Exhibit 1.1
OH&S DRAFT
(Subject to client review)
2,700,000 SHARES OF COMMON STOCK
TOYMAX INTERNATIONAL, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
_____________, 1997
▇▇▇▇▇▇▇▇▇▇ & CO. INC.
WEDBUSH ▇▇▇▇▇▇ SECURITIES
As Representatives of the Several
Underwriters listed on Schedule A hereto
c/o Fahnestock & Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Toymax International, Inc., a Delaware corporation (the "Company"),
confirms its agreement with ▇▇▇▇▇▇▇▇▇▇ & Co. Inc. ("▇▇▇▇▇▇▇▇▇▇"), Wedbush ▇▇▇▇▇▇
Securities ("Wedbush") and each of the underwriters named in Schedule A hereto
(collectively, the "Underwriters," which term shall also include any underwriter
substituted as hereinafter provided in SECTION 11), for whom ▇▇▇▇▇▇▇▇▇▇ and
Wedbush are acting as representatives (the "Representatives"), with respect to
the sale by the Company and the purchase by the Underwriters, acting severally
and not jointly, of the respective numbers of shares of the Company's common
stock, $.01 par value per share ("Common Stock"), set forth in Schedule A
hereto. Such shares of Common Stock are hereinafter referred to as the "Firm
Shares."
Upon your request, as provided in SECTION 2(b) of this Agreement, the
Company shall also sell to the Underwriters, acting severally and not jointly,
up to an additional 405,000 shares of Common Stock for the purpose of covering
over-allotments, if any (the "Option Shares"). The Firm Shares and the Option
Shares are sometimes hereinafter referred to as the "Shares." The Company also
proposes to issue and sell to the Representatives warrants (the
"Representatives' Warrants") pursuant to the Representatives' Warrant Agreement
(the "Representatives' Warrant Agreement") for the purchase of an additional
aggregate 195,750 shares of Common Stock. The shares of Common Stock issuable
upon exercise of the Representatives' Warrants are hereinafter referred to as
the "Representatives' Shares." The Firm Shares, the Option Shares, the
Representative's Warrants and the Representative's Shares (collectively,
hereinafter referred to as the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
Prior to August 6, 1997, the Company's business was conducted by
Toymax Inc., a New York corporation, Toymax (H.K.) Limited, a private limited
company organized under the laws of Hong Kong, Toymax (Bermuda) Limited, a
company organized under the laws of Bermuda, Toymax (Canada) Limited, a
corporation organized under the laws of the Province of Ontario and Toymax
(U.K.) Limited, a company organized under the laws of England and Wales
(collectively, the "Predecessors"). The Company represents and warrants that
all of the representations and warrants of the Company contained herein shall,
except as described in the Registration Statement and the Prospectus referred to
below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, each of the Underwriters as of the
date hereof, and as of the Closing Date (hereinafter defined) and the Option
Closing Date (hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (No. 333-33409), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Firm Shares and the Option Shares under the Securities Act of 1933, as
amended (the "Act"), which registration statement and amendment or amendments
have been prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Regulations") of the Commission under
the Act. The Company will promptly file a further amendment to said
registration statement in the form heretofore delivered to the Underwriters, and
will not file any other amendment thereto to which the Underwriters shall have
objected in writing after having been furnished with a copy thereof. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein
(including, but not limited to those documents or information incorporated by
reference therein) and all information deemed to be a part thereof as of such
time pursuant to paragraph (b) of Rule 430(A) of the Regulations), is
hereinafter called the "Registration Statement", and the form of prospectus in
the form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, is hereinafter called the "Prospectus." For purposes hereof,
"Rules and Regulations" mean the rules and regulations adopted by the Commission
under either the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable.
(b) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus or any part of any thereof and no
proceedings for a stop order suspending the effectiveness of the Registration
Statement or any of the Company's securities have been instituted or are pending
or to the Company's knowledge, threatened. Each of the Preliminary Prospectus,
Registration Statement and Prospectus at the time of filing thereof conformed
with the requirements of the Act and the Rules and Regulations, and none of the
Preliminary Prospectus, Registration Statement or Prospectus at the time of
filing thereof contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein and necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, PROVIDED, HOWEVER, that this representation and
warranty does not apply to statements made or statements omitted in reliance
upon and in conformity with written information furnished to the Company with
respect to the Underwriters by or on behalf of the Underwriters expressly for
use in such Preliminary Prospectus, Registration Statement or Prospectus.
(c) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and each Option Closing Date, if
any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus will contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules and
Regulations; neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, PROVIDED, HOWEVER, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of any Underwriter expressly for use in the
Preliminary Prospectus, Registration Statement or Prospectus or any amendment
thereof or supplement thereto.
(d) Each of the Company, Toymax Inc. ("Toymax N.Y."), Toymax
(H.K.) Limited ("Toymax (H.K.)"), Toymax (Bermuda) Limited ("Toymax Bermuda"),
Toymax (Canada) Limited ("Toymax (Canada)") and Toymax (U.K.) Limited ("Toymax
UK") has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation. Toymax NY,
Toymax (H.K.), Toymax Bermuda, Toymax (Canada) and Toymax UK shall collectively
be referred to herein as the "Subsidiaries." Neither the Company nor the
Subsidiaries owns an interest in any corporation, partnership, trust, joint
venture or other business entity. Each of the Company and its Subsidiaries is
duly qualified and licensed and in good standing as a foreign corporation in
each jurisdiction in which its ownership or leasing of any properties or the
character of its operations requires such qualification or licensing. Each of
the Company and its Subsidiaries has all requisite corporate power and
authority, and each of the Company and its Subsidiaries has obtained any and all
necessary authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over environmental or
similar matters), to own or lease its properties and conduct its business as
described in the Prospectus; each of the Company and its Subsidiaries is and has
been doing business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all federal, state
and local laws, rules and regulations; and neither the Company nor the
Subsidiaries has received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially and
adversely affect the condition, financial or otherwise, or the earnings,
position, prospects, value, operation, properties, business or results of
operations of the Company and its Subsidiaries, taken as a whole. The
disclosures in the Registration Statement concerning the effects of federal,
state and local laws, rules and regulations on the Company's and the
Subsidiaries' business as currently conducted and as contemplated are correct in
all material respects and do not omit to state a material fact
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necessary to make the statements contained therein not misleading in light of
the circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Closing Date and the Option Closing Date, if any, based upon the
assumptions set forth therein, and the Company is not a party to or bound by any
instrument, agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this Agreement,
the Representatives' Warrant Agreement and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company conform
or, when issued and paid for, will conform, in all respects to all statements
with respect thereto contained in the Registration Statement and the Prospectus.
All issued and outstanding securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable and the holders thereof
have no rights of rescission with respect thereto, and are not subject to
personal liability by reason of being such holders; and none of such securities
were issued in violation of the preemptive rights of any holders of any security
of the Company or similar contractual rights granted by the Company. The
Securities are not and will not be subject to any preemptive or other similar
rights of any stockholder, have been duly authorized and, when issued, paid for
and delivered in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable and will conform to the description thereof contained in
the Prospectus; the holders thereof will not be subject to any liability solely
by reason of being such holders; all corporate action required to be taken for
the authorization, issue and sale of the Securities has been duly and validly
taken; and the certificates representing the Securities will be in due and
proper form. Upon the issuance and delivery pursuant to the terms hereof of the
Securities to be sold by the Company hereunder, the Underwriters or the
Representatives, as the case may be, will acquire good and marketable title to
such Securities free and clear of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind whatsoever.
(f) The consolidated financial statements, including the related
notes and schedules thereto, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus fairly present the financial position,
income, changes in cash flow, changes in stockholders' equity, and the results
of operations of the Company and the Subsidiaries at the respective dates and
for the respective periods to which they apply and the pro forma financial
information included in the Registration Statement and Prospectus presents
fairly, on a basis consistent with that of the audited financial statements
included therein, what the Company's pro forma capitalization would have been
for the respective periods and as of the respective dates to which they apply
after giving effect to the adjustments described therein. Such financial
statements have been prepared in conformity with generally accepted accounting
principles and the Rules and Regulations, consistently applied throughout the
periods involved. There has been no adverse change or development involving a
material prospective change in the condition, financial or otherwise, or in the
earnings, position, prospects, value, operation, properties, business, or
results of operations of the Company and the Subsidiaries whether or not arising
in the ordinary course of business, since the date of the financial statements
included in the Registration Statement and the Prospectus, and the outstanding
debt, the property, both tangible and intangible, and the business of the
Company and the Subsidiaries conform in all material
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respects to the descriptions thereof contained in the Registration Statement and
the Prospectus. Financial information set forth in the Prospectus under the
headings "Summary Consolidated Financial Data," "Selected Consolidated Financial
Data," "Capitalization," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," fairly present, on the basis stated in the
Prospectus, the information set forth therein, have been derived from or
compiled on a basis consistent with that of the audited financial statements
included in the Prospectus.
(g) Each of the Company and the Subsidiaries (i) has paid all
federal, state, local, and foreign taxes for which it is liable and for which
payment is due, including, but not limited to, withholding taxes and amounts
payable under Chapters 21 through 24 of the Internal Revenue Code of 1986 (the
"Code"), and has furnished all information returns it is required to furnish
pursuant to the Code, (ii) has established adequate reserves for such taxes
which are not due and payable, and (iii) does not have any tax deficiency or
claims outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable
by or on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriters of the
Securities to be sold by the Company hereunder and the purchase by the
Representatives of the Representatives' Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement or
the Representatives' Warrant Agreement, or (iv) resales of the Shares in
connection with the distribution contemplated hereby.
(i) Each of the Company and the Subsidiaries maintains insurance
policies, including, but not limited to, general liability, product liability
and property insurance, which insures the Company, the Subsidiaries and their
respective employees, against such losses and risks generally insured against by
comparable businesses. Neither the Company nor any of the Subsidiaries (A) has
failed to give notice or present any insurance claim with respect to any matter,
including but not limited to the Company's business, property or employees,
under the insurance policy or surety bond in a due and timely manner, (B) has
any disputes or claims against any underwriter of such insurance policies or
surety bonds or has not failed to pay any premiums due and payable thereunder,
or (C) has failed to comply with all conditions contained in such insurance
policies and surety bonds. There are no facts or circumstances under any such
insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company or any Subsidiary.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar matters),
domestic or foreign, pending or threatened against (or circumstances that may
give rise to the same), or involving the properties or business of, the Company
or any of the Subsidiaries which (i) questions the validity of the capital stock
of the Company, this Agreement or the Representatives' Warrant Agreement or of
any action taken or to be taken by the Company pursuant to or in connection with
this Agreement or the Representatives' Warrant Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all material respects), or (iii) might materially and
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adversely affect the condition, financial or otherwise, or the earnings,
position, prospects, stockholders' equity, value, operation, properties,
business or results of operations of the Company.
