SHOE PAVILION, INC.
UNDERWRITING AGREEMENT
February , 1998
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XXX XXXXXX & COMPANY
As Representative of the
Several Underwriters
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
Shoe Pavilion, Inc., a Delaware corporation (the "Company"), proposes to issue
and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of 1,800,000 shares (the "Firm Shares") of its
authorized but unissued Common Stock, par value $0.001 per share (the "Common
Stock"). The Company also proposes to grant to the Underwriters an option to
purchase up to 270,000 additional shares of Common Stock (the "Option Shares")
for the sole purpose of covering over-allotments, if any, in connection with the
sale of the Firm Shares. The Firm Shares and any Option Shares purchased
pursuant to this Agreement are referred to below as the "Shares." Xxx Xxxxxx &
Company is acting as representative of the several Underwriters and in that
capacity is referred to in this Agreement as the "Representative."
Each of the Company and its sole stockholder, Xxxxxx Xxxxxx (the "Sole
Stockholder"), hereby confirms its and his agreement with the several
Underwriters as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SOLE
STOCKHOLDER. The Company and Sole Stockholder hereby represents and warrants to
and agrees with each Underwriter as follows:
(a) A registration statement (Registration No. 333-41877) on
Form S-1 under the Securities Act of 1933, as amended (the "Securities Act")
relating to the Shares, including a prospectus subject to completion, and such
amendments to such registration statement as may have been required to the date
of this Agreement, has been prepared by the Company under and in conformity with
the provisions of the Securities Act and the applicable rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act and has been filed with the Commission.
(b) After the execution of this Agreement, the Company will
file with the Commission either (i) if such registration statement, as it may
have been amended, has been declared by the Commission to be effective under the
Securities Act, a prospectus in the form most recently included in an amendment
to such registration statement (or, if no such amendment has been filed, in such
registration statement), with such changes or insertions as are required by
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Rule 430A of the Rules and Regulations or permitted by Rule 424(b) of the Rules
and Regulations, and as has been provided to and approved by the Representative
prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the Commission
to be effective under the Securities 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 Representative prior to the execution of this
Agreement. 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 statements and exhibits thereto, any
information omitted therefrom pursuant to Rule 430A(a) of the Rules and
Regulations and included in the Prospectus (defined below) as well as any such
abbreviated registration statements pursuant to Rule 462(b) of the Rules and
Regulations as may be filed in connection with the offering of the Shares; the
term "Preliminary Prospectus" means each prospectus subject to completion filed
with such registration statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration Statement
or any amendment thereto at the time it was or is declared effective); and the
term "Prospectus" means the following:
(A) the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Securities Act, including, if the
Company omitted information from the Registration Statement
pursuant to Rule 430A(a) of the Rules and Regulations, the
information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule
430A(b) of the Rules and Regulations; or
(B) if no prospectus is required to be filed pursuant to Rule
424(b) under the Securities Act, the prospectus included in
the Registration Statement;
provided that if any revised prospectus that is provided to the Underwriters by
the Company for use in connection with the offering of the Shares differs from
the prospectus on file with the Commission at the time the Registration
Statement became or becomes, as the case may be, effective, whether or not the
revised prospectus is required to be filed with the Commission pursuant to Rule
424(b)(3) of the Rules and Regulations, the term "Prospectus" shall mean such
revised prospectus from and after the time it is first provided to the
Underwriters for such use.
(c) No order suspending the effectiveness of the
Registration Statement or preventing or suspending the use of any Preliminary
Prospectus or the Prospectus has been issued and no proceedings for that purpose
are pending or, to the best knowledge of the Company and the Sole Stockholder,
threatened or contemplated by the Commission; no stop order suspending the sale
of the Shares in any jurisdiction has been issued and no proceedings for that
purpose are pending or, to the best knowledge of the Company and the Sole
Stockholder, threatened or contemplated, and any request of the Commission for
additional information (to be included in the Registration Statement, any
Preliminary Prospectus or the Prospectus or otherwise) has been complied with.
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(d) Each Preliminary Prospectus when filed with the
Commission (i) contained all statements required to be contained therein and
complied in all material respects with the requirements of the Securities Act
and the Rules and Regulations (ii) 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 and (iii) if filed by electronic transmission pursuant to
Electronic Data Gathering, Analysis and Retrieval System ("XXXXX") (except as
may be permitted by Regulation S-T under the Securities Act), was identical to
the copy thereof delivered to the Underwriters for use in connection with the
offer and sale of the Shares. When the Registration Statement or any amendment
thereto was or is declared effective (the "Effective Date"), it (i) contained or
will contain all statements required to be contained therein and complied or
will comply in all material respects with the requirements of the Securities Act
and the Rules and Regulations and (ii) 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 amendment
or supplement to the Prospectus is filed with the Commission pursuant to Rule
424(b) (or, if the Prospectus or part thereof or such amendment or supplement is
not required to be so filed, when the Registration Statement or the amendment
thereto containing such amendment or supplement to the Prospectus was or is
declared effective) and on the Closing Date (defined below) and any date on
which Option Shares are to be purchased, the Prospectus, as amended or
supplemented at any such time, (i) contained or will contain all statements
required to be contained therein and complied or will comply in all material
respects with the requirements of the Securities Act and the Rules and
Regulations and (ii) did not or will 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. The foregoing provisions of this paragraph (d) do 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 written
information furnished to the Company by any Underwriter through the
Representative specifically for use therein.
(e) Each of the Company and its wholly-owned subsidiary,
Shoe Inn, Inc., a Washington corporation (the "Subsidiary"), has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has full corporate power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement and Prospectus and as is currently being conducted
by it. All of the outstanding capital stock of the Subsidiary is owned by the
Company free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest. Each of the Company and the Subsidiary is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except for
such jurisdictions where the failure to so qualify or to be in good standing
would not have a material adverse effect on the business, properties, condition
(financial or otherwise), results of operations or prospects of the Company and
the Subsidiary considered as one enterprise. No proceeding has been instituted
in any such jurisdiction, revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or qualification. Each of the
Company and the Subsidiary is in possession
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of and operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from federal, state, local and other governmental
or regulatory authorities that are material to the conduct of its business, all
of which are valid and in full force and effect. Except for the Subsidiary, the
Company has no subsidiaries (defined below) and does not own any equity
securities of any other Entity (defined below). As used in this Agreement, the
word "subsidiary" means any corporation, partnership, limited liability company
or other entity (each an "Entity") that the Company directly or indirectly
controls.
(f) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been any material loss or interference with the business of the Company or the
Subsidiary from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any court or governmental action, order or decree, or any
changes in the capital stock or long-term debt of the Company or the Subsidiary,
or any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or the Subsidiary, or any material change, or a
development known to the Company or the Sole Stockholder that might cause or
result in a material change, in or affecting the business, properties, condition
(financial or otherwise), results of operations or prospects of the Company or
the Subsidiary, whether or not arising from transactions in the ordinary course
of business, in each case other than as may be set forth in the Registration
Statement and the Prospectus, and since such dates, except in the ordinary
course of business, neither the Company nor the Subsidiary has entered into any
material transaction not described in the Registration Statement and the
Prospectus. Except as set forth in the Prospectus, neither the Company nor the
Subsidiary has made any distributions to its existing stockholder within the
three most recent fiscal years, and neither the Company nor the Subsidiary will
make any future distributions to its existing stockholder other than the S
corporation distribution to be paid to the Sole Stockholder immediately
following the Closing Date (the "Distribution"), which Distribution shall not
exceed $7.8 million.
(g) There is no agreement, contract, license, lease or other
document required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement which is
not described or filed as required. All contracts described in the Prospectus,
if any, are in full force and effect on the date hereof, and none of the
Company, the Subsidiary or, to the best knowledge of the Company and the Sole
Stockholder, any other party thereto, is in material breach of or default under
any such contract.
(h) The authorized and outstanding capital stock of the
Company as of the date set forth therein and the date hereof is set forth in the
Prospectus under the caption "Capitalization", and the description of the Common
Stock set forth in the Prospectus under the caption "Description of Capital
Stock" conforms with and accurately describes the rights set forth in the
instruments defining the Common Stock. The Shares are duly authorized and, when
issued in accordance with the terms of this Agreement and against payment
therefor, will be validly issued, fully paid and nonassessable, and the issuance
of the Shares is not subject to any preemptive or similar rights.
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(i) All of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all applicable federal and
state securities laws and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted or exercised thereunder,
set forth in the Prospectus, accurately and fairly present the information
required to be shown with respect to such plans, arrangements, options and
rights. Other than this Agreement and the options and warrants to purchase
Common Stock described in the Prospectus, there are no options, warrants or
other rights outstanding to subscribe for or purchase any shares of the
Company's or the Subsidiary's capital stock. There are no preemptive rights
applicable to any shares of capital stock of the Company or the Subsidiary.
There are no restrictions upon the voting or transfer of any of the Firm Shares
or Option Shares pursuant to the Company's or the Subsidiary's charter, bylaws
or other governing documents or any agreement to which the Company or the
Subsidiary is a party or by which either of them may be bound. 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 for or relating to the
registration of any securities (other than the Shares) of or issued by the
Company.
(j) The Company has full right, power and authority to enter
into and perform its obligations under this Agreement and to issue, sell and
deliver the Shares and perform any other transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and
the Sole Stockholder, constitutes a valid and binding agreement of the Company
and the Sole Stockholder, and is enforceable against the Company and the Sole
Stockholder in accordance with its terms except insofar as enforceability may be
affected by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and except insofar as the indemnification
and contribution provisions of Section 7 hereof may be affected by public policy
concerns.
