[Draft of _____________, 1997]
_______________ Shares
ACTION PERFORMANCE COMPANIES, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
Dated [___]
TABLE OF CONTENTS
Section 1. Representations and Warranties of the Company..................................6
A. Representations and Warranties of the Company..........................................6
Compliance with Registration Requirements.........................................6
Offering Materials Furnished to Underwriters......................................7
Distribution of Offering Material by the Company..................................7
The Underwriting Agreement........................................................7
Authorization of the Common Shares................................................7
No Applicable Registration or Other Similar Rights................................7
No Material Adverse Change........................................................8
Independent Accountants...........................................................8
Preparation of the Financial Statements...........................................8
Incorporation and Good Standing of the Company and its Subsidiaries...............8
Capitalization and Other Capital Stock Matters....................................9
Stock Exchange Listing............................................................9
Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required................................................................9
No Material Actions or Proceedings................................................10
Intellectual Property Rights......................................................10
All Necessary Permits, Etc........................................................11
Title to Properties...............................................................11
Tax Law Compliance................................................................11
Company Not an "Investment Company"...............................................11
Insurance.........................................................................11
No Price Stabilization or Manipulation............................................12
Related Party Transactions........................................................12
No Unlawful Contributions or Other Payments.......................................12
Company's Accounting System.......................................................12
Exchange Act Compliance...........................................................12
Compliance with Environmental Laws................................................13
ERISA Compliance..................................................................13
B. Representations and Warranties of the Selling Shareholders.............................14
The Underwriting Agreement........................................................14
The Custody Agreement and Power of Attorney.......................................14
Title to Common Shares to be Sold; All Authorizations Obtained....................15
Delivery of the Common Shares to be Sold..........................................15
Non-Contravention; No Further Authorizations or Approvals Required................15
No Registration or Other Similar Rights...........................................15
No Further Consents, Etc..........................................................15
2
Disclosure Made by Such Selling Shareholder in the Prospectus.....................16
No Price Stabilization or Manipulation............................................16
Confirmation of Company Representations and Warranties............................16
Section 2. Purchase, Sale and Delivery of the Common Shares...............................16
The Firm Common Shares............................................................16
The First Closing Date............................................................17
The Optional Common Shares; The Second Closing Date...............................17
Public Offering of the Common Shares..............................................18
Payment for the Common Shares.....................................................18
Delivery of the Common Shares.....................................................18
Delivery of Prospectus to the Underwriters........................................19
Section 3. Additional Covenants of the Company............................................19
A. Covenants of the Company...............................................................19
Underwriters' Review of Proposed Amendments and Supplements.......................19
Securities Act Compliance.........................................................19
Amendments and Supplements to the Prospectus and Other
Securities Act Matters............................................................20
Copies of Any Amendments and Supplements to the Prospectus........................20
Blue Sky Compliance...............................................................20
Use Of Proceeds...................................................................20
Transfer Agent....................................................................20
Earnings Statement................................................................21
Periodic Reporting Obligations....................................................21
Agreement Not to Offer or Sell Additional Securities..............................21
Future Reports to the Underwriters................................................21
Exchange Act Compliance...........................................................21
B. Covenants of the Selling Shareholders..................................................22
Agreement Not to Offer or Sell Additional Securities..............................22
Delivery of Forms W-8 and W-9....................................................22
Section 4. Payment of Expenses............................................................22
Section 5. Conditions of the Obligations of the Underwriters..............................23
Accountants' Comfort Letter.......................................................23
Compliance with Registration Requirements;
No Stop Order; No Objection from NASD.............................................24
No Material Adverse Change or Ratings Agency Change...............................24
Opinion of Counsel for the Company................................................24
3
Opinion of Counsel for the Underwriters...........................................25
Officers' Certificate.............................................................25
Bring-Down Comfort Letter.........................................................25
Opinion of Counsel for the Selling Shareholders...................................25
Selling Shareholders' Certificate.................................................26
Selling Shareholders' Documents...................................................26
Lock-Up Agreement from Certain Shareholders of the Company Other Than
Selling Shareholders..............................................................26
Additional Documents..............................................................26
Section 6. Reimbursement of Underwriters' Expenses........................................27
Section 7. Effectiveness of this Agreement................................................27
Section 8. Indemnification................................................................27
Indemnification of the Underwriters...............................................27
Indemnification of the Company, its Directors and Officers........................29
Notifications and Other Indemnification Procedures................................29
Settlements.......................................................................30
Section 9. Contribution..................................................................31
Section 10. Default of One or More of the Several Underwriters............................32
Section 11. Termination of this Agreement.................................................33
Section 12. Representations and Indemnities to Survive Delivery...........................33
Section 13. Notices.......................................................................34
Section 14. Successors....................................................................34
Section 15. Partial Unenforceability......................................................35
Section 16. Governing Law Provisions......................................................35
Consent to Jurisdiction...........................................................35
Waiver of Immunity................................................................35
Section 17. Failure of One or More of the Selling Shareholders to Sell and Deliver
Common Shares.....................................................................36
Section 18. General Provisions............................................................36
4
UNDERWRITING AGREEMENT
[________, 1997]
▇▇▇▇▇▇▇▇▇▇ SECURITIES
ADVEST, INCORPORATED
INTERSTATE/▇▇▇▇▇▇▇ LANE CORPORATION
c/▇ ▇▇▇▇▇▇▇▇▇▇ SECURITIES
▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Introductory. Action Performance Companies, Inc., an Arizona
corporation (the "Company"), proposes to issue and sell to the several
underwriters named in Schedule A (the "Underwriters") an aggregate of [___]
shares of its Common Stock, par value $.01 per share (the "Common Stock"); and
the shareholders of the Company named in Schedule B (collectively, the "Selling
Shareholders") severally propose to sell to the Underwriters an aggregate of
[___] shares of Common Stock. The [___] shares of Common Stock to be sold by the
Company and the [___] shares of Common Stock to be sold by the Selling
Shareholders are collectively called the "Firm Common Shares". In addition, the
Company has granted to the Underwriters an option to purchase up to an
additional [___] shares (the "Optional Common Shares") of Common Stock, as
provided in Section 2.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(File No. 333-[___]), which contains a form of prospectus to be used in
connection with the public offering and sale of the Common Shares. Such
registration statement, as amended, including the financial statements, exhibits
and schedules thereto, in the form in which it was declared effective by the
Commission under the Securities Act of 1933 and the rules and regulations
promulgated thereunder (collectively, the "Securities Act"), including all
documents incorporated or deemed to be incorporated by reference therein and any
information deemed to be a part thereof at the time of effectiveness pursuant to
Rule 430A or Rule 434 under the Securities Act or the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder (collectively, the
"Exchange Act"), is called the "Registration Statement." Any registration
statement filed by the Company pursuant to Rule 462(b) under the Securities Act
is called the "Rule 462(b) Registration Statement," and from and after the date
and time of filing of the Rule 462(b) Registration Statement the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
Such prospectus, in the form first used by the Underwriters to confirm sales of
the Common Shares, is called the "Prospectus;" provided, however, if the Company
has, with the consent of ▇▇▇▇▇▇▇▇▇▇ Securities, elected to rely upon Rule 434
under the Securities Act, the term "Prospectus" shall mean the Company's
prospectus subject to completion (each, a "preliminary prospectus") dated [___]
(such preliminary prospectus
5
is called the "Rule 434 preliminary prospectus"), together with the applicable
term sheet (the "Term Sheet") prepared and filed by the Company with the
Commission under Rules 434 and 424(b) under the Securities Act and all
references in this Agreement to the date of the Prospectus shall mean the date
of the Term Sheet. All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, a preliminary prospectus, the
Prospectus or the Term Sheet, or any amendments or supplements to any of the
foregoing, shall include any copy thereof filed with the Commission pursuant to
its Electronic Data Gathering, Analysis and Retrieval System ("▇▇▇▇▇"). All
references in this Agreement to financial statements and schedules and other
information which is "contained," "included" or "stated" in the Registration
Statement or the Prospectus (and all other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be; and all references
in this Agreement to amendments or supplements to the Registration Statement or
the Prospectus shall be deemed to mean and include the filing of any document
under the Exchange Act which is or is deemed to be incorporated by reference in
the Registration Statement or the Prospectus, as the case may be.
The Company and each of the Selling Shareholders hereby
confirms their respective agreements with the Underwriters as follows:
Section 1. Representations and Warranties of the Company.
