EXHIBIT 1.1
5,700,000 SHARES
FOUR MEDIA COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
UNDERWRITING AGREEMENT
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FEBRUARY 5, 1997
▇▇▇▇▇▇ ▇▇▇▇ LLC
PAINEWEBBER INCORPORATED
As Representatives of the
several Underwriters
c/o ▇▇▇▇▇▇ ▇▇▇▇ LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
1. INTRODUCTION. Four Media Company, a Delaware corporation (the
"Company"), proposes to issue and sell to the several Underwriters named in
Schedule I hereto (the "Underwriters"), for which ▇▇▇▇▇▇ ▇▇▇▇ LLC and
PaineWebber Incorporated are acting as the representatives (the
"Representatives"), an aggregate of 3,491,784 shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"). Technical Services
Partners, L.P., a Delaware limited partnership (the "Selling Stockholder")
proposes to sell to the several Underwriters an aggregate of 2,208,216
outstanding shares of Common Stock. The 3,491,784 shares of Common Stock to be
sold by the Company and the 2,208,216 shares of Common Stock to be sold by the
Selling Stockholder are referred to herein as the "Firm Shares." The Company
also proposes to issue and sell to the several Underwriters an aggregate of not
more than 855,000 additional shares of Common Stock (the "Additional Shares"),
if requested by the Underwriters in accordance with Section 9 hereof.
The Firm Shares and the Additional Shares collectively are referred to herein as
the "Shares." The words "you" and "your" refer to the Representatives of the
Underwriters.
The Company and the Selling Stockholder hereby severally agree with the
several Underwriters as follows:
2. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to, and agrees with, each of the
several Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-13721)
under the Securities Act of 1933, as amended (the "Act"), with respect to
the Shares, including a form of prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the Act and
the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder (the "Rules and Regulations"). Such registration
statement has been filed with the Commission under the Act, and one or more
amendments to such registration statement also may have been so filed.
After the execution of this Underwriting Agreement (this "Agreement"), the
Company shall file with the Commission either (A) if such registration
statement, as it may have been amended, has been declared by the Commission
to be effective under the Act, either (1) if the Company relies on Rule 434
under the Act, a Term Sheet (as hereinafter defined) relating to the
Shares, that shall identify the Preliminary Prospectus (as hereinafter
defined) that it supplements and containing such information as is required
by Rules 434 and 430A under the Act or permitted by Rule 424(b) under the
Act or (2) if the Company does not rely on Rule 434 under the Act, a
prospectus in the form most recently included in an amendment to such
registration statement filed with the Commission (or, if no such amendment
shall have been filed, in such registration statement), with such
insertions and changes as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act, and in the case of either clause
(A)(1) or (A)(2) of this sentence as shall have been provided to and
approved by the Representatives prior to the filing thereof, or (B) if such
registration statement, as it may have been amended, has not been declared
by the Commission to be effective under the Act, an amendment to such
registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by the Representatives prior
to the filing thereof. As used in this Agreement, the term "Registration
Statement" means such registration statement, as amended at the time when
it was or is declared effective, including all financial schedules and
exhibits thereto; the Registration Statement shall be deemed to include any
information omitted therefrom pursuant to Rule 430A under the Act and
included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion contained in such
registration statement or any amendment thereto (including the prospectus
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subject to completion, if any, included in the Registration Statement or
any amendment thereto or filed pursuant to Rule 424(a) under the Act at the
time it was or is declared effective); and the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the Act, the Term Sheet
relating to the Shares that is first filed pursuant to Rule 424(b)(7) under
the Act, together with the Preliminary Prospectus identified therein that
such Term Sheet supplements; (B) if the Company does not rely on Rule 434
under the Act, the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Act; or (C) if the Company does not rely on Rule 434
under the Act and if no prospectus is required to be filed pursuant to Rule
424(b) under the Act, the prospectus included in the Registration
Statement; and the term "Term Sheet" means any term sheet that satisfies
the requirements of Rule 434 under the Act. Any reference to the "date" of
a Prospectus that contains a Term Sheet shall mean the date of such Term
Sheet. To the extent the Company relies on Rule 462(b) under the Act ("Rule
462(b)") to increase the maximum aggregate offering price, the Company
shall have made in a timely manner any filing required under Rule 462(b)
and such filing shall be in compliance with such Rule.
(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus and has not instituted or
threatened to institute any proceedings with respect to such an order.
When any Preliminary Prospectus delivered to you for dissemination in
connection with the offering was filed with the Commission it (A) contained
all statements required to be stated therein in accordance with, and
complied in all material respects with the requirements of, the Act and the
Rules and Regulations and (B) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. When the Registration Statement or any
amendment thereto was or is declared effective, it (A) contained or will
contain all statements required to be stated therein in accordance with,
and complied or will comply in all material respects with the requirements
of, the Act and the Rules and Regulations and (B) did not or will not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading.
When the Prospectus or any Term Sheet that is a part thereof and when any
amendment or supplement thereto is filed with the Commission pursuant to
Rule 424(b) (or, if the Prospectus or such amendment or supplement is not
required to be so filed, when the Registration Statement and when any
amendment thereto containing such amendment or supplement to the Prospectus
was or is declared effective) and at all times subsequent thereto up to and
including the Closing Date (as defined in Section 3 hereof) and the Option
Closing Date (as defined in Section 9 hereof), the Prospectus, as amended
or supplemented at any such time, including any amendment or supplement
effected by a Term Sheet (A) contained or will contain all statements
required to be stated therein in accordance with, and complied or will
comply in all material respects with the requirements of, the Act and the
Rules and Regulations and (B) did not or will not
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include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
foregoing provisions of this paragraph (ii) shall not apply to statements
or omissions made in any Preliminary Prospectus, the Registration Statement
or any amendment thereto or the Prospectus or any amendment or supplement
thereto in reliance upon, and in conformity with, information furnished in
writing to the Company by or on behalf of the Underwriters through the
Representatives expressly for use therein.
(iii) The Company and each of its subsidiaries (the
"Subsidiaries") (A) is a duly organized and validly existing corporation in
good standing under the laws of its jurisdiction of incorporation, with
full power and authority (corporate and other) to own or lease its
properties and to conduct its business as described in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus); and (B) is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction in which it owns or leases property or in which the conduct of
its business requires such qualification (except for those jurisdictions in
which the failure so to qualify would not have a Material Adverse Effect
(as hereinafter defined)). "Material Adverse Effect" means, when used in
connection with the Company or its Subsidiaries, any development, change or
effect that is materially adverse to the business, properties, assets, net
worth, condition (financial or other), results of operations or prospects
of the Company and its Subsidiaries taken as a whole.
(iv) The Company has the duly authorized and validly outstanding
capitalization set forth under the caption "Capitalization" in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and will have the adjusted capitalization set forth
therein on the Closing Date and the Option Closing Date, based on the
assumptions set forth therein. As of the Closing Date, the securities of
the Company will conform to the descriptions thereof contained in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). The outstanding shares of Common Stock have been
duly authorized and validly issued by the Company and are fully paid and
nonassessable. Except as created hereby or referred to in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), there are no outstanding options, warrants, rights or other
arrangements requiring the Company or any Subsidiary at any time to issue
any capital stock. No holders of outstanding shares of capital stock of
the Company are entitled as such to any preemptive or other rights to
subscribe for any of the Shares and neither the filing of the Registration
Statement nor the offering or sale of the Shares as contemplated by this
Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to, the registration of any securities of the
Company. The Shares have been duly authorized; on the Closing Date or the
Option Closing Date (as the case may
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be), after payment therefor in accordance with the terms of this Agreement,
(A) the Firm Shares and the Additional Shares to be sold by the Company
hereunder will be validly issued, fully paid and nonassessable, and (B)
good and marketable title to the Shares will pass to the Underwriters on
the Closing Date or the Option Closing Date (as the case may be) free and
clear of any lien, encumbrance, security interest, claim or other
restriction whatsoever. Except as disclosed in the Prospectus, the
outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and are
owned directly by the Company, free and clear of any lien, encumbrance,
security interest, claim or other restriction whatsoever. The Company has
received, subject to official notice of issuance, approval to have the
Shares listed on the Nasdaq National Market (the "NNM") and the Company
knows of no reason or set of facts which is likely to adversely affect such
approval.
(v) The consolidated financial statements and the related notes
and schedules thereto included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present in all material respects the
consolidated financial condition, results of operations, stockholders'
equity and cash flows of the Company and its Subsidiaries at the respective
dates and for the respective periods specified therein. Such financial
statements and the related notes and schedules thereto have been prepared
in accordance with generally accepted accounting principles consistently
applied throughout the periods involved (except as otherwise noted therein)
and such financial statements as are audited have been examined by Coopers
& ▇▇▇▇▇▇▇ L.L.P., who are independent public accountants within the meaning
of the Act and the Rules and Regulations, as indicated in their reports
filed therewith. The selected financial information and statistical data
set forth under the captions "Prospectus Summary--Summary Financial
Information," "Capitalization," "Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and "Business" in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) fairly present, on the
basis stated in the Prospectus (or such Preliminary Prospectus), the
information included therein and have been properly derived from the
financial statements and other operating records of the Company and its
Subsidiaries.
