EXHIBIT 1.1
UNDERWRITING AGREEMENT
May ___, 2005
Feltl & Company
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Ladies and Gentlemen:
Peoples Educational Holdings, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Feltl & Company (the "Underwriter"),
500,000 shares of its Common Stock, $.02 par value (the "Common Stock"). The
500,000 shares of Common Stock to be sold by the Company are called the "Firm
Common Shares." In addition, the Company has granted to the Underwriter an
option to purchase up to an additional 75,000 shares of Common Stock (the
"Optional Common Shares"), as provided in Section 2 of this Agreement. The Firm
Common Shares and, if and to the extent such option is exercised, the Optional
Common Shares are collectively called the "Common Shares."
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-2 (File No.
333-123868), which contains a form of prospectus to be used in connection with
the public offering and sale of the Common Shares. Such registration statement,
as amended, including the financial statements and exhibits, in the form in
which it was declared effective by the Commission under the Securities Act of
1933 and the rules and regulations promulgated thereunder (collectively, the
"Securities Act"), including any information deemed to be a part thereof at the
time of effectiveness pursuant to Rule 430A under the Securities Act, is called
the "Registration Statement". Any registration statement filed by the Company
pursuant to Rule 462(b) under the Securities Act is called the "Rule 462(b)
Registration Statement," and from and after the date and time of filing of the
Rule 462(b) Registration Statement the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. Such prospectus, in the form
first used by the Underwriter to confirm sales of the Common Shares, is called
the "Prospectus". All references in this Agreement to (i) the Registration
Statement, the Rule 462(b) Registration Statement, a preliminary prospectus or
the Prospectus, or any amendments or supplements to any of the foregoing, shall
include any copy thereof filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System ("XXXXX") and (ii) the Prospectus
shall be deemed to include the "electronic Prospectus" provided for use in
connection with the offering of the Common Shares as contemplated by Section
3(q) of this Agreement.
The Company hereby confirms its agreements with the Underwriter as
follows:
Section 1. Representations and Warranties. The Company hereby represents,
warrants, covenants, and agrees with the Underwriter, that:
(a) Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The Company has complied to the
Commission's satisfaction with all requests of the Commission for additional or
supplemental information. No stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement is in effect
and no proceedings for such purpose have been instituted or are pending or, to
the best knowledge of the Company, are contemplated or threatened by the
Commission.
Each preliminary prospectus and the Prospectus when filed complied in all
material respects with the Securities Act and, if filed by electronic
transmission pursuant to XXXXX (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriter for use in connection with the offer and sale of the Common Shares.
Each of the Registration Statement, any Rule 462(b) Registration Statement and
any post-effective amendment thereto, at the time it became effective, at the
First Closing Date (as defined below) and at the Second Closing Date (as defined
below), complied and will comply in all material respects with the Securities
Act and did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Prospectus, as amended or
supplemented, as of its date, at the First Closing Date (as defined below) and
at the Second Closing Date (as defined below), did not and will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The representations and warranties set
forth in the two immediately preceding sentences do not apply to statements in
or omissions from the "Underwriting" section of the Registration Statement, or
of any Rule 462(b) Registration Statement, or any post-effective amendment
thereto, or the Prospectus, or any amendments or supplements thereto, made in
reliance upon and in conformity with information relating to the Underwriter
furnished to the Company in writing by the Underwriter expressly for use
therein. There are no contracts or other documents required to be described in
the Prospectus or to be filed as exhibits to the Registration Statement which
have not been described or filed as required. There are no material agreements
or understandings affecting the Company that have not been reduced to writing
and so filed.
(b) Offering Materials Furnished to the Underwriter. The Company has
delivered to the Underwriter three complete manually signed copies of the
Registration Statement and of each consent and certificate of experts filed as a
part thereof, and conformed copies of the Registration Statement (without
exhibits) and preliminary prospectuses and the Prospectus, as amended or
supplemented, in such quantities and at such places as the Underwriter has
reasonably requested.
(c) Distribution of Offering Material By the Company. The Company has not
distributed and will not distribute, prior to the later of the Second Closing
Date (as
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defined below) and the completion of the Underwriter's distribution of the
Common Shares, any offering material in connection with the offering and sale of
the Common Shares other than a preliminary prospectus, the Prospectus or the
Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Common Shares. The Common Shares to be purchased
by the Underwriter from the Company have been duly authorized for issuance and
sale pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived in writing prior to the date of this Agreement, with copies of such
written waivers furnished to the Underwriter.
(g) No Material Adverse Change. Except as otherwise disclosed or described
in the Prospectus, subsequent to the respective dates as of which information is
given in the Prospectus: (i) there has been no adverse change, or any
development that could reasonably be expected to result in an adverse change, in
the condition, financial or otherwise, or in the earnings, business, operations
or prospects of the Company that is, individually or in the aggregate, material
to the Company, whether or not arising from transactions in the ordinary course
of business, of the Company (any such change or effect is called a "Material
Adverse Change"); (ii) the Company has not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
capital stock or repurchase or redemption by the Company of any class of capital
stock, nor is there any agreement or understanding with respect to the same.
(h) Independent Accountants. McGladrey and Xxxxxx, LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) filed with the Commission as
a part of the Registration Statement and included in the Prospectus, are
independent registered public accountants within the meaning of
Regulation S-X issued under the Securities Act and the Exchange Act and as
required under the Securities Act and Exchange Act.
(i) Preparation of the Financial Statements. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the
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Prospectus present fairly the financial position of the Company as of and at the
dates indicated and the results of its operations and cash flows for the periods
specified. Such financial statements have been prepared in conformity with
generally accepted accounting principles as applied in the United States applied
on a consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. No other financial statements or
supporting schedules are required to be included in the Registration Statement.
The financial data set forth under the captions "Summary -- Summary Financial
Data," "Capitalization," "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in the
Prospectus fairly present the information set forth therein on a basis
consistent with that of the audited financial statements contained in the
Registration Statement.
(j) Incorporation and Good Standing of the Company and PPG. The Company
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus and to enter into and perform its obligations
under this Agreement. The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions where the
failure to so qualify or to be in good standing would not, individually or in
the aggregate, result in a Material Adverse Change. The Peoples Publishing
Group, Inc., a Delaware corporation ("PPG"), is the only subsidiary of the
Company and is wholly-owned by the Company, and there are no options, warrants,
or other rights that have been granted or are outstanding with respect to the
capital stock of PPG. PPG is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Prospectus. PPG is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except for such jurisdictions where the
failure to qualify or to be in good standing would not, individually or in the
aggregate result in a Material Adverse Change.
