Exhibit 1.1
2,750,000 Shares
FACTORY CARD OUTLET CORP.
Common Stock
(No Par Value)
FORM OF UNDERWRITING AGREEMENT
____________, 1996
Alex. ▇▇▇▇▇ & Sons Incorporated
▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
As Representatives of the
Several Underwriters
c/o Alex. ▇▇▇▇▇ & Sons Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
Factory Card Outlet Corp., a Delaware corporation (the "Company"), and
certain shareholders of the Company (the "Selling Shareholders) propose to sell
to the several underwriters (the "Underwriters") named in Schedule I hereto for
whom you are acting as representatives (the "Representatives") an aggregate of
2,750,000 shares (the "Firm Shares") of the Company's common stock, no par value
(the "Common Stock") of which 2,550,000 shares will be sold by the Company and
200,000 shares will be sold by the Selling Shareholders. The respective amounts
of the Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto and the respective amounts to be sold
by the Selling Shareholders are set forth opposite their names in Schedule II
hereto. The Company and the Selling Shareholders are sometimes referred to
herein collectively as the "Sellers." The Company and the Selling Shareholders
also propose to sell at the Underwriters' option an aggregate of up to 412,500
additional shares of the Common Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to exercise the over-allotment option in whole
or in part for the
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
referred to as the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY THE AND THE SELLING
SHAREHOLDERS.
(a) The Company hereby represents and warrants to each of the
Underwriters as follows:
(i) A registration statement on Form S-1 (File No. 333-13827) with
respect to the Shares has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission.
Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the
Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have
heretofore been delivered by the Company to you and each preliminary
prospectus delivered to the Underwriters for use in connection with
this offering was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to ▇▇▇▇▇, except to the
extent permitted by the Rules and Regulations. Such registration
statement shall be herein referred to as the "Registration Statement"
and shall include any registration statement filed pursuant to Rule
462(b) under the Act (the "Rule 462(b) Registration Statement"). The
Registration Statement, which shall be deemed to include all
information omitted therefrom in reliance upon Rule 430A and contained
in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has
been filed as of the date of this Agreement. "Prospectus" means (A)
the form of prospectus first filed with the Commission pursuant to
Rule 424(b) or (B) the last preliminary prospectus included in the
Registration Statement filed prior to the time it becomes effective or
filed pursuant to Rule 424(a) under the Act that is delivered by the
Company to the Underwriters for delivery to purchasers of the Shares,
together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7), if any, under the Act. Each
preliminary prospectus included in the Registration Statement prior to
the time it becomes effective is herein referred to as a "Preliminary
Prospectus." Any reference herein to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to
any supplements or amendments thereto, filed with the Commission after
the date of filing of the Prospectus under Rules 424(b) or 430A, and
prior to the termination of the offering of the Shares by the
Underwriters.
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(ii) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its
properties, conduct its business as described in the Registration
Statement and enter into and perform its obligations under this
Agreement. Each of the subsidiaries of the Company as listed on
Exhibit 21 of the Registration Statement (collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement. The Company and each of the Subsidiaries are duly
qualified to transact business and are in good standing in all
jurisdictions in which the conduct of their business requires such
qualification except where the failure to so qualify or be in good
standing, whether singly or in the aggregate, would not result in a
material adverse effect on the earnings, business, management,
properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company and its Subsidiaries taken as
a whole, or a material adverse effect on the ability of the Company to
consummate the transactions contemplated hereby (a "Material Adverse
Effect"). The outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable and are owned by the Company or another
Subsidiary free and clear of all liens, encumbrances and equities and
claims; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert
any obligations into shares of capital stock or ownership interests in
the Subsidiaries are outstanding. The only subsidiaries of the Company
are the subsidiaries listed on Exhibit 21 to the Registration
Statement and certain other subsidiaries which, when considered in the
aggregate as a single subsidiary, do not constitute a "significant
subsidiary" as defined in Rule 1-02 of Regulations S-X.
(iii) The outstanding shares of Common Stock, including all
shares to be sold by the Selling Shareholders, have been duly
authorized and validly issued and are fully paid and non-assessable;
the portion of the Shares to be issued and sold by the Company have
been duly authorized for issuance and sale to the Underwriters and
when issued and paid for as contemplated herein will be validly
issued, fully paid and non-assessable; and no preemptive rights of
stockholders exist with respect to any of the Shares or the issue and
sale thereof. No holder of Shares will be subject to personal
liability by being such a holder.
(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. The Common
Stock and the Shares conform to the descriptions thereof contained in
the Registration Statement. The certificates for the Shares are in
due and proper form and complies with all applicable statutory
requirements, with any applicable requirements of the charter and
by-laws of the Company and the requirements of The Nasdaq National
Market. Except as described in or contemplated by the Prospectus,
there are no outstanding securities
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of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the
Company and there are no outstanding or authorized options, warrants
or rights of any character obligating the Company to issue any shares
of its capital stock or any securities convertible or exchangeable
into or evidencing the right to purchase or subscribe for any shares
of such stock.
(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering
of the Shares nor instituted proceedings for that purpose nor to the
Company's knowledge, are any such proceedings contemplated by the
Commission, and the Company has fully complied with any request on the
part of the Commission for additional information. The Registration
Statement contains, and the Prospectus and any amendments or
supplements thereto will contain, all statements which are required to
be stated therein by, and will conform to, the requirements of the Act
and the Rules and Regulations. The Registration Statement and any
amendment thereto do not contain, and will not contain, any untrue
statement of a material fact and do not omit, and will not omit, to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any
amendments and supplements thereto do not contain, and will not
contain, any untrue statement of material fact; and do not omit, and
will not omit, to state any material 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. If Rule
434 is used, the Company will comply with the requirements of Rule 434
and the Prospectus shall not be "materially different," as such term
is used in Rule 434, from the Prospectus included in the Registration
Statement at the time it became effective. The Company makes no
representations or warranties as to information contained in or
omitted from the Registration Statement or the Prospectus, or any such
amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any
Underwriter through the Representatives, specifically for use in the
preparation thereof.
(vi) The consolidated financial statements of the Company and
the Subsidiaries, together with related notes and schedules as set
forth in the Registration Statement, present fairly the financial
position and the results of operations and cash flows of the Company
and the consolidated Subsidiaries, at the indicated dates and for the
indicated periods. Such financial statements and related schedules
have been prepared in accordance with generally accepted principles of
accounting, consistently applied throughout the periods involved, and
all adjustments necessary for a fair presentation of results for such
periods have been made. The summary financial and statistical data
included in the Registration Statement present fairly the information
shown therein and such data have been compiled on a basis consistent
with the financial statements presented therein and the books and
records of the company.
