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EXHIBIT 1.1
KANI, INC.
FORM OF UNDERWRITING AGREEMENT
, 1996
XXXXXX XXXXXXX & ASSOCIATES, INC.
As Representatives of the
Several Underwriters
c/o Xxxxxx Xxxxxxx & Associates, Inc.
0000 Xxxxxxxx Xxxx.
Xxxxxxx Xxxxx, XX 00000
Ladies and Gentlemen:
Kani, Inc., a California corporation (the "Company"), proposes to issue
and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters"), an aggregate of 1,400,000 shares (hereinafter referred to as
the "Firm Securities") of its authorized but unissued Common Stock, no par value
(the "Common Stock"). The Company also proposes to grant to the Underwriters an
option to purchase up to 210,000 additional shares (hereinafter referred to as
the "Option Securities") of Common Stock for the sole purpose of covering
over-allotments, if any, in connection with the sale of the Firm Securities. The
Firm Securities and any Option Securities purchased pursuant to this Agreement
are referred to in this Agreement as the "Securities." The Company also proposes
to sell to each of you individually, and not in your respective capacities as
Representatives, four-year warrants to purchase up to [140,000 in the aggregate]
shares of Common Stock (the "Representatives' Warrants"). The sale of the
Representatives' Warrants will be consummated in accordance with the terms and
conditions of that certain Representatives' Warrant Agreement dated as of
, 1996 between the Company and the Representatives (the
"Representatives' Warrant Agreement"). The shares of Common Stock issuable
upon the exercise of the Representative's Warrants are hereinafter sometimes
referred to collectively as the "Warrant Securities." Xxxxxx Xxxxxxx &
Associates, Inc. and are acting as representatives
of the several Underwriters, and in that capacity are referred to in this
Agreement as the "Representatives."
The term "Registration Statement" as used in this Agreement shall mean
such registration statement, including financial statements, schedules and
exhibits, in the form in which it became or becomes, as the case may be,
effective (including, if the Company omitted information from the Registration
Statement pursuant to Rule 430A(a) of the Rules and Regulations, the information
deemed to be a part of the Registration Statement at the time it became
effective pursuant to Rule 430A(b) of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") )
and, in the event of any amendment thereto after the effective date of the
Registration Statement, shall also mean (from and after the
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effectiveness of such amendment) the Registration Statement as so amended. The
term "Prospectus" as used in this Agreement shall mean the prospectus relating
to the Securities included in the Registration Statement at the time it became
effective, except that if any revised prospectus shall be provided to the
Underwriters by the Company for use in connection with the offering of the
Securities that differs from the Prospectus on file with the Commission at the
time the Registration Statement became or becomes, as the case may be,
effective, whether or not the revised prospectus is required to be filed with
the Commission pursuant to Rule 424(b)(3) of the Rules and Regulations, the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriters for such use. For purposes of this
Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus, or any amendment or supplement to any of the
foregoing, shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering and Retrieval System ("XXXXX").
The Company hereby confirms its agreement with the several Underwriters
as follows:
1. Representations and Warranties of the Company. The Company represents and
warrants to, and agrees with, each of the several Underwriters as follows:
(a) The Company meets the requirements for use of Form S-1
under the Securities Act of 1933, as amended (the "Securities Act"), and a
registration statement (Registration No. 333- ) on Form S-1 relating to the
Securities, including such amendments to such registration statement as may have
been required to the date of this Agreement, has been prepared by the Company
under and in conformity with the provisions of the Securities Act, and the Rules
and Regulations thereunder, and has been filed with the Commission. If such
registration statement has not become effective upon execution of this
Agreement, a further amendment to such registration statement, including a form
of final prospectus, necessary to permit such registration statement to become
effective will promptly be filed by the Company with the Commission. If such
registration statement has become effective, a final prospectus containing
information permitted to be omitted at the time of effectiveness by Rule 430A of
the Rules and Regulations will promptly be filed by the Company with the
Commission in accordance with Rule 424 of the Rules and Regulations (and in form
and substance reasonably satisfactory to the counsel for the Representatives).
(b) No stop order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of the Prospectus has
been issued and no proceedings for that purpose are pending or threatened or, to
the best knowledge of the Company, contemplated by the Commission; no stop order
suspending the sale of the Securities in any jurisdiction has been issued and no
proceedings for that purpose are pending or, to the best knowledge of the
Company, threatened or are contemplated; and any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) has been complied with.
(c) The Company has been duly organized and IS validly
existing in good standing under the laws of its jurisdiction of organization,
has full power and authority to own or lease its properties and conduct its
business as described in the Registration Statement and the
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Prospectus and as it is currently conducted, and is duly qualified as a foreign
organization and in good standing in all jurisdictions in which the character of
the property owned or leased or the nature of the business transacted by it
makes qualification necessary (except where the failure to be so qualified would
not have a material adverse effect on the business, properties, condition
(financial or otherwise), prospects or results of operations of the Company.
Except as disclosed in the Registration Statement, the Company is in possession
of and operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities (including foreign governments) that are material to the conduct of
its business, all of which are valid and in full force and effect. The Company
does not have any subsidiaries.
(d) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not been any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any court or
governmental action, order or decree, or any changes in the capital stock or
long-term debt of the Company, or any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company, or any material
adverse change, or a development known to the Company that might cause or result
in a material adverse change, in or affecting the general affairs, management,
business, properties, condition (financial or otherwise), prospects or results
of operations of the Company, whether or not arising from transactions in the
ordinary course of business, other than as set forth in the Registration
Statement and the Prospectus, and since such dates, except in the ordinary
course of business, the Company has not entered into any material transaction
not described in the Registration Statement and the Prospectus.
(e) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material respects to
the requirement of the Securities Act and the Rules and Regulations; when the
Registration Statement became or becomes, as the case may be, effective (the
"Effective Date") and when the Prospectus is first filed (if required) in
accordance with Rule 424(b), and at all times subsequent thereto up to and at
the "Closing Date" (as hereinafter defined) and through any later date on which
Option Securities are to be purchased, as the case may be, the Registration
Statement and the Prospectus, and any amendments or supplements thereto, will in
all material respects conform to the requirements of the Securities Act and the
Rules and Regulations, and the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"), and the rules and regulations of the Commission thereunder; on
the Effective Date, the Registration Statement did not or will not contain any
untrue statement of a material fact and did not or will not omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and neither the Registration Statement nor
the Prospectus, nor any amendment or supplement thereto, will include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that none of the
representations and warranties in this Section 1(a)(v) shall apply to statements
in, or omissions from, the Registration Statement or the Prospectus made in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of the Underwriters through the Representatives
specifically for use
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in the Registration Statement or the Prospectus. There is no agreement,
contract, license, lease or other document required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement which is not described or filed as required. The
contracts so described in the Prospectus are in full force and effect on the
date hereof, and neither the Company, nor to the best knowledge of the Company,
any other party, is in material breach of or default under any such contracts.
(f) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all applicable federal and
state securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
the authorized and outstanding capital stock of the Company conforms in all
material respects to the statements relating thereto contained in the
Registration Statement and the Prospectus (and such statements correctly state
the substance of the instruments defining the capitalization of the Company).
The description of the Company's stock option, stock bonus and other stock plans
or arrangements, and the options or other rights granted or exercised
thereunder, set forth in the Prospectus accurately and fairly present the
information required to be shown with respect to such plans, arrangements,
options and rights. The Common Stock to be sold by the Company hereunder has
been duly authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company against payment therefor
in accordance with the terms of this Agreement, will be duly and validly issued
and fully paid and nonassessable. Other than this Agreement, the
Representatives' Warrant Agreement and the options and warrants to purchase the
Common Stock described in the Prospectus, there are no options, warrants or
other rights outstanding to subscribe for or purchase any shares of the
Company's capital stock. There are no preemptive rights or any restrictions upon
the voting or transfer of any of the Firm Securities or Option Securities
pursuant to the Company's certificate of incorporation, bylaws or any other
governing document or agreement to which the Company is a party or by which it
may be bound. Neither the filing of the Registration Statement nor the offering
or sale of the Securities as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or relating to
the registration of any of the Firm Securities or Option Securities or any other
capital stock of the Company.
(g) The Company has full right, power and authority to enter
into and perform its obligations under this Agreement and the Representatives'
Warrant Agreement, and to issue, sell and deliver the Securities and the Option
Securities. This Agreement and the Representatives' Warrant Agreement have each
been duly authorized, executed and delivered by the Company and constitute the
valid and binding agreements of the Company and each is enforceable against the
Company in accordance with its terms.
