Exhibit 1.1
800-JR CIGAR, INC.
3,000,000 Shares(1)
Common Stock
UNDERWRITING AGREEMENT
________ ___, 1997
WHEAT, FIRST SECURITIES, INC.
X.X. XXXXXXXX & CO.
As Representatives of the several Underwriters
c/o Wheat, First Securities, Inc.
Riverfront Plaza
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
800-JR Cigar, Inc., a Delaware corporation (the "Company"), and the
persons or trusts (the "Trusts") named in Schedule 1 hereto (individually, an
"Existing Stockholder" and collectively, the "Existing Stockholders") hereby
confirm their respective agreements with the several underwriters named in
Schedule 2 hereto (the "Underwriters"), for whom you have been duly authorized
to act as representatives (in such capacities, the "Representatives"), as set
forth below. If you are the only Underwriters, all references herein to the
Representatives shall be deemed to be to the Underwriters.
1. Securities. Subject to the terms and conditions herein contained, the
Company proposes to issue and sell to the several Underwriters an aggregate of
3,000,000 shares (the "Firm Securities") of the Company's Common Stock, par
value $.01 per share ("Common Stock"). The Company also proposes to issue and
sell to the several Underwriters not more than 450,000 additional shares of
Common Stock if requested by the Representatives as provided in Section 3 of
this Agreement. Any and all shares of Common Stock to be purchased by the
Underwriters pursuant to such option are referred to herein as the "Option
Securities," and the Firm Securities and any Option Securities are collectively
referred to herein as the "Securities."
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(1) Plus an option to purchase from 800-JR Cigars, Inc. up to 450,000
additional shares to cover over-allotments.
2. Representations and Warranties of the Company and the Existing
Stockholders. (i) The Company and the Existing Stockholders jointly and
severally represent and warrant to, and agree with, each of the several
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-23401) with respect
to the Securities, including a prospectus subject to completion, has been filed
by the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and one or more
amendments to such registration statement may have been so filed and such
registration statement has been delivered to you and each of the Underwriters.
After the execution of this Agreement, the Company will file with the Commission
either (i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, either (A) if the
Company relies on Rule 434 under the Act, a Term Sheet (as hereinafter defined)
relating to the Securities, that shall identify the Preliminary Prospectus (as
hereinafter defined) that it supplements containing such information as is
required or permitted by Rules 434, 430A and 424(b) under the Act or (B) if the
Company does not rely on Rule 434 under the Act, a prospectus in the form most
recently included in an amendment to such registration statement (or, if no such
amendment shall have been filed, in such registration statement), with such
changes or insertions as are required by Rule 430A under the Act or permitted by
Rule 424(b) under the Act, and in the case of either clause (i)(A) or (i)(B) of
this sentence as have been provided to and approved by the Representatives prior
to the execution of this Agreement, or (ii) if such registration statement, as
it may have been amended, has not been declared by the Commission to be
effective under the Act, an amendment to such registration statement, including
a form of prospectus, a copy of which amendment has been furnished to and
approved by the Representatives prior to the execution of this Agreement. The
Company may also file a related registration statement with the Commission
pursuant to Rule 462(b) under the Act for the purpose of registering certain
additional Securities, which registration shall be effective upon filing with
the Commission. As used in this Agreement, the term "Original Registration
Statement" means the registration statement initially filed relating to the
Securities, as amended at the time when it was or is declared effective,
including all financial schedules and exhibits thereto and including any
information omitted therefrom pursuant to Rule 430A under the Act and included
in the Prospectus (as hereinafter defined); the term "Rule 462(b) Registration
Statement" means any registration statement filed with the Commission pursuant
to Rule 462(b) under the Act (including the Registration Statement and any
Preliminary Prospectus or Prospectus incorporated therein at the time such
Registration Statement becomes effective); the term "Registration Statement"
includes both the Original Registration Statement and any Rule 462(b)
Registration Statement; the term "Preliminary Prospectus" means each prospectus
subject to completion filed with such registration statement or any amendment
thereto (including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment thereto at the time it was or is
declared effective); the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the Act, the Term Sheet
relating to the Securities that is first filed pursuant to Rule 424(b)(7)
under the Act, together with the Preliminary Prospectus identified therein
that such Term Sheet supplements;
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(B) if the Company does not rely on Rule 434 under the Act, the prospectus
first filed with the Commission pursuant to Rule 424(b) under the Act; or
(C) if the Company does not rely on Rule 434 under the Act and if no
prospectus is required to be filed pursuant to Rule 424(b) under the Act,
the prospectus included in the Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies the
requirements of Rule 434 under the Act. Any reference herein to the "date"
of a Prospectus that includes a Term Sheet shall mean the date of such
Term Sheet.
(b) The Commission has not issued any order preventing or suspending use
of the Registration Statement or any Preliminary Prospectus. When any
Preliminary Prospectus was filed with the Commission it (i) contained all
statements required to be stated therein in accordance with, and complied in all
material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. When the
Registration Statement or any amendment thereto was or is declared effective, it
(i) contained or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. When the Prospectus
or any Term Sheet that is a part thereof or any amendment or supplement to the
Prospectus is filed with the Commission pursuant to Rule 424(b) (or, if the
Prospectus or part thereof or such amendment or supplement is not required to be
so filed, when the Registration Statement or the amendment thereto containing
such amendment or supplement to the Prospectus was or is declared effective) and
on the Firm Closing Date and any Option Closing Date (both as hereinafter
defined), the Prospectus, as amended or supplemented at any such time, (i)
contained or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects with the
requirements of, the Act and the rules and regulations of the Commission
thereunder and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (b) do not apply to statements or omissions made in
any Preliminary Prospectus, the Registration Statement or any amendment thereto
or the Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representatives specifically for use therein, which information
consists only of the information identified in Section 12.
(c) If the Company has elected to rely on Rule 462(b) and the Rule 462(b)
Registration Statement has not been declared effective (i) the Company has filed
a Rule 462(b) Registration Statement in compliance with, and that is effective
upon filing pursuant, to Rule 462(b) and has received confirmation of its
receipt and (ii) the Company has given irrevocable instructions for
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transmission of the applicable filing fee in connection with the filing of the
Rule 462(b) Registration Statement, in compliance with Rule 111 promulgated
under the Act or the Commission has received payment of such filing fee.
(d) J.R. Tobacco of America, Inc., a North Carolina corporation, Cigars by
Santa Clara, N.A., Inc., a North Carolina corporation, J.N.R. Grocery Corp., a
New York corporation, J.R. Tobacco NC, Inc., a North Carolina corporation, J&R
Tobacco (New Jersey) Corp., a New Jersey corporation, J.R. Tobacco Company of
Michigan, Inc., a Michigan corporation, J.R-46th Street, Inc., a New York
corporation, J.R. Tobacco Outlet Inc., a New Jersey corporation, J.R.
Statesville, Inc., a North Carolina corporation, and JR Cigar (DC), Inc., a
District of Columbia corporation, which upon consummation of the transactions
(the "Reorganization Transactions") described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) under
the caption "Reorganization of the Company" will become the only subsidiaries of
the Company (each a "Subsidiary" and collectively the "Subsidiaries"). At or
prior to the Firm Closing Date (as hereinafter defined) the Reorganization
Transactions will have occurred in the manner described in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus)
under the caption "Reorganization of the Company" and (i) the Existing
Stockholders and the Subsidiaries shall have entered into a tax agreement with
the Company in a form reasonably acceptable to the Representatives (the "Tax
Agreement"); (ii) the Existing Stockholders and the Company shall have entered
into a contribution agreement (the "Contribution Agreement") pursuant to which
the Existing Stockholders will contribute to the Company all of the outstanding
capital stock of each of the Subsidiaries; (iii) the Subsidiaries shall have
declared a dividend payable to the Existing Stockholders in the form of notes
payable (the "Notes"); and (iv) the Company, the Subsidiaries and the Existing
Stockholders shall have entered into all other agreements (the "Ancillary
Agreements" and together with the Tax Agreement, the Contribution Agreement and
the Notes, the "Reorganization Agreements"), if any, necessary to consummate the
Reorganization Transactions.
(e) The Company and each of the Subsidiaries have been duly organized and
are validly existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation and are duly qualified to transact
business as foreign corporations and are in good standing under the laws of all
other jurisdictions where the ownership or leasing of their respective
properties or the conduct of their respective businesses requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the consolidated financial position of the Company
and the Subsidiaries.
(f) The Company and each of the Subsidiaries have full power (corporate
and other) to own or lease their respective properties and conduct their
respective businesses as described in the Registration Statement and the
Prospectus or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus; and the Company has full power (corporate and other) to
enter into this Agreement and to carry out all the terms and provisions hereof
to be carried out by it.
(g) The issued and outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable and, except as otherwise set forth in the Prospectus or, if the
Prospectus is not in existence, the most recent Preliminary
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Prospectus, are, or upon consummation of the Reorganization Transactions, will
be owned of record by the Company free and clear of any security interests,
liens, encumbrances, equities or claims.
(h) Upon consummation of the Reorganization Transactions, the Company will
have an authorized, issued and outstanding capitalization as set forth in the
Prospectus or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus. All of the shares of capital stock of the Company to be
issued to the Existing Stockholders will have been duly and validly authorized
and, after payment therefor in accordance with the terms of the Contribution
Agreement, at the Firm Closing Date will be duly and validly issued, fully paid
and nonassessable. The Firm Securities and the Option Securities will have been
duly and validly authorized and at the Firm Closing Date or the related Option
Closing Date (as hereinafter defined), as the case may be, after payment
therefor in accordance herewith, will be duly and validly issued, fully paid and
nonassessable. No holders of outstanding shares of capital stock of the Company
are or will be entitled as such to any preemptive or other rights to subscribe
for or to purchase any of the Securities, and no holder of securities of the
Company has or will have any right which has not been fully exercised or waived
to require the Company to register the offer or sale of any securities owned by
such holder under the Act in the public offering contemplated by this Agreement.