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(vii) KPMG Peat Marwick LLP, who have certified certain of the
financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required
by the Act and the Rules and Regulations.
(viii) Except as set forth in the Registration Statement, there
is no action, suit, claim, proceeding, inquiry or investigation
pending or, to the knowledge of the Company, threatened against the
Company or any of the Subsidiaries, or to which the property of the
Company or any Subsidiary is subject, before or brought by any court
or governmental agency or otherwise which if determined adversely to
the Company or any of its Subsidiaries might result, whether singly or
in the aggregate, in a Material Adverse Effect.
(ix) The Company and the Subsidiaries have good and marketable
title to all of the properties and assets reflected in the financial
statements (or as described in the Registration Statement) hereinabove
described, subject to no lien, mortgage, pledge, charge or encumbrance
of any kind except those reflected in such financial statements (or as
described in the Registration Statement) or which, singly or in the
aggregate, are not material in amount and do not interfere with the
use made or proposed to be made of such property by the Company or any
of its Subsidiaries. The Company and the Subsidiaries occupy their
leased properties under valid and binding leases (conforming in all
material respects to the description thereof set forth in the
Registration Statement). Neither the Company nor any Subsidiary has
any notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any Subsidiary under
any of such leases, or affecting or questioning the rights of the
Company or any Subsidiary of the continued possession of the leased
premises under any such lease.
(x) The Company and the Subsidiaries have filed all Federal,
State, local and foreign income tax returns which have been required
to be filed and have paid all taxes indicated by said returns and all
assessments received by them or any of them to the extent that such
taxes have become due. All tax liabilities have been adequately
provided for in the financial statements of the Company.
(xi) Neither the Company nor any Subsidiary has sustained since
the date of the latest audited financial statements included in the
Prospectus any material loss, or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in the Prospectus; and
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (A) there has not been any
material adverse change or any development involving a prospective
material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition
(financial or otherwise), or prospects of the Company
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and its Subsidiaries taken as a whole, whether or not occurring in the
ordinary course of business, (B) there has not been any material
transaction entered into or any material transaction that is probable
of being entered into by the Company or the Subsidiaries other than
transactions described in the Registration Statement, as it may be
amended or supplemented and (C) there has not been any change in the
capital stock or long-term debt of the Company or any of the
Subsidiaries. The Company and the Subsidiaries have no material
contingent obligations which are not disclosed in the Company's
financial statements which are included in the Registration Statement.
(xii) Neither the Company nor any of the Subsidiaries is or with
the giving of notice or lapse of time or both, will be, in violation
of its charter or by-laws and no default by the Company or any
Subsidiary exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which it is a party or by which it, or any
of its properties, is bound. The execution and delivery of this
Agreement and the consummation of the transactions herein contemplated
and the fulfillment of the terms hereof and the use of the proceeds
from the sale of the Shares as described in the Prospectus under the
caption "Use of Proceeds" have been duly authorized by all necessary
corporate action and do not, and will not, whether with or without the
giving of notice or passage of time or both, conflict with or result
in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any assets or property of the Company or
any Subsidiary under, any indenture, mortgage, lease, deed of trust or
other agreement or instrument to which the Company or any Subsidiary
is a party or by which the Company or any of the Subsidiaries may be
bound, nor will such action result in any violation of the charter or
by-laws of the Company or any Subsidiary or any order, rule or
regulation applicable to the Company or any Subsidiary of any court or
of any regulatory body or administrative agency or other governmental
body having jurisdiction.
(xiii) This Agreement has been duly authorized, executed and
delivered by the Company.
(xiv) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company of this Agreement and the consummation of the
transactions herein contemplated (except such additional steps as may
be required by the Commission, the National Association of Securities
Dealers, Inc. (the "NASD") or such additional steps as may be
necessary to qualify the Shares for public offering by the
Underwriters under state securities or Blue Sky laws) has been
obtained or made and is in full force and effect.
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(xv) The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their businesses (the "Governmental
Licenses"). The Company and the Subsidiaries are in compliance with
the terms and conditions of all such Governmental Licenses, except
where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect. All of the Governmental Licenses are
valid and in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to
be in full force and effect would not, whether singly or in the
aggregate, have a Material Adverse Effect and neither the Company nor
any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses, which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xvi) The Company and the Subsidiaries own or possess, or can
acquire on reasonable terms, adequate patents, patent rights,
licenses, inventions, copyrights, trademarks, service marks, trade
names or other intellectual property (collectively "Intellectual
Property") necessary to carry on the business now operated by them,
and neither the Company nor any of the Subsidiaries has infringed or
has a conflict with the asserted rights of others with respect to any
Intellectual Property, which infringement or conflict would, whether
singly or in the aggregate, have a Material Adverse Effect nor is the
Company aware of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of
the Company or the Subsidiaries therein. The Company knows of no
material infringement by others of Intellectual Property owned by or
licensed to the Company.
(xvii) Neither the Company, nor to the Company's best knowledge,
any of its affiliates (within the meaning of Rule 405 under the Act),
has taken or will take, directly or indirectly, any action designed to
cause or result in, or which has constituted or which might reasonably
be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale
of the Shares.
(xviii) Neither the Company nor any Subsidiary is, nor will be,
upon the issuance and sale of the Shares and the application of net
proceeds therefrom, as described in the Prospectus, an "investment
company" within the meaning of such term under the Investment Company
Act of 1940 and the rules and regulations of the Commission thereunder
(the "1940 Act").
(xix) The Company maintains a system of internal 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 and to maintain
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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.
(xx) The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and the value
of their respective properties and as is customary for companies
engaged in similar industries.
(xxi) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Section 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(xxii) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida,
Chapter 92-198, AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH
CUBA, and the Company further agrees that if it commences engaging in
business with the government of Cuba or with any person or affiliate
located in Cuba after the date the Registration Statement becomes or
has become effective with the Commission or with the Florida
Department of Banking and Finance (the "Department"), whichever date
is later, or if the information reported or incorporated by reference
in the Prospectus, if any, concerning the Company's business with Cuba
or with any person or affiliate located in Cuba changes in any
material way, the Company will promptly provide the Department notice
of such business or change, as appropriate, in a form acceptable to
the Department.