(vi) The Company and each of its Subsidiaries have filed (giving
effect to permitted extensions) all necessary foreign, federal, state and
local income, franchise and other material tax returns and have paid all
taxes shown as due thereunder (other than those being contested in good
faith and by appropriate proceeding or for which adequate reserves have
been established and reflected in the Company's financial statements), and
the Company has no knowledge of any tax deficiency which might be assessed
against the Company which, if so assessed, may have a Material Adverse
Effect.
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(vii) The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which they are engaged; neither the Company nor any Subsidiary has been
refused any insurance coverage sought or applied for; and neither the
Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect, except as described in or contemplated by the Prospectus.
(viii) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
there is no pending action, suit, proceeding or investigation or, to the
knowledge of the Company, threatened action, suit, proceeding or
investigation before or by any court, regulatory body or administrative
agency or any other governmental agency or body, domestic or foreign, which
(A) questions the validity of the capital stock of the Company or this
Agreement or of any action taken or to be taken by the Company pursuant to
or in connection with this Agreement, (B) is required to be disclosed in
the Registration Statement which is not so disclosed (and such proceedings,
if any, as are summarized in the Registration Statement are accurately
summarized in all respects), or (C) may have a Material Adverse Effect.
(ix) The Company has full legal right, power and authority to
enter into this Agreement and to consummate the transactions provided for
herein. This Agreement has been duly authorized, executed and delivered by
the Company and, assuming it is a binding agreement of yours, constitutes a
legal, valid and binding 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 the enforcement
of creditors' rights and the application of equitable principles relating
to the availability of remedies and except as rights to indemnity or
contribution may be limited by federal or state securities laws and the
public policy underlying such laws), and none of the Company's execution or
delivery of this Agreement, its performance hereunder, its consummation of
the transactions contemplated herein, its application of the net proceeds
of the offering in the manner set forth under the caption "Use of Proceeds"
or the conduct of its business as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
conflicts 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, causes or will cause (or permits or will
permit) the maturation or acceleration of any liability or obligation or
the termination of any right under, or result in the creation or imposition
of any lien, charge, or encumbrance upon, any property or assets of the
Company or any of its Subsidiaries pursuant to the
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terms of (A) the charter or by-laws of the Company or any of its
Subsidiaries, as will have been amended, as of the Closing Date, (B) any
indenture, mortgage, deed of trust, voting trust agreement, stockholders'
agreement, note agreement or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which any of them are
or may be bound or to which any of their respective properties is or may be
subject and is material to the Company and its Subsidiaries taken as a
whole, or (C) any statute, judgment, decree, order, rule or regulation
applicable to the Company or any of its Subsidiaries of any government,
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, domestic or foreign, having jurisdiction over
the Company, any of its Subsidiaries or any of their respective activities
or properties.
(x) All executed agreements or copies of executed agreements
filed as exhibits to the Registration Statement to which the Company or any
of its Subsidiaries is a party or by which any of them are or may be bound
or to which any of their assets, properties or businesses is or may be
subject have been duly and validly authorized, executed and delivered by
the Company or such Subsidiary, as the case may be, and constitute the
legal, valid and binding agreements of the Company or such Subsidiary, as
the case may be, enforceable against each of them in accordance with their
respective terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
relating to enforcement of creditors' rights generally, and general
equitable principles relating to the availability of remedies, and except
as rights to indemnity or contribution may be limited by federal or state
securities laws and the public policy underlying such laws). The
descriptions in the Registration Statement of contracts and other documents
are accurate in all material respects and fairly present the information
required to be shown with respect thereto by the Act and the Rules and
Regulations, and there are no contracts or other documents which are
required by the Act or the Rules and Regulations 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 complete and correct copies of the documents of which they
purport to be copies.
(xi) Subsequent to the most recent respective dates as of which
information is given in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), and except as expressly
described therein, neither the Company nor any of its Subsidiaries has
incurred, other than in the ordinary course of its business, any material
liabilities or obligations, direct or con tingent, purchased any of its
outstanding capital stock, paid or declared any dividends or other
distributions on its capital stock or entered into any material
transactions not in the ordinary course of business, and there has been no
material change in capital stock or debt or any material adverse change in
the business, properties, assets, net worth, condition (financial or
other), results of operations or prospects of the
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Company and its Subsidiaries taken as a whole. Neither the Company nor any
of its Subsidiaries (or the manner in which it or any of them conducts its
business) is in breach or violation of, or in default under, any term or
provision of (A) its charter or by-laws, as will have been amended as of
the Closing Date, (B) any indenture, mortgage, deed of trust, voting trust
agreement, stockholders' agreement, note agreement or other agreement or
instrument to which it is a party or by which it is or may be bound or to
which any of its property is or may be subject, or any indebtedness, the
effect of which breach or default singly or in the aggregate may have a
Material Adverse Effect, or (C) any statute, judgment, decree, order, rule
or regulation applicable to the Company or any of its Subsidiaries or of
any arbitrator, court, regulatory body, administrative agency or any other
governmental agency or body, domestic or foreign, having jurisdiction over
the Company or any of its Subsidiaries or any of their respective
activities or properties and the effect of which breach or default singly
or in the aggregate may have a Material Adverse Effect.
(xii) Except as set forth in the Prospectus, no labor disturbance
by, or labor dispute with, the employees of the Company or any of its
Subsidiaries exists or, to the Company's best knowledge, is threatened,
which may have a Material Adverse Effect.
(xiii) Since its inception, the Company has not incurred any
material liability arising under or as a result of the application of the
provisions of the Act.
(xiv) The Company and each of its Subsidiaries owns, or is
licensed or otherwise has sufficient right to use, the proprietary
knowledge, inventions, patents, trademarks, service marks, trade names,
logo marks and copyrights used in or necessary for the conduct of its
business (collectively "Rights") as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
No claims have been asserted against the Company or any of its Subsidiaries
by any person with respect to the use of any such Rights or challenging or
questioning the validity or effectiveness of any such Rights. The use, in
connection with the business and operations of the Company of such Rights
does not, to the Company's best knowledge, infringe on the rights of any
person except where such infringement would not have a Material Adverse
Effect.
(xv) No consent, approval, authorization or order of or filing
with any court, regulatory body, administrative agency or any other
governmental agency or body, domestic or foreign, is required for the
performance of this Agreement or the consummation of the transactions
contemplated hereby, 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 Underwriters' purchase and distribution of the Shares
or such approval as may be required from the NNM or such
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filings as may be required to effect certain amendments to the Company's
charter that are described in the Prospectus or such filings as are
otherwise described in the Prospectus, all of which will be obtained or
made prior to the Closing Date.
(xvi) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities under the
Registration Statement (other than those that have been disclosed in the
Prospectus or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), that have not been waived with respect to the
Registration Statement.
(xvii) Neither the Company nor any of its officers, directors or
affiliates (within the meaning of the Rules and Regulations) has taken,
directly or indirectly, any action designed to stabilize or manipulate the
price of any security of the Company, or which has constituted or which
might in the future reasonably be expected to, cause or result in,
stabilization or manipulation of the price of any security of the Company,
to facilitate the sale or resale of the Shares or otherwise.
(xviii) The Company and each of its Subsidiaries has good and
marketable title to, or valid and enforceable leasehold interests in, all
properties and assets owned or leased by it, free and clear of all liens,
encumbrances, security interests, claims, restrictions, equities, claims
and defects, except (A) such as are described in the Registration Statement
and Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), or such as do not materially adversely affect the
value of any of such properties or assets taken as a whole and do not
materially interfere with the use made and proposed to be made of any of
such properties or assets, (B) liens for taxes not yet due and payable as
to which appropriate reserves have been established and reflected in the
financial statements included in the Registration Statement, and (C) except
for liens securing various capital leases and equipment notes related to
the purchase of such equipment. The Company and each of its Subsidiaries
owns or leases all such properties as are necessary to its operations as
now conducted, and as proposed to be conducted as set forth in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus); and the properties and
business of the Company and its Subsidiaries conform in all material
respects to the descriptions thereof contained in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus). All the material leases and
subleases of the Company and its Subsidiaries are in full force and effect,
and neither the Company nor any Subsidiary is in default in respect of any
of the material terms or provisions of any such material leases or
subleases, and neither the Company nor any Subsidiary has notice of any
claim which has been asserted by
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anyone adverse to the Company's or any of its Subsidiary's rights as lessee
or sublessee under either the material lease or sublease, or affecting or
questioning the Company's or any Subsidiary's right to the continued
possession of the leased or subleased premises under any such material
lease or sublease, which may have a Material Adverse Effect.
(xix) The Company and each of its Subsidiaries are (a) in
compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), or is taking action aimed at assuring
compliance therewith (b) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (c) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a Material Adverse Effect.
(xx) The costs and liabilities, if any, associated with the
effect of Environmental Laws on the business, operations and properties of
the Company and its Subsidiaries (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties) would not, singly or in the aggregate, have a
Material Adverse Effect.
(xxi) Neither the Company nor any Subsidiary has violated any
federal or state law relating to discrimination in the hiring, promotion or
pay of employees, nor any applicable federal or state wages and hours law,
nor any provisions of the Employee Retirement Income Security Act of 1974,
as amended, or the rules and regulations promulgated thereunder, the
consequences of which violation may have a Material Adverse Effect.
