Exhibit 1
_______ Shares
HAPPY KIDS INC.
Common Stock, $.01 par value
UNDERWRITING AGREEMENT
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March ___, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & CO. INC.
CRUTTENDEN ▇▇▇▇ INC.
As Representatives of the several Underwriters
named in Schedule A hereto
▇/▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
1. Introductory. Happy Kids Inc., a New York corporation (the
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"Company"), proposes to sell, pursuant to the terms of this Agreement, to the
several underwriters named in Schedule A hereto (the "Underwriters," or, each,
an "Underwriter"), an aggregate of _______ shares of common stock, $.01 par
value (the "Common Stock"), of the Company. The aggregate of _______ shares so
proposed to be sold is hereinafter referred to as the "Firm Stock." The Company
also proposes to sell to the Underwriters, upon the terms and conditions set
forth in Section 3 hereof, up to an additional _______ shares of Common Stock
(the "Option Stock"). The Firm Stock and the Option Stock are hereinafter
collectively referred to as the "Stock." Ladenburg ▇▇▇▇▇▇▇▇ & Co. Inc.
("Ladenburg"), and Cruttenden ▇▇▇▇ Inc. are acting as representatives of the
several Underwriters and in such capacity are hereinafter referred to as the
"Representatives."
You have advised us that concurrently with the effectiveness of the
offering of the Firm Stock by the Underwriters, the Company has caused each
of the Founding Companies (as hereinafter defined) to be reorganized (the
"Founding Company Reorganization") as wholly owned C-Corporation subsidiaries
of the Company pursuant to a securities purchase agreement ("Securities Purchase
Agreement") in the form thereof attached as an exhibit to the Registration
Statement (as hereinafter defined) the consideration for which will be shares of
Common Stock, and the terms of which Founding Company Reorganization are as
described in the Registration Statement.
2. Representations and Warranties of the Company. Each of the
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Company, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇, jointly and severally,
represent and warrant to, and agree with, the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333 ______)
in the form in which it became or becomes effective and also in such form as it
may be when any post-effective amendment thereto shall become effective with
respect to the Stock, including any pre-effective prospectuses included as part
of the registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, copies of which have heretofore been delivered to you,
has been carefully prepared by the Company in conformity with the requirements
of the Securities Act and has been filed with the Commission under the
Securities Act; one or more amendments to such registration statement,including
in each case an amended pre-effective prospectus, copies of which amendments
have heretofore been delivered to you, have been so prepared and filed. Such
registration statement is referred to hereinafter as the "Registration
Statement." If it is contemplated, at the time this Agreement is executed, that
a post-effective amendment to the Registration Statement will be filed and must
be declared effective before the offering of the Stock may commence, the term
"Registration Statement" as used in this Agreement means the Registration
Statement as amended by said post-effective amendment. The term "Registration
Statement" as used in this Agreement shall also include any registration
statement relating to the Stock that is filed pursuant to Rule 462(b) under the
Securities Act. The term "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement, or, (A) if the
prospectus included in the Registration Statement omits information in reliance
on Rule 430A under the Securities Act and such information is included in a
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act, the term "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement as supplemented by
the addition of Rule 430A information contained in the prospectus filed with the
Commission pursuant to Rule 424(b) and (B) if prospectuses that meet the
requirements of Section 10(a) of the Securities Act are delivered pursuant to
Rule 434 under the Securities Act, then (i) the term "Prospectus" as used in
this Agreement means the "prospectus subject to completion" (as such term is
defined in Rule 434(g) under the Securities Act) as supplemented by (a) the
addition of Rule 430A information or other information contained in the form of
prospectus delivered pursuant to Rule 434(b)(2) under the Securities Act or (b)
the information contained in the term sheets described in Rule 434(b)(3) under
the Securities Act, (ii) the date of
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such prospectuses shall be deemed to be the date of the term sheets. The term
"Pre-effective Prospectus" as used in this Agreement means the prospectus
subject to completion in the form included in the Registration Statement at the
time of the initial filing of the Registration Statement with the Commission,
and as such prospectus shall have been amended from time to time prior to the
date of the Prospectus.
(b) The Commission has not issued or threatened to issue any order
preventing or suspending the use of any Pre-effective Prospectus, and, at its
date of issue, each Pre-effective Prospectus conformed in all material respects
with the requirements of the Securities Act and did not include 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; and,
when the Registration Statement becomes effective and at all times subsequent
thereto up to and including the Closing Dates (as hereinafter defined), the
Registration Statement and the Prospectus and any amendments or supplements
thereto contained and will contain all material statements and information
required to be included therein by the Securities Act and conformed and will
conform in all material respects to the requirements of the Securities Act and
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, included or will include any untrue statement of a material
fact or omit to state any material fact required to be stated therein, in light
of the circumstances under which they were made in the case of the Prospectus,
or necessary to make the statements therein not misleading, provided, however,
that the foregoing representations, warranties and agreements shall not apply to
information contained in or omitted from any Pre-effective Prospectus or the
Registration Statement or the Prospectus or any such amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by or on behalf of any Underwriter, directly or through you,
specifically for use in the preparation thereof; and each Pre-effective
Prospectus and Prospectus delivered to the Underwriters for use in connection
with the offering of the Stock will, at the time of such delivery, be identical
to the electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation S-T under the
Securities Act. There is no franchise, lease, contract, agreement or document
required to be described in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which is not described or
filed therein as required; and all descriptions of any such franchises, leases,
contracts, agreements or documents contained in the Registration Statement are
accurate and complete descriptions of such documents in all material respects.
(c) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, and except as set forth or
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contemplated in the Prospectus, neither the Company nor any of the Founding
Companies, have incurred any liabilities or obligations, direct or contingent,
nor entered into any transactions not in the ordinary course of business, and
there has not been any material adverse change in the condition (financial or
otherwise), properties, business, management, prospects, net worth or results of
operations of the Company and/or any of the Founding Companies, individually or
in the aggregate (a "Material Adverse Effect"), or any change in the capital
stock, short-term or long-term debt of the Company or any of the Founding
Companies.
(d) The audited consolidated financial statements of the Company (which
include the consolidated accounts of each of Happy Kids, Ltd., O'Boy, Inc., Talk
of the Town Apparel Corp., O.P. Kids, Inc., H.O.T. Kidz, Inc., Hawk Industries,
Inc. and J & B 18 Corp.)(each a "Founding Company" and, together, the "Founding
Companies"), in each case together with related notes and schedules, as set
forth in the Registration Statement and/or any Pre-Effective Prospectus as
applicable, present fairly the financial position and the results of operations
and cash flows of the Company and the Founding Companies on a consolidated
basis, at the indicated dates and for the indicated periods. Such financial
statements and related schedules have been prepared in accordance with generally
accepted principles of accounting, consistently applied throughout the periods
involved, except as disclosed therein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary
historical and statistical data include in the Registration Statement present
fairly the information shown therein and such data have been compiled on a basis
consistent with the financial statements presented therein and the books and
records of the Company and the Founding Companies, as applicable. The pro forma
consolidated balance sheet of the Company (as well as the supplemental pro forma
information presented in the Registration Statement), together with the related
notes, as set forth in the Registration Statement, present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial statements
and supplemental pro forma information and have been properly compiled on the
pro forma bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein. The selected
financial information included under the captions "Capitalization" and "Selected
Financial Data" in the Prospectus presents fairly the information shown therein
and has been compiled on a basis consistent with that of the audited
consolidated financial statements of the Company and the Founding Companies. No
other financial statements or schedules of the Company or the Founding Companies
are required by the Securities Act or the Rules and Regulations to be included
in the Registration Statement or Prospectus. None of the Company or any of the
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Founding Companies is currently planning any probable acquisition for which
disclosure of pro forma financial information would be required by the
Securities Act.
(e) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who have expressed their opinions on the audited
financial statements included in the Registration Statement and the Prospectus
are independent public accountants as required by the Securities Act and the
Rules and Regulations.
(f) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of New York with full
corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Prospectus. Each of the Founding
Companies has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation, with full
corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Prospectus. As of the Effective Date
after giving effect to the Founding Company Reorganization, all of the
outstanding capital stock of each of the Founding Companies is owned by the
Company, free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest; and no preemptive right, co-sale right,
registration right, right of first refusal or other similar right of
stockholders exists with respect to any shares of any of the Founding Companies.
The Company and each of the Founding Companies is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or be
in good standing would not have a Material Adverse Effect, and to the knowledge
of the Company, no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiaries listed on Exhibit 21 to the Registration Statement. None of the
Founding Companies owns or controls, directly or indirectly, any corporation,
association or other entity. None of the shareholders of the Company immediately
prior to the Effective Date owns or controls, directly or indirectly, any
interest in any corporation, association or other entity (other than the Company
and the Founding Companies) engaged in the business conducted by, or related to
the business conducted by, the Company or any Founding Company. Except as
described in the Registration Statement and the Prospectus, the Company is not
engaged in any discussions or party to any agreement or understanding, written
or oral, regarding, the
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acquisition of, or of an interest in, any corporation, firm, partnership, joint
venture, association or other entity.
