1,000,000 SHARES(1)
XXXXXX VINEYARDS INC.
CLASS A COMMON STOCK
UNDERWRITING AGREEMENT
May 7, 1998
CRUTTENDEN XXXX INCORPORATED
As Representative of the several Underwriters
00000 Xxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Dear Sirs:
Xxxxxx Vineyards Inc., a Delaware corporation (the "COMPANY"), Xxxxxx X.
Xxxxxx, Chairman of the Board of Directors and Chief Executive Officer of the
Company, individually and as Trustee of the Xxxxxx X. Xxxxxx Revocable Trust
dated October 8, 1992 (the "PRINCIPAL SELLING STOCKHOLDER"), and Xxxxx X.
Xxxxxx, Xxxxx X. Xxxxxx, Xxxx X. Xxxxxxxx, Xxxxx X. Liberty, Xxxxx X. Xxxxxx,
and Xxxxxxx Xxxxxxx Xxxxxx individually and as Trustee Under Declaration of
Trust dated March 12, 1997 (together with the Principal Selling Stockholder,
the "SELLING STOCKHOLDERS"), address you as the representative (the
"REPRESENTATIVE") of each of the parties listed in SCHEDULE A hereto (herein
collectively called the "UNDERWRITERS") and hereby confirm their agreement
with the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Principal Selling Stockholder proposes
to issue and sell one million (1,000,000) shares of the Company's Class A
Common Stock, par value $0.001 per share (the "FIRM SHARES"), to the several
Underwriters. The Selling Stockholders other than Xxxxxx X. Xxxxxx also
propose to grant to the Underwriters an option to purchase up to an aggregate
150,000 additional shares of the Company's Class A Common Stock, par value
$0.001 per share (the "OPTION SHARES"), as provided in SECTION 8. All shares
of Class A Common Stock, par value $0.001 per share, of the Company,
including the Shares, are hereinafter referred to as "CLASS A COMMON STOCK,"
and all shares of Class B Common Stock, par value $.001 per share, of the
Company are hereafter referred to
--------------------
(1) Plus an option to purchase up to 150,000 additional shares from the
Selling Stockholders other than the Principal Selling Stockholder to
cover over-allotments.
as "CLASS B COMMON STOCK." The Class A Common Stock and the Class B Common
Stock are referred to herein collectively as the "COMMON STOCK." As used in
this Agreement, the term "SHARES" shall include the Firm Shares and the
Option Shares, as shares of Class B Common Stock in the hands of the Selling
Stockholders and as shares of Class A Common Stock upon and after sale to the
Underwriters pursuant hereto.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company and the Principal Selling Stockholder, Xxxxx X. Xxxxxx,
Xxxxx X. Xxxxxx and Xxxx X. Xxxxxxxx jointly and severally represent and
warrant to and agree with each Underwriter that:
(a) A registration statement on Form SB-2 (File No. 333-51055)
with respect to the Shares, including a prospectus, has been prepared by the
Company in material conformity with the requirements of the Securities Act of
1933, as amended (the "ACT"), and the applicable rules and regulations (the
"RULES AND REGULATIONS") of the Securities and Exchange Commission (the
"COMMISSION") under the Act and has been filed with the Commission; such
amendments to such registration statement, such amended prospectuses and such
abbreviated registration statements pursuant to Rule 462(b) of the Rules and
Regulations as may have been required prior to the date hereof have been
similarly prepared and filed with the Commission; and the Company will file
such additional amendments to such registration statement, such amended
prospectuses and such abbreviated registration statements as may hereafter be
required. Copies of such registration statement and amendments together with
each exhibit filed therewith, of each related prospectus (the "PRELIMINARY
PROSPECTUSES") and of any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations have been delivered to you.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare
and promptly file with the Commission, pursuant to Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus), the information omitted
from the registration statement pursuant to Rule 430A(a) of the Rules and
Regulations or, if Cruttenden Xxxx Incorporated, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the information required to be included in any term sheet filed
pursuant to Rule 434(b) or (c), as applicable, of the Rules and Regulations.
If the registration statement relating to the Shares has not been declared
effective under the Act by the Commission, the Company will prepare and
promptly file an amendment to the registration statement, including a final
form of prospectus, or, if Cruttenden Xxxx Incorporated, on behalf of the
several Underwriters, shall agree to the utilization of Rule 434 of the Rules
and Regulations, the information required to be included in any term sheet
filed pursuant to Rule 434(b) or (c), as applicable, of the Rules and
Regulations.
The term "REGISTRATION STATEMENT" as used in this Agreement shall
mean such registration statement, including financial statements, schedules
and exhibits (including exhibits incorporated by reference), in the form in
which it became or becomes, as the case may be, effective (including, if the
Company omitted information from the registration statement pursuant to Rule
430A(a) of the Rules and Regulations or files a term sheet pursuant to Rule
434 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) or Rule 434(d) of the Rules and Regulations) and, in the event of
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any amendment thereto or the filing of any abbreviated registration statement
pursuant to Rule 462(b) of the Rules and Regulations relating thereto after
the effective date of such registration statement, shall also mean (from and
after the effectiveness of such amendment or the filing of such abbreviated
registration statement) such registration statement as so amended, together
with any such abbreviated registration statement. The term "PROSPECTUS" as
used in this Agreement shall mean the prospectus relating to the Shares as
included in such Registration Statement at the time it becomes effective
(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);
PROVIDED, HOWEVER, that if in reliance on Rule 434 of the Rules and
Regulations and with the consent of Cruttenden Xxxx Incorporated, on behalf
of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable,
prior to the time that a confirmation is sent or given for purposes of
Section 2(10)(a) of the Act, the term "Prospectus" shall mean the "prospectus
subject to completion" (as defined in Rule 434(g) of the Rules and
Regulations) last provided to the Underwriters by the Company and circulated
by the Underwriters to all prospective purchasers of the Shares and the
information deemed to be a part of the Registration Statement at the time it
became effective pursuant to Rule 434(d) of the Rules and Regulations, and
such Prospectus will not be materially different from such prospectus subject
to completion. Notwithstanding the foregoing, if any revised prospectus shall
be provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the Underwriters
for such use.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or, to the Company's
knowledge, instituted proceedings for that purpose, and each such Preliminary
Prospectus has conformed in all material respects to the requirements of the
Act and the Rules and Regulations and, as of its date, has not included any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and at the time the Registration
Statement became or becomes, as the case may be, effective and at all times
subsequent thereto up to and on the Closing Date (hereinafter defined) and on
any later date on which Option Shares are to be purchased, (i) the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (ii) the Registration Statement, and any amendments or
supplements thereto, did not and will not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and (iii) the
Prospectus, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that none of the representations and warranties contained in this
subparagraph (b) shall apply to information contained in or omitted from the
Registration Statement or Prospectus, or any amendment or supplement thereto,
in reliance upon, and in conformity with, written information
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relating to any Underwriter furnished to the Company by such Underwriter
specifically for use in the preparation thereof.
(c) The Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the State of Delaware and owns
all of the issued and outstanding capital stock of Xxxxxx Vineyards
California Inc. ("SVI-CAL"), which is duly incorporated and validly existing
as a corporation in good standing under the laws of the State of California.
The Company conducts its business through SVI-Cal and has no independent
material operations and no material assets other than the capital stock of
SVI-Cal. The Company and SVI-Cal have full power and authority (corporate
and other) to own, lease and operate their respective properties and conduct
their business as described in the Registration Statement and the Prospectus;
the Company and SVI-Cal are duly qualified to do business as foreign
corporations and are in good standing in each jurisdiction in which the
ownership or leasing of their respective properties or the conduct of their
business requires such qualification, except where the failure to be so
qualified or be in good standing would not have a material adverse effect on
the financial condition, earnings, operations, business or business prospects
of the Company and SVI-Cal taken as a whole; 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; the Company and SVI-Cal are in possession of and operating in
material compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities that are material to the conduct of their business, all of which
are valid and in full force and effect; neither the Company nor SVI-Cal is in
violation of or breach of or default under (nor has any event occurred that
with notice, lapse of time or both would constitute a breach of or default
under) its charter or bylaws or any material obligation, agreement, covenant
or condition contained in any material bond, debenture, note or other
evidence of indebtedness, or in any material lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which it is a party or by which its properties may be bound;
and neither the Company nor SVI-Cal is in material violation of any law,
order, rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over it or its properties. The Company does not directly or
indirectly own any equity interest in or securities of, or control, any
corporation, association or other entity other than SVI-Cal.