(xxii) The Company and each of its Subsidiaries holds all
franchises, licenses, permits, approvals, certificates and other
authorizations from federal, state and other governmental or regulatory
authorities necessary to the ownership, leasing and operation of its
properties or required for the present conduct of its business, and such
franchises, licenses, permits, approvals, certificates and other
governmental authorizations are in full force and effect and the Company
and its Subsidiaries are in compliance therewith in all material respects
except where the failure so to obtain, maintain or comply with would not
have a Material Adverse Effect.
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(xxiii) No Subsidiary of the Company currently is prohibited,
directly or indirectly, from paying any dividends to the Company, from
making any other distribution on such Subsidiary's capital stock, from
repaying to the Company any loans or advances to such Subsidiary from the
Company, except as described in or contemplated by the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
P1rospectus).
(xxiv) The books, records and accounts and systems of internal
accounting controls of the Company currently comply with the requirements
of Section 13(b)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(b) The Selling Stockholder represents and warrants to, and agrees with,
the several Underwriters that:
(i) The Selling Stockholder has full legal right, power and
authority to enter into this Agreement and the Letter of Transmittal and
Custody Agreement entered into with U.S. Stock Transfer Corporation
relating to the transactions contemplated hereby (the "Custody Agreement").
This Agreement and the Custody Agreement have been duly authorized,
executed and delivered by the Selling Stockholder, and (assuming this
Agreement is a binding agreement of yours) constitutes the valid and
binding agreement of the Selling Stockholder, enforceable against the
Selling Stockholder 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 the enforcement of creditor's rights and the application of
equitable principles relating to the availability of remedies, and except
as rights to indemnity or contribution may be limited by federal or state
securities law or the public policy underlying such laws).
(ii) None of the execution, delivery or performance of this
Agreement and the Custody Agreement and the consummation of the
transactions herein contemplated, will conflict with or result in a breach
of, or default under, any indenture, mortgage, deed of trust, voting trust
agreement, stockholders' agreement, note agreement, or other agreement or
instrument to which the Selling Stockholder is a party or by which the
Selling Stockholder is or may be bound or to which any of its property is
or may be subject, or any statute, judgment, decree, order, rule or
regulation applicable to the Selling Stockholder of any government,
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, domestic or foreign, having jurisdiction over
the Selling Stockholder or any of its activities or properties.
(iii) At the date hereof the Selling Stockholder has, and at the
time of delivery of the Shares to be sold by the Selling Stockholder to the
several
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Underwriters, the Selling Stockholder will have, full right, power and
authority to sell, assign, transfer and deliver the Shares to be sold by
the Selling Stockholder hereunder. At the date hereof the Selling
Stockholder is, and at the time of delivery of the Shares to be sold by the
Selling Stockholder, the Selling Stockholder will be, the lawful owner of
and has and will have, good and marketable title to such Shares free and
clear of any liens, encumbrances, security interests, claims, community
property rights, restrictions on transfer or other defects in title (other
than pursuant to this Agreement and such restrictions as may be imposed by
the securities laws). Upon delivery of and payment for the Shares to be
sold by the Selling Stockholder hereunder and assuming that each of the
Underwriters which has severally purchased such Shares acquires such Shares
in good faith without notice of any adverse claim (as such term is used in
Section 8-302 of the Uniform Commercial Code as in effect in the State of
New York), good and marketable title to such Shares will pass to the
Underwriters, free and clear of any liens, encumbrances, security
interests, claims, community property rights, restrictions on transfer or
other defects in title (other than those created by any Underwriter or as
contemplated in this Agreement). Except as described in the Registration
Statement and the Prospectus (or, if there is no Prospectus, the most
recent Preliminary Prospectus) or created hereby, there are no outstanding
options, warrants, rights, or other agreements or arrangements requiring
the Selling Stockholder at any time to transfer any Common Stock to be sold
hereunder by the Selling Stockholder.
(iv) At the time when the Registration Statement becomes or
became effective, and at all times subsequent thereto up to and including
the Closing Date and the Option Closing Date, the Registration Statement
and any amendments thereto will not contain any untrue statement of a
material fact regarding the Selling Stockholder or omit to state a material
fact regarding the Selling Stockholder required to be stated therein or
necessary in order to make the statements therein regarding the Selling
Stockholder not misleading, and the Prospectus (and any supplements
thereto) (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) will not contain any untrue statement of a material
fact regarding the Selling Stockholder or omit to state a material fact
regarding the Selling Stockholder required to be stated therein or
necessary in order to make the statements therein regarding the Selling
Stockholder, in the light of the circumstances under which they were made,
not misleading, and the Selling Stockholder is unaware of any material
misstatement in or omission from the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) or of any material adverse information regarding
the business or operations of the Company which is not set forth in the
Registration Statement and the Prospectus (or, if the Prospectus is not
then in existence, in the most recent Preliminary Prospectus).
(v) The Selling Stockholder has not taken, directly or
indirectly, any action designed to stabilize or manipulate the price of any
security of the
-12-
Company, or which has constituted or which might in the future reasonably
be expected to cause or result in stabilization or manipulation of the
price of any security of the Company, to facilitate the sale or resale of
the Shares or otherwise.
(vi) Nothing has come to the attention of the Selling
Stockholder to cause the Selling Stockholder to believe that the Company's
representations and warranties contained in this Agreement are not
accurate.
(vii) There is not pending or threatened against the Selling
Stockholder any action, suit or proceeding which (A) questions the validity
of this Agreement or of any action taken or to be taken by the Selling
Stockholder pursuant to or in connection with this Agreement or (B) is
required to be disclosed in the Registration Statement which is not so
disclosed, and such actions, suits or proceedings as are summarized in the
Registration Statement, if any, are summarized accurately.
3. PURCHASE, SALE AND DELIVERY OF THE SHARES. On the basis of the
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, (A) the Company agrees to
sell to each Underwriter and each Underwriter, severally and not jointly, agrees
to purchase from the Company at a purchase price of $____ per Share, the number
of Firm Shares set forth opposite the name of such Underwriter in Column (1) of
Schedule I hereto and (B) the Selling Stockholder agrees to sell to each
Underwriter, and each Underwriter, severally and not jointly, agrees to purchase
from the Selling Stockholder at a purchase price of $_______ per Share, the
number of Firm Shares set forth opposite the name of such Underwriter in Column
(2) of Schedule I hereto.
Delivery of certificates, and payment of the purchase price, for the Firm
Shares shall be made at the offices of ▇▇▇▇▇▇ ▇▇▇▇ LLC at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other location as shall be agreed upon by the
Company and the Representatives. Such delivery and payment shall be made at
10:00 a.m., New York time, on February __, 1996 or at such other time and date
not more than ten business days thereafter as shall be agreed upon by the
Representatives and the Company. The time and date of such delivery and payment
are herein called the "Closing Date." Delivery of the certificates for the Firm
Shares shall be made to the Representatives for the respective accounts of the
several Underwriters against payment by the several Underwriters through the
Representatives of the purchase price for the Firm Shares by certified or
official bank checks in New York Clearing House (next day) funds drawn to the
order of the Company in the case of the Firm Shares sold by it and Technical
Services Partners, L.P. in the case of the Firm Shares sold by the Selling
Stockholder. The certificates for the Shares to be so delivered will be in
definitive, fully registered form, will bear no restrictive legends and will be
in such denominations and registered in such names as the Representatives shall
request, not less than two full business days prior to the Closing Date. The
certificates for the Firm
-13-
Shares will be made available to the Representatives at such office or such
other place as the Representatives may designate for inspection, checking and
packaging not later than 9:30 a.m., New York time, on the business day prior to
the Closing Date.
4. PUBLIC OFFERING OF THE SHARES. It is understood that the Underwriters
propose to make a public offering of the Shares at the price and upon the other
terms set forth in the Prospectus.
5. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDER.
(a) The Company covenants and agrees with each of the Underwriters
that:
(i) The Company will use its best efforts to cause the
Registration Statement and any amendments thereto, if not effective at the
time of execution of this Agreement, to become effective as promptly as
practicable. If required, the Company will file the Prospectus or any Term
Sheet that constitutes a part thereof and any amendment or supplement
thereto with the Commission in the manner and within the time period
required by Rules 424(b) and 434 under the Act. During any time when a
prospectus relating to the Shares is required to be delivered under the
Act, the Company (A) will comply with all requirements imposed upon it by
the Act and the Rules and Regulations to the extent necessary to permit the
continuance of sales of or dealings in the Shares in accordance with the
provisions hereof and of the Prospectus, as then amended or supplemented,
and (B) will not file with the Commission the prospectus, Term Sheet or the
amendment referred to in the third sentence of Section 2(a)(i) hereof, any
amendment or supplement to such prospectus, Term Sheet or any amendment to
the Registration Statement of which the Representatives shall not
previously have been advised and furnished with a copy a reasonable period
of time prior to the proposed filing and as to which filing the
Representatives shall not have given their consent.
(ii) As soon as the Company is advised or obtains knowledge
thereof, the Company will advise the Representatives (A) when the
Registration Statement, as amended, has become 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;
(B) of any request made by the Commission for amending the Registration
Statement, for supplementing any Preliminary Prospectus or the Prospectus
or for additional information; or (C) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or any post-effective amendment thereto or any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or the institution or threat of any
investigation or
-14-
proceeding for that purpose, and will use its best efforts to prevent the
issuance of any such order and, if issued, to obtain the lifting thereof as
soon as possible.