(h) The Company is not, or with the giving of notice or lapse
of time or both would it be, in violation of or in default under, nor will the
execution or delivery of this Agreement or the Representatives' Warrant
Agreement, or the consummation of the transactions contemplated by such
agreements result in a violation of or constitute a default (with the giving of
notice, passage of time or otherwise) under the articles of incorporation or
other charter or governing documents of the Company, or any obligation,
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any contract,
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indenture, mortgage, deed of trust, loan agreement, lease, license, joint
venture or other agreement or instrument to which the Company is a party or by
which it or any of its properties may be bound or affected, nor will the
performance by the Company of its obligations under this Agreement or the
Representatives' Warrant Agreement violate any law, rule, administrative
regulation or decree of any court or any governmental agency or body having
jurisdiction over the Company or any of its respective properties, or result in
the creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of the Company. Except for permits and similar authorizations
required under the Securities Act, the Exchange Act or under other securities or
Blue Sky laws of certain jurisdictions, and for such permits and authorizations
that have been obtained, no consent, approval, authorization or order of any
court, governmental agency or body or financial institution is required in
connection with the consummation of the transactions contemplated by this
Agreement or the Representatives' Warrant Agreement.
(i) The Company owns, or has valid rights to use, all items of
real and personal property which are material to the business of the Company,
free and clear of all liens, encumbrances and claims that might materially
interfere with the business, properties, condition (financial or otherwise) or
prospects of the Company.
(j) Except as described in the Prospectus, there is no
litigation or governmental proceeding to which the Company is a party, or to
which any property of the Company is subject, which is pending, or to the best
knowledge of the Company, contemplated against the Company, that might have any
material adverse effect on, or might result in any material adverse change in
the business, properties, condition (financial or otherwise), prospects or
results of operations of the Company, or that might prevent consummation of the
transactions contemplated by this Agreement or the Representatives' Warrant
Agreement or that are required to be disclosed in the Registration Statement.
(k) The Company is not in violation of any law, order,
ordinance, rule, regulation, writ, injunction, judgment or decree of any court
or governmental agency or body to which it or its properties (whether owned or
leased) may be subject, which violation might have a material adverse effect on
the business, properties, condition (financial or otherwise), prospects or
results of operations of the Company.
(l) The Company owns or possesses adequate rights to use all
material patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, tradenames and copyrights described or referred to in
the Prospectus as owned by or used by it, or which are necessary for the conduct
of its business as described in the Prospectus; and the Company has not received
any notice of infringement of or conflict with asserted rights of others with
respect to any patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, tradenames or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the business, properties, condition (financial
or otherwise), prospects or results of operations of the Company.
(m) The Company has not taken, and shall not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to cause or result in, under the Exchange
Act, the rules and regulations of the
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Commission under the Exchange Act, or otherwise, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities. No bid or purchase by the Company, and, to the best
knowledge of the Company, no bid or purchase that could be attributed to the
Company (as a result of bids or purchases by an "affiliated purchaser" within
the meaning of Rule 10b-6 under the Exchange Act) for or of the Common Stock,
any securities of the same class or series as the Common Stock or any securities
immediately convertible into or exchangeable for or that represent any right to
acquire the Common Stock, is now pending or in progress or will have commenced
at any time prior to the completion of the distribution of the Securities.
(n) KPMG Peat Marwick LLP, whose reports appear in the
Prospectus, are, and during the periods covered by their reports in the
Registration Statement were, independent accountants as required by the
Securities Act and the Rules and Regulations. The financial statements and pro
forma financial data included in the Registration Statement, any Preliminary
Prospectus or the Prospectus present fairly the consolidated financial
condition, results of operations, cash flow and changes in shareholders' equity
of the Company at the dates and for the periods indicated, and the financial
statements and pro forma financial data included in the Registration Statement
present fairly the information required to be stated therein. Such financial
statements and pro forma financial data have been prepared in accordance with
generally accepted accounting principles in the United States of America,
applied on a consistent basis throughout the periods presented, except as stated
therein. The selected and summary financial and statistical data, including pro
forma data, included in the Registration Statement and the Prospectus present
fairly the information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein. No other
financial statements and no schedules are required to be included in the
Registration Statement.
(o) The books, records and accounts of the Company accurately
and fairly reflect, in reasonable detail, the transactions in and dispositions
of the assets of the Company. The systems of internal accounting controls
maintained by the Company are sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary (A) to
permit preparation of financial statements in conformity with generally accepted
accounting principles and (B) 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 the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(p) The Company has delivered to the Representatives the
written agreement of each of its officers and directors and Skechers U.S.A.,
Inc. to the effect that each of them will not, for a period of one year
following the Closing Date, other than intra-family transfers or transfers to
trusts for estate planning purposes, without the prior written consent of the
Representatives, offer, sell or contract to sell, or otherwise dispose of, or
announce the offer of, any Common Stock and/or securities exercisable or
exchangeable for, or convertible into, Common Stock.
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(q) No labor disturbance by the employees of the Company
exists or is imminent, nor is the Company aware of any existing or imminent
labor disturbance by the employees of any principal suppliers, contract
manufacturing organizations, manufacturers, authorized dealers or distributors,
in either case, where such labor disturbance might be expected to result in any
material adverse change in the condition (financial or otherwise), earnings,
operations, business or prospects of the Company. No collective-bargaining
agreement exists with any of the Company's employees and, to the best knowledge
of the Company, no such agreement is imminent.
(r) The Company has filed all United States, state, local and
foreign tax returns which are required to be filed or has requested extensions
thereof and has paid all taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges to the extent that the same have
become due and payable. No tax assessment or deficiency has been made or
proposed against the Company nor has the Company received any notice of any
proposed assessment or deficiency.
(s) Except as set forth in the Prospectus and except as to
which may exist in the ordinary course of business with Skechers U.S.A., Inc.
consistent with past practice, there are no outstanding loans, advances or
guaranties of indebtedness by the Company to or for the benefit of any of its
"affiliates," as such term is defined in the Rules and Regulations, or any of
its officers or directors, or any of the members of the families of any of them.
(t) The Company has not, directly or indirectly, at any time
(i) made any contributions to any candidate for political office, or failed to
disclose fully any such contribution, in violation of law; (ii) made any payment
to any state, federal or foreign governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or allowed by all applicable laws; or (iii) violated nor is it in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended.
(u) The Company does not have any liability, known or unknown,
matured or not matured, absolute or contingent, assessed or unassessed, imposed
or based upon any provision of, or has received notice of any potential
liability under, any foreign, United States, state or local law, rule or
regulation, or the common law, or any tort, nuisance or absolute liability
theory applicable to the Company, or under any code, order, decree, judgment or
injunction applicable to the Company relating to public health or safety, worker
health or safety or pollution, damage to or protection of the environment,
including, without limitation, laws relating to damage to natural resources,
emissions, discharges, releases or threatened releases of hazardous materials
into the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), or otherwise relating to the
manufacture, processing, use, treatment, storage, generation, disposal,
transport or handling of hazardous materials. As used herein, "hazardous
material" includes chemical substances, wastes, pollutants, contaminants,
hazardous or toxic substances, constituents, materials or wastes, whether solid,
gaseous or liquid in nature.
(v) The Company has not distributed and will not distribute
prior to the Closing Date or on or prior to any date on which the Option
Securities are to be purchased, as
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the case may be, any prospectus or other offering material in connection with
the offering and sale of the Securities other than the Prospectus, the
Registration Statement, and any other material which may be permitted by the
Securities Act and the Rules and Regulations.
(w) The Common Stock has been approved for inclusion for
quotation on the National Association of Securities Dealers Automated Quotation
National Market System (the "National Market System"), subject to official
notice of issuance.
(x) The Company is familiar with and has discussed with its
United States legal counsel the Investment Company Act of 1940, as amended (the
"1940 Act"), and the rules and regulations thereunder, and has in the past
conducted, and intends in the future to conduct, its affairs in such a manner as
to ensure that it will not become an "investment company" within the meaning of
the 1940 Act and such rules and regulations.
(y) The Representatives' Warrants have been duly and validly
authorized, and when issued and delivered will be valid and binding obligations
of the Company in accordance with their terms; the Warrant Securities have been
duly and validly authorized for issuance upon exercise of the Representatives'
Warrants, and when so issued will be validly issued, fully paid and
non-assessable; and no stockholder of the Company has any preemptive rights with
respect to the Representatives' Warrants or the Warrant Securities.
(z) The Company does not know of any facts which may adversely
affect its earnings, prospects or business which have not been fully disclosed
in writing to the Representatives.
2. Purchase, Sale and Delivery of Securities.
(a) On the basis of the representations, warranties and
covenants contained in this Agreement, and subject to the terms and conditions
set forth in this Agreement, the Company agrees to sell to the several
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $ per share of Common Stock,
the respective number of Firm Securities set forth opposite the name of such
Underwriter in Schedule I to this Agreement (subject to adjustment as provided
in Section 8 of this Agreement).
