
represent and warrant to each of the Underwriters as follows:
(i) A registration statement on Form S-1 (File No. 333-51015) with
respect to the Shares 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 (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 and to the extent applicable, were identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
the Commission's Electronic Data Gathering, Analysis and Retrieval System
("XXXXX"), except to the extent permitted by Regulation S-T. Such registration
statement, together with any registration statement filed by the Company
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 the form of prospectus first filed with the Commission
pursuant to Rule 424(b). Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein referred
to as a "Preliminary Prospectus." Any reference herein to the Registration
Statement, any Preliminary Prospectus or to the Prospectus shall be deemed to
refer to and include any supplements or amendments thereto filed with the
Commission after the date of filing of the Prospectus under Rules 424(b) or 430A
and prior to the
3
-3-
termination of the offering of the Shares by the Underwriters. For purposes of
this Agreement, all references to the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement to any of the
foregoing, shall be deemed to include the respective copies thereof filed with
the Commission pursuant to XXXXX.
(ii) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, 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 21.1 to the Registration Statement and
including the Operating Subsidiary (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. 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, 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.
(iii) The outstanding shares of Common Stock of the Company, including
all outstanding shares to be sold by the Selling Shareholders, have been duly
authorized and validly issued and are fully paid and non-assessable; the portion
of 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; the Warrant Shares have been duly authorized and when
issued and paid for in accordance with the terms of the Firm Warrants, will be
validly issued, fully paid and non-assessable; the portion of the Shares to be
sold by the Selling Shareholders after conversion of Preferred Stock into such
Common Stock have been duly authorized and when issued in accordance with the
terms of such Preferred Stock, 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.
(iv) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct. All of the Shares conform, in all material
respects, to the description thereof contained in the Registration Statement.
The Warrant Shares, at the Closing Date, will conform to the description of the
Common Stock 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.
4
-4-
(v) 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, 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 and the Operating Subsidiary make 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.
(vi) The financial statements, including the related notes and
schedules as set forth in the Registration Statement, present fairly the
financial position and the results of operations and cash flows of the entities
purported to be shown thereby, at the indicated dates and for the indicated
periods. Such financial statements and related schedules have been prepared in
accordance with generally accepted principles of accounting, consistently
applied throughout the periods involved, except as disclosed therein, and all
adjustments necessary for a fair presentation of results for such periods have
been made. The summary financial and statistical data included in the
Registration Statement presents fairly 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.
(vii) Deloitte & Touche LLP, who have certified the financial
statements filed with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the Rules and
Regulations.
(viii) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company or the Operating Subsidiary, 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.
(ix) 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
5
-5-
Statement) or which are not material in amount. The Company and the Subsidiaries
occupy their leased properties under valid and binding leases conforming in all
material respects to the description thereof set forth in the Registration
Statement.
(x) The Company and the Subsidiaries have filed all Federal, State,
local and foreign tax returns which have been required to be filed 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 due and are not being
contested in good faith and for which an adequate reserve for accrual has been
established in accordance with generally accepted accounting principles. All tax
liabilities have been adequately provided for in the financial statements of the
Company, and the Company and the Operating Subsidiary do not know of any actual
or proposed additional material tax assessments.
(xi) 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.
(xii) 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 Certificate of Incorporation, as amended (the "Charter") 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 Charter 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.
(xiii) 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 and the Operating Subsidiary 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
6
-6-
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.
(xii) 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 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 and the Operating
Subsidiary know of no material infringement by others of patents, patent rights,
trade names, trademarks or copyrights owned by or licensed to the Company or any
of the Subsidiaries.
(xiii) Neither the Company, nor to the Company's or the Operating
Subsidiary's 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.
(xiv) Neither the Company nor any Subsidiary is an "investment
company" within the meaning of such term under the Investment Company Act of
1940, (as amended, the "1940 Act") and the rules and regulations of the
Commission thereunder.
(xv) 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.
(xvi) 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.
(xvii) The Company and each of its Subsidiaries is in compliance in
all material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any of the Subsidiaries would have any
liability; the Company and each of the Subsidiaries has not incurred and does
not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the
7
-7-
Company or any Subsidiary would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(xviii) To the Company's and the Operating Subsidiary's knowledge,
there are no affiliations or associations between any member of the NASD and any
of the Company's officers, directors or securityholders, except as set forth in
the Registration Statement.