(d) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and
is a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may
be limited by applicable law and except as the enforcement hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles; the making and performance of this Agreement by
the Company and the consummation of the transactions herein contemplated will
not result in a breach or violation of any of the material terms and
provisions of, or constitute a default under, (i) any bond, debenture, note
or other evidence of indebtedness, or under any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company or SVI-Cal is a party or by which their
respective properties may be bound, (ii) the charter or bylaws of the Company
or SVI-Cal or (iii) any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, administrative agency, regulatory body,
government or governmental
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agency or body, domestic or foreign, having jurisdiction over the Company or
SVI-Cal or their respective properties. No consent, approval, authorization
or order of or qualification with any court, government or governmental
agency or body, domestic or foreign, having jurisdiction over the Company or
SVI-Cal or their respective properties is required for the execution and
delivery of this Agreement and the consummation by the Company of the
transactions herein contemplated, except such as may be required under the
Act, by the National Association of Securities Dealers, Inc. (the "NASD"),
the rules of the Nasdaq National Market, or under state or other securities
or Blue Sky laws, all of which requirements have been satisfied in all
material respects.
(e) There is not pending or, to the Company's knowledge,
threatened, any action, suit, claim or proceeding against the Company or
SVI-Cal, any of their respective officers, directors, employees, or agents or
any of their respective properties or assets or rights, at law or in equity,
before any court, administrative agency, regulatory body, government or
governmental agency or body, domestic or foreign, which (i) might,
individually or in the aggregate, result in any material adverse change in
the financial condition, earnings, operations, business or business prospects
of the Company and SVI-Cal taken as a whole or might materially and
adversely affect the properties, assets or rights of the Company and SVI-Cal
taken as a whole, (ii) might prevent consummation of the transactions
contemplated hereby or (iii) is required to be disclosed in the Registration
Statement or Prospectus and is not so disclosed; and there are no agreements,
contracts, leases or documents of the Company or SVI-Cal 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 by the
Act or the Rules and Regulations which have not been accurately described in
all material respects in the Registration Statement or Prospectus or filed as
exhibits to the Registration Statement. Neither the Company nor SVI-Cal is a
party or subject to the provisions of any injunction, judgment, decree or
order of any court, regulatory body, administrative agency, government or
governmental agency or body domestic or foreign, that could be expected to
result in a material adverse change in the condition (financial or other),
earnings, operations, business or business prospects of the Company and
SVI-Cal taken as a whole.
(f) All 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 federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities, and the number of outstanding
shares of Class A Common Stock is 2,325,000 and the number of outstanding
shares of Class B Common Stock is 4,375,000, and the authorized capital stock
of the Company is as set forth in the Prospectus under the caption
"CAPITALIZATION" and the authorized and outstanding capital stock of the
Company conforms in all material respects to the statements relating thereto
contained in the Registration Statement and the Prospectus (and such
statements correctly state the substance of the instruments defining the
capitalization of the Company); the Shares have been duly authorized for
issuance as Class A Common Stock upon sale to the Underwriters pursuant to
this Agreement and conversion to shares of Class A Common Stock in connection
therewith, and, when issued by the Company upon such conversion and delivered
by the Selling Stockholders as shares of Class A Common Stock in connection
with sale to the Underwriters and subsequent resale by the Underwriters in
accordance with the terms of this Agreement will be duly and validly issued
and fully paid and nonassessable, and will be sold free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest
imposed by the Company; to the Company's knowledge, no preemptive right,
co-sale right, registration right, right of
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first refusal or other similar right of stockholders or the Company exists
with respect to any of the Shares or the issuance and sale thereof as
contemplated hereby other than rights of holders of Class B Common Stock to
consent to the sale of the Shares pursuant to the Amended and Restated
Buy-Sell Agreement among them; and the certificates for the Shares are in due
and proper form and the purchasers of the Shares in the offering contemplated
hereby, after making payment therefor, will not be subject to personal
liability solely by reason of being the holders thereof. No further approval
or authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale or transfer of the Shares except
as may be required under the Act or under state or other securities or Blue
Sky laws. Except as disclosed in the Registration Statement, Prospectus and
the financial statements of the Company, and the related notes thereto
included in the Prospectus, the Company has no outstanding options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The description of
the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Prospectus fairly and accurately presents the
information required to be shown with respect to such plans, arrangements,
options and rights.
(g) Deloitte & Touche LLP, whose report on the financial
statements of the Company is included in the Registration Statement and the
Prospectus, are independent accountants within the meaning of the Act and the
Rules and Regulations; the audited financial statements of the Company,
together with the related schedules and notes, and the unaudited financial
information, forming part of the Registration Statement and Prospectus,
fairly present the financial position and the results of operations and cash
flows of the Company at the respective dates and for the respective periods
to which they apply and have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved except as may be otherwise stated therein. The selected and summary
financial and statistical data included in the Registration Statement 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.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
(i) material adverse change in the financial condition, earnings, operations,
business or business prospects of the Company and SVI-Cal taken as a whole,
except losses incurred in operation of the Company's business in the ordinary
course and consistent with past practices, (ii) transaction that is material
to the Company or SVI-Cal, except transactions entered into in the ordinary
course of business consistent with past practices, (iii) obligation, direct
or contingent, that is material to the Company or SVI-Cal, incurred by the
Company or SVI-Cal, except obligations incurred in the ordinary course of
business consistent with past practices, (iv) change in the capital stock of
the Company, (v) change in the outstanding indebtedness of the Company or
SVI-Cal that is material to the Company and SVI-Cal taken as a whole or is
out of the ordinary course of business of the Company and SVI-Cal taken as a
whole, (vi) dividend or distribution of any kind declared, paid or made on
the capital stock of the Company, (vii) default in the payment of principal
of or interest on any outstanding debt obligations, or (viii) loss or damage
(whether or not insured) to the property of the Company or SVI-Cal that has
been
6
sustained or will have been sustained that has a material adverse effect on
the financial condition, earnings, operations, business or business prospects
of the Company and SVI-Cal taken as a whole.
(i) The Company and SVI-Cal each has good and marketable title to
all properties and assets described in the Registration Statement and
Prospectus as owned by it, and valid and subsisting interests in all of the
real property described in the Registration Statement and Prospectus as
leased by it, in each case free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than as set forth
in the Registration Statement and Prospectus or as would not have a material
adverse effect on the financial condition, earnings, operations, business or
business prospects of the Company or SVI-Cal. The agreements to which the
Company or SVI-Cal is a party described in, or filed as exhibits to, the
Registration Statement and Prospectus are valid agreements, enforceable by
the Company or SVI-Cal, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach or material
default under any of such agreements, and the Company and SVI-Cal each has
valid and enforceable leases for all properties described in the Registration
Statement and Prospectus as leased by it, except as the enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles. Except as set forth in the
Registration Statement and Prospectus, the Company and SVI-Cal each owns or
leases all such properties as are necessary to its operations as now
conducted or as proposed to be conducted (subject to the acquisition of
additional properties and assets as may be required in connection with
expansion of the Company's operations), and all such properties are free of
contractual or legal restrictions that would impair the use by the Company or
SVI-Cal of such properties in its business for the purposes described in the
Registration Statement and the Prospectus.
(j) The Company and SVI-Cal have timely filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes shown thereon as due, and there is no tax deficiency that has been or,
to the Company's knowledge, might be asserted against the Company or SVI-Cal
that might have a material adverse effect on the financial condition,
earnings, operations, business or business prospects of the Company; and all
tax liabilities are adequately provided for on the books of the Company.
(k) The Company and SVI-Cal maintain insurance with insurers of
recognized financial responsibility of the types and in the amounts they deem
prudent for their business, including, but not limited to, insurance covering
real and personal property owned or leased by the Company or SVI-Cal against
theft, damage, destruction, acts of vandalism, errors and omissions, and all
other risks customarily insured against, all of which insurance is in full
force and effect (PROVIDED, HOWEVER, that the Company and SVI-Cal have
elected to have minimal crop insurance coverage consistent with standard
practice in the wine grape industry); neither the Company nor SVI-Cal has
been refused any insurance coverage sought or applied for other than refusal
of certain insurance coverages that were discontinued by the carriers
thereof; and the Company does not have any reason to believe that it or
SVI-Cal will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue its business at a cost that would not materially
and adversely affect the financial condition, earnings, operations, business
or business prospects of the Company.