(k) Neither the Company nor the Subsidiary is, nor with the
giving of notice or lapse of time or both would it be, in violation of or in
default under, nor will the execution or delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement result in a
material violation of or constitute a material breach of or a default
(including, without limitation, with the giving of notice, the passage of time
or otherwise) under the certificate of incorporation, bylaws or other governing
documents of the Company or the Subsidiary or any obligation, agreement,
covenant or condition contained in any bond, debenture, note or other evidence
of indebtedness or in any contract, indenture, mortgage, deed of trust, loan
agreement, lease, license, joint venture or other agreement or instrument to
which the Company or the Subsidiary is a party or by which any of their
respective properties may be bound or affected. Neither the Company nor the
Subsidiary has incurred any liability, direct or indirect, for any finders' or
similar fees payable on behalf of the Company, the Subsidiary or the
Underwriters in connection with the transactions contemplated by this Agreement.
The performance by the Company of its obligations under this Agreement will not
result in a material violation of any law, ordinance, rule or regulation
(provided that no representation or warranty is made hereby with respect to the
effect, if any, of public policy concerns on the indemnification
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and contribution provisions of Section 7 hereof), or any order, writ,
injunction, judgment or decree of any governmental agency or body or of any
court having jurisdiction over the Company or the Subsidiary or any of their
respective properties, or result in the creation or imposition of any lien,
charge, claim or encumbrance upon any property of the Company or the Subsidiary.
No consent, approval, authorization or order of qualification with any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or the Subsidiary or over their respective
properties is required for the execution and delivery of this Agreement and the
consummation by the Company of the transactions contemplated by this Agreement,
except such as may be required under the Securities Act or under state or other
securities laws, all of which requirements have been satisfied in all material
respects (except for any filings under Rule 424 of the Rules and Regulations,
which filings have been or will be made under Section 3(a) of this Agreement) or
Blue Sky laws.
(l) Each of the Company and the Subsidiary owns, or has
valid rights to use, all items of real and personal property that are material
to their respective business, free and clear, except as described in the
Registration Statement and the Prospectus, of all liens, encumbrances and claims
that might materially interfere with the business, properties, condition
(financial or otherwise), results of operations or prospects of the Company and
the Subsidiary considered as one enterprise.
(m) Each of the Company and the Subsidiary owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, tradenames and copyrights described or
referred to in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) as owned
by or used by it, or which are necessary for the conduct of their respective
business as described in the Registration Statement and the Prospectus; and none
of the Company, the Subsidiary or the Sole Stockholder has received any notice
of infringement of or conflict with asserted rights of others with respect to
any patents, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, tradenames or copyrights which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, might have a material
adverse effect on the business, properties, condition (financial or otherwise),
results of operations or prospects of the Company and the Subsidiary considered
as one enterprise.
(n) There is no litigation or governmental proceeding to
which the Company or the Subsidiary is a party or to which any property of the
Company or the Subsidiary is subject which is pending or, to the best knowledge
of the Company and the Sole Stockholder, is threatened or contemplated against
the Company, the Subsidiary or any of their respective officers or any of their
respective properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or the Subsidiary or over their respective officers or properties or
otherwise that (i) might have a material effect on, or might result in any
material adverse change in the business, properties, condition (financial or
otherwise), results of operations or prospects of the Company and the Subsidiary
considered as one enterprise or might materially and adversely affect their
respective properties, assets or rights, (ii) might prevent consummation of the
transactions contemplated
6
hereby or (iii) is required to be disclosed in the Registration Statement or
Prospectus and is not so disclosed.
(o) Neither the Company nor the Subsidiary is in violation
of any law, order, ordinance, rule or regulation, or any order, writ,
injunction, judgment or decree of any governmental agency or body or of any
court, to which it or its respective properties (whether owned or leased) may be
subject, which violation might have a material adverse effect on the business,
properties, condition (financial or otherwise), results of operations or
prospects of the Company and the Subsidiary considered as one enterprise.
(p) Neither the Company nor the Subsidiary has taken and
neither shall take, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
cause or result in, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the rules and regulations of the Commission thereunder or
otherwise, the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares. No bid or purchase by
the Company for or of the Common Stock, any securities of the same class or
series as the Common Stock or any securities convertible into or exchangeable
for or that represent any right to acquire the Common Stock is now pending or in
progress or will have commenced at any time prior to the completion of the
distribution of the Shares.
(q) Deloitte & Touche LLP, whose report appears in the
Registration Statement and the Prospectus are, and during the periods covered by
its report in the Registration Statement were, independent accountants as
required by the Securities Act and the Rules and Regulations. The financial
statements included in the Registration Statement, each Preliminary Prospectus
and the Prospectus present fairly the financial condition, results of
operations, cash flow and changes in stockholders' equity of the Company at the
dates and for the periods indicated, and the financial statements included in
the Registration Statement present fairly the information required to be stated
therein. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods presented, except as may be stated therein. The selected
and summary financial and statistical data included in the Registration
Statement and the Prospectus present fairly the information shown therein and
have been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules are required to be
included in the Registration Statement.
(r) The pro forma financial or other information and related
notes included in the Registration Statement, each Preliminary Prospectus and
the Prospectus comply in all material respects with the requirements of the
Securities Act and the Rules and Regulations and present fairly the pro forma
information shown, as of the dates and for the periods covered by such pro forma
information. Such pro forma information, including any related notes, has been
prepared on a basis consistent with the historical financial statements and
other historical information, as applicable, included in the Registration
Statement, the Preliminary Prospectus and the Prospectus, except for the pro
forma adjustments specified therein, and give effect to assumptions made on a
reasonable basis to give effect to historical and, if applicable, proposed
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transactions described in the Registration Statement, each Preliminary
Prospectus and the Prospectus. The information set forth under "Selected
Operating Data" included in the Registration Statement, each Preliminary
Prospectus and the Prospectus has been derived from the books and records of the
Company and fairly and accurately presents the information shown as of the dates
and for the periods covered by such data.
(s) The books, records and accounts of the Company and the
Subsidiary accurately and fairly reflect, in reasonable detail, the transactions
in and dispositions of the assets of the Company and the Subsidiary. The systems
of internal accounting controls maintained by each of the Company and the
Subsidiary are sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(t) The Company has delivered to the Representative the
written agreement of the Sole Stockholder, to the effect that the Sole
Stockholder will not, for a period of one year following the date of this
Agreement, without the prior written consent of the Representative, offer, sell
or contract to sell, or otherwise dispose of, or announce the offer of, any
Common Stock or options or convertible securities exercisable or exchangeable
for, or convertible into, Common Stock.
(u) Except as set forth in the Prospectus, no labor
disturbance by the employees of the Company or the Subsidiary exists, is
imminent or, to the knowledge of the Company and the Sole Stockholder, is
contemplated or threatened; and neither the Company nor the Sole Stockholder is
aware of an existing, imminent or threatened labor disturbance by the employees
of any principal suppliers, manufacturers, contractors or others that might be
expected to result in any material change in the business, properties, condition
(financial or otherwise), results of operations or prospects of the Company and
the Subsidiary considered as one enterprise. Except as set forth in the
Prospectus, no collective bargaining agreement exists with any employees of the
Company or the Subsidiary and, to the best knowledge of the Company and the Sole
Stockholder, no such agreement is imminent other than as set forth in the
Prospectus.
(v) Each of the Company and the Subsidiary has filed all
federal, state, local and foreign tax returns which are required to be filed or
have requested extensions thereof and have paid all taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges to the extent
that the same have become due and payable. No tax assessment or deficiency has
been made or proposed against the Company or the Subsidiary nor has the Company
or the Subsidiary received any notice of any proposed tax assessment or
deficiency. All tax liabilities are adequately provided for on the books of the
Company and the Subsidiary.
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(w) Except as set forth in the Prospectus, there are no
outstanding agreements with or loans, advances or guaranties of indebtedness by
the Company or the Subsidiary to or for the benefit of any of (i) the Company's
or the Subsidiary's "affiliates," as such term is defined in the Rules and
Regulations or (ii) any of the members of the families of any of them.
(x) Neither the Company nor the Subsidiary has, directly or
indirectly, at any time: (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution, in
violation of law; (ii) made any payment to any local, state, federal or foreign
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or allowed by all applicable
laws; or (iii) violated any provision of the Foreign Corrupt Practices Act of
1977, as amended.
(y) To the best knowledge of each of the Company and the
Sole Stockholder, neither the Company nor the Subsidiary has any liability,
absolute or contingent, relating to: (i) public health or safety; (ii) worker
health or safety; (iii) product defect or warranty or (iv) pollution, damage to
or protection of the environment, including, without limitation, relating to
damage to natural resources, emissions, discharges, releases or threatened
releases of hazardous materials into the environment (including further, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or otherwise relating to the manufacture, processing, use, treatment,
storage, generation, disposal, transport or handling of any hazardous materials.
As used herein, "hazardous material" includes chemical substances, wastes,
pollutants, contaminants, hazardous or toxic substances, constituents, materials
or wastes, whether solid, gaseous or liquid in nature.
(z) The Company has not distributed and will not distribute
prior to the Closing Date or on or prior to any date on which the Option Shares
are to be purchased, as the case may be, any prospectus or other offering
material in connection with the offering and sale of the Shares other than the
Preliminary Prospectus(es), the Prospectus, the Registration Statement and any
other material permitted by the Securities Act and the Rules and Regulations.
(aa) The Common Stock has been approved for quotation on the
Nasdaq National Market, subject to official notice of issuance.
(bb) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to use its
best efforts to conduct, its affairs in such a manner as to ensure that it will
not become an "investment company" or a company "controlled" by an "investment
company" within the meaning of the 1940 Act and such rules and regulations.