(k) Capitalization and Other Capital Stock Matters. The authorized, issued
and outstanding capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" (other than for subsequent issuances, if any,
pursuant to employee benefit plans described in the Prospectus or upon exercise
of outstanding options described in the Prospectus). The Common Stock (including
the Common Shares) conforms in all material respects to the description thereof
contained in the Prospectus. All of the issued and outstanding shares of Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable and have been issued in compliance with all applicable federal and
state securities laws. None of the outstanding shares of Common Stock were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There are
no authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of the
Company other than those accurately described in the Prospectus. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth in
the Prospectus accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and rights.
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(l) Quotation. The Common Shares have been approved for inclusion on the
Nasdaq SmallCap Market, subject only to official notice of issuance.
(m) Non-Contravention of Existing Instruments; No Further Authorizations
or Approvals Required. Neither the Company nor PPG is in violation of its
Certificate of Incorporation or Bylaws or in default (or, with the giving of
notice or lapse of time, would be in default) ("Default") under any indenture,
mortgage, loan or credit agreement, note, contract, understanding, franchise,
lease or other instrument or agreement to which the Company or PPG is a party or
by which it may be bound, or to which any of the property or assets of the
Company or PPG is subject (each, an "Existing Instrument"), except for such
Defaults as would not, individually or in the aggregate, result in a Material
Adverse Change. The Company's execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby and by the
Prospectus (i) have been duly authorized by all necessary corporate action and
will not result in any violation of the provisions of the Certificate of
Incorporation or Bylaws of the Company, (ii) will not conflict with or
constitute a breach of, or Default or a Debt Repayment Triggering Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or PPG pursuant
to, or require the consent of any other party to, any Existing Instrument,
except for any conflict, breach, Default, lien, charge or encumbrance as would
not, individually or in the aggregate, result in a Material Adverse Change and
(iii) will not result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or PPG, except for any
violation that would not result in a Material Adverse Change. No consent,
approval, authorization or other order of, or registration or filing with, any
court or other governmental or regulatory authority or agency, is required for
the Company's execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby and by the Prospectus,
except such as have been obtained or made by the Company and are in full force
and effect under the Securities Act, applicable state securities or blue sky
laws and from the NASD. As used herein, a "Debt Repayment Triggering Event"
means any event or condition which gives, or with the giving of notice or lapse
of time would give, the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right to require
the repurchase, redemption, or repayment of all or a portion of such
indebtedness by the Company or PPG.
(n) No Material Actions or Proceedings. There are no legal or governmental
actions, suits or proceedings pending or, to the best of the Company's
knowledge, threatened (i) against or affecting the Company or PPG, (ii) which
has as the subject thereof any officer, director or employee of, or property
owned or leased by, the Company or PPG, or (iii) relating to environmental or
discrimination matters, where in any such case any such action, suit or
proceeding, if so determined adversely, would reasonably be expected to result
in a Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement or by the Prospectus. No labor
dispute with the employees of the Company or PPG or with the employees of any
third party, with whom the Company has a material relationship, exists or, to
the best of the Company's knowledge, is threatened or imminent.
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(o) Intellectual Property Rights. Except as otherwise disclosed in the
Prospectus, the Company and PPG own or possess valid and enforceable licenses or
other rights to use all trademarks, trade names, service marks, patent rights
(including all patents and patent applications), copyrights, domain names,
licenses, approvals, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), inventions, trade secrets, technologies, proprietary techniques
(including processes and substances) and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to conduct its business as
now conducted and as currently contemplated to be conducted as disclosed in the
Registration Statement and the Prospectus, free and clear of all liens, claims
and encumbrances, other than as described in the Registration Statement and the
Prospectus; and the expected expiration of any of such Intellectual Property
Rights would not result in a Material Adverse Change. Other than as described in
the Registration Statement and the Prospectus: (i) there are no third parties
who have any rights in the Intellectual Property that could preclude the Company
or PPG from conducting its business as currently conducted or as presently
contemplated to be conducted as described in the Registration Statement and the
Prospectus; (ii) there are no pending or, to the best knowledge of the Company,
threatened actions, suits, proceedings, investigations or claims by others
challenging the rights of the Company or PPG (or if the Intellectual Property is
licensed, the licensor thereof) in any Intellectual Property owned or licensed
to the Company or PPG; (iii) neither the Company or PPG nor (if the Intellectual
Property is licensed) the licensor thereof has infringed, or received any notice
of infringement of or conflict with, any rights of others with respect to the
Intellectual Property; and (iv) there is no dispute between the Company or PPG
and any licensor with respect to any Intellectual Property Right. The Company
and PPG have taken all reasonable steps to protect, maintain and safeguard the
Intellectual Property Rights for which improper or unauthorized disclosure would
impair its value or validity and has entered into appropriate and enforceable
nondisclosure and confidentiality agreements and made appropriate filings and
registrations in connection with the foregoing.
(p) Title to Properties. The Company and PPG have good and marketable
title to all the properties and assets reflected as owned in the financial
statements referred to in Section 1(i) above (or elsewhere in the Prospectus),
in each case free and clear of any security interests, mortgages, liens,
encumbrances, equities, claims and other defects, except as described in the
Prospectus or such as do not materially and adversely affect the value of such
property and do not materially interfere with the use made or proposed to be
made of such property by the Company and PPG. The real property, improvements,
equipment and personal property held under lease by the Company and PPG are held
under valid and enforceable leases, with such exceptions as are not material and
do not materially interfere with the use made or proposed to be made of such
real property, improvements, equipment or personal property by the Company or
PPG.
(q) Tax Law Compliance. The Company and PPG have filed all necessary
federal, state and foreign income, employment and franchise tax returns and have
paid all taxes required to be paid by them and, if due and payable, any related
or similar assessment, fine or penalty levied against them. The Company and PPG
have made adequate charges, accruals and reserves in the applicable financial
statements referred to in
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Section 1(i) above in respect of all federal, state and foreign income and
franchise taxes for all periods as to which the tax liability of the Company or
PPG have not been finally determined.
(r) Company is Not an "Investment Company". The Company has been advised
by its legal counsel of the rules and requirements under the Investment Company
Act of 1940, as amended (the "Investment Company Act"). The Company is not, and
after receipt of payment for the Common Shares will not be, an "investment
company" within the meaning of the Investment Company Act and will conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(s) Insurance. The Company and PPG are insured by reputable institutions
licensed to do business in the State of Delaware, Minnesota, Texas and other
states in which they are conducting business, with policies in such amounts and
with such deductibles and covering such risks as are generally deemed adequate
and customary for its business including, but not limited to, policies covering
real and personal property owned or leased by the Company and PPG against theft,
damage, destruction and acts of vandalism. The Company has no reason to believe
that it and PPG will not be able (i) to renew their existing insurance coverage
as and when such policies expire or (ii) to obtain comparable coverage from
similar institutions as may be necessary or appropriate to conduct their
business as now conducted and at a cost that would not result in a Material
Adverse Change. Neither the Company nor PPG has been denied any insurance
coverage that they have sought or for which they have applied.