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(l) To the Company's knowledge, no labor disturbance by the
employees of the Company or SVI-Cal exists or is imminent, and the Company is
not aware of any existing or imminent labor disturbance by the employees of
any of its principal suppliers, subcontractors, authorized dealers or
distributors that might be expected to result in a material adverse change in
the financial condition, earnings, operations, business or business prospects
of the Company. There are no pending grievances or arbitration awards against
the Company or SVI-Cal pursuant to any Collective Bargaining Agreement or
otherwise, and no Unfair Labor Practice filings have been made with the
Agricultural Labor Relations Board ("ALRB") against the Company or SVI-Cal
within the past five years, and there are no pending ALRB proceedings or ALRB
orders that have been issued against the Company or SVI-Cal, except for such
matters as would not, individually or in the aggregate, result in a material
adverse change in the financial condition, earnings, operations, business or
business prospects of the Company.
(m) The Company and SVI-Cal each owns or possesses rights to use
all know-how necessary to conduct its business as now conducted and as
described in the Registration Statement and Prospectus; no patent rights or
copyrights are utilized in the business of the Company or SVI-Cal; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company or SVI-Cal by
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights; and the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of others by the Company or
SVI-Cal with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names 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 financial condition,
earnings, operations, business or business prospects of the Company.
(n) The Class A Common Stock is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), and is approved for quotation on the Nasdaq National Market, and the
Shares are authorized for inclusion on the Nasdaq National Market, and the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Class A Common Stock under the Exchange
Act or delisting the Class A Common Stock or the Shares from the Nasdaq
National Market, nor has the Company received any notification that the
Commission or the NASD is contemplating terminating such registration or
listing.
(o) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 ACT"), and the rules and regulations
thereunder, and the Company has in the past conducted, and the Company
intends in the future to conduct, its affairs in such a manner as to ensure
that it is not and 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.
(p) The Company has not distributed and will not distribute prior
to the later of (i) the Closing Date, or any date on which Option Shares are
to be purchased, as the case may be, and (ii) completion of the distribution
of the Shares, any offering material in connection with the offering and sale
of the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
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(q) None of the Company, SVI-Cal or their officers, directors,
employees or agents has at any time during the last five (5) years made (i)
any unlawful contribution to any candidate for foreign office or failed to
disclose fully any contribution in violation of law, or (ii) any payment to
any federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof, or (iii) any other payment of funds of the Company or SVI-Cal
prohibited by law, and no funds of the Company or SVI-Cal have been set aside
for any payment prohibited by law.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Class A
Common Stock to facilitate the sale or resale of the Shares (except for any
action taken by the Underwriters).
(s) The Company hereby represents and warrants that it will not
purport to release any of its officers, directors or other stockholders from
any Lock-up Agreements currently existing or hereafter effected including,
without limitation, the provisions of SECTION 5(k), without the prior written
consent of Cruttenden Xxxx Incorporated.
(t) The Company and SVI-Cal maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorizations, (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 existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(u) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company or SVI-Cal to or for the benefit of
any of the officers, directors, employees, or consultants of the Company or
SVI-Cal or any of the members of the families of any of them, except as
disclosed in the Registration Statement and the Prospectus.
(v) Other than Cruttenden Xxxx Incorporated, on behalf of the
several Underwriters, no person is or will be owed any finder's fee or
commission or similar payment in connection with the transactions
contemplated by this Agreement.
(w) There are no persons with registration or other similar rights
to have any securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the Act, except that the
underwriters of the Company's July 1997 initial public offering have
registration rights with respect to the Underwriters' Warrants granted in
connection with that initial public offering and the underlying Class A
Common Stock as described in the Underwriters Warrant Agreement dated July
30, 1997.
(x) The Company and SVI-Cal have conducted and are conducting
their businesses in compliance with all applicable federal, state, local and
foreign statutes, laws, rules,
9
regulations, ordinances, codes, decisions, decrees, directives and orders,
except where the failure to do so would not, singly or in the aggregate, have
a material adverse effect on the financial condition, earnings, operations,
business or business prospects of the Company.
(y) Except as described in the Prospectus, to the Company's
knowledge, there are no rulemaking or similar proceedings before any federal,
state, local or foreign government or regulatory bodies which involve or
affect the Company or SVI-Cal which, if the subject of an action unfavorable
to the Company or SVI-Cal would have a material adverse effect on the
financial condition, earnings, operations, business or business prospects of
the Company taken as a whole.
(z) To the knowledge of the Company, no officer, director,
employee, or consultant of the Company or SVI-Cal is in violation of any
non-competition, non-disclosure, confidentiality or other similar agreement
with any party other than the Company or SVI-Cal, and no such person is
expected to be in violation thereof as a result of the business conducted or
expected to be conducted by the Company and SVI-Cal as described in the
Prospectus or such person's performance of his obligations to the Company or
SVI-Cal.
(aa) Neither the Company nor SVI-Cal has violated any foreign,
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), and the Company
does not anticipate incurring any material costs or liabilities (including
without limitation any capital or operating expenditures) in connection with
any clean-up or remediation of hazardous or toxic substances or wastes,
pollutants or contaminants, related closure of properties or compliance with
Environmental Laws, or any federal or state law relating to discrimination in
the hiring, promotion or pay of employees or any applicable federal or state
wages and hours laws, or any provisions of the Employee Retirement Income
Security Act or the rules and regulations promulgated thereunder, which in
each case might result in any material adverse effect on the properties,
assets, operations, business, business prospects or condition (financial or
other) of the Company.
(bb) The Company and SVI-Cal have such permits, licenses,
franchises and authorizations of governmental or regulatory authorities
("permits"), including without limitation under any applicable Environmental
Laws, as are necessary to own, lease and operate their respective properties
and to conduct their business; the Company and SVI-Cal have fulfilled and
performed all of their respective material obligations with respect to such
permits and no event has occurred which allows, or after notice or lapse of
time would allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such permit; and,
except as described in the Prospectus, such permits contain no restrictions
that are materially burdensome to the Company or SVI-Cal.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE SELLING
STOCKHOLDERS.
Each of the Selling Stockholders, severally and not jointly, represents
and warrants to and agrees with each Underwriter that:
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(a) Such Selling Stockholder has and on the date of sale to the
Underwriters pursuant hereto will have valid and unencumbered title to the
number of Shares of Class B Common Stock set forth opposite such Selling
Stockholder's name on SCHEDULE B hereto, which shares will automatically
convert to shares of Class A Common Stock on a share-for-share basis prior to
or in connection with their sale to the Underwriters pursuant hereto, and
full right, power and authority to enter into this Agreement and to sell,
assign, transfer and deliver such Shares hereunder; and upon delivery of and
payment for such Shares hereunder, and to the extent delivered and paid for
in the case of the Option Shares, the several Underwriters will acquire valid
and unencumbered title thereto.
(b) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Class A Common Stock to facilitate the sale or resale of the Shares
(except for any action taken by the Underwriters).
(c) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, is required to be obtained or made by such Selling
Stockholder for the execution and delivery of this Agreement and the
consummation of the transactions herein contemplated in connection with the
sale of the Shares to be sold by such Selling Stockholder, except such as
have been obtained and made under the Act, and such as may be required by the
NASD, by the rules of the Nasdaq National Market, or under state or other
securities or Blue Sky laws.
(d) The execution, delivery and performance of this Agreement and
the consummation of the transactions herein contemplated will not result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any statute, rule, regulation or order of any governmental
agency or body or any court having jurisdiction over such Selling Stockholder
or any of his or her properties, any material agreement or instrument to
which such Selling Stockholder is a party or by which such Selling
Stockholder is bound or to which any of the properties of such Selling
Stockholder is subject.
(e) The sale of shares by such Selling Stockholder pursuant hereto
is not prompted by any material adverse information concerning the Company,
and the statements or omissions made in the Prospectus under the caption
"Principal and Selling Stockholders" and any other statements or omissions in
the Registration Statement or the Prospectus, or any amendment or supplement
thereto, made in reliance upon, and in conformity with, written information
furnished to the Company by such Selling Stockholder specifically for use in
the preparation thereof, did not or will not upon filing and effectiveness of
the Registration Statement and the Closing Date contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and each
such part of the Prospectus and any amendment or supplement thereto, upon
filing and effectiveness of the Registration Statement and the Closing Date,
did not or will not include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading.
11
(f) Each Selling Stockholder other than Xxxxxx X. Xxxxxx hereby
delivers to Xxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx, each with the power to act
individually, as his or her agent (the "AGENT"), stock certificates that
evidence the maximum number of Option Shares that such Selling Stockholder
has agreed to sell to the Underwriters, should the Underwriters exercise
their over-allotment option in full, together with duly executed instruments
of transfer thereof endorsed in blank. Agent is instructed and authorized by
each Selling Stockholder other than Xxxxxx X. Xxxxxx to hold the certificates
for the account of such Selling Stockholder pending disposition thereof in
accordance with the terms of this Agreement.