(g) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable, have been
issued in compliance with all federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and the authorized and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption "Capitalization"
and conforms in all material respects to the statements relating thereto
contained in the Registration Statement and the Prospectus (and such statements
correctly state the substance of the instruments defining the capitalization
of the Company); the Firm Stock and the Option Stock to be purchased from the
Company hereunder have been duly and validly authorized for issuance and sale to
the Underwriters pursuant to this Agreement and, when issued and delivered by
the Company against payment therefor in accordance with the terms of this
Agreement, will be duly and validly issued and fully paid and nonassessable, and
will be sold free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest; and no preemptive right, co-sale right,
registration right, right of first refusal or other similar right of
stockholders exists with respect to any shares of the Firm Stock or Option Stock
to be purchased from the Company hereunder or the issuance and sale thereof. No
further approval or authorization of any stockholder, the Board of Directors of
the Company or others is required for the issuance and sale of the Stock except
as may be required under state or other securities or blue sky laws. Upon
completion of the Founding Company Reorganization in the manner described in the
Prospectus, the shares of Common Stock to be issued in such Reorganization will
be duly authorized, validly issued and fully paid and nonassessable. Except as
disclosed in the Prospectus and the audited consolidated financial statements of
the Company and the related notes thereto, included in the Prospectus, the
Company does not have outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations. The description of the Company's 1997 Stock Option Plan (the
"Option Plan"), and the options or other rights granted and exercised
thereunder, set forth in the Prospectus accurately and fairly presents the
information required to be shown with respect to the Option Plan and the options
granted thereunder.
(h) All the issued and outstanding capital stock of each of the Founding
Companies has been duly authorized and validly issued and is fully paid and
nonassessable, and was not issued in violation of or subject to any preemptive
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right, or other rights to subscribe for or purchase any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations, and is owned of record and beneficially, as of the date hereof,
and will be owned of record and beneficially at or prior to the closing of the
issuance of the Firm Stock, by the Company free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest; and no preemptive
right, co-sale right, registration right, right of first refusal or other
similar right of stockholders exists with respect to any shares of the Founding
Companies. There are no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, any shares of capital stock or
other equity interest in any of the Founding Companies. Except as described in
the Registration Statement and the Prospectus or as may be restricted by the
terms and provisions of any credit or loan facility to which the Company or any
of the Founding Companies is a party and which is described in the Registration
Statement and the Prospectus or by relevant state law with respect to the need
for sufficient surplus, none of the Founding Companies is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from making
any other distribution on its capital stock, or from transferring any of the
property or assets of any such Founding Company to the Company.
(i) Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of the Founding
Companies is a party or of which any property of the Company or any Founding
Company is subject, which, if determined adversely to the Company or any such
Founding Company, might individually or in the aggregate (i) prevent or
adversely affect the transactions contemplated by this Agreement, including
without limitation the Founding Company Reorganization, (ii) suspend the
effectiveness of the Registration Statement, (iii) prevent or suspend the use of
the Pre-effective Prospectus in any jurisdiction or (iv) result in a Material
Adverse Effect; and to the best of the Company's knowledge no such proceedings
are threatened against the Company or any Founding Company by governmental
authorities or others. Neither the Company nor any Founding Company is a party
or subject to the provisions of any material injunction, judgment, decree or
order of any court, regulatory body or other governmental agency or body.
(j) The execution, delivery and performance of this Agreement and the
consummation of the transactions herein and therein contemplated, including
without limitation the Founding Company Reorganization, will not result (with or
without due notice or lapse of time or both) in the creation of any lien or in
a breach or violation of or constitute a default under any of the terms or
provisions of, or give rise to any right of termination, cancellation or
acceleration under (i) any material indenture, license, mortgage, deed of trust,
note agreement or other agreement or instrument to which the Company, ▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ or any of the Founding Companies is a party or by which it
or any of them or any of their properties is
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or may be bound, (ii) the charter, By-laws or other organizational documents of
the Company, or any of the Founding Companies or (iii) any law, statue, order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ or any of the
Founding Companies or any of their properties.
(k) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company and
/or any of the Founding Companies of the transactions contemplated by this
Agreement, including without limitation the Founding Company Reorganization,
except such as may be required by the National Association of Securities
Dealers, Inc. (the "NASD") or under the securities or blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Stock by
the Underwriters.
(l) The Company has the full corporate power and authority to enter into
this Agreement and to perform its obligations hereunder (including to issue,
sell and deliver the Stock), and this Agreement has been duly and validly
authorized, executed and delivered by the Company and is a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that rights to indemnity and contribution
hereunder may be limited by federal or state securities laws or the public
policy underlying such laws or by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles. The Company and
each of ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ has full legal right, power and authority to enter
into the Securities Purchase Agreement and has performed all the transactions
contemplated thereby.
(m) The Company and each of the Founding Companies possesses all
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from, and have made all declarations and filings with, all
regulatory or governmental officials, bodies and tribunals ("Permits") to own,
lease or operate their respective properties and to conduct their respective
businesses described in the Registration Statement and the Prospectus, except
where the failure to have obtained or made the same would not have a Material
Adverse Effect and neither the Company nor any of the Founding Companies has
received any notice of proceedings relating to the revocation or modification of
any such Permits.
(n) The Company and each of the Founding Companies owns, and/or possesses
adequate rights to use, free and clear of all liens, charges, encumbrances,
pledges, security interests or defects, all patents, trademarks,
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service marks, logos, trade names, trade secrets, know how, copyrights,
proprietary technology and licenses, and rights with respect to the foregoing
(collectively, "Intellectual Property"), used in the conduct of their respective
businesses as described in the Registration Statement and the Prospectus, and
none of the Intellectual Property presently owned, held or used by the Company
or any of the Founding Companies infringes or conflicts with any Intellectual
Property of any other person or entity or are in dispute, and neither the
Company nor any Founding Company has received a notice, or knows of any basis,
of any infringement of or conflict with the asserted rights of others in any
such respect.
(o) The Company and each of the Founding Companies owns and has the right
to use all other trade secrets, know-how (including all other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
inventions, designs, processes, works of authorship, computer programs and
technical data and information that are material to its business, properties and
operations.
(p) The Company and each of the Founding Companies is in compliance with,
and conducts its business in conformity with, all applicable federal, state,
local and foreign laws, rules and regulations of each court or governmental
agency or body having jurisdiction over the Company or any of the Founding
Companies, except where the failure to be in compliance would not have a
Material Adverse Effect; to the knowledge of the Company, otherwise than as set
forth in the Registration Statement and the Prospectus, no prospective change in
any of such federal or state laws, rules or regulations has been adopted which,
when made effective, would have a Material Adverse Effect.
(q) The Company and each of the Founding Companies is in compliance with
all federal, state, local or foreign laws or regulations relating to pollution
or protection of human health or the environment ("Environmental Laws"), except
where the failure to be in compliance would not have a Material Adverse Effect.
Neither the Company nor any of the Founding Companies has authorized, conducted
or generated, transported, stored, used, treated, disposed or released any
hazardous substance, hazardous waste, hazardous material, hazardous constituent,
toxic substance, pollutant, contaminant, petroleum product, natural gas,
liquified gas or synthetic gas, defined or regulated under any Environmental Law
on, in or under any property currently leased or owned or by any means
controlled by the Company or any of the Founding Companies (the "Real Property")
in violation of any applicable law, except for any violation which would not
have a Material Adverse Effect; there is no pending or, to the Company's
knowledge, threatened claim, action, litigation or any administrative agency
proceeding involving the Company, any of the Founding Companies or
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their respective properties, nor has the Company or any of the Founding
Companies received any written notice, or any oral notice to any executive
officer of the Company or any other employee responsible for receipt of any such
notice, from any governmental entity or third party, that (A) alleges a
violation of any Environmental Laws by the Company or any of the Founding
Companies or any person or entity whose liability for a violation of an
Environmental Law the Company or any of the Founding Companies has retained or
assumed either contractually or by operation of law, which liability or
violation could be reasonably expected to have a Material Adverse Effect, (B)
alleges the Company or any of the Founding Companies is a liable party under the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S) 9601 et seq., or any state superfund law, (C) alleges possible contamination
of the environment by the Company or any of the Founding Companies or (D)
alleges possible contamination of the Real Property.
(r) The Company and each of the Founding Companies has filed all necessary
federal, state, local and foreign income, payroll, franchise and other tax
returns and has paid all taxes shown as due thereon or with respect to any of
its properties, and there is no tax deficiency that has been, or to the
knowledge of the Company is likely to be, asserted against the Company or any of
the Founding Companies or any of their respective properties or assets and all
tax liabilities are adequately provided for on the books of the Company and each
of the Founding Companies.
(s) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any action designed
or intended to stabilize or manipulate the price of any security of the Company,
or which caused or resulted in, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the price of
any security of the Company.
(t) The Company has provided you with all financial statements for
each of the Founding Companies since the year ended December 31, 1992 to the
date hereof.
(u) Neither the Company nor any of the Founding Companies is in
violation of its respective charter or by-laws. The Company and each of the
Founding Companies has performed all obligations required to be performed by
the Company or any such Founding Company under any material license, indenture,
mortgage, deed of trust, note agreement or other agreement or instrument to
which it is a party or by which it is or any of its properties may be bound, and
neither the Company nor any of the Founding Companies, nor to the knowledge of
the Company or any Founding Company, any other party to such material license,
indenture, mortgage, deed of trust, note agreement or other agreement or
instrument is in default under or in breach of any such obligations. Neither
the Company nor any of the Founding Companies has received or sent any notice of
such default or breach.