(k) The Company has full legal right, corporate power and
authority to authorize, issue, deliver and sell the Securities, enter into this
Agreement and the Representatives' Warrant Agreement and to consummate the
transactions provided for in such agreements; and this Agreement and the
Representatives' Warrant Agreement have each been duly and properly authorized,
executed and delivered by the Company. Each of this Agreement and the
Representatives' Warrant Agreement constitutes a legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, except (i) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification or contribution provisions may be limited under applicable
laws or the public policies underlying such laws and (iii) that the remedies of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceedings may be brought. None of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the Representatives'
Warrant Agreement, its performance hereunder and thereunder, its consummation of
the transactions contemplated herein and therein, or the conduct of its business
as described in the Registration Statement, the Prospectus, and any amendments
or supplements thereto, conflicts with or will conflict with or results or will
result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or result in the creation or
imposition of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any property
or assets (tangible or intangible) of the Company or the Subsidiaries pursuant
to the terms of, (i) the certificate of incorporation or by-laws of any of the
Company or the Subsidiaries, (ii) any license, contract, indenture, mortgage,
deed of trust, voting trust agreement, stockholders agreement, note, loan or
credit agreement or any other agreement or instrument to which any of the
Company or the Subsidiaries is a party or by which it is or may be bound or to
which any of its properties or assets (tangible or intangible) is or may be
subject, or any indebtedness, or (iii) any statute, judgment, decree, order,
rule or regulation applicable to any of the Company or the Subsidiaries of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over any of the Company or the Subsidiaries or any of its
activities or properties.
(l) Except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court, regulatory body,
government agency or other body, domestic or foreign, is required for the
issuance of the Shares pursuant to the Prospectus and the Registration
Statement, the issuance of the Representatives' Warrants, the performance of
this Agreement and the Representatives' Warrant Agreement and the transactions
contemplated hereby and thereby, including without limitation, any waiver of any
preemptive, first refusal or other rights that any entity or person may have for
the issue and/or sale of any of the Shares or the Representatives' Warrants,
except such as have been or may be obtained under the Act or may be required
under state securities or Blue Sky laws in connection with the
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Underwriters' purchase and distribution of the Shares, and the Representatives'
Warrants to be sold by the Company hereunder and under the Representative's
Warrant Agreement.
(m) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which any of the Company or the Subsidiaries is a
party or by which it may be bound or to which any of its assets, properties or
business may be subject have been duly and validly authorized, executed and
delivered by the Company, and constitute the legal, valid and binding agreements
of the Company or the Subsidiaries, as the case may be, enforceable against the
Company, in accordance with their respective terms. The descriptions in the
Registration Statement of agreements, contracts and other documents are accurate
in all material respects and fairly present the information required to be shown
with respect thereto on Form S-1, and there are no contracts or other documents
which are required by the Act to be described in the Registration Statement or
filed as exhibits to the Registration Statement which are not described or filed
as required, and the exhibits which have been filed are in all material respects
complete and correct copies of the documents of which they purport to be copies.
(n) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, neither the Company
nor any of the Subsidiaries has (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money, (ii) entered
into any transaction other than in the ordinary course of business, or
(iii) declared or paid any dividend or made any other distribution on or in
respect of its capital stock of any class, and there has not been any change in
the capital stock, or any material change in the debt (long or short term) or
liabilities or material adverse change in or affecting the general affairs,
management, financial operations, stockholders' equity or results of operations
of the Company or any of the Subsidiaries.
(o) No default exists in the due performance and observance of
any term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
stockholders agreement, partnership agreement, note, loan or credit agreement,
purchase order, or any other agreement or instrument evidencing an obligation
for borrowed money, or any other material 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 or to which the property or assets (tangible or
intangible) of the Company is subject or affected.
(p) Each of the Company and the Subsidiaries has generally
enjoyed a satisfactory employer-employee relationship with its employees and is
in compliance with all federal, state, local, and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. There are no pending investigations involving
the Company or any of the Subsidiaries by the U.S. Department of Labor, or any
other governmental agency responsible for the enforcement of such federal,
state, local, or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company or any of the Subsidiaries
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any of the Subsidiaries, or any predecessor entity, and
none
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has ever occurred. No representation question exists respecting the employees
of the Company or any of the Subsidiaries, and no collective bargaining
agreement or modification thereof is currently being negotiated by the Company
and the Subsidiaries. No grievance or arbitration proceeding is pending under
any expired or existing collective bargaining agreements of the Company or any
of the Subsidiaries. No labor dispute with the employees of the Company exists,
or, is imminent.
(q) Except as described in the Prospectus, neither the Company
nor any of the Subsidiaries maintains, sponsors or contributes to any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a "multiemployer plan" as such terms are defined in SECTIONS
3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") ("ERISA Plans"). Neither the Company nor any
of the Subsidiaries maintains or contributes, now or at any time previously, to
a defined benefit plan, as defined in SECTION 3(35) of ERISA. No ERISA Plan (or
any trust created thereunder) has engaged in a "prohibited transaction" within
the meaning of SECTION 406 of ERISA or SECTION 4975 of the Code, which could
subject the Company or any of the Subsidiaries to any tax penalty on prohibited
transactions and which has not adequately been corrected. Each ERISA Plan is in
compliance with all reporting, disclosure and other requirements of the Code and
ERISA as they relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan which
is intended to comply with Code SECTION 401(a), stating that such ERISA Plan and
the attendant trust are qualified thereunder. The Company has never completely
or partially withdrawn from a "multiemployer plan."
(r) Neither the Company, the Subsidiaries, nor any of their
employees, directors, stockholders, partners, or affiliates (within the meaning
of the Rules and Regulations) of any of the foregoing has taken or will take,
directly or indirectly, any action designed to or which has constituted or which
might be expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, service names, trade
names and copyrights, and none of the licenses and rights to the foregoing
presently owned or held by the Company or any of the Subsidiaries are in dispute
or are in any conflict with the right of any other person or entity. Each of
the Company and the Subsidiaries (i) owns or has the right to use, free and
clear of all liens, charges, claims, encumbrances, pledges, security interests,
defects or other restrictions or equities of any kind whatsoever, all patents,
patent applications, trademarks, service marks, service names, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing and (ii) is not obligated or under any liability whatsoever to
make any payment by way of royalties, fees or otherwise to any owner or licensee
of, or other claimant to, any patent, patent application, trademark, service
▇▇▇▇, service name, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise.
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(t) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental or other proceeding, domestic or
foreign, pending or threatened (or circumstances that may give rise to the same)
against the Company which challenges the exclusive rights of the Company with
respect to any trademarks, trade names, service marks, service names,
copyrights, patents, patent applications or licenses or rights to the foregoing
used in the conduct of its business, or which challenge the right of the Company
to use any technology presently used or contemplated to be used in the conduct
of its business.
(u) Each of the Company and the Subsidiaries owns and has the
unrestricted right to use all trade secrets, know-how (including all other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), inventions, technology, designs, processes, works of authorship,
computer programs and technical data and information (collectively herein
"intellectual property") that are material to the development, manufacture,
operation and sale of all products and services sold or proposed to be sold by
the Company or any of the Subsidiaries, free and clear of and without violating
any right, lien, or claim of others, including without limitation, former
employers of its employees; provided, however, that the possibility exists that
other persons or entities, completely independently of the Company or any of the
Subsidiaries, or their employees or agents, could have developed trade secrets
or items of technical information similar or identical to those of the Company
or any of the Subsidiaries. Neither the Company nor any of the Subsidiaries is
aware of any such development of similar or identical trade secrets or technical
information by others.
(v) Each of the Company and the Subsidiaries has good and
marketable title to, or valid and enforceable leasehold estates in, all items of
real and personal property stated in the Prospectus, to be owned or leased by it
free and clear of all liens, charges, claims, encumbrances, pledges, security
interests, defects, or other restrictions or equities of any kind whatsoever,
other than those referred to in the Prospectus, taxes, lessor's interests and
liens for taxes not yet due and payable.
(w) Deloitte & Touche LLP ("Deloitte") and BDO ▇▇▇▇▇▇▇, LLP
("BDO") whose reports are filed with the Commission as a part of the
Registration Statement, are independent certified public accountants as required
by the Act and the Rules and Regulations.
(x) The Company has caused to be duly executed legally binding
and enforceable agreements pursuant to which the holders of the Common Stock and
holders of securities exchangeable or exercisable for or convertible into shares
of Common Stock agreed not to, directly or indirectly, offer to sell, sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate,
distribute or otherwise encumber or dispose of any shares of Common Stock or
securities convertible into, exercisable or exchangeable for or evidencing any
right to purchase or subscribe for any shares of Common Stock (either pursuant
to Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein for a period of not less than nine (9) months
following the effective date of the Registration Statement without the prior
written consent of ▇▇▇▇▇▇▇▇▇▇. During the nine (9) month period commencing on
the effective date of the Registration Statement, the Company shall not, without
the prior written consent of the Representatives, sell, contract or offer to
sell, issue, transfer, assign, pledge, distribute, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or any options, rights or
warrants with respect to any shares of Common Stock, except up to [_______]
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shares of Common Stock reserved for grants of options under the Company's stock
option plan as described in the Prospectus. The Company will cause the Transfer
Agent, as defined below, to ▇▇▇▇ an appropriate legend on the face of stock
certificates representing all of such securities and to place "stop transfer"
orders on the Company's stock ledgers.
(y) Except as described in the Prospectus under "Underwriting,"
there are no claims, payments, issuances, arrangements or understandings,
whether oral or written, for services in the nature of a finder's or origination
fee with respect to the sale of the Securities hereunder or any other
arrangements, agreements, understandings, payments or issuance with respect to
the Company, the Subsidiaries or any of their respective officers, directors,
stockholders, partners, employees or affiliates that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
(z) The Common Stock has been approved for quotation on the
Nasdaq National Market ("Nasdaq").