(xix) The Firm Warrants may be transferred to the several Underwriters
pursuant to this Agreement, and the Underwriters, upon receipt of the Firm
Warrants being so transferred to them, may exercise the Firm Warrants, receiving
259,856 Warrant Shares upon exercise of the Firm Warrants in accordance with
their terms, including payment to the Company by the Underwriters of an amount
equal to $.002 per Warrant Share (the "Warrant Exercise Price").
(b) Each of the Selling Shareholders severally represents and warrants
as follows:
(i) Such Selling Shareholder now has and at the Closing Date (as such
date is hereinafter defined) will have good and marketable title to the Firm
Shares (and Firm Warrants, where applicable) to be sold by such Selling
Shareholder, free and clear of any liens, encumbrances, equities and claims, and
full right, power and authority to effect the sale and delivery of such Firm
Shares (and Firm Warrants, where applicable); and upon the delivery of, against
payment for, such Firm Shares (and Firm Warrants, where applicable) pursuant to
this Agreement, the Underwriters will acquire good and marketable title thereto,
free and clear of any liens, encumbrances, equities and claims.
(ii) Such Selling Shareholder has full right, power and authority to
execute and deliver this Agreement, the Power of Attorney, and the Custodian
Agreement referred to below and to perform its obligations under such
Agreements. The execution and delivery of this Agreement and the consummation by
such Selling Shareholder of the transactions herein contemplated and the
fulfillment by such Selling Shareholder of the terms hereof will not require any
consent, approval, authorization, or other order of any court, regulatory body,
administrative agency or other governmental body (except as may be required
under the Act, state securities laws or Blue Sky laws) and will not result in a
breach of any of the terms and provisions of, or constitute a default under, the
organizational documents of such Selling Shareholder, if not an individual, or
any indenture, mortgage, deed of trust or other agreement or instrument to which
such Selling Shareholder is a party, or of any order, rule or regulation
applicable to such Selling Shareholder of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has constituted, or
which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Common Stock of the Company and, other than as
permitted by the Act, the Selling Shareholder will not distribute any prospectus
or other offering material in connection with the offering of the Shares.
8
-8-
(iv) Without having undertaken to determine independently the accuracy
or completeness of either the representations and warranties of the Company and
the Operating Subsidiary contained herein or the information contained in the
Registration Statement, such Selling Shareholder has no reason to believe that
the representations and warranties of the Company and the Operating Subsidiary
contained in this Section 1 are not true and correct, is familiar with the
Registration Statement and has no knowledge of any material fact, condition or
information not disclosed in the Registration Statement which has adversely
affected or may adversely affect the business of the Company or any of the
Subsidiaries; and the sale of the Firm Shares (and Firm Warrants, where
applicable) by such Selling Shareholder pursuant hereto is not prompted by any
information concerning the Company or any of the Subsidiaries which is not set
forth in the Registration Statement. The information pertaining to such Selling
Shareholder under the caption "Principal and Selling Stockholders" in the
Prospectus is complete and accurate in all material respects.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES AND FIRM WARRANTS.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, (i) the
Company agrees to issue and sell to the Underwriters 2,200,000 Firm Shares, (ii)
the Selling Shareholders agree, severally and not jointly, to sell to the
Underwriters in the respective amounts set forth in SCHEDULE II hereto, an
aggregate of 250,144 Firm Shares and 259,856 Firm Warrants and (iii) the Company
agrees to issue and to sell to the Underwriters 259,856 Warrant Shares upon
exercise of the Firm Warrants. The Underwriters agree, severally and not
jointly, to purchase from the Company and the Selling Shareholders,
respectively, the number of Firm Shares and Firm Warrants set forth opposite the
name of each Underwriter in SCHEDULE I hereof, subject to adjustments in
accordance with Section 9 hereof. The purchase price per Firm Share to be paid
by the several Underwriters to the Company and to the Selling Shareholders,
respectively, shall be $______ per share. The purchase price per Firm Warrant
(each Firm Warrant representing the right to purchase one Common Share) shall be
the price stated in the preceding sentence less the Warrant Exercise Price. The
number of Firm Shares (and Firm Warrants, where applicable) to be purchased by
each Underwriter from each Seller shall be as nearly as practicable in the same
proportion to the total number of Firm Shares (and Firm Warrants, where
applicable) being sold by each Seller as the number of Firm Shares and Firm
Warrants being purchased by each Underwriter bears to the total number of Firm
Shares and Firm Warrants to be sold hereunder. The obligations of the Company
and of each of the Selling Shareholders shall be several and not joint.