(i) The capital stock of the Company and the Securities to be sold by the
Company conform to the description thereof contained in the Prospectus or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus.
(j) Except as disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there are no outstanding (A)
securities or obligations of the Company or any of the Subsidiaries convertible
into or exchangeable for any capital stock of the Company or any such
Subsidiary, (B) warrants, rights or options to subscribe for or purchase from
the Company or any such Subsidiary any such capital stock or any such
convertible or exchangeable securities or obligations, or (C) obligations of the
Company or any such Subsidiary to issue any shares of capital stock, any such
convertible or exchangeable securities or obligations, or any such warrants,
rights or options.
(k) The combined financial statements and related notes and schedules
included in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) fairly present the
combined financial position of the Subsidiaries and the combined results of
operations and changes in financial condition of the Subsidiaries as of the
dates and for the periods therein specified. Such financial statements and
schedules have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except as
otherwise noted therein) and all adjustments necessary for a fair presentation
of results for such periods have been made. The summary and selected financial
data set forth under the captions "Summary Combined Financial Data" and
"Selected Combined Financial Data," respectively, in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) fairly
present, on the basis stated in the Prospectus (or such Preliminary Prospectus),
the information included therein.
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(l) Each of (i) Ernst & Young LLP, who have certified certain combined
financial statements of the Subsidiaries and delivered their report with respect
to such audited combined financial statements and schedules included in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), are independent public
accountants as required by the Act and the applicable rules and regulations
thereunder; and (ii) X.X. Xxxx LLP, who have certified certain combined
financial statements of the Subsidiaries and delivered their report with respect
to such audited combined financial statements and schedules included in the
Registration Statement and the Prospectus (or if the Prospectus is not in
existence, the most recent Preliminary Prospectus), are independent public
accountants as required by the Act and the applicable rules and regulations
thereunder.
(m) The execution and delivery of this Agreement have been duly authorized
by the Company and this Agreement has been duly executed and delivered by the
Company, and is the valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms; except (i) as enforceability
hereof may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equitable principles and (ii) that enforcement
of rights to indemnity and contribution hereunder may be limited by federal or
state securities laws or principles of public policy.
(n) The execution and delivery of each of the Reorganization Agreements
have been duly authorized by each Subsidiary or the Company party thereto and
each of the Reorganization Agreements has been duly executed and delivered by
each Subsidiary and/or the Company party thereto, and is the valid and
binding agreement of each Subsidiary and/or the Company party thereto,
enforceable against such Subsidiary and/or the Company in accordance with its
terms; except (i) as enforceability thereof may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equitable
principles and (ii) that enforcement of rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or principles of
public policy.
(o) No legal or governmental proceedings are pending to which the Company
or any of the Subsidiaries is a party or to which the property of the Company or
any of the Subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not described therein (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
and, to the knowledge of the Company and the Existing Stockholders, no such
proceedings have been threatened or are contemplated against the Company or any
of the Subsidiaries or with respect to any of their respective properties; and
no contract or other document to which the Company or any Subsidiary is a party
or to which the property of the Company or any of the Subsidiaries is subject is
required to be described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement that is not described
therein (or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) or filed as required under the Act. Assuming due authorization,
execution and delivery by each other party thereto, all such contracts to which
the Company or a Subsidiary is a party constitute valid and binding agreements
of the Company or such Subsidiary, as the case may be.
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(p) The issuance, offering and sale of the Securities to the Underwriters
by the Company pursuant to this Agreement, the compliance by the Company or the
Subsidiaries, as the case may be, with the other provisions of this Agreement or
the Reorganization Agreements and the consummation of the other transactions
contemplated hereby or thereby do not and will not (i) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as have been obtained, such as may be
required under state securities or blue sky laws and, if the registration
statement filed with respect to the Securities (as amended) is not effective
under the Act as of the time of execution hereof, such as may be required (and
shall be obtained as provided in this Agreement) under the Act, or (ii) conflict
with or result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
guarantee, loan agreement, material lease or other agreement or instrument to
which the Company or any of the Subsidiaries is a party or by which the Company
or any of the Subsidiaries or any of their respective properties or assets are
bound, or the charter documents or by-laws of the Company or any of the
Subsidiaries, or any statute or any judgment, decree, order, rule or regulation
of any court or other governmental authority or any arbitrator applicable to the
Company or any of the Subsidiaries or any of their properties, other than as
described in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(q) Other than pursuant to this Agreement, the Company has not, directly
or indirectly, (i) taken any action designed to cause or to result in, or that
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or (ii) since the filing of the
Registration Statement (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Securities or (B) paid or agreed
to pay to any person any compensation for soliciting another to purchase any
other securities of the Company.
(r) The Company has not distributed and, prior to the later of (i) the
Firm Closing Date and (ii) the completion of the distribution of the Securities,
will not distribute any offering material in connection with the offering and
sale of the Securities other than the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or other materials, if any permitted by the Act.
(s) Subsequent to the respective dates as of which information is given in
the Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and, except for the
Reorganization Transactions, (i) the Company and the Subsidiaries have not
incurred any material liability or obligation, direct or contingent, nor entered
into any material transaction, not in the ordinary course of business; (ii) the
Company and the Subsidiaries have not sustained any material loss or
interference with their businesses or properties from fire, flood, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding, order or decree; (iii) there has not
been any material adverse change, or any development involving a prospective
material adverse change, in the condition (financial or otherwise),
shareholders' equity, management, business prospects, net worth, or results of
operations of the Company and the Subsidiaries, taken as a whole; (iv) the
Company and the Subsidiaries have not purchased any of their outstanding capital
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stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on their capital stock; and (v) there has not been any material change in
the capital stock, short-term debt or long-term debt of the Company and the
Subsidiaries; in the case of each of clauses (i) through (v) except as described
in or contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus).
(t) The Company and each of the Subsidiaries have valid title in fee
simple to all items of real property and valid title to all personal property
owned by each of them, in each case free and clear of any security interests,
liens, encumbrances, claims and other defects, except such as do not materially
and adversely affect the value of such property as reflected by the financial
statements included in the Prospectus and do not materially interfere with the
use made or proposed to be made of such property by the Company or such
Subsidiary, and any real property and buildings held under lease by the Company
or any such Subsidiary are held under valid, subsisting and enforceable leases,
with such exceptions as are not material and do not materially interfere with
the use made or proposed to be made of such property and buildings by the
Company or such Subsidiary, in each case except as described in or contemplated
by the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(u) No labor dispute with the employees of the Company or any of the
Subsidiaries exists or, to the knowledge of the Company or the Existing
Stockholders, is threatened or imminent that could reasonably be expected to
result in a material adverse change in the condition (financial or otherwise),
business prospects, net worth or results of operations of the Company and the
Subsidiaries, taken as a whole, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(v) The Company and each Subsidiary owns, possesses, has currently
subsisting licenses to use or can acquire on reasonable terms, all material
patents, patent applications, trademarks, service marks, trade names, licenses,
copyrights and proprietary or other confidential information necessary to carry
on its business as presently operated by it, and neither the Company nor any
such Subsidiary has received any notice of infringement of or conflict with
asserted rights of any third party with respect to any of the foregoing which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a material adverse change in the condition (financial
or otherwise), business prospects, net worth or results of operations of the
Company and the Subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(w) The Company and each of the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition
(financial or otherwise), business prospects, net
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worth or results of operations of the Company and the Subsidiaries, taken as a
whole, except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(x) No Subsidiary of the Company is currently, or upon consummation of the
Reorganization Transactions will be, prohibited, directly or indirectly, from
paying any dividends to the Company, from making any other distribution on such
Subsidiary's capital stock, from repaying to the Company any loans or advances
to such Subsidiary from the Company or from transferring any of such
Subsidiary's property or assets to the Company or any other Subsidiary of the
Company, except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(y) The Company and each of the Subsidiaries possess all certificates,
consents, authorizations and permits ("Licenses") issued by the appropriate
international, federal, state or foreign regulatory and self-regulatory
authorities necessary to conduct their respective businesses, except for those
of which the failure to obtain would not result in a material adverse change in
the condition (financial or otherwise), business prospects, net worth or results
of operations of the Company and the Subsidiaries, taken as a whole, and except
as described in or contemplated by the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus). All Licenses are valid
and in full force and effect and the Company and each of the Subsidiaries are in
compliance with all laws, regulations, orders and decrees applicable to them,
except as described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), and except for
those, the absence of which, would not cause a material adverse change in the
condition (financial or otherwise), business prospects, net worth or results of
operations of the Company and the Subsidiaries, taken as a whole. Neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate, authorization or permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a material adverse change in the condition
(financial or otherwise), business prospects, net worth or results of operations
of the Company and the Subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).
(z) The Company will conduct its operations in a manner that will not
subject it to registration as an investment company under the Investment Company
Act of 1940, as amended, and this transaction will not cause the Company to
become an investment company subject to registration under such Act.