(t) No Price Stabilization or Manipulation. The Company has not taken and
will not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the Common Shares.
The Company acknowledges that the Underwriter may engage in passive market
making transactions in the Common Shares on the Nasdaq SmallCap Market in
accordance with Regulation M under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(u) Related Party Transactions. No relationship, direct or indirect,
exists between or among the Company and PPG, on the one hand, and the directors,
officers, employees, contractors, stockholders, customers, distributors or
suppliers of the Company or PPG, on the other, that is required by the
Securities Act to be described in the Registration Statement and the Prospectus
and that is not so described.
(v) Internal Controls and Procedures and Disclosure Controls and
Procedures. The Company maintains a system of internal control over financial
reporting sufficient to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. As of the
date of the latest audited financial statements included in the Prospectus, the
Company's internal control over financial reporting was effective and the
Company was not aware of any material weaknesses in its internal control over
financial reporting. Since the date of the latest audited financial statements
included in the Prospectus, there has been no change in the Company's internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-15(e) of the Exchange Act) that comply with the
requirements of the Exchange Act; such disclosure controls and procedures have
been designed to ensure that material information relating to the Company and
its subsidiaries is made known to the Company's principal executive officer and
principal financial officer by others within those entities; such disclosure
controls and procedures are effective.
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(w) No Unlawful Contributions or Other Payments. Neither the Company, PPG,
nor any director, officer, employee, agent, contractor, distributor or other
persons acting on behalf of the Company or PPG, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(x) Company's Accounting System. The Company maintains a system of
accounting controls sufficient to provide reasonable assurances that with
respect to the Company and PPG (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 as applied in the United States 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.
(y) Compliance with Environmental Laws. Except as would not, individually
or in the aggregate, result in a Material Adverse Change, (i) neither the
Company nor PPG is in violation of any federal, state, local or foreign law or
regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum products
(collectively, "Materials of Environmental Concern"), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern (collectively,
"Environmental Laws"), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations required for
the operation of the business of the Company or PPG under applicable
Environmental Laws, or noncompliance with the terms and conditions thereof, nor
has the Company or PPG received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges that
the Company is in violation of any Environmental Law; (ii) there is no claim,
action or cause of action filed with a court or governmental authority, no
investigation with respect to which the Company or PPG have received written
notice, and no written notice by any person or entity alleging potential
liability for investigatory costs, cleanup
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costs, governmental responses costs, natural resources damages, property
damages, personal injuries, attorneys' fees or penalties arising out of, based
on or resulting from the presence, or release into the environment, of any
Material of Environmental Concern at any location owned, leased or operated by
the Company or PPG, now or in the past (collectively, "Environmental Claims"),
pending or, to the best of the Company's knowledge, threatened against the
Company, PPG or any person or entity whose liability for any Environmental Claim
the Company has retained or assumed either contractually or by operation of law;
and (iii) to the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that reasonably could be expected to
result in a violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company, PPG or against any person or entity
whose liability for any Environmental Claim the Company or PPG has retained or
assumed either contractually or by operation of law.
(z) ERISA Compliance. The Company and any "employee benefit plan" (as
defined under the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company or its "ERISA Affiliates" (as
defined below) are in compliance in all material respects with ERISA. "ERISA
Affiliate" means, with respect to the Company, any member of any group of
organizations described in Sections 414(b),(c),(m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established or
maintained by the Company or any of its ERISA Affiliates. No "employee benefit
plan" established or maintained by the Company or any of its ERISA Affiliates,
if such "employee benefit plan" were terminated, would have any "amount of
unfunded benefit liabilities" (as defined under ERISA). Neither the Company nor
any of its ERISA Affiliates has incurred or reasonably expects to incur any
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" or (ii) Section 412, 4971, 4975 or
4980B of the Code. Each "employee benefit plan" established or maintained by the
Company or any of its ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualification.
(aa) Brokers. Except as disclosed in the Registration Statement and the
Prospectus, there is no broker, finder or other party that is entitled to
receive from the Company or PPG any brokerage or finder's fee or other fee,
commission or performance-based compensation as a result of any transactions
contemplated by this Agreement.
(bb) No Outstanding Loans or Other Indebtedness. There are no outstanding
loans, advances (except normal advances for business expenses in the ordinary
course of business) or guarantees of indebtedness by the Company or PPG to or
for the benefit of any of the officers, directors, employees or consultants of
the Company or PPG except as disclosed in the Registration Statement and the
Prospectus.
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(cc) Suppliers. No supplier of products to the Company or PPG has ceased
shipments to the Company or PPG or indicated, to the Company's best knowledge,
an interest in decreasing or ceasing its sales to the Company or PPG or
otherwise modifying its relationship with the Company, or PPG, other than in the
normal and ordinary course of business consistent with past practices in a
manner which would not, individually or in the aggregate, result in a Material
Adverse Change.
(dd) MD&A. There are no transactions, arrangements or other relationships
that are required to be disclosed in the Prospectus by the Commission's
"Statement About Management's Discussion and Analysis of Financial Condition and
Results of Operations" (January 22, 2002) that are not so disclosed or described
as required.
(ee) Xxxxxxxx-Xxxxx Act. Since August 26, 2004, there has been no failure
on the part of the Company or PPG or any of the Company's directors or officers,
in their capacities as such, to comply with any applicable provision of the
Xxxxxxxx-Xxxxx Act, including without limitation Section 402 related to loans.
(ff) Patent Filings. The Company has duly and properly filed or caused to
be filed with the United States Patent and Trademark Office (the "PTO") and
applicable foreign and international patent authorities all patent applications
(if any) owned by the Company that are material to the Company or its business
(the "Company Patent Applications"). The Company has complied with the PTO's
duty of candor and disclosure for the Company Patent Applications and has made
no material misrepresentation in the Company Patent Applications. The Company is
not aware of any information material to a determination of patentability
regarding the Company Patent Applications not called to the attention of the PTO
or similar foreign authority. The Company is not aware of any information not
called to the attention of the PTO or similar foreign authority which would
preclude the grant of a patent for the Company Patent Applications. The Company
has no knowledge of any information which would preclude the Company from having
clear title to, and complete ownership of, the Company Patent Applications.