(cc) The execution and delivery of the Exchange Agreement
dated as of February __, 1998 (the "Exchange Agreement") between the Subsidiary
and the Company, which effected the transfer of the stock of the Subsidiary to
the Company on the date hereof, was duly authorized by all necessary corporate
action on the part of each of the Subsidiary and the Company. Each of the
Subsidiary and the Company had all necessary corporate power and authority to
execute and deliver the Exchange Agreement and to consummate the transfer
contemplated by the Exchange Agreement, and the Exchange Agreement constitutes a
valid and
9
binding obligation of each of the Subsidiary and the Company,
enforceable in accordance with its terms, except as enforceability may by
limited by general equitable principles, bankruptcy, insolvency,
reorganization,. moratorium or other laws affecting creditors.
10
2. PURCHASE, SALE AND DELIVERY OF SHARES.
(a) On the basis of the representations, warranties,
covenants and agreements of the Company and the Sole Stockholder contained in
this Agreement, and subject to the terms and conditions set forth in this
Agreement, the Company agrees to sell to the several Underwriters, and each of
the Underwriters agrees, severally and not jointly, to purchase from the
Company, at a purchase price of $___ per share, the respective number of Firm
Shares set forth opposite the name of such Underwriter on Schedule I to this
Agreement (subject to adjustment as provided in Section 8 of this Agreement).
(b) On the basis of the several (and not joint) covenants
and agreements of the Underwriters contained in this Agreement, and subject to
the terms and conditions set forth in this Agreement, the Company grants an
option to the several Underwriters to purchase from the Company, severally and
not jointly, all or any portion of the Option Shares at the same price per share
as the Underwriters are to pay for the Firm Shares. This option may be exercised
only to cover over-allotments in the sale of the Firm Shares by the Underwriters
and may be exercised in whole or in part at any time (but not more than once) on
or before the 45th day after the date of the Prospectus upon written, telecopied
or telegraphic notice by the Representative to the Company setting forth the
aggregate number of Option Shares as to which the several Underwriters are
exercising the option and the settlement date. The Option Shares shall be
purchased severally, and not jointly, by each Underwriter, if purchased at all,
in the same proportion that the number of Firm Shares set forth opposite the
name of the Underwriter in Schedule I to this Agreement bears to the total
number of Firm Shares to be purchased by the Underwriters under Section 2(a)
above, subject to such adjustments as the Representative in its absolute
discretion shall make to eliminate any fractional shares. Delivery of
certificates for the Option Shares, and payment therefor, shall be made as
provided in Section 2(c) and Section 2(d) below.
(c) Delivery of the Firm Shares and the Option Shares (if
the option granted by the Company in Section 2(b) above has been exercised not
later than 6:30 a.m., San Francisco time, on the date two business days
preceding the Closing Date), and payment therefor, less the non-accountable
expense allowance provided for in Section 4(a)(ii) of this Agreement, shall be
made at the offices of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, 000 Xxxxxxx Xxxxxx,
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, at 6:30 a.m., San Francisco time, on February
__, 1998, or at such time on such other day, not later than seven full business
days after such date, as shall be agreed upon in writing by the Company and the
Representative, or as provided in Section 8 of this Agreement. The date and hour
of delivery and payment for the Firm Shares are referred to in this Agreement as
the "Closing Date." As used in this Agreement, "business day" means a day on
which the Nasdaq National Market is open for trading and on which banks in New
York and California are open for business and not permitted by law or executive
order to be closed.
(d) If the option granted by the Company in Section 2(b)
above is exercised after 6:30 a.m., San Francisco time, on the date two business
days preceding the Closing Date, delivery of the Option Shares and payment
therefor, less the applicable portion, if any, of the non-accountable expense
allowance provided for in Section 4(a)(ii) of this Agreement, shall be
11
made at the offices of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, 000 Xxxxxxx Xxxxxx,
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, at 6:30 a.m., San Francisco time, on the date
specified by the Representative (which shall be three or four, or fewer,
business days after the exercise of the option, but not in excess of the period
of time specified in the Rules and Regulations).
(e) Payment of the purchase price for the Shares by the
several Underwriters shall be made by certified or official bank check, checks
drawn in same-day funds or wire transfer, payable to the order of the Company.
Such payment shall be made upon delivery of certificates for the Shares to you
for the respective accounts of the several Underwriters. Certificates for the
Shares to be delivered to you shall be registered in such name or names and
shall be in such denominations as the Representative may request at least two
business days before the Closing Date, in the case of Firm Shares, and at least
one business day prior to the purchase of the Option Shares, in the case of the
Option Shares. Such certificates will be made available to the Underwriters for
inspection, checking and packaging at a location in San Francisco, California as
the Representative may designate, not less than one full business day prior to
the Closing Date or, in the case of the Option Shares, by 12:00 p.m., San
Francisco time, on the first business day preceding the date of purchase. If the
Representative so elects, delivery of the Shares may be made by credit through
full fast transfer to the accounts at The Depository Trust Company designated by
the Representative.
(f) It is understood that the several Underwriters propose
to offer the Shares for sale to the public as soon as the Representative deems
it advisable to do so. The Firm Shares are to be initially offered to the public
at the public offering price set forth (or to be set forth) in the Prospectus.
The Representative may from time to time thereafter change the public offering
price and other selling terms.
(g) The information set forth in the last paragraph on the
front cover page (insofar as such information relates to the Underwriters), the
legend respecting stabilization set forth on the inside front cover page and the
statements in the third and eighth paragraphs set forth under the caption
"Underwriting" in any Preliminary Prospectus and in the final form of Prospectus
filed pursuant to Rule 424(b) constitute the only information furnished by the
Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement.
3. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with the several Underwriters as follows:
(a) The Company will use its best efforts to cause the
Registration Statement, and any amendment thereof, if not effective at the time
and date this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible. If the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the Prospectus
is otherwise required under Rule 424(b), the Company will file the Prospectus,
properly completed (and in form and substance reasonably satisfactory to the
Underwriters) pursuant to Rule 424(b) within the time period prescribed and will
provide evidence satisfactory to the Representative of such timely filing. The
Company will not file the Prospectus, any amended Prospectus, any
12
amendment (including post-effective amendments) to the Registration Statement or
any supplement to the Prospectus without (i) advising the Representative of and,
a reasonable time prior to the proposed filing of such amendment or supplement,
furnishing the Representative with copies thereof and (ii) obtaining the prior
consent of the Representative to such filing. The Company will prepare and file
with the Commission, promptly upon the request of the Representative, any
amendment to the Registration Statement or supplement to the Prospectus that may
be necessary or advisable in connection with the distribution of the Shares by
you and use its best efforts to cause the same to become effective as promptly
as possible.
(b) The Company will promptly advise the Representative (i)
when the Registration Statement becomes effective, (ii) when any amendment
thereto becomes effective, (iii) of any request by the Commission for any
amendment to or supplement to the Registration Statement or the Prospectus or
for any additional information, (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (v) of the
receipt by the Company of any notification with respect to the suspension of the
registration, qualification or exemption from registration or qualification of
the Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will use its best efforts to prevent
the issuance of any such stop order or suspension and, if issued, to obtain as
soon as possible the withdrawal thereof.
(c) The Company will (i) on or before the Closing Date,
deliver to you and your counsel a signed copy of the Registration Statement as
originally filed and of each amendment thereto filed prior to the time the
Registration Statement becomes effective and, promptly upon the filing thereof,
a signed copy of each post-effective amendment, if any, to the Registration
Statement (together with, in each case, all exhibits thereto unless and to the
extent previously furnished to you) and will also deliver to you, for
distribution to the several Underwriters, a sufficient number of additional
conformed copies of each of the foregoing (excluding exhibits) so that one copy
of each may be distributed to each Underwriter, (ii) as promptly as possible
deliver to each of you and send to the several Underwriters, at such office or
offices as you may designate, as many copies of the Prospectus as you may
reasonably request and (iii) thereafter from time to time during the period in
which a prospectus is required by law to be delivered by an Underwriter or a
dealer, likewise send to the Underwriters as many additional copies of the
Prospectus and as many copies of any supplement to the Prospectus and of any
amended Prospectus, filed by the Company with the Commission, as you may
reasonably request for the purposes contemplated by the Securities Act. In
addition, no later than ninety (90) days following the Closing Date, the Company
shall provide the Representative and its counsel, at the Company's cost, such
number of bound volumes as may be reasonably requested by the Representative and
its counsel, each volume to contain all of the documents relating to the
offering of the Shares.
(d) If at any time during the period in which a prospectus
is required by law to be delivered by an Underwriter or a dealer any event shall
occur as a result of which it is necessary to supplement or amend the Prospectus
in order to make the Prospectus not misleading or so that the Prospectus will
not omit to state a material fact necessary to be stated therein, in
13
each case at the time the Prospectus is delivered to a purchaser of the Shares,
or if it shall be necessary to amend or to supplement the Prospectus to comply
with the Securities Act or the Rules and Regulations, the Company will forthwith
prepare and file with the Commission a supplement to the Prospectus or an
amended Prospectus so that the Prospectus as so supplemented or amended will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein not misleading and so
that it then will otherwise comply with the Securities Act and the Rules and
Regulations. If, after the public offering of the Shares by the Underwriters and
during such period, the Underwriters propose to vary the terms of the offering
thereof by reason of changes in general market conditions or otherwise, you will
advise the Company in writing of the proposed variation and if, in the opinion
either of counsel for the Company or counsel for the Underwriters, such proposed
variation requires that the Prospectus be supplemented or amended, the Company
will forthwith prepare and file with the Commission a supplement to the
Prospectus or an amended Prospectus setting forth such variation. The Company
authorizes the Underwriters and all dealers to whom any of the Shares may be
sold by the Underwriters to use the Prospectus, as from time to time so amended
or supplemented, in connection with the sale of the Shares in accordance with
the applicable provisions of the Securities Act and the Rules and Regulations
for such period.