(aa) Each of the Company, the Subsidiaries and the Existing Stockholders
have filed all foreign, federal, state and local tax returns that are required
to be filed or has requested extensions thereof (except in any case in which
the failure so to file would not have a material adverse effect on the Company
and the Subsidiaries) and have paid all taxes as shown on said returns required
to be paid and any other assessment, fine or penalty levied, to the extent that
any of the foregoing is due and payable, except for any such assessment, fine
or penalty that is currently being contested in good faith or as described in
or contemplated by the
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Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). To the knowledge of the Company there is no tax
deficiency that has been or might be asserted against the Company and that could
have a material adverse effect on the business, properties, business prospects,
condition, earnings or results of operations of the Companies or the
Subsidiaries, taken as a whole, except as described in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) or reserved against in the combined
financial statements of the Company. Effective as of the dates set forth
opposite each Subsidiary on Schedule 3 hereto, each Subsidiary validly elected
to be treated as an S Corporation (as defined in Section 1361 of the Internal
Revenue Code of 1986, as amended (the "Code") and the corresponding provision of
any prior version of the Code) for Federal and state income tax purposes and
each Subsidiary has continued and will continue to so qualify as an S
Corporation in each such jurisdiction since that date until the day preceding
consummation of the Reorganization Transactions, at which time each Subsidiary
will validly terminate its S Corporation status.
(bb) Neither the Company nor any of the Subsidiaries is in violation of
any federal or state law or regulation relating to occupational safety and
health or to the storage, handling, transportation, treatment or disposal of
hazardous or toxic materials and the Company and the Subsidiaries have received
all permits, licenses or other approvals required of them under applicable
federal and state occupational safety and health and environmental laws and
regulations to conduct their respective businesses, and the Company and each
such Subsidiary is in compliance with all terms and conditions of any such
permit, license or approval, except any such violation of law or regulation,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
which would not, singly or in the aggregate, result in a material adverse change
in the condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and the Subsidiaries, taken as a whole,
except as described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus). Neither the
Company nor any of the Subsidiaries has received any notices or claims that it
is a responsible party or a potentially responsible party in connection with any
claim or notice asserted pursuant to 42 U.S.C. Section 9601 et seq. or any state
superfund law or any similar foreign law; and the disposal by the Company or any
Subsidiary of any of the Company's and each Subsidiary's hazardous substances,
hazardous materials and other waste products has been lawful in all material
respects.
(cc) Any certificate signed by any officer of the Company and delivered to
the Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty jointly and severally made by the Company and each
of the Existing Stockholders to each Underwriter as to the matters covered
thereby and shall be deemed incorporated herein in its entirety and shall be
effective as if such representation and warranty were made herein; and any
certificate signed by the Existing Stockholders and delivered to the
Representatives or to counsel for the Underwriters shall also be deemed a
representation and warranty jointly and severally made by the Company and each
of the Existing Stockholders to each Underwriter as to the matters covered
thereby and shall also be deemed incorporated herein in its entirety and shall
be effective as if such representation and warranty were made herein.
10
(dd) Except for the shares of capital stock of each of the Subsidiaries
owned, or to be owned, by the Company, neither the Company nor any Subsidiary
owns any shares of stock or any other equity securities of any corporation or
has any equity interest in any firm, partnership, association or other entity,
except as described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus).
(ee) The Company and each of the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (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.
(ff) No default by the Company or the Subsidiaries exists, and no event
has occurred which, with notice or lapse of time or both, would constitute a
default in the due performance and observance of any term, covenant or condition
of any indenture, mortgage, deed of trust, material lease or other agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries or any of their respective
properties is bound or may be affected in any material adverse respect with
regard to the property, business or operations of the Company and the
Subsidiaries, taken as a whole, except for any such default that would be cured
upon application of the proceeds from the sale of the Securities in the manner
described under the caption "Use of Proceeds" in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
(gg) All employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
established, maintained or contributed to by the Company comply in all material
respects with the requirements of ERISA and no employee pension benefit plan (as
defined in Section 3(2) of ERISA) has incurred or assumed an "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or has incurred
or assumed any material liability (other than for the payment of premiums) to
the Pension Benefit Guaranty Corporation, except where such non-compliance,
deficiency or liability will not have a material adverse effect on the Company
and the Subsidiaries, taken as a whole.
(hh) No relationship, direct or indirect, exists between or among the
Company or any of the Subsidiaries, on the one hand, and the directors,
officers, Existing Stockholders, customers or suppliers of the Company or any of
the Subsidiaries on the other hand, that is required by the Act or the Exchange
Act, or by the rules and regulations under either of such Acts to be described
in the Registration Statement and the Prospectus that is not so described.
11
(ii) In addition to the foregoing, the Existing Stockholders severally and
not jointly represent and warrant to, and agree with, each of the several
Underwriters that:
(a) The execution and delivery of this Agreement has been duly
authorized by each of the Trusts and this Agreement has been duly executed and
delivered by each of the Existing Stockholders, and is the valid, binding
agreement of each of the Existing Stockholders, enforceable against such
Existing Stockholder in accordance with its terms; except (i) as enforceability
hereof may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equitable principles and (ii) that enforcement
of rights to indemnity and contribution hereunder may be limited by federal or
state securities laws or principles of public policy.
(b) Each Existing Stockholder has full legal right, and each Trust
has the power and authority, to enter into this Agreement and each
Reorganization Agreement to which such Existing Stockholder is a party. The
execution, delivery and performance by each Existing Stockholder of this
Agreement and of each Reorganization Agreement to which such Existing
Stockholder is a party, and the consummation by each Existing Stockholder of the
transactions contemplated hereby and thereby will not conflict with or result in
a breach of any of the terms or provisions, or constitute a default or cause an
acceleration of any obligation under any material license, indenture, lease,
mortgage, deed of trust, bank loan, credit agreement, or other material
agreement or instrument to which such Existing Stockholder is a party or by
which such Existing Stockholder is bound, or to which any of the property or
assets of such Existing Stockholder is subject, or any order of any court or
governmental agency or authority entered into in any proceeding to which such
Existing Stockholder was or is a party or by which such Existing Stockholder is
bound, or violate or conflict with any applicable foreign, federal, state or
local law, rule, administrative regulation or ordinance or administrative or
court decree applicable to such Existing Stockholder or such Existing
Stockholder's property.
(c) Other than as permitted by the Act, no Existing Stockholder has
distributed, nor will any Existing Stockholder distribute, any prospectus or
other offering material in connection with the offering and sale of the
Securities.
(d) None of the Existing Stockholders nor any trustee or beneficiary
of the Existing Stockholders is affiliated as a director, officer, partner,
stockholder, or otherwise with any securities broker or dealer which is a member
of the NASD or any other organization that owns or controls any member of the
NASD.
(e) No statement, representation, warranty or covenant made by the
Existing Stockholders in this Agreement or made in any certificate or document
required by this Agreement to be delivered to the Representatives was or will
be, when made, inaccurate, untrue or incorrect.
(f) Other than pursuant to this Agreement, no Existing Stockholder
has, directly or indirectly, (i) taken any action designed to cause or to result
in, or that has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or (ii) since the filing of the
Registration Statement (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting
12
purchases of, the Securities or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company.
3. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to each of the Underwriters, and
each of the Underwriters, severally and not jointly, agrees to purchase from the
Company, at a purchase price of $________ per share, the number of Firm
Securities set forth opposite the name of such Underwriter in Schedule 2 hereto.
One or more certificates in definitive form for the Firm Securities that the
several Underwriters have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the Representatives may
request upon notice to the Company at least 48 hours prior to the Firm Closing
Date, shall be delivered by or on behalf of the Company to the Representatives
for the respective accounts of the Underwriters, against payment by or on behalf
of the Underwriters of the purchase price therefor by certified or official bank
check in immediately available funds or, at the option of the Representatives by
wire transfer in same-day funds (the "Wired Funds") to the account of the
Company. Such delivery of and payment for the Firm Securities shall be made at
the offices of Stroock & Stroock & Xxxxx LLP, 000 Xxxxxx Xxxx, Xxx Xxxx, Xxx
Xxxx 00000 at 9:30 A.M., New York time, on __________, 1997, or at such other
place, time or date as the Representatives and the Company may agree upon or as
the Representatives may determine pursuant to Section 9 hereof, such time and
date of delivery against payment being herein referred to as the "Firm Closing
Date". The Company will make such certificate or certificates for the Firm
Securities available for checking and packaging by the Representatives at the
offices in New York, New York of the Company's transfer agent or registrar or
such other location designated by the Underwriters to the Company at least 24
hours prior to the Firm Closing Date.
(b) For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Securities as contemplated by the Prospectus,
the Company hereby grants to the several Underwriters an option to purchase,
severally and not jointly, the Option Securities. The purchase price to be paid
for any Option Securities shall be the same price per share as the price per
share for the Firm Securities set forth above in paragraph (a) of this Section
3, plus if the purchase and sale of any Option Securities takes place after the
Firm Closing Date and after the Firm Securities are trading "ex-dividend", an
amount equal to the dividends payable on such Option Securities. The option
granted hereby may be exercised as to all or any part of the Option Securities
from time to time within 30 days after the date of the Prospectus (or, if such
30th day shall be a Saturday or Sunday or a holiday, on the next business day
thereafter when the New York Stock Exchange is open for trading). The
Underwriters shall not be under any obligation to purchase any of the Option
Securities prior to the exercise of such option. The Representatives may from
time to time exercise the option granted hereby by giving notice in writing or
by telephone (confirmed in writing) to the Company setting forth the aggregate
number of Option Securities as to which the several Underwriters are then
exercising the option and the date and time for delivery of and payment for such
Option Securities. Any such date of delivery shall be determined by the
Representatives but shall not be earlier than two business days or later than
five business days after such exercise of the option and, in any event, shall
not be earlier than the Firm
13
Closing Date. The time and date set forth in such notice, or such other time on
such other date as the Representatives and Company may agree upon or as the
Representatives may determine pursuant to Section 9 hereof, is herein called the
"Option Closing Date" with respect to such Option Securities. Upon exercise of
the option as provided herein, the Company shall become obligated to sell to
each of the several Underwriters, and, subject to the terms and conditions
herein set forth, each of the Underwriters (severally and not jointly) shall
become obligated to purchase from the Company, the same percentage of the total
number of the Option Securities as to which the several Underwriters are then
exercising the option as such Underwriter is obligated to purchase of the
aggregate number of Firm Securities, as adjusted by the Representatives in such
manner as they deem advisable to avoid fractional shares. If the option is
exercised as to all or any portion of the Option Securities, one or more
certificates in definitive form for such Option Securities, and payment
therefor, shall be delivered on the related Option Closing Date in the manner,
and upon the terms and conditions, set forth in paragraph (a) of this Section 3,
except that reference therein to the Firm Securities and the Firm Closing Date
shall be deemed, for purposes of this paragraph (b), to refer to such Option
Securities and Option Closing Date, respectively.