(b) Certificates in negotiable form for the total number of the
Shares, including instruments representing the Firm Warrants, to be sold
hereunder by the Selling Shareholders have been placed in custody with
____________________, as custodian (the "Custodian") pursuant to the Custodian
Agreement executed by each Selling Shareholder for delivery of all Firm Shares
(and Firm Warrants, where applicable) to be sold hereunder by the Selling
Shareholders. Each of the Selling Shareholders specifically agrees that the Firm
Shares represented by the certificates (and the Firm Warrants represented by
instruments, where applicable) held in custody for the Selling Shareholders
under the Custodian Agreement are subject to the interests of the Underwriters
hereunder, that the arrangements made by the Selling Shareholders for such
custody are to that
9
-9-
extent irrevocable, and that the obligations of the Selling Shareholders
hereunder shall not be terminable by any act or deed of the Selling Shareholders
(or by any other person, firm or corporation including the Company, the
Custodian or the Underwriters) or by operation of law (including the death of an
individual Selling Shareholder or the dissolution of a corporate Selling
Shareholder) or by the occurrence of any other event or events, except as set
forth in the Custodian Agreement. If any such event should occur prior to the
delivery to the Underwriters of the Firm Shares (and Firm Warrants, where
applicable) hereunder, certificates for the Firm Shares (and instruments
representing Firm Warrants, where applicable) shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as if
such event has not occurred. The Custodian is authorized to receive and
acknowledge receipt of the proceeds of sale of the Shares held by it against
delivery of such Shares.
(c) Payment for the Firm Shares and Firm Warrants to be sold hereunder
is to be made in Federal (same day) funds (i) with respect to the Firm Shares to
(A) an account designated by the Company for the shares to be sold by it and (B)
an account designated by the Custodian for the shares to be sold by the Selling
Shareholders and (ii) with respect to the Firm Warrants and the Warrant Shares,
to an account designated by the Custodian for the Firm Warrants to be sold by
the Selling Shareholders and to an account designated by the Company for the
aggregate Warrant Exercise Price, in each case against delivery of certificates
therefor (including certificates for the Warrant Shares) to the Representatives
for the several accounts of the Underwriters. Such payment and delivery are to
be made through the facilities of the Depository Trust Company at 10:00 a.m.,
New York 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 not permitted by law or executive order to be closed.)
(d) 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 and Firm Warrants being
purchased by such Underwriter bears to the total number of Firm Shares and Firm
Warrant, adjusted by you in such manner as to avoid fractional shares. The
option with respect to
10
-10-
the Option Shares granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Shares and Firm Warrants 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 Federal (same day) funds drawn to the order of the Company against
delivery of certificates therefor through the facilities of the Depository Trust
Company, New York, New York.
(e) If on the Closing Date, any Selling Shareholder fails to sell the
Firm Shares (and Firm Warrants, where applicable) which such Selling Shareholder
has agreed to sell on such date as set forth in SCHEDULE II, the Company agrees
that it will sell or arrange for the sale of that number of shares of Common
Stock to the Underwriters which represents Firm Shares (and Firm Warrants, where
applicable) which such Selling Shareholder has failed to so sell, as set forth
in SCHEDULE II hereto, or such lesser number as may be requested by the
Representatives.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares and Warrant Shares as soon as the Representatives
deem it advisable to do so. The Firm Shares and Warrant 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.
4. COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) 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 Regulations and (B) 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 to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations. To the extent applicable, the copies
of the Registration Statement and each amendment thereto (including all exhibits
filed therewith), any Preliminary Prospectus or Prospectus (in each case, as
amended or supplemented) furnished to
11
-11-
the Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to XXXXX, except to the extent
permitted by Regulation S-T.
(ii) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (D) 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.
(iii) 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 that 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.
(iv) 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 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.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (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
12
-12-
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.
(vi) 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
15 months after the effective date of the Registration Statement, 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 and will
advise you in writing when such statement has been so made available.
(vii) Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared by or are available to the
Company, a copy of any unaudited interim financial statements of the Company for
any period subsequent to the period covered by the most recent financial
statements appearing in the Registration Statement and the Prospectus.