(e) The Company will cooperate with you and your counsel in
the qualification or registration of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you may designate and, if
applicable, in connection with exemptions from such qualification or
registration and, during the period in which a Prospectus is required by law to
be delivered by an Underwriter or a dealer, in keeping such qualifications,
registrations and exemptions in effect; provided, however, that the Company
shall not be obligated to file any general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction in which it
is not so qualified. The Company will, from time to time, prepare and file such
statements, reports and other documents as are or may be required to continue
such qualifications, registrations and exemptions in effect for so long a period
as you may reasonably request for the distribution of the Shares.
(f) During a period of five years commencing with the date
of this Agreement, the Company will promptly furnish to you and to each
Underwriter who may so request in writing copies of (i) all periodic and special
reports furnished by it to stockholders of the Company, (ii) all information,
documents and reports filed by it with the Commission, the Nasdaq National
Market, any securities exchange or the National Association of Securities
Dealers, Inc., (iii) every material press release and every material news item
or article in respect of the Company or its affairs delivered to stockholders or
prepared by the Company or any of its subsidiaries and (iv) any additional
information concerning the Company or its business that the Representative may
reasonably request.
(g) As soon as practicable, but not later than the 45th day
following the end of the fiscal quarter first ending after the first anniversary
of the Effective Date, the Company will make generally available to its
securities holders and furnish to the Representative an earnings statement or
statements in accordance with Section 11(a) of the Securities Act and Rule 158
thereunder.
14
(h) The Company agrees that it will not and it will cause
the Sole Stockholder to enter into an agreement with the Representative to the
effect that he will not without your prior written consent, in each case
directly or indirectly, sell, offer, contract to sell, grant any option to
purchase or otherwise dispose of any shares of Common Stock, or any securities
convertible into, exchangeable for or exercisable for Common Stock, or any
rights to purchase or acquire Common Stock, for a period of one year following
the date of this Agreement, excluding only (i) the sale of the Shares to be sold
to the Underwriters pursuant to this Agreement and (ii) the grant of options to
purchase Common Stock under the Company's presently authorized employee plans
that are described in the Prospectus, in accordance with the provisions of such
plans as so authorized, so long as none of such options become exercisable
within one year from the date of this Agreement.
(i) The Company will apply the net proceeds from the
offering received by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(j) The Company will, and at all times for a period of at
least five years after the date of this Agreement, unless such securities are
then listed on a national securities exchange, use its best efforts to cause the
Common Stock (including the Shares) to be included for quotation on the Nasdaq
National Market, and the Company will comply with all registration, filing,
reporting and other requirements of the Exchange Act and the Nasdaq National
Market that may from time to time be applicable to the Company.
(k) The Company will use its best efforts to maintain
insurance of the types and in the amounts which it deems adequate for its
business consistent with insurance coverage maintained by companies of similar
size and engaged in similar businesses including, but not limited to, general
liability insurance covering all real and personal property owned or leased by
the Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against.
(l) 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.
(m) If at any time during the twenty-five (25) day period
after the Registration Statement becomes effective, any rumor, publication or
event relating to or affecting the Company shall occur as a result of which, in
your opinion, the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith prepare, consult with you concerning the substance of and
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
15
4. FEES AND EXPENSES.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and
expenses in connection with: the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits),
Preliminary Prospectuses and the Prospectus, any drafts of each of them and any
amendments or supplements to any of them; the duplication or, if applicable,
printing (including all drafts thereof) of this Agreement, the Agreement Among
Underwriters, any Selected Dealer Agreements, the Blue Sky Survey, the
Underwriters' Questionnaire and the Power of Attorney and the duplication and
printing (including of drafts thereof) of any other underwriting documents and
material (including but not limited to marketing memoranda and other marketing
material) in connection with the offering, purchase, sale and delivery of the
Shares; the issuance and delivery of the Shares under this Agreement to the
several Underwriters, including all expenses, taxes, duties, fees and
commissions on the purchase and sale of the Shares and Nasdaq National Market
brokerage and transaction levies with respect to the purchase and, if
applicable, the sale of the Shares (x) incident to the sale and delivery of the
shares by the Company to the Underwriters and (y) incident to the sale and
delivery of the Shares by the Underwriters to the initial purchasers thereof;
the cost of printing all stock certificates; the Transfer Agents' and
Registrars' fees; the fees and disbursements of counsel for the Company; all
fees and other charges of the Company's independent public accountants and any
other experts named in the Prospectus; the cost of furnishing to the several
Underwriters copies of the Registration Statement (including appropriate
exhibits), Preliminary Prospectus(es) and the Prospectus, the agreements and
other documents and instruments referred to above and any amendments or
supplements to any of the foregoing; NASD filing fees and the cost of qualifying
or registering the Shares (or obtaining exemptions from qualification or
registration) under the laws of such jurisdictions as you may designate
(including filing fees and fees and disbursements of Underwriters' counsel in
connection with such NASD, state securities or Blue Sky qualifications,
registrations and exemptions, provided that such reimburseable expenses of
Underwriters' counsel shall not exceed $5,000); all fees and expenses in
connection with qualification of the Shares for inclusion for quotation on the
Nasdaq National Market; the Company's portion of all roadshow expenses; and all
other expenses incurred by the Company in connection with the performance of its
obligations hereunder.
(ii) In addition to its obligations under Section 4(a)(i)
above, the Company agrees to pay the Representative a non-accountable expense
allowance equal to 1% of the public offering price of the Shares. Such allowance
shall be paid to the Representative as provided in Sections 2(c) and 2(d) of
this Agreement.
(iii) In addition to its obligations under Section 7(a) of
this Agreement, the Company agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any loss, claim, damage or liability described in
Section 7(a) of this Agreement, it will reimburse or advance to or for the
benefit of the Underwriters, and each of them, on a quarterly basis (or more
often, if requested) for all legal and other expenses incurred in connection
with investigating or defending any such
16
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Company's obligation to reimburse or advance for the benefit of the
Underwriters for such expenses or the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any portion, or all, of any such interim reimbursement payments or
advances are so held to have been improper, the Underwriters receiving the same
shall promptly return such amounts to the Company together with interest,
compounded daily, at the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) announced from time to time by Bank of
America, NT&SA, San Francisco, California (the "Prime Rate"), but not in excess
of the maximum rate permitted by applicable law, from the date of such request
until the date paid.
(b) In addition to their obligations under Section 7(b) of
this Agreement, the Underwriters severally and in proportion to their obligation
to purchase Firm Shares as set forth on Schedule 1 hereto, agree that, as an
interim measure during the pendency of any claim, action, investigation, inquiry
or other proceeding arising out of or based upon any loss, claim, damage or
liability described in Section 7(b) of this Agreement, they will reimburse or
advance to or for the benefit of the Company on a quarterly basis (or more
often, if requested) for all legal and other expenses incurred by the Company in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the proprietary or enforceability of the
Underwriters' obligation to reimburse or advance for the benefit of the Company
for such expenses and the possibility that such payments or advances might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any portion, or all, of any such interim reimbursement payments or
advances are so held to have been improper, the Company shall promptly return
such amounts to the Underwriters together with interest, compounded daily, at
the Prime Rate, but not in excess of the maximum rate permitted by applicable
law. Any such interim reimbursement payments or advances that are not made to
the Company within 30 days of a request for reimbursement or for an advance
shall bear interest at the Prime Rate, but not in excess of the maximum rate
permitted by applicable law, from the date of such request until the date paid.
(c) It is agreed that any controversy arising out of the
operation of the interim reimbursement and advance arrangements set forth in
Sections 4(a)(iii) and 4(b) above, including the amounts of any requested
reimbursement payments or advance, the method of determining such amounts and
the basis on which such amounts shall be apportioned among the indemnifying
parties, shall be settled by arbitration conducted under the provisions of the
Constitution and Rules of the Board of Governors of the New York Stock Exchange,
Inc. or pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for arbitration or
a written notice of intention to arbitrate, therein electing the arbitration
tribunal. If the party demanding arbitration does not make such designation of
an arbitration tribunal in such demand or notice, then the party responding to
the demand or notice is authorized to do so. Any such arbitration will be
limited to the interpretation and obligations of the parties under the interim
reimbursement and advance provisions contained in Sections 4(a)(iii) and 4(b)
above and will not resolve the ultimate propriety or enforceability of the
17
obligation to indemnify for or contribute to expenses that is created by the
provisions of Section 7 of this Agreement.
(d) If the sale of the Shares provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 5 of this Agreement is not satisfied, or because of any
termination pursuant to Section 9(b) of this Agreement, or because of any
refusal, inability or failure on the part of the Company to perform any covenant
or agreement set forth in this Agreement or to comply with any provision of this
Agreement other than by reason of a default by any of the Underwriters, the
Company agrees to reimburse the Representative upon demand for its reasonable
out-of-pocket expenses (including fees and disbursements of counsel) that shall
have been incurred by it in connection with investigating, preparing to market
or marketing the Shares or otherwise in connection with this Agreement;
provided, however, that in no event shall the total amount of the out-of-pocket
expenses payable to the Representative exceed $80,000.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations
of the several Underwriters to purchase and pay for the Shares shall be subject,
in the sole discretion of the Representative, to the accuracy as of the date of
execution of this Agreement, the Closing Date and the date on which the Option
Shares are to be purchased, as the case may be, of the representations and
warranties of the Company and the Sole Stockholder set forth in this Agreement,
to the accuracy of the statements of the Company and its officers made in any
certificate delivered pursuant to this Agreement, to the performance by the
Company of all of its obligations to be performed under this Agreement at or
prior to the Closing Date or any later date on which Option Shares are to be
purchased, as the case may be, to the satisfaction of all conditions to be
satisfied or performed by the Company at or prior to that date and to the
following additional conditions:
(a) The Registration Statement shall have become effective
(or, if a post-effective amendment is required to be filed pursuant to Rule 430A
under the Securities Act, such post-effective amendment shall become effective
and the Company shall have provided evidence satisfactory to the Representative
of such filing and effectiveness) not later than 2:00 p.m., San Francisco time,
on the date of this Agreement or at such later date and time as you may approve
in writing and, at the Closing Date or, with respect to the Option Shares, the
date on which such Option Shares are to be purchased; no stop order suspending
the effectiveness of the Registration Statement or any qualification,
registration or exemption from qualification or registration for the sale of the
Shares in any jurisdiction shall have been issued and no proceedings for that
purpose shall have been instituted or threatened; any request for additional
information on the part of the Commission shall have been complied with to the
reasonable satisfaction of the Representative and their counsel; and the NASD
shall have raised no objection to the fairness and reasonableness of the
underwriting terms and arrangements.