(b) On the basis of the representations, warranties and
covenants contained in this Agreement, and subject to the terms and conditions
set forth in this Agreement, including the terms set forth below, the Company
grants an option to the several Underwriters to purchase from the Company all or
any portion of 210,000 shares of Common Stock at the same price per share of
Common Stock as the Underwriters shall pay for the shares of Common Stock
included in the Firm Securities. Said option may be exercised only to cover
over-allotments in the sale of the Firm Securities by the Underwriters and may
be exercised in whole or in part at any time (but not more than once) on or
before the sixtieth day after the date of the Prospectus upon written,
telecopied or telegraphic notice by the Representatives to the Company setting
forth the aggregate number and class of Option Securities as to which the
several Underwriters are exercising the option and the settlement date. The
Option Securities shall be purchased
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severally, and not jointly, by each Underwriter, if purchased at all, in the
same proportion that the number of Firm Securities set forth opposite the name
of the Underwriter in Schedule I to this Agreement bears to the total number of
Firm Securities to be purchased by the Underwriters under Section 2(a), above,
subject to such adjustments as the Representatives in their absolute discretion
shall make to eliminate any fractional shares. Delivery of certificates for the
Option Securities, and payment therefor, shall be made as provided in Section
2(c) and Section 2(d) below.
(c) Delivery of certificates for the Firm Securities and the
Option Securities (if the option granted by the Company in Section 2(b) above
shall have been exercised not later than 10:00 a.m., California time, on the
date two business days preceding the Closing Date), and payment therefor, less
any reimbursable expenses provided for in Section 4(a) of this Agreement and the
nonaccountable expense allowance provided for in Section 4(b) of this Agreement,
shall be made at the office of Xxxxxx Xxxxxxx &Associates, Inc., Beverly Hills,
California, at 7:00 a.m., California time, on the later to occur of (i) the
fourth business day after the date of this Agreement, (ii) the third business
day after the date the Firm Securities are first offered to the public, or (iii)
as provided in Section 8 of this Agreement. The date and hour of delivery and
payment for the Firm Securities are referred to in this Agreement as the
"Closing Date." As used in this Agreement, "business day" means a day on which
the New York Stock Exchange is open for trading and on which banks in California
are open for business and not permitted by law or executive order to be closed.
(d) If any of the options granted by the Company in Section
2(b) above shall be exercised after 10:00 a.m., California time, on the date two
business days preceding the Closing Date, delivery of certificates for the
Option Securities, and payment therefor, shall be made at the office of Xxxxxx
Xxxxxxx &Associates, Inc., Beverly Hills, California, at 7:00 a.m., California
time, on the date specified by the Representatives (which shall be within four
business days after the exercise of the option).
(e) Payment of the purchase price for the Securities by the
several Underwriters shall be made by certified or official bank check or checks
drawn in next-day funds, payable to the order of the Company (and the Company
agrees not to deposit or permit deposit of any such check in the bank on which
drawn until the day following the date of its delivery to the Company). Such
payment shall be made upon delivery of certificates for the Securities to you
for the respective accounts of the several Underwriters. Certificates for the
Securities to be delivered to you shall be registered in such name or names and
shall be in such denominations as the Representatives may request at least two
business days before the Closing Date, in the case of Firm Securities, and at
least one business day prior to the purchase of the Option Securities, in the
case of the Option Securities. Such certificates will be made available to the
Underwriters for inspection, checking and packaging at the offices of Xxxxxx
Xxxxxxx &Associates, Inc., Boca Raton, Florida, not less than one full business
day prior to the Closing Date or, in the case of the Option Securities, by 3:00
p.m., Florida time, on the first business day preceding the date of purchase.
It is understood that either or both of the Representatives,
individually and not on behalf of the Underwriters, may (but shall not be
obligated to) make payment to the Company for
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Securities to be purchased by any Underwriter whose check shall not have been
received by the Representatives on the Closing Date or any later date on which
Option Securities are purchased for the account of such Underwriter. Any such
payment shall not relieve such Underwriter from any of its obligations
hereunder.
(f) It is understood that the several Underwriters propose to
offer the Securities for sale to the public as soon as the Representatives deem
it advisable to do so (the "Public Offering"). The Firm Securities are to be
initially offered to the public at the public offering price set forth in the
Prospectus (the "Public Offering Price"). The Representatives may from time to
time thereafter change the public offering price and other selling terms.
(g) The information set forth in the last paragraph on the
front cover page (insofar as such information relates to the Underwriters), the
legend respecting stabilization set forth on the inside front cover page, and
the statements in the first two paragraphs and the penultimate paragraph set
forth under the caption "Underwriting" in any Preliminary Prospectus and in the
final form of Prospectus filed pursuant to Rule 424(b), constitute the only
information furnished by the Underwriters to the Company for inclusion in any
Preliminary Prospectus, the Prospectus or the Registration Statement.
3. Further Agreements of the Company. The Company covenants and agrees
with the several Underwriters as follows:
(a) The Company will use its best efforts to cause the
Registration Statement, and any amendment thereof, if not effective at the time
of execution of this Agreement, to become effective as promptly as possible. If
the Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectus is otherwise required under Rule 424(b), the
Company will file the Prospectus, properly completed (and in form and substance
reasonably satisfactory to counsel for the Underwriters) pursuant to Rule 424(b)
within the time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company will not file the Prospectus,
any amended Prospectus, any amendment of the Registration Statement or
supplement to the Prospectus without advising the Representatives of, and
furnishing the Representatives with copies thereof a reasonable time prior to
the proposed filing of, such amendment or supplement and without obtaining the
prior consent of the Representatives to such filing. The Company will prepare
and file with the Commission, promptly upon the request of the Representatives,
any amendment to the Registration Statement or supplement to the Prospectus that
may be necessary or advisable in connection with the distribution of the
Securities by you, and use its best efforts to cause the same to become
effective as promptly as possible.
(b) The Company will promptly advise the Representatives (i)
when the Registration Statement shall have become effective, (ii) when any
amendment thereof shall have become effective, (iii) of any request by the
Commission for any amendment of or supplement to the Registration Statement or
the Prospectus or for any additional information, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that purpose
and (v) of the receipt by the Company of any notification with respect to the
suspension of the qualification
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of the Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose. The Company will use its best efforts to
prevent the issuance of any such stop order or suspension and, if issued, to
obtain as soon as possible the withdrawal thereof.
(c) The Company will (i) on or before the Closing Date,
deliver to each of you and your counsel a conformed copy of the Registration
Statement as filed and of each amendment thereto filed prior to the time the
Registration Statement becomes effective and, promptly upon the filing thereof,
a conformed copy of each post-effective amendment, if any, to the Registration
Statement (together with, in each case, all exhibits thereto unless previously
furnished to you) and all documents filed by the Company with the Commission
under the Exchange Act and deemed to be incorporated by reference into any
Preliminary Prospectus or the Prospectus, and will also deliver to you, for
distribution to the several Underwriters, a sufficient number of additional
conformed copies of each of the foregoing (excluding exhibits) so that one copy
of each may be distributed to each Underwriter, (ii) as promptly as possible
deliver to each of you and send to the several Underwriters, at such office or
offices as you may designate, as many copies of the Prospectus as you may
reasonably request and (iii) thereafter from time to time during the period in
which a prospectus is required by law to be delivered by an Underwriter or a
dealer, likewise send to the Underwriters as many additional copies of the
Prospectus and as many copies of any supplement to the Prospectus and of any
amended Prospectus, filed by the Company with the Commission, as you may
reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or a dealer any event shall
occur as a result of which it is necessary to supplement or amend the Prospectus
in order to make the Prospectus not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser of the Securities, or if it
shall be necessary to amend or to supplement the Prospectus to comply with the
Securities Act or the Rules and Regulations, the Company will forthwith prepare
and file with the Commission a supplement to the Prospectus or an amended
Prospectus so that the Prospectus as so supplemented or amended will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time such Prospectus is delivered to such
purchaser, not misleading, and so that it then will otherwise comply with the
Securities Act and the Rules and Regulations. If, after the public offering of
the Securities by the Underwriters and during such period, the Underwriters
shall propose to vary the terms of offering thereof by reason of changes in
general market conditions or otherwise, you will advise the Company in writing
of the proposed variation, and, if in the opinion either of counsel for the
Company or of counsel for the Underwriters such proposed variation requires that
the Prospectus be supplemented or amended, the Company will forthwith prepare
and file with the Commission a supplement to the Prospectus or an amended
prospectus setting forth such variation. The Company authorizes the Underwriters
and all dealers to whom any of the Securities may be sold by the several
Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Securities in accordance with
the applicable provisions of the Securities Act and the Rules and Regulations
for such period.