A. Representations and Warranties of the Company. The Company hereby
represents, warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The
Registration Statement and any Rule 462(b) Registration Statement have been
declared effective by the Commission under the Securities Act. The Company
has complied to the Commission's satisfaction with all requests of the
Commission for additional or supplemental information. No stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement is in effect and no proceedings for such
purpose have been instituted or are pending or, to the best knowledge of
the Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed
complied in all material respects with the Securities Act and, if filed by
electronic transmission pursuant to ▇▇▇▇▇ (except as may be permitted by
Regulation S-T under the Securities Act), was identical to the copy thereof
delivered to the Underwriters for use in connection with the offer and sale
of the Common Shares. Each of the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendment thereto, at the
time it became effective and at all subsequent times, complied and will
comply in all material respects with the Securities Act and did not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, as amended or
supplemented, as of its date and at all subsequent times,
6
did not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The representations and warranties set forth in the two
immediately preceding sentences do not apply to statements in or omissions
from the Registration Statement, any Rule 462(b) Registration Statement, or
any post-effective amendment thereto, or the Prospectus, or any amendments
or supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing
by the Underwriters expressly for use therein. There are no contracts or
other documents required to be described in the Prospectus or to be filed
as exhibits to the Registration Statement which have not been described or
filed as required.
(b) Offering Materials Furnished to Underwriters. The Company
has delivered to the Underwriters three complete manually signed copies of
the Registration Statement and of each consent and certificate of experts
filed as a part thereof, and conformed copies of the Registration Statement
(without exhibits) and preliminary prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as the
Underwriters have reasonably requested for each of the Underwriters.
(c) Distribution of Offering Material by the Company. The
Company has not distributed and will not distribute, prior to the later of
the Second Closing Date (as defined below) and the completion of the
Underwriters' distribution of the Common Shares, any offering material in
connection with the offering and sale of the Common Shares other than a
preliminary prospectus, the Prospectus or the Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, except as rights
to indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(e) Authorization of the Common Shares. The Common Shares to
be purchased by the Underwriters from the Company have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and
delivered by the Company pursuant to this Agreement, will be validly
issued, fully paid and nonassessable.
(f) No Applicable Registration or Other Similar Rights. There
are no persons with registration or other similar rights to have any equity
or debt securities registered for sale under the Registration Statement or
included in the offering contemplated by this Agreement, other than the
Selling Shareholders with respect to the Common Shares included in the
Registration Statement, except for such rights as have been duly waived.
7
(g) No Material Adverse Change. Except as otherwise disclosed
in the Prospectus, subsequent to the respective dates as of which
information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects, whether
or not arising from transactions in the ordinary course of business, of the
Company and its subsidiaries, considered as one entity (any such change is
called a "Material Adverse Change"); (ii) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or
obligation, indirect, direct or contingent, not in the ordinary course of
business nor entered into any material transaction or agreement not in the
ordinary course of business; and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company or, except
for dividends paid to the Company or other subsidiaries, any of its
subsidiaries on any class of capital stock or repurchase or redemption by
the Company or any of its subsidiaries of any class of capital stock.
(h) Independent Accountants. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who have
expressed their opinion with respect to the financial statements (which
term as used in this Agreement includes the related notes thereto) filed
with the Commission as a part of the Registration Statement and included in
the Prospectus, are independent public or certified public accountants as
required by the Securities Act and the Exchange Act.
(i) Preparation of the Financial Statements. The financial
statements filed with the Commission as a part of the Registration
Statement and included in the Prospectus present fairly the consolidated
financial position of the Company and its subsidiaries as of and at the
dates indicated and the results of their operations and cash flows for the
periods specified. Such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as may be
expressly stated in the related notes thereto. No other financial
statements or supporting schedules are required to be included in the
Registration Statement. The financial data set forth in the Prospectus
under the captions "Prospectus Summary--Summary Consolidated Financial
Data," "Selected Consolidated Financial Data" and "Capitalization" fairly
present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration
Statement.
(j) Incorporation and Good Standing of the Company and its
Subsidiaries. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation and has corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus and, in the case of the
Company, to enter into and perform its obligations under this Agreement.
Each of the Company and each subsidiary is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of
8
property or the conduct of business, except for such jurisdictions where
the failure to so qualify or to be in good standing would not, individually
or in the aggregate, result in a Material Adverse Change. All of the issued
and outstanding capital stock of each subsidiary has been duly authorized
and validly issued, is fully paid and nonassessable and is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance or claim. The Company does
not own or control, directly or indirectly, any corporation, association or
other entity other than the subsidiaries listed in Exhibit 22 to the
[Company's Annual Report on Form 10 K for the fiscal year ended [_____],
19[__]].
(k) Capitalization and Other Capital Stock Matters. The
authorized, issued and outstanding capital stock of the Company is as set
forth in the Prospectus under the caption "Capitalization" (other than for
subsequent issuances, if any, pursuant to employee benefit plans described
in the Prospectus or upon exercise of outstanding options described in the
Prospectus). The Common Stock (including the Common Shares) conforms in all
material respects to the description thereof contained in the Prospectus.
All of the issued and outstanding shares of Common Stock (including the
shares of Common Stock owned by Selling Shareholders) have been duly
authorized and validly issued, are fully paid and nonassessable and have
been issued in compliance with federal and state securities laws. None of
the outstanding shares of Common Stock were issued in violation of any
preemptive rights, rights of first refusal or other similar rights to
subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of
first refusal or other rights to purchase, or equity or debt securities
convertible into or exchangeable or exercisable for, any capital stock of
the Company or any of its subsidiaries other than those accurately
described in the Prospectus. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, set forth in the Prospectus accurately and
fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights.
(l) Stock Exchange Listing. The Common Stock (including the
Common Shares) is registered pursuant to Section 12(g) of the Exchange Act
and is listed on the Nasdaq National Market, and the Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the
Common Stock from the Nasdaq National Market, nor has the Company received
any notification that the Commission or the National Association of
Securities Dealers, Inc. (the "NASD") is contemplating terminating such
registration or listing.
(m) Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default
(or, with the giving of notice or lapse of time, would be in default)
("Default") under any indenture, mortgage, loan or credit agreement, note,
contract, franchise, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be bound
(including, without limitation, the Company's 8.05%
9
Senior Notes due January 2, 1999 and Revolving Credit Facility with First
Union National Bank of North Carolina, as lender), or to which any of the
property or assets of the Company or any of its subsidiaries is subject
(each, an "Existing Instrument"), except for such Defaults as would not,
individually or in the aggregate, result in a Material Adverse Change. The
Company's execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby and by the Prospectus
(i) have been duly authorized by all necessary corporate action and will
not result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary, (ii) will not conflict with or constitute a
breach of, or Default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries pursuant to, or require the consent of any other
part to, any Existing Instrument, except for such conflicts, breaches,
Defaults, liens, charges or encumbrances as would not, individually or in
the aggregate, result in a Material Adverse Change and (iii) will not
result in any violation of any law, administrative regulation or
administrative or court decree applicable to the Company or any subsidiary.
No consent, approval, authorization or other order of, or registration or
filing with, any court or other governmental or regulatory authority or
agency, is required for the Company's execution, delivery and performance
of this Agreement and consummation of the transactions contemplated hereby
and by the Prospectus, except such as have been obtained or made by the
Company and are in full force and effect under the Securities Act,
applicable state securities or blue sky laws and from the NASD. As used
herein, a "Debt Repayment Triggering Event" means any event or condition
which gives, or with the giving of notice or lapse of time would give, the
holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any of its subsidiaries.
(n) No Material Actions or Proceedings. Except as otherwise
disclosed in the Prospectus, there are no legal or governmental actions,
suits or proceedings pending or, to the best of the Company's knowledge,
threatened (i) against or affecting the Company or any of its subsidiaries,
(ii) which has as the subject thereof any officer or director of, or
property owned or leased by, the Company or any of its subsidiaries or
(iii) relating to environmental or discrimination matters, where in any
such case (A) there is a reasonable possibility that such action, suit or
proceeding might be determined adversely to the Company or such subsidiary
and (B) any such action, suit or proceeding, if so determined adversely,
would reasonably be expected to result in a Material Adverse Change or
adversely affect the consummation of the transactions contemplated by this
Agreement. No material labor dispute with the employees of the Company or
any of its subsidiaries, or with the employees of any principal supplier of
the Company, exists or, to the best of the Company's knowledge, is
threatened or imminent.
(o) Intellectual Property Rights. Except as otherwise
disclosed in the Prospectus, the Company and its subsidiaries own or
possess sufficient trademarks, trade names, patent rights, copyrights,
licenses, approvals, trade secrets and other similar rights (collectively,
"Intellectual Property Rights") reasonably necessary to
10
conduct their businesses as now conducted; and the expected expiration of
any of such Intellectual Property Rights would not result in a Material
Adverse Change. Neither the Company nor any of its subsidiaries has
received any notice of infringement or conflict with asserted Intellectual
Property Rights of others, which infringement or conflict, if the subject
of an unfavorable decision, would result in a Material Adverse Change.
(p) All Necessary Permits, Etc. The Company and each
subsidiary possess such valid and current certificates, authorizations or
permits issued by the appropriate state, federal or foreign regulatory
agencies or bodies necessary to conduct their respective businesses, and
neither the Company nor any subsidiary has received any notice of
proceedings relating to the revocation or modification of, or
non-compliance with, any such certificate, authorization or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could result in a Material Adverse Change.