(iii) The Company will (A) use its best efforts to arrange for
the qualification of the Shares for offer and sale under the state
securities or blue sky laws of such jurisdictions as the Representatives
reasonably may designate, (B) continue such qualifications in effect for as
long as may be necessary to complete the distribution of the Shares, and
(C) make such applications, file such documents and furnish such
information as may be required for the purposes set forth in clauses (A)
and (B); provided, however, that the Company shall not be required to
-------- -------
qualify as a foreign corporation or file a general or unlimited consent to
service of process or take any action that would subject itself to taxation
in respect of doing business in any such jurisdiction.
(iv) The Company consents to the use of the Prospectus (and any
amendment or supplement thereto) by the Underwriters and all dealers to
whom the Shares may be sold, in connection with the offering or sale of the
Shares and for such period of time thereafter as the Prospectus is required
by law to be delivered in connection therewith. If, at any time when a
prospectus relating to the Shares is required to be delivered under the
Act, any event occurs as a result of which the Prospectus, as then amended
or supplemented, would include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein in
the light of the circumstances under which they are made, not misleading,
or if it becomes necessary at any time to amend or supplement the
Prospectus to comply with the Act or the Rules and Regulations, the Company
promptly will so notify the Representatives and, subject to Section 5(a)(i)
hereof, will prepare and file with the Commission an amendment to the
Registration Statement or an amendment or supplement to the Prospectus
which will correct such statement or omission or effect such compliance,
each such amendment or supplement to be reasonably satisfactory to counsel
to the Underwriters.
(v) 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
will 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 or the Rules and Regulations,
covering a period of at least 12 consecutive months after the effective
date of the Registration Statement.
-15-
(vi) During a period of five years after the date hereof, the
Company will deliver to the Representatives:
(A) as soon as practicable after filing with the Commission,
all such reports, forms or other documents as may be required from
time to time, under the Act, the Rules and Regulations, the Exchange
Act and the rules and regulations thereunder;
(B) as soon as they are available, copies of all information
(financial or other) mailed to stockholders;
(C) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the National
Association of Securities Dealers, Inc. ("NASD") or any securities
exchange or market;
(D) 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 the Company;
and
(E) any additional information of a public nature concerning
the Company or its business which the Representatives may reasonably
request.
During such five-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries
are consolidated, and will be accompanied by similar financial statements
for any significant subsidiary which is not so consolidated.
(vii) 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.
(viii) The Company will furnish, without charge, to the
Representatives or on the Representatives' order, at such place as the
Representatives may designate, so long as a prospectus relating to the
Shares is required by law to be delivered, copies of each Preliminary
Prospectus, the Registration Statement and any pre-effective or post-
effective amendments thereto, and any registration statement filed pursuant
to Rule 462(b) (two of which copies will be signed and will include all
financial statements and exhibits) and the Prospectus, and all amendments
and supplements thereto, including any Term Sheet, in each case as soon as
available and in such quantities as the Representatives reasonably may
request. The Company will provide or cause to be provided to the
Representatives and upon request to each
-16-
Underwriter, a copy of the report on Form SR filed by the Company as
required by Rule 463 under the Act.
(ix) The Company will not, directly or indirectly, without the
prior written consent of ▇▇▇▇▇▇ ▇▇▇▇ LLC, on behalf of the Underwriters,
issue, offer, sell, offer to sell, contract to sell, grant any option to
purchase, pledge, transfer or otherwise dispose (or announce any issuance,
offer, sale, offer of sale, contract of sale, grant of any option to
purchase, pledge, transfer or other disposition) of any shares of Common
Stock or any securities convertible into, or exchangeable or exercisable
for, shares of Common Stock for a period of 180 days after the date hereof,
except (a) pursuant to this Agreement, or (b) for granting of options or
for issuances pursuant to the exercise of stock options outstanding on, or
granted subsequent to, the date hereof pursuant to a stock option or other
employee benefit plan in existence on the date hereof and described in the
Prospectus.
(x) The Company will cause the Shares to be duly approved for
listing on the NNM, subject to official notice of issuance, prior to the
Closing Date.
(xi) The Company shall not, and shall not use its best effort
to, cause its officers, directors and affiliates of any of them (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, or which will constitute, stabilization or
manipulation of the price of any securities of the Company.
(xii) The Company will apply the net proceeds of the offering
received by it in the manner set forth under the caption "Use of Proceeds"
in the Prospectus.
(xiii) The Company will timely file all such reports, forms or
other documents as may be required from time to time, under the Act, the
Rules and Regulations, the Exchange Act and the rules and regulations
thereunder, and all such reports, forms and documents filed will comply in
all material respects as to form and substance with the applicable
requirements under the Act, the Rules and Regulations, the Exchange Act and
the rules and regulations thereunder.
(b) The Selling Stockholder covenants and agrees with each of the
Underwriters that:
(i) The Selling Stockholder will not, directly or indirectly,
without the prior written consent of ▇▇▇▇▇▇ ▇▇▇▇ LLC, on behalf of the
Underwriters, offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
including, without limitation, any distribution to any
-17-
partner of the Selling Stockholder, (or announce any issuance, offer, sale,
offer of sale, contract of sale, grant of any option to purchase, pledge,
transfer or other disposition), any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for, shares of
Common Stock for a period of 270 days after the date hereof, and will not
take, directly or indirectly, any action designed to, or which might in the
foreseeable future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the
Company.
(ii) The Selling Stockholder consents to the use of the
Prospectus and any amendment or supplement thereto by the Underwriters and
all dealers to whom the Shares may be sold, both in connection with the
offering or sale of the Shares and for such period of time thereafter as
the Prospectus is required by law to be delivered in connection therewith.
6. EXPENSES.
(a) Regardless of whether the transactions contemplated in this
Agreement are consummated, and regardless of whether for any reason this
Agreement is terminated, the Company will pay, and hereby agrees to indemnify
each Underwriter against, all fees and expenses incident to the performance of
the obligations of the Company and the Selling Stockholder under this Agreement,
including, but not limited to, (i) fees and expenses of accountants and counsel
for the Company and the Selling Stockholder, (ii) all costs and expenses
incurred in connection with the preparation, duplication, printing, filing,
delivery and shipping of copies of the Registration Statement and any pre-
effective or post-effective amendments thereto, any registration statement filed
pursuant to Rule 462(b), any Preliminary Prospectus and the Prospectus and any
amendments or supplements thereto (including postage costs related to the
delivery by the Underwriters of any Preliminary Prospectus or Prospectus, or any
amendment or supplement thereto), this Agreement, the Agreement Among
Underwriters, any Selected Dealer Agreement, Underwriters' Questionnaire,
Underwriters' Power of Attorney and all other documents in connection with the
transactions contemplated herein, including the cost of all copies thereof,
(iii) fees and expenses relating to qualification of the Shares under state
securities or blue sky laws, including the cost of preparing and mailing the
preliminary and final blue sky memoranda and filing fees and disbursements and
fees of counsel (which fees shall not exceed $30,000) and other related
expenses, if any, in connection therewith, (iv) filing fees of the Commission
and the NASD relating to the Shares, (v) any fees and expenses in connection
with the listing of the Shares on the NNM, (vi) costs and expenses incident to
the preparation, issuance and delivery to the Underwriters of any certificates
evidencing the Shares, including transfer agent's and registrar's fees and any
applicable transfer taxes incurred in connection with the delivery to the
Underwriters of the Shares to be sold by the Company and the Selling Stockholder
pursuant to this Agreement, (vii) costs and expenses incident to any meetings
with prospective investors in the Shares (other than as shall have been
specifically approved by the Representatives to be paid for by the
Underwriters), and
-18-
(viii) costs and expenses of advertising relating to the offering of the Shares
(other than as shall have been specifically approved by the Representatives to
be paid for by the Underwriters).
(b) If the purchase of the Shares as herein contemplated is not
consummated for any reason other than the Underwriters' default under this
Agreement or other than by reason of Sections 11(b)(ii), 11(b)(iii), 11(b)(iv)
or 11(b)(v)(A), the Company shall reimburse the several Underwriters for their
reasonable out-of-pocket expenses (including counsel fees and disbursements) in
connection with any investigation made by them, and any preparation made by them
in respect of marketing of the Shares or in contemplation of the performance by
them of their obligations hereunder.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligation of each
Underwriter to purchase and pay for the Shares set forth opposite the name of
such Underwriter in Schedule I is subject to the continuing accuracy of the
representations and warranties of the Company and the Selling Stockholder herein
as of the date hereof and as of the Closing Date as if they had been made on and
as of the Closing Date; the accuracy on and as of the Closing Date of the
statements of officers of the Company and the Selling Stockholder made pursuant
to the provisions hereof; the performance by the Company and the Selling
Stockholder on and as of the Closing Date of their respective covenants and
agreements hereunder; and the following additional conditions:
(a) If the Company has elected to rely on Rule 430A under the Act, the
Registration Statement shall have been declared effective, and the Prospectus
(containing the information omitted pursuant to Rule 430A) shall have been filed
with the Commission not later than the Commission's close of business on the
second business day following the date hereof or such later time and date to
which the Representatives shall have consented; if the Company does not elect to
rely on Rule 430A, the Registration Statement shall have been declared effective
not later than 11:00 a.m., New York time, on the date hereof or such later time
and date to which the Representatives shall have consented; if required, in the
case of any changes in or amendments or supplements to the Prospectus in
addition to those contemplated above, the Company shall have filed such
Prospectus or any Term Sheet that constitutes a part thereof as amended or
supplemented with the Commission in the manner and within the time period
required by Rules 424(b) and 434 under the Act; no stop order suspending the
effectiveness of the Registration Statement or any amendment thereto shall have
been issued, and no proceedings for that purpose shall have been instituted or
threatened or, to the knowledge of the Company or the Representatives, shall be
contemplated by the Commission; and the Company shall have complied with any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise).