(v) Neither the Company nor any of the Founding Companies is involved in
any labor dispute nor, to their knowledge, is any such dispute threatened.
Neither the Company nor any of the Founding Companies is aware that (A) any
executive, key employee or significant group of employees of the Company or any
Founding Company plans to terminate employment with the Company or any such
Founding Company or (B) any such executive or key employee is subject to any
noncompete, nondisclosure, confidentiality, employment, consulting or similar
agreement that would be violated by the present or proposed business activities
of the Company or any of the Founding Companies. Neither the Company nor any
Founding Company has or expects to have any liability for any prohibited
transaction or funding deficiency or any complete or partial withdrawal
liability with respect to any pension, profit sharing or other plan which is
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), to which the Company or any Founding Company makes or ever has made a
contribution and in which any employee of the Company or any Founding Company is
or has ever been a participant. With respect to such plans, the Company and each
Founding Company is in compliance in all material respects with all applicable
provisions of ERISA.
(w) The Company has obtained the written agreement described in Section
8(h) of this Agreement from each of its officers, directors, director designees
and holders of Common Stock listed on Schedule B hereto.
(x) The consummation of the Founding Company Reorganization has not
generated or caused to arise any intangible asset consisting of going concern
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value in excess of the asset value of the Founding Companies (i.e., "goodwill")
----
that the Company would be required to write off over time in accordance with
generally accepted accounting principles.
(y) The Company and each of the Founding Companies have, and as of the
Closing Dates will have, good and marketable title to all real property free and
clear of all liens, encumbrances and defects except such as are described in the
Prospectus or such as would not have a Material Adverse Effect; and any real
property and buildings held under lease by the Company or any of the Founding
Companies or proposed to be held after giving effect to the transactions
described in the Prospectus are, or will be as of the Closing Dates, held by
them under valid, subsisting and enforceable leases with such exceptions as
would not have a Material Adverse Effect, in each case except as described in
the Prospectus. All personal property used by the Company and each of the
Founding Companies in their business is either owned or leased by the Company or
the Founding Companies and is in good working order and condition, ordinary wear
and tear excepted.
(z) The Company and each Founding Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as is customary in the businesses in which it is engaged or proposes to
engage after giving effect to the transactions described in the Prospectus; and
neither the Company nor any Founding Company has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue their business at a cost that would not have a Material
Adverse Effect.
(aa) Other than as contemplated by this Agreement, the Registration
Statement or the Prospectus, there is no broker, finder or other party that is
entitled to receive from the Company any brokerage or finder's fee or other fee
or commission as a result of any of the transactions contemplated by this
Agreement.
(bb) The inventory of the Company and the Founding Companies is in
merchantable condition and can be sold in the ordinary course of business at the
carrying value of such inventory, as shown in the Company's or the Founding
Companies' financial statements, subject to pricing reductions in the ordinary
course of business.
(cc) The Company and each of the Founding Companies maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
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specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(dd) To the Company's knowledge, neither the Company nor any of the
Founding Companies nor any employee or agent of the Company or any of the
Founding Companies has made any payment of funds of the Company or any of the
Founding Companies or received or retained any funds in violation of any law,
rule or regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectus.
(ee) Neither the Company nor any of the Founding Companies is an
"investment company," or an entity "controlled" by an "investment company"
required to be registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as such terms are defined in the 1940 Act, and neither the
Company nor any of the Founding Companies expects to be treated as such by
reason of the receipt and application of the net proceeds from the sale of the
Stock.
(ff) The Stock has been duly approved for quotation on the Nasdaq National
Market, subject to notice of effectiveness.
(gg) No holder of any security of the Company has the right to have any
security owned by such holder included in the Registration Statement and, except
as described in the Registration Statement and the Prospectus, no holder of any
security of the Company has the right to demand registration of any security
owned by such holder during the period ending 12 months after the date of the
Prospectus.
(hh) Each certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters pursuant to this Agreement
shall be deemed to be a representation and warranty by the Company as to the
matters covered thereby.
(ii) For all periods from its election under Subchapter S of the Internal
Revenue Code of 1986, as amended (the "Code"), until the Effective Date, each of
the Founding Companies that so elected was qualified as an S Corporation
pursuant to an election validly made under Subchapter S of the Code (which
12
election has not been and will not be revoked or terminated for any
such period) and the Company has not been and will not be subject to
federal corporate taxes for such periods. Any Subchapter S election
was duly terminated on or prior to the Effective Date.
(jj) All conditions to the consummation of the Founding Company
Reorganizations have been satisfied or waived, and the Founding
Company Reorganizations have been consummated as described in the
Registration Statement.
(kk) The Company has a backlog of $[ ] as of December 31, 1997
and $___ as of January 31, 1998.
(ll) All distributions made by the Company and each of the
Founding Companies pursuant to Subchapter S of the Code were made in
compliance with Section 510 of the New York Business Corporation Law.
3. Purchase by, and Sale and Delivery to, Underwriters-Closing
-----------------------------------------------------------
Dates. The Company agrees to sell to the Underwriters the Firm Stock, and on the
-----
basis of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set forth, the
Underwriters agree, severally and not jointly, to purchase the Firm Stock from
the Company, the number of Firm Stock to be purchased by each Underwriter being
set opposite its name in Schedule A, subject to adjustment in accordance with
Section 12 hereof.
The purchase price per share to be paid by the Underwriters to the
Company will be $_______ per share (the "Purchase Price").
The Company will deliver the Firm Stock to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York City time, on the second full business day preceding the
First Closing Date (as defined below) or, if no such direction is received, in
the names of the respective Underwriters or in such other names as Ladenburg may
designate (solely for the purpose of administrative convenience) and in such
denominations as Ladenburg may determine), against payment of the aggregate
Purchase Price therefor by wire transfer of same-day funds to an account
specified by the Company in writing at least two (2) business days prior to the
First Closing Date, all at the offices of Rosenman & Colin LLP, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such other place as the parties may
designate. The time and date of the delivery and closing shall be at 10:00 A.M.,
New York City time, on ____________, 1998, in accordance with Rule 15c6-1 of the
Exchange Act. The time and date of such payment and delivery are herein referred
to as the "First Closing Date." The First Closing Date and the location of
delivery of, and the form of payment for, the Firm Stock may be varied by
agreement between the Company and Ladenburg. The First Closing Date may be
postponed pursuant to the provisions of Section 12.
13
The Company shall make the certificates for the Stock available to the
Representatives for examination on behalf of the Underwriters not later than
10:00 A.M., New York City time, on the business day preceding the First Closing
Date at the offices of Ladenburg, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
It is understood that either of the Representatives, individually and not
as a Representative of the several Underwriters, may (but shall not be obligated
to) make payment to the Company on behalf of any Underwriter or Underwriters,
for the Stock to be purchased by such Underwriter or Underwriters. Any such
payment by either of the Representatives shall not relieve such Underwriter or
Underwriters from any of its or their other obligations hereunder.
The several Underwriters agree to make an initial public offering of the
Firm Stock at the initial public offering price set forth on the cover page of
the Prospectus as soon after the effectiveness of the Registration Statement as
in their judgment is advisable. The Representatives shall promptly advise the
Company of the making of the initial public offering.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Company hereby grants to the Underwriters an option to purchase, severally and
not jointly, an aggregate of up to ________ of Common Stock. The price per
share to be paid for the Option Stock shall be the Purchase Price. The option
granted hereby may be exercised as to all or any part of the Option Stock at any
time, and from time to time, not more than thirty (30) days subsequent to the
effective date of this Agreement. No Option Stock shall be sold and delivered
unless the Firm Stock previously has been, or simultaneously is, sold and
delivered. The right to purchase the Option Stock or any portion thereof may be
surrendered and terminated at any time upon notice by the Underwriters to the
Company.
The option granted hereby may be exercised by the Underwriters by giving
written notice from Ladenburg to the Company setting forth the number of the
Option Stock to be purchased by them and the date and time for delivery of and
payment for the Option Stock. Each date and time for delivery of and payment
for the Option Stock (which may be the First Closing Date, but not earlier) is
herein called the "Option Closing Date" and shall in no event be earlier than
two (2) business days nor later than ten (10) business days after written notice
is given. (The Option Closing Date and the First Closing Date are herein called
the "Closing Dates.") Option Stock shall be purchased for the account of each
Underwriter in the same proportion as the number of Firm Stock set forth
opposite such Underwriter's name in Schedule A hereto bears to the total number
of Firm Stock (subject to adjustment by the Underwriters to eliminate odd lots).
Upon exercise of the option by the Underwriters, the Company agrees to sell to
the Underwriters the number of Option Stock set forth in the written notice of
exercise and the
14
Underwriters agree, severally and not jointly and subject to the terms and
conditions herein set forth, to purchase the number of such determined as
aforesaid.