(xxiii) No labor dispute with the employees of the Company or
any Subsidiary exists or, to the knowledge of the Company, is
imminent, and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its or any Subsidiary s
principal suppliers, customers or vendors, which, in any case, may
reasonably be expected to result in a Material Adverse Effect.
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(xxiv) There are no contracts or documents which are required to
be described in the Registration Statement or the Prospectus or to be
filed as exhibits thereto which have not been so described and filed
as required.
(xxv) Except as disclosed in the Prospectus, there has been no
storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of toxic wastes, hazardous waste
or hazardous substances (collectively, "Hazardous Materials") by the
Company or any Subsidiary (or, to the knowledge of the Company, any of
the Company s or any Subsidiary s predecessors in interest) at, upon
or from any of the property now owned or leased by the Company or any
Subsidiary in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require
remedial action under any applicable law, ordinance, rule, regulation,
order, judgment decree or permit, except for any violation or remedial
action which would not have, or could not be reasonably likely to
have, singly or in the aggregate with all such violations and remedial
actions, a Material Adverse Effect; there has been no material spill,
discharge, leak, emission, injection, escape, dumping or release of
any kind onto such property or into the environment surrounding such
property of any Hazardous Materials due to or caused by the Company,
any Subsidiary or any of the Company s or Subsidiary s predecessors or
with respect to which the Company has knowledge, except for any such
spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably like to have,
singly or in the aggregate with all other such spills, discharges,
leaks, emissions, injections, escapes, dumpings and releases, a
Material Adverse Effect. The terms "hazardous wastes," "toxic wastes"
and "hazardous substances" shall have the meanings specified in any
applicable local, State or Federal laws or regulations with respect to
environmental protection. Each of the Company and the Subsidiaries is
in compliance with any and all applicable Federal, state and local
laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants.
(xxvi) Other than as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right (other than rights which have
been waived or satisfied) to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.
(b) Each of the Selling Shareholders severally represents and
warrants as follows:
(i) Such Selling Shareholder now has and at the Closing Date (and the
Option Closing Date, as the case may be (as such dates are hereinafter
defined))
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will have good and marketable title to the Firm Shares and the Option
Shares to be sold by such Selling Shareholder, free and clear of any
liens, encumbrances, equities and claims, and full right, power and
authority to effect the sale and delivery of such Firm Shares and
Option Shares; and upon the delivery of, against payment for, such
Firm Shares and Option Shares pursuant to this Agreement, the
Underwriters will acquire good and marketable title thereto, free and
clear of any liens, encumbrances, equities and claims.
(ii) Such Selling Shareholder has full right, power and
authority to execute and deliver this Agreement, the Power of
Attorney, and the Custodian Agreement referred to below and to perform
his or its obligations under such Agreements. This Agreement, the
Power of Attorney and the Custodian Agreement (collectively, the
"Selling Shareholders Agreements") have been duly authorized, executed
and delivered by such Selling Shareholders. The execution and
delivery of the Selling Shareholder Agreements and the consummation by
such Selling Shareholder of the transactions herein and therein
contemplated and the fulfillment by such Selling Shareholder of the
terms hereof and thereof will not require any consent, approval,
authorization, or other order of any court, regulatory body,
administrative agency or other governmental body (except as may be
required under the Act, state securities laws or Blue Sky laws) and
will not result in a breach of any of the terms and provisions of, or
constitute a default under, the organizational documents of such
Selling Shareholder, if not an individual, or any indenture, mortgage,
lease, deed of trust or other agreement or instrument to which such
Selling Shareholder is a party, or of any order, rule or regulation
applicable to such Selling Shareholder of any court or of any
regulatory body or administrative agency or other governmental body
having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to cause or result
in the stabilization or manipulation of the price of the Common Stock
and, other than as permitted by the Act, the Selling Shareholder will
not distribute any prospectus or other offering material in connection
with the offering of the Shares.
(iv) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties
of the Company contained herein or the information contained in the
Registration Statement, such Selling Shareholder (A) has no reason to
believe that the representations and warranties of the Company
contained in this Section 1 are not true and correct and (B) is
familiar with the Registration Statement and has no knowledge of any
material fact, condition or information not disclosed in the
Registration Statement which has adversely affected or may adversely
affect the business of the Company or any of the Subsidiaries; and the
sale of the Firm Shares (and the Option Shares) by such Selling
Shareholder pursuant hereto is not prompted by any information
concerning the Company or any of the Subsidiaries which is not set
forth in the
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Registration Statement. The information pertaining to such Selling
Shareholder under the caption "Selling Shareholders" in the Prospectus
is complete and accurate in all material respects.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the
Sellers agree to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $ per
share, the number of Firm Shares set forth opposite the name of each
Underwriter in Schedule I hereof, subject to adjustments in accordance with
Section 9 hereof. The number of Firm Shares to be purchased by each
Underwriter from each Seller shall be as nearly as practicable in the same
proportion to the total number of Firm Shares being sold by each Seller as
the number of Firm Shares being purchased by each Underwriter bears to the
total number of Firm Shares to be sold hereunder. The obligations of the
Company and of each of the Selling Shareholders shall be several and not
joint.