(b) The Representatives shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact
-19-
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 the 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 counsel to the Underwriters, such opinion or opinions with respect
to the issuance and sale of the Firm Shares, the Registration Statement and the
Prospectus and such other related matters as the Representatives reasonably may
request and such counsel shall have received such documents and other
information as they request to enable them to pass upon such matters.
(d) On the Closing Date the Underwriters shall have received the
opinion, dated the Closing Date, of ▇▇▇▇ & ▇▇▇▇▇ Professional Corporation,
counsel to the Company, to the effect set forth below:
(i) The Company has duly authorized the issuance and sale of the
Shares to be sold by it hereunder; such Shares, when issued by the Company
and paid for in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable and will conform in all material respects to
the description thereof contained in the Prospectus and will not be subject
to any preemptive, subscription or other similar rights; and the Shares
have been approved for listing on the NNM except as created hereby or
referred to in the Prospectus;
(ii) Based on the advice of the Commission, the Registration
Statement has become effective under the Act; any required filing of a
registration statement pursuant to Rule 462(b) has been made in the manner
and within the time period required by Rule 462(b); any required filing of
the Prospectus or any Term Sheet that constitutes a part thereof pursuant
to Rules 424(b) and 434 has been made in the manner and within the time
periods required by Rules 424(b) and 434; and no stop order suspending the
effectiveness of the Registration Statement or any amendment thereto has
been issued, and no proceedings for that purpose have been instituted or
are pending or, to the best knowledge of such counsel, are threatened; the
Registration Statement and the Prospectus and, if any, each amendment and
supplement thereto (except for the financial statements, schedules and
other financial data included therein or in the exhibits thereto, as to
which such counsel need not express any opinion), complied as to form in
all material respects with the requirements of the Act and the Rules and
Regulations; the descriptions contained and summarized in the Registration
Statement and the Prospectus of contracts and other documents, are accurate
and fairly represent in all material respects the information
-20-
required to be shown by the Act and the Rules and Regulations; to the best
knowledge of such counsel, there are no contracts or documents which are
required by the Act to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement which
are not described or filed as required by the Act and the Rules and
Regulations;
(iii) To the best knowledge of such counsel, there is not pending
or threatened against the Company any action, suit, proceeding or
investigation before or by any court, regulatory body, or administrative
agency or any other governmental agency or body, domestic or foreign, of a
character required to be disclosed in the Registration Statement or the
Prospectus which is not so disclosed therein; and the statements set forth
under the captions "Business--Litigation," "Management--Director
Compensation," "--Executive Compensation," "--Compensation Committee
Interlocks and Insider Participation," "--1997 Stock Plans," "--Employment
Agreements," "--Limitation of Liability and Indemnification Matters,"
"Certain Transactions--Indemnification Agreements," and "Description of
Capital Stock--Certain Provisions of the Company's Bylaws," in the
Prospectus, and Item 14 in the Registration Statement, insofar as such
statements constitute a summary of the legal matters, documents or
proceedings referred to therein, provide a summary of such legal matters,
documents and proceedings which is accurate in all material respects;
(iv) The Company has the corporate power and authority to enter
into this Agreement and to consummate the transactions provided for herein;
this Agreement has been duly authorized, executed and delivered by the
Company; and this Agreement, assuming due authorization, execution and
delivery by each other party hereto, is a valid and binding agreement of
the Company, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
now or hereafter in effect relating to or affecting creditors' rights
generally or by general principles of equity relating to the availability
of remedies and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy underlying
such laws.
(v) None of the Company's execution or delivery of this
Agreement, its performance hereof, its consummation of the transactions
contemplated herein or its application of the net proceeds of the offering
in the manner set forth under the caption "Use of Proceeds" in the
Prospectus and in compliance with restrictive covenants in loan agreements
of the Company and its Subsidiaries, conflicts or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company or any of its Subsidiaries pursuant to: (A) the terms of the
charter or by-laws of the domestic Subsidiaries; (B) to the best knowledge
of such counsel, the terms of any indenture, mortgage, deed of trust,
voting trust agreement,
-21-
stockholder's agreement, note agreement or other agreement or instrument to
which the domestic Subsidiaries is a party or by which it is or may be
bound or to which any of their respective properties may be subject; (C) to
the best knowledge of such counsel, any statute, rule or regulation of any
regulatory body or administrative agency or other governmental agency or
body, domestic or foreign, having jurisdiction over the domestic
Subsidiaries or any of their respective activities or properties; or (D) to
the best knowledge of such counsel, any judgment, decree or order of any
government, arbitrator, court, regulatory body or administrative agency or
other governmental agency or body, domestic or foreign, having such
jurisdiction; and no consent, approval, authorization or order of any
domestic court, regulatory body or administrative agency or other domestic
governmental agency or body, has been or is required for the Company's
performance of this Agreement or the consummation of the transactions
contemplated hereby, except such as have been obtained under the Act or may
be required under state securities or blue sky laws in connection with the
purchase and distribution by the Underwriters of the Shares;
In addition, such counsel shall state that such counsel has
participated in conferences with officers and representatives of the Company,
the Company's independent public accountants and you and your counsel, at which
the contents of the Registration Statement and the Prospectus were discussed and
(without taking any further action to verify independently the statements made
in the Registration Statement and the Prospectus and, except as stated in the
foregoing opinion, without assuming responsibility for the accuracy,
completeness or fairness of such statements) nothing has come to such counsel's
attention that causes such counsel to believe that, both as of the Effective
Date and as of the Closing Date, the Registration Statement, or any amendments
thereto, contains or contained any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the Prospectus
or any amendment or supplement thereto as of the date thereof and as of the
Closing Date contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need not express any opinion with respect to the financial statements,
schedules and other financial data included in the Registration Statement or the
Prospectus).
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials and, as to matters involving the
application of laws of any jurisdiction other than the State of California or
the United States, or the general corporation law of the State of Delaware, or
as to intellectual property or specified regulatory matters (to the extent
satisfactory in form and scope to counsel for the Underwriters) such counsel may
rely upon or substitute the opinion of other counsel reasonably acceptable to
Underwriters' counsel. The foregoing opinion also shall state that the
Underwriters are justified in relying upon such
-22-
opinion of any other counsel, and copies of such opinion shall be delivered to
the Representatives and counsel for the Underwriters.
References to the Registration Statement and the Prospectus in this
paragraph (d) shall include any amendment or supplement thereto at the date of
such opinion.