Any certificate signed by an officer of the Company and delivered to the
Underwriter or to counsel for the Underwriter shall be deemed to be a
representation and warranty by the Company to the Underwriter as to the matters
set forth therein. The Company acknowledges that the Underwriter and, for
purposes of the opinions to be delivered pursuant to Section 5 hereof, counsels
to the Company and counsel to the Underwriter, will rely upon the accuracy and
truthfulness of the foregoing representations and hereby consents to such
reliance.
Section 2. Purchase, Sale and Delivery of the Common Shares.
(a) The Firm Common Shares. The Company agrees to issue and sell to the
Underwriter the Firm Common Shares upon the terms herein set forth. On the basis
of the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriter agrees to
purchase from the
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Company the number of Firm Common Shares as set forth on Schedule 1 attached
hereto. The purchase price per Firm Common Share to be paid by the Underwriter
to the Company shall be $______ per share.
(b) The First Closing Date. Delivery of certificates for the Firm Common
Shares to be purchased by the Underwriter and payment therefor shall be made at
the offices of Xxxxxxxxx & Xxxxxx P.L.L.P., located at 4200 IDS Center, 00 Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 (or such other place as may be
agreed to by the Company and the Underwriter) at 9:00 a.m., Minneapolis,
Minnesota time, on _________, 2005, or such other time as the Underwriter shall
designate by notice to the Company (the time and date of such closing are called
the "First Closing Date"). The Company hereby acknowledges that circumstances
under which the Underwriter may provide notice to postpone the First Closing
Date as originally scheduled include, but are in no way limited to, any
determination by the Company or the Underwriter to recirculate to the public
copies of an amended or supplemented Prospectus or a delay as contemplated by
the provisions of Section 10.
(c) The Optional Common Shares; the Second Closing Date. In addition, on
the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the Underwriter to purchase up to an aggregate of
75,000 Optional Common Shares from the Company at the purchase price per share
to be paid by the Underwriter for the Firm Common Shares. The option granted
hereunder is for use by the Underwriter solely in covering any over-allotments
in connection with the sale and distribution of the Firm Common Shares. The
option granted hereunder may be exercised at any time (but not more than once)
upon notice by the Underwriter to the Company, which notice may be given at any
time within 45 days from the date of this Agreement. Such notice shall set forth
(i) the aggregate number of Optional Common Shares as to which the Underwriter
is exercising the option, (ii) the names and denominations in which the
certificates for the Optional Common Shares are to be registered and (iii) the
time, date and place at which such certificates will be delivered (which time
and date may be simultaneous with, but not earlier than, the First Closing Date;
and in such case the term "First Closing Date" shall refer to the time and date
of delivery of certificates for the Firm Common Shares and the Optional Common
Shares). Such time and date of delivery, if subsequent to the First Closing
Date, is called the "Second Closing Date" and shall be determined by the
Underwriter and shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. If any Optional Common
Shares are to be purchased, the Underwriter agrees to purchase the number of
Optional Common Shares (subject to such adjustments to eliminate fractional
shares as the Underwriter may determine) set forth in the notice from the
Underwriter to the Company referenced in this subsection (c). The Underwriter
may cancel the option at any time prior to its expiration by giving written
notice of such cancellation to the Company.
(d) Public Offering of the Common Shares. The Underwriter hereby advises
the Company that the Underwriter intends to offer for sale to the public, as
described in the Prospectus, the Common Shares as soon after this Agreement has
been executed and
11
the Registration Statement has been declared effective as the Underwriter, in
its sole judgment, has determined is advisable and practicable.
(e) Payment for the Common Shares. Payment for the Common Shares shall be
made at the First Closing Date (and, if applicable, at the Second Closing Date)
by wire transfer of immediately available funds to the order of the Company. It
is understood that the Underwriter has been authorized for its own account to
accept delivery of and receipt for, and make payment of the purchase price for,
the Firm Common Shares and any Optional Common Shares the Underwriter has agreed
to purchase.
(f) Delivery of the Common Shares. The Company shall deliver, or cause to
be delivered, to the Underwriter for the account of the Underwriter,
certificates for the Firm Common Shares at the First Closing Date, against the
irrevocable release of a wire transfer of immediately available funds for the
amount of the purchase price therefor. The Company shall also deliver, or cause
to be delivered, to the Underwriter for the account of the Underwriter
certificates for the Optional Common Shares the Underwriter has agreed to
purchase at the First Closing Date or the Second Closing Date, as the case may
be, against the irrevocable release of a wire transfer of immediately available
funds for the amount of the purchase price therefor. The certificates for the
Common Shares shall be in definitive form and registered in such names and
denominations as the Underwriter shall have requested at least two full business
days prior to the First Closing Date (or the Second Closing Date, as the case
may be) and shall be made available for inspection on the business day preceding
the First Closing Date (or the Second Closing Date, as the case may be) at a
location in Minneapolis, Minnesota as the Underwriter may designate. Time shall
be of the essence, and delivery at the time and place specified in this
Agreement is a further condition to the obligations of the Underwriter. In lieu
of manual delivery of the certificates for the Common Shares, by mutual
agreement of the Company and the Underwriter delivery of the certificates of
the Common Shares may be satisfied pursuant to the DWAC procedures.
(g) Delivery of Prospectus to the Underwriter. Not later than 3:00 p.m.
(Minneapolis, Minnesota time) on the next business day, or such shorter period
as may be required by law, following the date of this Agreement, the Company
shall deliver or cause to be delivered, copies of the Prospectus in such
quantities and at such places as the Underwriter shall request.
Section 3. Additional Covenants. The Company further covenants and agrees
with the Underwriter as follows:
(a) Underwriter's Review of Proposed Amendments and Supplements. During
such period beginning on the date hereof and ending on the later of the First
Closing Date or such other date, as in the opinion of counsel for the
Underwriter, the Prospectus is no longer required by law to be delivered in
connection with sales by the Underwriter or dealer (the "Prospectus Delivery
Period"), prior to amending or supplementing the Registration Statement
(including any registration statement filed under Rule 462(b) under the
Securities Act) or the Prospectus, the Company shall furnish to the Underwriter
for review a copy of each such proposed amendment or supplement, and the Company
shall not file any such proposed amendment or supplement to which the
Underwriter reasonably object.