Each Selling Stockholder other than Xxxxxx X. Xxxxxx hereby
appoints Agent as his or her attorney-in-fact and agent with full power and
authority in the name of, and for the benefit of, such Selling Stockholder to
make, execute, acknowledge and deliver all contracts, orders, receipts,
notices, requests, instructions, certificates, letters and other writings,
and in general to do or cause to be done all things and to take all action,
which the Agent or the Company may consider necessary or proper in connection
with or to carry out and comply with all terms and conditions herein and the
sale and transfer of the Option Shares placed in the custody of the Agent by
such Selling Stockholder to the Underwriters as contemplated by this
Agreement. It is understood that the Agent assumes no responsibility or
liability to any person other than to deal with the certificates for the
Option Shares deposited with the Agent in accordance with the provisions of
this SECTION 3(f). The Agent shall not be liable for any error of judgment
or for any act done or omitted or for any mistake of fact or law in the
exercise of Agent's power under this SECTION 3(f) except for the Agent's own
gross negligence or bad faith. Each Selling Stockholder other than Xxxxxx X.
Xxxxxx agrees to indemnify and hold the Agent harmless from any and all loss,
claim, damage, liability or expense (including without limitation, all fees
and expenses of counsel) with respect to anything done by Agent in accordance
with the provisions of this SECTION 3(f), absent gross negligence or bad
faith on the part of the Agent.
The Option Shares hereby placed in the custody of the Agent and all
power and authority conferred hereby are granted and conferred subject to the
interests of the Underwriters, the Company and the Principal Selling
Stockholder; in consideration of those interests, and for the purpose of
completing the transaction contemplated by this Agreement, the custody
arrangement in this SECTION 3(f) is coupled with an interest and, subject to
the last paragraph in this SECTION 3(f), all power and authority conferred
hereby shall be irrevocable and shall not be terminable by act or deed or
death or incapacity of such Selling Stockholder (or by any other person, firm
or corporation including the Company, the Agent or the Underwriters) or by
operation of law, or the occurrence of any other event or events, except as
expressly stated in this SECTION 3(f), and the obligations of such Selling
Stockholder under this SECTION 3(f) are to be similarly not subject to
termination. If any event should occur prior to the delivery to the
Underwriters of any Option Shares hereunder, certificates for such Option
Shares shall be delivered by the Agent in accordance with the terms and
conditions of this Agreement as if such event had not occurred.
In the event that, and to the extent that, the Underwriters have
not exercised their over-allotment option in the period permitted under
SECTION 8(a) hereof, or in the event that this Agreement shall terminate,
then the Agent shall promptly return to each Selling Stockholder the
certificates delivered by such Selling Stockholder to the Agent under this
SECTION 3(f), at the Company's address set forth below to such Selling
Stockholder's attention, and the custody
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arrangement in this SECTION 3(f) shall, upon such delivery, terminate,
subject to any lawful action done or performed by the Agent pursuant to this
SECTION 3(f) prior to such termination.
4. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Principal Selling Stockholder
agrees to sell to the Underwriters, and each Underwriter agrees, severally
and not jointly, to purchase from the Principal Selling Stockholder, at a
purchase price of $8.4175 per share, the respective number of Firm Shares set
forth opposite the name of such Underwriter in SCHEDULE A hereto (subject to
adjustment as provided in SECTION 11).
Delivery of definitive certificates for the Firm Shares to be purchased
by the several Underwriters pursuant to this SECTION 4 shall be made against
payment of the purchase price therefor by the several Underwriters by
certified or official bank check or checks drawn in same day funds, payable
to the order of the Principal Selling Stockholder, at the offices of Xxxxxx,
Xxxx & Xxxxxxxx LLP, 0 Xxxx Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxxxx (or at such
other place as may be agreed upon between the Representative and the
Company), at 7:00 a.m. California time, (a) on the third (3rd) full business
day following the first day that Shares are traded or (b) if this Agreement
is executed and delivered after 1:30 p.m. California time, the fourth (4th)
full business day following the day that this Agreement is executed and
delivered or (c) at such other time and date not later than seven (7) full
business days following the first day that Shares are traded as the
Representative and the Principal Selling Stockholder may determine (or at
such time and date to which payment and delivery shall have been postponed
pursuant to SECTION 11), such time and date of payment and delivery being
herein called the "CLOSING DATE"; PROVIDED, HOWEVER, that if the Company or
the Principal Selling Stockholder has not made available to the
Representative copies of the Prospectus within the time provided in SECTION
5(d), the Representative may, in its sole discretion, postpone the Closing
Date until no later than two (2) full business days following delivery of
copies of the Prospectus to the Representative.
The certificates for the Firm Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the Closing Date and will be in such
names and denominations as you shall specify at least two (2) full business
days prior to the Closing Date. If the Representative so elects, delivery of
the Firm Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representative.
It is understood that you, individually, and not as the Representative
of the several Underwriters, may (but shall not be obligated to) make payment
of the purchase price on behalf of any Underwriter or Underwriters whose
check or checks shall not have been received by you prior to the Closing Date
for the Firm Shares to be purchased by such Underwriter or Underwriters. Any
such payment by you shall not relieve any such Underwriter or Underwriters of
any of its or their obligations hereunder.
The Underwriters intend to make a public offering of the Firm Shares at
the public offering price of $9.25 per share. After the public offering, the
Underwriters may from time to time, in their discretion, vary the public
offering price. The information set forth on the inside front cover page of
the Prospectus (insofar as such information relates to the Underwriters)
concerning stabilization, syndicate
13
short covering transactions and penalty bids, and under the first (including
the table listing the Underwriters), second, third, eighth, ninth, tenth and
eleventh paragraphs under the caption "Underwriting" in the Prospectus
constitutes the only information furnished by the Underwriters to the Company
for inclusion in the Registration Statement or Prospectus or any Preliminary
Prospectus, or amendment or supplement thereto, and you, on behalf of the
respective Underwriters, represent and warrant to the Company that the
statements made therein do not include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
5. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING STOCKHOLDERS.
The Company and the Selling Stockholders agree with the several
Underwriters that:
(a) The Company and the Selling Stockholders will each use its or
his or her best efforts to cause the Registration Statement and any amendment
thereof, if not effective at the time and date that this Agreement is
executed and delivered by the parties hereto, to become effective as promptly
as possible; the Company and the Selling Stockholders will each use its or
his or her best efforts to cause any abbreviated registration statement
pursuant to Rule 462(b) of the Rules and Regulations as may be required
subsequent to the date the Registration Statement is declared effective to
become effective as promptly as possible; the Company will notify you,
promptly after it shall receive notice thereof, of the time when the
Registration Statement, any subsequent amendment to the Registration
Statement or any abbreviated registration statement has become effective or
any supplement to the Prospectus has been filed; if the Company omitted
information from the Registration Statement at the time it was originally
declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time
period prescribed, with the Commission pursuant to Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the
Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus and term sheet meeting the requirements of Rule 434(b) or
(c), as applicable, of the Rules and Regulations have been filed, within the
time period prescribed, with the Commission pursuant to Rule 424(b) of the
Rules and Regulations; if for any reason the filing of the final form of
Prospectus is required under Rule 424(b)(3) of the Rules and Regulations, it
will provide evidence satisfactory to you that the Prospectus contains such
information and has been filed with the Commission within the time period
prescribed; it will notify you promptly of any request by the Commission for
the amending or supplementing of the Registration Statement or the Prospectus
or for additional information; promptly upon your request, it will prepare
and file with the Commission any amendments or supplements to the
Registration Statement or Prospectus which, in the opinion of counsel for the
several Underwriters ("UNDERWRITERS' COUNSEL"), may be necessary or advisable
in connection with the distribution of the Shares by the Underwriters; it
will promptly prepare and file with the Commission, and promptly notify you
of the filing of, and provide you with copies of, any amendments or
supplements to the Registration Statement or Prospectus which may be
necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act,
any event shall have occurred as a result of which the Prospectus or any
other prospectus relating to the Shares as then in effect would include any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in
14
light of the circumstances under which they were made, not misleading; in
case any Underwriter is required to deliver a prospectus nine (9) months or
more after the effective date of the Registration Statement in connection
with the sale of the Shares, it will prepare promptly upon request, but at
the expense of such Underwriter, such amendment or amendments to the
Registration Statement and such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of
the Act; and it will file no amendment or supplement to the Registration
Statement or Prospectus which shall not previously have been submitted to you
a reasonable time prior to the proposed filing thereof or to which you shall
reasonably object in writing, subject, however, to compliance with the Act
and the Rules and Regulations and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement, or suspension of the
qualification of the Shares for sale in any jurisdiction, or of the initiation
or threat of any proceeding for any such purpose; and it will promptly use its
best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts (including by providing
full cooperation with your counsel, whose services in this matter are required
and which you and the Company will seek to expedite) to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the Company
shall not be required in connection therewith or as a condition thereof to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction in which it is not otherwise required to be so
qualified or to so execute a general consent to service of process. In each
jurisdiction in which the Shares shall have been qualified as above provided,
the Company will make and file such statements and reports in each year as are
or may be required by the laws of such jurisdiction for such purpose.