(e) On the Closing Date the Underwriters shall have received the
opinion, dated the Closing Date, of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Fields Claman & Machtinger
LLP, counsel to the Company, to the effect set forth below:
(i) The Company and each of its Subsidiaries (A) is a duly
incorporated and validly existing corporation in good standing under the
laws of its jurisdiction of incorporation with full corporate power and
authority to own or lease its properties and to conduct its business as
described in the Prospectus, and (B) is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction (x) in
which the conduct of its business requires such qualification (except for
those jurisdictions in which the failure so to qualify can be cured without
having a Material Adverse Effect) and (y) in which it owns or leases
property;
(ii) The Company has authorized capital stock as set forth in
the Prospectus; the authorized capital stock of the Company conforms in all
material respects to the descriptions thereof contained in the Prospectus;
the outstanding shares of Common Stock have been duly authorized and
validly issued by the Company, are fully paid and nonassessable, and are
free of any preemptive or other rights to subscribe for any of the Shares;
to the best knowledge of such counsel, except as described in the
Prospectus, there are no outstanding options, warrants, rights or other
arrangements requiring the Company or any Subsidiary at any time to issue
any capital stock;
(iii) The statements set forth under the caption "Business--
Government Regulations" in the Prospectus, and Item 15 in the Registration
Statement relating to the stock issuance and stock dividend and the
exemption from registration relating thereto, insofar as such statements
constitute a summary of the legal matters, documents or proceedings
referred to therein, provide a summary of such legal matters, documents and
proceedings which is accurate in all material respects;
(iv) None of the Company's execution or delivery of this
Agreement, its performance hereof, its consummation of the transactions
contemplated herein or its application of the net proceeds of the offering
in the manner set forth under the caption "Use of Proceeds" in the
Prospectus and in compliance with restrictive covenants in loan agreements
of the Company and its Subsidiaries, conflicts or will conflict with or
results or will result in any breach or violation of any of the terms or
provisions of, or constitute a default under, or result
-23-
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its Subsidiaries pursuant to:
(A) the terms of the charter or by-laws of the foreign Subsidiary; (B) to
the best knowledge of such counsel, the terms of any indenture, mortgage,
deed of trust, voting trust agreement, stockholder's agreement, note
agreement or other agreement or instrument to which the foreign Subsidiary
is a party or by which it is or may be bound or to which any of its
property may be subject; (C) to the best knowledge of such counsel, any
statute, rule or regulation of any regulatory body or administrative agency
or other governmental agency or body, domestic or foreign, having
jurisdiction over the foreign Subsidiary or any of its activities or
properties; or (D) to the best knowledge of such counsel, any judgment,
decree or order of any government, arbitrator, court, regulatory body or
administrative agency or other governmental agency or body, domestic or
foreign, having such jurisdiction; and to the best knowledge of such
counsel, no consent, approval, authorization or order of any Singapore
court, regulatory body or administrative agency or other Singapore
governmental agency or body, has been or is required for the Company's
performance of this Agreement or the consummation of the transactions
contemplated hereby;
(v) To the best knowledge of such counsel, the conduct of the
businesses of the Company and its Subsidiaries as described in the
Prospectus is not in violation of any federal, state or local statute,
administrative regulation or other law, which violation is likely to have a
Material Adverse Effect; the Company and each of its Subsidiaries have
obtained all licenses, permits, franchises, certificates and other
authorizations from state, federal and other regulatory authorities as are
necessary or required for the ownership, leasing and operation of its
properties and the conduct of its business as presently conducted and as
contemplated in the Prospectus, except for such licenses, permits,
franchises, certificates and other authorizations the failure of which to
obtain, individually or in the aggregate, would not have a Material Adverse
Effect;
(vi) The issued shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable and are owned by the Company free and clear of any
perfected security interests (except for the capital stock of Digital Magic
Company and 4MC-Burbank, Inc., which is pledged as security to The CIT
Group/Business Credit, Inc.) or, to the best knowledge of such counsel, any
other liens, encumbrances, claims or security interests; no Subsidiary of
the Company currently is prohibited, directly or indirectly, from paying
any dividends to the Company, from making any other distribution on such
Subsidiary's capital stock, from repaying to the Company any loans or
advances to such Subsidiary from the Company, except as described in or
contemplated by the Prospectus; and
(vii) Based solely upon consultation with officers and
representatives of the Company, and without any additional investigation of
the underlying facts and statements of such officers and representatives
during such
-24-
consultation, such counsel is not aware of any insufficiency in the
Company's ownership of, or right to use, the Rights used in, or necessary
for, the conduct of its business as described in the Prospectus. To the
best knowledge of such counsel, no claims have been asserted against the
Company or any of its Subsidiaries by any person to the use of any such
Rights or challenging or questioning the validity or effectiveness of any
such Rights. Based solely upon consultation with officers and
representatives of the Company, and without any additional investigation of
the underlying facts and statements of such officers and representatives
during such consultation, the use, in connection with the business and
operations of the Company and its Subsidiaries of such rights does not, to
such counsel's best knowledge, infringe on the rights of any person.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials and, as to matters involving the
application of laws of any jurisdiction other than the State of California or
the United States, or the general corporation law of the State of Delaware, or
as to intellectual property or specified regulatory matters (to the extent
satisfactory in form and scope to counsel for the Underwriters) such counsel may
rely upon or substitute the opinion of other counsel reasonably acceptable to
Underwriters' counsel. The foregoing opinion also shall state that the
Underwriters are justified in relying upon such opinion of any other counsel,
and copies of such opinion shall be delivered to the Representatives and counsel
for the Underwriters.
References to the Registration Statement and the Prospectus in this
paragraph (d) shall include any amendment or supplement thereto at the date of
such opinion.
(f) On or prior to the Closing Date, counsel to the Underwriters shall
have been furnished such documents, certificates and opinions as they reasonably
may require in order to evidence the accuracy, completeness or satisfaction of
any of the representations or warranties of the Company or the Selling
Stockholder or conditions herein contained.
(g) At the time that this Agreement is executed by the Company the
Underwriters shall have received from Coopers & ▇▇▇▇▇▇▇ L.L.P. a letter as of
the date this Agreement is executed by the Company with respect to the financial
statements and certain financial information contained in the Registration
Statement or the Prospectus in form and substance satisfactory to you (the
"Original Letter"), and on the Closing Date the Underwriters shall have received
from such firm a letter dated the Closing Date stating that, as of the Closing
Date, and as though made on the Closing Date, nothing has come to the attention
of such firm to suggest that the statements made in the Original Letter are not
true and correct.
(h) On the Closing Date, the Underwriters shall have received a
certificate, dated the Closing Date, of the principal executive officer and the
principal financial or
-25-
accounting officer of the Company to the effect that each of such persons has
carefully examined the Registration Statement and the Prospectus and any
amendments or supplements thereto 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,
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 the Closing Date;
(ii) No stop order 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 knowledge of each of
such persons, are contemplated or threatened under the Act and any and all
filings required by Rule 424, Rule 430A, Rule 434 and Rule 462(b) have been
timely made;
(iii) The Registration Statement and Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and
information required to be included therein, and neither the Registration
Statement nor any amendment 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 Prospectus (or any supplement thereto) or any Preliminary
Prospectus includes or included any untrue statement of a material fact or
omits or omitted to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus up to and
including the Closing Date, neither the Company nor any of the Subsidiaries
has incurred, other than in the ordinary course of its business, any
material liabilities or obligations, direct or contingent; neither the
Company nor any of the Subsidiaries has purchased any of its outstanding
capital stock or paid or declared any dividends or other distributions on
its capital stock; neither the Company nor any of the Subsidiaries has
entered into any transactions not in the ordinary course of business; and
there has not been any change in the capital stock or consolidated long-
term debt or any increase in the consolidated short-term borrowings (other
than any increase in short-term borrowings in the ordinary course of
business) of the Company or any material adverse change to the business,
properties, assets, net worth, condition (financial or other), results of
operations or prospects of the Company and its Subsidiaries taken as a
whole; neither the Company nor any of the Subsidiaries has sustained any
material loss or damage to its property or assets, whether or not insured;
there is no litigation which is pending or threatened against the Company
or any of its Subsidiaries which
-26-
is required under the Act or the Rules and Regulations to be set forth in
an amended or supplemented Prospectus which has not been set forth; and
there has not occurred any 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 paragraph (h) are to such documents as amended and supplemented at the
date of the certificate.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus up to and including the
Closing Date there has not been (i) any change or decrease specified in the
letter or letters referred to in paragraph (g) of this Section 7 or (ii) any
change, or any development involving a prospective change, in the business or
properties of the Company or its Subsidiaries which change or decrease in the
case of clause (i) or change or development in the case of clause (ii) makes it
impractical or inadvisable in the Representatives' judgment to proceed with the
public offering or the delivery of the Shares as contemplated by the Prospectus.
(j) No order suspending the sale of the Shares in any jurisdiction
designated by you pursuant to Section 5(a)(iii)(A) hereof has been issued on or
prior to the Closing Date and no proceedings for that purpose have been
instituted or, to your knowledge or that of the Company, have been or are
contemplated.
(k) On the Closing Date, the Underwriters shall have received the
opinion, dated the Closing Date, of ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP, in its capacity
as counsel for the Selling Stockholder, to the effect set forth below:
(i) The Selling Stockholder has full legal right, power and
authority to enter into this Agreement and the Custody Agreement and to
sell, assign, transfer and deliver in the manner provided herein the Shares
sold by the Selling Stockholder; this Agreement and the Custody Agreement
have been duly authorized, executed and delivered by the Selling
Stockholder; and the Custody Agreement and this Agreement, assuming due
authorization, execution and delivery by each other party hereto and
further assuming it is a valid and binding agreement of each of the
Underwriters, are valid and binding agreements of the Selling Stockholder,
enforceable against the Selling Stockholder in accordance with each of
their terms (except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws now or hereafter in effect
relating to or affecting creditors' rights generally and by general
principles of equity relating to the availability of remedies and except as
rights to indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws);
-27-
(ii) None of the execution, delivery or performance of this
Agreement and the Custody Agreement by the Selling Stockholder and the
consummation by the Selling Stockholder of the transactions herein
contemplated, conflict with or result in a breach of, or default under, any
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note agreement or other agreement or other instrument known to
such counsel to which the Selling Stockholder is a party or by which the
Selling Stockholder is bound or to which any of the capital stock of the
Company owned by the Selling Stockholder is subject, and nothing has come
to such counsel's attention which causes such counsel to believe that such
actions will result in any violation of any law, rule, administrative
regulation or court decree applicable to such Selling Stockholder (other
than state securities or blue sky laws or regulations, as to which such
counsel express no opinion);
(iii) Upon the delivery of the Shares to be sold hereunder by
the Selling Stockholder and payment therefor in accordance with the terms
of this Agreement and assuming that each of the Underwriters which has
severally purchased such Shares acquires such Shares in good faith without
notice of any adverse claim (as such term is used in Section 8-302 of the
Uniform Commercial Code as in effect in the State of New York), such
Underwriter will have acquired all of the rights of the Selling Stockholder
to the Shares sold by the Selling Stockholder hereunder, and in addition
will have acquired title to such Shares free and clear of any adverse claim
(other than those created by any Underwriter or as contemplated in this
Agreement); and
(iv) The statements set forth in Item 15 of the Registration
Statement (except for statements relating to the stock issuance and stock
dividend and the exemption from registration relating thereto), insofar as
such statements constitute a summary of the legal matters, documents or
proceedings referred to therein, provide a summary of such legal matters,
documents and proceedings which is accurate in all material respects.
