Draft
2,000,000 SHARES
THE CHEESECAKE FACTORY, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
DATED OCTOBER __, 1997
TABLE OF CONTENTS
SECTION 1. REPRESENTATIONS AND WARRANTIES.................................. 2
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDERS.......................................................... 2
COMPLIANCE WITH REGISTRATION REQUIREMENTS........................... 2
OFFERING MATERIALS FURNISHED TO UNDERWRITERS........................ 3
DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY.................... 3
THE UNDERWRITING AGREEMENT.......................................... 3
AUTHORIZATION OF THE COMMON SHARES.................................. 3
NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS.................. 3
NO MATERIAL ADVERSE CHANGE.......................................... 3
INDEPENDENT ACCOUNTANTS............................................. 4
PREPARATION OF THE FINANCIAL STATEMENTS............................. 4
INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES...................................................... 4
CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS...................... 5
STOCK EXCHANGE LISTING.............................................. 5
NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED.............................. 5
NO MATERIAL ACTIONS OR PROCEEDINGS.................................. 6
INTELLECTUAL PROPERTY RIGHTS........................................ 6
ALL NECESSARY PERMITS, ETC.......................................... 6
TITLE TO PROPERTIES................................................. 6
TAX LAW COMPLIANCE.................................................. 7
COMPANY NOT AN "INVESTMENT COMPANY"................................. 7
INSURANCE........................................................... 7
NO PRICE STABILIZATION OR MANIPULATION.............................. 7
RELATED PARTY TRANSACTIONS.......................................... 7
NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS......................... 7
EXCHANGE ACT COMPLIANCE............................................. 8
COMPANY'S ACCOUNTING SYSTEM......................................... 8
ERISA COMPLIANCE.................................................... 8
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS............ 9
THE UNDERWRITING AGREEMENT.......................................... 9
THE CUSTODY AGREEMENT AND POWER OF ATTORNEY......................... 9
TITLE TO COMMON SHARES TO BE SOLD; ALL AUTHORIZATIONS OBTAINED...... 9
DELIVERY OF THE COMMON SHARES TO BE SOLD............................ 9
NON-CONTRAVENTION; NO FURTHER AUTHORIZATIONS OR APPROVALS
REQUIRED.......................................................... 9
NO REGISTRATION OR OTHER SIMILAR RIGHTS.............................10
NO FURTHER CONSENTS, ETC............................................10
DISCLOSURE MADE BY SUCH SELLING SHAREHOLDER IN THE PROSPECTUS.......10
NO PRICE STABILIZATION OR MANIPULATION..............................10
CONFIRMATION OF COMPANY REPRESENTATIONS AND WARRANTIES..............10
SECTION 2. PURCHASE, SALE AND DELIVERY OF COMMON SHARES....................11
THE FIRM COMMON SHARES..............................................11
THE FIRST CLOSING DATE..............................................11
THE OPTIONAL COMMON SHARES; THE SECOND CLOSING DATE.................11
PUBLIC OFFERING OF THE COMMON SHARES................................12
PAYMENT FOR THE COMMON SHARES.......................................12
DELIVERY OF THE COMMON SHARES.......................................13
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DELIVERY OF PROSPECTUS TO THE UNDERWRITERS..........................13
SECTION 3. ADDITIONAL COVENANTS............................................13
A. COVENANTS OF THE COMPANY..............................................13
UNDERWRITERS' REVIEW OF PROPOSED AMENDMENTS AND SUPPLEMENTS.........13
SECURITIES ACT COMPLIANCE.........................................13
AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER
SECURITIES ACT MATTERS..............................................14
COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS..........14
BLUE SKY COMPLIANCE.................................................14
USE OF PROCEEDS.....................................................14
TRANSFER AGENT......................................................14
EARNINGS STATEMENT..................................................15
PERIODIC REPORTING OBLIGATIONS......................................15
AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES................15
FUTURE REPORTS TO THE UNDERWRITERS..................................15
EXCHANGE ACT COMPLIANCE.............................................16
B. COVENANTS OF THE SELLING SHAREHOLDERS.................................16
AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES................16
DELIVERY OF FORMS W-9...............................................16
SECTION 4. PAYMENT OF EXPENSES.............................................16
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS...............17
ACCOUNTANTS' COMFORT LETTER.........................................17
COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER, NO
OBJECTION FROM NASD...............................................17
NO MATERIAL ADVERSE CHANGE OR RATINGS AGENCY CHANGE.................18
OPINION OF COUNSEL FOR THE COMPANY..................................18
OPINION OF COUNSEL FOR THE UNDERWRITERS.............................18
OFFICERS' CERTIFICATE...............................................18
BRING-DOWN COMFORT LETTER...........................................19
OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS.....................19
SELLING SHAREHOLDERS' CERTIFICATE...................................19
SELLING SHAREHOLDERS' DOCUMENTS.....................................19
LOCK-UP AGREEMENT FROM CERTAIN SHAREHOLDERS OF THE COMPANY
OTHER THAN SELLING SHAREHOLDERS...................................19
ADDITIONAL DOCUMENTS................................................20
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES.........................20
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.................................20
SECTION 8. INDEMNIFICATION.................................................21
INDEMNIFICATION OF THE UNDERWRITERS.................................21
INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS..........22
NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES..................23
SETTLEMENTS.........................................................23
SECTION 9. CONTRIBUTION....................................................24
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS..............25
SECTION 11. TERMINATION OF THIS AGREEMENT...................................26
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.............26
SECTION 13. NOTICES.........................................................27
SECTION 14. SUCCESSORS......................................................27
SECTION 15. PARTIAL UNENFORCEABILITY........................................28
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SECTION 16. GOVERNING LAW PROVISIONS........................................28
SECTION 17. FAILURE OF ONE OR MORE OF THE SELLING SHAREHOLDERS TO
SELL AND DELIVER COMMON SHARES..................................28
SECTION 18. GENERAL PROVISIONS..............................................28
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UNDERWRITING AGREEMENT
, 1997
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
SALOMON BROTHERS INC
c/o NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
INTRODUCTORY. The Cheesecake Factory, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
SCHEDULE A (the "Underwriters") an aggregate of 2,000,000 shares of its
Common Stock, par value $.01 per share (the "Common Stock"); and the
Shareholders of the Company named in SCHEDULE B (collectively, the "Selling
Shareholders") severally propose to sell to the Underwriters an aggregate of
675,000 shares of Common Stock. The 2,000,000 shares of Common Stock to be
sold by the Company and the 675,000 shares of Common Stock to be sold by the
Selling Shareholders are collectively called the "Firm Common Shares." In
addition, the Company has granted to the Underwriters an option to purchase
up to an additional 401,250 shares (the "Optional Common Shares") of Common
Stock, as provided in Section 2. The Firm Common Shares and, if and to the
extent such option is exercised, the Optional Common Shares are collectively
called the "Common Shares."
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-36181), which contains a form of prospectus to be used in connection with
the public offering and sale of the Common Shares. Such registration
statement, as amended, including the financial statements, exhibits and
schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (collectively, the "Securities Act"), including all
documents incorporated or deemed to be incorporated by reference therein and
any information deemed to be a part thereof at the time of effectiveness
pursuant to Rule 430A or Rule 434 under the Securities Act or the Securities
Exchange Act of 1934 and the rules and regulations promulgated thereunder
(collectively, the "Exchange Act"), is called the "Registration Statement."
Any registration statement filed by the Company pursuant to Rule 462(b) under
the Securities Act is called the "Rule 462(b) Registration Statement," and
from and after the date and time of filing of the Rule 462(b) Registration
Statement the term "Registration Statement" shall include the Rule 462(b)
Registration Statement. Such prospectus, including all documents incorporated
or deemed to be incorporated by reference therein, in the form first used by
the Underwriters to confirm sales of the Common Shares, is called the
"Prospectus"; PROVIDED, HOWEVER, if the Company has, with the consent of
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc., elected to rely upon Rule 434 under
the Securities Act, the term "Prospectus" shall mean the Company's prospectus
subject to completion (each, a "preliminary
prospectus") dated [___] (such preliminary prospectus is called the "Rule 434
preliminary prospectus"), together with the applicable term sheet (the "Term
Sheet") prepared and filed by the Company with the Commission under Rules 434
and 424(b) under the Securities Act and all references in this Agreement to
the date of the Prospectus shall mean the date of the Term Sheet. All
references in this Agreement to the Registration Statement, the Rule 462(b)
Registration Statement, a preliminary prospectus, the Prospectus or the Term
Sheet, or any amendments or supplements to any of the foregoing, shall
include any copy thereof filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval System ("▇▇▇▇▇"). All references in
this Agreement to financial statements and schedules and other information
which is "contained," "included" or "stated" in the Registration Statement or
the Prospectus (and all other references of like import) shall be deemed to
mean and include all such financial statements and schedules and other
information which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be; and all
references in this Agreement to amendments or supplements to the Registration
Statement or the Prospectus shall be deemed to mean and include the filing of
any document under the Exchange Act which is or is deemed to be incorporated
by reference in the Registration Statement or the Prospectus, as the case may
be.
The Company and each of the Selling Shareholders hereby confirm their
respective agreements with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES.
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and covenants to each Underwriter as follows:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The
Registration Statement and any Rule 462(b) Registration Statement have
been declared effective by the Commission under the Securities Act. The
Company has complied to the Commission's satisfaction with all requests
of the Commission for additional or supplemental information. No stop
order suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement is in effect and no proceedings for
such purpose have been instituted or are pending or, to the best
knowledge of the Company, are contemplated or threatened by the
Commission.
Each preliminary prospectus and the Prospectus when filed
complied in all material respects with the Securities Act and, if filed
by electronic transmission pursuant to ▇▇▇▇▇ (except as may be permitted
by Regulation S-T under the Securities Act), was identical to the copy
thereof delivered to the Underwriters for use in connection with the
offer and sale of the Common Shares. Each of the Registration Statement,
any Rule 462(b) Registration Statement and any post-effective amendment
thereto, at the time it became effective and at all subsequent times,
complied and will comply in all material respects with the Securities Act
and did not and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus,
as amended or supplemented, as of its date and at all subsequent times,
did not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. The representations and
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warranties set forth in the two immediately preceding sentences do not
apply to statements in or omissions from the Registration Statement, any
Rule 462(b) Registration Statement, or any post-effective amendment
thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Underwriters
expressly for use therein. There are no contracts or other documents
required to be described in the Prospectus or to be filed as exhibits to
the Registration Statement which have not been described or filed as
required.