The Company will deliver the Option Stock to the Underwriters (in the
form of definitive certificates, issued in such names and in such denominations
as the Representatives may direct by notice in writing to the Company given at
or prior to 12:00 Noon, New York City time, on the second full business day
preceding the Option Closing Date or, if no such direction is received, in the
names of the respective Underwriters or in such other names as Ladenburg may
designate (solely for the purpose of administrative convenience) and in such
denominations as Ladenburg may determine), against payment of the aggregate
Purchase Price therefor by wire transfer of same-day funds to an account
specified by the Company in writing at least two (2) business days prior to the
Option Closing Date, all at the offices of Rosenman & Colin LLP, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The Option Closing Date and the location of
delivery of, and the form of payment for, the Option Stock may be varied by
agreement between, the Company and Ladenburg. The Option Closing Date may be
postponed pursuant to the provisions of Section 12.
4. Covenants and Agreements of the Company. The Company covenants
---------------------------------------
and agrees with the several Underwriters that:
(a) The Company will (i) if the Company and the Representatives
have determined not to proceed pursuant to Rule 430A, use its best
efforts to cause the Registration Statement to become effective, (ii)
if the Company and the Representatives have determined to proceed
pursuant to Rule 430A, use its best efforts to comply with the
provisions of and make all requisite filings with the Commission
pursuant to Rule 430A and Rule 424 of the Rules and Regulations and
(iii) if the Company and the Representatives have determined to
deliver Prospectuses pursuant to Rule 434 of the Rules and
Regulations, to use its best efforts to comply with all the
applicable provisions thereof. The Company will advise the
Representatives promptly as to the time at which the Registration
Statement becomes effective, will advise the Representatives promptly
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of
any proceedings for that purpose, and will use its best efforts to
prevent the issuance of any such stop order and to obtain as soon as
possible the lifting thereof, if issued. The Company will advise the
Representatives promptly of the receipt of any comments of the
Commission or any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for
additional information and will not at any time file any amendment to
the Registration Statement or supplement to the Prospectus which
shall not previously have been submitted to the Representatives a
reasonable time prior to the proposed filing thereof or to which the
15
Representatives shall reasonably object in writing or which is not in compliance
with the Securities Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon the request of the Representatives, any amendments or supplements to the
Registration Statement or the Prospectus which in the opinion of the
Representatives may be necessary to enable the several Underwriters to continue
the distribution of the Stock and will use its best efforts to cause the same to
become effective as promptly as possible.
(c) If at any time after the effective date of the Registration
Statement when a prospectus relating to the Stock is required to be delivered
under the Securities Act any event relating to or affecting the Company or any
of the Founding Companies occurs as a result of which the Prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the Prospectus to
comply with the Securities Act, the Company will promptly notify the
Representatives thereof and will prepare an amended or supplemented prospectus
which will correct such statement or omission; and in case any Underwriter is
required to deliver a prospectus relating to the Stock nine (9) months or more
after the effective date of the Registration Statement, the Company upon the
request of the Representatives and at the expense of such Underwriter will
prepare promptly such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Securities Act.
(d) The Company will deliver to the Representatives, at or before the
Closing Dates, signed copies of the Registration Statement, as originally filed
with the Commission, and all amendments thereto including all financial
statements and exhibits thereto, and will deliver to the Representatives such
number of copies of the Registration Statement, including such financial
statements but without exhibits, and all amendments thereto, as the
Representatives may reasonably request. The Company will deliver or mail to or
upon the order of the Representatives, from time to time until the effective
date of the Registration Statement, as many copies of the Pre-effective
Prospectus as the Representatives may reasonably request. The Company will
deliver or mail to or upon the order of the Representatives on the date of the
initial public offering, and thereafter from time to time during the period when
delivery of a prospectus relating to the Stock is required under the Securities
Act, as many copies of the Prospectus, in final form or as thereafter amended or
supplemented as the Representatives may reasonably request; provided, however,
that the
16
expense of the preparation and delivery of any prospectus required for use nine
(9) months or more after the effective date of the Registration Statement shall
be borne by the Underwriters required to deliver such prospectus.
(e) The Company will make generally available to its shareholders as soon
as practicable, but not later than fifteen (15) months after the effective date
of the Registration Statement, an earning statement which will be in reasonable
detail (but which need not be audited) and which will comply with Section 11(a)
of the Securities Act, covering a period of at least twelve (12) months
beginning after the "effective date" (as defined in Rule 158 under the
Securities Act) of the Registration Statement.
(f) The Company will cooperate with the Representatives to enable the
Stock to be registered or qualified for offering and sale by the Underwriters
and by dealers under the securities laws of such jurisdictions as the
Representatives may reasonably designate and at the request of the
Representatives will make such applications and furnish such consents to service
of process or other documents as may be required of it as the issuer of the
Stock for that purpose; provided, however, that the Company shall not be
required to qualify to do business or to file a general consent (other than that
arising out of the offering or sale of the Stock) to service of process in any
such jurisdiction where it is not now so subject. The Company will, from time to
time, prepare and file such statements and reports as are or may be required of
it as the issuer of the Stock to continue such qualifications in effect for so
long a period as the Representatives may reasonably request for the distribution
of the Stock. The Company will advise the Representatives promptly after the
Company becomes aware of the suspension of the qualifications or registration of
(or any such exception relating to) the Common Stock of the Company for
offering, sale or trading in any jurisdiction or of any initiation or threat of
any proceeding for any such purpose, and in the event of the issuance of any
orders suspending such qualifications, registration or exception, the Company
will, with the cooperation of the Representatives use its best efforts to obtain
the withdrawal thereof.
(g) The Company will furnish to its stockholders annual reports containing
financial statements certified by independent public accountants and with
quarterly summary financial information in reasonable detail which may be
unaudited. During the period of five (5) years from the date hereof, the Company
will deliver to the Representatives, as soon as they are available, copies of
each annual report of the Company containing the balance sheet of the Company as
of the close of such fiscal year and statements of income, stockholders' equity
and cash flows for the year then ended and the opinion thereon of the Company's
independent public accountants and each other report
17
or communication furnished by the Company to its stockholders and will deliver
to the Representatives, (i) as soon as they are available, copies of any other
reports or communication (financial or other) which the Company shall publish or
otherwise make available to any of its stockholders as such and (ii) as soon as
they are available, copies of any reports and financial statements furnished
to or filed with the Commission, or the NASD or any national securities
exchange. So long as the Company has active subsidiaries, such financial
statements will be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally. Separate financial statements shall be furnished for all
subsidiaries whose accounts are not consolidated but which at the time are
significant subsidiaries as defined in the Rules and Regulations.
(h) The Company will use its best efforts to qualify for inclusion,
subject to notice of effectiveness, on the Nasdaq National Market, the Stock to
be issued and sold by the Company.
(i) The Company will maintain a transfer agent and registrar for its
Common Stock.
(j) The Company will not, without the prior written consent of
Ladenburg, offer, sell, assign, transfer, encumber, contract to sell, grant an
option to purchase or otherwise dispose of any of Common Stock or securities
convertible into or exercisable or exchangeable for Common Stock during the 180
days following the date of the Prospectus, other than: (i) the Company's sale of
Common Stock hereunder, (ii) in connection with the Founding Company
Reorganization as described in the Registration Statement, (iii) upon the
exercise of stock options granted or issued prior to the date hereof and as
described in the Registration Statement and (iv) the grant of stock options
pursuant to the Option Plan.
(k) The Company will apply the net proceeds from the sale of the
Stock as set forth in the description under "Use of Proceeds" in the Prospectus,
which description complies in all respects with the requirements of Item 504 of
Regulation S-K.
(l) The Company will supply you with copies of all correspondence to
and from, and all documents issued to and by, the Commission in connection with
the registration of the Stock under the Securities Act.
(m) Prior to the Closing Dates the Company will furnish to you, as
soon as they have been prepared, copies of any unaudited interim consolidated
18
financial statements of the Company and each of the Founding
Companies for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statement and the
Prospectus.
(n) Prior to the Closing Dates the Company will issue no press
release or other communications directly or indirectly and hold no
press conference with respect to the Company or any of the Founding
Companies, the financial condition, results of operation, business,
prospects, assets or liabilities of any of them, or the offering of
the Stock, without your prior written consent.
(o) The Company will not at any time, directly or indirectly,
take any action designed or intended to stabilize or manipulate the
price of any security of the Company, or which caused or resulted in,
or which might in the future reasonably be expected to cause or
result in, stabilization or manipulation of the price of any security
of the Company.
(p) Until the expiration of two years from the First Closing
Date, in connection with any public or private offering of equity,
debt or convertible securities by the Company or any Founding
Company, the Company shall (or shall cause the applicable Founding
Company to) first offer the opportunity to act as a manager or
placement agent of such offering, as applicable, to Ladenburg, upon
specified terms and conditions, and if Ladenburg shall fail to accept
such terms and conditions within thirty days, then the Company or
such Founding Company shall be free to appoint any other firm or
organization as a manager or placement agent of such offering, as
applicable, upon terms and conditions which shall not be more
favorable to such firm or organization than those so offered to
Ladenburg.
(q) Within days of the date hereof, the Company shall appoint
--
at least two independent directors to the Company's Board of
Directors who shall have no business or family relationship with
the Company or any other director or officer thereof, and which
independent directors will constitute at least half of the members of
the Company's Compensation Committee, Option Committee and Audit
Committee. The Company shall have provided to the Representative the
charter of the Audit Committee or resolutions establishing such
committee, which shall provide, among other things, for the Audit
Committee to approve in advance transactions between the Company and
any of its affiliates.