References to the Registration Statement and the Prospectus in this
paragraph (k) shall include any amendment or supplement thereto at the date of
such opinion.
(l) On the Closing Date, the Underwriters shall have received a
certificate, dated the Closing Date, from the Selling Stockholder to the effect
that the Selling Stockholder carefully has examined the Registration Statement
and the Prospectus and any amendments or supplements thereto and this Agreement,
and that:
(i) The representations and warranties of the Selling Stockholder
in this Agreement are true and correct, as if made at and as of the Closing
Date, and the Selling Stockholder has complied with all the agreements and
-28-
satisfied all the conditions contained in this Agreement to be performed or
satisfied by the Selling Stockholder at or prior to the Closing Date; and
(ii) The Registration Statement and Prospectus and, if any, each
amendment and each supplement thereto, contain all statements required to
be included therein regarding the Selling Stockholder, and none of the
Registration Statement nor any amendment thereto includes any untrue
statement of a material fact regarding the Selling Stockholder or omits to
state any material fact regarding the Selling Stockholder required to be
stated therein or necessary to make the statements therein regarding the
Selling Stockholder not misleading, and neither the Prospectus (and any
supplements thereto) or any Preliminary Prospectus includes or included any
untrue statement of a material fact regarding the Selling Stockholder or
omits or omitted to state a material fact regarding the Selling Stockholder
required to be stated therein or necessary in order to make the statements
therein regarding the Selling Stockholder, in the light of the
circumstances under which they were made, not misleading.
(m) The Representatives shall have received from each person who is a
director or officer of the Company an agreement to the effect that such person
will not, directly or indirectly, without the prior written consent of ▇▇▇▇▇▇
▇▇▇▇ LLC, on behalf of the Underwriters, during the period ending three years
after the date of the Prospectus, offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer or dispose
of, any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for, shares of Common Stock.
(n) The Company and the Selling Stockholder shall have furnished the
Underwriters with such further opinions, letters, certificates or documents as
you or counsel for the Underwriters may reasonably request. All opinions,
certificates, letters and documents to be furnished by the Company and the
Selling Stockholder will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Underwriters and to
counsel for the Underwriters. The Company and the Selling Stockholder shall
furnish the Underwriters with conformed copies of such opinions, certificates,
letters and documents in such quantities as you reasonably request. The
certificates delivered under this Section 7 shall constitute representations,
warranties and agreements of the Company and the Selling Stockholder, as the
case may be, as to all matters set forth therein as fully and effectively as if
such matters had been set forth in Section 2 of this Agreement.
(o) The Shares shall have been duly authorized for listing on the NNM,
subject to official notice of issuance.
-29-
8. INDEMNIFICATION.
(a) The Company and the Selling Stockholder, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls such Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any and all losses, claims, damages or
liabilities, joint or several (and actions in respect thereof), to which such
Underwriter or such controlling person may become subject, under the Act or
other federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or the Prospectus or any
Preliminary Prospectus, or any amendment or supplement thereto, or any blue sky
application or other document executed by the Company or the Selling Stockholder
specifically for the purpose of qualifying, or based upon written information
furnished by the Company or the Selling Stockholder filed in any state or other
jurisdiction in order to qualify, any or all of the Shares under the securities
or blue sky laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus or any amendment or supplement thereto, in the light of the
circumstances under which they were made) not misleading and will reimburse, as
incurred, such Underwriter or such controlling persons for any legal or other
expenses reasonably incurred by such Underwriter or such controlling persons in
connection with investigating, defending or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action; provided,
--------
however, that the obligations of the Selling Stockholder pursuant to this
-------
Section 8(a) shall apply only with respect to information provided by the
Selling Stockholder for inclusion in such documents; and provided further, that
-------- -------
the Company and the Selling Stockholder will not be liable in any such case to
the extent that any such loss, claim, damage, liability or action arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in any of such documents in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of such Underwriter through the Representatives expressly for use therein; and
provided further, that such indemnity with respect to any Preliminary Prospectus
-------- -------
shall not inure to the benefit of any Underwriter (or to the benefit of any
person controlling such Underwriter) from whom the person asserting any such
loss, claim, damage, liability or action purchased Shares which are the subject
thereof to the extent that any such loss, claim, damage, liability or action (i)
results from the fact that such Underwriter failed to send or give a copy of the
Prospectus (as amended or supplemented) to such person at or prior to the
confirmation of the sale of such Shares to such person in any case where such
delivery is required by the Act and (ii) arises out of or is based upon an
untrue statement or omission of a material fact contained in such Preliminary
Prospectus that was corrected in the Prospectus (as amended and supplemented),
unless such failure resulted from non-compliance by the Company with Section
5(a)(viii) hereof; and provided further, the liability of the
-------- -------
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Selling Stockholder under this paragraph (a) shall be limited to the amount of
the net proceeds received by the Selling Stockholder from the sale of the Shares
hereunder.
The indemnity agreement in this paragraph (a) shall be in addition to
any liability which the Company and the Selling Stockholder otherwise may have.
(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 person, if any, who
controls the Company or the Selling Stockholder within the meaning of Section 15
of the Act or Section 20 of the Exchange Act against any and all losses, claims,
damages or liabilities (and actions in respect thereof) to which the Company or
the Selling Stockholder, any such director, officer, or controlling person may
become subject, under the Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or the Prospectus or any Preliminary Prospectus, or any amendment or
supplement thereto or in any Blue Sky Application, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with information furnished in writing by or
on behalf of that Underwriter through the Representatives to the Company
expressly for use therein; and will reimburse, as incurred, all legal or other
expenses reasonably incurred by the Company or the Selling Stockholder, any such
director, officer, controlling person in connection with investigating,
defending or appearing as a third party witness in connection with any such
loss, claim, damage, liability or action. The Company and the Selling
Stockholder acknowledge that the statements with respect to the public offering
of the Shares set forth in the third and penultimate paragraphs under the
heading "Underwriting," the last paragraph on the cover page of the Prospectus
and the stabilization legend in the Prospectus have been furnished by the
Underwriters to the Company 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 contained in this paragraph (b) shall be in
addition to any liability which the Underwriters otherwise may have.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against one or more indemnifying parties
under this Section 8, notify such indemnifying party or parties of the
commencement thereof; but the failure so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under paragraph (a) or (b) of this Section 8 or to the extent
-31-
that the indemnifying party was not adversely affected by such omission. In
case any such action is brought against an indemnified party and it notifies an
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties against which a claim is to be made will be entitled to
participate therein and, to the extent that it or they may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
-------- -------
indemnified party and the indemnifying party and the indemnified party has
reasonably concluded (based on the advice of its counsel) that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right, upon written notice to the
Indemnifying Party, to select separate counsel to assume such legal defenses and
otherwise to participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses (other than the reasonable costs of investigation)
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party has employed such counsel in connection
with the assumption of such different or additional legal defenses in accordance
with the proviso to the immediately preceding sentence (it being understood,
however, that an indemnifying party shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for each
such indemnified party), (ii) the indemnifying party has not employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action, or
(iii) the indemnifying party has authorized in writing the employment of counsel
for the indemnified party at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 8 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) above in respect of any losses, claims, damages, expenses
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
(i) 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 Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of 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 or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company and/or the
-32-
Selling Stockholder 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 Shares (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 the
Selling Stockholder 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 or liabilities (or actions in
respect thereof) referred to above in this paragraph (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this paragraph (d), the Underwriters shall not
be required to contribute in the aggregate, any amount in excess of the
underwriting discount applicable to the Shares purchased by the Underwriters
hereunder. The Underwriters' obligations to contribute pursuant to this
paragraph (d) are several in proportion to their respective underwriting
obligations, and not joint. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), (i) each person, if any,
who controls an Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as
such Underwriter and (ii) each director of the Company, each officer of the
Company who has signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act and the Selling Stockholder shall have the same rights to
contribution as the Company, subject in each case to this paragraph (d). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect to
which a claim for contribution may be made against another party or parties
under this paragraph (d), notify such party or parties from 7-33whom
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 other obligation (x) it or they may have hereunder or otherwise than under
this paragraph (d) or (y) 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 otherwise
may have.
9. RIGHT TO INCREASE OFFERING. At anytime during a period of 30 days
from the date of the Prospectus, the Underwriters, by no less than two business
days' prior notice to the Company may designate a closing (which may be
concurrent with, and part of, the closing on the Closing Date with respect to
the Firm Shares or may be a second closing held on a date subsequent to the
Closing Date, in either case such date shall be referred to herein as the
"Option Closing Date") at which the Underwriters may purchase all or less than
all of the Additional Shares in accordance with the provisions of this Section 9
at the purchase
-33-
price per share to be paid for the Firm Shares. In no event shall the Option
Closing Date be later than 10 business days after written notice of election to
purchase Additional Shares is given.