(b) Certificates in negotiable form for the total number of the
Shares to be sold hereunder by the Selling Shareholders have been placed in
custody with the Company as custodian (the "Custodian") pursuant to the
Custodian Agreement executed by each Selling Shareholder for delivery of
all Firm Shares and any Option Shares to be sold hereunder by the Selling
Shareholders. Each of the Selling Shareholders specifically agrees that
the Firm Shares and any Option Shares represented by the certificates held
in custody for the Selling Shareholders under the Custodian Agreement are
subject to the interests of the Underwriters hereunder, that the
arrangements made by the Selling Shareholders for such custody are to that
extent irrevocable, and that the obligations of the Selling Shareholders
hereunder shall not be terminable by any act or deed of the Selling
Shareholders (or by any other person, firm or corporation including the
Company, the Custodian or the Underwriters) or by operation of law
(including the death of an individual Selling Shareholder or the
dissolution of a corporate Selling Shareholder) or by the occurrence of any
other event or events, except as set forth in the Custodian Agreement. If
any such event should occur prior to the delivery to the Underwriters of
the Firm Shares (or the Option Shares) hereunder, certificates for the Firm
Shares or the Options Shares, as the case may be, shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as
if such event had not occurred. The Custodian is authorized to receive and
acknowledge receipt of the proceeds of sale of the Shares held by it
against delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in
New York Clearing House funds by certified or bank cashier's checks or
similar next day funds drawn to the order of the Company for the Shares to
be sold by it and to the order of the Company, "as Custodian" for the
Shares to be sold by the Selling Shareholders, in each case against
delivery of certificates therefor to the Representatives for the several
accounts of the Underwriters. Such payment and delivery are to be made at
the offices of Alex. ▇▇▇▇▇ & Sons Incorporated, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, at 10:00
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a.m., Baltimore time, on the third business day after the date of this
Agreement (or on the fourth business day thereafter if pricing of the
offering of the Shares shall occur after 4:30 p.m., Baltimore time) or at
such other time and date not later than five business days thereafter as
you and the Company shall agree upon, such time and date being herein
referred to as the "Closing Date." (As used herein, "business day" means a
day on which the New York Stock Exchange is open for trading and on which
banks in New York are open for business and not permitted by law or
executive order to be closed.) The certificates for the Firm Shares will
be delivered in such denominations and in such registrations as the
Representatives request in writing not later than the second full business
day prior to the Closing Date, and will be made available for inspection by
the Representatives at least one business day prior to the Closing Date.
(d) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth,
the Company and the Selling Shareholders listed on Schedule III hereto
hereby grant an option to the several Underwriters to purchase the Option
Shares at the price per share as set forth in the first paragraph of this
Section 2. The maximum number of Option Shares to be sold by the Company
and the Selling Shareholders is set forth opposite their respective names
on Schedule III hereto. The option granted hereby may be exercised in
whole or in part by giving written notice (i) at any time before the
Closing Date and (ii) from time to time thereafter within 30 days after the
date of this Agreement, by you, as Representatives of the several
Underwriters, to the Company, the Attorney-in-Fact, and the Custodian
setting forth the number of Option Shares as to which the several
Underwriters are exercising the option, the names and denominations in
which the Option Shares are to be registered and the time and date at which
such certificates are to be delivered. If the option granted hereby is
exercised in part, the respective number of Option Shares to be sold by the
Company and each of the Selling Shareholders listed in Schedule III hereto
shall be determined on a pro rata basis in accordance with the percentages
set forth opposite their names on Schedule III hereto, adjusted by you in
such manner as to avoid fractional shares. The time and date at which
certificates for Option Shares are to be delivered shall be determined by
the Representatives but shall not be earlier than three nor later than 10
full business days after the exercise of such option, nor in any event
prior to the Closing Date (such time and date being herein referred to as
an "Option Closing Date"). If the date of exercise of an option is three
or more days before the Closing Date, the notice of exercise shall set the
Closing Date as the Option Closing Date. The number of Option Shares to be
purchased by each Underwriter shall be in the same proportion to the total
number of Option Shares being purchased as set forth in the notice from the
Representatives as the number of Firm Shares being purchased by such
Underwriter bears to the total number of Firm Shares, adjusted by you in
such manner as to avoid fractional shares. The option with respect to the
Option Shares granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Shares by the Underwriters. You,
as Representatives of the several Underwriters, may cancel any such option
at any time prior to its expiration by giving written notice of such
cancellation to the Company and the Attorney-in-Fact. To the extent, if
any, that an option is exercised, payment for the Option Shares shall be
made on the Option Closing Date in New York Clearing House
-12-
funds by certified or bank cashier's check or similar next day funds drawn
to the order of the Company for the Option Shares to be sold by it and to
the order of the Company, as "Custodian" for the Option Shares to be sold
by the Selling Shareholders, against delivery of certificates therefor at
the offices of Alex. ▇▇▇▇▇ & Sons Incorporated, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
(e) If on the Closing Date or on an Option Closing Date, as the case
may be, any Selling Shareholder fails to sell the Firm Shares or Option
Shares which such Selling Shareholder has agreed to sell on such date as
set forth in Schedule II and III hereto, the Company agrees that it will
sell or arrange for the sale of that number of shares of Common Stock to
the Underwriters which represents Firm Shares or the Option Shares which
such Selling Shareholder has failed to so sell, as set forth in Schedule II
and III hereto, or such lesser number as may be requested by the
Representatives.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it
advisable to do so. The Firm Shares are to be initially offered to the
public at the initial public offering price set forth in the Prospectus.
The Representatives may from time to time thereafter change the public
offering price and other selling terms. To the extent, if at all, that any
Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with
a Master Agreement Among Underwriters entered into by you and the several
other Underwriters.
4. COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in
Rule 430A of the Rules and Regulations is followed, to prepare and
timely file with the Commission under Rule 424(b) of the Rules and
Regulations a Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness
of the Registration Statement in reliance on Rule 430A of the Rules
and Regulations and (B) not file any amendment to the Registration
Statement (including any filing under Rule 462(b)), any term sheet
under Rule 434 or any supplement to the Prospectus of which the
Representatives shall not previously have been advised and furnished
with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Rules and
Regulations.