(viii) 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,
except that the Company may, without such consent, (A) issue shares upon
exercise of (1) options outstanding on the date of this Agreement issued
pursuant to the Company's currently existing stock-based compensation plans and
(2) warrants outstanding on the date of this Agreement, and (B) grant options,
offer to sell and sell shares of its Common Stock to its employees, directors
and consultants pursuant to its currently existing stock-based compensation
plans.
(ix) The Company will use its best efforts to list, subject to notice
of issuance, the Shares on the Nasdaq National Market.
(x) The Company has caused each officer and director and specific
shareholders 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 sell, offer
or contract to 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"). The Company further agrees
not to file with the Commission any registration statements on Form S-8 or
equivalent on any date which is earlier than 90 days after the date of this
Agreement.
13
-13-
(xi) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall include such information with
respect thereto in such reports filed with the Commission as may be required in
accordance with Rule 463 under the Act.
(xii) 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 1940 Act.
(xiii) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.
(xiv) 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.
(b) Each of the Selling Shareholders covenants and agrees with the
several Underwriters that:
(i) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other capital stock of the Company or
other securities convertible, exchangeable or exercisable for Common Stock or
derivative of Common Stock owned by the Selling Shareholder or request the
registration for the offer or sale of any of the foregoing (or as to which the
Selling Shareholder has the right to direct the disposition of) will be made for
a period of 180 days after the date of this Agreement, directly or indirectly,
by such Selling Shareholder otherwise than hereunder or with the prior written
consent of BT Alex. Xxxxx Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury Department Form W-8 or W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
(iii) Such Selling Shareholder 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 Sellers 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 and the
Selling Shareholders; the cost of printing and delivering to, or as requested
by, the Underwriters copies of the Registration Statement, Preliminary
Prospectuses, the
14
-14-
Prospectus, this Agreement, the Underwriters' Selling Memorandum, if any, the
Underwriters' Invitation Letter, 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 NASD of the terms of the sale of the Shares; the Listing
Fee of the Nasdaq National 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. To the
extent, if at all, that any of the Selling Shareholders engage special legal
counsel to represent them in connection with this offering, the fees and
expenses of such counsel shall be borne by such Selling Shareholder. Any
transfer taxes imposed on the sale of the Shares to the several Underwriters
will be paid by the Sellers pro rata. The Company agrees to pay all costs and
expenses of the Underwriters, including the fees and disbursements of counsel
for the Underwriters, incident to the offer and sale of directed shares of the
Common Stock by the Underwriters to employees and persons having business
relationships with the Company and its Subsidiaries. The Sellers 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 hereof, or by reason
of any failure, refusal or inability on the part of the Company or the Selling
Shareholders to perform any undertaking or satisfy any condition of this
Agreement or to comply with any of the terms hereof on their 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 and the
Selling Shareholders 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 TO OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm
Shares and the Warrant 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 and the Selling Shareholders contained herein, and to
the performance by the Company and the Selling Shareholders of their 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, the Operating Subsidiary or the Selling
Shareholders, shall be contemplated by the Commission and no
15
-15-
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,
or Option Closing Date, as the case may be, 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 Goulston & Storrs, P.C.,
counsel for Company and the Selling Shareholders, dated the Closing Date or the
Option Closing Date, as the case 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 validly existing
as a corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and, to the
knowledge of such counsel, 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, to the knowledge of such counsel, 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 so 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 the best of 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, including the Shares to be sold by the
Selling Shareholders, 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 contemplated by this
Agreement; and no preemptive rights of stockholders exist with respect to any of
the Shares or the issue or sale thereof in the Company's Charter, the Company's
By-Laws or in any agreements known to us.
(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
16
-16-
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 therein).
(vi) The statements under the captions "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 required, and such contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
(viii) Based solely on a docket search and a certificate provided
by the Company, 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 Charter 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 and the Operating Subsidiary.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in
17
-17-
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, specifying the same.
(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.
(xiii) This Agreement has been duly authorized, executed and
delivered on behalf of the Selling Shareholders.
(xiv) Each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as required by State
securities and Blue Sky laws as to which such counsel need express no opinion),
to sell, assign, transfer and deliver the portion of the Shares to be sold by
such Selling Shareholder.
(xv) The Custodian Agreement and the Power of Attorney executed
and delivered by each Selling Shareholder is valid and binding.
(xvi) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) have acquired good
and marketable title to the Shares being sold by each Selling Shareholder on the
Closing Date, free and clear of all liens, encumbrances, equities and claims.