(b) OFFERING MATERIALS FURNISHED TO UNDERWRITERS. The Company
has delivered to each Underwriter one complete manually signed copy of
the Registration Statement and of each consent and certificate of experts
filed as a part thereof, and conformed copies of the Registration
Statement (without exhibits) and preliminary prospectuses and the
Prospectus, as amended or supplemented, in such quantities and at such
places as the Underwriters have reasonably requested for each of the
Underwriters.
(c) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY. The
Company has not distributed and will not distribute, prior to the later
of the Second Closing Date (as defined below) and the completion of the
Underwriters' distribution of the Common Shares, any offering material in
connection with the offering and sale of the Common Shares other than a
preliminary prospectus, the Prospectus or the Registration Statement.
(d) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) AUTHORIZATION OF THE COMMON SHARES. The Common Shares to
be purchased by the Underwriters from the Company have been duly
authorized for issuance and sale pursuant to this Agreement and, when
issued and delivered by the Company pursuant to this Agreement, will be
validly issued, fully paid and nonassessable.
(f) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS. There
are no persons with registration or other similar rights to have any
equity or debt securities registered for sale under the Registration
Statement or included in the offering contemplated by this Agreement.
(g) NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed
in the Prospectus, subsequent to the respective dates as of which
information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects, whether
or not arising from transactions in the ordinary course of business, of
the Company and its subsidiaries, considered as one entity (any such
change is called a "Material Adverse Change"); (ii) the Company and its
subsidiaries, considered as one entity, have not incurred any material
liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business; and (iii) there has
been no dividend or distribution of any kind declared, paid or made by
the Company or,
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except for dividends paid to the Company or other subsidiaries, any of
its subsidiaries on any class of capital stock or repurchase or
redemption by the Company or any of its subsidiaries of any class of
capital stock.
(h) INDEPENDENT ACCOUNTANTS. Coopers & ▇▇▇▇▇▇▇ L.L.P.,
independent accountants, who have expressed their opinion with respect to
the financial statements (which term as used in this Agreement includes
the related notes thereto) filed with the Commission as a part of the
Registration Statement and included in the Prospectus, are independent
public or certified public accountants as required by the Securities Act
and the Exchange Act.
(i) PREPARATION OF THE FINANCIAL STATEMENTS. The financial
statements filed with the Commission as a part of the Registration
Statement and included in the Prospectus present fairly the consolidated
financial position of the Company and its subsidiaries as of and at the
dates indicated and the results of their operations and cash flows for
the periods specified. Such financial statements have been prepared in
conformity with generally accepted accounting principles as applied in
the United States applied on a consistent basis throughout the periods
involved, except as may be expressly stated in the related notes thereto.
No other financial statements or supporting schedules are required to be
included in the Registration Statement. The financial data set forth in
the Prospectus under the captions "Prospectus Summary--Summary
Consolidated Financial Data," "Capitalization," "Selected Consolidated
Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations" and
"--Liquidity and Capital Resources" fairly present the information set
forth therein on a basis consistent with that of the audited financial
statements contained in the Registration Statement.
(j) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and, in the case of
the Company, to enter into and perform its obligations under this
Agreement. Each of the Company and each subsidiary is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required whether by reason of
the ownership or leasing of property or the conduct of business, except
for such jurisdictions where the failure to so qualify or to be in good
standing would not, individually or in the aggregate, result in a
Material Adverse Change. All of the issued and outstanding capital stock
of each subsidiary has been duly authorized and validly issued, is fully
paid and nonassessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance or claim. The Company does not own or control,
directly or indirectly, any corporation, association or other entity
other than the subsidiaries listed in Exhibit 22.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 29, 1996.
4
(k) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. The
authorized, issued and outstanding capital stock of the Company is as set
forth in the Prospectus under the caption "Capitalization" (other than
for subsequent issuances, if any, pursuant to employee benefit plans
described in the Prospectus or upon exercise of outstanding options
described in the Prospectus). The Common Stock (including the Common
Shares) conforms in all material respects to the description thereof
contained in the Prospectus. All of the issued and outstanding shares of
Common Stock (including the shares of Common Stock owned by Selling
Shareholders) have been duly authorized and validly issued, are fully
paid and nonassessable and have been issued in compliance with federal
and state securities laws. None of the outstanding shares of Common Stock
were issued in violation of any preemptive rights, rights of first
refusal or other similar rights to subscribe for or purchase securities
of the Company. There are no authorized or outstanding options,
warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable
or exercisable for, any capital stock of the Company or any of its
subsidiaries other than those accurately described in the Prospectus.
The description of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted
thereunder, set forth in the Prospectus accurately and fairly presents
the information required to be shown with respect to such plans,
arrangements, options and rights.
(l) STOCK EXCHANGE LISTING. The Common Stock (including the
Common Shares) is registered pursuant to Section 12(g) of the Exchange
Act and is listed on the Nasdaq National Market, and the Company has
taken no action designed to, or likely to have the effect of, terminating
the registration of the Common Stock under the Exchange Act or delisting
the Common Stock from the Nasdaq National Market, nor has the Company
received any notification that the Commission or the National Association
of Securities Dealers, Inc. (the "NASD") is contemplating terminating
such registration or listing.
(m) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default
(or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement,
note, contract, franchise, lease or other instrument to which the Company
or any of its subsidiaries is a party or by which it or any of them may
be bound (including, without limitation, the Company's Revolving Credit
Facility with Sanwa Bank California, as lender), or to which any of the
property or assets of the Company or any of its subsidiaries is subject
(each, an "Existing Instrument"), except for such Defaults as would not,
individually or in the aggregate, result in a Material Adverse Change.
The Company's execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby and by the
Prospectus (i) have been duly authorized by all necessary corporate
action and will not result in any violation of the provisions of the
charter or by-laws of the Company or any subsidiary, (ii) will not
conflict with or constitute a breach of, or Default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant to,
or require the consent of any other part to, any Existing Instrument,
except for such conflicts, breaches, Defaults, liens, charges or
encumbrances as would not, individually or in the aggregate, result in a
Material Adverse Change and (iii) will not result in any violation of any
law, administrative regulation or administrative or court decree
applicable to the Company or any subsidiary. No consent, approval,
authorization or other order of, or registration or filing with, any
court or other
5
governmental or regulatory authority or agency, is required for the
Company's execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby and by the
Prospectus, except such as have been obtained or made by the Company and
are in full force and effect under the Securities Act, applicable state
securities or blue sky laws and from the NASD.
(n) NO MATERIAL ACTIONS OR PROCEEDINGS. Except as otherwise
disclosed in the Prospectus, there are no legal or governmental actions,
suits or proceedings pending or, to the best of the Company's knowledge,
threatened (i) against or affecting the Company or any of its
subsidiaries, (ii) which has as the subject thereof any officer or
director of, or property owned or leased by, the Company or any of its
subsidiaries or (iii) relating to environmental or discrimination
matters, where in any such case (A) there is a reasonable possibility
that such action, suit or proceeding might be determined adversely to the
Company or such subsidiary and (B) any such action, suit or proceeding,
if so determined adversely, would reasonably be expected to result in a
Material Adverse Change or adversely affect the consummation of the
transactions contemplated by this Agreement. No material labor dispute
with the employees of the Company or any of its subsidiaries exists or,
to the best of the Company's knowledge, is threatened or imminent.
(o) INTELLECTUAL PROPERTY RIGHTS. The Company and its
subsidiaries own or possess sufficient trademarks, trade names, patent
rights, copyrights, licenses, approvals, trade secrets and other similar
rights (collectively, "Intellectual Property Rights") reasonably
necessary to conduct their businesses as now conducted; and the expected
expiration of any of such Intellectual Property Rights would not result
in a Material Adverse Change. Except as otherwise disclosed in the
Prospectus, neither the Company nor any of its subsidiaries has received
any notice of infringement or conflict with asserted Intellectual
Property Rights of others, which infringement or conflict, if the subject
of an unfavorable decision, would result in a Material Adverse Change.
(p) ALL NECESSARY PERMITS, ETC. The Company and each
subsidiary possess such valid and current certificates, authorizations or
permits issued by the appropriate state, federal or foreign regulatory
agencies or bodies necessary to conduct their respective businesses, and
neither the Company nor any subsidiary has received any notice of
proceedings relating to the revocation or modification of, or
non-compliance with, any such certificate, authorization or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could result in a Material Adverse Change.
(q) TITLE TO PROPERTIES. The Company and each of its
subsidiaries has good and marketable title to all the properties and
assets reflected as owned in the financial statements referred to in
Section 1(A) (i) above (or elsewhere in the Prospectus), in each case
free and clear of any security interests, mortgages, liens, encumbrances,
equities, claims and other defects, except such as do not materially and
adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property by
the Company or such subsidiary. The real property, improvements,
equipment and personal property held under lease by the Company or any
subsidiary are held under valid and enforceable leases, with such
exceptions as are not material and do not materially interfere with the
use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company or such subsidiary.
6
(r) TAX LAW COMPLIANCE. The Company and its subsidiaries have
filed all necessary federal, state and foreign income and franchise tax
returns and have paid all taxes required to be paid by any of them and,
if due and payable, any related or similar assessment, fine or penalty
levied against any of them except as may be being contested in good faith
and by appropriate proceedings. The Company has made adequate charges,
accruals and reserves in the applicable financial statements referred to
in Section 1 (A) (i) above in respect of all federal, state and foreign
income and franchise taxes for all periods as to which the tax liability
of the Company or any of its subsidiaries has not been finally
determined.
(s) COMPANY NOT AN "INVESTMENT COMPANY." The Company has been
advised of the rules and requirements under the Investment Company Act of
1940, as amended (the "Investment Company Act"). The Company is not, and
after receipt of payment for the Common Shares will not be, an
"investment company" within the meaning of Investment Company Act and
will conduct its business in a manner so that it will not become subject
to the Investment Company Act.