(aa) Neither the Company nor any of the Subsidiaries nor any of
their respective officers, employees, agents, or any other person acting on
behalf of the Company or the Subsidiaries, has, directly or indirectly, given or
agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of any governmental agency (domestic or foreign) or instrumentality of any
government (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company (or assist the Company or the
Subsidiaries in connection with any actual or proposed transaction) which (a)
might subject the Company or the Subsidiaries, or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign), (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the Company
or any Subsidiary, or (c) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Company or any of the
Subsidiaries. The Company's and each Subsidiary's internal accounting controls
are sufficient to cause the Company to comply with the Foreign Corrupt Practices
Act of 1977, as amended.
(bb) Except as set forth in the Prospectus, no officer, director
or stockholder of the Company, or any "affiliate" or "associate" (as these terms
are defined in Rule 405 promulgated under the Rules and Regulations) of any of
the foregoing persons or entities has or has had, either directly or indirectly,
(i) an interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company or any Subsidiary, or (B) purchases from or sells or furnishes to
the Company or any Subsidiary any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the Company or any Subsidiary is
a party or by which it may be bound or affected. Except as set forth in the
Prospectus under "Certain Transactions," there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company and
any officer, director, or Principal Shareholder (as such term is defined in the
Prospectus) of the
- 10 -
Company or any Subsidiary, or any partner, affiliate or associate of any of the
foregoing persons or entities.
(cc) Any certificate signed by any officer of the Company or any
Subsidiary, and delivered to the Underwriters or to Underwriters' Counsel (as
defined herein) shall be deemed a representation and warranty by the Company to
the Underwriters as to the matters covered thereby.
(dd) The minute books of each of the Company and the Subsidiaries
have been made available to the Underwriters and contains a complete summary of
all meetings and actions of the directors, stockholders, audit committee,
compensation committee and any other committee of the Board of Directors of each
of the Company and the Subsidiaries, since the time of its incorporation, and
reflects all transactions referred to in such minutes accurately in all material
respects.
(ee) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to include
any securities issued by the Company in the Registration Statement or any
registration statement to be filed by the Company or to require the Company to
file a registration statement under the Act and no person or entity holds any
anti-dilution rights with respect to any securities of the Company.
(ff) The Company has as of the effective date of the Registration
Statement (i) entered into an employment agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇, in the forms
filed as Exhibit 10.3, 10.4, 10.5, 10.6 and 10.7, respectively, to the
Registration Statement and (ii) purchased individual term key-man insurance
policies on the lives of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, in the amount of
$1,500,000, which policies name the Company as the sole beneficiary.
(gg) As of the date hereof, the Company has effected: (i) the
reorganization pursuant to which (i) Toymas HK contributes all of the
outstanding capital stock of Toymax NY and Toymax UK to the Company and (ii) the
stockholders of Toymax HK exchanged all of their shares of Toymax HK stock for
substantially all of the shares of the Company (the "Reorganization"). The
Reorganization has been duly and validly authorized by each of the Company, the
Predecessors and the Subsidiaries and their respective shareholders, partners
and/or members and all certificates, agreements, contracts, minutes or other
documents necessary to effect the Reorganization (collectively, the
"Reorganization Documents") have been duly and validly authorized, executed and
delivered and, if necessary, filed with the appropriate regulatory body,
government agency or other body, domestic or foreign, by the appropriate
parties, and constitute the legal, valid and binding agreements of such parties,
enforceable against each of them in accordance with their respective terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as rights to
indemnity or contribution may be limited by applicable law), and none of the
execution or delivery of any of the Reorganization Documents by the parties
thereto, the performance by the Company and the Subsidiaries hereunder or by the
Company, the Subsidiaries and the
- 11 -
Predecessors thereunder, or consummation of the transactions contemplated herein
or therein, conflicts with or will conflict with or results or will result in
any breach or violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or imposition of any
lien, charge, claim, encumbrance, pledge, security interest, defect or other
restriction or equity of any kind whatsoever upon, any property or assets
(tangible or intangible) of any of the Company or the Subsidiaries pursuant to
the terms of, (A) the certificate of incorporation or by-laws of any of the
Company or the Subsidiaries, (B) any license, contract, collective bargaining
agreement, indenture, mortgage, deed of trust, lease, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other agreement or
instrument to which any of the Company or the Subsidiaries is a party or by
which it is or they are or may be bound or to which any of its or their
respective properties or assets (tangible or intangible) is or may be subject,
or any indebtedness, or (C) any statute, judgment, decree, order, rule or
regulation applicable to any of the Company or the Subsidiaries of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign, having
jurisdiction over any of the Company or the Subsidiaries or any of its or their
respective activities or properties. The Reorganization Documents effectively
convey to the Company all right, title and interest to the business of the
Company as described in the Prospectus; and the descriptions in the Registration
Statement of the Reorganization are accurate and fairly present the information
required to be shown with respect thereto by Form S-1.
[(hh) representations and warranties related to the
reorganization and manufacturing and purchase/agency agreements to come.]
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND
REPRESENTATIVES' WARRANTS.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$______ per share of Common Stock, that number of Firm Shares set forth in
Schedule A opposite the name of such Underwriter, plus any additional number of
Firm Shares which such Underwriter may become obligated to purchase pursuant to
the provisions of SECTION 11 hereof.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of the
Option Shares. The option granted hereby will expire 30 days after (i) the date
the Registration Statement becomes effective, if the Company has elected not to
rely on Rule 430A under the Rules and Regulations, or (ii) the date of this
Agreement if the Company has elected to rely upon Rule 430A under the Rules and
Regulations, and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Firm Shares upon notice by the Representatives
to the Company setting forth the number of Option Shares as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for any such Option Shares. Any such time and date of delivery (an
"Option
- 12 -
Closing Date") shall be determined by the Representatives, but shall not be
later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Date, as hereinafter defined, unless otherwise
agreed upon by the Representatives and the Company. Nothing herein contained
shall obligate the Underwriters to make any over-allotments. No Option Shares
shall be delivered unless the Firm Shares shall be simultaneously delivered or
shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Shares shall be made at the offices of ▇▇▇▇▇▇▇▇▇▇ &
Co. Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as
shall be agreed upon by the Representatives and the Company. Such delivery and
payment shall be made at 10:00 a.m. (New York City time) on _______________,
1997 or at such other time and date as shall be agreed upon by the
Representatives and the Company, but not less than three (3) nor more than seven
(7) full business days after the effective date of the Registration Statement
(such time and date of payment and delivery being herein called the "Closing
Date"). In addition, in the event that any or all of the Option Shares are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Shares shall be made at the above mentioned
office of the Representatives or at such other place as shall be agreed upon by
the Representatives and the Company on each Option Closing Date as specified in
the notice from the Representatives to the Company. Delivery of the
certificates for the Firm Shares and the Option Shares, if any, shall be made to
the Underwriters against payment by the Underwriters, severally and not jointly,
of the purchase price for the Firm Shares and the Option Shares, if any, to the
order of the Company for the Firm Shares and the Option Shares, if any, by New
York Clearing House funds. In the event such option is exercised, each of the
Underwriters, acting severally and not jointly, shall purchase that proportion
of the total number of Option Shares then being purchased which the number of
Firm Shares set forth in Schedule A hereto opposite the name of such Underwriter
bears to the total number of Firm Shares, subject in each case to such
adjustments as the Representatives in their discretion shall make to eliminate
any sales or purchases of fractional shares. Certificates for the Firm Shares
and the Option Shares, if any, shall be in definitive, fully registered form,
shall bear no restrictive legends and shall be in such denominations and
registered in such names as the Underwriters may request in writing at least two
(2) business days prior to the Closing Date or the relevant Option Closing Date,
as the case may be. The certificates for the Firm Shares and the Option Shares,
if any, shall be made available to the Representatives at such office or such
other place as the Representatives may designate for inspection, checking and
packaging no later than 9:30 a.m. on the last business day prior to Closing Date
or the relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representatives, Representatives' Warrants at a purchase price of $.0001 per
warrant, which warrants shall entitle the holders thereof to purchase an
aggregate of 195,750 shares of Common Stock. The Representatives' Warrants
shall be exercisable for a period of four years commencing one year from the
effective date of the Registration Statement at a price equaling one hundred
twenty percent (120%) of the initial public offering price of the shares of
Common Stock. The Representatives' Warrant Agreement and form of Warrant
Certificate shall be substantially in the form filed as Exhibit [4.2] to the
Registration Statement. Payment for the Representatives' Warrants shall be made
on the Closing Date.
- 13 -
3. PUBLIC OFFERING OF THE SHARES. As soon after the Registration
Statement becomes effective as the Representatives deem advisable, the
Underwriters shall make a public offering of the Shares (other than to residents
of or in any jurisdiction in which qualification of the Shares is required and
has not become effective) at the price and upon the other terms set forth in the
Prospectus. The Representatives may from time to time increase or decrease the
public offering price after distribution of the Shares has been completed to
such extent as the Representatives, in their discretion deem advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. COVENANTS AND AGREEMENTS OF THE COMPANY.
(a) The Company covenants and agrees with each of the Underwriters as
follows:
i) The Company shall use its best efforts to cause the
Registration Statement and any amendments thereto to become effective
as promptly as practicable and will not at any time, whether before or
after the effective date of the Registration Statement, file any
amendment to the Registration Statement or supplement to the
Prospectus or file any document under the Act or Exchange Act before
termination of the offering of the Shares by the Underwriters of which
the Representatives shall not previously have been advised and
furnished with a copy, or to which the Representatives shall have
objected or which is not in compliance with the Act, the Exchange Act
or the Rules and Regulations.
ii) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representatives and confirm the
notice in writing, (i) when the Registration Statement, as amended,
becomes effective, if the provisions of Rule 430A promulgated under
the Act will be relied upon, when the Prospectus has been filed in
accordance with said Rule 430A and when any post-effective amendment
to the Registration Statement becomes effective, (ii) of the issuance
by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use
of the Preliminary Prospectus or the Prospectus, or any amendment or
supplement thereto, or the institution of proceedings for that
purpose, (iii) of the issuance by the Commission or by any state
securities commission of any proceedings for the suspension of the
qualification of any of the Securities for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any
proceeding for that purpose, (iv) of the receipt of any comments from
the Commission; and (v) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional information. If the Commission or
any state securities commission authority shall enter a stop order or
suspend such qualification at any time, the Company will make every
effort to obtain promptly the lifting of such order.