In rendering such opinion, Goulston & Storrs, P.C. may rely as to
matters governed by the laws of states other than Massachusetts or Delaware or
Federal laws on local counsel in such jurisdictions and as to the matters set
forth in subparagraphs (xiii), (xiv) and (xv) on opinions of other counsel
representing the respective Selling Shareholders, provided that in each case
Goulston & Storrs, P.C. shall state that they believe that they and the
Underwriters are justified in relying on such other counsel. 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 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, Goulston &
Storrs, P.C. may state that their belief is based upon the procedures set forth
in such opinion, but is without independent check and verification.
18
-18-
(c) The Representatives shall have received from Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP, 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 (ix) of Paragraph (b) of this
Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In rendering such opinion
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP may rely as to all matters governed other than
by the laws of the Commonwealth of Massachusetts or the State of Delaware 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, Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.
(d) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of Deloitte & Touche LLP confirming that they
are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in their
opinion the financial statements and schedules examined by them and included in
the Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(e) 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 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;
19
-19-
(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct 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) He or she has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, 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 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.
(f) The Company and the Selling Shareholders 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.
(g) The Firm Shares and Warrant Shares and Option Shares, if any, have
been approved for designation upon notice of issuance on the Nasdaq National
Market.
(h) The Lockup Agreements described in Section 4 (j)(x) 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 satisfactory to the Representatives and to Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP, 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 and the Selling Shareholders 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.
20
-20-
In such event, the Selling Shareholders, the Company, the Operating
Subsidiary 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 SELLERS.
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the 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 and the Operating Subsidiary jointly and severally
agree as follows:
(1) 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, (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, or (iii) any act
or failure to act, or any alleged act or failure to act, by any Underwriter
in connection with, or relating in any manner to, the Shares or the
offering contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based
upon matters covered by clause (i) or (ii) above (provided that the Company
and the Operating Subsidiary shall not be liable under this clause (iii) to
the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, claim, damage, liability or action
resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its gross negligence or
willful misconduct); provided, however, that the Company and the Operating
Subsidiary 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 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 obligation will be in addition to any liability which the Company
or the Operating Subsidiary may otherwise have.
(2) to reimburse each Underwriter and each such controlling person
upon demand for any legal or other out-of-pocket expenses reasonably
incurred by such Underwriter or
21
-21-
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. In the event that it is finally
judicially determined that the Underwriters were not entitled to receive
payments for legal and other expenses pursuant to this subparagraph, the
Underwriters will promptly return all sums that had been advanced pursuant
hereto.
(b) The Selling Shareholders agree to indemnify the Underwriters 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
controlling person may become subject under the Act or otherwise to the same
extent as indemnity is provided by the Company and the Operating Subsidiary
pursuant to Section 8(a) above. The liability under this Agreement (excluding
any liability based on any statutory or common law claim, including without
limitation, fraud) of each Selling Shareholder shall not exceed, at any time,
the lesser of (a) the proceeds received by such Selling Shareholder from the
Underwriters in the offering and (b) the proportion of the aggregate amount of
losses, liabilities, claims, damages or expenses which, up to and including such
time, have been or are being claimed by the Underwriters and each person, if
any, who controls any Underwriter within the meaning of the Act, or any of them,
against the Selling Shareholders and the Company and the Operating Subsidiary,
or any of them, equal to the proportion that the number of Shares sold hereunder
by such Selling Shareholder bears to the aggregate number of Shares sold
hereunder. This indemnity obligation will be in addition to any liability which
the Selling Shareholders may otherwise have.
(c) 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, the Selling Shareholders, and each person, if
any, who controls the Company or the Selling Shareholders within the meaning of
the Act, against any losses, claims, damages or liabilities to which the Company
or any such director, officer, Selling Shareholder 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, Selling Shareholder or controlling person in 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.
22
-22-
(d) 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), (b) or (c) shall be available to any party who shall fail to give notice
as provided in this Section 8(d) 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), (b) or (c). 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) or (b) and by the Company and the Selling Shareholders
in the case of parties indemnified pursuant to Section 8(c). The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent but if settled with such 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.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a), (b) or (c) 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
23
-23-
Company, the Operating Subsidiary and the Selling Shareholders 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, the Operating Subsidiary and the Selling Shareholders 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, the Operating
Subsidiary and the Selling Shareholders 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, the
Operating Subsidiary and the Selling Shareholders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Shareholders 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, the Operating Subsidiary, the Selling Shareholders and
the Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 8(e) 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(e). 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(e) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (e), (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, (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, and (iii) no
Selling Shareholder shall be required to contribute any amount in excess of the
proceeds received by such Selling Shareholder from the Underwriters in the
offering. The Underwriters' obligations in this Section 8(e) to contribute are
several in proportion to their respective underwriting obligations and not
joint.