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(e) Prior to the filing thereof with the Commission, the
Company will submit to you, for your information, a copy of any post-effective
amendment to the Registration Statement and any supplement to the Prospectus or
any amended Prospectus proposed to be filed.
(f) The Company will cooperate with you and your counsel in
the qualification of the Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions as you may designate and, during the period
in which a prospectus is required by law to be delivered by an Underwriter or a
dealer, in keeping such qualifications in good standing under said securities or
Blue Sky laws; provided, however, that the Company shall not be obligated to
file any general consent to service of process or to qualify to do business as a
foreign corporation in any jurisdiction in which it is not so qualified. The
Company will, from time to time, prepare and file such statements, reports, and
other documents as are or may be required to continue such qualifications in
effect for so long a period as you may reasonably request for distribution of
the Securities.
(g) During a period of five years commencing with the date of
this Agreement, the Company will promptly furnish to each of you, and to each
Underwriter who may so request in writing, copies of all periodic and special
reports furnished to shareholders of the Company, of all information, documents
and reports filed with Commission, any securities exchange or the National
Association of Securities Dealers, Inc. and of all press releases and material
news items or articles in respect of the Company, its products or affairs
released or prepared by the Company (other than promotional and marketing
materials disseminated solely to customers and potential customers of the
Company in the ordinary course of business); and any additional information
concerning the Company or its business which you may reasonably request.
(h) As soon as practicable, but not later than the 45th day
following the end of the fiscal quarter first ending after the first anniversary
of the Effective Date, the Company will make generally available to its
securities holders and furnish to the Representatives an earnings statement or
statements in accordance with Section 11(a) of the Securities Act and Rule 158
thereunder.
(i) The Company agrees that it will cause each of its
executive officers and directors and Skechers U.S.A., Inc to enter into
agreements with the Representatives to the effect that they will not, directly
or indirectly, without your prior written consent, sell, offer, contract to
sell, grant any option to purchase, or otherwise dispose of any shares of Common
Stock, or any securities convertible into, exchangeable for or exercisable for
Common Stock, or any rights to purchase or acquire Common Stock (other than
intra-family transfers or transfers to trusts for estate planning purposes) for
a period of one year after the Closing Date, other than the sale of the
Securities to be sold to the Underwriters pursuant to this Agreement.
(j) The Company will apply the net proceeds from the offering
received by it in the manner set forth under the caption "Use of Proceeds" in
the Prospectus.
(k) The Company will, prior to the date of this Agreement, and
at all times thereafter, unless such securities are then listed on a national
securities exchange, cause each of the Securities to be included for quotation
on the National Market System, and the Company will
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comply with all registration, filing, reporting and other requirements of the
Exchange Act and National Market System which may from time to time be
applicable to the Company.
(l) The Company will use its best efforts to maintain
insurance of the types and in the amounts which it deems adequate for its
business and consistent with insurance coverage maintained by companies of
similar size and engaged in similar businesses, including, but not limited to,
general liability insurance covering all real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against. The Company will obtain and
maintain a reasonable amount of Directors and Officers liability insurance from
a responsible insurer who shall be satisfactory to the Representatives (provided
that such insurance can be obtained at a reasonable cost, as determined by the
Company and the Representatives).
(m) In accordance with the Representative's Warrant Agreement,
the Company agrees, upon its receipt from each of Xxxxxx Xxxxxxx & Associates,
Inc. and of the exercise price set forth in the Representative's Warrant
Agreement in payment therefor, to deliver to each of Xxxxxx Xxxxxxx &
Associates, Inc. and (individually, and not as the Representatives of the
Underwriters) on the Closing Date upon completion of the purchase and sale of
the Securities pursuant to Section 2 of this Agreement, Warrants (in the form
attached as Exhibit A to the Representatives' Warrant Agreement) representing
the right to purchase up to [140,000 in the aggregate] shares of Common Stock at
a price equal to 120% of the offering price per share of Common Stock to the
public as set forth on the cover page of the Prospectus.
(n) The Company shall use its best efforts to retain in their
current positions the individuals named as executive officers under the caption
"Management" in the Registration Statement for a reasonable period after the
consummation of the Public Offering (but in no circumstance in the absence of
good cause shall such period be less than one year).
(o) The Company shall use its best efforts to at all times
maintain at least two (2) independent directors (that is directors that are not
officers of the Company, who are neither related to its officers nor represent
concentrated or family holdings of the Company's shares, and who, in the view of
the Company's board of directors, are free of any relationship that would
interfere with the exercise of independent judgement (the "Independent
Directors")). The Independent Directors shall constitute a majority of the
Company's audit and compensation committees. Further, the favorable vote of a
majority of the Company's directors, including at least one of the Independent
Directors, shall be required as to any related party transaction between the
Company and any 5% or more shareholder of the Company and/or officer or director
of the Company (or any affiliates of such individuals). Any proposed changes in
the Company's Articles of Incorporation that are not otherwise approved by the
majority vote of the shares held by the Company's non-management shareholders
(shareholders exclusive of Skechers U.S.A., Inc., and officers and directors of
the Company) shall be approved by a majority of the Company's directors and not
disapproved by a majority of the Company's Independent Directors.
(p) The Company will include in the Registration Statement
audited financial statements of the Company for the three fiscal years preceding
the effective date of the
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Registration Statement (reported on by KPMG Peat Marwick, LLP) and, if required
under SEC rules and regulations, pro forma financial data and current unaudited
comparative interim financial statements. The financial statements and pro forma
financial data will present fairly the financial condition of the Company and
the results of its operations at the time and for the periods covered by such
financial statements and pro forma financial data, and such statements and pro
forma financial data will be substantially as heretofore represented to the
Representatives.
(q) Except in connection with acquisitions, and the Company's
right to adopt a stock option plan for the issuance of up to 450,000 shares of
Common Stock and the grant of options to its directors, officers and employees
under such Plan at an exercise price not less than the Public Offering Price
prior to the offering and the Bid price after the offering, the Company will
not, without the Representatives' prior written consent (1) sell any shares of
capital stock or issue any warrants, options or any other security exercisable
or convertible into any shares of capital stock, except pursuant to the
Company's employee benefit plans described in the Registration Statement, or (2)
purchase any shares of capital stock of the Company, in either case, during the
12-month period following the closing of the Public Offering (the "Closing").
(r) The Representatives shall have the right for a period of
three (3) years from the Closing to designate an observer to the Board of
Directors of the Company, which observer shall have the right to attend all
Board and Board committee meetings and shall be compensated on the same basis as
outside members of the Board. The Company shall use its reasonable efforts to
provide the Representative's nominee with an agenda and all accompanying back-up
data for each Board meeting at least one week prior to such meeting. The Company
shall pay all reasonable expenses of the Representative's observer in attending
Board meetings.
(s) As soon as it is legally permitted to do so, the Company
will file and maintain a Registration Statement on Form S-3 covering the Warrant
Securities.
(t) The Company shall enter into a Consulting Agreement for
financial and investment banking services with Xxxxxx Xxxxxxx & Associates, Inc.
for a period of 24 months, with consulting fees of $2,500 per month, payable in
advance at the Closing.
(u) The Company shall engage the services of an investor
relations advisory firm reasonably acceptable to the Representatives, commencing
prior to the effective date of the Registration Statement and continuing for a
period of at least one year.
4. Fees and Expenses. The Company agrees with each Underwriter that:
(a) The Company shall pay all costs and expenses incident to
the purchase, sale and delivery of the Securities, including without limitation,
all fees and expenses of filing the Registration Statement with the SEC and the
NASD; all Blue Sky fees and expenses, including fees of the Representatives'
counsel (which shall undertake all such Blue Sky matters) up to a maximum of
$15,000; fees and disbursements of counsel and accountants for the Company;
printing and mailing costs, including costs of printing the Registration
Statement, any amendments thereto, all underwriting documents, Blue Sky
memoranda and a reasonable quantity
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of prospectuses as determined by the Representatives; the Company's and
Representatives' road show cost and expenses; and the cost of preparing a total
of three (3) sets of bound volumes of the Public Offering documents for the
Representatives and their counsel. The Company shall also pay for the cost of
advertising the Public Offering in the national edition of the Wall Street
Journal and all other expenses for advertising undertaken at the Company's
request, including graphic slide costs. The Representatives shall pay the fees
and disbursements of their counsel, with the exception of the Blue Sky fees
described above.
(b) In addition to its obligations under Section 4(a) above,
the Company agrees to pay the Representatives a non-accountable expense
allowance equal to two and one-half percent (2-1/2%) of the aggregate Public
Offering Price of the Securities sold in the Public Offering, including any
over-allotment Securities sold in such offering. Such allowance, less $40,000
which was paid to the Representatives by the Company upon the execution of the
letter of intent relating to this offering, shall be paid to the Representatives
as provided in Section 2(c) of this Agreement.
5. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Securities shall be subject, in
the sole discretion of the Representatives, to the accuracy as of the date of
execution of this Agreement, the Closing Date and the date on which the Option
Securities are to be purchased, as the case may be, of the representations and
warranties of the Company set forth in this Agreement, to the accuracy of the
statements of the Company and its officers made in any certificate delivered
pursuant to the terms of this Agreement, to the performance by the Company of
all of its obligations to be performed under this Agreement at or prior to the
Closing Date or any later date on which Option Securities are to be purchased,
as the case may be, and to the following additional conditions:
(a) The Registration Statement shall have become effective,
(or, if a post-effective amendment is required to be filed pursuant to Rule 430A
under the Act, such post-effective amendment shall become effective and the
Company shall have provided evidence satisfactory to the Representatives of such
filing and effectiveness) not later than 5:00 p.m., California time, on the date
of this Agreement or at such later date and time as you may approve in writing
and, at the Closing Date, or, with respect to the Option Securities, the date on
which such Option Securities are to be purchased, no stop order suspending the
effectiveness of the Registration Statement or any qualification or exemption
from qualification for the sale of the Securities in any jurisdiction shall have
been issued and no proceedings for that purpose shall have been instituted or
threatened; and any request for additional information on the part of the
Commission shall have been complied with to the reasonable satisfaction of the
Representatives and their counsel.
(b) The Representatives shall have received from Troop
Xxxxxxxxx Xxxxxxx & Xxxxxx, LLP, counsel for the Underwriters, an opinion dated
the Closing Date, with respect to the issuance and sale of the Securities, and
such other related matters as the Representatives may reasonably require, and
the Company shall have furnished such counsel with all documents which they may
request for the purpose of enabling them to pass upon such matters.
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(c) You shall have received on the Closing Date and on any
later date on which Option Securities are purchased, as the case may be, the
opinion of Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx, counsel for the Company,
addressed to the Underwriters and dated the Closing Date or such later date, and
with reproduced copies or signed counterparts thereof for each of the
Underwriters, covering the matters set forth in Annex A to this Agreement.
(d) You shall be satisfied that there has not been any
material change in the market for securities in general or in political,
financial or economic conditions from those reasonably foreseeable as to render
it impracticable in your sole judgment to make a public offering of the
Securities, or a material adverse change in market levels for securities in
general (or those of companies in particular) or financial or economic
conditions which render it inadvisable to proceed.
(e) You shall have received on the Closing Date and on any
later date on which Option Securities are purchased a certificate, dated the
Closing Date or such later date, as the case may be, and signed by the President
and the Chief Financial Officer of the Company, stating that:
(i) The representations and warranties of the Company
set forth in Section 1 of this Agreement are true and correct with the same
force and effect as if expressly made at and as of such date, and the Company
has complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to such date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings for that purpose
have been instituted or are pending or are threatened under the Securities Act;
(iii) the Securities have been duly designated
national market system securities, duly authorized for quotation on the National
Market System; and
(iv) (A) the respective signers of said certificate
have carefully examined the Registration Statement in the form in which it
originally became effective and the Prospectus and any supplements or amendments
thereto, and that, as of the Effective Date, the statements made in the
Registration Statement and the Prospectus were true and correct in all material
respects, and the Registration Statement did not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, and the Prospectus did not omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstance under which they were made, not
misleading, (B) since the Effective Date, no event has occurred that should have
been set forth in a supplement or amendment to the Prospectus that has not been
set forth in such a supplement or amendment, (C) since the respective dates as
of which information is given in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein, there has
not been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, condition
(financial or otherwise), capitalization, prospects or results of operations of
the Company, whether or not arising from transactions in the ordinary course of
business, and, since such
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dates, except in the ordinary course of business, the Company has not entered
into any material transaction not referred to in the Registration Statement in
the form in which it originally became effective and the Prospectus contained
therein, (D) there are not any pending or known threatened legal proceedings to
which the Company is a party or of which property of the Company is the subject
which are material and which are not disclosed in the Registration Statement and
the Prospectus, and (E) there are not any license agreements, contracts, leases
or other documents that are required to be filed as exhibits to the Registration
Statement that have not been filed as required.
(f) On the date of this Agreement and on each Closing Date you
shall have received a letter from KPMG Peat Marwick LLP, independent
accountants, dated such date and Closing Date, respectively, addressed to you as
Representative, to the effect that:
(i) it is an independent certified public accountant
with respect to the Company within the meaning of the Securities Act and the
applicable Rules and Regulations;
(ii) in its opinion, the financial statements, pro
forma financial data, and the respective notes thereto, of the Company examined
by it and contained in the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and the Rules
and Regulations;
(iii) On the basis of its procedures and inquiries as
specified in its letters, nothing has come to its attention to cause it to
believe that (A) the data (including pro forma data) included in the Prospectus
under the caption "Selected Financial Data" do not agree with the corresponding
amounts in the audited financial statements and pro forma data for and as at the
end of each of the periods then ended; and (B) at a specified date not more than
five business days prior to the date of such letter, (x) there was any change in
the capital stock or long-term debt of the Company or any decrease in net
current assets or net assets or share holders' equity, in each case as compared
with the corresponding amounts shown in the September 30, 1996 balance sheet
contained in the Prospectus, or (y) for the period from October 1, 1996 to the
specified date referred to above, as compared with the corresponding period in
the prior year, there was any decrease in sales, net income or income per share,
except in all instances for changes or decreases which the Prospectus discloses
have occurred or may occur, or if there was any change or decrease, setting
forth the amount of such change or decrease.
(iv) It has compared the information expressed in
amounts, dollar amounts and percentages derived therefrom, and other financial
information pertaining to the Company set forth in the Prospectus specified by
you, in each case to the extent such information was obtained or derived from
the general accounting records of the Company, with the results obtained from
the application of specified readings, inquiries and other appropriate
procedures set forth in such letters, and found by it to be in agreement.
In addition, you shall have received from KPMG Peat Marwick
LLP on or prior to the Closing Date, a letter addressed to the Company and made
available to you for the use of the Underwriters stating that their review of
the Company's system of internal controls, to
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the extent they deemed necessary in establishing the scope of their examination
of the Company's financial statements as of December 31, 1995, did not disclose
any weaknesses in internal controls that they considered to be material
weaknesses.
(g) Prior to the Closing Date, the Securities shall have been
designated national market system securities, duly authorized for quotation on
the National Market System upon official notice of issuance.
(h) On or prior to the Closing Date, you shall have received
from the Company's officers and directors and from Skechers U.S.A., Inc.
executed lock-up agreements covering the matters described in Section 1(xvi) of
this Agreement.
(i) On or prior to the Closing Date, the Company shall have
entered into the Representatives' Warrant Agreement, substantially in the form
filed as Exhibit 4.2 to the Registration Statement; and on the Closing Date,
concurrently with the purchase and sale of the Securities, the Company shall
have issued, sold and delivered the Warrants to the Representatives.
(j) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request (including
certificates of officers of the Company), as to the accuracy of the
representations and warranties of the Company set forth in this Agreement, as to
the performance by the Company of its obligations under this Agreement and as to
the other conditions concurrent and precedent to the obligations of the
Underwriters under this Agreement.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement will be in compliance with the provisions of this
Agreement only if they are reasonably satisfactory to Troop Xxxxxxxxx Xxxxxxx &
Xxxxxx, LLP, counsel for the Underwriters. The Company will furnish you with
such number of conformed copies of such opinions, certificates, letters and
documents as you shall reasonably request.
If any of the conditions specified in this Section 5 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and their counsel, this Agreement and all
obligations of the Underwriters hereunder may be canceled by the Representatives
at, or at any time prior to, the Closing Date or (with respect to the Option
Securities) prior to the date upon which the Option Securities are to be
purchased, as the case may be. Notice of such cancellation shall be given to the
Company in writing or by telephone, telecopy or telegraph confirmed in writing.
Any such termination shall be without liability of the Company to the
Underwriters (except as provided in Section 4 or Section 7 of this Agreement)
and without liability of the Underwriters to the Company (except to the extent
provided in Section 7 of this Agreement).
6. Conditions of the Obligation of the Company. The obligations of the
Company to sell and deliver the Securities required to be delivered as and when
specified in this
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Agreement shall be subject to the condition that at the Closing Date or (with
respect to the Option Securities) the date upon which the Option Securities are
to be purchased, no stop order suspending the effectiveness thereof shall be in
effect and no proceedings therefor shall be pending or threatened by the
Commission.
7. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner or officer thereof) who
controls any Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act or other federal or state statute,
law or regulation, at common law or otherwise, specifically including but not
limited to losses, claims, damages or liabilities (or actions in respect
thereof) related to negligence on the part of any Underwriter, and the Company
agrees to reimburse each such Underwriter and controlling person for any legal
or other expenses (including, except as otherwise hereinafter provided,
settlement expenses and reasonable fees and disbursements of counsel) incurred
by the respective indemnified parties in connection with defending against any
such losses, claims, damages or liabilities or in connection with any
investigation or inquiry of, or other proceeding that may be brought against,
the respective indemnified parties, in each case insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon, in whole or in part, (i) any breach of any representation, warranty, or
covenant of the Company in this Agreement, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement in
the form originally filed or in any amendment thereto (including the Prospectus
as part thereof) or any post-effective amendment thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or (iii) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus or
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) or the omission
or alleged omission to state therein 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 (iv) any untrue statement or alleged untrue statement
of a material fact contained in any application or other document, or any
amendment or supplement thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to qualify the Securities under the securities or Blue Sky laws thereof
or filed with the Commission or any securities association or securities
exchange, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that (1) the indemnity agreements of the Company contained in this
Section 7(a) shall not apply to any such losses, claims, damages, liabilities or
expenses if such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of any Underwriter through the Representatives specifically for use in any
Preliminary Prospectus or the Registration Statement or the Prospectus or any
such amendment thereof or supplement thereto and (2) the indemnity agreement
contained in this Section 7(a) with respect to any Preliminary Prospectus
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shall not inure to the benefit of any Underwriter from whom the person asserting
any such losses, claims, damages, liabilities or expenses purchased the
Securities that are the subject thereof (or to the benefit of any person
controlling such Underwriter) if a copy of the Prospectus (or the Prospectus as
amended or supplemented) was not sent or delivered to such person within the
time required by the Securities Act and the Rules and Regulations and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented), unless the failure is the result of noncompliance by the Company
with Section 3 of this Agreement. The indemnity agreements of the Company
contained in this Section 7(a) and the representations and warranties of the
Company contained in Section 1(a) of this Agreement shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the delivery of and payment for the
Securities. This Indemnity Agreement shall be in addition to any liabilities
which the Company may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its officers who signs the Registration Statement,
each of its directors, each other Underwriter, and each person (including each
partner or officer thereof) who controls the Company or any such other
Underwriter within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such indemnified parties or any of them may become subject under the
Securities Act, the Exchange Act, or other federal or state statute, law or
regulation or at common law or otherwise and to reimburse each of them for any
legal or other expenses (including, except as otherwise hereinafter provided,
settlement expenses and reasonable fees and disbursements of counsel) incurred
by the respective indemnified parties in connection with defending against any
such losses, claims, damages or liabilities or in connection with any
investigation or inquiry of, or other proceeding that may be brought against,
the respective indemnified parties, in each case arising out of or based upon
(i) any breach of any representation, warranty or covenant of the indemnifying
Underwriter in this Agreement, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (including
the Prospectus as part thereof) or any post-effective amendment thereto, or the
omission or alleged omission to state therein, in the light of the circumstances
under which they were made, a material fact required to be stated therein or
necessary to make the statements therein not misleading or (iii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but only if such
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such
indemnifying Underwriter through the Representatives specifically for use in any
Preliminary Prospectus or the Registration Statement or the Prospectus or any
such amendment thereof or supplement thereto. The Company acknowledges and
agrees that the disclosure described in Section 2(g) of this Agreement
constitutes the only information furnished in writing by or on behalf of the
several Underwriters for inclusion in the Registration Statement or the
Prospectus or in any Preliminary Prospectus. The indemnity agreement of each
Underwriter contained in this Section 7(b) shall remain operative and in full
force and effect regardless of any investigation made by or on
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behalf of any indemnified party and shall survive the delivery of and payment
for the Securities. This Indemnity Agreement shall be in addition to any
liabilities which each Underwriter may otherwise have.
(c) Each party indemnified under the provisions of Sections
7(a) and 7(b) above, agrees that, upon the service of a summons or other initial
legal process upon it in any action or suit instituted against it or upon its
receipt of written notification of the commencement of any investigation or
inquiry of, or proceeding against, it in respect of which indemnity may be
sought on account of any indemnity agreement contained in such Sections , it
will, if a claim in respect thereunder is to be made against the indemnifying
party or parties under this Section 7, promptly give written notice (the
"Notice") of such service or notification to the party or parties from whom
indemnification may be sought hereunder. No indemnification provided for in
Sections 7(a) and 7(b) above, shall be available to any party who shall fail so
to give the Notice if the party to whom such Notice was not given was unaware of
the action, suit, investigation, inquiry or proceeding to which the Notice would
have related and was materially prejudiced by the failure to receive the Notice,
but the omission so to notify such indemnifying party or parties of any such
service or notification shall not relieve such indemnifying party or parties
from any liability which it or they may have to the indemnified party for
contribution or otherwise than on account of such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in the
defense of any action, suit or proceeding against, or investigation or inquiry
of, an indemnified party. Any indemnifying party shall be entitled, if it so
elects within a reasonable time after receipt of the Notice by giving written
notice (the "Notice of Defense") to the indemnified party, to assume (alone or
in conjunction with any other indemnifying party or parties) the entire defense
of such action, suit, investigation, inquiry or proceeding, in which event such
defense shall be conducted, at the expense of the indemnifying party or parties,
by counsel chosen by such indemnifying party or parties and reasonably
satisfactory to the indemnified party or parties; provided, however, that (i) if
the indemnified party or parties reasonably determine that there may be a
conflict between the positions of the indemnifying party or parties and of the
indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses
available to such indemnified party or parties different from or in addition to
those available to the indemnifying party or parties, then counsel for the
indemnified party or parties shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interests of the indemnified party or parties and (ii) in any event, the
indemnified party or parties shall be entitled to have counsel chosen by such
indemnified party or parties participate in, but not conduct, the defense,
however, in no event shall the indemnifying parties be obligated to pay for more
than one firm of attorneys and one local counsel in each appropriate
jurisdiction for all of the indemnified parties. If, within a reasonable time
after receipt of the Notice, an indemnifying party gives a Notice of Defense and
the counsel chosen by the indemnifying party or parties is reasonably
satisfactory to the indemnified party or parties, the indemnifying party or
parties will not be liable under Sections 7(a) through 7(c) for any legal or
other expenses subsequently incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding, except that (A) the indemnifying party or parties shall bear and pay
the legal and other expenses incurred in connection with the conduct of the
defense as referred to in clause (i) of the proviso to the preceding sentence
and (B) the indemnifying party or parties shall bear and pay such other
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expenses as it or they have authorized to be incurred by the indemnified party
or parties. If, within a reasonable time after receipt of the Notice, no Notice
of Defense has been given, the indemnifying party or parties shall be
responsible for any legal or other expenses incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding.
(d) In order to provide for just and equitable contribution in
any action in which a claim for indemnification is made pursuant to this Section
7 but is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right to appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in Section 7(a) and 7(b) above, (i)
in such proportion as is appropriate to reflect the relative benefits received
by each indemnifying party from the offering of the Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each indemnifying
party in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, or actions in respect thereof, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Underwriters shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Securities
received by the Company, and the total underwriting discount retained by the
Underwriters, bear to the aggregate public offering price of the Securities.
Relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
each indemnifying party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this Section
7(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this Section 7(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating, preparing to defend or defending against any action or claim
which is the subject of this Section 7(d). Notwithstanding the provisions of
this Section 7(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Securities purchased by
that Underwriter. For purposes of this Section 7(d), each person who controls an
Underwriter within the meaning of the Securities Act shall have the same rights
to contribution as such Underwriter, and each person who controls the Company
within the meaning of the Securities Act, each officer of the Company who shall
have signed the Registration Statement and each director of the Company shall
have the same rights to contribution as the Company, subject in each case to the
following sentence. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall
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be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute in
this Section 7(d) are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in Section 7(b) above). This Section 7(d) shall not be operative as to any
Underwriter to the extent that the Company is entitled to receive or has
received indemnity under this Section 7.
(e) Neither the Company nor any indemnified party shall,
without the prior written consent of each Underwriter and the indemnifying
party, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the
Securities Act is a party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each such
Underwriter, each such controlling person and the Company from all liability
arising out of such claim, action, suit or proceeding.
(f) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of this Section 7, and are fully informed regarding
said provisions. They further acknowledge that the provisions of this Section 7
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement and Prospectus as required by the Securities Act
and the Exchange Act. The parties are advised that federal or state policy, as
interpreted by the courts in certain jurisdictions, may be contrary to certain
provisions of this Agreement and this Section 7, and the parties hereto hereby
expressly waive and relinquish any right or ability to assert such public policy
as a defense to a claim under this Section 7 and further agree not to attempt to
assert any such defense.