- 14 -
iii) The Company shall file the Prospectus (in form and
substance satisfactory to the Representatives) or transmit the
Prospectus by a means reasonably calculated to result in filing with
the Commission pursuant to Rule 424(b)(1) (or, if applicable and if
consented to by the Representatives, pursuant to Rule 424(b)(4)) not
later than the Commission's close of business on the earlier of (i)
the second business day following the execution and delivery of this
Agreement and (ii) the fifteenth business day after the effective date
of the Registration Statement.
iv) The Company will give the Representatives notice of its
intention to file or prepare any amendment to the Registration
Statement (including any post-effective amendment) or any amendment or
supplement to the Prospectus (including any revised prospectus which
the Company proposes for use by the Underwriters in connection with
the offering of the Securities which differs from the corresponding
prospectus on file at the Commission at the time the Registration
Statement becomes effective, whether or not such revised prospectus is
required to be filed pursuant to Rule 424(b) of the Rules and
Regulations), and will furnish the Representatives with copies of any
such amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file any such
prospectus to which the Representatives or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ &
Sutcliffe LLP ("Underwriters' Counsel"), shall object.
v) The Company shall endeavor in good faith, in cooperation
with the Representatives, at or prior to the time the Registration
Statement becomes effective, to qualify the Securities for offering
and sale under the securities laws of such jurisdictions as the
Representatives may designate to permit the continuance of sales and
dealings therein for as long as may be necessary to complete the
distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose;
PROVIDED, HOWEVER, the Company shall not be required to qualify as a
foreign corporation or file a general or limited consent to service of
process in any such jurisdiction. In each jurisdiction where such
qualification shall be effected, the Company will, unless the
Representatives agree that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements
or reports at such times as are or may reasonably be required by the
laws of such jurisdiction to continue such qualification.
vi) During the time when a prospectus is required to be
delivered under the Act, the Company shall use all reasonable efforts
to comply with all requirements imposed upon it by the Act and the
Exchange Act, as now and hereafter amended and by the Rules and
Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Securities in
accordance with the provisions hereof and the Prospectus, or any
amendments or supplements thereto. If at any time when a prospectus
relating to the Securities is required to be delivered under the Act,
any event shall have occurred as a result of which, in the opinion of
counsel for the Company or
- 15 -
Underwriters' Counsel, the Prospectus, as then amended or
supplemented, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it is necessary at any
time to amend the Prospectus to comply with the Act, the Company will
notify the Representatives promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with
SECTION 10 of the Act, each such amendment or supplement to be
satisfactory to Underwriters' Counsel, and the Company will furnish to
the Underwriters copies of such amendment or supplement as soon as
available and in such quantities as the Underwriters may request.
vii) As soon as practicable, but in any event not later than
45 days after the end of the 12-month period beginning on the day
after the end of the fiscal quarter of the Company during which the
effective date of the Registration Statement occurs (90 days in the
event that the end of such fiscal quarter is the end of the Company's
fiscal year), the Company shall make generally available to its
security holders, in the manner specified in Rule 158(b) of the Rules
and Regulations, and to the Representatives, an earnings statement
which will be in the detail required by, and will otherwise comply
with, the provisions of SECTION 11(a) of the Act and Rule 158(a) of
the Rules and Regulations, which statement need not be audited unless
required by the Act, covering a period of at least 12 consecutive
months after the effective date of the Registration Statement.
viii) During a period of seven years after the date hereof,
the Company will furnish to its stockholders annual reports (including
financial statements audited by independent public accountants) and
will deliver to the Representatives:
(a) concurrently with furnishing such quarterly
reports to its stockholders, statements of income of the Company
for each quarter in the form furnished to the Company's
stockholders and certified by the Company's principal financial
or accounting officer;
(b) concurrently with furnishing such annual reports
to its stockholders, a balance sheet of the Company as at the end
of the preceding fiscal year, together with statements of
operations, stockholders' equity, and cash flows of the Company
for such fiscal year, accompanied by a copy of the report thereon
of independent certified public accountants;
(c) as soon as they are available, copies of all
reports (financial or other) mailed to stockholders;
(d) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the
Commission, the NASD or any securities exchange;
- 16 -
(e) every press release and every material news item
or article of interest to the financial community in respect of
the Company, or its affairs which was released or prepared by or
on behalf of the Company; and
(f) any additional information of a public nature
concerning the Company (and any future subsidiary) or its
businesses which the Representatives may request.
During such five (5)-year period, if the Company has an
active subsidiary, the foregoing financial statements will be on a
consolidated basis to the extent that the accounts of the Company and
its subsidiary are consolidated, and will be accompanied by similar
financial statements for any significant subsidiary which is not so
consolidated.
ix) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a
Registrar (which may be the same entity as the Transfer Agent) for its
Common Stock.
x) The Company will furnish to the Representatives or on the
Representatives' order, without charge, at such place as the
Representativess may designate, copies of each Preliminary Prospectus,
the Registration Statement and any pre-effective or post-effective
amendments thereto (two of which copies will be signed and will
include all financial statements and exhibits), the Prospectus, and
all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in
each case as soon as available and in such quantities as the
Representatives may request.
xi) On or before the effective date of the Registration
Statement, the Company shall provide the Representatives with true
copies of duly executed, legally binding and enforceable agreements
pursuant to which for a period of not less than nine (9) months from
the effective date of the Registration Statement, holders of all
shares of Common Stock and holders of securities exchangeable or
exercisable for or convertible into shares of Common Stock, will not
directly or indirectly, issue, offer to sell, sell, grant an option
for the sale of, assign, transfer, pledge, hypothecate, distribute or
otherwise encumber or dispose of any shares of Common Stock or
securities convertible into, exercisable or exchangeable for or
evidencing any right to purchase or subscribe for any shares of Common
Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein without the
prior written consent of ▇▇▇▇▇▇▇▇▇▇ (collectively, the "Lock-up
Agreements"). On or before the Closing Date, the Company shall
deliver instructions to the Transfer Agent authorizing it to place
appropriate legends on the certificates representing the securities
subject to the Lock-up Agreements and to place appropriate stop
transfer orders on the Company's ledgers. During the nine (9) month
period commencing with the effective date of the Registration
Statement, the Company shall not, without the prior written consent of
▇▇▇▇▇▇▇▇▇▇, sell, contract or offer
- 17 -
to sell, issue, transfer, assign, pledge, hypothecate, distribute, or
otherwise dispose of, directly or indirectly, any shares of Common
Stock or any options, rights or warrants with respect to any shares of
Common Stock. During the nine (9) month period commencing with the
effective date of the Registration Statement, the Company shall not
file any registration statement with the Securities and Exchange
Commission on Form S-8 without the prior written consent of the
Representatives.
xii) Neither the Company nor any of the Subsidiaries, nor
any of their officers, directors, stockholders, nor any of their
respective affiliates (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed
to, or which might in the future reasonably be expected to cause or
result in, stabilization or manipulation of the price of any
securities of the Company.
xiii) The Company shall apply the net proceeds from the sale
of the Securities in the manner, and subject to the conditions, set
forth under "Use of Proceeds" in the Prospectus. Except as described
in the Prospectus, no portion of the net proceeds will be used,
directly or indirectly, to acquire any securities issued by the
Company.
xiv) The Company shall timely file all such reports, forms
or other documents as may be required from time to time, under the
Act, the Exchange Act, and the Rules and Regulations, and all such
reports, forms and documents filed will comply as to form and
substance with the applicable requirements under the Act, the Exchange
Act, and the Rules and Regulations.
xv) The Company shall furnish to the Representatives as
early as practicable prior to each of the date hereof, the Closing
Date and each Option Closing Date, if any, but no later than two (2)
full business days prior thereto, a copy of the latest available
unaudited interim financial statements of the Company (which in no
event shall be as of a date more than thirty (30) days prior to the
date of the Registration Statement) which have been read by the
Company's independent public accountants, as stated in their letter to
be furnished pursuant to SECTION 6(j) hereof.
xvi) The Company shall cause the Common Stock to be quoted
on Nasdaq or a National Securities exchange and for a period of seven
(7) years from the date hereof, and use its best efforts to maintain
the Nasdaq quotation or exchange listing of the Common Stock to the
extent outstanding.
xvii) For a period of five (5) years from the Closing Date,
the Company shall furnish to the Representatives at the
Representatives' request and at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Common Stock, (ii) the
list of holders of all of the Company's securities and (iii) a Blue
Sky "Trading Survey" for secondary sales of the Company's securities
prepared by counsel to the Company.
- 18 -
xviii) As soon as practicable, (i) but in no event more than
5 business days before the effective date of the Registration
Statement, file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities and (ii) but in
no event more than 30 days from the effective date of the Registration
Statement, take all necessary and appropriate actions to be included
in Standard and Poor's Corporation Descriptions and ▇▇▇▇▇'▇ OTC Manual
and to continue such inclusion for a period of not less than seven (7)
years.
xix) The Company hereby agrees that it will not for a period
of thirteen (13) months from the effective date of the Registration
Statement, adopt, propose to adopt or otherwise permit to exist any
employee, officer, director, consultant or compensation plan or
arrangement permitting the grant, issue or sale of any shares of
Common Stock or other securities of the Company (i) in an amount
greater than an aggregate of [_________] shares of Common Stock, (ii)
at an exercise or sale price per share less than the fair market value
of the Common Stock on the date of grant or sale, (iii) to any direct
or indirect beneficial holder on the date hereof of more than 10% of
the issued and outstanding shares of Common Stock, (iv) with the
payment for such securities with any form of consideration other than
cash, (v) upon payment of less than the full purchase or exercise
price for such shares of Common Stock or other securities of the
Company.
xx) Until the completion of the distribution of the Shares,
and for 25 days thereafter, the Company shall not without the prior
written consent of the Representatives and Underwriters' Counsel,
issue, directly or indirectly, any press release or other
communication or hold any press conference with respect to the Company
or its activities or the offering contemplated hereby.
xxi) For a period equal to the lesser of (i) seven (7) years
from the date hereof, and (ii) the sale to the public of the
Representatives' Shares, the Company will not take any action or
actions which may prevent or disqualify the Company's use of Form S-1
(or other appropriate form) for the registration under the Act of the
Representatives' Shares.
xxii) The Company shall enter into an investment banking
agreement with ▇▇▇▇▇▇▇▇▇▇ which, amongst other things, will grant to
▇▇▇▇▇▇▇▇▇▇ a right of first refusal for a period of fifteen (15)
months after the Effective Date for any investment banking services,
including amongst other things, any sales of securities to be made by
the Company or any of its present or future Subsidiaries.
xxiii) [The Company shall enter into a manufacturing and
purchasing agreement with Jauntiway Investment Limited ("Jauntiway")
and Tai Nam Industrial Company Limited ("Tai Nam").]