-13-
(ii) The Company will advise the Representatives promptly (A)
when the Registration Statement or any post-effective amendment
thereto shall have become effective, (B) of receipt of any comments
from the Commission, (C) of any request of the Commission for
amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information, and (D) of the issuance
by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus or of the
institution or threatened institution of any proceedings for that
purpose. The Company will use its best efforts to prevent the
issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof,
if issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws
of such jurisdictions as the Representatives may reasonably have
designated in writing and will make such applications, file such
documents, and furnish such information as may be reasonably required
for that purpose, provided the Company shall not be required to
qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from
time to time, prepare and file such statements, reports, and other
documents, as are or may be required to continue such qualifications
in effect for a period of one year from the date of the offering of
the Shares or such longer period as the Representatives may reasonably
request.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request, and the
Company hereby consents to the use of such copies for purposes
permitted by the Act. The Company will deliver to, or upon the order
of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus
in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to
the Representatives at or before the Closing Date, four signed copies
of the Registration Statement and all amendments thereto including all
exhibits filed therewith, and will deliver to the Representatives such
number of copies of the Registration Statement (including such number
of copies of the exhibits filed therewith that may reasonably be
requested), and of all amendments thereto, as the Representatives may
reasonably request. The copies of the Registration Statement and the
Prospectus, and all amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to ▇▇▇▇▇, except to
the extent permitted by the Rules and Regulations.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange
Act"), and the rules and regulations of the Commission thereunder, so
as to permit the completion of the
-14-
distribution of the Shares as contemplated in this Agreement and the
Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur
as a result of which, in the judgment of the Company or in the
reasonable opinion of the Underwriters, it becomes necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading, or, if it is necessary at
any time to amend the Registration Statement or supplement the
Prospectus to comply with any law, the Company promptly will, subject
to Section 4(a)(i), prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to
the Prospectus so that the Prospectus as so amended or supplemented
will not, in the light of the circumstances when it is so delivered,
be misleading, or so that the Prospectus will comply with the law, and
the Company will furnish to the Underwriters such number of copies of
such amendment or supplement as the Underwriters may reasonably
request.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration
Statement, an earning statement (which need not be audited) in
reasonable detail, covering a period of at least 12 consecutive months
beginning after the effective date of the Registration Statement,
which earning statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(vii) The Company will, for a period of five years from the
Closing Date, deliver to the Representatives copies of annual reports
and copies of all other documents, reports and information furnished
by the Company to its stockholders or filed with any securities
exchange pursuant to the requirements of such exchange or with the
Commission pursuant to the Act or the Exchange Act. The Company will
deliver to the Representatives similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and
Regulations, which are not consolidated in the Company's financial
statements.
(viii) No offering, sale, short sale, pledge or other
disposition of any shares of Common Stock of the Company or other
securities convertible into or exchangeable or exercisable for shares
of Common Stock or derivative of Common Stock (or agreement for such)
will be made for a period of 180 days after the date of this
Agreement, directly or indirectly, by the Company without the prior
written consent of Alex. ▇▇▇▇▇ & Sons Incorporated. The foregoing
shall not apply to (A) the Shares to be sold hereunder and (B) any
shares of Common Stock issued by the Company upon the exercise of an
option or warrant or the conversion of security outstanding on the
date hereof and described in the Prospectus.
-15-
(ix) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on The Nasdaq National Market.
(x) The Company has caused each officer and director and
specific shareholders of the Company to furnish to you, on or prior to
the date of this Agreement, a letter or letters, in form and substance
satisfactory to the Representatives, pursuant to which each such
person shall agree not to offer, sell, sell short, pledge or otherwise
dispose of any shares of Common Stock or any other securities
convertible, exchangeable or exercisable for shares of Common Stock or
derivative of shares of Common Stock owned by such person or request
the registration for the offer or sale of any of the foregoing (or as
to which such person has the right to direct the disposition of) for a
period of 180 days after the date of this Agreement, directly or
indirectly, except with the prior written consent of Alex. ▇▇▇▇▇ &
Sons Incorporated ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with
the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required in accordance
with Rule 463 under the Act.
(xii) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a
manner as would require the Company or any of the Subsidiaries to
register as an investment company under the 1940 Act.
(xiii) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a
registrar for the Common Stock.
(xiv) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company.
(b) Each of the Selling Shareholders covenants and agrees with the
several Underwriters that:
(i) No offering, sale, short sale or other disposition of any
shares of Common Stock or other capital stock of the Company or other
securities convertible, exchangeable or exercisable for Common Stock
or derivative of Common Stock owned by the Selling Shareholder or
request for the registration of the offer or sale of any of the
foregoing (or as to which the Selling Shareholder has the right to
direct the disposition of) will be made for a period of 180 days after
the date of this Agreement, directly or indirectly, by such Selling
Shareholder
-16-
otherwise than hereunder or with the prior written consent of Alex.
▇▇▇▇▇ & Sons Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 and the Interest and Dividend Tax
Compliance Act of 1983 with respect to the transactions herein
contemplated, each of the Selling Shareholders agrees to deliver to
you prior to or at the Closing Date a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form
or statement specified by Treasury Department regulations in lieu
thereof).
(iii) Such Selling Shareholder will not take, directly or
indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any securities of the
Company.
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement,
including, without limiting the generality of the foregoing, the following:
accounting fees of the Company; the fees and disbursements of counsel for,
and any other advisors to, the Company; the cost of printing and delivering
to, or as requested by, the Underwriters, copies of the Registration
Statement, the Preliminary Prospectuses, the Prospectus, this Agreement,
any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase or sale of the Shares,
the Blue Sky survey and any supplements or amendments thereto; the
preparation, issuance and delivery of the certificates for the Shares to
the Underwriters; the filing fees of the Commission; the filing fees and
expenses (including legal fees and disbursements) incident to securing any
required review by the National Association of Securities Dealers, Inc.