(r) Until the expiration of one year from the effective date of
the Offering contemplated hereby, the Company shall not grant any
options or stock purchase rights, pursuant to the Option Plan or
otherwise, at an exercise or conversion price below the then
applicable fair market value of the security issuable upon exercise
or conversion thereof.
5. Payment of Expenses. (a) The Company will pay (directly or by
-------------------
reimbursement) all costs, fees and expenses incurred in connection with expenses
incident to the performance of its obligations under this Agreement and in
connection with the transactions contemplated hereby, including but not limited
to (i) all expenses and taxes incident to the issuance and delivery of the Stock
to the Representatives; (ii) all expenses incident to the registration of the
Stock under the Securities Act; (iii) the costs of preparing stock certificates
(including printing and engraving costs); (iv) all fees and expenses of the
registrar and transfer agent of the Stock; (v) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Stock to the
Underwriters; (vi) fees and expenses of the Company's counsel and the Company's
independent accountants; (vii) all costs and expenses incurred in connection
with the preparation, printing, filing, shipping and distribution of the
Registration
19
Statement, each Pre-effective Prospectus and the Prospectus (including all
exhibits and financial statements) and all amendments and supplements provided
for herein, the "Agreement Among Underwriters" between the Representatives and
the Underwriters, the Selling Agreement, the Underwriters' Questionnaire and the
Blue Sky memoranda, if any, and this Agreement; (viii) all filing fees,
attorneys' fees and expenses incurred by the Company or the Underwriters in
connection with exemptions from the qualifying or registering (or obtaining
qualification or registration of) all or any part of the Stock for offer and
sale and determination of its eligibility for investment under the Blue Sky or
other securities laws of such jurisdictions as the Representatives may designate
and all fees and expenses, including attorneys' fees, paid or incurred in
connection with filings made with the NASD, up to $25,000 in respect of the
matters contemplated by this clause (viii); (ix) all fees and expenses in
connection with qualifying the Stock for inclusion on the Nasdaq National Market
and (x) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section 5, including any and all costs and expenses associated with the Founding
Company Reorganization, except for those costs which shall be borne by the
Founding Companies.
(b) In addition to its other obligations under Section 6(a) hereof,
the Company agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
(i) any statement or omission or any alleged statement or omission or (ii) any
breach or inaccuracy in its representations and warranties, it will reimburse
each Underwriter on a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse each Underwriter for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Underwriter shall promptly return
it to the Company together with interest, determined on the basis of the prime
rate (or other commercial lending rate for borrowers of the highest credit
standing) announced from time to time by Citibank, NA, New York, New York (the
"Prime Rate"). Any such interim reimbursement payments which are not made to an
Underwriter in a timely manner as provided below shall bear interest at the
Prime Rate from the due date for such reimbursement. This expense reimbursement
agreement will be in addition to any other liability which the Company may
otherwise have. The request for reimbursement will be sent to the Company.
(c) In addition to its other obligations under Section 6(b) hereof,
each Underwriter severally agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in Section 6(c) hereof which relates to written
information furnished to the Company by the Representatives on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus, it will
20
reimburse the Company (and, to the extent applicable, each officer, director or
controlling person) on a quarterly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director or controlling person) for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company (and, to the
extent applicable, each officer, director or controlling person) shall promptly
return it to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company within thirty (30) days of a request
for reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(d) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in paragraph (b) and/or (c)
of this Section 5, including the amounts of any requested reimbursement payments
and the method of determining amounts, shall be settled by arbitration conducted
under the provisions of the Constitution and Rules of the Board of Governors of
the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration
Procedure of the NASD. Any such arbitration must be commenced by service of a
written demand for arbitration or written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in paragraph (b) and/or (c) of
this Section 5 and would not resolve the ultimate propriety or enforceability of
the obligation to reimburse expenses which is created by the provisions of
Section 6.
6. Indemnification and Contribution. (a) The Company, ▇▇▇▇ ▇.
--------------------------------
▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇, jointly and severally, agree to indemnify
and hold harmless each Underwriter and each person, if any, who controls such
Underwriter within the meaning of the Securities Act and the respective
officers, directors, partners, employees, representatives and agents of each of
such Underwriter (collectively, the "Underwriter Indemnified Parties" and, each,
an "Underwriter Indemnified Party"), against any losses, claims, damages,
liabilities or expenses (including the reasonable cost of investigating and
defending against any claims therefor and counsel fees incurred in connection
therewith), joint or several, which may be based upon the Securities Act, or any
other statute or at common law, on the ground that any Pre-effective Prospectus,
the Registration Statement or the Prospectus (or any Pre-effective Prospectus,
the Registration Statement or the Prospectus as from time to time amended or
supplemented) includes or allegedly includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements
21
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that such indemnity shall not inure to the
benefit of any Underwriter (or any person controlling such) on account of any
losses, claims, damages, liabilities or expenses arising from the sale of the
Stock to any person by such Underwriter (i) if such untrue statement or omission
or alleged untrue statement or omission was made in any Pre-effective
Prospectus, the Registration Statement or the Prospectus, or such amendment or
supplement, in reliance upon and in conformity with information furnished in
writing to the Company by the Representatives on behalf of any Underwriter
specifically for use therein or (ii) as to any Pre-effective Prospectus, with
respect to any Underwriter, to the extent that any such loss, claim, damage,
liability or expense of such Underwriter results from an untrue statement of a
material fact contained in, or the omission of a material fact from, such
Pre-effective Prospectus, which untrue statement or omission was corrected in
the Prospectus, if such Underwriter sold Stock to the person alleging such
loss, claim, damage or liability without sending or giving, at or prior to the
written confirmation of such sale, a copy of the Prospectus, unless such
failure resulted from the failure of the Company to deliver copies of the
Prospectus to such Underwriter on a timely basis to permit such sending or
giving. The Company will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Company elects to assume the defense,
such defense shall be conducted by counsel chosen by it. In the event the
Company elects to assume the defense of any such suit and retain such counsel,
any Underwriter Indemnified Parties, defendant or defendants in the suit, may
retain additional counsel but shall bear the fees and expenses of such counsel
unless (i) the Company shall have specifically authorized the retaining of such
counsel or (ii) the parties to such suit include any such Underwriter
Indemnified Parties, and the Company and such Underwriter Indemnified Parties at
law or in equity have been advised by counsel to the Underwriters that one or
more legal defenses may be available to it or them which may not be available to
the Company, in which case the Company shall not be entitled to assume the
defense of such suit notwithstanding its obligation to bear the fees and
expenses of such counsel. This indemnity agreement is not exclusive and will be
in addition to any liability which the Company might otherwise have and shall
not limit any rights or remedies which may otherwise be available at law or in
equity to each Underwriter Indemnified Party. The Company agrees that the
statements with respect to the price and underwriting discount set forth on, and
the information contained in the last paragraph of, the cover page of the
Prospectus, the stabilization legend on the inside front cover page of the
Prospectus, and the table of Underwriters, the paragraph regarding price and
underwriting discount, the paragraph regarding the amounts of the selling
concession and reallowance, all set forth under the caption "Underwriting" in
the Prospectus, constitute the only information provided in writing by the
Representatives on behalf of any Underwriter expressly for use in the
Registration Statement or the Prospectus.
(b) Each Underwriter severally and not jointly agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning
22
of the Securities Act (collectively, the "Company Indemnified Parties") against
any losses, claims, damages, liabilities or expenses (including, unless the
Underwriter or Underwriters elect to assume the defense, the reasonable cost of
investigating and defending against any claims therefor and counsel fees
incurred in connection therewith), joint or several, which arise out of or are
based in whole or in part upon the Securities Act, the Exchange Act or any other
federal, state, local or foreign statute or regulation, or at common law, on the
ground or alleged ground that any Pre-effective Prospectus, the Registration
Statement or the Prospectus (or any Pre-effective Prospectus, the Registration
Statement or the Prospectus, as from time to time amended and supplemented)
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
but only insofar as any such statement or omission was made in reliance upon,
and in conformity with, written information furnished to the Company by such
Underwriter, directly or through the Representatives, specifically for use in
the preparation thereof; provided, however, that in no case is such Underwriter
to be liable with respect to any claims made against any Company Indemnified
Party against whom the action is brought unless such Company Indemnified Party
shall have notified such Underwriter in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon the Company Indemnified Party, but failure to
notify such Underwriter of such claim shall not relieve it from any liability
which it may have to any Company Indemnified Party otherwise than on account of
its indemnity agreement contained in this paragraph. Such Underwriter shall be
entitled to participate at its own expense in the defense, or, if it so elects,
to assume the defense of any suit brought to enforce any such liability, but, if
such Underwriter elects to assume the defense, such defense shall be conducted
by counsel chosen by it. In the event that any Underwriter elects to assume the
defense of any such suit and retain such counsel, the Company Indemnified
Parties and any other Underwriter or Underwriters or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them, respectively. The Underwriter
against whom indemnity may be sought shall not be liable to indemnify any person
for any settlement of any such claim effected without such Underwriter's
consent. This indemnity agreement is not exclusive and will be in addition to
any liability which such Underwriter might otherwise have and shall not limit
any rights or remedies which may otherwise be available at law or in equity to
any Company Indemnified Party.