- 19 -
xxiv) [The Company hereby agrees that the independent
members of the Board of Directors shall approve each transaction
between the Company and ▇▇▇▇▇ ▇▇▇, Jauntiway and Tai Nam and each such
transaction shall be on terms no less favorable than can be obtained
from third parties.]
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on each of the Closing Date
and the Option Closing Date (to the extent not paid at the Closing Date) all
expenses and fees (other than fees of Underwriters' Counsel, except as provided
in (iv) below) incident to the performance of the obligations of the Company
under this Agreement and the Representatives' Warrant Agreement, including,
without limitation, (i) the fees and expenses of accountants and counsel for the
Company, (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto) and delivery of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreements, and related documents, including
the cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to the
Underwriters and such dealers as the Underwriters may request, in quantities as
hereinabove stated, (iii) the printing, engraving, issuance and delivery of the
Securities including, but not limited to, (x) the purchase by the Underwriters
of the Shares and the purchase by the Representatives of the Representatives'
Warrants from the Company, (y) the consummation by the Company of any of its
obligations under this Agreement and the Representatives' Warrant Agreement, and
(z) resale of the Shares by the Underwriters in connection with the distribution
contemplated hereby, (iv) the qualification of the Securities under state or
foreign securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith, (v) costs and expenses in connection with
due diligence investigations, including but not limited to the fees of any
independent counsel or consultant retained, (vi) fees and expenses of the
transfer agent and registrar, (vii) applications for assignments of a rating of
the Securities by qualified rating agencies, (viii) the fees payable to the
Commission and the NASD, and (ix) the fees and expenses incurred in connection
with the quotation of the Securities on Nasdaq and any other exchange.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of SECTION 6 or SECTION 12, the Company shall
reimburse and indemnify the Representatives for all of their actual
out-of-pocket expenses, including the fees and disbursements of Underwriters'
Counsel, less any amounts already paid pursuant to SECTION 5(c) hereof.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this SECTION 5, it will pay to the
Representatives on the Closing Date by certified or bank cashier's check or, at
the election of the Representatives, by deduction from the proceeds of the
offering contemplated herein a non-accountable expense
- 20 -
allowance equal to seventy-five thousand dollars ($75,000), forty thousand
dollars [($40,000)] of which has been paid to date.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of
the Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, with respect to the
Company as if it had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date or
Option Closing Date, if any, of the statements of the officers of the Company
made pursuant to the provisions hereof; and the performance by the Company on
and as of the Closing Date and each Option Closing Date, if any, of their
respective covenants and obligations hereunder and to the following further
conditions:
(a) The Registration Statement shall have become effective not
later than 12:00 Noon, New York time, on the date of this Agreement or such
later date and time as shall be consented to in writing by the Representatives,
and, at the Closing Date and each Option Closing Date, if any, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has elected to
rely upon Rule 430A of the Rules and Regulations, the price of the Shares and
any price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to the Closing Date the Company
shall have provided evidence satisfactory to the Representatives of such timely
filing, or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representatives shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representatives' opinion, is material, or omits
to state a fact which, in the Representatives' opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representatives' opinion, is material, or
omits to state a fact which, in the Representatives' opinion, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representatives shall
have received from Underwriters' Counsel, such opinion or opinions with respect
to the organization of the Company, the validity of the Securities, the
Representatives' Warrants, the Registration Statement, the Prospectus and other
related matters as the Representatives requests and Underwriters' Counsel shall
have received such papers and information as they request to enable them to pass
upon such matters.
- 21 -
(d) At Closing Date, the Underwriters shall have received the
favorable opinion of ▇▇▇▇ Marks & ▇▇▇▇▇ LLP, counsel to the Company, dated the
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
i) each of the Company and the Subsidiaries (A) has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction, (B) is duly qualified and licensed
and in good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of any properties or the character of
its operations requires such qualification or licensing, and (C) has
all requisite corporate power and authority; and the Company has
obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing
business in material compliance with all such authorizations,
approvals, orders, licenses, certificates, franchises and permits and
all federal, state and local laws, rules and regulations; the Company
has not received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
materially adversely affect the business, operations, condition,
financial or otherwise, or the earnings, business affairs, position,
prospects, value, operation, properties, business or results of
operations of the Company. The disclosures in the Registration
Statement concerning the effects of federal, state and local laws,
rules and regulations on the Company's business as currently conducted
and as contemplated are correct in all material respects and do not
omit to state a fact necessary to make the statements contained
therein not misleading in light of the circumstances in which they
were made;
ii) the Company owns, directly or indirectly, one hundred percent
(100%) of the outstanding capital stock of each of the Subsidiaries
and all such shares have been validly issued, are fully paid and
non-assessable and were not in violation of any statutory preemptive
rights. Except as described in the Prospectus, to the best of such
counsel's knowledge, none of the Company nor any of the Subsidiaries
owns an interest in any other corporation, partnership, joint venture,
trust or other business entity;
iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "Capitalization" and "Description of
Securities," and is not a party to or bound by any instrument,
agreement or other arrangement providing for it to issue any capital
stock, rights, warrants, options or other securities, except for this
Agreement, the Representatives' Warrant Agreement and as described in
the Prospectus. The Securities, and all other securities issued or
issuable by the Company conform in all material respects to all
statements with respect thereto
- 22 -
contained in the Registration Statement and the Prospectus. All
issued and outstanding securities of the Company have been duly
authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto,
and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company. The
Shares, the Representatives' Warrants and the Representatives' Shares
to be sold by the Company hereunder and under the Representatives'
Warrant Agreement are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized
and, when issued, paid for and delivered in accordance with the terms
hereof, will be validly issued, fully paid and non-assessable and
conform to the description thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely as such
holders; all corporate action required to be taken for the
authorization, issue and sale of the Shares, the Representatives'
Warrants and the Representatives' Shares has been duly and validly
taken, and the certificates representing the Shares and the
Representatives' Warrants are in due and proper form. The
Representatives' Warrants constitute valid and binding obligations of
the Company to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the Company called for
thereby. Upon the issuance and delivery pursuant to this Agreement
and the Representatives' Warrant Agreement of the Shares and the
Representatives' Warrants, respectively, to be sold by the Company,
the Underwriters and the Representatives, respectively, will acquire
good and marketable title to the Shares and the Representatives'
Warrants free and clear of any pledge, lien, charge, claim,
encumbrance, pledge, security interest, or other restriction or equity
of any kind whatsoever. No transfer tax is payable by or on behalf of
the Underwriters in connection with (A) the issuance by the Company of
the Shares, (B) the purchase by the Underwriters and the
Representatives of the Shares and the Representatives' Warrants,
respectively, from the Company, (C) the consummation by the Company of
any of its obligations under this Agreement or the Representatives'
Warrant Agreement, or (D) resales of the Shares in connection with the
distribution contemplated hereby;
iv) the Registration Statement is effective under the Act, and,
if applicable, filing of all pricing information has been timely made
in the appropriate form under Rule 430A, and no stop order suspending
the use of the Preliminary Prospectus, the Registration Statement or
Prospectus or any part of any thereof or suspending the effectiveness
of the Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or, to the best of
such counsel's knowledge threatened or contemplated under the Act;
v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial and
statistical data included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations;
- 23 -
vi) to the best of such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the Act to be
described in the Registration Statement and the Prospectus and filed
as exhibits to the Registration Statement other than those described
in the Registration Statement (or required to be filed under the
Exchange Act if upon such filing they would be incorporated, in whole
or in part, by reference therein) and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are correct
copies of the documents of which they purport to be copies; (B) the
descriptions in the Registration Statement and the Prospectus and any
supplement or amendment thereto of contracts and other documents to
which the Company or any Subsidiary is a party or by which it is
bound, including any document to which the Company or any Subsidiary
is a party or by which it is bound, incorporated by reference into the
Prospectus and any supplement or amendment thereto, are accurate in
all material respects and fairly represent the information required to
be shown by Form S-1; (C) there is not pending or threatened against
the Company or any Subsidiary any action, arbitration, suit,
proceeding, inquiry, investigation, litigation, governmental or other
proceeding (including, without limitation, those having jurisdiction
over environmental or similar matters), domestic or foreign, pending
or threatened against (or circumstances that may give rise to the
same), or involving the properties or business of the Company or any
Subsidiary which (x) is required to be disclosed in the Registration
Statement which is not so disclosed, (and such proceedings as are
summarized in the Registration Statement are accurately summarized in
all material respects), (y) questions the validity of the capital
stock of the Company or this Agreement or the Representatives' Warrant
Agreement, or of any action taken or to be taken by the Company
pursuant to or in connection with any of the foregoing; (D) no statute
or regulation or legal or governmental proceeding required to be
described in the Prospectus is not described as required; and
(E) there is no action, suit or proceeding pending, or threatened,
against or affecting the Company or any Subsidiary before any court or
arbitrator or governmental body, agency or official (or any basis
thereof known to such counsel) in which there is a reasonable
possibility of an adverse decision which may result in a material
adverse change in the condition, financial or otherwise, or the
earnings, position, prospects, stockholders' equity, value, operation,
properties, business or results of operations of the Company or any
Subsidiary, which could adversely affect the present or prospective
ability of the Company to perform its obligations under this Agreement
or the Representatives' Warrant Agreement or which in any manner draws
into question the validity or enforceability of this Agreement or the
Representatives' Warrant Agreement;
vii) the Company has full legal right, power and authority to
enter into each of this Agreement and the Representatives' Warrant
Agreement and to consummate the transactions provided for herein and
therein; and each of this Agreement and the Representatives' Warrant
Agreement has been duly authorized, executed and delivered by the
Company. Each of this Agreement and the Representatives' Warrant
Agreement, assuming due authorization, execution and delivery by each