(d) The Company will furnish to you, as soon as available, and, in
the case of the Prospectus and any term sheet or abbreviated term sheet under
Rule 434, in no event later than the first full business day following the
first day that Shares are traded, copies of the Registration Statement (two
of which will be signed and which will include all exhibits), each
Preliminary Prospectus, the Prospectus and any amendments or supplements to
such documents, including any prospectus prepared to permit compliance with
Section 10(a)(3) of the Act, all in such quantities as you may from time to
time reasonably request. Notwithstanding the foregoing, if Cruttenden Xxxx
Incorporated, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the Company shall
provide to you copies of a Preliminary Prospectus updated in all respects
through the date specified by you in such quantities as you may from time to
time reasonably request.
(e) The Company will make generally available to its securityholders
as soon as practicable, but in any event not later than the forty-fifth (45th)
day following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Act or Rule 158 of the Rules and
Regulations and covering a twelve (12) month period beginning after the
effective date of the Registration Statement.
15
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders as soon as practicable after the end
of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and, upon request by a
stockholder, unaudited quarterly reports of operations for each of the first
three quarters of the fiscal year, and will furnish to you and the other
several Underwriters hereunder, upon request (i) concurrently with furnishing
such reports to its stockholders, statements of operations of the Company for
each of the first three (3) quarters in the form furnished to the Company's
stockholders, (ii) concurrently with furnishing to its stockholders, a
balance sheet of the Company as of the end of such fiscal year, together with
statements of operations, of stockholders' equity, and of cash flows of the
Company for such fiscal year, accompanied by a copy of the certificate or
report thereon of independent certified public accountants, (iii) as soon as
they are available, copies of all reports (financial or other) mailed to
stockholders, (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any
securities exchange or the NASD, (v) every material press release and every
material news item or article in respect of the Company or its affairs which
was generally released to stockholders or prepared by the Company, and (vi)
any additional information of a public nature concerning the Company, or its
business which you may reasonably request. During such five (5) year period,
if the Company shall have active subsidiaries, the foregoing financial
statements shall be on a consolidated basis to the extent that the accounts
of the Company and such subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary
which is not so consolidated.
(g) The Company will pay or reimburse to the Selling Stockholders
half of the non-accountable expense allowance and other expenses incurred in
connection with the offering contemplated hereby (excluding underwriting
discounts and commissions).
(h) 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 Class A Common Stock.
(i) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company to
perform any agreement on its part to be performed hereunder or to fulfill any
condition of the Underwriters' obligations hereunder, or if the Company or
the Principal Selling Stockholder shall terminate this Agreement pursuant to
SECTION 12(a), or if the Representative shall terminate this Agreement
pursuant to SECTION 12(b), then, subject to SECTION 5(g) and in addition to
the payments required under SECTION 6(a), the Principal Selling Stockholder
will reimburse the Representative up to $50,000 for its out-of-pocket
expenses including, without limitation, its legal fees and disbursements.
(j) If at any time during the ninety (90) 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 Class A 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.
16
(k) In consideration of the Underwriters' agreement to purchase
and make the Public Offering of the Shares as provided for herein, and for
other good valuable consideration, receipt of which is hereby acknowledged,
the Principal Selling Stockholder hereby agrees, for a period beginning on
the date of the final prospectus included in the Registration Statement and
ending 180 days thereafter (the "Lock-Up Period"), not to offer to sell,
contract to sell or otherwise sell, transfer, dispose of, loan, pledge or
grant any rights with respect to or solicit any offer to buy, or otherwise
transfer the economic risk of ownership in (collectively a "Disposition") any
shares of Common Stock, any options or warrants to purchase any shares of
Common Stock or any securities convertible into or exchangeable for shares of
Common Stock (collectively "Securities") now owned or hereafter acquired
directly by the Principal Selling Stockholder or with respect to which the
Principal Selling Stockholder has or hereafter acquires the power of
disposition, otherwise than (i) exercise (on a cash or cashless basis not
resulting in any public sale of Class A Common Stock) of options to purchase
Class A Common Stock, PROVIDED that the shares of Class A Common Stock
received (net of any shares delivered to the Company in a traditional
cashless exercise thereof) shall be subject to the terms hereof; (ii) as a
bona fide gift or gifts or upon death by will or intestacy, PROVIDED each
transferees thereof agree in writing to be bound by the terms of this SECTION
5(k); (iii) transfers of Class B Common Stock of the Company permitted
pursuant to the Amended and Restated Buy-Sell Agreement among the holders of
the Company's Class B Common Stock (PROVIDED such transfers do not result in
any public sale or distribution of any Securities and the transferees agree
in writing to hold such shares subject to this SECTION 5(k)); or (iv) with
the prior written consent of Cruttenden Xxxx Incorporated. The foregoing
restriction is expressly agreed to preclude the holder of the Securities from
engaging in any hedging, pledge or other transaction which is designed to or
reasonably expected to lead to or result in any Disposition of any Securities
during the Lock-Up Period even if such Securities are owned by a person other
than the Principal Selling Stockholder and/or would be disposed of by someone
other than the Principal Selling Stockholder. Such prohibited hedging,
pledge or other transactions would include, without limitation, any short
sale (whether or not against the box), any pledge of shares covering an
obligation that matures, or could reasonably be expected to mature, during
the Lock-Up Period, or any purchase, sale or grant of any right (including
without limitation any put or call option) with respect to any Securities or
with respect to any security (other than a broad-based market basket or
index) that includes, relates or derives any significant part of its value
from Securities.
Furthermore, the Principal Selling Stockholder hereby agrees and
consents to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Securities held by the Principal
Selling Stockholder except in compliance with this SECTION 5(k).
(l) During the Lock-up Period, the Company will not, without the
prior written consent of Cruttenden Xxxx Incorporated, effect the Disposition
of, directly or indirectly, any Securities other than the sale of the Firm
Shares and the Option Shares hereunder, the issuance of Class A Common Stock
pursuant to the warrants issued to the representatives of the underwriters
for the Company's initial public offering, and the Company's issuance of
options or Common Stock under the Company's presently authorized stock option
and stock purchase plans described in the Registration Statement and the
Prospectus.
17
(m) Each of the Selling Stockholders shall pay to Cruttenden Xxxx
Incorporated a nonaccountable expense allowance equal to one percent (1%) of
the gross proceeds of the sale by the Underwriters to the public of the
Shares sold by such person hereunder (which obligation shall be several and
not joint).
(n) The Company will use its best efforts to cause the Shares to
be included in the Nasdaq National Market.
(o) The Company will furnish to you as early as practicable before
the Closing Date and any later date on which Option Shares are to be
purchased, as the case may be, but not later than two business days prior
thereto, a copy of the latest available unaudited interim consolidated
financial statements, if any, of the Company that have been read by the
Company's independent certified public accountants as stated in their letter
to be furnished pursuant to SECTION 7(f).
(p) To the extent necessary to consummate the sale of the Shares
pursuant to this Agreement, the Representative hereby consents to the sale of
the Shares by the Selling Stockholders notwithstanding any otherwise
applicable restrictions set forth in the certain Lock-up Agreements dated
July 21, 1997, between certain of the Company's stockholders and the
representatives of the underwriters in the Company's initial public offering.