(t) INSURANCE. Each of the Company and its subsidiaries are
insured by recognized, financially sound and reputable institutions with
policies in such amounts and with such deductibles and covering such
risks as are generally deemed adequate and customary for their businesses
including, but not limited to, policies covering real and personal
property owned or leased by the Company and its subsidiaries against
theft, damage, destruction, acts of vandalism and earthquakes. The
Company has no reason to believe that it or any subsidiary will not be
able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business
as now conducted and at a cost that would not result in a Material
Adverse Change. Neither of the Company nor any subsidiary has been
denied any insurance coverage which it has sought or for which it has
applied.
(u) NO PRICE STABILIZATION OR MANIPULATION. The Company has
not taken and will not take, directly or indirectly, any action designed
to or that might be reasonably expected to cause or result in
stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Common Shares.
(v) RELATED PARTY TRANSACTIONS. There are no business
relationships or related-party transactions involving the Company or any
subsidiary or any other person required to be described in the Prospectus
which have not been described as required.
(w) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. Neither the
Company nor any of its subsidiaries, nor, to the best of the Company's
knowledge, any employee or agent of the Company or any such subsidiary,
has made any contribution or other payment to any official of, or
candidate for, any federal, state or foreign office in violation of any
law or of the character required to be disclosed in the Prospectus.
7
(x) EXCHANGE ACT COMPLIANCE. The documents incorporated or
deemed to be incorporated by reference in the Prospectus, at the time
they were or hereafter are filed with the Commission, complied and will
comply in all material respects with the requirements of the Exchange
Act, and, when read together with the other information in the
Prospectus, at the time the Registration Statement and any amendments
thereto become effective and at the First Closing Date and the Second
Closing Date, as the case may be, will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the facts required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(y) COMPANY'S ACCOUNTING SYSTEM. The Company maintains a
system of accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles as applied in the United
States and to maintain accountability for assets; (iii) access to assets
is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(z) ERISA COMPLIANCE. The Company and its subsidiaries and
any "employee benefit plan" (as defined under the Employee Retirement
Income Security Act of 1974, as amended, and the regulations and
published interpretations thereunder (collectively, "ERISA")) established
or maintained by the Company, its subsidiaries or their "ERISA
Affiliates" (as defined below) are in compliance in all material respects
with ERISA. "ERISA Affiliate" means, with respect to the Company or a
subsidiary, any member of any group of organizations described in
Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations thereunder
(the "Code") of which the Company or such subsidiary is a member. No
"reportable event" (as defined under ERISA) has occurred or is reasonably
expected to occur with respect to any "employee benefit plan" established
or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates. No "employee benefit plan" established or maintained by the
Company, its subsidiaries or any of their ERISA Affiliates, if such
"employee benefit plan" were terminated, would have any "amount of
unfunded benefit liabilities" (as defined under ERISA). Neither the
Company, its subsidiaries nor any of their ERISA Affiliates has incurred
or reasonably expects to incur any liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "employee benefit
plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates that is intended to be
qualified under Section 401(a) of the Code is so qualified and nothing
has occurred, whether by action or failure to act, which would cause the
loss of such qualification.
Any certificate signed by an officer of the Company and delivered to the
Underwriters or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
8
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. In
addition to the representations, warranties and covenants set forth in
Section 1(A), each Selling Shareholder represents, warrants and covenants to
each Underwriter as follows:
(a) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by or on behalf of such Selling
Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms, except as rights
to indemnification hereunder may be limited by applicable law and except
as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(b) THE CUSTODY AGREEMENT AND POWER OF ATTORNEY. Each of the
(i) Custody Agreement signed by such Selling Shareholder and [___], as
custodian (the "Custodian"), relating to the deposit of the Common Shares
to be sold by such Selling Shareholder (the "Custody Agreement") and (ii)
Power of Attorney appointing certain individuals named therein as such
Selling Shareholder's attorneys-in-fact (each, an "Attorney-in-Fact") to
the extent set forth therein relating to the transactions contemplated
hereby and by the Prospectus (the "Power of Attorney"), of such Selling
Shareholder has been duly authorized, executed and delivered by such
Selling Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms, except as rights
to indemnification thereunder may be limited by applicable law and except
as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(c) TITLE TO COMMON SHARES TO BE SOLD; ALL AUTHORIZATIONS
OBTAINED. Such Selling Shareholder has, and on the First Closing Date
and the Second Closing Date (as defined below) will have, good and valid
title to all of the Common Shares which may be sold by such Selling
Shareholder pursuant to this Agreement on such date and the legal right
and power, and all authorizations and approvals required by law, to enter
into this Agreement and its Custody Agreement and Power of Attorney, to
sell, transfer and deliver all of the Common Shares which may be sold by
such Selling Shareholder pursuant to this Agreement and to comply with
its other obligations hereunder and thereunder.
(d) DELIVERY OF THE COMMON SHARES TO BE SOLD. Delivery of the
Common Shares which are sold by such Selling Shareholder pursuant to this
Agreement will pass good and valid title to such Common Shares, free and
clear of any security interest, mortgage, pledge, lien, encumbrance or
other claim.
(e) NON-CONTRAVENTION; NO FURTHER AUTHORIZATIONS OR APPROVALS
REQUIRED. The execution and delivery by such Selling Shareholder of, and
the performance by such Selling Shareholder of its obligations under,
this Agreement, the Custody Agreement and the Power of Attorney will not
contravene or conflict with, result in a breach of, or constitute a
Default under, or require the consent of any other party to, any
partnership agreement, trust agreement or other organizational documents
of such Selling Shareholder or any other agreement or instrument to which
such Selling Shareholder is a party or by which it is bound or under
which it is entitled to any right or benefit, any provision of applicable
law or any judgment, order, decree or regulation applicable to such
Selling Shareholder of any court,
9
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over such Selling Shareholder. No consent, approval,
authorization or other order of, or registration or filing with, any
court or other governmental authority or agency, is required for the
consummation by such Selling Shareholder of the transactions contemplated
in this Agreement, except such as have been obtained or made and are in
full force and effect under the Securities Act, applicable state
securities or blue sky laws and from the NASD.
(f) NO REGISTRATION OR OTHER SIMILAR RIGHTS. Such Selling
Shareholder does not have any registration or other similar rights to
have any equity or debt securities registered for sale by the Company
under the Registration Statement or included in the offering contemplated
by this Agreement.
(g) NO FURTHER CONSENTS, ETC. No consent, approval or waiver
is required under any instrument or agreement to which such Selling
Shareholder is a party or by which it is bound or under which it is
entitled to any right or benefit, in connection with the offering, sale
or purchase by the Underwriters of any of the Common Shares which may be
sold by such Selling Shareholder under this Agreement or the consummation
by such Selling Shareholder of any of the other transactions contemplated
hereby.
(h) DISCLOSURE MADE BY SUCH SELLING SHAREHOLDER IN THE
PROSPECTUS. All information furnished by or on behalf of such Selling
Shareholder in writing expressly for use in the Registration Statement
and Prospectus is, and on the First Closing Date and the Second Closing
Date will be, true, correct, and complete in all material respects, and
does not, and on the First Closing Date and the Second Closing Date will
not, contain any untrue statement of a material fact or omit to state any
material fact necessary to make such information not misleading. Such
Selling Shareholder confirms as accurate the number of shares of Common
Stock set forth opposite such Selling Shareholder's name in the
Prospectus under the caption "Selling Stockholders" (both prior to and
after giving effect to the sale of the Common Shares).
(i) NO PRICE STABILIZATION OR MANIPULATION. Such Selling
Shareholder has not taken and will not take, directly or indirectly, any
action designed to stabilize or manipulate the price of the Common Stock,
or that might be reasonably expected to cause or result in stabilization
or manipulation of the price of the Common Stock, to facilitate the sale
or resale of the Common Shares.
(j) CONFIRMATION OF COMPANY REPRESENTATIONS AND WARRANTIES.
Although the Selling Shareholder has not conducted any investigation,
nothing has come to the Selling Shareholder's attention that would lead
it to believe that the representations and warranties of the Company
contained in Section 1(A) hereof are not true and correct. Such Selling
Shareholder has read the Registration Statement and the Prospectus and
has no knowledge of any material fact, condition or information not
disclosed in the Registration Statement or the Prospectus which has had
or may have a Material Adverse Effect and is not prompted to sell shares
of Common Stock by any information concerning the Company which is not
set forth in the Registration Statement and the Prospectus.
Any certificate signed by or on behalf of any Selling Shareholder and
delivered to the Underwriters or to counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Shareholder to
each Underwriter as to the matters covered thereby.
10
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE COMMON SHARES.
THE FIRM COMMON SHARES. Upon the terms herein set forth, (i) the Company
agrees to issue and sell to the several Underwriters an aggregate of
2,000,000 Firm Common Shares and (ii) the Selling Shareholders agree to sell
to the several Underwriters an aggregate of 675,000 Firm Common Shares, each
Selling Shareholder selling the number of Firm Common Shares set forth
opposite such Selling Shareholder's name on SCHEDULE B. On the basis of the
representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company and the Selling
Shareholders the respective number of Firm Common Shares set forth opposite
their names on SCHEDULE A. The purchase price per Firm Common Share to be
paid by the several Underwriters to the Company and the Selling Shareholders
shall be $[___] per share.
THE FIRST CLOSING DATE. Delivery of certificates for the Firm Common
Shares to be purchased by the Underwriters and payment therefor shall be made
at the offices of NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (or such other place as may be agreed to
by the Company and the Underwriters) at 6:00 a.m. San Francisco time, on
[____], or such other time and date not later than 10:30 a.m. San Francisco
time, ten business days following the original contemplated First Closing
Date, as the Underwriters shall designate by notice to the Company (the time
and date of such closing are called the "First Closing Date"). The Company
and the Selling Shareholders hereby acknowledge that circumstances under
which the Underwriters may provide notice to postpone the First Closing Date
as originally scheduled include, but are in no way limited to, any
determination by the Company, the Selling Shareholders or the Underwriters to
recirculate to the public copies of an amended or supplemented Prospectus or
a delay as contemplated by the provisions of Section 10.