other party thereto constitutes a legal, valid and binding
- 24 -
agreement of the Company enforceable against the Company in accordance
with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application relating to or affecting enforcement of
creditors' rights and the application of equitable principles in any
action, legal or equitable, and except as rights to indemnity or
contribution may be limited by applicable law), and none of the
Company's execution or delivery of this Agreement and the
Representatives' Warrant Agreement, its performance hereunder or
thereunder, its consummation of the transactions contemplated herein
or therein, or the conduct of its business as described in the
Registration Statement, the Prospectus and any amendments or
supplements thereto, conflicts with or will conflict with or results
or will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or
result in the creation or imposition of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever upon, any property or assets (tangible
or intangible) of the Company or any Subsidiary pursuant to the terms
of, (A) the certificate of incorporation or by-laws of the Company or
any Subsidiary, (B) any license, contract, indenture, mortgage, deed
of trust, voting trust agreement, stockholders agreement, note, loan
or credit agreement or any other agreement or instrument to which the
Company is a party or by which it is or may be bound or to which any
of its respective properties or assets (tangible or intangible) is or
may be subject, or any indebtedness, or (C) any statute, judgement,
decree, order, rule or regulation applicable to the Company or any
Subsidiary of any arbitrator, court, regulatory body or administrative
agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or
any Subsidiary, or any of their activities or properties;
viii) except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court,
regulatory body, government agency or other body (other than such as
may be required under Blue Sky laws, as to which no opinion need be
rendered) is required in connection with the issuance of the Shares
pursuant to the Prospectus, the issuance of the Representatives'
Warrants, the performance of this Agreement and the Representatives'
Warrant Agreement and the transactions contemplated hereby and
thereby;
ix) the properties and business of the Company conform in all
material respects to the description thereof contained in the
Registration Statement and the Prospectus; and the Company has good
and marketable title to, or valid and enforceable leasehold estates
in, all items of real and personal property stated in the Prospectus
to be owned or leased by it, in each case free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects or
other restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus, and liens for taxes not yet due
and payable;
- 25 -
x) to the best knowledge of such counsel, neither the Company nor
any of its Subsidiaries is in breach of, or in default under, any term
or provision of any license, contract, indenture, mortgage,
installment sale agreement, deed of trust, lease, voting trust
agreement, stockholders' agreement, partnership agreement, note, loan
or credit agreement or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to
which the Company or any Subsidiary is a party or by which the Company
or any Subsidiary may be bound or to which the property or assets
(tangible or intangible) of the Company or any Subsidiary is subject
or affected; and neither the Company nor any of the Subsidiaries is in
violation of any term or provision of its certificate of incorporation
by-laws, or in violation of any franchise, license, permit, judgment,
decree, order, statute, rule or regulation;
xi) the statements in the Prospectus under "BUSINESS,"
"MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN TRANSACTIONS,"
"DESCRIPTION OF SECURITIES," and "SHARES ELIGIBLE FOR FUTURE SALE"
have been reviewed by such counsel, and insofar as they refer to
statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all material
respects;
xii) the Shares have been accepted for quotation on Nasdaq;
xiii) the persons listed under the caption "PRINCIPAL
SHAREHOLDERS" in the Prospectus are the respective "beneficial owners"
(as such phrase is defined in regulation 13d-3 under the Exchange Act)
of the securities set forth opposite their respective names thereunder
as and to the extent set forth therein;
xiv) except as described in the Prospectus, no person,
corporation, trust, partnership, association or other entity has the
right to include and/or register any securities of the Company in the
Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration
statement;
xv) except as described in the Prospectus, there are no claims,
payments, issuances, arrangements or understandings for services in
the nature of a finder's or origination fee with respect to the sale
of the Securities hereunder or financial consulting arrangement or any
other arrangements, agreements, understandings, payments or issuances
that may affect the Underwriters' compensation, as determined by the
NASD;
xvi) neither the execution of the Reorganization Documents nor
the consummation of the transactions contemplated thereby, nor the
consummation of any other of the transactions contemplated herein or
therein by the Predecessors, nor the fulfillment of the terms hereof
or thereof by the Predecessors, will conflict with, result in a breach
of, or constitute a default under the respective articles of
incorporation or by-laws of any of the
- 26 -
Predecessors or the terms of any other agreement or instrument to
which any of the Predecessors or any of their respective subsidiaries
is a party or by which any of their prospective properties are bound
or affected, or any order, regulation or judgement applicable to any
of the Predecessors or any of their respective subsidiaries of any
court regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over any of the Predecessors or any of
their prospective subsidiaries;
xvii) the Reorganization Documents (i) have been duly
authorized, executed and delivered by the Predecessors and constitute
valid and binding obligations of the Predecessors enforceable in
accordance with their respective terms and (ii) effectively convey
from the Predecessors to the Company all right, title and interest to
the business of the Predecessors as described in the Prospectus;
xviii) assuming due execution by the parties thereto other than
the Company, the Lock-up Agreements are legal, valid and binding
obligations of parties thereto, enforceable against the party and any
subsequent holder of the securities subject thereto in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution
may be limited by applicable law); and
xix) except as described in the Prospectus, the Company does not
(A) maintain, sponsor or contribute to any ERISA Plans, (B) maintain
or contribute, now or at any time previously, to a defined benefit
plan, as defined in SECTION 3(35) of ERISA, and (C) has never
completely or partially withdrawn from a "multiemployer plan".
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company at which
conferences such counsel made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary Prospectus, the
Registration Statement, the Prospectus, and related matters were discussed and,
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Preliminary Prospectus, the Registration Statement and Prospectus, on the basis
of the foregoing, no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment became effective or the
Preliminary Prospectus or Prospectus or amendment or supplement thereto as of
the date of such opinion contained any 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 (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus).
- 27 -
Such opinion shall not state that it is to be governed or qualified
by, or that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991), or any comparable
State bar accord.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company and the
Subsidiaries, and certificates or other written statements of officers of
departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company and the Subsidiaries,
provided that copies of any such statements or certificates shall be delivered
to Underwriters' Counsel if requested. The opinion of such counsel for the
Company and the Subsidiaries shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Representatives and
they are justified in relying thereon. Such opinion shall also state that
Underwriters' Counsel is entitled to rely thereon.
(e) At each Option Closing Date, if any, the Underwriters shall
have received the favorable opinion of ▇▇▇▇ Marks & ▇▇▇▇▇ LLP, counsel to the
Company and the Subsidiaries, dated the Option Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters' Counsel
confirming as of the Option Closing Date the statements made by ▇▇▇▇ Marks &
▇▇▇▇▇ LLP in its opinion delivered on the Closing Date.
(f) On or prior to each of the Closing Date and the Option
Closing Date, if any, Underwriters' Counsel shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
subsection (c) of this SECTION 6, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company, or herein contained.
(g) Prior to each of the Closing Date and each Option Closing
Date, if any, (i) there shall have been no material adverse change nor
development involving a prospective change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company or any of the Subsidiaries, from
the latest date as of which the financial condition of the Company and the
Subsidiaries is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company or any of the Subsidiaries; (iii) the Company
shall not be in default under any provision of any instrument relating to any
outstanding indebtedness; (iv) neither the Company nor any of the Subsidiaries
shall have issued any securities (other than the Securities); neither the
Company nor any of the Subsidiaries shall have declared or paid any dividend or
made any distribution in respect of its capital stock of any class; and there
has not been any change in the capital stock of the Company or any of the
- 28 -
Subsidiaries, or any material change in the debt (long or short term) or
liabilities or obligations of the Company or any of the Subsidiaries (contingent
or otherwise); (v) no material amount of the assets of the Company or any of the
Subsidiaries shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (vi) no action, suit or proceeding, at
law or in equity, shall have been pending or threatened (or circumstances giving
rise to same) against the Company or any of the Subsidiaries, or affecting any
of its properties or business before or by any court or federal, state or
foreign commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may adversely affect the business, operations,
prospects or financial condition or income of the Company, except as set forth
in the Registration Statement and Prospectus; and (vii) no stop order shall have
been issued under the Act and no proceedings therefor shall have been initiated,
threatened or contemplated by the Commission.
(h) At each of the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received a certificate of the Company signed by
the principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
i) The representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Closing
Date or the Option Closing Date, as the case may be, and the Company
has complied with all agreements and covenants and satisfied all
conditions contained in this Agreement on its part to be performed or
satisfied at or prior to such Closing Date or Option Closing Date, as
the case may be;
ii) No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of each of such person's knowledge, after due inquiry are
contemplated or threatened under the Act;
iii)The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the
Registration Statement, the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading and neither the Preliminary
Prospectus nor any supplement thereto included any untrue statement of
a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; and
iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (a) neither
the Company nor any of the Subsidiaries has incurred up to and
including the Closing Date or the
- 29 -
Option Closing Date, as the case may be, other than in the ordinary
course of its business, any material liabilities or obligations,
direct or contingent; (b) neither the Company nor any of its
Subsidiaries has paid or declared any dividends or other distributions
on its capital stock; (c) neither the Company nor any of the
Subsidiaries has entered into any transactions not in the ordinary
course of business; (d) there has not been any change in the capital
stock of the Company or any material change in the debt (long or
short-term) of the Company or any of the Subsidiaries; (e) neither the
Company nor any of the Subsidiaries has sustained any material loss or
damage to its property or assets, whether or not insured; (g) there is
no litigation which is pending or threatened (or circumstances giving
rise to same) against the Company, or any affiliated party of any of
the foregoing which is required to be set forth in an amended or
supplemented Prospectus which has not been set forth; and (h) there
has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this subsection
(h) are to such documents as amended and supplemented at the date of such
certificate.
(i) By the Closing Date, the Underwriters will have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriters, as described in the Registration Statement.