6. EXPENSES.
(a) The Company and each of the Selling Stockholders agree with
each Underwriter that:
(i) Subject to SECTION 5(g), the Principal Selling
Stockholder will pay and bear all costs and expenses in connection with the
preparation, printing and filing of the Registration Statement (including
financial statements, schedules and exhibits), Preliminary Prospectuses and
the Prospectus and any amendments or supplements thereto; the printing of
this Agreement, the Agreement Among Underwriters, the Selected Dealer
Agreement, the Preliminary Blue Sky Survey and any Supplemental Blue Sky
Survey, the Underwriters' Questionnaire and Power of Attorney, and any
instruments related to any of the foregoing; the issuance and delivery of the
Shares hereunder to the several Underwriters, including transfer taxes, if
any; the cost of all certificates representing the Shares and transfer
agents' and registrars' fees; the fees and disbursements of counsel for the
Company; all fees and other charges of the Company's independent certified
public accountants; the cost of furnishing to the several Underwriters copies
of the Registration Statement (including appropriate exhibits), Preliminary
Prospectus and the Prospectus, and any amendments or supplements to any of
the foregoing; NASD filing fees and the cost of qualifying the Shares under
the laws of such United States jurisdictions as you may reasonably designate
(including fees of Underwriters' Counsel not to exceed $5,000 and filing fees
and other disbursements in connection with such NASD filings and Blue Sky
qualifications); the cost of any listing of the Shares on any securities
exchange or qualification of the Shares for inclusion in the Nasdaq National
Market; registration and other fees payable to the Commission; the cost of
preparing bound volumes of the public offering documents for the
Representatives and Underwriters' Counsel; and all other expenses directly
incurred by the Company or the Selling Stockholders in connection with the
performance of its or his or her obligations hereunder. If the Underwriters'
over-allotment option is exercised, all Selling Stockholders will share the
expenses
18
payable by the Principal Selling Stockholder pursuant to this SECTION 6(a)(i)
pro-rata based upon the relative number of Shares sold by each of them
pursuant hereto. The provisions of this SECTION 6(a)(i) are intended to
relieve the Underwriters from the payment of the expenses and costs which the
Selling Stockholders hereby agree to pay.
(ii) In addition to their other obligations under SECTION
9(a), the Company, jointly and severally with the Selling Stockholders (each
obligated severally in proportion to the relative number of Shares sold by
each Selling Stockholder hereunder), agree that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
described in SECTION 9(a), each will reimburse the Underwriters on a monthly
basis for all reasonable legal or other expenses incurred 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 propriety and enforceability of the Company's or the Selling
Stockholder's obligation to reimburse the Underwriters for such expenses and
the possibility that such payments might later be held to have been improper
by a court of competent jurisdiction, PROVIDED that no Selling Stockholder
will be obligated to provide reimbursement under this SECTION 6(a)(ii) in
respect of any such claim, action, investigation, inquiry or other proceeding
if SECTION 9(a) would preclude any obligation of such Selling Stockholder to
provide indemnity in respect of any such claim, action, investigation,
inquiry or other proceeding. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Company or Selling Stockholder, as
the case may be, together with interest, compounded daily, determined on the
basis of the prime rate (or other commercial lending rate for borrowers of
the highest credit standing) listed from time to time in THE WALL STREET
JOURNAL which represents the base rate on corporate loans posted by a
substantial majority of the nation's thirty (30) largest banks (the "PRIME
RATE"). Any such interim reimbursement payments which are not made to the
Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(b) In addition to their other obligations under SECTION 9(b), the
Underwriters severally in proportion to the relative number of Shares
purchased by each of them hereunder agree that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
described in SECTION 9(b), they will reimburse the Company or the Selling
Stockholders on a monthly basis for all reasonable legal or other expenses
incurred 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 propriety and enforceability of
the Underwriters' obligation to reimburse the Company or the Selling
Stockholders for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction. To
the extent that any such interim reimbursement payment is so held to have
been improper, the Company or the Selling Stockholders shall promptly return
such payment to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company or the Selling Stockholders within
thirty (30) days of a request for reimbursement shall bear interest at the
Prime Rate from the date of such request.
(c) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in SECTIONS 6(a)(ii) and
6(b), including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall
be apportioned among the reimbursing parties, shall be settled by arbitration
19
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. In the event the
party demanding arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand
or notice is authorized to do so. Any such arbitration will be limited to
the operation of the interim reimbursement provisions contained in SECTIONS
6(a)(ii) and 6(b) and will not resolve the ultimate propriety or
enforceability of the obligation to indemnify for expenses that is created by
the provisions of SECTIONS 9(a) and 9(b) or the obligation to contribute to
expenses that is created by the provisions of SECTION 9(d).
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein
shall be subject to the accuracy, as of the date hereof and the Closing Date
and any later date on which Option Shares are to be purchased, as the case
may be, of the representations and warranties of the Company and the
representations and warranties made by each Selling Stockholder herein, to
the performance by the Company and each Selling Stockholder of its or his or
her obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 2:00 p.m., California time, on the date following the date of
execution and delivery of this Agreement, or such later date and time as
shall be consented to in writing by you; and no stop order suspending the
effectiveness thereof shall have been issued, no suspension of the
qualification of the Shares for sale in any jurisdiction shall have occurred,
and no proceedings for any such purpose shall have been initiated or, to the
knowledge of the Company, any Selling Stockholder or any Underwriter,
threatened by the Commission or any other regulatory authority of appropriate
jurisdiction, and any request of the Commission for additional information
(to be included in the Registration Statement or the Prospectus or otherwise)
shall have been complied with to the satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of
the Shares, shall have been reasonably satisfactory to the Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be, there shall not have been any (i) change in
the financial condition, earnings, operations, properties, assets, business
or business prospects of the Company from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and
adverse to the Company and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the
Shares as contemplated by the Prospectus; (ii) transaction that is material
to the Company entered into or committed to by the Company other than as
described in the Registration Statement and the Prospectus; or (iii) material
obligation, contingent or otherwise, directly or indirectly, incurred by the
Company other than as described in the Registration Statement and the
Prospectus.
20
(d) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, the
following opinion of Sanders, Barnet, Goldman, Xxxxxx & Mosk, A Professional
Corporation, counsel for the Company, dated the Closing Date or such later
date on which Option Shares are to be purchased addressed to the Underwriters
and with reproduced copies or signed counterparts thereof for each of the
Underwriters, substantially to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with the corporate power and corporate authority to own or lease
its properties and conduct its business as described in the Registration
Statement and Prospectus.
(ii) SVI-Cal has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
California, with the corporate power and corporate authority to own or lease
its properties and conduct its business as described in the Registration
Statement and Prospectus.
(iii) The authorized capital stock, and to such counsel's
knowledge, the issued and outstanding capital stock of the Company, is as set
forth in the Prospectus under the caption "Capitalization," as of the date
stated therein, and, to such counsel's knowledge, the outstanding shares of
capital stock of the Company and SVI-Cal have been duly authorized and
validly issued, are fully paid and nonassessable, are not subject to any
preemptive or similar rights and have not been issued in violation of any
registration right or in violation of or subject to any preemptive right,
co-sale right, right of first refusal or other similar right.
(iv) The conversion of shares of the Class B Common Stock
into Class A Common Stock on a one-for-one basis will occur by operation of
the Company's Certificate of Incorporation, and upon such conversion, the
Shares as Class A Common Stock will be duly and validly issued and fully paid
and nonassessable, and, to such counsel's knowledge, will be free of any
pledge, lien or other encumbrance, will not have been issued in violation of
or subject to any preemptive or similar rights or any registration right or
any co-sale right, right of first refusal, or other similar right.
(v) The Registration Statement has become effective under
the Act, any required filing of the Prospectus, or any Term Sheet that
constitutes a part thereof, pursuant to Rules 434 and 424(b) has been made in
the manner and within the time period required by Rules 434 and 424(b) and,
to such counsel's knowledge, no stop order proceedings suspending the
effectiveness of the Registration Statement have been instituted or
threatened or are pending under the Act.
(vi) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company and has been executed and delivered by
each of the Selling Stockholders. The Underwriting Agreement constitutes a
valid and binding obligation of the Company and, to such counsel's knowledge,
each of the Selling Stockholders, enforceable in accordance with its terms,
except to the extent that rights to indemnity or contribution under the
Underwriting Agreement may be unenforceable under certain circumstances under
law or court decisions with respect to a liability where indemnification or
contribution is contrary to law or public policy and except as enforceability
may be
21
subject to or limited by the effect of bankruptcy, insolvency,
fraudulent transfer or conveyance, reorganization, receivership, moratorium
or other similar laws now or hereafter in effect relating to or affecting the
rights of creditors generally and general principles of equity, regardless of
whether enforcement is considered in proceedings at law or in equity
(including possible unavailability of specific performance or injunctive
relief and the general discretion of the court or tribunal considering the
matter), including principles of commercial reasonableness or conscionability
and an implied covenant of good faith and fair dealing.
(vii) The information in the Prospectus under the captions
"Description of Capital Stock," and "Shares Eligible For Future Sale" to the
extent that it describes laws, regulations, rules, legal or governmental
proceedings, or contracts, or constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is accurate in all
material respects;
(viii) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company or SVI-Cal is a party 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 which are not described or referred to therein or filed as required.