(b) The Representative shall have received from Xxxxxx
Godward LLP, counsel for the Underwriters, an opinion, dated the Closing Date,
with respect to the issuance and sale of the Shares and such other related
matters as the Representative may reasonably require,
18
and the Company shall have furnished such counsel with all documents which they
may reasonably request for the purpose of enabling them to pass upon such
matters.
(c) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased, as the case may be, the opinion
of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, counsel for the Company, addressed to the
Underwriters and dated the Closing Date or such later date, with reproduced
copies or signed counterparts thereof for each of the Underwriters, covering the
matters set forth in Annex A to this Agreement and in form and substance
reasonably satisfactory to you.
(d) You shall be satisfied that there has not been any
material change in the market for securities in general or in political,
financial or economic conditions as to render it impracticable, in your sole
judgment, to make a public offering of the Shares, or a material adverse change
in market levels for securities in general (or those of companies in particular)
or financial or economic conditions which render it inadvisable to proceed.
(e) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased a certificate, dated the Closing
Date or such later date, as the case may be, and signed by the President and the
Chief Financial Officer of the Company stating that:
(i) The representations and warranties of the
Company set forth in Section 1 of this Agreement are true and correct with the
same force and effect as if expressly made at and as of the Closing Date or such
later date, and the Company has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at or prior to the
Closing Date or such later 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 are threatened under the Securities Act;
and
(iii) (A) the respective signers of the certificate
have carefully examined the Registration Statement in the form in which it
originally became effective and the Prospectus and any supplements or amendments
to any of them and, as of the Effective Date, the statements made in the
Registration Statement and the Prospectus were true and correct in all material
respects and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading, (B) since the Effective Date, no
event has occurred that should have been set forth in an amendment to the
Registration Statement or a supplement or amendment to the Prospectus that has
not been set forth in such an amendment or supplement, (C) since the respective
dates as of which information is given in the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein,
there has not been any material change or any development involving a
prospective material change in or affecting the business, properties, condition
(financial or otherwise), results of operations or prospects of the Company and
the Subsidiary considered as one enterprise, whether or not arising from
transactions in the ordinary course of business, and, since such dates, except
in the ordinary course of business, neither the
19
Company nor the Subsidiary has entered into any material transaction not
referred to in the Registration Statement in the form in which it originally
became effective and the Prospectus contained therein, (D) there are not any
pending or known threatened legal proceedings to which the Company or the
Subsidiary is a party or of which any property of the Company or the Subsidiary
is the subject which are material and which are not disclosed in the
Registration Statement and the Prospectus and (E) there are not any contracts,
leases or other documents that are required to be filed as exhibits to the
Registration Statement that have not been filed as required.
(f) You shall have received on the Closing Date and on any
later date on which Option Shares are purchased a certificate, dated the Closing
Date or such later date, as the case may be, and signed by the Sole Stockholder
stating that:
(i) The representations and warranties of the Sole
Stockholder set forth in Section 1 of this Agreement are true and correct with
the same force and effect as if expressly made at and as of the Closing Date or
such later date, and the Sole Stockholder has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date or such later 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 are threatened under the Securities Act;
and
(iii) (A) the Sole Stockholder has carefully examined
the Registration Statement in the form in which it originally became effective
and the Prospectus and any supplements or amendments to any of them and, as of
the Effective Date, the statements made in the Registration Statement and the
Prospectus were true and correct in all material respects and neither the
Registration Statement nor the Prospectus omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, (B) since the Effective Date, no event has occurred that
should have been set forth in an amendment to the Registration Statement or a
supplement or amendment to the Prospectus that has not been set forth in such an
amendment or supplement, (C) since the respective dates as of which information
is given in the Registration Statement in the form in which it originally became
effective and the Prospectus contained therein, there has not been any material
change or any development involving a prospective material change in or
affecting the business, properties, condition (financial or otherwise), results
of operations or prospects of the Company and the Subsidiary considered as one
enterprise, whether or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary course of business,
neither the Company nor the Subsidiary has entered into any material transaction
not referred to in the Registration Statement in the form in which it originally
became effective and the Prospectus contained therein, (D) there are not any
pending or known threatened legal proceedings to which the Company or the
Subsidiary is a party or of which any property of the Company or the Subsidiary
is the subject which are material and which are not disclosed in the
Registration Statement and the Prospectus and (E) there are not any contracts,
leases or other documents that
20
are required to be filed as exhibits to the Registration Statement that have not
been filed as required.
(g) You shall have received from Deloitte & Touche LLP a
letter or letters, addressed to the Underwriters and dated the Closing Date and
any later date on which Option Shares are purchased, confirming that they are
independent accountants with respect to the Company within the meaning of the
Securities Act and the applicable published Rules and Regulations thereunder
and, based upon the procedures described in their letter, referred to below,
delivered to you concurrently with the execution of this Agreement (the
"Original Letter"), but carried out to a date not more than five business days
prior to the Closing Date or such later date on which Option Shares are
purchased, (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of the Closing Date
or such later date, as the case may be, and (ii) setting forth any revisions and
additions to the statements and conclusions set forth in the Original Letter
that are necessary to reflect any changes in the facts described in the Original
Letter since the date of the Original Letter or to reflect the availability of
more recent financial statements, data or information. Such letters shall not
disclose any change, or any development involving a prospective change, in or
affecting the business, properties or condition (financial or otherwise),
results of operations or prospects of the Company or the Subsidiary which, in
your sole judgment, makes it impractical or inadvisable to proceed with the
public offering of the Shares or the purchase of the Option Shares as
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus). The Original Letter from Deloitte & Touche
LLP shall be addressed to or for the use of the Underwriters in form and
substance reasonably satisfactory to the Underwriters and shall (i) represent,
to the extent true, that they are independent public accountants with respect to
the Company within the meaning of the Securities Act and the applicable
published Rules and Regulations; (ii) represent that the consolidated balance
sheets of the Company as of December 31, 1997 and 1996 and related consolidated
statements of income, stockholder's equity, and cash flows for the each of the
three years in the period ended December 31, 1997 comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act and the rules and regulations thereunder; (iii) state that Deloitte & Touche
LLP has performed the procedures set out in Statement on Auditing Standards No.
71 ("SAS 71") for a review of interim financial information and providing the
report of Deloitte & Touche LLP as described in SAS 71 on the financial
statements for each of the quarters in the eight-quarter period ended December
31, 1997 (the "Quarterly Financial Statements"); (iv) state that in the course
of such review, nothing came to their attention that leads them to believe that
any material modifications need to be made to any of the Quarterly Financial
Statements in order for them to be in compliance with generally accepted
accounting principles consistently applied across the periods presented and (v)
address other matters agreed upon by Deloitte & Touche LLP and the
Representative. In addition, you shall have received from Deloitte & Touche LLP,
on or prior to the Closing Date, a letter addressed to the Company and made
available to you for the use of the Underwriters stating that their review of
the Company's system of internal controls, to the extent they deemed necessary
in establishing the scope of their examination of the Company's financial
statements as of December 31, 1997 or in delivering their Original Letter, did
not disclose any weaknesses in internal controls that they considered to be a
material weaknesses.
21
(h) Prior to the Closing Date, the Shares shall have been
designated national market system securities, duly authorized for quotation on
the Nasdaq National Market upon official notice of issuance.
(i) On or prior to the Closing Date, you shall have received
from the Sole Stockholder an executed agreement covering the matters described
in Section 3(h) of this Agreement.
(j) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request (including
certificates of officers of the Company), as to the accuracy of the
representations and warranties of the Company and the Sole Stockholder set forth
in this Agreement, the performance by the Company of its obligations under this
Agreement and the other conditions concurrent and precedent to the obligations
of the Underwriters under this Agreement.
(k) All the agreements, opinions, certificates and letters
mentioned above or elsewhere in this Agreement will be in compliance with the
provisions of this Agreement only if they are reasonably satisfactory to the
Representative and its counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
(l) If any of the conditions specified in this Section 5
shall not have been fulfilled in all material respects when and as provided in
this Agreement, time being of the essence, or if any of the opinions and
certificates mentioned above or elsewhere in this Agreement shall not be in all
material respects reasonably satisfactory in form and substance to the
Representative and its counsel, this Agreement and all obligations of the
Underwriters hereunder may be canceled by the Representative at, or at any time
prior to, the Closing Date or (with respect to the Option Shares) prior to the
date upon which the Option Shares are to be purchased, as the case may be.
Notice of such cancellation shall be given to the Company in writing or by
telephone, telecopy or telegraph confirmed in writing. Any such termination
shall be without liability of the Company to the Underwriters (except as
provided in Section 4 or Section 7 of this Agreement) and without liability of
the Underwriters to the Company (except to the extent provided in Section 7 of
this Agreement).