(j) At the time this Agreement is executed, the Underwriters
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel, from BDO:
i) confirming that they are independent public accountants with
respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
ii) stating that it is their opinion that the financial
statements and supporting schedules of the Company included in the
Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Act and the Rules and
Regulations thereunder and that the Representatives may rely upon the
opinion of BDO with respect to such financial statements and
supporting schedules included in the Registration Statement;
iii) stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company and the Subsidiaries, a reading of the
latest available minutes of the stockholders and board of directors
and the various committees of the board of directors of the Company,
consultations with officers and other employees of the Company and the
Subsidiaries responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their
attention which would lead them to believe that (A) the unaudited
financial statements and
- 30 -
supporting schedules of the Company and the Subsidiaries included in
the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the Rules and Regulations or are not fairly presented in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited consolidated
financial statements of the Company and the Subsidiaries included in
the Registration Statement, or (B) at a specified date not more than
five (5) days prior to the effective date of the Registration
Statement, there has been any change in the capital stock of the
Company, any change in the long-term debt of the Company or any of the
Subsidiaries, or any decrease in the stockholders' equity of the
Company or any of the Subsidiaries or any decrease in the net current
assets or net assets of the Company as compared with amounts shown in
the December 31, 1996 balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any change or decrease,
setting forth the amount of such change or decrease, and (C) during
the period from December 31, 1996 to a specified date not more than
five (5) days prior to the effective date of the Registration
Statement, there was any decrease in net revenues or net earnings of
the Company or any of the Subsidiaries or increase in net earnings per
common share of the Company, in each case as compared with the
corresponding period beginning December 31, 1995 other than as set
forth in or contemplated by the Registration Statement, or, if there
was any such decrease, setting forth the amount of such decrease;
iv)setting forth, at a date not later than five (5) days prior to
the date of the Registration Statement, the amount of liabilities of
the Company and the Subsidiaries (including a break-down of commercial
paper and notes payable to the banks);
v) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements
and other financial information pertaining to the Company and the
Subsidiaries set forth in the Prospectus in each case to the extent
that such amounts, numbers, percentages, statements and information
may be derived from the general accounting records, including work
sheets, of the Company and the Subsidiaries and excluding any
questions requiring an interpretation by legal counsel, with the
results obtained from the application of specified readings, inquiries
and other appropriate procedures (which procedures do not constitute
an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
and
vi) statements as to such other matters incident to the
transaction contemplated hereby as the Representatives may request.
(k) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received from BDO a letter, dated as of the Closing
Date or the Option Closing Date, as the case may be, to the effect that they
reaffirm the statements made in the
- 31 -
letter furnished pursuant to SUBSECTION (i) of this SECTION hereof except that
the specified date referred to shall be a date not more than five days prior to
the Closing Date or the Option Closing Date, as the case may be, and, if the
Company has elected to rely on Rule 430A of the Rules and Regulations, to the
further effect that they have carried out procedures as specified in clause (v)
of SUBSECTION (j) of this SECTION with respect to certain amounts, percentages
and financial information as specified by the Representatives and deemed to be a
part of the Registration Statement pursuant to Rule 430A(b) and have found such
amounts, percentages and financial information to be in agreement with the
records specified in such clause (v).
(l) At the Closing Date and each Option Closing Date, if any,
the Underwriters shall have received a letter, dated such date, addressed to the
Underwriters in form and substance satisfactory in all respects to the
Underwriters and counsel to the Underwriters, from Deloitte containing
statements and information of the type ordinarily included in accountant's
"comfort letters" to Underwriters with respect to financial information
contained in the Registration Statement and the Prospectus.
(m) The Company shall have delivered to the Representatives a
letter from BDO addressed to the Company stating that they have not during the
immediately preceding two year period brought to the attention of the Company's
management any "weakness" as defined in Statement of Auditing Standards No. 60
"Communication of Internal Control Structure Related Matters Noted in an Audit,"
in any of the Company's internal controls.
(n) On each of the Closing Date and Option Closing Date, if any,
there shall have been duly tendered to the Representatives for the several
Underwriters' accounts the appropriate number of Shares.
(o) No order suspending the sale of the Securities in any
jurisdiction designated by the Representatives pursuant to subsection (e) of
SECTION 4 hereof shall have been issued on either the Closing Date or the Option
Closing Date, if any, and no proceedings for that purpose shall have been
instituted or shall be contemplated.
[(p) On or before [__________] the Closing Date, the Underwriters
shall have received the favorable opinion of [___________], special patent
counsel to the Company, dated the Closing Date, addressed to the Underwriters,
in form and substance satisfactory to Underwriters' counsel, and in
substantially the form of Exhibit A attached hereto.]
(q) On or before the Closing Date, the Company shall have
executed and delivered to the Representatives, (i) the Representatives' Warrant
Agreement substantially in the form filed as Exhibit 4.2 to the Registration
Statement in final form and substance satisfactory to the Representatives, and
(ii) the Representatives' Warrants in such denominations and to such designees
as shall have been provided to the Company
(r) On or before the Closing Date, the Shares shall have been
duly approved for quotation on Nasdaq, subject to official notice of issuance.
- 32 -
(s) On or before the Closing Date, there shall have been
delivered to the Representatives all of the Lock-up Agreements, in form and
substance satisfactory to Underwriters' Counsel.
(t) On or before the Closing Date, the Company shall have
effected the Reorganization as described in the Prospectus.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representatives may terminate this
Agreement or, if the Representatives so elect, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this SECTION 7 "Underwriter" shall include the
officers, directors, partners, employees, agents and counsel of the Underwriter,
including specifically each person who may be substituted for an Underwriter as
provided in SECTION 11 hereof), and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, from and against any and all losses,
claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, and suits in respect thereof),
whatsoever (including but not limited to any and all costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending against
such action, proceeding, investigation, inquiry or suit, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise or under the
laws of foreign countries, arising out of or based upon (A) any untrue statement
or alleged untrue statement of a material fact contained (i) in any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
amended and supplemented); (ii) in any post-effective amendment or amendments or
any new registration statement and prospectus in which is included securities of
the Company issued or issuable upon exercise of the Securities; or (iii) in any
application or other document or written communication (in this SECTION 7
collectively called "application") executed by the Company or based upon written
information furnished by the Company filed, delivered or used in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
Nasdaq or any other securities exchange, (B) the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), or (C) any breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company or any of its officers
delivered pursuant hereto unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or any Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be.
- 33 -
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly,
to indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of the Act, to the same extent
as the foregoing indemnity from the Company to the Underwriters but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriters expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in addition to
any liability which the Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this
SECTION 7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this SECTION 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this SECTION 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action, investigation,
inquiry, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action,
- 34 -
investigation, inquiry, suit or proceeding on behalf of the indemnified party or
parties), in any of which events such fees and expenses of one additional
counsel shall be borne by the indemnifying parties. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action, investigation, inquiry,
suit or proceeding or separate but similar or related actions, investigations,
inquiries, suits or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances. Anything in this SECTION 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, investigation, inquiry,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) In order to provide for just and equitable contribution in
any case in which (i) an indemnified party makes claim for indemnification
pursuant to this SECTION 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this SECTION 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities (or
actions, investigations, inquiries, suits or proceedings in respect thereof)
(A) in such proportion as is appropriate to reflect the relative benefits
received by each of the contributing parties, on the one hand, and the party to
be indemnified on the other hand, from the offering of the Securities or (B) if
the allocation provided by clause (A) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company, on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) bear to the total
underwriting discounts received by the Underwriters hereunder, in each case as
set forth in the table on the Cover Page of the Prospectus. 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 by
the Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, expenses or liabilities (or actions, investigations,
inquiries, suits or
- 35 -
proceedings in respect thereof) referred to above in this subdivision (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,
claim, investigation, inquiry, suit or proceeding. Notwithstanding the
provisions of this subdivision (d) the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Securities purchased by the Underwriters hereunder. 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. For purposes of this SECTION 7, each person, if
any, who controls the Company within the meaning of the Act, each officer of the
Company who has signed the Registration Statement, and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to this subparagraph (d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit, inquiry,
investigation or proceeding against such party in respect to which a claim for
contribution may be made against another party or parties under this
subparagraph (d), notify such party or parties from whom contribution may be
sought, but the omission so to notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have hereunder or otherwise than under this subparagraph (d), or to
the extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in addition to
any liabilities which any indemnifying party may have at common law or
otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements at the Closing
Date and the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the indemnity agreements contained
in SECTION 7 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, the
Company, any controlling person of any Underwriter, the Company, and shall
survive termination of this Agreement or the issuance, sale and delivery of the
Securities to the Underwriters and the Representatives, as the case may be.
9. EFFECTIVE DATE.
(a) This Agreement shall become effective at 10:00 a.m., New York
City time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Representatives, in their discretion, shall release the Securities for sale to
the public; PROVIDED, HOWEVER, that the provisions of SECTIONS 5, 7 and 10 of
this Agreement shall at all times be effective. For purposes of this SECTION 9,
the Shares to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representatives of telegrams to securities
dealers releasing such shares for offering or the release by the Representatives
for publication of the first newspaper advertisement which is subsequently
published relating to the Shares.
- 36 -
10. TERMINATION.
(a) Subject to subsection (b) of this SECTION 10, the
Representatives shall have the right to terminate this Agreement, after the date
hereof, (i) if any domestic or international event or act or occurrence has
materially disrupted, or in the Representatives' opinion will in the immediate
future materially adversely disrupt the financial markets; or (ii) any material
adverse change in the financial markets shall have occurred; or (iii) if trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Boston Stock Exchange, the
Commission or any other government authority having jurisdiction; or (iv) if
trading of any of the securities of the Company shall have been suspended, or
any of the securities of the Company shall have been delisted, on any exchange
or in any over-the-counter market; or (v) if the United States shall have become
involved in a war or major hostilities, or if there shall have been an
escalation in an existing war or major hostilities or a national emergency shall
have been declared in the United States; or (vi) if a banking moratorium has
been declared by a state or federal authority; or (vii) if a moratorium in
foreign exchange trading has been declared; or (viii) if the Company shall have
sustained a loss material or substantial to the Company by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious
act which, whether or not such loss shall have been insured, will, in the
Representatives' opinion, make it inadvisable to proceed with the delivery of
the Securities; or (viii) if there shall have occurred any outbreak or
escalation of hostilities or any calamity or crisis or there shall have been
such a material adverse change in the conditions or prospects of the Company, or
such material adverse change in the general market, political or economic
conditions, in the United States or elsewhere as in the Representatives'
judgment would make it inadvisable to proceed with the offering, sale and/or
delivery of the Securities or (ix) if ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall no longer serve the Company in their
present capacity.
(b) If this Agreement is terminated by the Representatives in
accordance with the provisions of SECTION 10(a) the Company shall promptly
reimburse and indemnify the Representatives for all of their actual
out-of-pocket expenses, including the fees and disbursements of counsel for the
Underwriters (less amounts previously paid pursuant to SECTION 5(c) above).
Notwithstanding any contrary provision contained in this Agreement, if this
Agreement shall not be carried out within the time specified herein, or any
extension thereof granted to the Representatives, by reason of any failure on
the part of the Company to perform any undertaking or satisfy any condition of
this Agreement by it to be performed or satisfied (including, without
limitation, pursuant to SECTION 6 or SECTION 12) then, the Company shall
promptly reimburse and indemnify the Representatives for all of their actual
out-of-pocket expenses, including the fees and disbursements of counsel for the
Underwriters (less amounts previously paid pursuant to SECTION 5(c) above).