(the "NASD") of the terms of the sale of the Shares; the listing fee and
other expenses incident to securing the listing of the Shares on The Nasdaq
National Market; and the expenses, including filing fees and the fees and
disbursements of counsel for the Underwriters, incurred in connection with
preparation of the Blue Sky survey and the qualification of the Shares
under State securities or Blue Sky laws. [The Selling Shareholders have
agreed with the Company to reimburse the Company for a portion of such
expenses.] To the extent, if at all, that any of the Selling Shareholders
engage special legal counsel to represent them in connection with this
offering, the fees and expenses of such counsel shall be borne by such
Selling Shareholder. Any stock or other transfer taxes or duties imposed
on the sale of the Shares to the several Underwriters will be paid by the
Sellers pro rata. The Company shall not be required to pay for any of the
Underwriters' expenses (other than those related to qualification under
NASD regulation and State securities or Blue Sky laws) except that, if this
Agreement shall not be consummated because the conditions in Section 6
hereof are not satisfied, or because this Agreement is terminated by the
Representatives pursuant to Section 11 hereof, or by reason of any failure,
refusal or inability on the part of the Company or the
-17-
Selling Shareholders to perform any undertaking or satisfy any condition of
this Agreement or to comply with any of the terms hereof on their part to
be performed, unless such failure to satisfy said condition or to comply
with said terms be due to the default or omission of any Underwriter, then
the Company shall reimburse the several Underwriters for reasonable
out-of-pocket expenses, including fees and disbursements of counsel,
reasonably incurred in connection with investigating, marketing and
proposing to market the Shares or in contemplation of performing their
obligations hereunder; but the Company and the Selling Shareholders shall
not in any event be liable to any of the several Underwriters for damages
on account of loss of anticipated profits from the sale by them of the
Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on an Option
Closing Date are subject to the accuracy, as of the Closing Date or each
Option Closing Date, as the case may be, of the representations and
warranties of the Company and the Selling Shareholders contained herein,
and to the performance by the Company and the Selling Shareholders of their
covenants and obligations hereunder and to the following additional
conditions:
(a) The Registration Statement (including any Rule 462(b)
Registration Statement) and all post-effective amendments thereto shall
have become effective and any and all filings required by Rule 424 and Rule
430A of the Rules and Regulations shall have been made, and any request of
the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No
stop order suspending the effectiveness of the Registration Statement, as
amended from time to time, shall have been issued and no proceedings for
that purpose shall have been taken or, to the knowledge of the Company or
the Selling Shareholders, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or State
court of competent jurisdiction shall have been issued as of the Closing
Date or the Option Closing Date, as the case may be, which would prevent
the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Pitney, ▇▇▇▇▇▇,
▇▇▇▇ & ▇▇▇▇▇, counsel for the Company and the Selling Shareholders, dated
the Closing Date or the Option Closing Date, as the case may be, addressed
to the Underwriters (and stating that it may be relied upon by counsel to
the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its
properties, conduct its business as described in the Registration
Statement and enter into and perform its obligations under this
Agreement; each of the Subsidiaries has been duly organized and is
validly existing as a corporation in good standing under the laws of
the
-18-
jurisdiction of its incorporation, with corporate power and authority
to own or lease its properties and conduct its business as described
in the Registration Statement; the Company and each of the
Subsidiaries are in good standing and duly qualified to transact
business in all jurisdictions in which the conduct of their business
requires such qualification, except where the failure to be in good
standing or to so qualify would not, whether singly or in the
aggregate, result in a Material Adverse Effect; and the outstanding
shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable
and are owned by the Company or a Subsidiary; and, to the best of such
counsel's knowledge, the outstanding shares of capital stock of each
of the Subsidiaries is owned free and clear of all liens, encumbrances
and equities and claims, and no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to
convert any obligations into any shares of capital stock or of
ownership interests in the Subsidiaries are outstanding. The only
subsidiaries of the Company are the subsidiaries listed on Exhibit 21
to the Registration Statement and certain other subsidiaries which,
when considered in the aggregate as a single subsidiary, do not
constitute a "significant subsidiary" as defined in rule 1-02 of
Regulations S-X.
(ii) To the best of the knowledge of such counsel, neither the
Company nor any Subsidiary is, or with the giving of notice or lapse
of time or both, will be, in violation of its charter or by-laws and
no default by the Company or any Subsidiary exists in the due
performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which
the Company or any Subsidiary is a party or to which the property of
the Company or a Subsidiary is subject.
(iii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of Common Stock have been duly authorized; the
outstanding shares of Common Stock, including the Shares to be sold by
the Selling Shareholders, have been duly authorized and validly issued
and are fully paid and non-assessable; all of the Shares conform to
the description thereof contained in the Prospectus; the certificates
for the Shares are in due and proper form and complies with all
applicable statutory requirements, with any applicable requirements of
the charter and by-laws of the Company and the requirements of The
Nasdaq National Market; the shares of Common Stock, including the
Option Shares, if any, to be sold by the Company pursuant to this
Agreement have been duly authorized and will be validly issued, fully
paid and non-assessable when issued and paid for as contemplated by
this Agreement; and no preemptive rights of stockholders exist with
respect to any of the Shares or the issue or sale thereof. No holders
of Shares will be subject to personal liability by being such a
holder.
-19-
(iv) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities
of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the
Company and there are no outstanding or authorized options, warrants
or rights of any character obligating the Company to issue any shares
of its capital stock or any securities convertible or exchangeable
into or evidencing the right to purchase or subscribe for any shares
of such stock; and except as described in the Prospectus, to the
knowledge of such counsel, no holder of any securities of the Company
or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell
or otherwise issue to them, or to permit them to underwrite the sale
of, any of the Shares or the right to have any shares of Common Stock
or other securities of the Company included in the Registration
Statement or the right, as a result of the filing of the Registration
Statement or otherwise, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(v) The Registration Statement, including any Rule 462(b)
Registration Statement, has become effective under the Act; any
required filing pursuant to Rule 424 has been made in the manner and
within the time period required by Rule 424 and, to the best of the
knowledge of such counsel, no stop order proceedings with respect to
the Registration Statement have been instituted or are pending or
threatened under the Act.
(vi) The Registration Statement, including any Rule 462(b)
Registration Statement, the Prospectus and each amendment or
supplement thereto comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations (except that
such counsel need express no opinion as to the financial statements
and related schedules contained therein). If Rule 434 has been relied
upon, the Prospectus was not "materially different" as such term is
used in Rule 434, from the prospectus included in the Registration
Statement at the time it became effective.
(vii) The statements under the captions "Business Property,"
"Business -- Litigation," "Capitalization," "Shares Eligible for
Future Sale" and "Certain Federal Income Tax Considerations" in the
Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of law, fairly summarize in
all material respects the information called for with respect to such
documents and matters.
(viii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are
not so filed or described as required, and such contracts and
documents as are summarized in the Registration Statement or the
Prospectus are fairly summarized in all material respects.
-20-
(ix) To the best of such counsel s knowledge, except as set
forth in the Prospectus, there is not pending or threatened any
action, suit, claim, proceeding, inquiry or investigation, to which
the Company or any Subsidiary is a party, or to which the property of
the Company or any Subsidiary is subject, before or brought by any
court or governmental agency or otherwise, which if determined
adversely to the Company or any of its Subsidiaries, might result,
whether singly or in the aggregate, in a Material Adverse Effect.
(x) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated (including the
issuance of the Shares and the use of the proceeds therefrom as
described in the Prospectus) do not and will not, whether with or
without the giving of notice or lapse of time or both, conflict with
or result in a breach of any of the terms or provisions of, or
constitute a 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 Subsidiary pursuant to any contract, indenture,
mortgage, lease, deed of trust, loan or credit agreement, or any other
agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the
Subsidiaries may be bound except for such conflicts, breaches or
defaults, liens, charges or encumbrances that would not, whether
singly or in the aggregate, have a Material Adverse Effect, nor will
such action result in any violation of the provisions of the charter
or by-laws of the Company or any Subsidiary, or to the best of such
counsel's knowledge, any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, governmental
instrumentality or court having jurisdiction over the Company or any
Subsidiary or their respective properties, assets or operations.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution
and delivery of this Agreement and the consummation of the
transactions herein contemplated (other than as may be required by the
NASD or as required by State securities and Blue Sky laws as to which
such counsel need express no opinion) except such as have been
obtained or made, specifying the same.