(c) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to herein, then
each indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Stock. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid
23
or payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contribution were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating, defending, settling or compromising any
such claim. Notwithstanding the provisions of this subsection (c), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the shares of the Stock underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. The
Underwriters' obligations to contribute are several in proportion to their
respective underwriting obligations and not joint. 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.
(d) Notwithstanding the provisions of this Section 6, the maximum
liability of ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ in respect of this
Agreement shall not exceed $2,000,000 in the aggregate.
7. Survival of Indemnities, Representations, Warranties, etc. The
--------------------------------------------------------
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by them respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter, the Company or any of its officers or directors or
any controlling person, and shall survive delivery of and payment for the Stock.
8. Conditions of Underwriters' Obligations. The respective obligations
---------------------------------------
of the several Underwriters hereunder shall be subject to the accuracy, at and
(except as otherwise stated herein) as of the date hereof and at and as of the
Closing Dates, of the representations and warranties made herein by the Company,
to compliance at and as of the Closing Dates by the
24
Company with its covenants and agreements herein contained and other provisions
hereof to be satisfied at or prior to the Closing Dates, and to the following
additional conditions:
(a) The Registration Statement shall have become effective and no
stop order suspending the effectiveness thereof shall have been issued and
no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or the Representatives, shall be threatened by the
Commission, and any request for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the reasonable satisfaction
of the Representatives. Any filings of the Prospectus, or any supplement
thereto, required pursuant to Rule 424(b) or Rule 434 of the Rules and
Regulations, shall have been made in the manner and within the time period
required by Rule 424(b) and Rule 434 of the Rules and Regulations, as the
case may be.
(b) The Representatives shall have been satisfied that there shall
not have occurred any change, on a consolidated basis, prior to the Closing
Dates in the condition (financial or otherwise), properties, business,
management, prospects, net worth or results of operations of the Company
and the Founding Companies, or any change in the capital stock, short-term
or long-term debt of the Company and the Founding Companies, taken as a
whole, such that (i) the Registration Statement or the Prospectus, or any
amendment or supplement thereto, contains an untrue statement of fact which
is material, or omits to state a fact which is required to be stated
therein or is necessary to make the statements therein not misleading, or
(ii) it is impracticable in the reasonable judgment of the Representatives
to proceed with the public offering or purchase the Stock as contemplated
hereby.
(c) At the time of execution of this Agreement and at each of the
Closing Dates, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP shall have furnished to the Underwriters
a letter or letters, dated, respectively, the date of execution of this
Agreement and each of the Closing Dates, confirming that they are
independent certified public accountants with respect to the Company and
each of the Founding Companies within the meaning of the Securities Act and
the applicable published Rules and Regulations and based upon the
procedures described in such letter delivered to you concurrently with the
execution of this Agreement (herein called the "Comfort Letter"), but
carried out to a date not more than five (5) business days prior to the
First Closing Date or such later date on which the Option Stock is to be
purchased, as the case may be, (i) confirming, to the extent true, that the
statements and conclusions set forth in the Comfort Letter are accurate as
of the First Closing Date or such later date on which Option Stock is to be
purchased, as the case may be, and (ii) setting forth any revisions and
additions to the
25
statements and conclusions set forth in the Comfort Letter which are necessary
to reflect any changes in the facts described in the Comfort Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not contain any disclosure
relating to any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company or any of the
Founding Companies from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Stock as contemplated by the Prospectus. The Comfort
Letter shall be addressed to or for the use of the Underwriters in form and
substance satisfactory to the Underwriters and shall (i) represent that they are
independent certified public accountants with respect to the Company and each of
the Founding Companies within the meaning of the Act and the applicable
published Rules and Regulations, (ii) set forth their opinion with respect to
their examination of the balance sheet of the Company as of December 31, 1997,
each of the Founding Companies as of the end of their respective fiscal year
ends, and related consolidated statements or operations, shareholders' equity,
and cash flows for the twelve (12) months then ended, (iii) state that, on the
basis of a reading of the pro forma consolidated financial statements and
supplemental pro forma information included in the Registration Statement and
the Prospectus, carrying out certain specified procedures that would not
necessarily reveal matters of significance with respect to the comments set
forth in this clause (iii), inquiries of certain officials of the Company and
the Founding Companies who have responsibility for financial and accounting
matters and proving the arithmetic accuracy of the application of the pro forma
consolidated financial statements and supplemental pro forma information,
nothing came to their attention that caused them to believe that the pro forma
consolidated financial statements and supplemental pro forma information do not
comply in form in all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X or that the pro forma adjustments
have not been properly applied to the historical amounts in the compilation of
such statements and (iv) address other matters agreed upon by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
and you.
26
In addition, you shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP at the time of
execution of this Agreement a letter addressed to the Company and made available
to you for the use of the Underwriters stating that their review of the
Company's system of internal accounting controls, to the extent they deemed
necessary in establishing the scope of their examination of the above financial
statements as of December 31, 1997, did not disclose any weaknesses in internal
controls that they considered to be material weaknesses.
(d) The Representatives shall have received from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ PC,
counsel for the Company, an opinion, dated each of the Effective Date and the
Closing Dates, to the effect set forth in Exhibit I hereto. Counsel rendering
the foregoing opinion may rely as to questions of law not involving the laws of
the United States or the State of New York upon opinions of local counsel, and
as to questions of fact upon representations or certificates of officers of the
Company and/or the Founding Companies, and of government officials, in which
case their opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(e) The Representatives shall have received from Rosenman & Colin LLP,
counsel for the Underwriters, their opinion or opinions dated the Closing Dates
with respect to the incorporation of the Company, the validity of the Stock, the
Registration Statement and the Prospectus and such other related matters as it
may reasonably request, and the Company shall have furnished to such counsel
such documents as they may reasonably request for the purpose of enabling them
to pass upon such matters. In rendering such opinion, Rosenman & Colin LLP may
rely as to all matters governed other than by the laws of New York or federal
laws on the opinion of counsel referred to in paragraph (d) of this Section 8.
(f) The Representatives shall have received a certificate, dated the
Closing Dates, of the chief executive officer or the President and the chief
financial officer of the Company to the effect that:
(i) No stop order suspending the effectiveness of the Registration
Statement has been issued, and, to the best of the knowledge
27
of the signers, no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act;
(ii) Neither any Pre-effective Prospectus, as of its date, nor the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, as of the time when the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, included
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
(iii) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as set forth or
contemplated in the Prospectus, neither the Company nor any of the Founding
Companies has incurred any material liabilities or obligations, direct or
contingent, nor entered into any material transactions not in the ordinary
course of business and there has not been any material adverse change in the
condition (financial or otherwise), properties, business, management, prospects,
net worth or results of operations of the Company and the Founding Companies, or
any change in the capital stock, short-term or long-term debt of the Company and
any of the Founding Companies;
(iv) The representations and warranties of the Company in this Agreement
are true and correct at and as of the Closing Dates, and the Company has
complied with all the agreements and performed or satisfied all the conditions
on its part to be performed or satisfied at or prior to the Closing Dates; and
(v) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, and except as disclosed in or
contemplated by the Prospectus, (i) there has not been any material adverse
change or a development involving a material adverse change in the condition
(financial or otherwise), properties, business, management, prospects, net worth
or results of operations of the Company and the Founding Companies considered as
a whole; (ii) the business and operations conducted by the Company and the
Founding Companies have not sustained a loss by strike, fire, flood, accident or
other calamity (whether or not insured) of such a character as to interfere
materially with the conduct of the business and operations of the Company and
the Founding Companies considered as a whole; (iii) no legal or governmental
28
action, suit or proceeding is pending or, to the knowledge of the Company,
threatened against the Company or any of the Founding Companies which is
material to the Company and the Founding Companies considered as a whole,
whether or not arising from transactions in the ordinary course of
business, or which may materially and adversely affect the transactions
contemplated by this Agreement; (iv) since such dates and except as so
disclosed, the Company has not incurred any material liability or
obligation, direct, contingent or indirect, made any change in its capital
stock (except pursuant to its stock plans), made any material change in its
short-term or funded debt or repurchased or otherwise acquired any of the
Company's capital stock; and (v) the Company has not declared or paid any
dividend, or made any other distribution, upon its outstanding capital
stock payable to stockholders of record on a date prior to the Closing
Dates.
(g) The Company shall have furnished to the Representatives such
additional certificates as the Representatives may have reasonably requested as
to the accuracy, at and as of the Closing Dates, of the representations and
warranties made herein by it and as to compliance at and as of the Closing
Dates by it with its covenants and agreements herein contained and other
provisions hereof to be satisfied at or prior to the Closing Dates, and as to
satisfaction of the other conditions to the obligations of the Underwriters
hereunder.
(h) Ladenburg shall have received the written agreements of the officers,
directors, director nominees of the Company and the holders of securities of the
Company listed in Schedule B that each will not offer, sell, assign, transfer,
encumber, contract to sell, grant an option to purchase or otherwise dispose of,
any of Common Stock (including, without limitation, Common Stock which may be
deemed to be beneficially owned by such officer, director, director nominee or
holder in accordance with the Rules and Regulations) or securities convertible
into or exercisable or exchangeable for Common Stock during the 180 days
following the date of the Prospectus.