(q) Title to Properties. The Company and each of its
subsidiaries has good and marketable title to all the properties and assets
reflected as owned in the financial statements referred to in Section 1 (A)
(i) above (or elsewhere in the Prospectus), in each case free and clear of
any security interests, mortgages, liens, encumbrances, equities, claims
and other defects, except such as do not materially and adversely affect
the value of such property and do not materially interfere with the use
made or proposed to be made of such property by the Company or such
subsidiary. The real property, improvements, equipment and personal
property held under lease by the Company or any subsidiary are held under
valid and enforceable leases, with such exceptions as are not material and
do not materially interfere with the use made or proposed to be made of
such real property, improvements, equipment or personal property by the
Company or such subsidiary.
(r) Tax Law Compliance. The Company and its consolidated
subsidiaries have filed all necessary federal, state and foreign income and
franchise tax returns or have properly requested extensions thereof and
have paid all taxes required to be paid by any of them and, if due and
payable, any related or similar assessment, fine or penalty levied against
any of them. The Company has made adequate charges, accruals and reserves
in the applicable financial statements referred to in Section 1 (A) (i)
above in respect of all federal, state and foreign income and franchise
taxes for all periods as to which the tax liability of the Company or any
of its consolidated subsidiaries has not been finally determined.
(s) Company Not an "Investment Company." The Company has been
advised of the rules and requirements under the Investment Company Act of
1940, as amended (the "Investment Company Act"). The Company is not, and
after receipt of payment for the Common Shares will not be, an "investment
company" within the meaning of Investment Company Act and will conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(t) Insurance. Each of the Company and its subsidiaries are
insured
11
by recognized, financially sound and reputable institutions with policies
in such amounts and with such deductibles and covering such risks as are
generally deemed adequate and customary for their businesses including, but
not limited to, policies covering real and personal property owned or
leased by the Company and its subsidiaries against theft, damage,
destruction, acts of vandalism and earthquakes. The Company has no reason
to believe that it or any subsidiary will not be able (i) to renew its
existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that
would not result in a Material Adverse Change. Neither of the Company nor
any subsidiary has been denied any insurance coverage which it has sought
or for which it has applied.
(u) No Price Stabilization or Manipulation. The Company has
not taken and will not take, directly or indirectly, any action designed to
or that might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or
resale of the Common Shares.
(v) Related Party Transactions. There are no business
relationships or related-party transactions involving the Company or any
subsidiary or any other person required to be described in the Prospectus
which have not been described as required.
(w) No Unlawful Contributions or Other Payments. Neither the
Company nor any of its subsidiaries nor, to the best of the Company's
knowledge, any employee or agent of the Company or any subsidiary, has made
any contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the
character required to be disclosed in the Prospectus.
(x) Company's Accounting System. The Company maintains a
system of accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to
maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
(y) Exchange Act Compliance. The documents incorporated or
deemed to be incorporated by reference in the Prospectus, at the time they
were or hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the Exchange Act, and,
when read together with the other information in the Prospectus, at the
time the Registration Statement and any amendments thereto become effective
and at the First Closing Date and the Second Closing Date, as the case may
be, will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
12
the fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(z) Compliance with Environmental Laws. Except as otherwise
disclosed in the Prospectus or as would not, individually or in the
aggregate, result in a Material Adverse Change (i) neither the Company nor
any of its subsidiaries is in violation of any federal, state, local or
foreign law or regulation relating to pollution or protection of human
health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products (collectively, "Materials of Environmental Concern"), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environment Concern (collectively, "Environmental Laws"), which violation
includes, but is not limited to, noncompliance with any permits or other
governmental authorizations required for the operation of the business of
the Company or its subsidiaries under applicable Environmental Laws, or
noncompliance with the terms and conditions thereof, nor has the Company or
any of its subsidiaries received any written communication, whether from a
governmental authority, citizens group, employee or otherwise, that alleges
that the Company or any of its subsidiaries is in violation of any
Environmental Law; (ii) there is no claim, action or cause of action filed
with a court or governmental authority, no investigation with respect to
which the Company has received written notice, and no written notice by any
person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental responses costs, natural resources damages,
property damages, personal injuries, attorneys' fees or penalties arising
out of, based on or resulting from the presence, or release into the
environment, of any Material of Environmental Concern at any location
owned, leased or operated by the Company or any of its subsidiaries, now or
in the past (collectively, "Environmental Claims"), pending or, to the best
of the Company's knowledge, threatened against the Company or any of its
subsidiaries or any person or entity whose liability for any Environmental
Claim the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law; and (iii) to the best of the
Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that reasonably could result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim
the Company or any of its subsidiaries has retained or assumed either
contractually or by operation of law.
(aa) ERISA Compliance. The Company and its subsidiaries and
any "employee benefit plan" (as defined under the Employee Retirement
Income Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or
maintained by the Company, its subsidiaries or their "ERISA Affiliates" (as
defined below) are in compliance in all material
13
respects with ERISA. "ERISA Affiliate" means, with respect to the Company
or a subsidiary, any member of any group of organizations described in
Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations thereunder (the
"Code") of which the Company or such subsidiary is a member. No "reportable
event" (as defined under ERISA) has occurred or is reasonably expected to
occur with respect to any "employee benefit plan" established or maintained
by the Company, its subsidiaries or any of their ERISA Affiliates. No
"employee benefit plan" established or maintained by the Company, its
subsidiaries or any of their ERISA Affiliates, if such "employee benefit
plan" were terminated, would have any "amount of unfunded benefit
liabilities" (as defined under ERISA). Neither the Company, its
subsidiaries nor any of their ERISA Affiliates has incurred or reasonably
expects to incur any liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "employee benefit plan" or (ii)
Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their
ERISA Affiliates that is intended to be qualified under Section 401(a) of
the Code is so qualified and nothing has occurred, whether by action or
failure to act, which would cause the loss of such qualification.
Any certificate signed by an officer of the Company and
delivered to the Underwriters or to counsel for the Underwriters shall be deemed
to be a representation and warranty by the Company to each Underwriter as to the
matters set forth therein.
B. Representations and Warranties of the Selling Shareholders. In
addition to the representations, warranties and covenants set forth in Section
1(A), each Selling Shareholder represents, warrants and covenants to each
Underwriter as follows:
(a) The Underwriting Agreement. This Agreement has been duly
authorized, executed and delivered by or on behalf of such Selling
Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights and remedies of creditors or by general equitable principles.
(b) The Custody Agreement and Power of Attorney. Each of the
(i) Custody Agreement signed by such Selling Shareholder and [___], as
custodian (the "Custodian"), relating to the deposit of the Common Shares
to be sold by such Selling Shareholder (the "Custody Agreement") and (ii)
Power of Attorney appointing certain individuals named therein as such
Selling Shareholder's attorneys-in-fact (each, an "Attorney-in-Fact") to
the extent set forth therein relating to the transactions contemplated
hereby and by the Prospectus (the "Power of Attorney"), of such Selling
Shareholder has been duly authorized, executed and delivered by such
Selling Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms, except as rights to
indemnification thereunder may be limited by applicable law and except as
the enforcement thereof
14
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights and remedies of
creditors or by general equitable principles.
(c) Title to Common Shares to be Sold; All Authorizations
Obtained. Such Selling Shareholder has, and on the First Closing Date (as
defined below) will have, good and valid title to all of the Common Shares
which may be sold by such Selling Shareholder pursuant to this Agreement on
such date and the legal right and power, and all authorizations and
approvals required by law and under its charter or by-laws, partnership
agreement, trust agreement or other organizational documents to enter into
this Agreement and its Custody Agreement and Power of Attorney, to sell,
transfer and deliver all of the Common Shares which may be sold by such
Selling Shareholder pursuant to this Agreement and to comply with its other
obligations hereunder and thereunder.
(d) Delivery of the Common Shares to be Sold. Delivery of the
Common Shares which are sold by such Selling Shareholder pursuant to this
Agreement will pass good and valid title to such Common Shares, free and
clear of any security interest, mortgage, pledge, lien, encumbrance or
other claim.
(e) Non-Contravention; No Further Authorizations or Approvals
Required. The execution and delivery by such Selling Shareholder of, and
the performance by such Selling Shareholder of its obligations under, this
Agreement, the Custody Agreement and the Power of Attorney will not
contravene or conflict with, result in a breach of, or constitute a Default
under, or require the consent of any other party to, the charter or
by-laws, partnership agreement, trust agreement or other organizational
documents of such Selling Shareholder or any other agreement or instrument
to which such Selling Shareholder is a party or by which it is bound or
under which it is entitled to any right or benefit, any provision of
applicable law or any judgment, order, decree or regulation applicable to
such Selling Shareholder of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over such
Selling Shareholder. No consent, approval, authorization or other order of,
or registration or filing with, any court or other governmental authority
or agency, is required for the consummation by such Selling Shareholder of
the transactions contemplated in this Agreement, except such as have been
obtained or made and are in full force and effect under the Securities Act,
applicable state securities or blue sky laws and from the NASD.