THE OPTIONAL COMMON SHARES; THE SECOND CLOSING DATE. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally
and not jointly, up to an aggregate of 401,250 Optional Common Shares from
the Company at the purchase price per share to be paid by the Underwriters
for the Firm Common Shares. The option granted hereunder is for use by the
Underwriters solely in covering any over-allotments in connection with the
sale and distribution of the Firm Common Shares. The option granted
hereunder may be exercised at any time (but not more than once) upon notice
by the Underwriters to the Company, which notice may be given at any time
within 30 days from the date of this Agreement. Such notice shall set forth
(i) the aggregate number of Optional Common Shares as to which the
Underwriters are exercising the option, (ii) the names and denominations in
which the certificates for the Optional Common Shares are to be registered
and (iii) the time, date and place at which such certificates will be
delivered (which time and date may be simultaneous with, but not earlier
than, the First Closing Date; and in such case the term "First Closing Date"
shall refer to the time and date of delivery of certificates for the Firm
Common Shares and the Optional Common Shares). Such time and date of
delivery, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Underwriters and shall not be
earlier than three nor later than five full business days after delivery of
such notice of exercise. If any Optional Common Shares are to be purchased,
each Underwriter agrees, severally and not jointly, to purchase the number of
Optional Common
11
Shares (subject to such adjustments to eliminate fractional shares as the
Underwriters may determine) that bears the same proportion to the total
number of Optional Common Shares to be purchased as the number of Firm Common
Shares set forth on SCHEDULE A opposite the name of such Underwriter bears to
the total number of Firm Common Shares, and the Company agrees to sell such
Optional Common Shares. The Underwriters may cancel the option at any time
prior to its expiration by giving written notice of such cancellation to the
Company.
PUBLIC OFFERING OF THE COMMON SHARES. The Underwriters hereby advise the
Company and the Selling Shareholders that the Underwriters intend to offer
for sale to the public, as described in the Prospectus, their respective
portions of the Common Shares as soon after this Agreement has been executed
and the Registration Statement has been declared effective as the
Underwriters, in their sole judgment, have determined is advisable and
practicable.
PAYMENT FOR THE COMMON SHARES. Payment for the Common Shares to be sold
by the Company shall be made at the First Closing Date (and, if applicable,
at the Second Closing Date) by wire transfer of immediately available funds
to the order of the Company. Payment for the Common Shares to be sold by the
Selling Shareholders shall be made at the First Closing Date (and, if
applicable, at the Second Closing Date) by wire transfer of immediately
available funds to the order of the Custodian.
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc., individually and not as the
representative of the Underwriters, may (but shall not be obligated to) make
payment for any Common Shares to be purchased by any Underwriter whose funds
shall not have been received by NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc. by
the First Closing Date or the Second Closing Date, as the case may be, for
the account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
Each Selling Shareholder hereby agrees that (i) it will pay all
stock transfer taxes, stamp duties and other similar taxes, if any, payable
upon the sale or delivery of the Common Shares to be sold by such Selling
Shareholder to the several Underwriters, or otherwise in connection with the
performance of such Selling Shareholder's obligations hereunder and (ii) the
Custodian is authorized to deduct for such payment any such amounts from the
proceeds to such Selling Shareholder hereunder and to hold such amounts for
the account of such Selling Shareholder with the Custodian under the Custody
Agreement.
12
DELIVERY OF THE COMMON SHARES. The Company and the Selling Shareholders
shall deliver, or cause to be delivered, to the Underwriters certificates for
the Firm Common Shares to be sold by them at the First Closing Date, against
the irrevocable release of a wire transfer of immediately available funds for
the amount of the purchase price therefor. The Company shall also deliver,
or cause to be delivered, to the Underwriters certificates for the Optional
Common Shares the Underwriters have agreed to purchase at the First Closing
Date or the Second Closing Date, as the case may be, against the irrevocable
release of a wire transfer of immediately available funds for the amount of
the purchase price therefor. The certificates for the Common Shares shall be
in definitive form and registered in such names and denominations as the
Underwriters shall have requested at least two full business days prior to
the First Closing Date (or the Second Closing Date, as the case may be) and
shall be made available for inspection on the business day preceding the
First Closing Date (or the Second Closing Date, as the case may be) at a
location in New York City as the Underwriters may designate. Time shall be
of the essence, and delivery at the time and place specified in this
Agreement is a further condition to the obligations of the Underwriters.
DELIVERY OF PROSPECTUS TO THE UNDERWRITERS. Not later than 12:00 p.m. on
the second business day following the date the Common Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause
to be delivered copies of the Prospectus in such quantities and at such
places as the Underwriters shall request.
SECTION 3. ADDITIONAL COVENANTS.
A. COVENANTS OF THE COMPANY. The Company further covenants and agrees
with each Underwriter as follows:
(a) UNDERWRITER'S REVIEW OF PROPOSED AMENDMENTS AND
SUPPLEMENTS. During such period beginning on the date hereof and ending
on the later of the First Closing Date or such date, as in the opinion of
counsel for the Underwriters, the Prospectus is no longer required by law
to be delivered in connection with sales by an Underwriter or dealer (the
"Prospectus Delivery Period"), prior to amending or supplementing the
Registration Statement (including any registration statement filed under
Rule 462(b) under the Securities Act) or the Prospectus (including any
amendment or supplement through incorporation by reference of any report
filed under the Exchange Act), the Company shall furnish to the
Underwriters for review copies of each such proposed amendment or
supplement, and the Company shall not file any such proposed amendment or
supplement to which the Underwriters reasonably object.
(b) SECURITIES ACT COMPLIANCE. After the date of this
Agreement, the Company shall promptly advise the Underwriters in writing
(i) of the receipt of any comments of, or requests for additional or
supplemental information from, the Commission, (ii) of the time and date
of any filing of any post-effective amendment to the Registration
Statement or any amendment or supplement to any preliminary prospectus or
the Prospectus, (iii) of the time and date that any post-effective
amendment to the Registration Statement becomes effective and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereto or
of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any proceedings to remove, suspend or
terminate from listing or quotation the Common Stock from any securities
exchange upon which it is listed for trading or included or designated
for quotation,
13
or of the threatening or initiation of any proceedings for any of such
purposes. If the Commission shall enter any such stop order at any time,
the Company will use its best efforts to obtain the lifting of such order
at the earliest possible moment. Additionally, the Company agrees that
it shall comply with the provisions of Rules 424(b), 430A and 434, as
applicable, under the Securities Act and will use its reasonable efforts
to confirm that any filings made by the Company under such Rule 424(b)
were received in a timely manner by the Commission.
(c) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER
SECURITIES ACT MATTERS. If, during the Prospectus Delivery Period, any
event shall occur or condition exist as a result of which it is necessary
to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if in the opinion of the
Underwriters or counsel for the Underwriters it is otherwise necessary to
amend or supplement the Prospectus to comply with law, the Company agrees
to promptly prepare (subject to Section 3(A)(a) hereof), file with the
Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE
PROSPECTUS. The Company agrees to furnish the Underwriters, without
charge, during the Prospectus Delivery Period, as many copies of the
Prospectus and any amendments and supplements thereto (including any
documents incorporated or deemed incorporated by reference therein) as
the Underwriters may request.
(e) BLUE SKY COMPLIANCE. The Company shall cooperate with the
Underwriters and counsel for the Underwriters to qualify or register the
Common Shares for sale under (or obtain exemptions from the application
of) the Blue Sky or state securities laws of those jurisdictions
designated by the Underwriters, shall comply with such laws and shall
continue such qualifications, registrations and exemptions in effect so
long as required for the distribution of the Common Shares. The Company
shall not be required to qualify as a foreign corporation or to take any
action that would subject it to general service of process in any such
jurisdiction where it is not presently qualified or where it would be
subject to taxation as a foreign corporation. The Company will advise
the Underwriters promptly of the suspension of the qualification or
registration of (or any such exemption relating to) the Common Shares for
offering, sale or trading in any jurisdiction or any initiation or threat
of any proceeding for any such purpose, and in the event of the issuance
of any order suspending such qualification, registration or exemption,
the Company shall use its best efforts to obtain the withdrawal thereof
at the earliest possible moment.
(f) USE OF PROCEEDS. The Company shall apply the net proceeds
from the sale of the Common Shares sold by it in the manner described
under the caption "Use of Proceeds" in the Prospectus.
(g) TRANSFER AGENT. The Company shall engage and maintain, at
its expense, a registrar and transfer agent for the Common Stock.
14
(h) EARNINGS STATEMENT. As soon as practicable, the Company
will make generally available to its security holders and to the
Underwriters an earnings statement (which need not be audited) covering
the twelve-month period ending December ___, 1998 that satisfies the
provisions of Section 11(a) of the Securities Act.
(i) PERIODIC REPORTING OBLIGATIONS. During the Prospectus
Delivery Period the Company shall file, on a timely basis, with the
Commission and the Nasdaq National Market all reports and documents
required to be filed under the Exchange Act. Additionally, the Company
shall file with the Commission all reports on Form SR as may be required
under Rule 463 under the Securities Act.
(j) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES.
During the period of 90 days following the date of the Prospectus, the
Company will not, without the prior written consent of NationsBanc
▇▇▇▇▇▇▇▇▇▇ Securities, Inc. (which consent may be withheld at the sole
discretion of NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc.), directly or
indirectly, issue, sell, offer, contract or grant any option to sell,
pledge, transfer or establish an open "put equivalent position" within
the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose
of or transfer, or announce the offering of, or file any registration
statement under the Securities Act in respect of, any shares of Common
Stock, options or warrants to acquire shares of the Common Stock or
securities exchangeable or exercisable for or convertible into shares of
Common Stock (other than as contemplated by this Agreement with respect
to the Common Shares); PROVIDED, HOWEVER, that the Company may issue
shares of its Common Stock or options to purchase its Common Stock, or
Common Stock upon exercise of options, pursuant to any stock option,
stock bonus or other stock plan or arrangement described in the
Prospectus, but only if the holders of such shares, options, or shares
issued upon exercise of such options, agree in writing not to sell,
offer, dispose of or otherwise transfer any such shares or options during
such 90 day period without the prior written consent of NationsBanc
▇▇▇▇▇▇▇▇▇▇ Securities, Inc. (which consent may be withheld at the sole
discretion of NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc.).
(k) FUTURE REPORTS TO THE UNDERWRITERS. During the period of
five years hereafter the Company will furnish to the Underwriters at ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention:[____]: (i) as soon
as practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as of
the close of such fiscal year and statements of income, Shareholders'
equity and cash flows for the year then ended and the opinion thereon of
the Company's independent public or certified public accountants; (ii) as
soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Current Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its capital stock.