Notwithstanding any contrary provision contained in this Agreement, any election
hereunder or any termination of this Agreement (including, without limitation,
pursuant to SECTIONS 6, 10, 11 and 12 hereof), and whether or not this Agreement
is otherwise carried out, the provisions of SECTION 5 and SECTION 7 shall not be
in any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof.
- 37 -
11. SUBSTITUTION OF THE UNDERWRITERS. If one or more of the
Underwriters shall fail (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of SECTION 6, SECTION 10 or
SECTION 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representatives shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representatives shall not have completed such
arrangements within such 24-hour period, then:
(a)if the number of Defaulted Securities does not exceed 10% of
the total number of Firm Shares to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b)if the number of Defaulted Securities exceeds 10% of the total
number of Firm Shares, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriters.
No action taken pursuant to this SECTION shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Representatives shall have the right to
postpone the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements.
12. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing
Date or at any Option Closing Date, as applicable, to sell and deliver the
number of Shares which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Shares to be purchased on an Option Closing Date, the Underwriters may at
the Representatives' option, by notice from the Representatives to the Company,
terminate the Underwriters' obligation to purchase Option Shares from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to SECTION 5, SECTION 7 and SECTION 10 hereof. No
action taken pursuant to this SECTION shall relieve the Company from liability,
if any, in respect of such default.
13. NOTICES. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representatives c/o Fahnestock & Co. Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to the Company at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
President, with
- 38 -
a copy to ▇▇▇▇ Marks & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
14. PARTIES. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company, and the controlling
persons, directors and officers referred to in SECTION 7 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
15. CONSTRUCTION. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Representatives' Warrant Agreement constitute the entire agreement of the
parties hereto and supersede all prior written or oral agreements,
understandings and negotiations with respect to the subject matter hereof. This
Agreement may not be amended except in a writing, signed by the Representatives
and the Company.
- 39 -
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
TOYMAX INTERNATIONAL, INC.
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President
Confirmed and accepted as of
the date first above written.
▇▇▇▇▇▇▇▇▇▇ & CO. INC.
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:
----------------------------------
Name:
Title:
WEDBUSH ▇▇▇▇▇▇ SECURITIES
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By:
----------------------------------
Name:
Title:
- 40 -
SCHEDULE A
----------
NUMBER OF
UNDERWRITER SHARES
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇▇ & Co. Inc.
Wedbush ▇▇▇▇▇▇ Securities
TOTAL 2,700,000
=========
- 41 -
Exhibit A
[FORM OF INTELLECTUAL PROPERTY OPINION]
___________________, 1997
▇▇▇▇▇▇▇▇▇▇ & CO. INC.
[CO-MANAGER]
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Public Offering of Toymax International, Inc.
Gentlemen:
We have acted as special counsel to TOYMAX INTERNATIONAL, INC., a Delaware
corporation (the "Company"), in connection with the entering into by the Company
of that certain Underwriting Agreement by and between ▇▇▇▇▇▇▇▇▇▇ & Co. Inc.
("▇▇▇▇▇▇▇▇▇▇") and Webush ▇▇▇▇▇▇ Securities ("Wedbush"), as representatives of
the several underwriters named in Schedule A thereto, and the Company, dated
_______________, 1997 (the "Underwriting Agreement"). This opinion is provided
to you pursuant to Section ____ of the Underwriting Agreement.
For the purpose of rendering the opinions set forth below we have reviewed the
following (collectively, the "Documents"):
(i) the Underwriting Agreement;
(ii) that certain Registration Statement filed _____, 1997,
together with any and all amendments thereof exhibits
thereto (collectively, the "Registration Statement");
(iii) the company's Prospectus dated _____________, 1997
(the "Prospectus");
(iv) a search of the United States Patent and Trademark
Office records relevant to ownership of any and all:
patents and patent applications (including, without
limitation, the patents and patent applications listed on
Schedule A annexed hereto and hereby incorporated by
reference herein (collectively, the "Patents")), and
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trademarks, trademark applications, service marks and
service ▇▇▇▇ applications (collectively, the "Marks")
(including, without limitation, the Marks listed on Schedule
B annexed hereto and hereby incorporated by reference herein
(collectively, the "Trademarks")),
owned, purportedly owned or licensed by the Company
(including, those patents, patent applications and Marks
licensed, without limitation, pursuant to the licenses
listed on Schedule C annexed hereto and hereby incorporated
by reference herein (collectively, the "Licenses")),
conducted by ______________________________ and certified as
true and correct as of _______________________, 1997 (no
earlier than 5 days prior to the date of the Closing (as
defined in the Underwriting Agreement));
(v) a search of the United States Copyright Office records
relevant to ownership of any and all copyrighted material
(including, without limitation, the copyright in, or license
permitting the Company's actual use of, the material
licensed or otherwise distributed by the Company and listed
on Schedule D annexed hereto and hereby incorporated by
reference herein (collectively, the "Copyrighted
Material")), owned, purportedly owned or licensed by the
Company conducted by _____________________ and certified as
true and correct as of __________________, 1997 (no earlier
than 5 days prior to the date of the Closing);
(vi) an intellectual property litigation search with respect
to all Patents, Trademarks, Licenses and Copyrighted
Material, listed on Schedules A, B, C and D, respectively;
(vii) a search of the Uniform Commercial Code ("UCC")
recordation offices, in the following jurisdictions --
[________________, _____________ and _______], with respect
to the following two categories of general intangibles:
(a) the intellectual property general intangibles of the
Company, including, without limitation, the Company's
patents, patent applications, inventions, know how,
trademarks, service marks, copyrights, service and trade
names, intellectual property licenses and other rights, and
(b) the intellectual property general intangibles licensed
to the Company, including, without limitation, the patents,
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patent applications, inventions, know how, trademarks,
service marks, copyrights, service and trade names and other
intellectual property rights licensed to the Company
pursuant to the Licenses (listed on Schedule C),
said search certified to us as complete and accurate by
________________ and current through
________________________, 1996 (no earlier than 5 days prior
to the date of the Closing) and said jurisdictions being the
only jurisdictions in which filing of UCC financing
statements or other documents may be filed to effectively
evidence a security or other interest in said general
intangibles; and
(viii) any and all records, documents, instruments and
agreements in our possession or under our control relating
to the Company.
We have also examined such corporate records, documents,
instruments and agreements, and inquired into such other
matters, as we have deemed necessary or appropriate as a
basis for the opinions set forth herein. Whenever our
opinion herein is qualified by the phrase "to the best of
our knowledge" or "to the best of our knowledge, after due
inquiry," such language means that, based upon (i) our
inquiries of officers of the Company, (ii) our review of the
Documents, and (iii) our review of such other corporate
records, documents, instruments and agreements described in
the first sentence of this paragraph, we believe that such
opinions are factually correct.
To the best of our knowledge, as to all matters of fact represented to you by
the Company, we advise you that nothing has come to our attention that would
cause us to believe that such facts are incorrect, incomplete or misleading or
that reliance thereon is not warranted under the circumstances. We call to your
attention that our opinion is limited to such facts as they exist on the date
hereof and do not take into account any change of circumstances, fact or law
subsequent thereto.
Based upon and subject to the foregoing, we are of the opinion that:
1. To the best of our knowledge, after due inquiry, except as described in the
Registration Statement, the Company owns or has the right to use, free and clear
of all liens, encumbrances, pledges, security interests, defects or other
restrictions or equities of any kind whatsoever,
(i) all patents and patent applications (including, without
limitation, the Patents),
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(ii) all trademarks and service marks (including, without limitation,
the Trademarks),
(iii) all copyrights (including, without limitation, the Copyrighted
Material),
(iv) all service and trade names,
(v) all intellectual property licenses (including, without limitation,
the Licenses), and
(vi) all technology
used in, contemplated to be used in or required for, the conduct of the
Company's business.
2. To the best of our knowledge, after due inquiry, the Company possesses all
material intellectual property licenses or rights used in, or required for, the
conduct of its business (including, the Licenses and without limitation, any
such licenses or rights described in the Registration Statement as being owned,
possessed or licensed by the Company, as the case may be), such licenses and
rights are in full force and effect, and the Company's products, methods and
services do not infringe any unlicensed intellectual property of any third
parties.
3. To the best of our knowledge, after due inquiry, there is no claim or
action, pending, threatened or potential, which affects or could affect the
rights of the Company with respect to any trademarks, service marks, copyrights,
service names, trade names, patents, patent applications or licenses used in, or
required for, the conduct of the Company's business and all trademarks, service
marks, copyrights, trade names, and patents owned or licensed to the Company are
valid.
4. To the best of our knowledge, after due inquiry, there is no intellectual
property based claim or action, pending, threatened or potential, which affects
or could affect the rights of the Company with respect to any products,
services, processes or licenses, including, without limitation, the Licenses
used in the conduct of the Company's business.
5. To the best of our knowledge, after due inquiry, except as described in the
Registration Statement, the Company is not under any obligation to pay royalties
or fees to any third party with respect to any material, technology or
intellectual properties developed, employed, licensed or used by the Company.
6. To the best of our knowledge, after due inquiry, the statements in the
Registration Statement under the headings, "Risk Factors - Patents, Trademarks
and Proprietary Information" and "Business - Patents, Trademarks and Proprietary
Information", are accurate in all material respects, fairly represent the
information disclosed therein and
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do not omit to state any fact necessary to make the statements made therein
complete and accurate.
7. To the best of our knowledge, after due inquiry, the statements in the
Registration Statement and the Prospectus do not contain any untrue statement of
a material fact with respect to the intellectual property position of the
Company, or omit to state any material fact relating to the intellectual
property position of the Company which is required to be stated in the
Registration Statement and the Prospectus or is necessary to make the statements
therein not misleading.
We call your attention to the fact that the members of this firm are licensed to
practice law in the State of ______________ and before the United States Patent
and Trademark Office as Registered Patent Attorneys. Accordingly, we express no
opinion with respect to the laws, rules and regulations of any jurisdictions
other than the State of ___________ and the United States of America.
The opinions expressed herein are for the sole benefit of, and may be relied
upon only by, the several Underwriters named in Schedule A to the Underwriting
Agreement and ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP.
Very truly yours,
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