(f) No Registration or Other Similar Rights. Such Selling
Shareholder does not have any registration or other similar rights to have
any equity or debt securities registered for sale by the Company under the
Registration Statement or included in the offering contemplated by this
Agreement, except for such rights as are described in the Prospectus under
"Shares Eligible for Future Sale."
(g) No Further Consents, Etc. Except for the (i) exercise by
such Selling Shareholder of certain registration rights pursuant to the
Registration Rights
15
Agreement dated as of [___] (which registration rights have been duly
exercised pursuant thereto), (ii) consent of such Selling Shareholder to
the respective number of Common Shares to be sold by all of the Selling
Shareholders pursuant to this Agreement and (iii) waiver by certain other
holders of Common Stock of certain registration rights [pursuant to such
Registration Rights Agreement], no consent, approval or waiver is required
under any instrument or agreement to which such Selling Shareholder is a
party or by which it is bound or under which it is entitled to any right or
benefit, in connection with the offering, sale or purchase by the
Underwriters of any of the Common Shares which may be sold by such Selling
Shareholder under this Agreement or the consummation by such Selling
Shareholder of any of the other transactions contemplated hereby.
(h) Disclosure Made by Such Selling Shareholder in the
Prospectus. All information furnished by or on behalf of such Selling
Shareholder in writing expressly for use in the Registration Statement and
Prospectus is, and on the First Closing Date will be, true, correct, and
complete in all material respects, and does not, and on the First Closing
Date and will not, contain any untrue statement of a material fact or omit
to state any material fact necessary to make such information not
misleading. Such Selling Shareholder confirms as accurate the number of
shares of Common Stock set forth opposite such Selling Shareholder's name
in the Prospectus under the caption "Principal and Selling Shareholders"
(both prior to and after giving effect to the sale of the Common Shares).
(i) No Price Stabilization or Manipulation. Such Selling
Shareholder has not taken and will not take, directly or indirectly, any
action designed to or that might be reasonably expected to cause or result
in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Common Shares.
(j) Confirmation of Company Representations and Warranties.
Such Selling Shareholder has no reason to believe that the representations
and warranties of the Company contained in Section 1(A) hereof are not true
and correct, is familiar with the Registration Statement and the Prospectus
and has no knowledge of any material fact, condition or information not
disclosed in the Registration Statement or the Prospectus which has had or
may have a Material Adverse Effect and is not prompted to sell shares of
Common Stock by any information concerning the Company which is not set
forth in the Registration Statement and the Prospectus.
Any certificate signed by or on behalf of any Selling
Shareholder and delivered to the Underwriters or to counsel for the Underwriters
shall be deemed to be a representation and warranty by such Selling Shareholder
to each Underwriter as to the matters covered thereby.
Section 2. Purchase, Sale and Delivery of the Common Shares.
The Firm Common Shares. Upon the terms herein set forth, (i)
the Company agrees to issue and sell to the several Underwriters an aggregate of
[___] Firm
16
Common Shares and (ii) the Selling Shareholders agree to sell to the several
Underwriters an aggregate of [___] Firm Common Shares, each Selling Shareholder
selling the number of Firm Common Shares set forth opposite such Selling
Shareholder's name on Schedule B. On the basis of the representations,
warranties and agreements herein contained, and upon the terms but subject to
the conditions herein set forth, the Underwriters agree, severally and not
jointly, to purchase from the Company and the Selling Shareholders the
respective number of Firm Common Shares set forth opposite their names on
Schedule A. The purchase price per Firm Common Share to be paid by the several
Underwriters to the Company and the Selling Shareholders shall be $[___] per
share.
The First Closing Date. Delivery of certificates for the Firm
Common Shares to be purchased by the Underwriters and payment therefor shall be
made at the offices of ▇▇▇▇▇▇▇▇▇▇ Securities, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (or such other place as may be agreed to by the Company
and the Underwriters) at 6:00 a.m. San Francisco time, on [___], or such other
time and date not later than 10:30 a.m. San Francisco time on [___] as the
Underwriters shall designate by notice to the Company (the time and date of such
closing are called the "First Closing Date"). The Company and the Selling
Shareholders hereby acknowledge that circumstances under which the Underwriters
may provide notice to postpone the First Closing Date as originally scheduled
include, but are in no way limited to, any determination by the Company, the
Selling Shareholders or the Underwriters to recirculate to the public copies of
an amended or supplemented Prospectus or a delay as contemplated by the
provisions of Section 10.
The Optional Common Shares; The Second Closing Date. In
addition, on the basis of the representations, warranties and agreements herein
contained, and upon the terms but subject to the conditions herein set forth,
the Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of [___] Optional Common Shares
from the Company at the purchase price per share to be paid by the Underwriters
for the Firm Common Shares. The option granted hereunder is for use by the
Underwriters solely in covering any over-allotments in connection with the sale
and distribution of the Firm Common Shares. The option granted hereunder may be
exercised at any time (but not more than once) upon notice by the Underwriters
to the Company, which notice may be given at any time within 30 days from the
date of this Agreement. Such notice shall set forth (i) the aggregate number of
Optional Common Shares as to which the Underwriters are exercising the option,
(ii) the names and denominations in which the certificates for the Optional
Common Shares are to be registered and (iii) the time, date and place at which
such certificates will be delivered (which time and date may be simultaneous
with, but not earlier than, the First Closing Date; and in such case the term
"First Closing Date" shall refer to the time and date of delivery of
certificates for the Firm Common Shares and the Optional Common Shares). Such
time and date of delivery, if subsequent to the First Closing Date, is called
the "Second Closing Date" and shall be determined by the Underwriters and shall
not be earlier than three nor later than five full business days after delivery
of such notice of exercise. If any Optional Common Shares are to be purchased,
each Underwriter agrees, severally and not jointly, to purchase the number of
Optional Common Shares (subject to such adjustments to eliminate fractional
shares as the Underwriters may determine) that
17
bears the same proportion to the total number of Optional Common Shares to be
purchased as the number of Firm Common Shares set forth on Schedule A opposite
the name of such Underwriter bears to the total number of Firm Common Shares.
The Underwriters may cancel the option at any time prior to its expiration by
giving written notice of such cancellation to the Company.
Public Offering of the Common Shares. The Underwriters hereby
advise the Company and the Selling Shareholders that the Underwriters intend to
offer for sale to the public, as described in the Prospectus, their respective
portions of the Common Shares as soon after this Agreement has been executed and
the Registration Statement has been declared effective as the Underwriters, in
their sole judgment, have determined is advisable and practicable.
Payment for the Common Shares. Payment for the Common Shares
to be sold by the Company shall be made at the First Closing Date (and, if
applicable, at the Second Closing Date) by wire transfer of immediately
available funds to the order of the Company. Payment for the Common Shares to be
sold by the Selling Shareholders shall be made at the First Closing Date (and,
if applicable, at the Second Closing Date) by wire transfer of immediately
available funds to the order of the Custodian.
▇▇▇▇▇▇▇▇▇▇ Securities, individually and not as the
representative of the Underwriters, may (but shall not be obligated to) make
payment for any Common Shares to be purchased by any Underwriter whose funds
shall not have been received by ▇▇▇▇▇▇▇▇▇▇ Securities by the First Closing Date
or the Second Closing Date, as the case may be, for the account of such
Underwriter, but any such payment shall not relieve such Underwriter from any of
its obligations under this Agreement.
Each Selling Shareholder hereby agrees that (i) it will pay
all stock transfer taxes, stamp duties and other similar taxes, if any, payable
upon the sale or delivery of the Common Shares to be sold by such Selling
Shareholder to the several Underwriters, or otherwise in connection with the
performance of such Selling Shareholder's obligations hereunder and (ii) the
Custodian is authorized to deduct for such payment any such amounts from the
proceeds to such Selling Shareholder hereunder and to hold such amounts for the
account of such Selling Shareholder with the Custodian under the Custody
Agreement.
Delivery of the Common Shares. The Company and the Selling
Shareholders shall deliver, or cause to be delivered, to the Underwriters
certificates for the Firm Common Shares to be sold by them at the First Closing
Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered, to the Underwriters, certificates for
the Optional Common Shares the Underwriters have agreed to purchase from them at
the First Closing Date or the Second Closing Date, as the case may be, against
the irrevocable release of a wire transfer of immediately available funds for
the amount of the purchase price therefor. The certificates for the Common
Shares shall be in definitive form and registered in such names and
denominations as the Underwriters shall have requested at least two full
business days prior to the First Closing
18
Date (or the Second Closing Date, as the case may be) and shall be made
available for inspection on the business day preceding the First Closing Date
(or the Second Closing Date, as the case may be) at a location in New York City
as the Underwriters may designate. Time shall be of the essence, and delivery at
the time and place specified in this Agreement is a further condition to the
obligations of the Underwriters.