15
(l) EXCHANGE ACT COMPLIANCE. During the Prospectus Delivery
Period, the Company will file all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15 of the Exchange Act in the
manner and within the time periods required by the Exchange Act.
B. COVENANTS OF THE SELLING SHAREHOLDERS. Each Selling Shareholder
further covenants and agrees with each Underwriter:
(a) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES.
Such Selling Shareholder will not, without the prior written consent of
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc. (which consent may be withheld in
its sole discretion), directly or indirectly, sell, offer, contract or
grant any option to sell (including without limitation any short sale),
pledge, transfer, establish an open "put equivalent position" within the
meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of
any shares of Common Stock, options or warrants to acquire shares of
Common Stock, or securities exchangeable or exercisable for or
convertible into shares of Common Stock currently or hereafter owned
either of record or beneficially (as defined in Rule 13d-3 under
Securities Exchange Act of 1934, as amended) by the undersigned, or
publicly announce the undersigned's intention to do any of the foregoing,
for a period commencing on the date hereof and continuing through the
close of trading on the date 90 days after the date of the Prospectus.
(b) DELIVERY OF FORMS W-9. To deliver to the Underwriters
prior to the First Closing Date a properly completed and executed United
States Treasury Department Form W-9.
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc., on behalf of the several
Underwriters, may, in its sole discretion, waive in writing the performance
by the Company or any Selling Shareholder of any one or more of the foregoing
covenants or extend the time for their performance.
SECTION 4. PAYMENT OF EXPENSES. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of their
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the
issuance and delivery of the Common Shares (including all printing and
engraving costs), (ii) all fees and expenses of the registrar and transfer
agent of the Common Stock, (iii) all necessary issue, transfer and other
stamp taxes in connection with the issuance and sale of the Common Shares to
the Underwriters, (iv) all fees and expenses of the Company's counsel,
independent public or certified pubic accountants and other advisors, (v) all
costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement (including
financial statements, exhibits, schedules, consents and certificates of
experts), each preliminary prospectus and the Prospectus, and all amendments
and supplements thereto, and this Agreement, (vi) all filing fees, attorneys'
fees and expenses incurred by the Company or the Underwriters in connection
with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for
offer and sale under the Blue Sky laws, and, if requested by the
Underwriters, preparing and printing a "Blue Sky Survey" or memorandum, and
any supplements thereto, advising the Underwriters of such qualifications,
registrations and exemptions, (vii) the filing fees incident to, and the
reasonable fees and expenses of counsel for the Underwriters in connection
with, the NASD's review and approval of the Underwriters' participation in
the
16
offering and distribution of the Common Shares, (viii) the fees and expenses
associated with including the Common Shares on the Nasdaq National Market,
and (ix) all other fees, costs and expenses referred to in Item 14 of Part II
of the Registration Statement. Except as provided in this Section 4, Section
6, Section 8 and Section 9 hereof, the Underwriters shall pay their own
expenses, including the fees and disbursements of their counsel.
The Selling Shareholders further agree with each Underwriter to pay
(directly or by reimbursement) all fees and expenses incident to the
performance of their obligations under this Agreement which are not otherwise
specifically provided for herein, including but not limited to (i) fees and
expenses of counsel and other advisors for such Selling Shareholders, (ii)
fees and expenses of the Custodian and (iii) expenses and taxes incident to
the sale and delivery of the Common Shares to be sold by such Selling
Shareholders to the Underwriters hereunder (which taxes, if any, may be
deducted by the Custodian under the provisions of Section 2 of this
Agreement).
This Section 4 shall not affect or modify any separate, valid agreement
relating to the allocation of payment of expenses between the Company, on the
one hand, and the Selling Shareholders, on the other hand.
SECTION 5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Common
Shares as provided herein on the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date, shall be subject to the
accuracy of the representations and warranties on the part of the Company and
the Selling Shareholders set forth in Sections 1(A) and 1(B) hereof as of the
date hereof and as of the First Closing Date as though then made and, with
respect to the Optional Common Shares, as of the Second Closing Date as
though then made, to the timely performance by the Company and the Selling
Shareholders of their respective covenants and other obligations hereunder,
and to each of the following additional conditions:
(a) ACCOUNTANTS' COMFORT LETTER. On the date hereof, the
Underwriters shall have received from Coopers & ▇▇▇▇▇▇▇ L.L.P.,
independent accountants for the Company, a letter dated the date hereof
addressed to the Underwriters, in form and substance satisfactory to the
Underwriters, containing statements and information of the type
ordinarily included in accountant's "comfort letters" to underwriters,
delivered according to Statement of Auditing Standards No. 72 (or any
successor bulletin), with respect to the audited and unaudited financial
statements and certain financial information contained in the
Registration Statement and the Prospectus (and the Underwriters shall
have received additional conformed copies of such accountants' letter for
each of the several Underwriters).
(b) COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER;
NO OBJECTION FROM NASD. For the period from and after effectiveness of
this Agreement and prior to the First Closing Date and, with respect to
the Optional Common Shares, the Second Closing Date:
(i) the Company shall have filed the Prospectus with the
Commission (including the information required by Rule 430A under the
Securities Act) in the manner and within the time period required by
Rule 424(b) under the Securities Act; or the Company shall have filed
a post-effective
17
amendment to the Registration Statement containing the information
required by such Rule 430A, and such post-effective amendment shall
have become effective; or, if the Company elected to rely upon Rule
434 under the Securities Act and obtained the Underwriters' consent
thereto, the Company shall have filed a Term Sheet with the
Commission in the manner and within the time period required by such
Rule 424(b);
(ii) no stop order suspending the effectiveness of the
Registration Statement, any Rule 462(b) Registration Statement, or
any post-effective amendment to the Registration Statement, shall be
in effect and no proceedings for such purpose shall have been
instituted or threatened by the Commission; and
(iii) the NASD shall have raised no objection to the
fairness and reasonableness of the underwriting terms and
arrangements.
(c) NO MATERIAL ADVERSE CHANGE OR RATINGS AGENCY CHANGE. For
the period from and after the date of this Agreement and prior to the
First Closing Date and, with respect to the Optional Common Shares, the
Second Closing Date:
(i) in the judgment of the Underwriters there shall not
have occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any securities of the Company or any of its subsidiaries by any
"nationally recognized statistical rating organization" as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act.
(d) OPINION OF COUNSEL FOR THE COMPANY. On each of the First
Closing Date and the Second Closing Date the Underwriters shall have
received the opinion of Buchalter, Nemer, Fields & Younger (a
professional corporation), counsel for the Company, dated as of such
Closing Date, the form of which is attached as EXHIBIT A (and the
Underwriters shall have received additional conformed copies of such
counsel's legal opinion for each of the several Underwriters).
(e) OPINION OF COUNSEL FOR THE UNDERWRITERS. On each of the
First Closing Date and the Second Closing Date the Underwriters shall
have received the opinion of Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ (a
partnership including professional corporations), counsel for the
Underwriters, dated as of such Closing Date, with respect to the matters
set forth in paragraphs (i), (vii), (viii), (ix), (x), (xi) and (xiii)
and the next-to-last paragraph of EXHIBIT A (and the Underwriters shall
have received additional conformed copies of such counsel's legal opinion
for each of the several Underwriters).
(f) OFFICERS' CERTIFICATE. On each of the First Closing Date
and the Second Closing Date the Underwriters shall have received a
written certificate executed by the Chairman of the Board, Chief
Executive Officer or President of the Company and the Chief Financial
Officer or Chief Accounting Officer of the Company, dated as of such
Closing Date, to the effect set forth in subsections (b)(ii) and (c)(ii)
of this Section 5, and further to the effect that:
18
(i) for the period from and after the date of this
Agreement and prior to such Closing Date, there has not occurred any
Material Adverse Change;
(ii) the representations, warranties and covenants of the
Company set forth in Section 1(A) of this Agreement are true and
correct with the same force and effect as though expressly made on
and as of such Closing Date; and
(iii) the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to such Closing Date.
(g) BRING-DOWN COMFORT LETTER. On each of the First Closing
Date and the Second Closing Date the Underwriters shall have received
from Coopers & ▇▇▇▇▇▇▇ L.L.P., independent accountants for the Company, a
letter dated such date, in form and substance satisfactory to the
Underwriters, to the effect that they reaffirm the statements made in the
letter furnished by them pursuant to subsection (a) of this Section 5,
except that the specified date referred to therein for the carrying out
of procedures shall be no more than three business days prior to the
First Closing Date or Second Closing Date, as the case may be (and the
Underwriters shall have received additional conformed copies of such
accountants' letter for each of the several Underwriters).
(h) OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS. On each
of the First Closing Date and the Second Closing Date the Underwriters
shall have received the opinion of Buchalter, Nemer, Fields & Younger (a
professional corporation), counsel for the Selling Shareholders, dated as
of such Closing Date, the form of which is attached as EXHIBIT B (and the
Underwriters shall have received additional conformed copies of such
counsel's legal opinion for each of the several Underwriters).
(i) SELLING SHAREHOLDERS' CERTIFICATE. On each of the First
Closing Date and the Second Closing Date the Underwriters shall received
a written certificate executed by each Selling Shareholder or its
Attorney-in-Fact, dated as of such Closing Date, to the effect that:
(i) the representations, warranties and covenants of
such Selling Shareholder set forth in Section 1(B) of this Agreement
are true and correct with the same force and effect as though
expressly made by such Selling Shareholder on and as of such Closing
Date; and
(ii) such Selling Shareholder has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date.
(j) SELLING SHAREHOLDERS' DOCUMENTS. On the date hereof, the
Company and the Selling Shareholders shall have furnished for review by
the Underwriters copies of the Powers of Attorney and Custody Agreements
executed by each of the Selling Shareholders and such further
information, certificates and documents as the Underwriters may
reasonably request.
(k) LOCK-UP AGREEMENT FROM CERTAIN SHAREHOLDERS OF THE COMPANY
OTHER THAN SELLING SHAREHOLDERS. On the date hereof, the Company shall
have furnished to the Underwriters an agreement in the form of EXHIBIT C
hereto from each director and executive
19
officer of the Company, and such agreement shall be in full force and
effect on each of the First Closing Date and the Second Closing Date.