The Company agrees to sell to the several Underwriters on the Option
Closing Date the number of Additional Shares specified in such notice and the
Underwriters agree severally and not jointly, to purchase such Additional Shares
on the Option Closing Date. Such Additional Shares shall be purchased for the
account of each Underwriter in the same proportion as the number of Firm Shares
set forth opposite the name of such Underwriter in Column (3) of Schedule I
bears to the total number of Firm Shares (subject to adjustment by you to
eliminate fractions) and may be purchased by the Underwriters only for the
purpose of covering over-allotments made in connection with the sale of the Firm
Shares.
No Additional Shares shall be sold or delivered unless the Firm Shares
previously have been, or simultaneously are, sold and delivered. The right to
purchase the Additional Shares or any portion thereof may be surrendered and
terminated at any time upon notice by you to the Company.
Except to the extent modified by this Section 9, all provisions of
this Agreement relating to the transactions contemplated to occur on the Closing
Date for the sale of the Firm Shares shall apply, mutatis mutandis, to the
Option Closing Date for the sale of the Additional Shares.
10. REPRESENTATIONS, ETC. TO SURVIVE DELIVERY. The respective
representations, warranties, agreements, covenants, indemnities and statements
of, and on behalf of, the Company and its officers, the Selling Stockholder and
the Underwriters, respectively, set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of the Underwriters, and will survive delivery of and payment for the
Shares. Any successors to the Underwriters shall be entitled to the indemnity,
contribution and reimbursement agreements contained in this Agreement.
11. EFFECTIVE DATE AND TERMINATION.
(a) This Agreement shall become effective at 11:00 a.m., New York
time, on the first business day following the date hereof, or at such earlier
time after the Registration Statement becomes effective as the Representatives,
in their sole discretion, shall release the Shares for the sale to the public
unless prior to such time the Representatives shall have received written notice
from the Company that it elects that this Agreement shall not become effective,
or the Representatives shall have given written notice to the Company that the
Representatives on behalf of the Underwriters elect that this Agreement shall
not become effective; provided, however, that the provisions of this Section 11
-------- -------
and of Section 6 and Section 8 hereof shall at all times be effective. For
purposes of this Section 11(a), the Shares to be purchased hereunder shall be
deemed to have been so released upon the earlier of
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notification by the Representatives 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.
(b) This Agreement (except for the provisions of Sections 6 and 8
hereof) may be terminated by the Representatives by notice to the Company and
the Selling Stockholder in the event that the Company or the Selling Stockholder
have failed to comply in any respect with any of the provisions of this
Agreement required on their respective parts to be performed at or prior to the
Closing Date or the Option Closing Date, or if any of the representations or
warranties of the Company or the Selling Stockholder are not accurate in any
respect or if the covenants, agreements or conditions of, or applicable to the
Company or the Selling Stockholder herein contained have not been complied with
in any respect or satisfied within the time specified on the Closing Date or the
Option Closing Date, respectively, or if prior to the Closing Date or the Option
Closing Date:
(i) the Company or any of its Subsidiaries shall have sustained
a loss by strike, fire, flood, accident or other calamity of such a
character as to interfere materially with the conduct of the business and
operations of the Company and its Subsidiaries taken as a whole regardless
of whether or not such loss was insured;
(ii) trading in the Common Stock shall have been suspended by
the Commission or the NNM or trading in securities generally on the New
York Stock Exchange or the NNM shall have been suspended or a material
limitation on such trading shall have been imposed or minimum or maximum
prices shall have been established on either such exchange or market;
(iii) a banking moratorium shall have been declared by New York
or United States authorities;
(iv) there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power or an outbreak
or escalation of any other insurrection or armed conflict involving the
United States; or
(v) there shall have been a material adverse change in (A)
general economic, political or financial conditions or (B) the present or
prospective business or condition (financial or other) of the Company and
its Subsidiaries taken as a whole that, in each case, in the
Representatives' judgment makes it impracticable or inadvisable to make or
consummate the public offering, sale or delivery of the Company's Shares on
the terms and in the manner contemplated in the Prospectus and the
Registration Statement.
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(c) Termination of this Agreement under this Section 11 or Section 12
after the Firm Shares have been purchased by the Underwriters hereunder shall be
applicable only to the Additional Shares. Termination of this Agreement shall
be without liability of any party to any other party other than as provided in
Sections 6 and 8 hereof.
12. SUBSTITUTION OF UNDERWRITERS. If one or more of the Underwriters
shall fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 7 or 11 hereof) to
purchase and pay for (a) in the case of the Closing Date, the number of Firm
Shares agreed to be purchased by such Underwriter or Underwriters upon tender to
you of such Firm Shares in accordance with the terms hereof or (b) in the case
of the Option Closing Date, the number of Additional Shares agreed to be
purchased by such Underwriter or Underwriters upon tender to you of such
Additional Shares in accordance with the terms hereof, and the number of such
Shares shall not exceed 10% of the Firm Shares or Additional Shares required to
be purchased on the Closing Date or the Option Closing Date, as the case may be,
then, each of the non-defaulting Underwriters shall purchase and pay for (in
addition to the number of such Shares which it has severally agreed to purchase
hereunder) that proportion of the number of Shares which the defaulting
Underwriter or Underwriters shall have so failed or refused to purchase on such
Closing Date or Option Closing Date, as the case may be, which the number of
Shares agreed to be purchased by such non-defaulting Underwriter bears to the
aggregate number of Shares so agreed to be purchased by all such non-defaulting
Underwriters on such Closing Date or Option Closing Date, as the case may be.
In such case, you shall have the right to postpone the Closing Date or the
Option Closing Date, as the case may be, to a date not exceeding seven full
business days after the date originally fixed as such Closing Date or the Option
Closing Date, as the case may be, pursuant to the terms hereof in order that any
necessary changes in the Registration Statement, the Prospectus or any other
documents or arrangements may be made.
If one or more of the Underwriters shall fail or refuse (otherwise than for
a reason sufficient to justify the termination of this Agreement under the
provisions of Section 7 or 11 hereof) to purchase and pay for (a) in the case of
the Closing Date, the number of Firm Shares agreed to be purchased by such
Underwriter or Underwriters upon tender to you of such Firm Shares in accordance
with the terms hereof or (b) in the case of the Option Closing Date, the number
of Additional Shares agreed to be purchased by such Underwriter or Underwriters
upon tender to you of such Additional Shares in accordance with the terms
hereof, and the number of such Shares shall exceed 10% of the Firm Shares or
Additional Shares required to be purchased by all the Underwriters on the
Closing Date or the Option Closing Date, as the case may be, then (unless within
48 hours after such default arrangements to your satisfaction shall have been
made for the purchase of the defaulted Shares by an Underwriter or Underwriters)
and subject to the provisions of Section 11(b) hereof, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or on
the part of the Company or the Selling Stockholder except as otherwise provided
in Sections 6 and 8 hereof. As used in this Agreement, the term "Underwriter"
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includes any person substituted for an Underwriter under this paragraph.
Nothing in this Section 12, and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
13. NOTICES. All communications hereunder shall be in writing and if sent
to the Representatives shall be mailed or delivered or sent by facsimile
transmission and confirmed by letter to ▇/▇ ▇▇▇▇▇▇ ▇▇▇▇ LLC at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Syndicate Department (facsimile number:
(▇▇▇) ▇▇▇-▇▇▇▇) or, if sent to the Company, shall be mailed or delivered or sent
by facsimile transmission and confirmed by letter to the Company at ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Executive Officer
(facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇).
14. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Company, the Selling Stockholder, and each Underwriter and the
Company's, the Selling Stockholder's and each Underwriter's respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person, except that the
representations, warranties, indemnities and contribution agreements of the
Company and the Selling Stockholder contained in this Agreement also shall be
for the benefit of any person or persons, if any, who control any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
and except that the Underwriters' indemnity and contribution agreements shall
also be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement, and any person or persons,
if any, who control the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and the Selling Stockholder. No purchaser of
Shares from the Underwriters will be deemed a successor because of such
purchase.
15. APPLICABLE LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the choice of law or conflict of law principles thereof. Each party
hereto consents to the jurisdiction of each court in which any action is
commenced seeking indemnity or contribution pursuant to Section 8 above and
agrees to accept, either directly or through an agent, service of process of
each such court.
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
together shall be deemed to be one and the same instrument.
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If the foregoing correctly sets forth our understanding, please indicate
the Underwriters' acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
FOUR MEDIA COMPANY
By:
------------------------------
Name:
Title:
Accepted as of the date first
above written:
▇▇▇▇▇▇ ▇▇▇▇ LLC TECHNICAL SERVICES
PARTNERS, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇ LLC By:
Acting on its own behalf and as ------------------------------
the Representatives of Name:
the several Underwriters Title:
referred to in the foregoing
Agreement
By:______________________________
Name:
Title:
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SCHEDULE I
UNDERWRITERS
Underwriting Agreement dated February 5, 1997
(1) (2) (3)
Number of Firm Aggregate
Number of Firm Shares to be Number of
Shares to be Purchased from Firm Shares
Purchased from the Selling to be
the Company Stockholder Purchased
----------------- -------------- -----------
Name and Address
----------------
▇▇▇▇▇▇ ▇▇▇▇ LLC __________ __________ _________
PaineWebber Incorporated __________ __________ _________
Total __________ __________ _________
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