(i) The Nasdaq National Market shall have approved the Stock for
inclusion, subject only to notice of effectiveness.
(j) The Founding Company Reorganization shall have been consummated as of
the Effective Date on the terms set forth in the Registration Statement. All
opinions, certificates, letters and other documents will be in compliance with
the provisions hereunder only if they are satisfactory in form and substance to
the Representatives. The Company will furnish to the Representatives conformed
copies of such opinions, certificates, letters and other
29
documents as the Representatives shall reasonably request. If any of the
conditions hereinabove provided for in this Section 8 shall not have
been satisfied when and as required by this Agreement, this Agreement
may be terminated by the Representatives by notifying the Company of
such termination in writing or by telegram at or prior to the Closing
Dates, but Ladenburg shall be entitled to waive any of such conditions.
(k) Ladenburg shall have received, in form and substance
satisfactory to Ladenburg, opinions of counsel from each of ▇▇▇▇▇▇▇▇,
Hertan & Ives, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇.
9. Effective Date. This Agreement shall become effective
--------------
immediately as to Sections 5, 6, 7, 9, 10, 11, 13, 14, 15, 16, 17, 18 and 19
and, as to all other provisions, at 11:00 A.M. New York City time on the first
full business day following the effectiveness of the Registration Statement or
at such earlier time after the Registration Statement becomes effective as the
Representatives may determine on and by notice to the Company or by release of
any of the Stock for sale to the public. For the purposes of this Section 9, the
Stock shall be deemed to have been so released upon the release for publication
of any newspaper advertisement relating to the Stock or upon the release by you
of telegrams (i) advising Underwriters that the shares of Stock are released for
public offering or (ii) offering the Stock for sale to securities dealers,
whichever may occur first.
10. Termination. This Agreement (except for the provisions of
-----------
Section 5) may be terminated by the Company at any time before it becomes
effective in accordance with Section 9 by notice to the Representatives and may
be terminated by the Representatives at any time before it becomes effective in
accordance with Section 9 by notice to the Company. In the event of any
termination of this Agreement under this or any other provision of this
Agreement, there shall be no liability of any party to this Agreement to any
other party, other than as provided in Sections 5, 6 and 11 and other than as
provided in Section 12 as to the liability of defaulting Underwriters.
This Agreement may be terminated after it becomes effective by the
Representatives by notice to the Company (i) if at or prior to any First Closing
Date trading in securities on any of the New York Stock Exchange, American Stock
Exchange or Nasdaq National Market shall have been suspended or minimum or
maximum prices shall have been
30
established and are then currently in effect on any such exchange or market, or
a banking moratorium shall have been declared by New York or United States
authorities; (ii) trading of any securities of the Company shall have been
suspended on any exchange or in any over-the-counter market; (iii) if at or
prior to any Closing Date there shall have been (A) an outbreak or escalation
of hostilities between the United States and any foreign power or of any other
insurrection or armed conflict involving the United States or (B) any change in
financial markets or any calamity or crisis which, in the reasonable judgement
of the Representatives, makes it impractical or inadvisable to offer or sell the
Firm Stock on the terms contemplated by the Prospectus; (iv) if there shall have
been any development or prospective development involving particularly the
business or properties or securities of the Company or any of the Founding
Companies or the transactions contemplated by this Agreement which, in the
judgement of the Representatives, makes it impracticable or inadvisable to offer
or deliver the Firm Stock on the terms contemplated by the Prospectus; (v) if
there shall be any litigation or proceeding, pending or threatened, which, in
the reasonable judgment of the Representatives, makes it impracticable or
inadvisable to offer or deliver the Firm Stock on the terms contemplated by the
Prospectus; or (vi) if there shall have occurred any of the events specified in
the immediately preceding clauses (i) - (v) together with any other such event
that makes it, in the reasonable judgement of the Representatives, impractical
or inadvisable to offer or deliver the Firm Stock on the terms contemplated by
the Prospectus.
11. Reimbursement of Underwriters. Notwithstanding any other
-----------------------------
provisions hereof, if this Agreement shall not become effective by reason of any
election of the Company pursuant to the first paragraph of Section 10 or shall
be terminated by the Representatives under Section 8 or Section 10, the Company
will bear and pay the expenses specified in Section 5 hereof and, in addition to
its obligations pursuant to Section 6 hereof, the Company will reimburse the
reasonable out-of-pocket expenses of the several Underwriters (including
reasonable fees and disbursements of counsel for the Underwriters) incurred in
connection with this Agreement and the proposed purchase of the Stock, and
promptly upon demand the Company will pay such amounts to you as
Representatives.
12. Substitution of Underwriters. If on the First Closing Date or the
----------------------------
Option Closing Date, as the case may be, any Underwriter or Underwriters shall
default in its or their obligations to purchase shares of Stock hereunder
(otherwise than by reason of default on the part of the Company), you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 48 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and upon
the terms set forth herein, the shares of Stock which the defaulting Underwriter
or Underwriters failed to purchase. If during such 48 hours you, as such
Representatives, shall not have procured such other Underwriters, or any others,
to purchase the shares of Stock agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of shares which
such defaulting Underwriter or Underwriters agreed but failed to purchase does
not exceed ten percent (10%) of the total number of shares underwritten, the
other Underwriters shall be obligated severally, in
31
proportion to their respective commitments hereunder, to purchase the shares of
Stock which such defaulting Underwriter or Underwriters agreed but failed to
purchase, or (b) if the aggregate number of shares of Stock with respect to
which such default or defaults occur is more than ten percent (10%) of the total
number of shares underwritten, the Company or you, as the Representatives of the
Underwriters, will have the right, by written notice given within the next 48-
hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriters or the Company.
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a defaulting
Underwriter or Underwriters as provided in this Section 12, (i) the Company
shall have the right to postpone the Closing Dates for a period of not more than
five (5) full business days in order that the Company may effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (ii) the respective
numbers of shares to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken as the basis of their underwriting obligation for
all purposes of this Agreement. Nothing herein contained shall relieve any
defaulting Underwriter of its liability to the Company or the other Underwriters
for damages occasioned by its default hereunder. Any termination of this
Agreement pursuant to this Section 12 shall be without liability on the part of
any non-defaulting Underwriter or the Company, except for expenses to be paid or
reimbursed pursuant to Section 5 and except for the provisions of Section 6.
13. Notices. All communications hereunder shall be in writing and, if
-------
sent to the Underwriters shall be mailed, delivered or telegraphed and confirmed
to you, as their Representatives ▇/▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. Inc. at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, attention: ___________________, except
that notices given to an Underwriter pursuant to Section 6 hereof shall be sent
to such Underwriter at the address furnished by the Representatives or, if sent
to the Company, shall be mailed, delivered or telegraphed and confirmed c/o
_________________________.
14. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the several Underwriters, the Company and their respective
successors and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the person or persons, if any, who control any
Underwriter or Underwriters within the meaning of
32
Section 15 of the Securities Act or Section 20 of the Exchange Act, and the
indemnities of the several Underwriters shall also be for the benefit of each
director of the Company, each of its officers who has signed the Registration
Statement and the person or persons, if any, who control the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act.
15. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of New York without giving effect to the
choice of law principles thereof.
16. Authority of the Representatives. In connection with this Agreement,
--------------------------------
you will act for and on behalf of the several Underwriters, and any action taken
under this Agreement by you, as Representatives, or individually as a
Representative, will be binding on all the Underwriters.
17. 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.
18. General. 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.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and the Representatives.
19. Counterparts. This Agreement may be signed in two or more
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
33
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
HAPPY KIDS INC.
By:
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇, Chairman of
the Board, President and
Chief Executive Officer
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, with respect to
Sections 2 and 6 hereof
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, with respect to
Sections 2 and 6 hereof
------------------------------------
▇▇▇▇▇ ▇▇▇▇, with respect
to Sections 2 and 6 hereof
Accepted and delivered in _______________
as of the date first above written.
LADENBURG ▇▇▇▇▇▇▇▇ & CO. INC.
CRUTTENDEN ▇▇▇▇ INCORPORATED
Each acting on its own behalf
and as a Representative of the
several Underwriters referred
to in the foregoing Agreement.
By: Ladenburg ▇▇▇▇▇▇▇▇ & Co. Inc.
By:
--------------------------------------
Name:
Title:
34
SCHEDULE A
Number of
Name Firm Stock to be Purchased
---- --------------------------
Ladenburg ▇▇▇▇▇▇▇▇ & Co. Inc. .........
Cruttenden ▇▇▇▇ Incorporated .........
----------------------------
. ................
---------------------
Total ..................................