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(b) Securities Act Compliance. After the date of this Agreement, the
Company shall promptly advise the Underwriter in writing of (i) the receipt of
any comments of, or requests for additional or supplemental information from,
the Commission, (ii) the time and date of any filing of any post-effective
amendment to the Registration Statement or any amendment or supplement to any
preliminary prospectus or the Prospectus, (iii) the time and date that any
post-effective amendment to the Registration Statement becomes effective and
(iv) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereto or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which it is listed for trading or included or designated for
quotation, or of the threatening or initiation of any proceedings for any of
such purposes. If the Commission shall enter any such stop order at any time,
the Company will use its best efforts to obtain the lifting of such order at the
earliest possible moment. Additionally, the Company agrees that it shall comply
with the provisions of Rules 424(b) and 430A, as applicable, under the
Securities Act and will use its best efforts to confirm that any filings made by
the Company under such Rule 424(b) were received in a timely manner by the
Commission.
(c) Amendments and Supplements to the Prospectus and Other Securities Act
Matters. If, during the Prospectus Delivery Period, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if in the opinion of the Underwriter or counsel for the Underwriter it is
otherwise necessary to amend or supplement the Prospectus to comply with
applicable law, the Company agrees to promptly prepare (subject to Section 3(a)
hereof), file with the Commission and furnish at its own expense to the
Underwriter and to dealers, amendments or supplements to the Prospectus so that
the statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will comply
with applicable law.
(d) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Underwriter, without charge, during the Prospectus
Delivery Period, as many copies of the Prospectus and any amendments and
supplements thereto as the Underwriter may reasonably request.
(e) Blue Sky Compliance. The Company shall cooperate with the Underwriter
and counsel for the Underwriter to qualify or register the Common Shares for
sale under (or obtain exemptions from the application of) the state securities
or blue sky laws or other foreign laws of those jurisdictions designated by the
Underwriter, shall comply with such laws and shall continue such qualifications,
registrations and exemptions in effect so long as required for the distribution
of the Common Shares. The Company shall not be required to qualify as a foreign
corporation or to take any action that would subject it to general service of
process in any such jurisdiction where it is not presently qualified or where it
would be subject to taxation as a foreign corporation. The Company will advise
the Underwriter promptly of the suspension of the qualification or registration
of (or any
13
such exemption relating to) the Common Shares for offering, sale or trading in
any jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best efforts
to obtain the withdrawal thereof at the earliest possible moment.
(f) Use of Proceeds. The Company shall apply the proceeds from the sale of
the Common Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(g) Transfer Agent. The Company shall engage and maintain, at its expense,
an independent, qualified and experienced registrar and transfer agent for the
Common Stock.
(h) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Underwriter an earnings
statement (which need not be audited) covering the twelve-month period ending
June 30, 2006 that satisfies the provisions of Section 11(a) of the Securities
Act.
(i) Periodic Reporting Obligations. During the Prospectus Delivery Period
the Company shall file, on a timely basis, with the Commission and the Nasdaq
SmallCap Market all reports and documents required to be filed under the
Exchange Act. Additionally, the Company shall timely report the use of proceeds
from the issuance of the Common Shares as may be required under Rule 463 under
the Securities Act.
(j) Company to Provide Interim Financial Statements. Prior to the Closing
Date, the Company will furnish the Underwriter 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.
(k) Quotation. The Company will take such steps as are necessary or
helpful to include, subject to notice of issuance, the Common Shares on the
Nasdaq SmallCap Market.
(l) Agreement Not to Offer or Sell Additional Securities. During the
period commencing on the date hereof and ending on the 180th day following the
date of the Prospectus, the Company will not, without the prior written consent
of the Underwriter (which consent may be withheld at the sole discretion of the
Underwriter), directly or indirectly, sell, offer, contract or grant any option
to sell, pledge, transfer or establish an open "put equivalent position" within
the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or
transfer, or announce the offering of, or file any registration statement under
the Securities Act in respect of, any shares of Common Stock, options or
warrants to acquire shares of the Common Stock or securities exchangeable or
exercisable for or convertible into shares of Common Stock (other than as
contemplated by this Agreement with respect to the Common Shares); provided,
however, that the Company may issue shares of its Common Stock or options to
purchase
14
its Common Stock, or Common Stock upon exercise of options, pursuant to any
stock option, stock bonus or other stock plan or arrangement described in the
Prospectus, but only if the holders of such shares, options, or shares issued
upon exercise of such options, agree in writing not to sell, offer, dispose of
or otherwise transfer any such shares or options during such 180 day period
without the prior written consent of the Underwriter (which consent may be
withheld at the sole discretion of the Underwriter).
(m) Future Reports to the Underwriter. For a period of five years
following the date of the prospectus, the Company will furnish to the
Underwriter, Feltl & Company, 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxx,
XX 00000, Attention: Xxxx X. Xxxxx (i) as soon as practicable after the end of
each fiscal year, copies of the Annual Report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and statements
of income, shareholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public or certified public
accountants; (ii) as soon as practicable after the filing thereof, copies of
each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as available,
copies of any report or communication of the Company mailed generally to holders
of its capital stock.
(n) Investment Limitation. The Company shall not invest, or otherwise use
the proceeds received by the Company from its sale of the Common Shares in such
a manner as would require the Company to register as an investment company under
the Investment Company Act.
(o) No Manipulation of Price. 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.
(p) Existing Lock-Up Agreement. The Company will enforce all existing
agreements between the Company and any of its security holders that prohibit the
sale, transfer, assignment, pledge or hypothecation of any of the Company's
securities in connection with the Company's initial public offering. In
addition, the Company will direct the transfer agent to place stop transfer
restrictions upon any such securities of the Company, and will take steps
necessary to enforce the same, that are bound by such existing "lock-up"
agreements for the duration of the periods contemplated in such agreements.
(q) Upon written request of the Underwriter, to furnish, or cause to be
furnished, to the Underwriter an electronic version of the Company's trademarks,
servicemarks and corporate logo for use on the website, if any, operated by such
Underwriter for the purpose of facilitating the on-line offering of the Common
Shares, (the "License"); provided, however, that the License shall be used
solely for the purpose described above, is granted without any fee and may not
be assigned or transferred.
Section 4. Payment of Expenses and Underwriter's Warrants.