(c) The Company hereby acknowledges that the wire transfer by or on behalf
of the Underwriters of the purchase price for any Securities does not constitute
closing of a purchase and sale of the Securities. Only execution and delivery of
a receipt for Securities by the Underwriters indicates completion of the closing
of a purchase of the Securities from the Company. Furthermore, in the event that
the Underwriters wire funds to the Company prior to the completion of the
closing of a purchase of Securities, the Company hereby acknowledges that until
the Underwriters execute and deliver a receipt for the Securities, by facsimile
or otherwise, the Company will not be entitled to the wired funds and shall
return the wired funds to the Underwriters as soon as practicable (by wire
transfer of same-day funds) upon demand. In the event that the closing of a
purchase of Securities is not completed and the wired funds are not returned by
the Company to the Underwriters within one business day of their receipt by the
Company, the Company agrees to pay to the Underwriters in respect of each day
the wired funds are not returned by it, in same-day funds, interest on the
amount of such wired funds in an amount representing the Underwriters' cost of
financing as reasonably determined by Prudential Securities Incorporated.
(d) It is understood that any of you, individually and not as one of the
Representatives, may (but shall not be obligated to) make payment on behalf of
any Underwriter or Underwriters for any of the Securities to be purchased by
such Underwriter or Underwriters. No such payment shall relieve such Underwriter
or Underwriters from any of its or their obligations hereunder.
4. Offering by the Underwriters. Upon your authorization of the release of
the Firm Securities, the several Underwriters propose to offer the Firm
Securities for sale to the public upon the terms set forth in the Prospectus.
5. Covenants of the Company and the Existing Stockholders. The Company
covenants and agrees with each of the Underwriters as to the matters set forth
in subparagraphs (a) through (n) below and each of the Existing Stockholders
covenants and agrees with each of the Underwriters as to the matters set forth
in subparagraph (o) below:
14
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the time of execution of this Agreement, and any
amendments thereto to become effective as promptly as possible. If required, the
Company will file the Prospectus or any Term Sheet that constitutes a part
thereof and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rules 434 and 424(b) under the
Act. During any time when a prospectus relating to the Securities is required to
be delivered under the Act, the Company (i) will comply with all requirements
imposed upon it by the Act and the rules and regulations of the Commission
thereunder to the extent necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the provisions hereof and of the
Prospectus, as then amended or supplemented, and (ii) except as required by law,
will not file with the Commission the prospectus, Term Sheet or the amendment
referred to in the second sentence of Section 2(a) hereof, any amendment or
supplement to such Prospectus, Term Sheet or any amendment to the Registration
Statement or any Rule 462(b) Registration Statement of which the Representatives
previously have been advised and furnished with a copy for a reasonable period
of time prior to the proposed filing and as to which filing the Representatives
shall not have given their consent. The Company will prepare and file with the
Commission, in accordance with the rules and regulations of the Commission,
promptly upon request by the Representatives or counsel for the Underwriters,
any amendments to the Registration Statement or amendments or supplements to the
Prospectus that may be necessary or advisable in connection with the
distribution of the Securities by the several Underwriters, and will use its
best efforts to cause any such amendment to the Registration Statement to be
declared effective by the Commission as promptly as possible. The Company will
advise the Representatives, promptly after receiving notice thereof, of the time
when the Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement thereto has
been filed and will furnish the Representatives with copies of such documents
and provide evidence satisfactory to the Representatives of each such filing or
effectiveness.
(b) The Company will advise the Representatives, promptly after receiving
notice or obtaining knowledge thereof, of (i) the issuance by the Commission of
any stop order suspending the effectiveness of the Original Registration
Statement or any Rule 462(b) Registration Statement or any amendment thereto or
any stop order or any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, (ii) the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, (iii) the institution, threatening or contemplation of any
proceeding for any such purpose or (iv) any request made by the Commission for
amending the Original Registration Statement or any Rule 462(b) Registration
Statement, for amending or supplementing the Prospectus or for additional
information. The Company will use its best efforts to prevent the issuance of
any such stop order and, if any such order or stop order is issued, to obtain
the withdrawal thereof as promptly as possible.
(c) The Company will cooperate with you and counsel for the Underwriters
and take such actions as you may reasonably request in connection with the
qualification of the Securities for offering and sale under the securities or
blue sky laws of such jurisdictions as the Representatives may designate and
will continue such qualifications in effect for as long as may be necessary to
complete the distribution of the Securities, provided, however, that in
connection
15
therewith the Company shall not be required to qualify as a foreign corporation
or to execute a general consent to service of process in any jurisdiction.
(d) If, at any time prior to the later of (i) the final date when a
prospectus relating to the Securities is required to be delivered under the Act
or (ii) the Option Closing Date, any event occurs as a result of which the
Prospectus, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if for any other reason it is necessary at any time to
amend or supplement the Prospectus to comply with the Act or the rules or
regulations of the Commission thereunder, the Company will promptly notify the
Representatives thereof and, subject to Section 5(a) hereof, will prepare and
file with the Commission, at the Company's expense, an amendment to the
Registration Statement or an amendment or supplement to the Prospectus that
corrects such statement or omission or effects such compliance.
(e) The Company will, without charge, provide (i) to the Representatives
and to counsel for the Underwriters a conformed copy of the registration
statement originally filed with respect to the Securities and each amendment
thereto (in each case including exhibits thereto) or any Rule 462(b)
Registration Statement, certified by the Secretary or an Assistant Secretary of
the Company to be true and complete copies thereof as filed with the Commission
by electronic transmission, (ii) to each other Underwriter, a conformed copy of
such registration statement or any Rule 462(b) Registration Statement and each
amendment thereto (in each case without exhibits thereto) and (iii) so long as a
prospectus relating to the Securities is required to be delivered under the Act,
as many copies of each Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto as the Representatives may reasonably request; without
limiting the application of clause (iii) of this sentence, the Company, not
later than (A) 6:00 PM, New York City time, on the date of determination of the
initial public offering price, if such determination occurred at or prior to
10:00 A.M., New York City time, on such date or (B) 2:00 PM, New York City time,
on the business day following the date of determination of the initial public
offering price, if such determination occurred after 10:00 A.M., New York City
time, on such date, will deliver to the Underwriters, without charge, as many
copies of the Prospectus and any amendment or supplement thereto as the
Representatives may reasonably request for purposes of confirming orders that
are expected to settle on the Firm Closing Date. The Company will provide or
cause to be provided to each of the Representatives, and to each Underwriter
that so requests in writing, a copy of each report on Form SR filed by the
Company as required by Rule 463 under the Act.
(f) The Company, as soon as practicable, will make generally available to
its securityholders and to the Representatives a combined earnings statement of
the Company and the Subsidiaries that satisfies the provisions of Section 11(a)
of the Act and Rule 158 thereunder, covering a period of at least 12 months
beginning after the effective date of the Registration Statement.
(g) The Company will apply the net proceeds from the sale of the
Securities substantially as set forth under "Use of Proceeds" in the Prospectus.
16
(h) The Company will not, directly or indirectly, without the prior
written consent of the Representatives, on behalf of the Underwriters, offer,
sell, offer to sell, pledge or contract to sell or grant any option to purchase
or otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, grant of any option to purchase, sell or dispose) of
any shares of Common Stock or of any equity securities of the Company
substantially similar thereto or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock for a period of 180 days
after the date hereof, except pursuant to this Agreement and except for
issuances by the Company of employee stock options or warrants which are
exerciseable after the 180th day after the date hereof.
(i) The Company will not, directly or indirectly, (i) take any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities or (ii) (A) sell, bid for, purchase, or pay anyone any compensation
for soliciting purchases of, the Securities or (B) pay or agree to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.
(j) The Company has obtained or will obtain the agreements described in
Section 7(f) hereof prior to the Firm Closing Date.
(k) If at any time during the 25-day period after the Registration
Statement becomes effective or the period prior to the Option Closing Date, any
rumor, publication or event relating to or affecting the Company shall occur as
a result of which in your reasonable opinion the market price of the Common
Stock has been or is likely to be materially affected (regardless of whether
such rumor, publication or event necessitates a supplement to or amendment of
the Prospectus), the Company will, after notice from you advising the Company to
the effect set forth above, forthwith prepare, consult with you concerning the
substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event.
(l) If the Company elects to rely on Rule 462(b), the Company shall file a
Rule 462(b) Registration Statement with the Commission in compliance with Rule
462(b) and pay the applicable fees in accordance with Rule 111 promulgated under
the Act, each by the earlier of (i) 10:00 P.M. Eastern time on the date of this
Agreement and (ii) the time confirmations are sent or given, as specified by
Rule 462(b)(2).