(l) ADDITIONAL DOCUMENTS. On or before each of the First
Closing Date and the Second Closing Date, the Underwriters and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them
to pass upon the issuance and sale of the Common Shares as contemplated
herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the
conditions or agreements, herein contained.
If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Underwriters by notice to the Company and the Selling Shareholders at any
time on or prior to the First Closing Date and, with respect to the Optional
Common Shares, by notice to the Company at any time prior to the Second
Closing Date, which termination shall be without liability on the part of any
party to any other party, except that Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement
is terminated by the Underwriters pursuant to Section 5, Section 7, Section
10, Section 11 or Section 17, or if the sale to the Underwriters of the
Common Shares on the First Closing Date is not consummated because of any
refusal, inability or failure on the part of the Company or the Selling
Shareholders to perform any agreement herein or to comply with any provision
hereof, the Company agrees to reimburse the Underwriters (or such
Underwriters as have terminated this Agreement with respect to themselves),
severally, upon demand for all out-of-pocket expenses that shall have been
reasonably incurred by the Underwriters in connection with the proposed
purchase and the offering and sale of the Common Shares, including but not
limited to fees and disbursements of counsel, printing expenses, travel
expenses, postage, facsimile and telephone charges.
SECTION 7. EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall not become effective until the later of (i) the
execution of this Agreement by the parties hereto and (ii) notification by
the Commission to the Company and the Underwriters of the effectiveness of
the Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated by any
party by notice to each of the other parties hereto, and any such termination
shall be without liability on the part of (a) the Company or the Selling
Shareholders to any Underwriter, except that the Company and the Selling
Shareholders shall be obligated to reimburse the expenses of the Underwriters
pursuant to Sections 4 and 6 hereof, (b) of any Underwriter to the Company or
the Selling Shareholders, or (c) of any party hereto to any other party
except that the provisions of Section 8 and Section 9 shall at all times be
effective and shall survive such termination.
20
SECTION 8. INDEMNIFICATION.
(a) INDEMNIFICATION OF THE UNDERWRITERS. The Company, ▇▇▇▇▇
▇▇▇▇▇▇▇ and each of the Selling Shareholders, jointly and severally,
agree to indemnify and hold harmless each Underwriter, its officers and
employees, and each person, if any, who controls any Underwriter within
the meaning of the Securities Act and the Exchange Act against any loss,
claim, damage, liability or expense, as incurred, to which such
Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law
or regulation, or at common law or otherwise (including in settlement of
any litigation, if such settlement is effected with the written consent
of the Company), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out
of or is based (i) upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement, or any
amendment thereto, including any information deemed to be a part thereof
pursuant to Rule 430A or Rule 434 under the Securities Act, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not
misleading; or (ii) upon any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading; or (iii) in whole or in part upon any
inaccuracy in the representations and warranties of the Company or the
Selling Shareholders contained herein; or (iv) in whole or in part upon
any failure of the Company or the Selling Shareholders to perform their
respective obligations hereunder or under law; or (v) any act or failure
to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Common Stock or the
offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action arising out
of or based upon any matter covered by clause (i) or (ii) above, PROVIDED
that the Company shall not be liable under this clause (v) to the extent
that a court of competent jurisdiction shall have determined by a final
judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to
be taken by such Underwriter through its gross negligence or willful
misconduct; and to reimburse each Underwriter and each such controlling
person for any and all expenses (including the fees and disbursements of
counsel chosen by NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc.) as such
expenses are reasonably incurred by such Underwriter or such controlling
person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense
or action; PROVIDED, HOWEVER, that the foregoing indemnity agreement
shall not apply to any loss, claim, damage, liability or expense to the
extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information
furnished to the Company and the Selling Shareholders by the Underwriters
expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto);
and provided, further, that with respect to any preliminary prospectus,
the foregoing indemnity agreement shall not inure to the benefit of any
Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Common Shares, or any person controlling
such Underwriter, if copies of the Prospectus were timely delivered to
the Underwriter pursuant to Section 2 and a copy of the Prospectus (as
then amended or supplemented if the Company shall have
21
furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale
of the Common Shares to such person, and if the Prospectus (as so amended
or supplemented) would have cured the defect giving rise to such loss,
claim, damage, liability or expense; and PROVIDED, FURTHER, that the
liability of each Selling Shareholder under the foregoing indemnity
agreement shall be limited to an amount equal to the aggregate initial
public offering price of the Common Shares sold by such Selling
Shareholder, less the underwriting discount, as set forth on the front
cover page of the Prospectus (in the case of ▇▇. ▇▇▇▇▇▇▇, based on the
shares sold by The ▇▇▇▇▇▇▇ Family Trust B and The ▇▇▇▇▇▇▇ Family Trust C,
with the aggregate liability of ▇▇. ▇▇▇▇▇▇▇, The ▇▇▇▇▇▇▇ Family Trust B
and The ▇▇▇▇▇▇▇ Family Trust C limited to the amount sold by such Selling
Shareholders). ▇▇. ▇▇▇▇▇▇▇ shall not be obligated to indemnify the
Underwriters hereunder unless the Company, the ▇▇▇▇▇▇▇ Family Trust B
and/ or the ▇▇▇▇▇▇▇ Family Trust C shall fail to agree to indemnify in
full the Underwriters hereunder within 90 days of demand therefor or the
Company, the ▇▇▇▇▇▇▇ Family Trust B and the ▇▇▇▇▇▇▇ Family Trust C shall
not collectively have the financial ability to satisfy such
indemnification obligations in full. The indemnity agreement set forth
in this Section 8(a) shall be in addition to any liabilities that the
Company and the Selling Shareholders may otherwise have.
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND
OFFICERS. Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each of its directors, each of
its officers who signed the Registration Statement, the Selling
Shareholders and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, against any loss,
claim, damage, liability or expense, as incurred, to which the Company,
or any such director, officer, Selling Shareholder or controlling person
may become subject, under the Securities Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement
is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect
thereof as contemplated below) arises out of or is based upon any untrue
or alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto), or arises out of or is based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in
reliance upon and in conformity with written information furnished to the
Company and the Selling Shareholders by the Underwriters expressly for
use therein; and to reimburse the Company, or any such director, officer,
Selling Shareholder or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer,
Selling Shareholder or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action. The Company and each of the
Selling Shareholders hereby acknowledge that the only information that
the Underwriters have furnished to the Company and the Selling
Shareholders expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) are the statements set forth (A) as the first paragraph on page
3 of the Prospectus concerning stabilization by the Underwriters and (B)
in the table in the first paragraph and as the second paragraph and as
the last two paragraphs under the caption "Underwriting" in the
22
Prospectus; and the Underwriters confirm that such statements are
correct. The indemnity agreement set forth in this Section 8(b) shall be
in addition to any liabilities that each Underwriter may otherwise have.
23
(c) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES.
Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against an indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party for contribution or otherwise than under the indemnity
agreement contained in this Section 8 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such
action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent
that it shall elect, jointly with all other indemnifying parties
similarly notified, by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof with counsel reasonably satisfactory
to such indemnified party; PROVIDED, HOWEVER, if the defendants in any
such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that a conflict
may arise between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that
there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right
to select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified
party or parties. Upon receipt of notice from the indemnifying party to
such indemnified party of such indemnifying party's election so to assume
the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for
the expenses of more than one separate counsel (together with local
counsel), approved by the indemnifying party (NationsBanc ▇▇▇▇▇▇▇▇▇▇
Securities Inc. in the case of Section 8(b) and Section 9), representing
the indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases
the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(d) SETTLEMENTS. The indemnifying party under this Section 8
shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by
Section 8(c) hereof, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement, compromise or consent to the
entry of judgment in any pending or threatened action, suit or proceeding
in respect of which any indemnified party
24
is or could have been a party and indemnity was or could have been
sought hereunder by such indemnified party, unless such settlement,
compromise or consent includes an unconditional release of such
indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
SECTION 9. CONTRIBUTION.
If the indemnification provided for in Section 8 is for any reason held
to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute
to the aggregate amount paid or payable by such indemnified party, as
incurred, as a result of any losses, claims, damages, liabilities or expenses
referred to therein (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Shareholders, on
the one hand, and the Underwriters, on the other hand, from the offering of
the Common Shares pursuant to this Agreement or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company
and the Selling Shareholders, on the one hand, and the Underwriters, on the
other hand, in connection with the statements or omissions or inaccuracies in
the representations and warranties herein which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Selling Shareholders, on the one hand, and the Underwriters, on the other
hand, in connection with the offering of the Common Shares pursuant to this
Agreement shall be deemed to be in the same respective proportions as the
total net proceeds from the offering of the Common Shares pursuant to this
Agreement (before deducting expenses) received by the Company and the Selling
Shareholders, and the total underwriting discount received by the
Underwriters, in each case as set forth on the front cover page of the
Prospectus (or, if Rule 434 under the Securities Act is used, the
corresponding location on the Term Sheet) bear to the aggregate initial
public offering price of the Common Shares as set forth on such cover. The
relative fault of the Company and the Selling Shareholders, on the one hand,
and the Underwriters, on the other hand, shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact or any
such inaccurate or alleged inaccurate representation or warranty relates to
information supplied by the Company or the Selling Shareholders, on the one
hand, or the Underwriters, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 8(c) with respect to notice of commencement of any action shall apply
if a claim for contribution is to be made under this Section 9; PROVIDED,
HOWEVER, that no additional notice shall be required with respect to any
action for which notice has been given under Section 8(c) for purposes of
indemnification.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation
25
(even if the Underwriters were treated as one entity for such purpose) or by
any other method of allocation which does not take account of the equitable
considerations referred to in this Section 9.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the underwriting commissions
received by such Underwriter in connection with the Common Shares
underwritten by it and distributed to the public. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section 9 are several, and not joint, in
proportion to their respective underwriting commitments as set forth opposite
their names in SCHEDULE A. For purposes of this Section 9, each officer and
employee of an Underwriter and each person, if any, who controls an
Underwriter within the meaning of the Securities Act and 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, and each person, if any, who controls the Company
with the meaning of the Securities Act and the Exchange Act shall have the
same rights to contribution as the Company.