(xiii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement,
and application of the net proceeds therefrom as described in the
Prospectus, required to register as an investment company under the
1940 Act.
-21-
(xiv) The Selling Shareholders Agreements have been duly
authorized, executed and delivered on behalf of the Selling
Shareholders.
(xv) Each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as required by
State securities and Blue Sky laws as to which such counsel need
express no opinion), to sell, assign, transfer and deliver the portion
of the Shares to be sold by such Selling Shareholder.
(xvi) The Custodian Agreement and the Power of Attorney executed
and delivered by each Selling Shareholder are valid and binding and
enforceable against the executing Selling Shareholder in accordance
with their terms.
(xvii) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) have
acquired good and marketable title to the Shares being sold by each
Selling Shareholder on the Closing Date, and the Option Closing Date,
as the case may be, free and clear of all liens, encumbrances,
equities and claims.
In rendering such opinion Pitney, ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ may rely as to
matters governed by the laws of states other than New Jersey, the General
Corporation Laws of the State of Delaware or Federal laws on local counsel
in such jurisdictions (and as to the matters set forth in subparagraphs
(xiv) through (xvii) on opinions of other counsel representing the
respective Selling Shareholders, provided that in each case Pitney, ▇▇▇▇▇▇,
▇▇▇▇ & ▇▇▇▇▇ shall state that they believe that they and the Underwriters
are justified in relying on such other counsel. In addition to the matters
set forth above, such opinion shall also include a statement to the effect
that nothing has come to the attention of such counsel which leads them to
believe that (i) the Registration Statement, as of the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the
Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and (ii) the Prospectus, or any supplement thereto, on the
date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information contained therein). With respect to such
statement, such counsel may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(c) The Representatives shall have received from ▇▇▇▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇▇▇▇ counsel for the Underwriters, an opinion dated the Closing Date
or the Option Closing Date, as the case may be, in form and substance
satisfactory to the Representatives, with respect to
-22-
corporate proceedings by the Company, the form of the Registration
Statement and the Prospectus (other than financial and statistical data),
the validity of the Shares and other related matters as the Representatives
may reasonably request. In rendering such opinion ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
may rely as to all matters governed other than by the laws of the State of
New York, the General Corporation laws of the State of Delaware or Federal
laws on the opinion of counsel referred to in Paragraph (b) of this Section
6. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of
such counsel which leads them to believe that (i) the Registration
Statement, or any amendment thereto, as of the time it became effective
under the Act (but after giving effect to any modifications incorporated
therein pursuant to Rule 430A under the Act) as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact, necessary in order to
make the statements, in the light of the circumstances under which they are
made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information contained
therein). With respect to such statement, may state that their belief is
based upon the procedures set forth therein, but is without independent
check and verification.
(d) The Representatives shall have received at or prior to the
Closing Date from ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ a memorandum or summary, in form
and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under
the State securities or Blue Sky laws of such jurisdictions as the
Representatives may reasonably have designated to the Company.
(e) The Representatives shall have received, on each of the date
hereof, the Closing Date and the Option Closing Date, as the case may be, a
letter dated the date hereof, the Closing Date or the Option Closing Date,
as the case may be, in form and substance satisfactory to the
Representatives, of KPMG Peat Marwick LLP, confirming that they are
independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material
respects with the applicable accounting requirements of the Act and the
related published Rules and Regulations; and containing such other
statements and information as is ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements
and certain financial and statistical information contained in the
Registration Statement and Prospectus.
(f) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates
of the Chief Executive Officer and the Chief Financial Officer of the
Company to the effect that, as of the Closing
-23-
Date or the Option Closing Date, as the case may be, each of them severally
represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have
been taken or are, to his or her knowledge, contemplated by the
Commission;
(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be, and the Company has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Date or the Option
Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to
Rules 424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, the statements
contained in the Registration Statement and the Prospectus were true
and correct as of their respective dates, and such Registration
Statement and Prospectus did not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which
has not been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the
earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the
Company and the Subsidiaries taken as a whole, whether or not arising
in the ordinary course of business.
(g) The Company and the Selling Shareholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein
and related matters as the Representatives may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, have been approved for
listing upon notice of issuance on The Nasdaq National Market.
(i) The Lockup Agreements described in Section 4 shall be in full
force and effect.
-24-
(j) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in
all material respects satisfactory to the Representatives and to counsel
for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated
by the Representatives by notifying the Company and the Selling
Shareholders of such termination in writing or by telegram at or prior to
the Closing Date or the Option Closing Date, as the case may be.