(m) The Company will cause the Securities to be duly included for
quotation on the Nasdaq Stock Market's National Market (the "Nasdaq National
Market") prior to the Firm Closing Date. The Company will ensure that the
Securities remain included for quotation on the Nasdaq National Market or listed
on any national securities exchange for a reasonable period of time following
the Firm Closing Date.
(n) The Company will take no action to prevent consummation of the
Reorganization Transactions.
17
(o) The Existing Stockholders will not, directly or indirectly, without
the prior written consent of Wheat, First Securities, Inc., on behalf of the
Underwriters, offer, sell, offer to sell, pledge, contract to sell or grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge or grant of any option to purchase, sell
or dispose) of any shares of Common Stock or of any equity securities of the
Company substantially similar thereto or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock for a period of 180 days
after the date hereof, except pursuant to this Agreement (other than transfers
among the Existing Stockholders or by natural persons who are Existing
Stockholders to their children or to trusts to be established for the benefit of
their children).
6. Expenses. The Company will pay all costs and expenses incident to the
performance of its obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is terminated
pursuant to Section 11 hereof, including all costs and expenses incident to (i)
the preparation, printing or other production and filing of documents with
respect to the transactions, including any costs of printing the registration
statement originally filed with respect to the Securities and any amendment
thereto, any Rule 462(b) Registration Statement, any Preliminary Prospectus and
the Prospectus and any amendment or supplement thereto, this Agreement and any
blue sky memoranda, (ii) all arrangements relating to the mailing and delivery
to the Underwriters of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company in connection with the registration of the Securities
under the Act, (iv) preparation, issuance and delivery to the Underwriters of
any certificates evidencing the Securities, including transfer agent's and
registrar's fees, (v) the qualification of the Securities under state securities
and blue sky laws, including filing fees and fees and disbursements of counsel
for the Underwriters relating thereto (not to exceed $7,500 in the aggregate),
(vi) the filing fees of the Commission and the National Association of
Securities Dealers, Inc. relating to the Securities, (vii) any quotation of the
Securities on the Nasdaq National Market, (viii) any meetings with prospective
investors in the Securities (other than as shall have been specifically approved
by the Representatives to be paid for by the Underwriters) and (ix) advertising
relating to the offering of the Securities (other than as shall have been
specifically approved by the Representatives to be paid for by the
Underwriters). The Underwriters shall pay their own expenses, including the fees
and disbursements of Underwriter's counsel (but excluding those fees and
disbursements covered by clause (v) in the previous sentence); however, if the
sale of the Securities provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth in Section 7 hereof
is not satisfied, because this Agreement is terminated pursuant to Section 11
hereof or because of any failure, refusal or inability on the part of the
Company to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder other than by reason of a default by any of the
Underwriters, the Company will reimburse the Underwriters severally upon demand
for all out-of-pocket expenses (including all counsel fees and disbursements)
that shall have been incurred by them in connection with the proposed purchase
and sale of the Securities. The Company shall not in any event be liable to any
of the Underwriters for the loss of anticipated profits from the transactions
covered by this Agreement.
7. Conditions of the Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representatives'
18
sole discretion, to the accuracy of the representations and warranties of the
Company contained herein as of the date hereof and as of the Firm Closing Date,
as if made on and as of the Firm Closing Date, to the accuracy of the statements
of the Company's officers made in writing pursuant to the provisions hereof, to
the performance by the Company of its covenants and agreements hereunder and to
the following additional conditions:
(a) If the Original Registration Statement or any amendment thereto filed
prior to the Firm Closing Date has not been declared effective as of the time of
execution hereof, the Original Registration Statement or such amendment and, if
the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration
Statement shall have been declared effective not later than the earlier of (i)
11:00 A.M., New York time, on the date on which the amendment to the
registration statement originally filed with respect to the Securities or to the
Registration Statement, as the case may be, containing information regarding the
initial public offering price of the Securities has been filed with the
Commission and (ii) the time confirmations are sent or given as specified by
Rule 462(b)(2), or with respect to the Original Registration Statement, or such
later time and date as shall have been consented to by the Representatives; if
required, the Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto shall have been filed with the Commission in
the manner and within the time period required by Rules 434 and 424(b) under the
Act; no stop order suspending the effectiveness of the Registration Statement or
any amendment thereto shall have been issued, and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Company or the
Representatives, shall be threatened or contemplated by the Commission; and the
Company shall have complied with any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise).
(b) The Representatives shall have received opinions, dated the Firm
Closing Date, of Xxxxxx, Xxxxx & Xxxxxxx LLP ("Xxxxxx Xxxxx"), counsel for the
Company and the Existing Stockholders, to the effect of paragraphs (i) through
(xii) and (xiv) through (xvi), below, and Xxxx & Priest LLP, special
intellectual property counsel for the Company, to the effect of paragraph (xiii)
below:
(i) the Company and each of the Subsidiaries have been duly
organized and are validly existing as corporations in good standing under
the laws of their respective jurisdictions of incorporation and are duly
qualified to transact business as foreign corporations and are in good
standing under the laws of all other jurisdictions where, to the knowledge
of such counsel, the ownership or leasing of their respective properties
or the conduct of their respective businesses requires such qualification,
except where the failure to be so qualified would not have a material
adverse effect on the consolidated financial position, shareholders'
equity or results of operations of the Company and the Subsidiaries;
(ii) the Company and each of the Subsidiaries have corporate power
to own or lease their respective properties and conduct their respective
businesses as described in the Registration Statement and the Prospectus,
and the Company has corporate power to enter into this Agreement and to
carry out all the terms and provisions hereof to be carried out by it;
19
(iii) the issued shares of capital stock of each of the Subsidiaries
have been duly authorized and validly issued, are fully paid and
nonassessable and, except as otherwise set forth in the Prospectus, upon
consummation of the Reorganization Transactions on the terms and in the
manner contemplated by the Reorganization Agreements will be owned of
record by the Company free and clear of any perfected security interests
or, to the knowledge of such counsel, any other security interests,
liens, encumbrances, or claims;
(iv) upon consummation of the Reorganization Transactions, the
Company will have an authorized, issued and outstanding capitalization as
set forth in the Prospectus; upon consummation of the Reorganization
Transactions on the terms and in the manner contemplated by the
Reorganization Agreements, all of the issued shares of capital stock of
the Company will have been duly authorized and validly issued and fully
paid and nonassessable and will conform to the description of capital
stock in the Prospectus, and will not have been issued in violation of
or subject to any statutory preemptive rights or, to the knowledge of
such counsel, other rights to subscribe for or purchase securities; the
Firm Securities have been duly authorized by all necessary corporate
action of the Company and, when issued and delivered to and paid for by
the Underwriters pursuant to this Agreement, will be validly issued,
fully paid and nonassessable and will conform to the description of the
Firm Securities contained in the Prospectus as amended or supplemented
as of the Firm Closing Date; the Securities have been duly included for
trading on the Nasdaq National Market; no holders of outstanding shares
of capital stock of the Company are entitled as such to any statutory
preemptive or, to the knowledge of such counsel, other rights to
subscribe for any of the Securities; and, to the knowledge of such
counsel, no holders of securities of the Company are entitled to have
such securities registered under the Registration Statement which rights
have not been waived; and the form of certificates evidencing the
Securities complies as to form with the requirements of the Delaware
General Corporation Law, the charter and by laws of the Company and the
Nasdaq.
(v) the statements set forth under the heading "Description of
Capital Stock" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company, provide
a fair summary of such provisions; and the statements set forth under the
headings "Risk Factors--Extensive and Increasing Regulation of Tobacco
Products," "Risk Factors--Tobacco Industry Litigation,"
"Business--Government Regulation; Tobacco Industry Litigation" and
"Business--Legal Proceedings" in the Prospectus, insofar as such
statements constitute a summary of the legal matters, documents or
proceedings referred to therein, provide a fair summary of such legal
matters, documents and proceedings;
(vi) the execution and delivery of this Agreement have been duly
authorized by all necessary corporate action of the Company and this
Agreement has been duly executed and delivered by the Company, and is the
valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except (i) as enforceability hereof
may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and by general equitable principles (whether
considered in an action at law or in equity) and (ii) that enforcement
of rights to indemnity and
20
contribution hereunder may be limited by federal or state securities laws
or principles of public policy.
(vii) the execution and delivery of each of the Reorganization
Agreements have been duly authorized by the Trusts and the Subsidiaries or
the Company (as the case may be) and each of the Reorganization Agreements
has been duly executed and delivered by each Existing Stockholder, the
Subsidiaries and/or the Company party thereto, and each is
the valid and binding agreement of each Existing Stockholder, the
Subsidiaries or the Company, as the case may be, enforceable against such
Existing Stockholder, the Subsidiaries or the Company, party thereto,
in accordance with its terms; except (i) as enforceability hereof may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights
generally and by general equitable principles (whether considered in an
action at law or in equity) and (ii) that enforcement of rights to
indemnity and contribution hereunder may be limited by federal
or state securities laws or principles of public policy.