--------
======
A-1
SCHEDULE B
List of Officers, Directors, and 1% Shareholders
Subject to Lock Up Provision
B-1
EXHIBIT I
Matters to be covered in
------------------------
opinion of Counsel to the Company/1/
------------------------------------
1. The Company is validly existing as a corporation in good standing
under the laws of the State of New York; each of the Founding Companies is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation;
2. The Company has all corporate power and authority necessary to own or
hold its properties and to conduct its business (including, without limitation,
as conducted through the Founding Companies) as described in the Prospectus;
each of the Founding Companies has all corporate power and authority necessary
to own or hold its properties and to conduct their respective businesses as
described in the Prospectus;
3. The Company and each of the Founding Companies is duly qualified to
do business and is in good standing as a foreign corporation in each of the
jurisdictions set forth on a Schedule to the opinion; to such counsel's
knowledge, the Company does not own or control, and immediately after the
consummation of the Founding Company Reorganization will not own or control,
directly or indirectly, any corporation, association or other entity other than
the Founding Companies and to such counsel's knowledge none of the Founding
Companies owns or controls, directly or indirectly, any corporation, association
or other entity;
4. The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated therein, have not been issued in violation of or subject to any
statutory pre-emptive right, and, to such counsel's knowledge, have not been
issued in violation of or subject to any contractual preemptive right, co-sale
right, registration right, right of first refusal or other similar right and,
except as set forth in the Registration Statement, to such counsel's knowledge,
there are no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in the Company, have not been issued in violation of or subject
to any statutory pre-emptive right, and, to such counsel's knowledge, have not
been issued in violation of or subject to any contractual preemptive right, co-
sale right, registration right, right of first refusal or other similar right;
based solely on a review of stock ledgers and relying upon such ledgers to be
complete, true and accurate, all the issued and outstanding shares of capital
stock of each of the Founding Companies are owned of record and beneficially by
the Company, free and clear of any security interests, liens, encumbrances,
equities or other claims and there are no outstanding rights, warrants or
options
---------------------------
/1/ Capitalized terms used herein but not defined shall have the meanings given
such terms in the Underwriting Agreement.
Exhibit I-1
to acquire, or instruments convertible into or exchangeable for, any shares of
capital stock or other equity interest in any of the Founding Companies;
5. The Stock has been duly and validly authorized by the Company for
issuance, and the Company has full corporate power and authority to issue, sell
and deliver the Stock, and, when the Stock is issued and delivered against
payment therefor in accordance with the terms hereof, they will be fully paid
and nonassessable, and will not have been issued in violation of or subject to
any statutory preemptive right, or to such counsel's knowledge, any contractual
preemptive right, co-sale right, registration right, right of first refusal or
other similar right; and there are no restrictions upon the voting or transfer
of any of the Stock pursuant to the Certificate of Incorporation (as
hereinafter defined) or By-laws, or pursuant to any agreement or other
instrument of the Company known to such counsel.
6. To such counsel's knowledge, except as set forth in the Prospectus,
there are no legal or governmental proceedings pending to which the Company or
any of the Founding Companies is a party or of which any property or assets of
the Company or any of the Founding Companies is the subject which, if determined
adversely to the Company or any of the Founding Companies, could have a Material
Adverse Effect or prevent or adversely affect the transactions contemplated by
the Underwriting Agreement; and, to such counsel's knowledge, no such
proceedings are threatened by governmental authorities or other third parties.
7. This Agreement has been duly and validly authorized by all necessary
corporate action on the part of the Company and has been duly executed and
delivered by the Company and, assuming due authorization, execution and delivery
of this Agreement by you, is a valid and binding agreement of the parties; the
Company has full corporate power and authority to enter into this Agreement and
into the Securities Purchase Agreement.
8. The capital stock issued by the Company in the Founding Company
Reorganization is exempt from the registration requirements of the Securities
Act.
9. The execution, delivery and performance of the Underwriting Agreement,
and the consummation of the transactions therein contemplated will not result
(and in the case of the Founding Company Reorganization did not result), with or
without due notice or lapse of time or both, in a breach or violation of any of
the terms or provisions of or constitute a default under, or give rise to any
right of termination, cancellation or acceleration under, the Company's Amended
and Restated Certificate of Incorporation (the "Certificate of Incorporation"),
by-laws or other organizational documents of the Company or any of the Founding
Companies, or any material indenture, mortgage, deed of trust, note agreement
or, except for the Company's License Agreement with [Disney], other agreement or
instrument known to such counsel to which the Company or any of the Founding
Companies is a party or by which it or any of them or any of their properties is
or may be bound and will not result in a breach or violation of any law,
statute, order, rule or
Exhibit I-2
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of the Founding Companies or any of their properties or
result in the creation of a lien.
10. To such counsel's knowledge, neither the Company nor any of the
Founding Companies is presently (a) in violation of their respective charter or
by-laws, or (b), to such counsel's knowledge, in breach or default under any
lease, instrument, license, permit or any other agreement to which the Company
or any of the Founding Companies is bound or to which any property or assets of
the Company or any of the Founding Companies is the subject, where the
consequences of such violation, breach or default would have a Material Adverse
Effect;
11. No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company of
the transactions contemplated by the Underwriting Agreement (including without
limitation the Founding Company Reorganization) (except such as may be required
by the NASD or as required by the securities or "Blue Sky" laws of any
jurisdiction as to which such counsel need express no opinion) in connection
with the purchase and distribution of the Stock by the Underwriters except such
as have been obtained or made, specifying the same.
12. The Registration Statement has become effective under the
Securities Act and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding for that purpose is pending or threatened by the Commission.
13. The Registration Statement and the Prospectus and any amendments
or supplements thereto (except for the financial statements and notes thereto
and related schedules and other financial information as to which such counsel
need express no opinion) comply as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations.
14. There are no contracts, agreements or other documents, known to
such counsel, required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement which is
not described or filed therein as required. All descriptions of any such
contracts, agreements or documents contained in the Registration Statement are
accurate and complete descriptions of such documents in all material respects.
15. The statements in the Prospectus under the captions
"Management-Employment Agreements," -- "1997 Stock Option Plan," "Description of
Capital Stock" and "Shares Eligible for Future Sale," to the extent they
constitute a summary of documents referred to therein or matters of law
accurately summarize and fairly present in all material respects the legal and
regulatory matters described therein.
Exhibit I-3
16. Neither the Company nor any of the Founding Companies is an
"investment company," or an entity "controlled" by an "investment company"
required to be registered under the 1940 Act, as such terms are defined in the
1940 Act.
17. To such counsel's knowledge, except as set forth in the
Registration Statement and the Prospectus, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, to cause
the Company to sell or otherwise issue to such person, or to permit such person
to underwrite the sale of, any of the Stock or the right to have any Common
Stock or other securities of the Company included in the Registration Statement
or the right, as a result of the filing of the Registration Statement, to
require registration under the Securities Act of any shares of Common Stock or
other securities of the Company that has not been waived or lapsed.
18. The Company and each of the Founding Companies possesses all
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from, and have made all declarations and filings with, all
regulatory or governmental officials, bodies and tribunals ("Permits") to own,
lease or operate their respective properties and to conduct their respective
businesses described in the Registration Statement and the Prospectus, except
where the failure to have obtained or made the same would not have a Material
Adverse Effect and to the knowledge of such counsel neither the Company nor any
of the Founding Companies has received any notice of proceedings relating to the
revocation or modification of any such Permits.
19. The Company and each of the Founding Companies owns, and/or
possesses adequate rights to use, free and clear of all liens, charges,
encumbrances, pledges, security interests or defects, all patents, trademarks,
service marks, logos, trade names, trade secrets, know how, copyrights,
proprietary technology and licenses, and rights with respect to the foregoing
(collectively, "Intellectual Property"), used in the conduct of their respective
businesses as described in the Registration Statement and the Prospectus, and to
the knowledge of such counsel neither the Company nor any of the Founding
Companies has received a notice, or knows of any basis, of any infringement of
or conflict with the asserted rights of others in any such respect.
Exhibit I-4
20. To the knowledge of such counsel the Company and each of the
Founding Companies is in compliance with, and conducts its business in
conformity with, all applicable federal, state, local and foreign laws, rules
and regulations of each court or governmental agency or body having jurisdiction
over the Company or any of the Founding Companies, except where the failure to
be in compliance would not have a Material Adverse Effect; to the knowledge of
such counsel, otherwise than as set forth in the Registration Statement and the
Prospectus, no prospective change in any of such federal or state laws, rules or
regulations has been adopted which, when made effective, would have a Material
Adverse Effect.
21. To the knowledge of such counsel, neither the Company nor any
of the Founding Companies is in violation of its respective charter or by-laws.
To the knowledge of such counsel,the Company and each of the Founding Companies
has performed all obligations required to be performed by the Company or any
such Founding Company under any material license, indenture, mortgage, deed of
trust, note agreement or other agreement or instrument known to such counsel to
which it is a party or by which it is or any of its properties may be bound, and
neither the Company nor any of the Founding Companies, nor to the knowledge of
such counsel, any other party to such material license, indenture, mortgage deed
of trust, note agreement or other agreement or instrument is in default under or
in breach of any such obligations. To the knowledge of such counsel, neither the
Company nor any of the Founding Companies has received or sent any notice of
such default or breach.
22. The Stock has been duly approved for quotation on the Nasdaq
National Market, subject to notice of effectiveness.
23. All conditions to the consummation of the Founding Company
Reorganization have been satisfied, and the Founding Company Reorganization
has been consummated as described in the Registration Statement.
In addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement or any amendment
thereto, as to the time it became effective under the Securities Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Securities Act), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or (ii) that the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the First Closing Date or the Option Closing
Date, as the case may be, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading (expect that such counsel need express no view as
to financial statements and notes thereto and schedules or other financial or
statistical information therein). With respect to such statement, such counsel
Exhibit I-5
may state that their belief is based upon the procedures set forth therein, but
is without independent check and verification.
Exhibit I-6