In such event, the Selling Shareholders, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing
Date, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
(a) The Company and the Selling Shareholders, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of the Act and the
Exchange Act, against any losses, claims, damages or liabilities to which
such Underwriter or any such controlling person may become subject under
the Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto, or (ii) 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; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in
connection with investigating or defending any such loss, claim, damage or
liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Shares, whether or not
such Underwriter or controlling person is a party to any action or
proceeding; provided, however, that the Company and the Selling
Shareholders will not be liable in any such case
-25-
to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement, or
omission or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representatives specifically for use in the
preparation thereof. In no event, however, shall the liability of any
Selling Shareholder for indemnification under this Section 8(a) exceed the
proceeds received by such Selling Shareholder from the Underwriters in the
offering. This indemnity agreement will be in addition to any liability
which the Company or the Selling Shareholders may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement, the Selling Shareholders, and each
person, if any, who controls the Company or the Selling Shareholders within
the meaning of the Act or the Exchange Act, against any losses, claims,
damages or liabilities to which the Company or any such director, officer,
Selling Shareholder or controlling person may become subject under the Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii)
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were
made; and will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, Selling Shareholder or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided, however,
that each Underwriter will be liable in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission has been made in the Registration Statement,
any Preliminary Prospectus, the Prospectus or such amendment or supplement,
in reliance upon and in conformity with written information furnished to
the Company by or through the Representatives specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to this Section 8, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought
(the "indemnifying party") in writing. No indemnification provided for in
Section 8(a) or (b) shall be available to any party who shall fail to give
notice as provided in this Section 8(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related
and was materially prejudiced by the failure to give such notice, but the
failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified
party for contribution or otherwise than on account of the
-26-
provisions of Section 8(a) or (b). In case any such proceeding shall be
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party and shall pay
as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred (or within 30 days
of presentation) the fees and expenses of the counsel retained by the
indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them
or (iii) the indemnifying party shall have failed to assume the defense and
employ counsel acceptable to the indemnified party within a reasonable
period of time after notice of commencement of the action. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm (and local
counsel) for all such indemnified parties. Such firm shall be designated
in writing by you in the case of parties indemnified pursuant to Section
8(a) and by the Company and the Selling Shareholders in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent (which consent shall not be unreasonably withheld) 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 from and
against any loss or liability by reason of such settlement or judgment. In
addition, the indemnifying party will not, without the prior written
consent of the indemnified party (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment in
any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified
party is an actual or potential party to such claim, action or proceeding)
unless such settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising out of such
claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) 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 from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute
to such amount paid or payable by such indemnified party in such proportion
as is appropriate to reflect not only
-27-
such relative benefits but also the relative fault of the Company and the
Selling Shareholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect
thereof), 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 shall deemed to be in the
same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Shareholders
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this
Section 8(d) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 8(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) referred to
above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation, and (iii) no
Selling Shareholder shall be required to contribute any amount in excess of
the lesser of (A) that proportion of the total of such losses, claims,
damages or liabilities indemnified or contributed against equal to the
proportion of the total Shares sold hereunder which is being sold by such
Selling Shareholder, or (B) the proceeds received by such Selling
Shareholder from the Underwriters in the offering. The Underwriters'
obligations in this Section 8(d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may
-28-
join him or it as an additional defendant in any such proceeding in which
such other contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A
successor to any Underwriter, or to the Company, its directors or officers,
or any person controlling the Company, shall be entitled to the benefits of
the indemnity, contribution and reimbursement agreements contained in this
Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such
date (otherwise than by reason of any default on the part of the Company or
a Selling Shareholder), you, as Representatives of the Underwriters, shall
use your reasonable efforts to procure within 36 hours thereafter one or
more of the other Underwriters, or any others, to purchase from the Company
and the Selling Shareholders such amounts as may be agreed upon and upon
the terms set forth herein, the Firm Shares or option Shares, as the case
may be, which the defaulting Underwriter or Underwriters failed to
purchase. If during such 36 hours you, as such Representatives, shall not
have procured such other Underwriters, or any others, to purchase the Firm
Shares or Option Shares, as the case may be, agreed to be purchased by the
defaulting Underwriter or Underwriters, then (a) if the aggregate number of
shares with respect to which such default shall occur does not exceed 10%
of the Firm Shares or Option Shares, as the case may be, covered hereby,
the other Underwriters shall be obligated, severally, in proportion to the
respective numbers of Firm Shares or Option Shares, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Shares
or Option Shares, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate number of Firm
Shares or Option Shares, as the case may be, with respect to which such
default shall occur exceeds 10% of the Firm Shares or Option Shares, as the
case may be, covered hereby, the Company and the Selling Shareholders or
you as the Representatives of the Underwriters will have the right, by
written notice given within the next 36-hour period to the parties to this
Agreement, to terminate this Agreement without liability on the part of the
non-defaulting Underwriters or of the Company or of the Selling
Shareholders except to the extent provided in Section 8 hereof. In the
event of a default by any Underwriter or Underwriters, as set forth in this
Section 9, the Closing Date or Option Closing Date, as
-29-
the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representatives, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes
any person substituted for a defaulting Underwriter. Any action taken
under this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this
Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: if to the Underwriters, to Alex.
▇▇▇▇▇ & Sons Incorporated, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: _____________________; with a copy to Alex. ▇▇▇▇▇ & Sons
Incorporated, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Attention: General Counsel; if to the Company or the Selling Shareholders,
to Factory Card Outlet, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ________________; with a copy to Pitney, ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
11. TERMINATION.
This Agreement may be terminated by you by notice to the Company and
the Selling Shareholders as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change
in or affecting the condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise)
or prospects of the Company and its Subsidiaries taken as a whole, whether
or not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or
other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation,
declaration, emergency, calamity, crisis or change on the financial markets
of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of
the Shares, or (iii) suspension of trading in securities generally on the
New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (iv) the enactment, publication, decree
or other promulgation of any
-30-
statute, regulation, rule or order of any court or other governmental
authority which in your opinion materially and adversely affects or may
materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading in the rating of the Company's debt
securities by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 463(g) under the Exchange act) or (vii)
the taking of any action by any governmental body or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person
will have any right or obligation hereunder. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign merely
because of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company, the Selling Shareholders and the Underwriters acknowledge
and agree that the only information furnished or to be furnished by any
Underwriter to the Company for inclusion in any Prospectus or the
Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to
the Underwriters), legends required by Item 502(d) of Regulation S-K under
the Act and the information under the caption "Underwriting" in the
Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation
made by or on behalf of any Underwriter or controlling person thereof, or
by or on behalf of the Company or its directors or officers and (c)
delivery of and payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
-31-
If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling
Shareholders, the Company and the several Underwriters in accordance with
its terms.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Shareholder represents by so doing that he has been duly
appointed as Attorney-in-Fact by such Selling Shareholder pursuant to a
validly existing and binding Power of Attorney which authorizes such
Attorney-in-Fact to take such action.
Very truly yours,
FACTORY CARD OUTLET, INC.
By
------------------------------
Name
Title
[Selling Shareholders]
By
------------------------------
[Attorney-in-Fact]
The foregoing Underwriting
Agreement is hereby confirmed
and accepted as of the date
first above written.
-32-
ALEX, ▇▇▇▇▇ & SONS INCORPORATED
--------------------------------
--------------------------------
As Representatives of the several
Underwriters listed on Schedule I
By: Alex, ▇▇▇▇▇ & Sons Incorporated
By:
-----------------------------
Authorized Officer
-33-
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- -----------------------------
Alex, ▇▇▇▇▇ & Sons Incorporated
▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
-------------
Total
=============
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
Number of Firm Shares
Selling Shareholder to be Sold
------------------- --------------------------
-------------
Total
=============
SCHEDULE III
SCHEDULE OF OPTION SHARES
Number of Maximum Number Percentage of
Name of Seller of Option Shares Total Option Shares
%
----------- ----
Total 100%
=========== ====