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(a) The Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder, including without
limitation (i) all expenses incident to the issuance and delivery of the Common
Shares (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agent of the Common Stock, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Common Shares to the Underwriter, (iv) all fees and expenses of the
Company's counsel, independent registered or certified public accountants and
other advisors, (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the Registration
Statement (including financial statements, exhibits, schedules, consents and
certificates of experts), each preliminary prospectus and the Prospectus, and
all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriter in
connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for offer
and sale under the state securities or blue sky laws or any foreign
jurisdiction, and preparing and printing a "Blue Sky Survey" or memorandum, and
any supplements thereto, advising the Underwriter of such qualifications,
registrations and exemptions, (vii) the filing fees incident to, and the
reasonable expenses of counsel for the Underwriter in connection with, the
NASD's review and approval of the Underwriter's participation in the offering
and distribution of the Common Shares, (viii) the fees and expenses associated
with including the Common Shares on the Nasdaq SmallCap Market, (ix) all other
fees, costs and expenses referred to in Item 13 of Part II of the Registration
Statement, (x) the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the marketing of
the Common Shares, including without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants engaged by the Company or the Underwriter in connection with the
road show presentations, lodging expenses of the Underwriter and officers of the
Company and any such consultants, and all transportation expenses, in connection
with the road show, (xi) a nonaccountable expense allowance payable to the
Underwriter equal to three percent (3%) of the public offering price of the
Common Shares payable on the First or Second Closing Date, and (xii) all
expenses of the Underwriter in connection with due diligence meetings with the
investment community. Except as provided in this Section 4, Section 6, Section 8
and Section 9 hereof, the Underwriter shall pay its own expenses, including the
fees and disbursements of its counsel.
(b) On the First Closing Date, the Company shall sell to the Underwriter
for an aggregate of $50, the Underwriter's Warrant entitling the Underwriter to
purchase up to an aggregate of 50,000 shares of the Company's Common Stock, at
an exercise price of $_________ (subject to adjustment), which shall first
become exercisable one year after the Effective Date and shall remain
exercisable for a period of four (4) years thereafter. The Underwriter's Warrant
shall be subject to certain transfer restrictions and shall be in substantially
the form attached as Appendix A hereto.
Section 5. Conditions of the Obligations of the Underwriter. The
obligations of the Underwriter to purchase and pay for the Common Shares as
provided herein on the First Closing Date and, with respect to the Optional
Common Shares, the Second Closing
16
Date, shall be subject to the accuracy of the representations and warranties on
the part of the Company set forth in Section 1 hereof as of the date hereof and
as of the First Closing Date as though then made and, with respect to the
Optional Common Shares, as of the Second Closing Date as though then made, to
the timely performance by the Company of its covenants and other obligations
hereunder, and to each of the following additional conditions:
(a) Accountants' Comfort Letter. The Underwriter shall have received a
letter on the date of this Agreement, dated the date of delivery thereof of
McGladrey and Xxxxxx, LLP, in form and substance acceptable to the Underwriter,
confirming that they are independent registered accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder and
stating to the effect that:
(i) in their opinion the financial statements and schedules examined
by them and included in the Registration Statements comply as to form in
all material respects with the applicable accounting requirements of the
Act and the related published Rules and Regulations;
(ii) on the basis of a reading of the latest available interim
financial statements of the Company, inquiries of officials of the Company
who have responsibility for financial and accounting matters and other
specified procedures, nothing came to their attention that caused them to
believe that:
(A) at the date of the latest available balance sheet read by
such accountants, or at a subsequent specified date not more than
three business days prior to the date of this Agreement, there was
any change in the capital stock or any increase in short-term
indebtedness or long-term debt of the Company or, at the date of the
latest available balance sheet read by such accountants, there was
any decrease in net assets, as compared with amounts shown on the
latest balance sheet included in the Prospectus, except as disclosed
in the Prospectus; or
(B) for the period from the closing date of the latest income
statement included in the Registration Statements and the Prospectus
to the closing date of the latest available income statement read by
such accountants there were any decreases, as compared with the
corresponding period of the previous year in the total or per share
amounts of net income (loss), except as disclosed in the Prospectus;
and
(iii) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information
contained in the Registration Statement and the Prospectus (in each case
to the extent that such dollar amounts, percentages and other financial
information are derived from the general accounting records of the Company
subject to the internal controls of the Company's accounting system or are
derived from such records by analysis or computation) with the results
obtained from inquiries, a reading of such general accounting records and
other procedures specified in such letter and have found
17
such dollar amounts, percentages and other financial information to be in
agreement with such results, except as otherwise specified in such letter.
For purposes of this subsection, "Prospectus" shall mean the prospectus included
in the Registration Statement, including any Prospectus filed pursuant to Rule
424(b).
(b) Compliance with Registration Requirements; No Stop Order; No Objection
from NASD. For the period from and after effectiveness of this Agreement and
prior to the First Closing Date and, with respect to the Optional Common Shares,
the Second Closing Date:
(i) the Company, if required, shall have filed the Prospectus with
the Commission (including the information required by Rule 430A under the
Securities Act) in the manner and within the time period required by Rule
424(b) under the Securities Act; or the Company shall have filed a
post-effective amendment to the Registration Statement containing the
information required by such Rule 430A, and such post-effective amendment
shall have become effective;
(ii) no stop order suspending the effectiveness of the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment to the Registration Statement, shall be in effect and no
proceedings for such purpose shall have been instituted or threatened by
the Commission; and
(iii) the NASD shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change. For the period from and after the date of
this Agreement and prior to the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date, in the judgment of the
Underwriter there shall not have occurred any Material Adverse Change, other
than as described or contemplated in the Registration Statement and the
Prospectus.
(d) Opinion of Counsel for the Company. On each of the First Closing Date
and the Second Closing Date, the Underwriter shall have received the favorable
opinion of Robins, Kaplan, Xxxxxx and Xxxxxx L.L.P., counsel for the Company,
dated as of such Closing Date, in form and substance satisfactory to the
Underwriter, the form of which is attached as Exhibit B.
(e) Opinion of Counsel for the Underwriter. On each of the First Closing
Date and the Second Closing Date, the Underwriter shall have received the
favorable opinion of Xxxxxxxxx & Xxxxxx P.L.L.P., counsel for the Underwriter,
dated as of such Closing Date in a form satisfactory to the Underwriter.