(g) In addition to its obligations under Section 7(a) of this
Agreement, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any loss, claim, damage or liability described in Section 7(a) of
this Agreement, they will reimburse the Underwriters, and each of them, on a
quarterly basis (for which the Company has received invoices and other
documentation reasonably requested) for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the joint and
several obligation of the Company to reimburse the Underwriters for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any portion,
or all, of any
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such interim reimbursement payments are so held to have been improper, the
Underwriters receiving the same shall promptly return such amounts to the
Company together with interest, compounded daily, determined on the basis of the
prime rate (or other commercial lending rate for borrowers of the highest credit
standing) announced from time to time by Bank of America, NT&SA, San Francisco,
California (the "Prime Rate"). Any such interim reimbursement payments that are
not made to the Underwriters within 30 days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request until the date
paid.
(h) In addition to their obligations under Section 7(b) of
this Agreement, the Underwriters agree that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any loss, claim, damage or liability described in
Section 7(b) of this Agreement, they will reimburse the Company on a quarterly
basis (for which the Underwriters have received invoices and other documentation
reasonably requested) for all reasonable legal or other expenses incurred by the
Company in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any portion, or all, of any
such interim reimbursement payments are so held to have been improper, the
Company shall promptly return such amounts to the Underwriters together with
interest, compounded daily, determined on the basis of the Prime Rate. Any such
interim reimbursement payments that are not made to the Company within 30 days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request until the date paid.
(i) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections 7(g)
and 7(h) above, including the amounts of any requested reimbursement payments,
the method of determining such amounts and the basis on which such amounts shall
be apportioned among the indemnifying parties, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the National Association of Securities Dealers, Inc.
Any such arbitration must be commenced by service of a written demand for
arbitration or a written notice of intention to arbitrate, therein electing the
arbitration tribunal. If the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice, then the party
responding to said demand or notice is authorized to do so. Any such arbitration
will be limited to the interpretation and obligations of the parties under the
interim reimbursement provisions contained in Sections 7(g) and 7(h) above and
will not resolve the ultimate propriety or enforceability of the obligation to
indemnify for expenses that is created by the other provisions of this Section
7.
8. Substitution of Underwriters. If for any reason one or more of the
Underwriters shall fail or refuse (otherwise than for a reason sufficient to
justify the termination of this Agreement under the provisions of Section 5 or
Section 9 of this Agreement) to purchase and pay for the number of Firm
Securities agreed to be purchased by such Underwriter or Underwriters, the
Company shall immediately give notice thereof to the Representatives, and
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25
the non-defaulting Underwriters shall have the right within 24 hours after the
receipt by the Representatives of such notice to purchase, or procure one or
more other Underwriters to purchase, in such proportions as may be agreed upon
among the Representatives and such purchasing Underwriter or Underwriters and
upon the terms herein set forth, all or any part of the Firm Securities that
such defaulting Underwriter or Underwriters agreed to purchase. If the
non-defaulting Underwriters fail so to make such arrangements with respect to
all such Securities, the number of Firm Securities that each non-defaulting
Underwriter is otherwise obligated to purchase under this Agreement shall be
automatically increased on a pro rata basis to absorb the remaining Securities
that the defaulting Underwriter or Underwriters agreed to purchase; provided,
however, that the non-defaulting Underwriters shall not be obligated to purchase
the Securities that the defaulting Underwriter or Underwriters agreed to
purchase if the aggregate number of such Securities exceeds 10% of the total
number of Firm Securities that all Underwriters agreed to purchase under this
Agreement. If the total number of Firm Securities that the defaulting
Underwriter or Underwriters agreed to purchase shall not be purchased or
absorbed in accordance with the two preceding sentences, the Company shall have
the right, within 24 hours next succeeding the first 24-hour period above
referred to, to make arrangements with other underwriters or purchasers
satisfactory to you for purchase of such Securities on the terms set forth in
this Agreement. In any such case, either you or the Company shall have the right
to postpone the Closing Date determined as provided in Section 2(c) of this
Agreement for not more than seven business days after the date originally fixed
as the Closing Date pursuant to said Section 2(c) in order that any necessary
changes in the Registration Statement, the Prospectus or any other documents or
arrangements may be made.
If neither the non-defaulting Underwriters nor the Company
shall make arrangements within the time periods provided in the first three
sentences of the first paragraph this Section 8 for the purchase of all the Firm
Securities that the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement shall be terminated without further act or deed and
without any liability on the part of the Company to any non-defaulting
Underwriter (except as provided in Section 4 or Section 7 of this Agreement) and
without any liability on the part of any nondefaulting Underwriter to the
Company (except to the extent provided in Section 7 of this Agreement). Nothing
in this Section 8, and no action taken hereunder, shall relieve any defaulting
Underwriter from liability, if any, to the Company or any nondefaulting
Underwriter for damages occasioned by its default under this Agreement. The term
"Underwriter" in this Agreement shall include any persons substituted for an
Underwriter under this Section 8.
9. Effective Date of Agreement and Termination.
(a) If the Registration Statement has not been declared
effective prior to the date of this Agreement, this Agreement shall become
effective at such time, after notification of the effectiveness of the
Registration Statement has been released by the Commission, as you shall release
the Securities to the public. If you shall not have released the Securities
prior to 5:00 p.m., California time, on the fifth full business day after the
Registration Statement shall have become effective, this Agreement shall
thereupon terminate without liability on the part of the Underwriters to the
Company, except as set forth in Section 7 of this Agreement. By giving
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26
notice as set forth in Section 10 of this Agreement before the time this
Agreement becomes effective, you, as Representatives of the several
Underwriters, may prevent this Agreement from becoming effective without
liability of any party to the other party, except that the Company shall remain
obligated to pay costs and expenses to the extent provided in Section 4 and
Section 7 of this Agreement. If the Registration Statement has been declared
effective prior to the date of this Agreement, this Agreement shall become
effective upon execution and delivery by you and the Company.
(b) This Agreement may be terminated by you in your absolute
discretion by giving written notice to the Company at any time on or prior to
the Closing Date or, with respect to the purchase of the Option Securities, on
or prior to any later date on which the Option Securities are to be purchased,
as the case may be, if prior to such time any of the following has occurred or,
in your opinion, is likely to occur: (i) after the respective dates as of which
information is given in the Registration Statement and the Prospectus, any
material adverse change or development involving a prospective adverse change in
or affecting particularly the condition (financial or otherwise) of the Company
or the earnings, prospects or business affairs of the Company, whether or not
arising in the ordinary course of business, which would, in your sole judgment,
make the offering or the delivery of the Securities impracticable or
inadvisable; or (ii) if there shall have been the engagement in hostilities or
an escalation of major hostilities by the United States or the declaration of
war or a national emergency by the United States on or after the date hereof, or
any outbreak of hostilities or other national or international calamity or
crisis or change in economic or political conditions, if the effect of such
outbreak, calamity, crisis or change in economic or political conditions on the
financial markets of the United States would, in your sole judgment, make the
offering or delivery of the Securities impracticable, or (iii) if there shall
have been suspension of trading in securities generally or a material adverse
decline in value of securities generally on the New York Stock Exchange, the
American Stock Exchange, or the National Market System, or limitations on prices
(other than limitations on hours or numbers of days of trading) for securities
on either such exchange or system, or (iv) if there shall have been the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of, or commencement of any proceeding or
investigation by, or change in material substantive policy by, any court,
legislative body, agency or other foreign or domestic governmental authority
which in your sole judgment materially and adversely affects or will materially
or adversely affect the business, operations or prospects of the Company, or (v)
if there shall have been the declaration of a banking moratorium by United
States, New York or California state authorities, or (vi) if there shall have
been the taking of any action by any United States, state or local government or
agency in respect of its monetary or fiscal affairs which in your sole judgment
has a material adverse effect on the securities markets in the United States or
(vii) existing international monetary conditions shall have undergone a material
change which, in your sole judgment, makes the offering or delivery of the
Securities impracticable. If this Agreement shall be terminated pursuant to this
Section 9, there shall be no liability of the Company to the Underwriters and no
liability of the Underwriters to the Company (except to the extent provided in
Section 4 or Section 7 of this Agreement); provided, however, that in the event
of any such termination the Company agrees to indemnify and hold harmless the
Underwriters from all costs or expenses of the Company incident to the
performance of the obligations of the Company under this Agreement, including
all costs, expenses and advances referred to in Section 4 of this
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27
Agreement; provided, further, that the maximum amount of expenses that the
Company shall be obligated to reimburse the Representatives under Section 4 of
this Agreement shall be the Representatives actual accountable out-of-pocket
expenses.
10. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing delivered personally, by recognized overnight
courier service or by either telecopier or telegraph and, if to the
Underwriters, shall be delivered to Xxxxxx Xxxxxxx & Associates, Inc. at the
address set forth above (telecopier: (000) 000-0000) Attention: Director of
Investment Banking; and if to the Company, shall be mailed, telecopied,
telegraphed or delivered to it at its office, (telecopier: (310) - )
Attention: Xxxxxx Xxxxxxxxx, Chief Executive Officer. All notices given by
telecopy or telegraph shall be promptly confirmed by letter.
11. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 4 and Section 7 of this Agreement, the
several parties (in addition to the Company and the several Underwriters)
indemnified under the provisions of said Section 4 and Section 7, and their
respective personal representatives, successors and assigns. Nothing in this
Agreement is intended or shall be construed to give to any other person, firm or
corporation any legal or equitable remedy or claim under or in respect of this
Agreement or any provision herein contained. The term "successors and assigns"
as herein used shall not include any purchaser, as such purchaser, of any of the
Securities from the several Underwriters.
12. Miscellaneous. Notwithstanding any provision of this Agreement to
the contrary, the reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
their respective directors or officers, and (c) delivery and payment for the
Securities under this Agreement; provided, however, that if this Agreement is
terminated prior to the Closing Date, the provisions of Sections 3(h), 3(i),
3(j), 3(k) and 3(l) of this Agreement shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but all of which together shall constitute
one and the same instrument.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO
CONTRACTS MADE, AND TO BE PERFORMED, SOLELY WITHIN THAT STATE.
14. Authority of the Representatives. In connection with this
Agreement, the Representatives will act for and on behalf of the several
Underwriters, and any action taken under this Agreement by the Representatives,
jointly as representatives of the several Underwriters, will be binding on all
the Underwriters.
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If the foregoing correctly sets forth the understanding among
the Company the several Underwriters, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among the Company and the several Underwriters.
Very truly yours,
KANI, INC.
By:______________________________
Its:_____________________________
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
XXXXXX XXXXXXX & ASSOCIATES, INC.
On their behalf and on
behalf of each of the
several Underwriters
named in Schedule I hereto.
By: XXXXXX XXXXXXX & ASSOCIATES, INC.
By:______________________________
Xxxxxxx Xxxxxxxxx,
Managing Director
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SCHEDULE I
UNDERWRITERS
NUMBER OF FIRM SECURITIES
UNDERWRITERS TO BE PURCHASED
------------ ---------------
Xxxxxx Xxxxxxx & Associates, Inc...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
...............................................
............................................... ---------
Total................................................................ 1,400,000
=========
30
ANNEX A
Matters to be Covered in the Opinion of
Freshman, Marantz, Orlanski Xxxxxx & Xxxxx
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State
of California, with all necessary corporate power to own,
lease and operate its properties and to conduct its business
as described in the Prospectus;
(ii) The Company is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in
the United States, if any, in which the ownership or leasing
of its properties or the conduct of its business requires such
qualification, except where the failure so to qualify would
not have a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business
prospects of the Company;
(iii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein; the issued
and outstanding shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid
and nonassessable, have not been issued in violation of the
registration or qualification requirements of the Securities
Act or any state securities laws, and have not been issued in
violation of any preemptive right, co-sale right, right of
first refusal or other similar right; there are no preemptive
rights, options, warrants, or other similar rights to acquire
any securities of the Company which are not disclosed in the
Prospectus;
(iv) The Securities have been duly authorized, and upon issuance
and delivery against payment therefor in accordance with the
terms of the Agreement, will be validly issued, fully paid and
nonassessable, and will not have been issued in violation of
any preemptive right, registration right, co-sale right, right
of first refusal or other similar right, and no holder thereof
is or will be subject to personal liability by reason of being
such a holder;
(v) The Company has corporate power and authority to enter into
the Agreement and the Representatives' Warrant Agreement and
to issue, sell and deliver the Securities to the Underwriters;
(vi) The Agreement and the Representatives' Warrant Agreement have
been duly authorized by all necessary corporate action on the
part of the Company and have been duly executed and delivered
by the Company and, assuming due authorization, execution and
delivery by you, are the valid and binding agreements of the
Company, except insofar as the indemnification and
contribution provisions of
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such agreements may be limited by public policy concerns, and
except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by general equitable
principles;
(vii) The performance of the Agreement and the Representatives'
Warrant Agreement and the consummation of the transactions
contemplated thereby will not result in the breach or
violation of any of the terms and provisions of the Company's
Articles of Incorporation or Bylaws, or to the best of such
counsel's knowledge, result in the breach or violation of any
of the terms and provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement bond,
debenture, note agreement or other evidence of indebtedness,
or any lease, license, contract or other agreement or
instrument known to such counsel to which the Company is a
party or by which any of its properties are bound, or to the
best of such counsel's knowledge, (other than performance of
the Company's indemnification and contribution obligations
under such agreements, concerning which no opinion need be
expressed) any applicable statute, rule or regulation or, to
its knowledge, any order, writ or decree of any court or
governmental agency or body having jurisdiction over the
Company or over any of its properties or operations; provided,
however, that no opinion need be rendered concerning state
securities or Blue Sky laws
(viii) To the best knowledge of such counsel, the Company is not
presently in breach of, or in default under, its Articles of
Incorporation or Bylaws, or any bond, debenture, note or other
evidence of indebtedness or any contract, indenture, mortgage,
deed of trust, loan agreement, lease, license or other
agreement or instrument to which the Company is a party or by
which any of its properties are bound, which is material to
the financial condition, earnings, operations, business or
business prospects of the Company;
(ix) The forms of certificates evidencing the Common Stock comply
with the General Corporation Law of the State of California
and all other statutory requirements, the Bylaws of the
Company and any applicable rules of the NASD or the Nasdaq
National Market;
(x) The Registration Statement has become effective under the
Securities Act, any required filing of the Prospectus under
Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b) and, to the best knowledge of
such counsel, no stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings
for that purpose have been instituted or are pending or
threatened under the Securities Act;
(xi) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial
statements, pro forma financial data, financial and
statistical data included therein, as to which such counsel
need express no opinion) as of the effective date of the
Registration Statement,
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complied as to form in all material respects with the
requirements of the Securities Act and the applicable Rules
and Regulations;
(xii) The Common Stock conforms in all material respects to all
statements in relation thereto contained in the Prospectus;
(xiii) The description in the Registration Statement and the
Prospectus of the Articles of Incorporation and Bylaws of the
Company and of statutes and contracts are accurate in all
material respects and fairly present in all material respects
the information required to be presented by the Securities Act
and the Rules and Regulations;
(xiv) There are no statutes or regulations, or to the best knowledge
of such counsel, agreements, contracts, licenses, leases or
documents, of a character required to be described or referred
to in the Registration Statement or Prospectus or to be filed
as an exhibit to the Registration Statement, that are not
described or referred to therein and filed as required;
(xv) No authorization, approval or consent of any governmental
authority or agency of the United States of America is
necessary in connection with the consummation of the
transactions contemplated by the Agreement and the
Representatives' Warrant Agreement, except such as have been
obtained under the Securities Act or such as may be required
under the rules and regulations of the National Association of
Securities Dealers, Inc., or under state securities or Blue
Sky laws in connection with the purchase and the distribution
of the Securities by the Underwriters;
(xvi) To the best knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the
Company or any of its subsidiaries of a character which are
required to be disclosed in the Registration Statement or the
Prospectus by the Securities Act or the applicable Rules and
Regulations, other than those described therein;
(xvii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are
defined in the 1940 Act; and
(xviii) To the best knowledge of such counsel, except as set forth in
the Registration Statement and Prospectus, no holders of
Common Stock or other securities of the Company have
registration rights with respect to securities of the Company
and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having
rights to registration of such shares of Common Stock, or
other securities, because of the filing of the Registration
Statement by the Company have, with respect to the offering
contemplated hereby, waived such rights or such rights have
expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement, or
have
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33
included securities in the Registration Statement pursuant to
the exercise of such rights.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of
the Company, the Representatives, Underwriters' counsel and the
independent public accountants of the Company, at which conferences the
contents of the Registration Statement and the Prospectus and related
matters were discussed, and although they have not independently
checked or verified the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel that caused them to
believe that, at the time the Registration Statement became effective,
the Registration Statement (except as to financial statements, pro
forma financial data, financial data and supporting schedules contained
therein, as to which such counsel need express no opinion) contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or at the Closing Date or any later date on
which the Option Securities are to be purchased, as the case may be,
the Prospectus (except as aforesaid) contained any untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to
questions of fact upon representations or certificates of officers of
the Company, and of government officials, in which case their opinion
is explicitly to state that they are so relying thereon and that they
have no knowledge of any material misstatement or inaccuracy in such
opinions, representations or certificate. Copies of any opinion,
representation or certificate so relied upon shall be delivered to you,
as Representatives of the Underwriters, and to Underwriters' Counsel.
4