Delivery of Prospectus to the Underwriters. Not later than
12:00 p.m. on the second business day following the date the Common Shares of
released by the Underwriters for sale to the public, the Company shall deliver
or cause to be delivered copies of the Prospectus in such quantities and at such
places as the Underwriters shall request.
Section 3. Additional Covenants of the Company.
A. Covenants of the Company. The Company further covenants and agrees
with each Underwriter as follows:
(a) Underwriters' Review of Proposed Amendments and
Supplements. During such period beginning on the date hereof and ending on
the later of the First Closing Date or such date, as in the opinion of
counsel for the Underwriters, the Prospectus is no longer required by law
to be delivered in connection with sales by an Underwriter or dealer (the
"Prospectus Delivery Period"), prior to amending or supplementing the
Registration Statement (including any registration statement filed under
Rule 462(b) under the Securities Act) or the Prospectus including any
amendment or supplement through incorporation by reference of any report
filed under the Exchange Act, the Company shall furnish to the Underwriters
for review a copy of each such proposed amendment or supplement, and the
Company shall not file any such proposed amendment or supplement to which
the Underwriters reasonably object.
(b) Securities Act Compliance. After the date of this
Agreement, the Company shall promptly advise the Underwriters in writing
(i) of the receipt of any comments of, or requests for additional or
supplemental information from, the Commission, (ii) of the time and date of
any filing of any post-effective amendment to the Registration Statement or
any amendment or supplement to any preliminary prospectus or the
Prospectus, (iii) of the time and date that any post-effective amendment to
the Registration Statement becomes effective and (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or of any
order preventing or suspending the use of any preliminary prospectus or the
Prospectus, or of any proceedings to remove, suspend or terminate from
listing or quotation the Common Stock from any securities exchange upon
which the it is listed for trading or included or designated for quotation,
or of the threatening or initiation of any proceedings for any of such
purposes. If the Commission shall enter any such stop order at any time,
the Company will use its best efforts to obtain the lifting of such order
at the earliest possible moment. Additionally, the Company agrees that it
shall comply with the provisions of Rules 424(b), 430A and 434, as
applicable, under the Securities Act and
19
will use its reasonable efforts to confirm that any filings made by the
Company under such Rule 424(b) were received in a timely manner by the
Commission.
(c) Amendments and Supplements to the Prospectus and Other
Securities Act Matters. If, during the Prospectus Delivery Period, any
event shall occur or condition exist as a result of which it is necessary
to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered
to a purchaser, not misleading, or if in the opinion of the Underwriters or
counsel for the Underwriters it is otherwise necessary to amend or
supplement the Prospectus to comply with law, the Company agrees to
promptly prepare (subject to Section 3(A)(a) hereof), file with the
Commission and furnish at its own expense to the Underwriters and to
dealers, amendments or supplements to the Prospectus so that the statements
in the Prospectus as so amended or supplemented will not, in the light of
the circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) Copies of any Amendments and Supplements to the
Prospectus. The Company agrees to furnish the Underwriters, without charge,
during the Prospectus Delivery Period, as many copies of the Prospectus and
any amendments and supplements thereto (including any documents
incorporated or deemed incorporated by reference therein) as the
Underwriters may request.
(e) Blue Sky Compliance. The Company shall cooperate with the
Underwriters and counsel for the Underwriters to qualify or register the
Common Shares for sale under (or obtain exemptions from the application of)
the or state securities or blue sky laws or Canadian provincial securities
laws of those jurisdictions designated by the Underwriters, shall comply
with such laws and shall continue such qualifications, registrations and
exemptions in effect so long as required for the distribution of the Common
Shares. The Company shall not be required to qualify as a foreign
corporation or to take any action that would subject it to general service
of process in any such jurisdiction where it is not presently qualified or
where it would be subject to taxation as a foreign corporation. The Company
will advise the Underwriters promptly of the suspension of the
qualification or registration of (or any such exemption relating to) the
Common Shares for offering, sale or trading in any jurisdiction or any
initiation or threat of any proceeding for any such purpose, and in the
event of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its best efforts to obtain
the withdrawal thereof at the earliest possible moment.
(f) Use of Proceeds. The Company shall apply the net proceeds
from the sale of the Common Shares sold by it in the manner described under
the caption "Use of Proceeds" in the Prospectus.
(g) Transfer Agent. The Company shall engage and maintain, at
its expense, a registrar and transfer agent for the Common Stock.
20
(h) Earnings Statement. As soon as practicable, the Company
will make generally available to its security holders and to the
Underwriters an earnings statement (which need not be audited) covering the
twelve-month period ending [___] that satisfies the provisions of Section
11(a) of the Securities Act.
(i) Periodic Reporting Obligations. During the Prospectus
Delivery Period the Company shall file, on a timely basis, with the
Commission and the Nasdaq National Market all reports and documents
required to be filed under the Exchange Act. Additionally, the Company
shall file with the Commission all reports on Form SR as may be required
under Rule 463 under the Securities Act.
(j) Agreement Not to Offer or Sell Additional Securities.
During the period of [___] days following the date of the Prospectus, the
Company will not, without the prior written consent of ▇▇▇▇▇▇▇▇▇▇
Securities (which consent may be withheld at the sole discretion of
▇▇▇▇▇▇▇▇▇▇ Securities), directly or indirectly, sell, offer, contract or
grant any option to sell, pledge, transfer or establish an open "put
equivalent position" within the meaning of Rule 16a-1(h) under the Exchange
Act, or otherwise dispose of or transfer, or announce the offering of, or
file any registration statement under the Securities Act in respect of, any
shares of Common Stock, options or warrants to acquire shares of the Common
Stock or securities exchangeable or exercisable for or convertible into
shares of Common Stock (other than as contemplated by this Agreement with
respect to the Common Shares); provided, however, that the Company may
issue shares of its Common Stock or options to purchase its Common Stock,
or Common Stock upon exercise of options, pursuant to any stock option,
stock bonus or other stock plan or arrangement described in the Prospectus,
but only if the holders of such shares, options, or shares issued upon
exercise of such options, agree in writing not to sell, offer, dispose of
or otherwise transfer any such shares or options during such [___] day
period without the prior written consent of ▇▇▇▇▇▇▇▇▇▇ Securities (which
consent may be withheld at the sole discretion of the ▇▇▇▇▇▇▇▇▇▇
Securities).
(k) Future Reports to the Underwriters. During the period of
five years hereafter the Company will furnish to the Underwriters at ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention:[ ]: (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report
of the Company containing the balance sheet of the Company as of the close
of such fiscal year and statements of income, shareholders' equity and cash
flows for the year then ended and the opinion thereon of the Company's
independent public or certified public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement,
Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report
on Form 8-K or other report filed by the Company with the Commission, the
NASD or any securities exchange; and (iii) as soon as available, copies of
any report or communication of the Company mailed generally to holders of
its capital stock.
(l) Exchange Act Compliance. During the Prospectus Delivery
21
Period, the Company will file all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15 of the Exchange Act in the
manner and within the time periods required by the Exchange Act.
B. Covenants of the Selling Shareholders. Each Selling Shareholder
further covenants and agrees with each Underwriter:
(a) Agreement Not to Offer or Sell Additional Securities. Such
Selling Shareholder will not, without the prior written consent of
▇▇▇▇▇▇▇▇▇▇ Securities (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any
option to sell (including without limitation any short sale), pledge,
transfer, establish an open "put equivalent position" within the meaning of
Rule 16a-1(h) under the Exchange Act, or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock, or
securities exchangeable or exercisable for or convertible into shares of
Common Stock currently or hereafter owned either of record or beneficially
(as defined in Rule 13d-3 under Securities Exchange Act of 1934, as
amended) by the undersigned, or publicly announce the undersigned's
intention to do any of the foregoing, for a period commencing on the date
hereof and continuing through the close of trading on the date [___] days
after the date of the Prospectus.
(b) Delivery of Forms W-8 and W-9. To deliver to the
Underwriters prior to the First Closing Date a properly completed and
executed United States Treasury Department Form W-8 (if the Selling
Shareholder is a non-United States person) or Form W-9 (if the Selling
Shareholder is a United States Person).
▇▇▇▇▇▇▇▇▇▇ Securities, on behalf of the several Underwriters,
may, in its sole discretion, waive in writing the performance by the Company or
any Selling Shareholder of any one or more of the foregoing covenants or extend
the time for their performance.