(f) 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.
24
-24-
(g) 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 and the Operating Subsidiary 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 or a Selling
Shareholder), 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 and the Selling
Shareholders such amounts as may be agreed upon and upon the terms set forth
herein, the Firm Shares and Warrant Shares or Option Shares, as the case may be,
which the defaulting Underwriter or Underwriters failed to purchase. If during
such 36 hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares and Warrant 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
and Warrant 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 and Warrant Shares or Option Shares, as the
case may be, which they are obligated to purchase hereunder, to purchase the
Firm Shares and Warrant 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 and Warrant Shares or Option Shares,
as the case may be, with respect to which such default shall occur exceeds 10%
of the Firm Shares and Warrant Shares or Option Shares, as the case may be,
covered hereby, the Company and the Selling Shareholders 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 or of the Selling Shareholders 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
25
-25-
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, Xxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, Attention: Xxxx
Xxxxxxx and Xxx Xxxxxxx; with a copy to BT Alex. Xxxxx Incorporated, One Bankers
Trust Plaza, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: General
Counsel; if to the Company or the Selling Shareholders, to Tweeter Home
Entertainment Group, Inc., 00 Xxxxxx Xxxx, Xxxxxx, Xxxxxxxxxxxxx 00000,
Attention: Xxxxxx XxXxxxx; with a copy to Goulston & Storrs, P.C., 000 Xxxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention: Xxxx Xxxxxxxx, Esq. and Xxxxxx
Xxxxx, Esq.
11. TERMINATION.
(a) This Agreement may be terminated by you by notice to the Company
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 or inadvisable 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 Nasdaq National Market, the Commission, or any other governmental
authority 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
(b) as provided in Sections 6 and 9 of this Agreement.
26
-26-
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company, the Operating Subsidiary and the Selling Shareholders
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, the Operating Subsidiary, the Selling Shareholders 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 the
Underwriters), legends required by Item 502(d) of Regulation S-K under the Act
and the information set forth in the third, seventh and eighth paragraphs 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.
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 Selling Shareholders, the
Company, the Operating Subsidiary and the several Underwriters in accordance
with its terms.
27
-27-
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Shareholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
TWEETER HOME ENTERTAINMENT GROUP, INC.
By:
---------------------------------------
Title:
NEW ENGLAND AUDIO CO., INC.
By:
---------------------------------------
Title:
SELLING SHAREHOLDERS LISTED ON SCHEDULE II
By:
---------------------------------------
Attorney in Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. XXXXX INCORPORATED
XXXXX XXXXXX INCORPORATED
XXXX XXXXXXXX INCORPORATED
As Representatives of the several
Underwriters listed on SCHEDULE I
By: BT Alex. Xxxxx Incorporated
By:
--------------------------------
Authorized Officer
28
-1-
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares Number of Firm Warrants
Underwriter to be Purchased to be Purchased
----------- --------------- ---------------
BT Alex. Xxxxx Incorporated
PaineWebber Incorporated
Xxxx Xxxxxxxx Incorporated
--------- --------
Total 2,450,144 259,856
========= =======
29
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
Number of Firm Shares Number of Firm Warrants
Selling Shareholder to be Sold to be Sold
------------------- --------------------- -----------------------
Xxxxxx Xxxxxxxxx 51,703 0
Carolina Bloomberg 17,234 0
Xxxxxx Xxxxxxxxx Trust f/b/o Xxxxxxx Xxxxxxxxx 8,091 0
Xxxxxx Xxxxxxxxx Trust f/b/o Xxxxxx Xxxxxxxxx 8,091 0
Xxxxxxx Xxxxxxxxx 17,478 0
Xxxxxxx Xxxxx 16,473 0
Xxxxx Xxxxxx 7,298 0
Seacoast Capital Partners, L.P. 0 50,000
Exeter Venture Lenders, L.P. 61,888 104,928
Exeter Equity Partners, L.P. 61,888 104,928
------- -------
Total 250,144 259,856
======= =======