6. CONDITION OF THE OBLIGATION OF THE COMPANY. The obligation of
the Company to sell and deliver the Shares required to be delivered as and when
specified in this Agreement shall be subject to the condition that, at the
Closing Date or, (with respect to the Option Shares,) the date upon which the
Option Shares are to be purchased, no stop order suspending the effectiveness of
the Registration Statement shall be in effect and no proceedings therefor shall
be pending or threatened by the Commission.
22
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner or officer thereof) who
controls any Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act or other federal or state statute,
law or regulation, at common law or otherwise, specifically including but not
limited to losses, claims, damages or liabilities (or actions in respect
thereof) related to negligence on the part of any Underwriter, and the Company
agrees to reimburse each such Underwriter and controlling person for any legal
or other expenses (including, except as otherwise provided below, settlement
expenses and fees and disbursements of counsel) incurred by the respective
indemnified parties in connection with defending against any such losses,
claims, damages or liabilities or in connection with any investigation or
inquiry of, or other proceeding that may be brought against, the respective
indemnified parties, in each case insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon, in
whole or in part, (i) any breach of any representation, warranty, covenant or
agreement of the Company in this Agreement, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement in
the form originally filed or in any amendment thereto (including the Prospectus
as part thereof) or any post-effective amendment thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (iii) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus or
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading or (iv) any untrue
statement or alleged untrue statement of a material fact contained in any
application or other document, or any amendment or supplement thereto, executed
by the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify or register the Shares
under the securities or Blue Sky laws thereof or to obtain an exemption from
such qualification or registration or filed with the Commission or any
securities association, the Nasdaq National Market, or any securities exchange,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that (1) the indemnity agreements of the Company contained in this Section 7(a)
shall not apply to any such losses, claims, damages, liabilities or expenses if
such statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Underwriter through the Representative specifically for use in the Registration
Statement, any Preliminary Prospectus or the Prospectus or any such amendment
thereof or supplement thereto and (2) the indemnity agreement contained in this
Section 7(a) with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages, liabilities or expenses purchased the Shares that are the
subject thereof (or to the benefit of any person controlling such Underwriter)
if the Company can demonstrate that at
23
or prior to the written confirmation of the sale of such Shares a copy of the
Prospectus (or the Prospectus as amended or supplemented) (excluding the
documents incorporated therein by reference) was not sent or delivered to such
person and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented), unless the failure is the result of noncompliance by
the Company with Section 3 of this Agreement.
The indemnity agreement of the Company contained in this Section 7(a)
and the representations and warranties of the Company contained in Section 1 of
this Agreement shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any indemnified party and shall
survive the delivery of and payment for the Shares. This indemnity agreement
shall not function as an exclusive remedy hereunder and shall be in addition to
any liabilities that the Company may have pursuant to this Agreement or
otherwise.
(b) The Sole Stockholder agrees to indemnify and hold
harmless each Underwriter and each person (including each partner or officer
thereof) who controls any Underwriter within the meaning of Section 15 of the
Securities Act from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of them
may become subject under the Securities Act, the Exchange Act or other federal
or state statute, law or regulation, at common law or otherwise, specifically
including but not limited to losses, claims, damages or liabilities (or actions
in respect thereof) related to negligence on the part of any Underwriter, and
the Sole Stockholder agrees to reimburse each such Underwriter and controlling
person for any legal or other expenses (including, except as otherwise provided
below, settlement expenses and fees and disbursements of counsel) incurred by
the respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding that may be brought against, the respective
indemnified parties, in each case insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon, in
whole or in part, (i) any breach of any representation, warranty, covenant or
agreement of the Sole Stockholder in this Agreement, (ii) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement in the form originally filed or in any amendment thereto (including
the Prospectus as part thereof) or any post-effective amendment thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or (iii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or (iv) any untrue statement or alleged untrue statement of a
material fact contained in any application or other document, or any amendment
or supplement thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify or register the Shares under the securities or Blue Sky laws thereof or
to obtain an exemption from such qualification or registration or filed with the
Commission or any securities association, the Nasdaq National
24
Market, or any securities exchange, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that (1) the indemnity agreements of the Sole
Stockholder contained in this Section 7(b) shall not apply to any such losses,
claims, damages, liabilities or expenses if such statement or omission was made
in reliance upon and in conformity with information furnished in writing to the
Company or the Sole Stockholder by or on behalf of any Underwriter through the
Representative specifically for use in the Registration Statement, any
Preliminary Prospectus or the Prospectus or any such amendment thereof or
supplement thereto and (2) the indemnity agreement contained in this Section
7(b) with respect to any Preliminary Prospectus shall not inure to the benefit
of any Underwriter from whom the person asserting any such losses, claims,
damages, liabilities or expenses purchased the Shares that are the subject
thereof (or to the benefit of any person controlling such Underwriter) if the
Company or the Sole Stockholder can demonstrate that at or prior to the written
confirmation of the sale of such Shares a copy of the Prospectus (or the
Prospectus as amended or supplemented) (excluding the documents incorporated
therein by reference) was not sent or delivered to such person and the untrue
statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or
supplemented), unless the failure is the result of noncompliance by the Company
with Section 3 of this Agreement; provided, further, however, that the liability
of the Sole Stockholder for indemnification under this Section 7(b), in the
absence of fraud, shall not exceed the proceeds received by the Sole Stockholder
from the payment of the Distribution to be made to the Sole Stockholder
immediately following the Closing Date as set forth in the Prospectus.
The indemnity agreement of the Sole Stockholder contained in this
Section 7(b) and the representations and warranties of the Sole Stockholder
contained in Section 1 of this Agreement shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Shares.
This indemnity agreement shall not function as an exclusive remedy hereunder and
shall be in addition to any liabilities that the Sole Stockholder may otherwise
have pursuant to this Agreement or otherwise.
(c) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company, each of its officers who signs the
Registration Statement, each of its directors, each other Underwriter and each
person (including each partner or officer thereof) who controls the Company or
any such other Underwriter within the meaning of Section 15 of the Securities
Act from and against any and all losses, claims, damages or liabilities, joint
or several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or other federal or state statute,
law or regulation or at common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, settlement expenses and fees and disbursements of counsel) incurred by
the respective indemnified parties in connection with defending against any such
losses, claims, damages or liabilities or in connection with any investigation
or inquiry of, or other proceeding that may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any breach of
any representation, warranty, covenant or
25
agreement of the indemnifying Underwriter in this Agreement, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (including the Prospectus as part thereof) or any post-
effective amendment thereto, or 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 light of the circumstances under which they were
made, not misleading or (iii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, but in each case under clauses (i), (ii)
and (iii) above, as the case may be, only if such statement or omission was made
in reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of such indemnifying Underwriter through the
Representative specifically for use in the Registration Statement, in any
Preliminary Prospectus or the Prospectus or any such amendment thereof or
supplement thereto. The Company acknowledges and agrees that the matters
described in Section 2(h) of this Agreement constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in the Registration Statement, any Preliminary Prospectus or the Prospectus.
The indemnity agreement of each Underwriter contained in this Section
7(c) shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Shares. This indemnity agreement shall not
function as an exclusive remedy hereunder and shall be in addition to any
liabilities that each Underwriter may have pursuant to this Agreement or
otherwise.
(d) Each person or entity indemnified under the provisions
of Sections 7(a), 7(b) and 7(c) above agrees that, upon the service of a summons
or other initial legal process upon it in any action or suit instituted against
it or upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
Sections, it will, if a claim in respect thereunder is to be made against the
indemnifying party or parties under this Section 7, promptly give written notice
(the "Notice") of such service or notification to the party or parties from whom
indemnification may be sought hereunder. No indemnification provided for in
Sections 7(a), 7(b) or 7(c) above shall be available to any person who fails to
so give the Notice if the party to whom such Notice was not given was unaware of
the action, suit, investigation, inquiry or proceeding to which the Notice would
have related, but only to the extent such party was materially prejudiced by the
failure to receive the Notice, and the omission so to notify such indemnifying
party or parties shall not relieve such indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of Sections 7(a), 7(b) and 7(c). Any indemnifying
party shall be entitled at its own expense to participate in the defense of any
action, suit or proceeding against, or investigation or inquiry of, an
indemnified party. Any indemnifying party shall be entitled, if it so elects
within a reasonable time after receipt of the Notice by giving written notice
(the "Notice of Defense") to the indemnified party, to assume (alone or in
conjunction with any other
26
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses or rights available to such
indemnified party or parties different from or in addition to those available to
the indemnifying party or parties, then separate counsel for and selected by the
indemnified party or parties shall be entitled to conduct the defense of the
indemnified parties to the extent determined by such counsel to be necessary to
protect the interests of the indemnified party or parties, and (ii) provided,
further, that the indemnifying party shall not be liable for the fees and
expenses of more than one separate counsel, reasonably approved by the
indemnifying party, for all of the indemnified parties, plus, if applicable,
local counsel in each jurisdiction. In addition, in any event, the indemnified
party or parties shall be entitled to have counsel selected by such indemnified
party or parties participate in, but not conduct, the defense. If, within a
reasonable time after receipt of the Notice, an indemnifying party gives a
Notice of Defense and, unless separate counsel is to be chosen by the
indemnified party or parties as provided above, the counsel chosen by the
indemnifying party or parties is reasonably satisfactory to the indemnified
party or parties, the indemnifying party or parties will not be liable under
Sections 7(a) through 7(d) for any legal expenses subsequently incurred by the
indemnified party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding, except that (A) the indemnifying party or
parties shall bear and pay the legal and other expenses incurred in connection
with the conduct of the defense as referred to in clause (i) of the proviso to
the preceding sentence and (B) the indemnifying party or parties shall bear and
pay such other expenses as it or they have authorized to be incurred by the
indemnified party or parties. If, within a reasonable time after receipt of the
Notice, no Notice of Defense has been given, the indemnifying party or parties
shall be responsible for any legal or other expenses incurred by the indemnified
party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding.