Section 4. Payment of Expenses. The Company and the Selling
Shareholders, jointly and severally, agree to pay in such proportions as they
may agree upon among themselves all costs, fees and expenses incurred in
connection with the performance of their obligations hereunder and in connection
with the transactions contemplated hereby, including without limitation (i) all
expenses incident to the issuance and delivery of the Common Shares (including
all printing and engraving costs), (ii) all fees and expenses of the registrar
and transfer agent of the Common Stock, (iii) all necessary issue, transfer and
other stamp taxes in connection with the issuance and sale of the Common Shares
to the Underwriters, (iv) all
22
fees and expenses of the Company's counsel, independent public or certified
pubic accountants and other advisors, (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution of
the Registration Statement (including financial statements, exhibits, schedules,
consents and certificates of experts), each preliminary prospectus and the
Prospectus, and all amendments and supplements thereto, and this Agreement, (vi)
all filing fees, attorneys' fees and expenses incurred by the Company or the
Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Common Shares for offer and sale under the state securities or blue sky laws or
the provincial securities laws of Canada, and, if requested by the Underwriters,
preparing and printing a "Blue Sky Survey" or memorandum, and any supplements
thereto, advising the Underwriters of such qualifications, registrations and
exemptions, (vii) the filing fees incident to, and the reasonable fees and
expenses of counsel for the Underwriters in connection with, the NASD's review
and approval of the Underwriters' participation in the offering and distribution
of the Common Shares, (viii) the fees and expenses associated with including the
Common Shares on the Nasdaq National Market, and (ix) all other fees, costs and
expenses referred to in Item 14 of Part II of the Registration Statement. Except
as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the
Underwriters shall pay their own expenses, including the fees and disbursements
of their counsel.
The Selling Shareholders further agree with each Underwriter
to pay (directly or by reimbursement) all fees and expenses incident to the
performance of their obligations under this Agreement which are not otherwise
specifically provided for herein, including but not limited to (i) fees and
expenses of counsel and other advisors for such Selling Shareholders, (ii) fees
and expenses of the Custodian and (iii) expenses and taxes incident to the sale
and delivery of the Common Shares to be sold by such Selling Shareholders to the
Underwriters hereunder (which taxes, if any, may be deducted by the Custodian
under the provisions of Section 2 of this Agreement).
This Section 4 shall not affect or modify any separate, valid
agreement relating to the allocation of payment of expenses between the Company,
on the one hand, and the Selling Shareholders, on the other hand.
Section 5. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Common
Shares as provided herein on the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date, shall be subject to the
accuracy of the representations and warranties on the part of the Company and
the Selling Shareholders set forth in Section 1 hereof as of the date hereof and
as of the First Closing Date as though then made and, with respect to the
Optional Common Shares, to the accuracy of the representations and warranties on
the part of the Company set forth in Section 1(A) hereof and as of the Second
Closing Date as though then made, to the timely performance by the Company and
the Selling Shareholders of their respective covenants and other obligations
hereunder, and to each of the following additional conditions:
(a) Accountants' Comfort Letter. On the date hereof, the Underwriters
shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent public or
certified public accountants for the Company, a letter dated the date
hereof addressed to the Underwriters, in form and substance satisfactory to
the Underwriters, containing statements and information of the type
ordinarily included in accountant's "comfort letters" to underwriters,
delivered according to Statement of Auditing Standards
23
No. 72 (or any successor bulletin), with respect to the audited and
unaudited financial statements and certain financial information contained
in the Registration Statement and the Prospectus (and the Underwriters
shall have received an additional two conformed copies of such accountants'
letter for each of the several Underwriters).
(b) Compliance with Registration Requirements; No Stop Order;
No Objection from NASD.For the period from and after effectiveness of this
Agreement and prior to the First Closing Date and, with respect to the
Optional Common Shares, the Second Closing Date:
(i) the Company shall have filed the Prospectus with
the Commission (including the information required by Rule 430A under the
Securities Act) in the manner and within the time period required by Rule
424(b) under the Securities Act; or the Company shall have filed a
post-effective amendment to the Registration Statement containing the
information required by such Rule 430A, and such post-effective amendment
shall have become effective; or, if the Company elected to rely upon Rule
434 under the Securities Act and obtained the Underwriters' consent
thereto, the Company shall have filed a Term Sheet with the Commission in
the manner and within the time period required by such Rule 424(b);
(ii) no stop order suspending the effectiveness of
the Registration Statement, any Rule 462(b) Registration Statement, or any
post-effective amendment to the Registration Statement, shall be in effect
and no proceedings for such purpose shall have been instituted or
threatened by the Commission; and
(iii) the NASD shall have raised no objection to the
fairness and reasonableness of the underwriting terms and arrangements.
(c) No Material Adverse Change or Ratings Agency Change. For
the period from and after the date of this Agreement and prior to the First
Closing Date and, with respect to the Optional Common Shares, the Second
Closing Date:
(i) in the judgment of the Underwriters there shall
not have occurred any Material Adverse Change; and
(ii) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not indicate
the direction of the possible change, in the rating accorded any securities
of the Company or any of its subsidiaries by any "nationally recognized
statistical rating organization" as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act.
(d) Opinion of Counsel for the Company. On each of the First
Closing Date and the Second Closing Date, the Underwriters shall have
received the favorable opinion of ▇'▇▇▇▇▇▇, Cavanagh, Anderson,
▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the Company, dated as of such Closing
Date, the form of which is attached as Exhibit A (and the Underwriters
shall have received an additional two conformed
24
copies of such counsel's legal opinion for each of the several
Underwriters).
(e) Opinion of Counsel for the Underwriters. On each of the
First Closing Date and the Second Closing Date, the Underwriters shall have
received the favorable opinion of Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
(a partnership including professional corporations), counsel for the
Underwriters, dated as of such Closing Date, with respect to the matters
set forth in paragraphs (i), (vii) (with respect to subparagraph (i) only,
(viii), (ix), (x) (xi) and (xiv) (with respect to the captions "Description
of Securities" and "Underwriting" under subparagraph (i) only), (xii), and
the next-to-last paragraph of Exhibit A (and the Underwriters shall have
received an additional two conformed copies of such counsel's legal opinion
for each of the several Underwriters).
(f) Officers' Certificate. On each of the First Closing Date
and the Second Closing Date, the Underwriters shall have received a written
certificate executed by the Chairman of the Board, Chief Executive Officer
or President of the Company and the Chief Financial Officer or Chief
Accounting Officer of the Company, dated as of such Closing Date, to the
effect set forth in subsections (b)(ii) and (c)(ii) of this Section 5, and
further to the effect that:
(i) for the period from and after the date of this
Agreement and prior to such Closing Date, there has not occurred any
Material Adverse Change;
(ii) the representations, warranties and covenants of
the Company set forth in Section 1(A) of this Agreement are true and
correct with the same force and effect as though expressly made on and as
of such Closing Date, and
(iii) the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date.
(g) Bring-Down Comfort Letter. On each of the First Closing
Date and the Second Closing Date, the Underwriters shall have received from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent public or certified public accountants for
the Company, a letter dated such date, in form and substance satisfactory
to the Underwriters, to the effect that they reaffirm the statements made
in the letter furnished by them pursuant to subsection (a) of this Section
5, except that the specified date referred to therein for the carrying out
of procedures shall be no more than three business days prior to the First
Closing Date or Second Closing Date, as the case may be (and the
Underwriters shall have received an additional two conformed copies of such
accountants' letter for each of the several Underwriters). .
(h) Opinion of Counsel for the Selling Shareholders. On the
First Closing Date, the Underwriters shall have received the favorable
opinion of [▇'▇▇▇▇▇▇, Cavanagh, Anderson, ▇▇▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇],
counsel for the Selling Shareholders, dated as of such Closing Date, the
form of which is attached as
25
Exhibit B (and the Underwriters shall have received an additional two
conformed copies of such counsel's legal opinion for each of the several
Underwriters).
(i) Selling Shareholders' Certificate. On the First Closing
Date, the Underwriters shall have received a written certificate executed
by the Attorney-in-Fact of each Selling Shareholder, dated as of the First
Closing Date, to the effect that:
(i) the representations, warranties and covenants of
such Selling Shareholder set forth in Section 1(B) of this Agreement are
true and correct with the same force and effect as though expressly made by
such Selling Shareholder on and as of the First Closing Date; and
(ii) such Selling Shareholder has complied with all
the agreements and satisfied all the conditions on its part to be performed
or satisfied at or prior to the First Closing Date.
(j) Selling Shareholders' Documents. On the date hereof, the
Company and the Selling Shareholders shall have furnished for review by the
Underwriters copies of the Powers of Attorney and Custody Agreements
executed by each of the Selling Shareholders and such further information,
certificates and documents as the Underwriters may reasonably request.
(k) Lock-Up Agreement from Certain Shareholders of the Company
Other Than Selling Shareholders. On the date hereof, the Company shall have
furnished to the Underwriters an agreement in the form of Exhibit C hereto
from [___], and such agreement shall be in full force and effect on each of
the First Closing Date and the Second Closing Date.