(f) Officers' Certificate. On each of the First Closing Date and the
Second Closing Date, the Underwriter shall have received the written
certificates executed by the Chief Executive Officer and President of the
Company and the Chief Financial Officer or Chief Accounting Officer of the
Company, dated as of such Closing Date, to the effect set forth in subsection
(b)(ii) of this Section 5, and further to the effect that:
18
(i) for the period from and after the date of this Agreement and
prior to such Closing Date, there has not occurred any Material Adverse
Change;
(ii) the representations, warranties and covenants of the Company
set forth in Section 1 of this Agreement are true and correct with the
same force and effect as though expressly made on and as of such Closing
Date;
(iii) the Company has complied with all the agreements hereunder and
satisfied all the conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date; and
(iv) certify (a) that any financial projections presented to the
Underwriter for its review were prepared in good faith and represent the
President's best estimate of the Company's financial condition following
the first Closing Date; and (b) that the net proceeds to be derived from
the offering that is the subject hereof are sufficient to fund the
Company's operation for at least twelve (12) months following the First
Closing Date;
(g) Secretary's Certificate. On each of the First Closing Date and the
Second Closing Date, the Underwriter shall have received the written
certificates executed by the Secretary of the Company, dated as of such Closing
Date, in the form and substance satisfactory to the Underwriter, certifying as
to (i) the incumbency and the signatures of those officers of the Company
executing this Agreement and such other certificates or documents contemplated
under this Agreement, (ii) the Certificate of Incorporation and Bylaws of the
Company, and (iii) the resolutions of the Board of Directors of the Company
authorizing the execution and delivery of this Agreement and such other
certificates or documents contemplated under this Agreement, a copy of such
resolutions to be attached to said certificate.
(h) Good Standing. The Underwriter shall have received on and as of the
First Closing Date or the Second Closing Date, as the case may be, satisfactory
evidence of the good standing of the Company in its jurisdiction of organization
and its good standing as a foreign entity in such other jurisdictions as the
Underwriter may reasonably request, in each case in writing or any standard form
from the appropriate Governmental Authorities of such jurisdictions.
(i) Bring-down Comfort Letter. On each of the First Closing Date and the
Second Closing Date the Underwriter shall have received from McGladrey and
Xxxxxx LLP, independent public or certified public accountants for the Company,
a letter dated such date, in form and substance satisfactory to the Underwriter
to the effect that they reaffirm the statements made in the letter furnished by
them pursuant to subsection (a) of this Section 5, except that the specified
date referred to therein for the carrying out of procedures shall be no more
than three business days prior to the First Closing Date and Second Closing
Date, if applicable.
(j) Lock-Up Agreement from Certain Securityholders of the Company. On or
prior to the date hereof, the Company shall have furnished to the Underwriter an
19
agreement in the form of Exhibit C hereto from each director and officer, and
such agreement shall be in full force and effect on each of the First Closing
Date and the Second Closing Date.
(k) Additional Documents. On or before each of the First Closing Date and
the Second Closing Date, the Underwriter and counsel for the Underwriter shall
have received such information, documents and opinions as they may reasonably
require for the purposes of enabling them to pass upon the issuance and sale of
the Common Shares as contemplated herein, or in order to evidence the accuracy
of any of the representations and warranties, or the satisfaction of any of the
conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Underwriter by
notice to the Company at any time on or prior to the First Closing Date and,
with respect to the Optional Common Shares, at any time prior to the Second
Closing Date, which termination shall be without liability on the part of any
party to any other party, except that Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
Section 6. Reimbursement of Underwriter's Expenses. If this Agreement is
terminated by the Underwriter pursuant to Section 5 or Section 10, or if the
sale to the Underwriter of the Common Shares on the First Closing Date is not
consummated because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or to comply with any provision hereof,
(unless such failure to perform or comply is due to the material default of the
Underwriter), the Company agrees to reimburse the Underwriter, upon demand for
all out-of-pocket expenses that shall have been reasonably incurred by the
Underwriter in connection with the proposed purchase and the offering and sale
of the Common Shares, including but not limited to fees and disbursements of
counsel, printing expenses, travel expenses, postage, facsimile and telephone
charges, but not to exceed $25,000.
Section 7. Effectiveness of this Agreement. This Agreement shall not
become effective until the later of (i) the execution of this Agreement by the
parties hereto and (ii) notification by the Commission to the Company and the
Underwriter of the effectiveness of the Registration Statement under the
Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any party
by notice to each of the other parties hereto, and any such termination shall be
without liability on the part of (a) the Company to the Underwriter, except that
the Company shall be obligated to reimburse the expenses of the Underwriter to
the extent required by Sections 4 and 6 hereof, (b) the Underwriter to the
Company, or (c) any party hereto to any other party except that the provisions
of Section 8 and Section 9 shall at all times be effective and shall survive
such termination.
20
Section 8. Indemnification.
(a) Indemnification of the Underwriter. The Company agrees to indemnify
and hold harmless the Underwriter, its officers, directors and employees, and
each person, if any, who controls the Underwriter within the meaning of the
Securities Act and the Exchange Act against any loss, claim, damage, liability
or expense, joint or several, as incurred, to which the Underwriter, its
officers, directors and employees or such controlling person may become subject,
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such loss, claim, damage, liability or expense (or actions
in respect thereof as contemplated below) arises out of or is based (i) upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A under the Securities Act, or
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading; or
(ii) upon any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part upon any failure of the Company to
perform its obligations hereunder or under law; or (v) any act or failure to act
or any alleged act or failure to act by the Company in connection with, or
relating in any manner to, the Common Stock 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 any matter covered by clause
(i) through (iv) above, provided that the Company shall not be liable under this
clause (v) to the extent that a court of competent jurisdiction shall have
determined by a final judgment 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 the Underwriter through its gross negligence, bad faith
or willful misconduct; and to reimburse the Underwriter, its officers, directors
and employees and each such controlling person for any and all expenses
(including the fees and disbursements of counsel for the Underwriter chosen by
the Underwriter) as such expenses are reasonably incurred by the Underwriter,
officer, director, employee, or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that (A) the foregoing
indemnity agreement shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Underwriter expressly for use in the Registration Statement,
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto); and (B) with respect to any preliminary prospectus, the foregoing
indemnity agreement shall not inure to the benefit of the Underwriter from whom
the person asserting any loss, claim, damage, liability or expense purchased
Common Shares, or any person controlling the
21
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of the Underwriter to
such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Common Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense; and (C) in the event
that the Company reimburses the Underwriter, officer, director, employee, or
controlling person for expenses under this Section 8(a) and it is finally
determined that such parties were not entitled to received payments for expenses
pursuant to this Section 8(a), such parties will promptly return all sums that
had been so advanced pursuant hereto, together with simple interest, from the
date of such final judicial determination, determined on the basis of the prime
rate (or other commercial lending rate for borrowers of the highest credit
standing) announced from time to time by U.S. Bank National Association. The
indemnity agreement set forth in this Section 8(a) shall be in addition to any
liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. The
Underwriter agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act, against any loss, claim, damage, liability or expense,
as incurred, to which the Company, or any such director, officer or controlling
person may become subject, under the Securities Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Underwriter), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based upon any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto), or arises
out of or is based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any preliminary prospectus, or
the Prospectus (or any amendment or supplement thereto), in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
expressly for use therein; and to reimburse the Company, or any such director,
officer or controlling person for any legal and other expense reasonably
incurred by the Company, or any such director, officer or controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action. The Company hereby
acknowledges that the only information that the Underwriter has furnished to the
Company expressly for use in the Registration Statement, or the Prospectus (or
any amendment or supplement thereto) are the commissions and expenses data under
the caption "Underwriting" in the Prospectus. The indemnity agreement set forth
in this Section 8(b) shall be in addition to any liabilities that the
Underwriter may otherwise have.