SECTION 10. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any
one or more of the several Underwriters shall fail or refuse to purchase
Common Shares that it or they have agreed to purchase hereunder on such date,
and the aggregate number of Common Shares which such defaulting Underwriter
or Underwriters agreed but failed or refused to purchase does not exceed 10%
of the aggregate number of the Common Shares to be purchased on such date,
the other Underwriters shall be obligated, severally, in the proportions that
the number of Firm Common Shares set forth opposite their respective names on
SCHEDULE A bears to the aggregate number of Firm Common Shares set forth
opposite the names of all such non-defaulting Underwriters, or in such other
proportions as may be specified by the non-defaulting Underwriters, to
purchase the Common Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase on such date. If, on the First
Closing Date or the Second Closing Date, as the case may be, any one or more
of the Underwriters shall fail or refuse to purchase Common Shares and the
aggregate number of Common Shares with respect to which such default occurs
exceeds 10% of the aggregate number of Common Shares to be purchased on such
date, and arrangements satisfactory to the Underwriters and the Company for
the purchase of such Common Shares are not made within 48 hours after such
default, this Agreement shall terminate without liability of any party to any
other party except that the provisions of Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
In any such case either the Underwriters or the Company shall have the right
to postpone the First Closing Date or the Second Closing Date, as the case
may be, but in no event for longer than seven days in order that the required
changes, if any, to the Registration Statement and the Prospectus or any
other documents or arrangements may be effected.
26
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this
Section 10. Any action taken under this Section 10 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 11. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date this Agreement may be terminated by the Underwriters by notice given to
the Company and the Selling Shareholders if at any time (i) trading or
quotation in any of the Company's securities shall have been suspended or
limited by the Commission or by the Nasdaq Stock Market, or trading in
securities generally on either the Nasdaq Stock Market or the New York Stock
Exchange shall have been suspended or limited, or minimum or maximum prices
shall have been generally established on any of such stock exchanges by the
Commission or the NASD; (ii) a general banking moratorium shall have been
declared by any of federal, New York, Delaware or California authorities;
(iii) there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the
United States or international financial markets, or any substantial change
or development involving a prospective substantial change in United States'
or international political, financial or economic conditions, as in the
judgment of the Underwriters is material and adverse and makes it
impracticable to market the Common Shares in the manner and on the terms
described in the Prospectus or to enforce contracts for the sale of
securities; (iv) in the judgment of the Underwriters there shall have
occurred any Material Adverse Change; or (v) the Company shall have sustained
a loss by strike, fire, flood, earthquake, accident or other calamity of such
character as in the judgment of the Underwriters may interfere materially
with the conduct of the business and operations of the Company regardless of
whether or not such loss shall have been insured. Any termination pursuant
to this Section 11 shall be without liability on the part of (a) the Company
or the Selling Shareholders to any Underwriter, except that the Company and
the Selling Shareholders shall be obligated to reimburse the expenses of the
Underwriters pursuant to Sections 4 and 6 hereof, (b) any Underwriter to the
Company or the Selling Shareholders, or (c) of any party hereto to any other
party except that the provisions of Section 8 and Section 9 shall at all
times be effective and shall survive such termination.
SECTION 12. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Shareholders and
of the several Underwriters set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or the Company or any of its or their
partners, officers or directors or any controlling person, or the Selling
Shareholders, as the case may be, and will survive delivery of and payment
for the Common Shares sold hereunder and any termination of this Agreement.
27
SECTION 13 NOTICES. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Underwriters:
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
Salomon Brothers Inc
c/o NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Company:
The Cheesecake Factory, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
If to the Selling Shareholders:
[Custodian]
[address]
Facsimile: [___]
Attention: [___]
Any party hereto may change the address for receipt of communications by
giving written notice to the others.
SECTION 14. SUCCESSORS. This Agreement will inure to the benefit of
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 8 and Section 9,
and in each case their respective successors, and personal representatives,
and no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of the Common Shares as such
from any of the Underwriters merely by reason of such purchase.
28
SECTION 15. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement
shall not affect the validity or enforceability of any other Section,
paragraph or provision hereof. If any Section, paragraph or provision of this
Agreement is for any reason determined to be invalid or unenforceable, there
shall be deemed to be made such minor changes (and only such minor changes)
as are necessary to make it valid and enforceable.
SECTION 16. GOVERNING LAW PROVISIONS. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
SECTION 17. FAILURE OF ONE OR MORE OF THE SELLING SHAREHOLDERS TO SELL
AND DELIVER COMMON SHARES. If one or more of the Selling Shareholders shall
fail to sell and deliver to the Underwriters the Common Shares to be sold and
delivered by such Selling Shareholders at the First Closing Date pursuant to
this Agreement, then the Underwriters may at their option, by written notice
from the Underwriters to the Company and the Selling Shareholders, either (i)
terminate this Agreement without any liability on the part of any Underwriter
or, except as provided in Sections 4, 6, 8 and 9 hereof, the Company or the
Selling Shareholders, or (ii) purchase the shares which the Company and other
Selling Shareholders have agreed to sell and deliver in accordance with the
terms hereof. If one or more of the Selling Shareholders shall fail to sell
and deliver to the Underwriters the Common Shares to be sold and delivered by
such Selling Shareholders pursuant to this Agreement at the First Closing
Date or the Second Closing Date, then the Underwriters shall have the right,
by written notice from the Underwriters to the Company and the Selling
Shareholders, to postpone the First Closing Date or the Second Closing Date,
as the case may be, but in no event for longer than seven days in order that
the required changes, if any, to the Registration Statement and the
Prospectus or any other documents or arrangements may be effected.
SECTION 18. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written
or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may
be executed in two or more counterparts, each one of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement may not be amended or modified
unless in writing by all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each party
whom the condition is meant to benefit. The Table of Contents and the Section
headings herein are for the convenience of the parties only and shall not
affect the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated business
person who was adequately represented by counsel during negotiations regarding
the provisions hereof, including, without limitation, the indemnification
provisions of Section 8 and the contribution provisions of Section 9, and is
fully informed regarding said provisions. Each of the parties hereto further
acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the
risks
29
in light of the ability of the parties to investigate the Company, its
affairs and its business in order to assure that adequate disclosure has been
made in the Registration Statement, any preliminary prospectus and the
Prospectus (and any amendments and supplements thereto), as required by the
Securities Act and the Exchange Act.
30
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to the Company and the Custodian the
enclosed copies hereof, whereupon this instrument, along with all
counterparts hereof, shall become a binding agreement in accordance with its
terms.
Very truly yours,
THE CHEESECAKE FACTORY, INC.
By:
--------------------------
President
By:
--------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
SELLING SHAREHOLDERS
By:
--------------------------
Attorney-in-Fact
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Underwriters in San Francisco, California as of the date first above
written.
NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
SALOMON BROTHERS INC
By NATIONSBANC ▇▇▇▇▇▇▇▇▇▇ SECURITIES, INC.
By:
--------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Authorized Signatory
31
SCHEDULE A
UNDERWRITERS NUMBER OF
FIRM COMMON
SHARES TO BE
PURCHASED
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc. .... [___]
▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. ......................... [___]
Salomon Brothers Inc........................ [___]
Total ...................................... 2,675,000
SCHEDULE B
SELLING SHAREHOLDER NUMBER OF MAXIMUM NUMBER
FIRM COMMON OF OPTIONAL
SHARES COMMON SHARES
T0 BE SOLD TO BE SOLD
▇▇▇▇▇▇▇ Family Limited Partnership
The Cheesecake Factory, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇................... 203,787 0
▇▇▇▇▇▇▇ Family Trust B
The Cheesecake Factory, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇................... 46,023 0
▇▇▇▇▇▇▇ Family Trust C
The Cheesecake Factory, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ .................. 425,190 0
Total: 675,000 0
EXHIBIT A
THE FINAL OPINION IN DRAFT FORM SHOULD BE ATTACHED AS EXHIBIT A AT THE
TIME THIS AGREEMENT IS EXECUTED.
Opinion of counsel for the Company to be delivered pursuant to Section
5(d) of the Underwriting Agreement.
References to the Prospectus in this EXHIBIT A include any supplements
thereto at the Closing Date.
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as described
in the Prospectus and to enter into and perform its obligations under the
Underwriting Agreement.
(iii) The Company is duly qualified as a foreign corporation
to transact business and is in good standing in the State of California
and in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct
of business, except for such jurisdictions where the failure to so
qualify or to be in good standing would not, individually or in the
aggregate, result in a Material Adverse Change.
(iv) Each significant subsidiary (as defined in Rule 405
under the Securities Act), meaning ___________, has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and, to the best
knowledge of such counsel, is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except for such
jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, result in a Material Adverse
Change.
(v) All of the issued and outstanding capital stock of each
such significant subsidiary has been duly authorized and validly issued,
is fully paid and non-assessable and is owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance known to such counsel or, to the best knowledge
of such counsel, any pending or threatened claim.
(vi) The authorized, issued and outstanding capital stock of
the Company (including the Common Stock) conform to the descriptions
thereof set forth or incorporated by reference in the Prospectus. All of
the outstanding shares of Common Stock (including the
A-1
shares of Common Stock owned by Selling Shareholders) have been duly
authorized and validly issued, are fully paid and nonassessable and, to
the best of such counsel's knowledge, have been issued in compliance with
the registration and qualification requirements of federal and state
securities laws. The form of certificate used to evidence the Common
Stock is in due and proper form and complies with all applicable
requirements of the charter and by-laws of the Company and the General
and Business Corporation Law of the State of Delaware. The description
(or lack thereof) of the Company's stock option, stock bonus and other
stock plans or arrangements set forth in the Prospectus accurately and
fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights.
(vii) No shareholder of the Company or any other person has
any preemptive right, right of first refusal or other similar right to
subscribe for or purchase securities of the Company arising (i) by
operation of the charter or by-laws of the Company or the General and
Business Corporation Law of the State of Delaware or (ii) to the best
knowledge of such counsel, otherwise.
(viii) The Underwriting Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the
Company, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as
the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(ix) The Common Shares to be purchased by the Underwriters
from the Company have been duly authorized for issuance and sale pursuant
to the Underwriting Agreement and, when issued and delivered by the
Company pursuant to the Underwriting Agreement against payment of the
consideration set forth therein, will be validly issued, fully paid and
nonassessable.