(l) Additional Documents. On or before each of the First
Closing Date and the Second Closing Date, the Underwriters and counsel for
the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them
to pass upon the issuance and sale of the Common Shares as contemplated
herein, or in order to evidence the accuracy of any of the representations
and warranties, or the satisfaction of any of the conditions or agreements,
herein contained.
If any condition specified in this Section 5 is not satisfied
when and as required to be satisfied, this Agreement may be terminated by the
Underwriters by notice to the Company and the Selling Shareholders at any time
on or prior to the First Closing Date and, with respect to the Optional Common
Shares, by the Underwriters by notice to the Company at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 4, Section 6, Section 8 and
Section 9 shall at all times be effective and shall survive such termination.
26
Section 6. Reimbursement of Underwriters' Expenses. If this Agreement
is terminated by the Underwriters pursuant to Section 5, Section 7, Section 10
or Section 11 or Section 17, or if the sale to the Underwriters of the Common
Shares on the First Closing Date is not consummated because of any refusal,
inability or failure on the part of the Company or the Selling Shareholders to
perform any agreement herein or to comply with any provision hereof, the Company
agrees to reimburse the Underwriters (or such Underwriters as have terminated
this Agreement with respect to themselves), severally, upon demand for all
out-of-pocket expenses that shall have been reasonably incurred by the
Underwriters in connection with the proposed purchase and the offering and sale
of the Common Shares, including but not limited to fees and disbursements of
counsel, printing expenses, travel expenses, postage, facsimile and telephone
charges.
Section 7. Effectiveness of this Agreement.
This Agreement shall not become effective until the later of
(i) the execution of this Agreement by the parties hereto and (ii) notification
by the Commission to the Company and the Underwriters of the effectiveness of
the Registration Statement under the Securities Act.
Prior to such effectiveness, this Agreement may be terminated
by any party by notice to each of the other parties hereto, and any such
termination shall be without liability on the part of (a) the Company or the
Selling Shareholders to any Underwriter, except that the Company and the Selling
Shareholders shall be obligated to reimburse the expenses of the Underwriters
pursuant to Sections 4 and 6 hereof, (b) of any Underwriter to the Company or
the Selling Shareholders, or (c) of any party hereto to any other party except
that the provisions of Section 8 and Section 9 shall at all times be effective
and shall survive such termination.
Section 8. Indemnification.
(a) Indemnification of the Underwriters. Each of the Company
and each of the Selling Shareholders, jointly and severally, agrees to
indemnify and hold harmless each Underwriter, its officers and
employees, and each person, if any, who controls any Underwriter within
the meaning of the Securities Act and the Exchange Act against any
loss, claim, damage, liability or expense, as incurred, to which such
Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory
law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the
written consent of the Company), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated
below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A or Rule
434 under the
27
Securities Act, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) upon any untrue statement or
alleged untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
or (iii) in whole or in part upon any inaccuracy in the representations
and warranties of the Company or the Selling Shareholders contained
herein; or (iv) in whole or in part upon any failure of the Company or
the Selling Shareholders to perform their respective obligations
hereunder or under law; or (v) any act or failure to act or any alleged
act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Common Stock or the offering
contemplated hereby, and which is included as part of or referred to in
any loss, claim, damage, liability or action arising out of or based
upon any matter covered by clause (i) or (ii) above, provided that the
Company shall not be liable under this clause (v) to the extent that a
court of competent jurisdiction shall have determined by a final
judgment that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to
be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling
person for any and all expenses (including the fees and disbursements
of counsel chosen by ▇▇▇▇▇▇▇▇▇▇ Securities) as such expenses are
reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action;
provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent,
but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information
furnished to the Company and the Selling Shareholders by the
Underwriters expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided, further, that with respect to any
preliminary prospectus, the foregoing indemnity agreement shall not
inure to the benefit of any Underwriter from whom the person asserting
any loss, claim, damage, liability or expense purchased Common Shares,
or any person controlling such Underwriter, if copies of the Prospectus
were timely delivered to the Underwriter pursuant to Section 2 and a
copy of the Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not
sent or given by or on behalf of such Underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Common Shares to such person, and if
the Prospectus (as so amended or supplemented) would have cured the
defect giving rise to such loss, claim, damage, liability or expense.
The indemnity agreement set forth in this Section 8(a) shall be in
addition to any liabilities that the Company and the Selling
Shareholders may otherwise have.
28
(b) Indemnification of the Company, its Directors and
Officers. Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each of its directors, each of
its officers who signed the Registration Statement, the Selling
Shareholders and each person, if any, who controls the Company or any
Selling Shareholder within the meaning of the Securities Act or the
Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company, or any such director, officer, Selling
Shareholder or controlling person may become subject, under the
Securities Act, the Exchange Act, or other federal or state statutory
law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the
written consent of such Underwriter), insofar as such loss, claim,
damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or
alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto), or arises out of or is based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement,
any preliminary prospectus, the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written
information furnished to the Company and the Selling Shareholders by
the Underwriters expressly for use therein; and to reimburse the
Company, or any such director, officer, Selling Shareholder or
controlling person for any legal and other expense reasonably incurred
by the Company, or any such director, officer, Selling Shareholder or
controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage,
liability, expense or action. Each of the Company and each of the
Selling Shareholders hereby acknowledges that the only information that
the Underwriters have furnished to the Company and the Selling
Shareholders expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) are the statements set forth (A) as the last two
paragraphs on the inside front cover page of the Prospectus concerning
stabilization and passive market making by the Underwriters and (B) in
the table in the first paragraph and as the second and [___] paragraphs
under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct. The indemnity
agreement set forth in this Section 8(b) shall be in addition to any
liabilities that each Underwriter may otherwise have.
(c) Notifications and Other Indemnification Procedures.
Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying
party under this Section 8, notify the indemnifying party in writing of
the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party for contribution or otherwise than under
the
29
indemnity agreement contained in this Section 8 or to the extent it is
not prejudiced as a proximate result of such failure. In case any such
action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party,
the indemnifying party will be entitled to participate in, and, to the
extent that it shall elect, jointly with all other indemnifying parties
similarly notified, by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however,
if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have
reasonably concluded that a conflict may arise between the positions of
the indemnifying party and the indemnified party in conducting the
defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such
indemnified party of such indemnifying party's election so to assume
the defense of such action and approval by the indemnified party of
counsel, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate
counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel (together
with local counsel), approved by the indemnifying party (▇▇▇▇▇▇▇▇▇▇
Securities in the case of Section 8(b) and Section 9), representing the
indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of
the indemnifying party.
(d) Settlements. The indemnifying party under this Section 8
shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by
Section 8(c) hereof, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of
such settlement. No indemnifying party
30
shall, without the prior written consent of the indemnified party,
effect any settlement, compromise or consent to the entry of judgment
in any pending or threatened action, suit or proceeding in respect of
which any indemnified party is or could have been a party and indemnity
was or could have been sought hereunder by such indemnified party,
unless such settlement, compromise or consent includes an unconditional
release of such indemnified party from all liability on claims that are
the subject matter of such action, suit or proceeding.
Section 9. Contribution.
If the indemnification provided for in Section 8 is for any
reason held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount paid or payable by such indemnified party, as incurred, as
a result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Shareholders, on the one hand,
and the Underwriters, on the other hand, from the offering of the Common Shares
pursuant to this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Selling Shareholders, on the one
hand, and the Underwriters, on the other hand, in connection with the statements
or omissions or inaccuracies in the representations and warranties herein which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Selling Shareholders, on the one hand, and the Underwriters,
on the other hand, in connection with the offering of the Common Shares pursuant
to this Agreement shall be deemed to be in the same respective proportions as
the total net proceeds from the offering of the Common Shares pursuant to this
Agreement (before deducting expenses) received by the Company and the Selling
Shareholders, and the total underwriting discount received by the Underwriters,
in each case as set forth on the front cover page of the Prospectus (or, if Rule
434 under the Securities Act is used, the corresponding location on the Term
Sheet) bear to the aggregate initial public offering price of the Common Shares
as set forth on such cover. The relative fault of the Company and the Selling
Shareholders, on the one hand, and the Underwriters, on the other hand, shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by the Company or the
Selling Shareholders, on the one hand, or the Underwriters, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 8(c), any
legal or other fees or expenses reasonably
31
incurred by such party in connection with investigating or defending any action
or claim. The provisions set forth in Section 8(c) with respect to notice of
commencement of any action shall apply if a claim for contribution is to be made
under this Section 9; provided, however, that no additional notice shall be
required with respect to any action for which notice has been given under
Section 8(c) for purposes of indemnification.
The Company, the Selling Shareholders and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 9 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in this
Section 9.
Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of the
underwriting commissions received by such Underwriter in connection with the
Common Shares underwritten by it and distributed to the public. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 9 are several, and not joint, in proportion
to their respective underwriting commitments as set forth opposite their names
in Schedule A. For purposes of this Section 9, each officer and employee of an
Underwriter and each person, if any, who controls an Underwriter within the
meaning of the Securities Act and the Exchange Act shall have the same rights to
contribution as such Underwriter, and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company with the meaning of the Securities Act and the Exchange
Act shall have the same rights to contribution as the Company.
Section 10. Default of One or More of the Several Underwriters. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Common
Shares that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of the
aggregate number of the Common Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the number
of Firm Common Shares set forth opposite their respective names on Schedule A
bears to the aggregate number of Firm Common Shares set forth opposite the names
of all such non-defaulting Underwriters, or in such other proportions as may be
specified by the Underwriters, to purchase the Common Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date. If, on the First Closing Date or the Second Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Common Shares and the aggregate number of Common Shares with respect to
which such default occurs exceeds 10% of the aggregate number of Common Shares
to be purchased on such date, and arrangements satisfactory to the Underwriters
and the Company for the purchase of such Common Shares are not made within 48
hours after such default, this Agreement shall
32
terminate without liability of any party to any other party except that the
provisions of Section 4, Section 6, Section 8 and Section 9 shall at all times
be effective and shall survive such termination. In any such case either the
Underwriters or the Company shall have the right to postpone the First Closing
Date or the Second Closing Date, as the case may be, but in no event for longer
than seven days in order that the required changes, if any, to the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected.
As used in this Agreement, the term "Underwriter" shall be
deemed to include any person substituted for a defaulting Underwriter under this
Section 10. Any action taken under this Section 10 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
Section 11. Termination of this Agreement. Prior to the First Closing
Date this Agreement maybe terminated by the Underwriters by notice given to the
Company and the Selling Shareholders if at any time (i) trading or quotation in
any of the Company's securities shall have been suspended or limited by the
Commission or by the Nasdaq Stock Market, or trading in securities generally on
either the Nasdaq Stock Market or the New York Stock Exchange shall have been
suspended or limited, or minimum or maximum prices shall have been generally
established on any of such stock exchanges by the Commission or the NASD; (ii) a
general banking moratorium shall have been declared by any of federal, New York,
Arizona or California authorities; (iii) there shall have occurred any outbreak
or escalation of national or international hostilities or any crisis or
calamity, or any change in the United States or international financial markets,
or any substantial change or development involving a prospective substantial
change in United States' or international political, financial or economic
conditions, as in the judgment of the Underwriters is material and adverse and
makes it impracticable to market the Common Shares in the manner and on the
terms described in the Prospectus or to enforce contracts for the sale of
securities; (iv) in the judgment of the Underwriters there shall have occurred
any Material Adverse Change; or (v) the Company shall have sustained a loss by
strike, fire, flood, earthquake, accident or other calamity of such character as
in the judgment of the Underwriters may interfere materially with the conduct of
the business and operations of the Company regardless of whether or not such
loss shall have been insured. Any termination pursuant to this Section 11 shall
be without liability on the part of (a) the Company or the Selling Shareholders
to any Underwriter, except that the Company and the Selling Shareholders shall
be obligated to reimburse the expenses of the Underwriters pursuant to Sections
4 and 6 hereof, (b) any Underwriter to the Company or the Selling Shareholders,
or (c) of any party hereto to any other party except that the provisions of
Section 8 and Section 9 shall at all times be effective and shall survive such
termination.
Section 12. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Shareholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect,
33
regardless of any investigation made by or on behalf of any Underwriter or the
Company or any of its or their partners, officers or directors or any
controlling person, or the Selling Shareholders, as the case may be, and will
survive delivery of and payment for the Common Shares sold hereunder and any
termination of this Agreement.
Section 13. Notices. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Underwriters:
▇▇▇▇▇▇▇▇▇▇ Securities
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ Securities
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Company:
Action Performance Companies, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: [___]
If to the Selling Shareholders:
[Custodian]
[Address]
Facsimile: [___]
Attention: [___]
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
Section 14. Successors. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 10 hereof, and to the benefit of the employees, officers and
directors and
34
controlling persons referred to in Section 8 and Section 9, and in each case
their respective successors, and personal representatives, and no other person
will have any right or obligation hereunder. The term "successors" shall not
include any purchaser of the Common Shares as such from any of the Underwriters
merely by reason of such purchase.
Section 15. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
Section 16. (a) Governing Law Provisions. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.
(b) Consent to Jurisdiction. Any legal suit, action or
proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby ("Related Proceedings") may be
instituted in the federal courts of the United States of America
located in the City and County of San Francisco or the courts of the
State of California in each case located in the City and County of San
Francisco (collectively, the "Specified Courts"), and each party
irrevocably submits to the exclusive jurisdiction (except for
proceedings instituted in regard to the enforcement of a judgment of
any such court (a "Related Judgment"), as to which such jurisdiction is
non-exclusive) of such courts in any such suit, action or proceeding.
Service of any process, summons, notice or document by mail to such
party's address set forth above shall be effective service of process
for any suit, action or other proceeding brought in any such court. The
parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the
Specified Courts and irrevocably and unconditionally waive and agree
not to plead or claim in any such court that any such suit, action or
other proceeding brought in any such court has been brought in an
inconvenient forum. Each party not located in the United States
irrevocably appoints CT Corporation System, which currently maintains a
San Francisco office at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the
City and County of San Francisco.
(c) Waiver of Immunity. With respect to any Related
Proceeding, each party irrevocably waives, to the fullest extent
permitted by applicable law, all immunity (whether on the basis of
sovereignty or otherwise) from jurisdiction,
35
service of process, attachment (both before and after judgment) and
execution to which it might otherwise be entitled in the Specified
Courts, and with respect to any Related Judgment, each party waives any
such immunity in the Specified Courts or any other court of competent
jurisdiction, and will not raise or claim or cause to be pleaded any
such immunity at or in respect of any such Related Proceeding or
Related Judgment, including, without limitation, any immunity pursuant
to the United States Foreign Sovereign Immunities Act of 1976, as
amended.
Section 17. Failure of One or More of the Selling Shareholders to Sell
and Deliver Common Shares. If one or more of the Selling Shareholders shall fail
to sell and deliver to the Underwriters the Common Shares to be sold and
delivered by such Selling Shareholders at the First Closing Date pursuant to
this Agreement, then the Underwriters shall have the right to, at their option,
by written notice to the Company and the Selling Shareholders, either (i)
terminate this Agreement without any liability on the part of any Underwriter
or, except as provided in Sections 4, 6, 8 and 9 hereof, the Company or the
Selling Shareholders, (ii) purchase the shares which the Company and other
Selling Shareholders have agreed to sell and deliver in accordance with the
terms hereof, or (iii) postpone the First Closing Date, but in no event for
longer than seven days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected.
Section 18. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
Each of the parties hereto acknowledges that it is a
sophisticated business person who was adequately represented by counsel during
negotiations regarding the provisions hereof, including, without limitation, the
indemnification provisions of Section 8 and the contribution provisions of
Section 9, and is fully informed regarding said provisions. Each of the parties
hereto further acknowledges that the provisions of Sections 8 and 9 hereto
fairly allocate the risks in light of the ability of the parties to investigate
the Company, its affairs and its business in order to assure that adequate
disclosure has been made in the Registration Statement, any preliminary
prospectus and the Prospectus (and any amendments and supplements thereto), as
required by the Securities Act and the Exchange Act.
36
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to the Company [and the Custodian] the
enclosed copies hereof, whereupon this instrument, along with all counterparts
hereof, shall become a binding agreement in accordance with its terms.
Very truly yours,
ACTION PERFORMANCE COMPANIES, INC.
By:___________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman of the
Board, President, and Chief Executive
Officer
SELLING SHAREHOLDERS
By:___________________________________
(Attorney-in-fact)
The foregoing Underwriting Agreement is hereby confirmed and
accepted by the Underwriters in San Francisco, California as of the date first
above written.
▇▇▇▇▇▇▇▇▇▇ SECURITIES
ADVEST, INCORPORATED
INTERSTATE/▇▇▇▇▇▇▇ ▇▇▇▇ CORPORATION
By ▇▇▇▇▇▇▇▇▇▇ SECURITIES
By:____________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Authorized Signatory
37
SCHEDULE A
Number of
Firm Common
Underwriters Shares
to be Purchased
▇▇▇▇▇▇▇▇▇▇ Securities ............................. [___]
Advest, Incorporated [___]
Interstate/▇▇▇▇▇▇▇ Lane Corporation [___]
[___]
Total..........................................
38
SCHEDULE B
Number of
Selling Shareholder Firm Common Shares
to be Sold
Selling Shareholder #1
[address]
Attention: [___] .......................... [___]
Selling Shareholder #2
[address] [___]
Attention: [___] ..........................
Total: [___]
39