(ix) The execution and delivery and performance of the
Underwriting Agreement and the consummation by the Company of the
transactions contemplated therein do not (a) result in any violation of the
Company's Certificate of Incorporation or the Company's Bylaws or (b) require
any approval, authorization, consent or order of or filing with any United
States federal or state governmental or regulatory board, authority or agency
in connection with the sale of the Shares to be sold as contemplated hereby
other than registration of the Shares under the Securities Act of 1933, as
amended (except that such counsel need not express any opinion as to any
necessary qualification under state or foreign securities or blue sky laws of
the various jurisdictions in which the Shares are being offered by the
Underwriters) or (c) result in a material breach or violation of any of the
terms and provisions of, or constitute a default under, (i) any material
bond, debenture, note or other evidence of indebtedness, or any material
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or SVI-Cal is a
party or by which either of their respective properties are bound and which
has been filed as an exhibit to the Registration Statement, (ii) any
applicable California, Delaware corporate or federal securities statute, rule
or regulation, other than state or foreign securities or Blue Sky laws, as to
which such counsel need express no opinion, or (iii) to such counsel's
knowledge, any judgment, order, or decree of any governmental body, agency or
court having jurisdiction over the Company or SVI-Cal or any of their
respective properties or operations; except as to clauses (i), (ii) and (iii)
where such material breach, violation or default would not have a material
adverse effect on the financial condition, earnings, operations or business
of the Company and SVI-Cal taken as a whole.
(x) To such counsel's knowledge, neither the Company nor
SVI-Cal (a) is in violation of its respective charter or bylaws, (b) is in
material breach or violation of any of the terms and provisions of, or in
default under, any material bond, debenture, note or other evidence of
indebtedness, or any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to
which the Company or SVI-Cal is a party or by which their respective
properties are bound and which has been filed as an exhibit to the
Registration Statement, or any applicable statute, rule or regulation or any
order, writ or decree of any court,
22
government or governmental agency or body having jurisdiction over the
Company or SVI-Cal or their respective properties or operations; except as to
clause (b) where such material breach, violation or default would not have a
material adverse effect on the financial condition, earnings, operations or
business of the Company or SVI-Cal, taken as a whole.
(xi) Except as set forth in the Registration Statement and
Prospectus, no holders of securities of the Company have preemptive rights
or, to the knowledge of such counsel, registration rights with respect to
securities of the Company.
(xii) To such counsel's knowledge, and without conducting any
litigation or similar searches, there is no legal or governmental proceeding
pending to which the Company or SVI-Cal is a party or to which any of the
properties of the Company or any of the properties of SVI-Cal is subject
which is required to be described in the Registration Statement or the
Prospectus and is not so described.
(xiii) Delivery of certificates for the Shares to be sold by
the Selling Stockholders pursuant hereto will pass title thereto to the
Underwriters severally, free and clear of any lien which may be perfected by
possession under Article 9 of the California Commercial Code assuming that
the several Underwriters are good faith purchasers without notice of any
adverse claim. To such counsel's knowledge, each of the Selling Stockholders
has full legal right and power, and has obtained any authorization or
approval required by law (other than those imposed by the Act or state or
foreign securities or blue sky laws with respect to which such counsel need
not express any opinion) to sell, assign, transfer and deliver the Shares to
be sold by such Selling Stockholder in the manner provided in this Agreement.
In addition, such counsel shall state in substance that such
counsel has acted as outside corporate legal counsel to the Company and
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters
were discussed, and although they have not verified the accuracy or
completeness of the statements contained in the Registration Statement or the
Prospectus, nothing has come to the attention of such counsel which leads
such counsel to believe that, at the time the Registration Statement became
effective and at all times subsequent thereto up to and on the Closing Date
and on any later date on which Option Shares are to be purchased, the
Registration Statement and any amendment or supplement thereto (other than
the financial statements including supporting schedules and other financial
information 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
Registration Statement, the Prospectus and any amendment or supplement
thereto (except as aforesaid) contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the State of California
upon opinions of local counsel, and as to
23
questions of fact upon representations or certificates of officers of the
Company, and of government officials, in which case their opinion is to state
that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or
certificate. Copies of any opinion, representation or certificate so relied
upon shall be delivered to you, as Representative of the Underwriters, and to
Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, an
opinion of Xxxxxx, Xxxx & Xxxxxxxx LLP, in form and substance reasonably
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the
Company shall have furnished to such counsel such documents as they may have
requested for the purpose of enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a letter
from Deloitte & Touche LLP, Independent Auditors ("DELOITTE"), addressed to
the Underwriters, dated the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be (in each case, the "BRING DOWN
LETTER"), confirming that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in a
letter delivered to you concurrently with the execution of this Agreement
(herein called the "ORIGINAL LETTER"), but carried out to a date not more
than five (5) business days prior to the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, (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 on
which Option Shares are to be purchased, 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 its date, or to reflect the
availability of more recent financial statements, data or information. The
Bring Down Letter shall not disclose any change in the financial condition,
earnings, operations, business or business prospects of the Company from that
set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the
Shares as contemplated by the Prospectus. The Original Letter from Deloitte
shall be addressed to or for the use of the Underwriters in form and
substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations, (ii) set forth their opinion with respect to
their examination of the combined balance sheet of the Company as of December
31, 1997 and related combined statements of operations, equity and cash flows
for the twelve (12) months ended December 31, 1997, (iii) state that nothing
came to their attention that caused them to believe that the financial
statements included in the Registration Statement and Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Rules and Regulations and that any adjustments thereto
have not been properly applied to the historical amounts in the compilation
of such statements, and (iv) address other matters agreed upon by Deloitte
and you. In addition, you shall have received from Deloitte 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
accounting controls, to the extent
24
they deemed necessary in establishing the scope of their examination of the
Company's financial statements as of December 31, 1997, did not disclose any
weaknesses in internal controls that they considered to be material
weaknesses.
(g) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be,
certificates of the Selling Stockholders, dated the Closing Date or such
later date on which Option Shares are purchased, as the case may be, that
their representations and warranties in this Agreement are true and correct,
as if made on and as of the Closing Date or any later date on which Option
Shares are to be purchased, as the case may be, and of the Company, dated the
Closing Date or such later date on which Option Shares are to be purchased,
as the case may be, signed by the Chief Executive Officer and Chief Financial
Officer of the Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in
this Agreement are true and correct, as if made on and as of the Closing
Date or any later date on which Option Shares are to be purchased, as the
case may be, 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 any later date on which Option Shares are to be
purchased, as the case may be;
(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 threatened under the Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required to be included therein
by the Act and the Rules and Regulations, and in all material respects
conformed to the requirements of the Act and the Rules and Regulations, the
Registration Statement, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, the Prospectus, and any amendment or
supplement thereto, did not and does not include any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and, since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has
not been any (A) material adverse change in the financial condition,
earnings, operations, business or business prospects of the Company and
SVI-Cal taken as a whole, except losses incurred in operation of the
Company's business in the ordinary course and consistent with past practices,
(B) transaction that is material to the Company or SVI-Cal, except
transactions entered into in the ordinary course of business consistent with
past practices, (C) obligation, direct or contingent, that is material to the
Company or SVI-Cal, incurred by the Company or SVI-Cal, except obligations
incurred in the ordinary course of business consistent with past practices,
(D) change in the capital stock of the Company, (E) change in the outstanding
indebtedness of the Company or SVI-Cal that is material to the Company and
SVI-Cal taken as a
25
whole or is out of the ordinary course of business of the Company and SVI-Cal
taken as a whole except for refinancing of the Company's lines of credit with
Sanwa Bank California, (F) dividend or distribution of any kind declared,
paid or made on the capital stock of the Company, (G) default in the payment
of principal of or interest on any outstanding debt obligations, or (H) loss
or damage (whether or not insured) to the property of the Company or SVI-Cal
which has been sustained or will have been sustained which has a material
adverse effect on the financial condition, earnings, operations, business or
business prospects of the Company and SVI-Cal taken as a whole.
(h) The Shares have been approved for inclusion in the Nasdaq
National Market.
(i) 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 herein, as to the performance
by the Company of its obligations hereunder and as to the other conditions
concurrent and precedent to the obligations of the Underwriters hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company will furnish you with
such number of conformed copies of such opinions, certificates, letters and
documents as you shall reasonably request.