(viii) (A) to the knowledge of such counsel, no legal or
governmental proceedings are pending to which the Company or any of the
Subsidiaries is a party or to which the property of the Company or any of
the Subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not described therein,
and, to the knowledge of such counsel, no such proceedings have been
threatened against the Company or any of the Subsidiaries or with respect
to any of their respective properties and (B) to the knowledge of such
counsel, no contract or other document or federal statute or regulation
is required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement that
is not described therein or filed as required;
(ix) the issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement, the compliance by
the Company with the other provisions of this Agreement or the
Reorganization Agreements to which it is a party, and the consummation of
the other transactions contemplated hereby or thereby do not, to the
knowledge of such counsel (A) require the consent, approval,
authorization, registration or qualification of or with any governmental
authority, except such as have been obtained and such as may be required
under state securities or blue sky laws in connection with the purchase
and distribution of the Securities by the Underwriters and the clearance
of such offering with the National Association of Securities Dealers,
Inc., or (B) conflict with or result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any of the
agreements listed on Schedule 4 attached hereto (the "Material
Agreements"), or the charter documents or by-laws of the Company or any of
the Subsidiaries, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any arbitrator
known to such counsel and applicable to the Company or the Subsidiaries
or any of their properties;
(x) the Registration Statement is effective under the Act; any
required filing of the Prospectus, or any Term Sheet that constitutes a
part thereof, pursuant to Rules 434 and
21
424(b) has been made in the manner and within the time period required by
Rules 434 and 424(b); and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement or any
amendment thereto [or any Rule 462(b) Registration Statement] has been
issued, and to the knowledge of such counsel, no proceedings for that
purpose have been instituted or threatened or contemplated by the
Commission;
(xi) the Registration Statement originally filed with respect to the
Securities and each amendment thereto, [any Rule 462(b) Registration
Statement] and the Prospectus and any amendments and supplements
thereto made by the Company (in each case, other than the financial
statements, schedules and other financial and statistical information
contained therein, as to which such counsel need express no opinion),
as of their respective dates, comply as to form in all material respects
with the applicable requirements of the Act and the rules and regulations
of the Commission thereunder; provided, however, that in passing upon
such compliance as to form, such counsel may assume that the statements
made therein are complete and correct;
[(xii) if the Company elects to rely on Rule 434, the Prospectus is
not "materially different," as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time of its
effectiveness or an effective post-effective amendment thereto (including
such information that is permitted to be omitted pursuant to Rule
430A);]
(xiii) the Company and the Subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent applications,
trademarks, service marks, trade names, licenses, copyrights and
proprietary or other confidential information currently employed by them
in connection with their respective businesses, and neither the Company
nor any such Subsidiary has received any notice of infringement of or
conflict with asserted rights of any third party with respect to any of
the foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material
adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company and the
Subsidiaries;
(xiv) to the knowledge of such counsel, the Company and the
Subsidiaries possess all certificates, authorizations and permits issued
by the appropriate federal, state or foreign regulatory authorities
necessary to conduct their respective businesses, and neither the Company
nor any such Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a material adverse change in
the condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and the Subsidiaries;
22
(xv) the Company is not and after giving effect to the offering and
sale of Securities, will not be an "investment company" or a person
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(xvi) each Existing Stockholder has full legal right, and each
Trust has the power and authority, to enter into this Agreement and
each Reorganization Agreement to which it is a party. This Agreement
and each Reorganization Agreement has been duly executed and delivered
by or on behalf of each Existing Stockholder party thereto. The execution,
delivery and performance by each of the Existing Stockholders of this
Agreement and each Reorganization Agreement to which it is a party,
and the consummation of the transactions contemplated hereby and thereby
will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default or cause an acceleration of
any obligation under any Material Agreement, or any order of any court or
governmental agency or authority known to such counsel and entered into in
any proceeding to which an Existing Stockholder was or is a party or by
which an Existing Stockholder is bound, or violate or conflict with any
applicable foreign, federal, state or local law, rule administrative
regulation or ordinance or administrative or court decree known to such
counsel and applicable to an Existing Stockholder or an Existing
Stockholder's property;
In rendering any such opinion, each such counsel may rely, as to matters
of fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company, the Existing Stockholders and public officials.
Xxxxxx Xxxxx shall also state that, in the course of its review and
discussion of the contents of the Registration Statement and the Prospectus with
certain directors, officers and employees of the Company, representatives of the
Underwriters and representatives of counsel for the Underwriters, nothing has
come to such counsel's attention which would lead such counsel to believe that
the Registration Statement, as of its effective date and as of the Firm Closing
Date, and any amendment thereto made by the Company prior to such Firm Closing
Date, as of the date thereof, contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus and any
amendment thereto made by the Company prior to such Firm Closing Date, as of the
date thereof, and as of the date of such opinion, included or includes any
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that in each
case, such counsel shall not be required to make any statement with respect to
the financial statements or other financial or statistical data.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
23
(c) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Stroock & Stroock & Xxxxx LLP, counsel for the Underwriters,
with respect to the issuance and sale of the Firm Securities, the Registration
Statement and the Prospectus, and such other related matters as the
Representatives may reasonably require, and the Company shall have furnished to
such counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(d) The Representatives shall have received from Ernst & Young LLP a
letter or letters dated, respectively, the date hereof and the Firm Closing
Date, in form and substance satisfactory to the Representatives, to the effect
of subparagraphs (i) through (v) below, and the Representatives shall have
received from X.X. Xxxx LLP a letter or letters dated, respectively, the date
hereof and the Firm Closing Date, in form and substance satisfactory to the
Representatives, to the effect of subparagraphs (i), (ii) and (iv), below:
(i) they are independent accountants with respect to the Company and
its combined subsidiaries within the meaning of the Act and the applicable
rules and regulations thereunder;
(ii) in their opinion, the audited combined financial statements and
schedules, if any, examined by them and included in the Registration
Statement and the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act and the related
published rules and regulations;
(iii) at a specific date not more than five business days prior to
the date of such letter, there were not any changes in the capital stock
or long-term debt of the Company and its combined subsidiaries or any
decreases in net current assets or stockholders' equity of the Company and
its combined subsidiaries, in each case compared with amounts shown on the
December 31, 1996 combined balance sheet included in the Registration
Statement and the Prospectus, or for the period from January 1, 1997 to
such specified date there were not any decreases, as compared with the
comparable period of the preceding year in sales, net income, income
before income taxes or total or per share amounts of net income of the
Subsidiaries, except in all instances for changes, decreases or increases
set forth in such letter;
(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting records
of the Company and its combined Subsidiaries and are included in the
Registration Statement and the Prospectus under the captions "Summary
Combined Financial Information" and "Selected Combined Financial Data",
and have compared such amounts, percentages and financial information with
such records of the combined Subsidiaries and with information derived
from such records and have found them to be in agreement, excluding any
questions of legal interpretation; and
(v) on the basis of a reading of the unaudited pro forma combined
condensed financial statements included in the Registration Statement and
the Prospectus, carrying out certain specified procedures that would not
necessarily reveal matters of significance with
24
respect to the comments set forth in this subparagraph (v), inquiries of
certain officials of the Company and its combined subsidiaries who have
responsibility for financial and accounting matters and proving the
arithmetic accuracy of the application of the pro forma adjustments to the
historical amounts in the unaudited pro forma combined condensed financial
statements, nothing came to their attention that caused them to believe
that the unaudited pro forma combined condensed financial statements do
not comply in form in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical amounts in
the compilation of such statements.
In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (A) such letters shall be accompanied
by a written explanation of the Company as to the significance thereof,
unless the Representatives deem such explanation unnecessary, and (B) such
changes, decreases or increases do not, in the sole judgment of the
Representatives, make it impractical or inadvisable to proceed with the
purchase and delivery of the Securities as contemplated by the
Registration Statement, as amended as of the date hereof.
References to the Registration Statement and the Prospectus in this
paragraph (d) with respect to either letter referred to above shall
include any amendment or supplement thereto at the date of such letter.
In two separate letters, which letters may be based upon
representations of each Subsidiary, in form and substance satisfactory to
the Representatives, dated the Firm Closing Date, each of X.X. Xxxx LLP
and Ernst & Young LLP shall also state that each Subsidiary has been an S
corporation under Subchapter S of the Code since the respective date set
forth opposite its name on Schedule 3 until the day preceding the
consummation of the Reorganization Transactions, at which time each
Subsidiary validly shall have terminated its S Corporation status.
(e) The Representatives shall have received a certificate, dated the Firm
Closing Date, of the principal executive officer and the principal financial or
accounting officer of the Company to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Firm Closing
Date; the Registration Statement, as amended as of the Firm Closing Date,
does not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading,
and the Prospectus, as amended or supplemented as of the Firm Closing
Date, does not 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; the Company has performed all covenants and agreements
contained in this Agreement and satisfied all conditions contained in this
Agreement on its part to be performed or satisfied hereunder at or prior
to the Firm Closing
25
Date; and no condition precedent to the Reorganization Transactions has
not been waived or satisfied other than the sale of the Securities under
this Agreement;
(ii) no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto has been issued, and no proceedings for
that purpose have been instituted or, to the knowledge of the Company,
have been threatened or have been contemplated by the Commission; and
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, neither the Company nor any of
the Subsidiaries has sustained any material loss or interference with
their respective businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from
any labor dispute or any legal or governmental proceeding, and there has
not been any material adverse change, or any development in the
outstanding capital stock or long-term debt of the Company or any of the
Subsidiaries or involving a prospective material adverse change, in the
condition (financial or otherwise), management, business prospects, net
worth, shareholders' equity or results of operations of the Company and
any of the Subsidiaries, taken as a whole, except in each case as
described in or contemplated by the Prospectus (exclusive of any amendment
or supplement thereto).
(f) The Representatives shall have received a certificate, dated the Firm
Closing Date, of the Existing Stockholders to the effect that the
representations and warranties of the Existing Stockholders in this Agreement
are true and correct as if made on and as of the Firm Closing Date; the
Registration Statement, as amended as of the Firm Closing Date, does not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading, and the Prospectus, as
amended or supplemented as of the Firm Closing Date, does not 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; the Existing Stockholders have performed
all covenants and agreements contained in this Agreement and satisfied all
conditions contained in this Agreement on their part to be performed or
satisfied hereunder at or prior to the Firm Closing Date; and no condition
precedent to the Reorganization Transactions has not been waived or satisfied
other than the sale of the Securities under this Agreement.