(x) Each of the Registration Statement and the Rule 462(b)
Registration Statement, if any, has been declared effective by the
Commission under the Securities Act. To the best knowledge of such
counsel, no stop order suspending the effectiveness of either of the
Registration Statement or the Rule 462(b) Registration Statement, if any,
has been issued under the Securities Act and no proceedings for such
purpose have been instituted or are pending or are contemplated or
threatened by the Commission. Any required filing of the Prospectus and
any supplement thereto pursuant to Rule 424(b) under the Securities Act
has been made in the manner and within the time period required by such
Rule 424(b).
(xi) The Registration Statement, including any Rule 462(b)
Registration Statement, the Prospectus including any document
incorporated by reference therein, and each amendment or supplement to
the Registration Statement and the Prospectus including any document
incorporated by reference therein, as of their respective effective or
issue dates (other than the financial statements and supporting schedules
included or incorporated by reference therein or in exhibits to or
excluded from the Registration Statement, as to which
A-2
no opinion need be rendered) comply as to form in all material respects
with the applicable requirements of the Securities Act and the Exchange
Act.
(xii) Each document filed pursuant to the Exchange Act (other
than the financial statements and supporting schedules included therein,
as to which no opinion need be rendered) and incorporated or deemed to be
incorporated by reference in the Prospectus complied as to form in all
material respects with the Exchange Act.
(xiii) The Common Shares have been approved for listing on the
Nasdaq National Market.
(xiv) The statements (i) in the Prospectus under the caption
"Risk Factors--Government Regulation," in the second paragraph under the
caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," under the
caption "Business--Government Regulation" and under the caption
"Business--Legal Proceeding" and (ii) in Item 15 of the Registration
Statement, insofar as such statements constitute matters of law,
summaries of legal matters, the Company's charter or by-law provisions,
documents or legal proceedings, or legal conclusions, has been reviewed
by such counsel and fairly present and summarize, in all material
respects, the matters referred to therein.
(xv) To the best knowledge of such counsel, there are no
legal or governmental actions, suits or proceedings pending or threatened
which are required to be disclosed in the Registration Statement, other
than those disclosed therein.
(xvi) To the best knowledge of such counsel, there are no
Existing Instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than
those described or referred to therein or filed or incorporated by
reference as exhibits thereto; and the descriptions thereof and
references thereto are correct in all material respects.
(xvii) No consent, approval, authorization or other order of,
or registration or filing with, any court or other governmental authority
or agency is required for the Company's execution, delivery and
performance of the Underwriting Agreement and consummation of the
transactions contemplated thereby and by the Prospectus, except as
required under the Securities Act, applicable state securities or blue
sky laws and from the NASD.
(xviii) The execution and delivery of the Underwriting
Agreement by the Company and the performance by the Company of its
obligations thereunder (other than performance by the Company of its
obligations under the indemnification section of the Underwriting
Agreement, as to which no opinion need be rendered) (i) have been duly
authorized by all necessary corporate action on the part of the Company;
(ii) will not result in any violation of the provisions of the charter or
by-laws of the Company or any subsidiary; (iii) will not constitute a
breach of, or Default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to, (A) the Company's
Revolving Credit Facility with Sanwa Bank California, as
A-3
lender, or (B) to the best knowledge of such counsel, any other material
Existing Instrument; or (iv) to the best knowledge of such counsel, will
not result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any
subsidiary.
(xix) The Company is not, and after receipt of payment for
the Common Shares will not be, an "investment company" within the meaning
of Investment Company Act.
(xx) Except as disclosed in the Prospectus, to the best
knowledge of such counsel, there are no persons with registration or
other similar rights to have any equity or debt securities registered for
sale under the Registration Statement or included in the offering
contemplated by the Underwriting Agreement.
(xxi) To the best knowledge of such counsel, neither the
Company nor any subsidiary is in violation of its charter or by-laws or
any law, administrative regulation or administrative or court decree
applicable to the Company or any subsidiary or is in Default under any
material Existing Instrument, except in each such case for such
violations or Defaults as would not, individually or in the aggregate,
result in a Material Adverse Change.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the Underwriters at which the contents
of the Registration Statement and the Prospectus, and any supplements or
amendments thereto, and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus (other than as specified above), and
any supplements or amendments thereto, on the basis of the foregoing, nothing
has come to their attention which would lead them to believe that either the
Registration Statement or any amendments thereto, at the time the Registration
Statement or such amendments became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus, as of its date or at the First Closing Date or the Second Closing
Date, as the case may be, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no belief as to
the financial statements or schedules or other financial or statistical data
derived therefrom, included or incorporated by reference in the Registration
Statement or the Prospectus or any amendments or supplements thereto).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware, the General Corporation Law of the
State of California or the federal law of the United States, to the extent they
deem proper and specified in such opinion, upon the opinion (which shall be
dated the First Closing Date or the Second Closing Date, as the case may be,
shall be satisfactory in form and substance to the Underwriters, shall expressly
state that the Underwriters may rely on such opinion as if it were addressed to
them and shall be furnished to the
A-4
Underwriters) of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters; provided,
however, that such counsel shall further state that they believe that they
and the Underwriters are justified in relying upon such opinion of other
counsel, and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials.
A-5
EXHIBIT B
THE FINAL OPINION IN DRAFT FORM SHOULD BE ATTACHED AS EXHIBIT B AT THE TIME THIS
AGREEMENT IS EXECUTED.
The opinion of such counsel pursuant to Section 5(h) shall be rendered to
the Underwriters at the request of the Company and shall so state therein.
References to the Prospectus in this EXHIBIT B include any supplements thereto
at the Closing Date.
(i) The Underwriting Agreement has been duly authorized,
executed and delivered by or on behalf of, and is a valid and binding
agreement of, such Selling Shareholder, enforceable in accordance with
its terms, except as rights to indemnification thereunder may be limited
by applicable law and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general
equitable principles.
(ii) The execution and delivery by such Selling Shareholder
of, and the performance by such Selling Shareholder of its obligations
under, the Underwriting Agreement and its Custody Agreement and its Power
of Attorney will not, to the best of such counsel's knowledge, violate or
contravene any provision of applicable law or regulation, or violate,
result in a breach of or constitute a default under the terms of such
Selling Shareholder's organizing documents.
(iii) Such Selling Shareholder has the legal right and power,
and all authorizations and approvals required to enter into the
Underwriting Agreement and its Custody Agreement and its Power of
Attorney, to sell, transfer and deliver all of the Common Shares which
may sold by such Selling Shareholder under the Underwriting Agreement and
to comply with its other obligations under the Underwriting Agreement,
its Custody Agreement and its Power of Attorney.
(iv) Each of the Custody Agreement and Power of Attorney of
such Selling Shareholder has been duly authorized, executed and delivered
by such Selling Shareholder and is a valid and binding agreement of such
Selling Shareholder, enforceable in accordance with its terms, except as
rights to indemnification thereunder may be limited by applicable law and
except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally or by general equitable
principles.
(v) Assuming that the Underwriters purchase the Common
Shares which are sold by such Selling Shareholder pursuant to the
Underwriting Agreement for value, in good faith and without notice of any
adverse claim, the delivery of such Common Shares pursuant to the
Underwriting Agreement will pass good and valid title to such Common
Shares, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or other claim.
B-1
(vi) To the best of such counsel's knowledge, no consent,
approval, authorization or other order of, or registration or filing
with, any court or governmental authority or agency, is required for the
consummation by such Selling Shareholder of the transactions contemplated
in the Underwriting Agreement, except as required under the Securities
Act, applicable state securities or blue sky laws, and from the NASD.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the General
Corporation Law of the State of Delaware, the General Corporation Law of the
State of California or the federal law of the United States, to the extent they
deem proper and specified in such opinion, upon the opinion (which shall be
dated the First Closing Date or the Second Closing Date, as the case may be,
shall be satisfactory in form and substance to the Underwriters, shall expressly
state that the Underwriters may rely on such opinion as if it were addressed to
them and shall be furnished to the Underwriters) of other counsel of good
standing whom they believe to be reliable and who are satisfactory to counsel
for the Underwriters; PROVIDED, HOWEVER, that such counsel shall further state
that they believe that they and the Underwriters are justified in relying upon
such opinion of other counsel, and (B) as to matters of fact, to the extent they
deem proper, on certificates of the Selling Shareholders and public officials.
B-2
EXHIBIT C
October __, 1997
NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
Salomon Brothers Inc
c/o NationsBanc ▇▇▇▇▇▇▇▇▇▇ Securities, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
RE: The Cheesecake Factory, Inc. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into
or exchangeable or exercisable for Common Stock. The Company proposes to
carry out a public offering of Common Stock (the "Offering") for which you
will act as the underwriters. The undersigned recognizes that the Offering
will be of benefit to the undersigned and will benefit the Company by, among
other things, raising additional capital for its operations. The undersigned
acknowledges that you are relying on the representations and agreements of
the undersigned contained in this letter in carrying out the Offering and in
entering into underwriting arrangements with the Company with respect to the
Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not, without the prior written consent of NationsBanc
▇▇▇▇▇▇▇▇▇▇ Securities, Inc. (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any
option to sell (including without limitation any short sale), pledge,
transfer, establish an open "put equivalent position" within the meaning of
Rule 16a-1(h) under the Securities Exchange Act of 1934, or otherwise dispose
of any shares of Common Stock, options or warrants to acquire shares of
Common Stock, or securities exchangeable or exercisable for or convertible
into shares of Common Stock currently or hereafter owned either of record or
beneficially (as defined in Rule 13d-3 under Securities Exchange Act of 1934,
as amended) by the undersigned, or publicly announce the undersigned's
intention to do any of the foregoing, for a period commencing on the date
hereof and continuing through the close of trading on the date 90 days after
the date of the Prospectus. The undersigned also agrees and consents to the
entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of shares of Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock held by the
undersigned except in compliance with the foregoing restrictions.
With respect to the Offering only, the undersigned waives any registration
rights relating to registration under the Securities Act of any Common Stock
owned either of record or beneficially by the undersigned, including any
rights to receive notice of the Offering.
C-1
This agreement is irrevocable and will be binding on the undersigned and the
respective successors, heirs, personal representatives, and assigns of the
undersigned.
-------------------------------------
Printed Name of Holder
By:----------------------------------
Signature
-------------------------------------
Printed Name of Person Signing
(AND INDICATE CAPACITY OF PERSON SIGNING IF
SIGNING AS CUSTODIAN, TRUSTEE, OR ON BEHALF
OF AN ENTITY)
C-2