22
(c) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party representing the indemnified parties who are parties to such
action) or (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, in each of which
cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(d) Settlements. The indemnifying party under this Section 8 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
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
8(c) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in
23
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement, compromise or consent to the entry of judgment in
any pending or threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity was or could have
been sought hereunder by such indemnified party, unless such settlement,
compromise or consent includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such action,
suit or proceeding.
Section 9. Contribution. If the indemnification provided for in Section 8
is for any reason held to be unavailable to or otherwise insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Underwriter,
on the other hand, from the offering of the Common Shares pursuant to this
Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and the Underwriter, on the other hand,
in connection with the statements or omissions or inaccuracies in the
representations and warranties herein which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the Underwriter, on the other hand, in connection with the offering of the
Common Shares pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the Common
Shares pursuant to this Agreement (before deducting expenses) received by the
Company, and the total underwriting discount received by the Underwriter, in
each case as set forth on the front cover page of the Prospectus bear to the
aggregate initial public offering price of the Common Shares as set forth on
such cover. The relative fault of the Company, on the one hand, and the
Underwriter, on the other hand, shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact or any such inaccurate
or alleged inaccurate representation or warranty relates to information supplied
by the Company, on the one hand, or the Underwriter, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim. The provisions set forth in Section 8(c) with
respect to notice of commencement of any action shall apply if a claim for
contribution is to be made under this Section 9; provided, however, that no
additional notice shall be required with respect to any action for which notice
has been given under Section 8(c) for purposes of indemnification.
24
The Company and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, the Underwriter shall
not be required to contribute any amount in excess of the underwriting
commissions or discount received by such Underwriter in connection with the
Common Shares underwritten by it and distributed to the public. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 9,
each officer, director and employee of the Underwriter and each person, if any,
who controls the Underwriter within the meaning of the Securities Act and the
Exchange Act shall have the same rights to contribution as the Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company with
the meaning of the Securities Act and the Exchange Act shall have the same
rights to contribution as the Company.
Section 10. Termination of this Agreement. Prior to the First Closing
Date, this Agreement may be terminated by the Underwriter by notice given to the
Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission, the Nasdaq
National Market or by the Nasdaq SmallCap Market or trading in securities
generally on either the Nasdaq National Market, the Nasdaq SmallCap Market or
the New York Stock Exchange shall have been suspended or limited, or minimum or
maximum prices shall have been generally established on any of such stock
exchanges by the Commission or the NASD; (ii) a general banking moratorium shall
have been declared by any federal, New York, New Jersey or Minnesota
authorities; (iii) there shall have occurred any outbreak or escalation of
national or international hostilities or any crisis or calamity, or any
substantial change in the United States or international financial markets, or
any substantial change or development involving a prospective substantial change
in United States' or international political, financial or economic conditions,
as in the reasonable judgment of the Underwriter is material and adverse and
makes it impracticable or inadvisable to market the Common Shares in the manner
and on the terms described in the Prospectus or to enforce contracts for the
sale of securities; (iv) in the judgment of the Underwriter there shall have
occurred any Material Adverse Change; or (v) the Company or PPG shall have
sustained a loss by strike, fire, flood, earthquake, storm, accident or other
calamity of such character as in the reasonable judgment of the Underwriter may
interfere materially with the conduct of the business and operations of the
Company or PPG regardless of whether or not such loss shall have been insured.
Any termination pursuant to this Section 10 shall be without liability on the
part of (a) the Company to the Underwriter, except that the Company shall be
obligated to reimburse the expenses of the Underwriter pursuant to Sections 4
and 6 hereof, (b) the Underwriter to the Company, or (c) any party hereto to any
other party except that the provisions of Section 8 and Section 9 shall at all
times be effective and shall survive such termination.
Section 11. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of
25
the Company, of its officers and of the Underwriter set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Underwriter or the Company or any
of its or their partners, officers or directors or any controlling person, as
the case may be, and will survive delivery of and payment for the Common Shares
sold hereunder and any termination of this Agreement.
Section 12. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Underwriter:
Feltl & Company
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
with copies to:
Xxxxxxxxx & Xxxxxx P.L.L.P.
4200 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
If to the Company:
Peoples Educational Holdings, Inc.
000 Xxxxxx Xxxxxx
Xxxxxx Xxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxx
with a copy to:
Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxx
Any party hereto may change the address for receipt of communications by
giving written notice to the others.
26
Section 13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 8 and Section 9,
and in each case their respective successors, and no other person will have any
right or obligation hereunder. The term "successors" shall not include any
purchaser of the Common Shares from the Underwriter merely by reason of such
purchase.
Section 14. Partial Unenforceability. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
Section 15. Governing Law Provisions. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MINNESOTA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
Section 16. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing signed by all of
the parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Section headings herein are for the convenience of the parties only and
shall not affect the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated
business person who was adequately represented by counsel during negotiations
regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
The respective indemnities, contribution agreements, representations,
warranties, covenants and other statements of the Company and the Underwriter
set forth in or made pursuant to this Agreement shall remain operative and in
full force and effect, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of the Underwriter, the officers,
directors or employees of the Underwriter, any person controlling the
Underwriter, the Company, the officers or employees of the Company, or
27
any person controlling the Company, (ii) acceptance of the Shares and payment
for them hereunder and (iii) termination of this Agreement.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriter, the
Underwriter's officers, directors and employees, any controlling persons
referred to herein, the Company's directors and the Company's officers who sign
the Registration Statement and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Common Shares from an
Underwriter merely because of such purchase.
[SIGNATURE PAGES FOLLOW]
28
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
PEOPLES EDUCATIONAL HOLDINGS, INC.
By:
_____________________________________
Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted as
of the date first above written.
FELTL & COMPANY
By: ___________________________
Xxxx X. Xxxxx
Director of Capital Markets
29
EXHIBIT A
UNDERWRITER'S WARRANT
A-1
EXHIBIT B
OPINION OF COUNSEL FOR THE COMPANY
A-1
EXHIBIT C
LOCK UP AGREEMENT