(g) The Representatives shall have received a certificate, dated the Firm
Closing Date, of each of the Existing Stockholders to the effect that such
Existing Stockholder does not have the right, and that to its knowledge no such
person has the right, contractual or otherwise, to request that the Company
register pursuant to the Act shares of capital stock of the Company held by such
Existing Stockholder or by any such person, upon the issuance and sale of the
Securities to the Underwriters hereunder, except to the extent that (A) such
shares are included in the Registration Statement, (B) such rights were waived
or not exercised or (C) such person was excluded from including any such shares
in the Registration Statement;
(h) The Representatives shall have received from each Existing
Stockholder, each person who is a director or officer of the Company an
agreement to the effect that such person will
26
not, directly or indirectly, without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, offer, sell, offer to
sell, pledge, contract to sell or grant any option to purchase or otherwise sell
or dispose (or announce any offer, sale, offer of sale, contract of sale,
pledge, or grant of any option to purchase, sell or dispose) of any shares of
Common Stock or of equity securities of the Company substantially similar
thereto or any securities convertible into, or exchangeable or exercisable for,
shares of Common Stock for a period of 180 days after the date hereof, except
pursuant to this Agreement (other than transfers among the Existing Stockholders
or by natural persons who are Existing Stockholders to their children or to
trusts to be established for the benefit of their children).
(i) The Reorganization Transactions shall have been consummated.
(j) On or before the Firm Closing Date, the Representatives and counsel
for the Underwriters shall have received such further certificates, documents or
other information as they may have reasonably requested from the Company.
(k) Prior to the commencement of the offering of the Securities, the
Securities shall have been included for trading on the Nasdaq National Market.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company or the Existing Stockholders shall
furnish to the Representatives such conformed copies of such opinions,
certificates, letters and documents in such quantities as the Representatives
and counsel for the Underwriters shall reasonably request.
The respective obligations of the several Underwriters to purchase and pay
for any Option Securities shall be subject, in their discretion, to each of the
foregoing conditions to purchase the Firm Securities, except that all references
to the Firm Securities and the Firm Closing Date shall be deemed to refer to
such Option Securities and the related Option Closing Date, respectively.
8. Indemnification and Contribution.
(a) The Company and the Existing Stockholders, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934 (the "Exchange Act"), against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by the
Company or the Existing Stockholders in Section 2 of this Agreement,
27
(ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto,
(iii) the omission or alleged omission to state in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, a material fact
required to be stated therein or necessary to make the statements therein
(in the case of the Prospectus, in light of the circumstances under which
they were made) not misleading, or
(iv) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials used in
connection with the marketing of the Securities, including without
limitation, slides, videos, films, tape recordings,
and will reimburse, as incurred, each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action;
provided, however, that the Company and the Existing Stockholders will not
be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto or any
such audio or visual materials in reliance upon and in conformity with
written information furnished to the Company by such Underwriter through
the Representatives specifically for use therein; and provided, further,
that (ii) the Company and the Existing Stockholders will not be liable to
any Underwriter or any person controlling such Underwriter with respect to
any such untrue statement or omission made in any Preliminary Prospectus
that is corrected in the Prospectus (or any amendment or supplement
thereto) if the person asserting any such loss, claim, damage or liability
purchased Securities from such Underwriter but was not sent or given a
copy of the Prospectus (as amended or supplemented) at or prior to the
written confirmation of the sale of such Securities to such person in any
case where such delivery of the Prospectus (as amended or supplemented) is
required by the Act, unless such failure to deliver the Prospectus (as
amended or supplemented) was a result of noncompliance by the Company with
Section 5(d) and (e) of this Agreement. This indemnity agreement will be
in addition to any liability which the Company may otherwise have. Neither
the Company nor the Existing Stockholders will not, without the prior
written consent of the Underwriter or Underwriters purchasing, in the
aggregate, more than fifty percent (50%) of the Securities, 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 any such
Underwriter or any person who controls any such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act is a
party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of all of the
Underwriters and such controlling persons from all liability arising out
of such claim, action, suit or proceeding.
28
(b) Each Underwriter, severally and not jointly, will indemnify and hold
harmless the Company, each of its directors, each of its officers who signed the
Registration Statement, each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act and each
Existing Stockholder against any losses, claims, damages or liabilities to which
the Company or any such director, officer, controlling person or Existing
Stockholder may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto or any audio or visual materials, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any audio or visual
materials or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein: and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person or Existing
Stockholder in connection with investigating or defending any such loss, claim,
damage, liability or any action in respect thereof. This indemnity agreement
will be in addition to any liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnified
party from any liability which it may have to any indemnified party otherwise
than under this Section 8. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party and/or
that representation of such indemnified party may be inappropriate under
applicable standards of professional conduct due to actual or potential
differing interests between them, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 8 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified
29
party in connection with the defense thereof, unless (i) the indemnified party
shall have employed separate counsel in accordance with the proviso to the next
preceding sentence (it being understood, however, that in connection with such
action the indemnifying party shall not be liable for the expenses of more than
one separate counsel (in addition to local counsel) in any one action or
separate but substantially similar actions in the same jurisdiction arising out
of the same general allegations or circumstances, designated by the
Representatives in the case of paragraph (a) of this Section 8, representing the
indemnified parties under such paragraph (a) who are parties to such action or
actions) or (ii) the indemnifying party does not promptly retain counsel
satisfactory to the indemnified party or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party, except that if clause (i) or (iii) is applicable, such
liability shall only be in respect of the counsel referred to in such clause (i)
or (iii). After such notice from the indemnifying party to such indemnified
party, the indemnifying party will not be liable for the costs and expenses of
any settlement of such action effected by such indemnified party without the
consent of the indemnifying party.
(d) In circumstances in which the indemnity agreement provided for in the
preceding paragraphs of this Section 8 is unavailable or insufficient, for any
reason, to hold harmless an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof), each indemnifying party,
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Company and Existing Stockholders on the one hand and the Underwriters on
the other from the offering of the Securities or (ii) if the allocation provided
by the foregoing clause (i) is not permitted by applicable law or if the
indemnified party failed to give notice required under subsection (c) above, not
only such relative benefits but also the relative fault of the Company and
Existing Stockholders on the one hand and the Underwriters on the other in
connection with the statements or omissions or alleged 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 Existing Stockholders on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as, (i) with respect to the Company, the total proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters and (ii)
with respect to the Existing Stockholders, the aggregate principal amount of the
Notes received by the Existing Stockholders to the total underwriting discounts
and commissions received by the Underwriters. The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company and the
Existing Stockholders or the Underwriters, the parties' relative intents,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and any other equitable considerations appropriate in the
circumstances. The Company, the Existing Stockholders and the Underwriters agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations referred to above
in this paragraph (d). Notwithstanding any other provision of this paragraph
(d), no Underwriter
30
shall be obligated to make contributions hereunder that in the aggregate exceed
the total public offering price of the Securities purchased by such Underwriter
under this Agreement, less the aggregate amount of any damages that such
Underwriter has otherwise been required to pay in respect of the same or any
substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute hereunder are
several in proportion to their respective underwriting obligations and not
joint, and contributions among Underwriters shall be governed by the provisions
of the Prudential Securities Incorporated Master Agreement Among Underwriters.
For purposes of this paragraph (d), each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, each Existing Stockholder and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, shall have the same rights to contribution as the Company.
(e) The liability of the Existing Stockholders under this Section 8 shall
be limited to the total principal amount of the Notes received by the Existing
Stockholders. Furthermore, no Existing Stockholder shall be required to provide
indemnification hereunder unless the Underwriters or controlling person seeking
indemnification shall have first made a demand for payment on the Company with
respect to any such loss, claim, liability or expense, and the Company shall
have failed to make such requested payment within 90 days after receipt of such
demand.
9. Default of Underwriters. If one or more Underwriters default in their
obligations to purchase Firm Securities or Option Securities hereunder and the
aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Securities or Option
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase. If one or more Underwriters so default with respect to an aggregate
number of Securities that is more than ten percent of the aggregate number of
Firm Securities or Option Securities, as the case may be, to be purchased by all
of the Underwriters at such time hereunder, and if arrangements satisfactory to
the Representatives are not made within 36 hours after such default for the
purchase by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives) of the Securities with respect to
which such default occurs, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter or the Company other than as provided
in Section 10 hereof. In the event of any default by one or more Underwriters as
described in this Section 9, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case may be,
established as provided in Section 3 hereof for not more than seven business
days in order that any necessary changes may be made in the arrangements or
documents for the purchase and
31
delivery of the Firm Securities or Option Securities, as the case may be, and
the Company agrees to file promptly any amendments to the Registration Statement
or the Prospectus which in your opinion, exercised in consultation with Stroock
& Stroock & Xxxxx LLP, may thereby be made necessary. As used in this Agreement,
the term "Underwriter" includes any person substituted for an Underwriter under
this Section 9. Nothing herein shall relieve any defaulting Underwriter from
liability for its default.
10. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company, its officers, the
Existing Stockholders and the several Underwriters set forth in this Agreement
or made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation (or any
statement as to the results thereof) made by or on behalf of the Company, any of
its officers or directors, the Existing Stockholders, any Underwriter or any
controlling person referred to in Section 8 hereof and (ii) delivery of and
payment for the Securities. The respective agreements, covenants, indemnities
and other statements set forth in Sections 6 and 8 hereof shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement.