(e) In order to provide for just and equitable contribution
in any action in which a claim for indemnification is made pursuant to this
Section 7 but is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right to appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in Section 7(a), 7(b) or
7(c) above (i) in such proportion as is appropriate to reflect the relative
benefits received by each indemnifying party 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 party in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, or actions in respect thereof, as well
as any other relevant equitable considerations. The relative benefits received
by the Company, the Sole Stockholder
27
and the Underwriters shall be deemed to be in the same respective proportions as
the total proceeds from the offering of the Shares received by the Company (net
of the underwriting discounts and the Distribution), the Distribution made to
the Sole Stockholder, and the total underwriting discount retained by the
Underwriters bear to the aggregate public offering price of the Shares. 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 a party and
the party's relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission.
(f) The parties agree that it would not be just and
equitable if contribution pursuant to Section 7(e) were to be determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of Section 7(e)
and to the considerations referred to in the third sentence of the first
paragraph of Section 7(e). The amount paid by an indemnified party as a result
of the losses, claims, damages or liabilities, or actions in respect thereof,
referred to in the first sentence of Section 7(e) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating, preparing to defend or defending against any
action or claim which is the subject of Section 7(e). Notwithstanding the
provisions of Section 7(e), (i) no Underwriter shall be required to contribute
any amount in excess of the underwriting discount applicable to the Shares
purchased by that Underwriter and (ii) the Sole Stockholder, in the absence of
fraud, shall not be required to contribute any amount in excess of the proceeds
received by the Sole Stockholder from the payment of the Distribution. For
purposes of Section 7(e), each person who controls an Underwriter within the
meaning of the Securities Act shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the meaning of the
Securities Act, each officer of the Company who signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the immediately preceding
and immediately following sentences. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to Section 7(e) are several in proportion to their respective
underwriting obligations and not joint.
(g) Each party or other entity entitled to contribution
agrees that upon the service of a summons or other initial legal process upon it
in any action instituted against it in respect of which contribution may be
sought, it will promptly give written notice of such service to the party or
parties from whom contribution may be sought, but the omission so to notify such
party or parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise (except as specifically provided in Section 7(d) above). Section 7(e)
shall not be operative as to any Underwriter to the extent that the Company is
entitled to receive or has received indemnity under this Section 7.
(h) Neither the Company nor the Sole Stockholder shall,
without the prior written consent of each Underwriter, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which
28
indemnification or contribution may be sought hereunder (whether or not such
Underwriter or any person who controls such Underwriter within the meaning of
Section 15 of the Securities Act is a party to such claim, action, suit or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of each such Underwriter and each such controlling person
from all liability arising out of such claim, action, suit or proceeding.
(i) The parties to this Agreement hereby acknowledge that
they are sophisticated business persons who were represented by counsel during
the negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of Sections 4(a)(iii), 4(b) and 4(c) and this Section
7 of this Agreement and that they are fully informed regarding all such
provisions. They further acknowledge that the provisions of Sections 4(a)(iii),
4(b) and 4(c) and this Section 7 of this Agreement fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement, each Preliminary Prospectus and the Prospectus as required by the
Securities Act, the Rules and Regulations, the Exchange Act and the rules and
regulations of the Commission under the Exchange Act.
8. SUBSTITUTION OF UNDERWRITERS. If for any reason one or more of
the Underwriters fails or refuses (otherwise than for a reason sufficient to
justify the termination of this Agreement under the provisions of Section 5 or
Section 9 of this Agreement) to purchase and pay for the number of Firm Shares
agreed to be purchased by such Underwriter or Underwriters, the Company shall
immediately give notice thereof to the Representative and the non-defaulting
Underwriters shall have the right within 24 hours after the receipt by the
Representative of such notice to purchase, or procure one or more other
Underwriters to purchase, in such proportions as may be agreed upon among the
Representative and such purchasing Underwriter or Underwriters and upon the
terms set forth herein, all or any part of the Firm Shares that such defaulting
Underwriter or Underwriters agreed to purchase. If the non-defaulting
Underwriters fail to make such arrangements with respect to all such Shares, the
number of Firm Shares that each non-defaulting Underwriter is otherwise
obligated to purchase under this Agreement shall be automatically increased on a
pro rata basis to absorb the remaining Shares that the defaulting Underwriter or
Underwriters agreed to purchase; provided, however, that the non-defaulting
Underwriters shall not be obligated to purchase the Shares that the defaulting
Underwriter or Underwriters agreed to purchase if the aggregate number of such
Shares exceeds 10% of the total number of Firm Shares that all Underwriters
agreed to purchase under this Agreement. If the total number of Firm Shares that
the defaulting Underwriter or Underwriters agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within 24 hours next succeeding the first 24-hour
period above referred to, to make arrangements with other underwriters or
purchasers satisfactory to you for purchase of such Shares on the terms set
forth in this Agreement. In any such case, either you or the Company shall have
the right to postpone the Closing Date determined as provided in Section 2(c) of
this Agreement for not more than seven business days after the date originally
fixed as the Closing Date pursuant to said Section 2(c) in order that any
necessary changes in the Registration Statement, the Prospectus or any other
documents or arrangements may be made.
29
If neither the non-defaulting Underwriters nor the Company makes
arrangements within the time periods provided in the first three sentences of
the first paragraph of this Section 8 for the purchase of all the Firm Shares
that the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Underwriter (except
as provided in Section 4 or Section 7 of this Agreement) and without any
liability on the part of any non-defaulting Underwriter to the Company (except
to the extent provided in Section 7 of this Agreement). Nothing in this Section
8, and no action taken hereunder, shall relieve any defaulting Underwriter from
liability, if any, to the Company, the Sole Stockholder or any non-defaulting
Underwriter for damages occasioned by its default under this Agreement. The term
"Underwriter" in this Agreement shall include any persons substituted for an
Underwriter under this Section 8.
9. EFFECTIVE DATE OF AGREEMENT AND TERMINATION.
(a) If the Registration Statement has not been declared
effective prior to the date of this Agreement, this Agreement shall become
effective at such time, after notification of the effectiveness of the
Registration Statement has been released by the Commission, as you and the
Company shall agree upon the public offering price and the purchase price of the
Shares. If the public offering price and the purchase price of the Shares shall
not have been determined prior to 2:00 p.m., San Francisco time, on the fifth
full business day after the Registration Statement has become effective, this
Agreement shall thereupon terminate without liability on the part of the Company
to the Underwriters (except as provided in Section 4 or Section 7 of this
Agreement) or the Underwriters to the Company (except as set forth in Section 7
of this Agreement). By giving notice before the time this Agreement becomes
effective, you, as Representative of the several Underwriters, may prevent this
Agreement from becoming effective without liability of any party to the other
party, except that the Company shall remain obligated to pay costs and expenses
to the extent provided in Section 4 and Section 7 of this Agreement. If the
Registration Statement has been declared effective prior to the date of this
Agreement, this Agreement shall become effective upon execution and delivery by
you and the Company.
(b) This Agreement may be terminated by you in your absolute
discretion by giving written notice to the Company at any time on or prior to
the Closing Date or, with respect to the purchase of the Option Shares, on or
prior to any later date on which the Option Shares are to be purchased, as the
case may be, if prior to such time any of the following has occurred: (i) the
Company shall have failed, refused or been unable to perform any agreement on
its part to be performed, or because any other condition of the Underwriters'
obligations hereunder required to be fulfilled is not fulfilled, including,
without limitation, after the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse change or
development involving a prospective adverse change in or affecting particularly
the business, properties, condition (financial or otherwise), results of
operations or prospects of the Company and the Subsidiary considered as one
enterprise, whether or not arising in the ordinary course of business, occurs
which would, in your reasonable judgment, make the offering or the delivery of
the Shares impracticable or inadvisable; or (ii) there shall have been the
engagement
30
in hostilities or an escalation of major hostilities by the United States or the
declaration of war or a national emergency by the United States on or after the
date hereof, or any outbreak of hostilities or other national or international
calamity or crisis or change in economic or political conditions, if the effect
of such outbreak, calamity, crisis or change in economic or political conditions
on the financial markets of the United States would, in your reasonable
judgment, make the offering or delivery of the Shares impracticable or
inadvisable; or (iii) there shall have been suspension of trading in securities
generally or a material adverse decline in value of securities generally on the
New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market
or limitations on prices (other than limitations on hours or numbers of days of
trading) for securities on either such exchange or system; or (iv) there shall
have been the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of, or commencement of any
proceeding or investigation by, any court, legislative body, agency or other
governmental authority which in your reasonable judgment materially and
adversely affects or may materially and adversely affect the business,
properties, condition (financial or other otherwise), results of operations or
prospects of the Company; or (v) there shall have been the declaration of a
banking moratorium by federal, New York or California state authorities; or (vi)
there shall have been the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which, in your
reasonable judgment, has or is likely to have a material adverse effect on the
securities markets in the United States; or (vii) the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured. In the event of termination pursuant to subparagraph (i) above
because of any intentional or willful failure, refusal or inability on the party
of the Company or the Sole Stockholder to perform any agreement herein or to
comply with any provisions herein, other than by reason of a default by any of
the Underwriters, the Company shall remain obligated to pay costs and expenses
pursuant to Sections 4 and 7. If this Agreement shall be
terminated pursuant to this Section 9, there shall be no liability of the
Company to the Underwriters (except pursuant to Section 4 and Section 7 of this
Agreement) and no liability of the Underwriters to the Company (except to the
extent provided in Section 7 of this Agreement).
10. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing and, if to the Underwriters, shall be mailed,
telecopied or telegraphed or delivered to Xxx Xxxxxx & Company, 000 Xxxxxxxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, Attention: Syndicate
Manager (telecopier: (000) 000-0000), with a copy to Xxxxxx Godward LLP, Xxx
Xxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxxx
X. Xxxxx (telecopier: (000) 000-0000); and if to the Company, shall be mailed,
telecopied or delivered to it at its office at 0000-X Xxxxxxx Xxxxxxxxx,
Xxxxxxxx, Xxxxxxxxxx 00000, Attention: President (telecopier: (000) 000-0000),
Attention: President, with a copy to Xxxxxx Xxxxxxxxxx & Sutcliffe LLP, 000
Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, Attention: Xxxx X. Xxxxxx, Esq.
(telecopier: (000) 000-0000). All notices given by telecopy or telegraph shall
be promptly confirmed by letter.
11. PERSONS ENTITLED TO THE BENEFIT OF THIS AGREEMENT. This
Agreement shall inure to the benefit of the Company, the Sole Stockholder and
the several Underwriters and, with
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respect to the provisions of Section 4 and Section 7 of this Agreement, the
several parties (in addition to the Company, the Sole Stockholder and the
several Underwriters) indemnified under the provisions of Section 4 and Section
7, and their respective personal representatives, successors and assigns.
Nothing in this Agreement is intended or shall be construed to give to any other
person, firm or corporation any legal or equitable remedy or claim under or in
respect of this Agreement or any provision contained herein. The term
"successors and assigns" as herein used shall not include any purchaser, as such
purchaser, of any of the Shares from the several Underwriters.
12. GENERAL. Notwithstanding any provision of this Agreement to the
contrary, the reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties, covenants and
agreements in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof or by or on behalf of
the Company or their respective directors or officers and (c) delivery and
payment for the Shares under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of Sections
3(f), 3(g), 3(h), 3(i), 3(j), 3(k), 3(l) and 3(m) of this Agreement shall be of
no further force or effect.
This Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which together shall constitute one and the
same instrument, and may be delivered by facsimile transmission.
13. APPLICABLE LAWS. This Agreement shall be governed by, and
construed in accordance with, the laws of the state of California.
14. AUTHORITY OF THE REPRESENTATIVE. In connection with this
Agreement, the Representative will act for and on behalf of the several
Underwriters, and any action taken under this Agreement by the Representative,
as representative of the several Underwriters, will be binding on all the
Underwriters.
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If the foregoing correctly sets forth your understanding, please so indicate by
signing in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, the Sole Stockholder and
the several Underwriters.
Very truly yours,
SHOE PAVILION, INC.
_________________________________
Xxxxxx Xxxxxx
Chairman, President and
Chief Executive Officer
SOLE STOCKHOLDER
---------------------------------
Xxxxxx Xxxxxx
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
On their behalf and on behalf of each of the
several Underwriters named in Schedule I
hereto:
XXX XXXXXX & COMPANY
By:
-----------------------------------------
Authorized Signatory
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SCHEDULE I
UNDERWRITERS
Number of
Firm Shares to
Underwriters be Purchased
------------ --------------
Xxx Xxxxxx & Company...........................
Total.................................. 1,800,000
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ANNEX A
Matters to be Covered in the Opinion of Counsel for the Company
(i) Each of the Company and the Subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation;
(ii) Each of the Company and the Subsidiary has the corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus;
(iii) The Company is duly qualified to do business as a foreign corporation
and is in good standing in the State of California and the Subsidiary is
duly qualified to do business as a foreign corporation and is in good
standing in the States of California, Nevada and Oregon;
(iv) The execution and delivery of the Exchange Agreement dated as of
February __, 1998 (the "Exchange Agreement") between the Subsidiary and
the Company, which effected the transfer of the stock of the Subsidiary
to the Company on the date hereof, was duly authorized by all necessary
corporate action on the part of each of the Subsidiary and the Company;
each of the Subsidiary and the Company had all necessary corporate power
and authority to execute and deliver the Exchange Agreement and to
consummate the transfer contemplated by the Exchange Agreement, and the
Exchange Agreement constitutes a valid and binding obligation of each of
the Subsidiary and the Company, enforceable in accordance with its
terms, except as enforceability may be limited by general equitable
principles, bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally;
(v) The authorized, issued and outstanding capital stock of the Company as
of date therein and the date hereof is as set forth in the Prospectus
under the caption "Capitalization"; the issued and outstanding shares of
capital stock of the Company and the Subsidiary have been duly and
validly authorized and issued, are fully paid and nonassessable and, to
the best knowledge of such counsel, have not been issued in violation of
any preemptive right or other rights to subscribe for or purchase
securities or in violation of any applicable federal or state securities
laws to the best knowledge of such counsel; to the best knowledge of
such counsel, the Company owns all of the outstanding shares of the
Subsidiary; to the best knowledge of such counsel, other than the rights
granted pursuant to the Underwriting Agreement and except as set forth
in the Prospectus, there are no options, warrants or other rights
outstanding to subscribe for or purchase any shares of capital stock of
the Company or the Subsidiary
(vi) The Shares will, upon issuance and delivery against payment therefor in
accordance with the terms of the Underwriting Agreement, be duly
authorized, validly issued, fully paid and nonassessable and, to the
best knowledge of such counsel, will not have been issued in violation
of any preemptive right or other rights to subscribe for or purchase
securities;
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(vii) The Company has the corporate power and authority to enter into the
Underwriting Agreement and to issue, sell and deliver to the
Underwriters the Shares to be issued and sold by it thereunder;
(viii) The Underwriting Agreement has been duly authorized by all necessary
corporate action on the part of the Company and has been duly executed
and delivered by the Company and the Sole Stockholder and, assuming its
due authorization, execution and delivery by you, is the valid and
binding agreement of the Company and the Sole Stockholder, enforceable
against the Company and the Sole Stockholder in accordance with its
terms, except insofar as the indemnification and contribution provisions
thereof may be limited by public policy concerns and except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by
general equitable principles;
(ix) The Registration Statement has become effective under the Securities Act
and, to the best knowledge of such counsel, 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
threatened under the Securities Act;
(x) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements and financial
data included therein, as to which such counsel need express no
opinion), as of the effective date of the Registration Statement,
complied as to form in all material respects with the requirements of
the Securities Act and the applicable Rules and Regulations;
(xi) The terms and provisions of the capital stock of the Company conform in
all material respects to the description thereof contained in the
Registration Statement and Prospectus, and the information in the
Prospectus under the caption "Description of Capital Stock," to the
extent it constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is correct, and the forms of certificates
evidencing the Common Stock comply with Delaware law;
(xii) The description in the Registration Statement and the Prospectus of the
charter and bylaws of the Company and of statutes are accurate in all
material respects and fairly present in all material respects the
information required to be presented by the Securities Act and the Rules
and Regulations;
(xiii) To the best knowledge of such counsel, there are no agreements,
contracts, licenses, leases or documents of a character required to be
described or referred to in the Registration Statement or Prospectus or
to be filed as an exhibit to the Registration Statement that are not
described or referred to therein and filed as required;
(xiv) The performance of the Underwriting Agreement and the consummation of
the transactions contemplated therein do not conflict with or result in
a breach or violation of any terms or provisions of, or constitute a
default under (a) the terms of the Company's Certificate of
Incorporation or Bylaws, (b) any agreement or instrument of the Company
A-2
or the Subsidiary that is filed as an exhibit to the Registration
Statement, (c) to the best knowledge of such counsel, any material law,
ordinance, rule or regulation of any regulatory body or administrative
agency or other governmental agency or body having jurisdiction over the
Company or the Subsidiary or over any of their properties or operations
or (d) to the best knowledge of such counsel, any order, writ,
injunction, judgment or decree of any governmental agency or body or of
any court having jurisdiction over the Company or the Subsidiary or over
any of their properties or operations;
(xv) No authorization, approval or consent of any governmental authority or
agency is necessary in connection with the consummation of the
transactions contemplated by the Underwriting Agreement, except such as
have been obtained under the Securities Act, are necessary under the
Securities Act or as may be required under state securities or Blue Sky
laws in connection with the purchase and the distribution of the Shares
by the Underwriters;
(xvi) To the best knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company, the
Subsidiary or the Sole Stockholder of a character which are required to
be disclosed in the Registration Statement or the Prospectus by the
Securities Act or the applicable Rules and Regulations, other than those
described therein;
(xvii) To the best knowledge of such counsel, neither the Company nor the
Subsidiary is presently (a) in material violation of its respective
charter or bylaws or (b) in material breach of any applicable statute,
rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court or governmental agency
or body having jurisdiction over the Company or the Subsidiary or over
any of their properties or operations;
(xviii) To the best knowledge of such counsel, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or,
other securities of the Company have registration rights with respect to
any securities of the Company.
In addition, such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company, the
independent public accountants of the Company, the Representative and counsel to
the Underwriters, at which conferences the contents of the Registration
Statement and the Prospectus and related matters were discussed and, although
such counsel has not independently verified the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus, nothing has come to the attention of such counsel that caused such
counsel to believe that, at the time the Registration Statement became
effective, the Registration Statement (except as to financial statements and
financial data derived therefrom, as to which such counsel need express no
opinion) contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or at the Closing Date or any later date on which the
Option Shares are to be purchased, as the case may be, the Prospectus
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(except as to financial statements and financial data derived therefrom)
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
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