11. Termination.
(a) This Agreement may be terminated with respect to the Firm Securities
or any Option Securities in the sole discretion of the Representatives by notice
to the Company given prior to the Firm Closing Date or the related Option
Closing Date, respectively, in the event that the Company shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder at or prior thereto or, if at or
prior to the Firm Closing Date or such Option Closing Date, respectively,
(i) the Company or any of the Subsidiaries shall have, in the sole
judgment of the Representatives, sustained any material loss or
interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding or there shall have been any material adverse change, or any
development involving a prospective material adverse change (including
without limitation a change in management or control of the Company), in
the condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and the Subsidiaries, taken as a
whole, except in each case as described in or contemplated by the
Prospectus (exclusive of any amendment or supplement thereto);
(ii) trading in the Common Stock shall have been suspended by the
Commission or the Nasdaq National Market or trading in securities
generally on the New York Stock Exchange or Nasdaq National Market shall
have been suspended or minimum or maximum prices shall have been
established on either such exchange or for such market system;
(iii) a banking moratorium shall have been declared by New York or
United States authorities; or
32
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or
material adverse change in general economic, political or financial
conditions having an effect on the U.S. financial markets that, in the
sole judgment of the Representatives, makes it impractical or inadvisable
to proceed with the public offering or the delivery of the Securities as
contemplated by the Registration Statement, as amended as of the date
hereof.
(b) Termination of this Agreement pursuant to this Section 11 shall be
without liability of any party to any other party except as provided in Section
10 hereof.
12. Information Supplied by Underwriters. The statements set forth in the
last paragraph on the front cover page and under the heading "Underwriting" in
any Preliminary Prospectus or the Prospectus (to the extent such statements
relate to the Underwriters) constitute the only information furnished by any
Underwriter through the Representatives to the Company for the purposes of
Sections 2(b) and 8 hereof. The Underwriters confirm that such statements (to
such extent) are correct.
13. Notices. All communications hereunder shall be in writing and, if sent
to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Wheat, First Securities,
Inc., Riverfront Plaza, 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000,
Attention: Corporate Finance Department (telecopier number (000) 000-0000); and
if sent to the Company or any Existing Stockholder, shall be delivered or sent
by mail, telex or facsimile transmission and confirmed in writing to the Company
or any Existing Stockholder at 000 Xxxxx 00 Xxxx, Xxxxxxxx, Xxx Xxxxxx 00000;
provided, however, that any notice to any Underwriter pursuant to Section 8
hereof shall be delivered or sent by reliable courier, first-class mail, telex
or facsimile transmission to such Underwriter at its address set forth in the
Underwriter's Questionnaire, which address will be supplied to the Company or
the Existing Stockholders by you on request. Any such statements, requests,
notices or agreement shall take effect upon receipt thereof.
14. Successors. This Agreement shall inure to the benefit of and shall be
binding upon the several Underwriters, the Existing Stockholders, the Company
and their respective successors and legal representatives, and nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any
other person any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of such persons and for the benefit of no other person except
that (i) the indemnities of the Company and the Existing Stockholders contained
in Section 8 of this Agreement shall also be for the benefit of any person or
persons who control any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act and (ii) the indemnities of the Underwriters
contained in Section 8 of this Agreement shall also be for the benefit of the
directors of the Company, the officers of the Company who have signed the
Registration Statement, the Existing Stockholders and any person or persons who
control the Company within the meaning of Section 15 of the Act or Section 20 of
the
33
Exchange Act. No purchaser of Securities from any Underwriter shall be deemed a
successor or assignee because of such purchase.
15. Time of the Essence. Time shall be of the essence in this Agreement.
16. Business Day. As used herein, the term "business day" shall mean any
day when the Commission's Office in Washington, D.C. is open for business.
17. Captions. The captions in this Agreement are included solely for
convenience of reference and shall not be deemed to be a part of this Agreement.
18. Applicable Law. The validity and interpretation of this Agreement, and
the terms and conditions set forth herein, shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to any
provisions relating to conflicts of laws.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
34
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute an agreement binding the Company and each of the
several Underwriters. It is understood that your acceptance of this Agreement on
behalf of each of the Underwriters is pursuant to the authority set forth in a
form of Agreement Among Underwriters, the form of which will be submitted to the
Company for examination, upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
800-JR CIGAR, INC.
By:
------------------------------
[Title]
XXXXX X. XXXXXXX
---------------------------------
XXXXXXX X. XXXXXXX
---------------------------------
TRUST F/B/O XXXXX XXXXXXX
---------------------------------
Xxxxx X. Xxxxxxx, Trustee
---------------------------------
XxXxxxx X. Xxxxxxx, Trustee
---------------------------------
Xxxxxx Xxxxxxxxx, Special Trustee
35
TRUST F/B/O XXXXX XXXXXXX
---------------------------------
Xxxxx X. Xxxxxxx, Trustee
---------------------------------
XxXxxxx X. Xxxxxxx, Trustee
---------------------------------
Xxxxxx Xxxxxxxxx, Special Trustee
TRUST F/B/O XXXXXXXX XXXXXXX
---------------------------------
Xxxxx X. Xxxxxxx, Trustee
---------------------------------
XxXxxxx X. Xxxxxxx, Trustee
---------------------------------
Xxxxxx Xxxxxxxxx, Special Trustee
TRUST F/B/O XXXX XXXXXXX
---------------------------------
Xxxxx X. Xxxxxxx, Trustee
---------------------------------
XxXxxxx X. Xxxxxxx, Trustee
---------------------------------
Xxxxxx Xxxxxxxxx, Special Trustee
36
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
WHEAT, FIRST SECURITIES, INC.
By: WHEAT, FIRST SECURITIES, INC.
X.X. XXXXXXXX & CO.
By:
----------------------------
For itself and on behalf of the Representatives.
37
SCHEDULE 1
EXISTING STOCKHOLDERS
Xxxxx X. Xxxxxxx
XxXxxxx X. Xxxxxxx
Trust f/b/o Xxxxx Xxxxxxx
(XxXxxxx and Xxxxx Xxxxxxx,
Trustees and Xxxxxx Xxxxxxxxx,
Special Trustee)
Trust f/b/o Xxxxx Xxxxxxx
(XxXxxxx and Xxxxx Xxxxxxx,
Trustees and Xxxxxx Xxxxxxxxx,
Special Trustee)
Trust f/b/o Xxxxxxxx Xxxxxxx
(XxXxxxx and Xxxxx Xxxxxxx,
Trustees and Xxxxxx Xxxxxxxxx,
Special Trustee)
Trust f/b/o Xxxx Xxxxxxx
(XxXxxxx and Xxxxx Xxxxxxx,
Trustees and Xxxxxx Xxxxxxxxx,
Special Trustee)
38
SCHEDULE 2
UNDERWRITERS
Number of Firm
Securities to
Underwriter be Purchased
----------- ---------------
Wheat, First Securities, Inc. ...
X.X. Xxxxxxxx & Co. ...
_______________
Total ..............
39
SCHEDULE 3
SUBSIDIARIES
Jurisdiction of Date of
Name Incorporation S Corporation Election
---- --------------- ----------------------
J.R. Tobacco of America, Inc. North Carolina
Cigars of Santa Clara, N.A., Inc. North Carolina
J.N.R. Grocery Corp. New York
J.R. Tobacco NC, Inc. North Carolina
J&R Tobacco (New Jersey) Corp. New Jersey
J.R. Tobacco Company of Michigan, Inc. Michigan
J.R-46th Street, Inc. New York
J.R. Tobacco Outlet Inc. New Jersey
J.R. Statesville, Inc. North Carolina
JR Cigar (DC), Inc. District of Columbia
40
SCHEDULE 4
MATERIAL AGREEMENTS
The Company's 1997 Long-Term Incentive Plan
The Company's 1997 Non-Employee Directors' Stock Plan
The Company's Employee Stock Purchase Plan
1997 Employee Bonus Pool Plan
Employment Agreement, dated March 13, 1997 between the Company and Xxxxx X.
Xxxxxxx
Employment Agreement, dated March 13, 1997 between the Company and
XxXxxxx X. Xxxxxxx
Employment Agreement, dated March 13, 1997 between the Company and Xxxx Xxxxxx
Management Agreement dated , 1997 by and between MC Management
and the Company
Indemnification Agreements
Contribution Agreement dated , 1997 by and among Xxxxx X. Xxxxxxx,
XxXxxxx X. Xxxxxxx, the Xxxxx Xxxxxxx Trust, the Xxxx Xxxxxxx Trust, the
Xxxxx Xxxxxxx Trust, the Xxxxxxxx Xxxxxxx Trust and the Company
Tax Agreement dated , 1997 by and among Xxxxx X. Xxxxxxx, XxXxxxx X.
Xxxxxxx, the Xxxxx Xxxxxxx Trust, the Xxxx Xxxxxxx Trust, the Xxxxx Xxxxxxx
Trust, the Xxxxxxxx Xxxxxxx Trust and the Company
Agreement dated March 13, 1997 by and between Cigars by Santa Clara,
N.A., Inc. and Nicaraguan-American Tobacco Company, Inc. ("Natco")
Agreement dated March 13, 1997 by and between Natco and Nicaraguan-American
Tobacco Sociedad Anonima, S.A.
Agreement dated March 13, 1997 by and between Cigars by Santa Clara, N.A., Inc.
and Tabacalera Nacional Dominicana, S.A.
Lease Agreement, dated July 19, 1993 by and between J.R. Tobacco of America,
Inc. and Interstate Development Company, as amended by First Amendment to Lease,
dated November 2, 1993, by and between J.R. Tobacco of America, Inc. and
Interstate Development Company
Lease Agreement, dated , 1996 by and between J.R. Outlet, Inc. and Casa
Xxxxxx, Inc.
Note
Additional Note
41