8. OPTION SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
each of the Selling Stockholders other than Xxxxxx X. Xxxxxx hereby grants to
the several Underwriters, for the purpose of covering over-allotments in
connection with the distribution and sale of the Firm Shares only, a
nontransferable option to purchase from such Selling Stockholder at the
purchase price per share for the Firm Shares set forth in SECTION 4, up to
the number of Option Shares listed opposite such Selling Stockholder's name
on SCHEDULE B hereto. Such option may be exercised by the Representative on
behalf of the several Underwriters on one (1) or more occasions in whole or
in part during the period ending forty-five (45) days after the date of the
final Prospectus by giving written notice (the "OPTION NOTICE") to the
Selling Stockholders. The number of Option Shares to be purchased by each
Underwriter upon the exercise of such option shall be the same proportion of
the total number of Option Shares to be purchased by the several Underwriters
pursuant to the exercise of such option as the number of Firm Shares
purchased by such Underwriter (set forth in SCHEDULE A hereto) bears to the
total number of Firm Shares purchased by the several Underwriters (set forth
in SCHEDULE A hereto), adjusted by the Representative in such manner as to
avoid fractional shares. In any partial exercise of the over-allotment
option, each of the Selling Stockholders other than Xxxxxx X. Xxxxxx will
sell that portion of the total Option Shares for which the over-allotment
option is being exercised equal to the portion of the 150,000 maximum
aggregate over-allotment shares listed opposite such Selling Stockholder's
name on SCHEDULE B.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this SECTION 8 shall be made by the
26
Agent against payment of the purchase price therefor by the several
Underwriters by certified or official bank check or checks drawn in same-day
funds, payable to the order of each Selling Stockholder. In the event of any
breach of such definitive certificate delivery obligations, the party in
breach shall reimburse the Underwriters for the interest lost and any other
expenses borne by them by reason of such breach. Such delivery and payment
shall take place at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 0 Xxxx Xxxxx,
Xxxxx 0000, Xxxxxx, Xxxxxxxxxx or at such other place as may be agreed upon
between the Representative and the Agent (i) on the Closing Date, if written
notice of the exercise of such option is received by the Agent at least two
(2) full business days prior to the Closing Date, or (ii) on a date which
shall not be later than the third (3rd) full business day following the date
the Agent receive written notice of the exercise of such option, if such
notice is received by the Agent after the date two (2) full business days
prior to the Closing Date.
The certificates for the Option Shares to be so delivered will be
made available to you at such office or such other location including,
without limitation, in New York City, as you may reasonably request for
checking at least one (1) full business day prior to the date of payment and
delivery and will be in such names and denominations as you shall specify at
least two (2) full business days prior to such date of payment and delivery.
If the Representative so elects, delivery of the Option Shares may be made by
credit through full fast transfer to the accounts at The Depository Trust
Company designated by the Representative.
It is understood that you, individually, and not as the
Representative of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by you prior
to the date of payment and delivery for the Option Shares to be purchased by
such Underwriter or Underwriters. Any such payment by you shall not relieve
any such Underwriter or Underwriters of any of its or their obligations
hereunder.
(b) Upon exercise of any option provided for in SECTION 8(a), the
obligations of the several Underwriters to purchase such Option Shares will
be subject (as of the date hereof and as of the date of payment and delivery
for such Option Shares) to the accuracy of and compliance with the
representations, warranties and agreements of the Company and each Selling
Stockholder herein, to the accuracy of the statements of the Company and
officers of the Company and each Selling Stockholder made pursuant to the
provisions hereof, to the performance by the Company and each Selling
Stockholder of its obligations hereunder, to the conditions set forth in
SECTION 7, and to the condition that all proceedings taken at or prior to the
payment date in connection with the sale and transfer of such Option Shares
shall be satisfactory in form and substance to you and to Underwriters'
Counsel, and you shall have been furnished with all such documents,
certificates and opinions as you may request in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements, the performance of any of the covenants or agreements of the
Company and each Selling Stockholder or the satisfaction of any of the
conditions herein contained.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company, jointly and severally with the Selling
Stockholders (each obligated severally in proportion to the relative number
of Shares sold by each Selling Stockholder hereunder), agree to indemnify,
defend and hold harmless each Underwriter (as "INDEMNITEE") against
27
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject (including, without limitation, in its
capacity as an Underwriter or as a "qualified independent underwriter" within
the meaning of Schedule E of the Bylaws of the NASD), under the Act, the
Exchange Act or otherwise, specifically including, but not limited to,
losses, claims, damages, judgments, liabilities and expenses (including the
fees and expenses of counsel and other expenses in connection with
investigating, defending or settling any such action or claim) (or actions in
respect thereof), as they are incurred and regardless of whether the
Indemnitee is a party to the litigation, if any, arising out of or based upon
(i) any breach of any representation, warranty, agreement or covenant of the
Company herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement 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 not misleading, or (iii) any untrue statement or
alleged untrue statement of any material fact contained in any Preliminary
Prospectus or the Prospectus or any amendment or supplement 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, and agrees to
reimburse each Underwriter for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; PROVIDED,
HOWEVER, that neither the Company nor any of the Selling Stockholders shall
be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or any
such amendment or supplement thereto, in reliance upon, and in conformity
with, written information relating to any Underwriter furnished to the
Company by such Underwriter, directly or through you, specifically for use in
the preparation thereof; PROVIDED FURTHER that Xxxxx X. Liberty, Xxxxx X.
Xxxxxx and Xxxxxxx Xxxxxxx Xxxxxx, individually and as Trustee Under
Declaration of Trust dated March 12, 1997, shall not be liable in indemnity
under clause (i), and in the case of each preceding clause (ii) and (iii),
shall be liable only if any untrue statement or alleged untrue statement, or
any omission or alleged omission, in the Registration Statement or any
amendment or supplement thereto, or in the Preliminary Prospectus, the
Prospectus or any amendment or supplement to either of the foregoing, is made
in reliance upon and in conformity with written information furnished to the
Company by such Selling Stockholder for use in the preparation thereof; and
PROVIDED FURTHER, that the indemnity agreement provided in this SECTION 9(a)
with respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any losses, claims, damages,
liabilities or actions based upon any untrue statement or alleged untrue
statement of material fact or omission or alleged omission to state therein a
material fact purchased Shares, if a copy of the Prospectus in which such
untrue statement or alleged untrue statement or omission or alleged omission
was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with SECTION 5(d).
In addition, each of the Selling Stockholders severally agrees to
indemnify, defend and hold harmless each Underwriter (as "INDEMNITEE")
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter may become subject under the Act, the Exchange Act or
otherwise, specifically including, but not limited to, losses, claims,
damages, judgments, liabilities and expenses (including the fees and expenses
of counsel and other expenses in connection with
28
investigating, defending or settling any such action or claim) (or actions in
respect thereof), as they are incurred and regardless of whether the
Indemnitee is a party to the litigation, if any, arising out of or based upon
any breach of any representation, warranty, agreement or covenant of such
Selling Stockholder herein contained.
The indemnity agreement in this SECTION 9(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person,
if any, who controls any Underwriter within the meaning of the Act or the
Exchange Act and each of the agents, employees, officers and directors of
each Underwriter and person who so controls any Underwriter. This indemnity
agreement shall be in addition to any liabilities which the Company may
otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to
indemnify, defend and hold harmless the Company and each Selling Stockholder
(as "INDEMNITEE") against any losses, claims, damages or liabilities, joint
or several, to which the Company and each Selling Stockholder may become
subject under the Act or otherwise, specifically including, but not limited
to, losses, claims, damages, judgments liabilities and expenses (including
the fees and expenses of counsel and other expenses in connection with
investigating, defending or settling any such action or claim) (or actions in
respect thereof), as they are incurred and regardless of whether the
Indemnitee is a party to the litigation, if any, arising out of or based upon
(i) any breach of any representation, warranty, agreement or covenant of such
Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement 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 not misleading, or (iii) any untrue statement or
alleged untrue statement of any material fact contained in any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, in the case of subparagraphs (ii) and (iii)
of this SECTION 9(b) to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company and/or each Selling Stockholder by such Underwriter, directly or
through you, specifically for use in the preparation thereof, and agrees to
reimburse the Company and/or such Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or any Selling Stockholder in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred.
The indemnity agreement in this SECTION 9(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each Selling
Stockholder, each officer of the Company who signed the Registration
Statement and each director of the Company, and each person, if any, who
controls the Company within the meaning of the Act or the Exchange Act. This
indemnity agreement shall be in addition to any liabilities which each
Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
SECTION 9 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this SECTION 9, notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this SECTION 9 except to
29
the extent that it has been prejudiced by such omission. In case any such
action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it shall elect by
written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
PROVIDED, HOWEVER, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
which are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select
separate counsel to assume such legal defenses and to otherwise participate
in the defense of such action on behalf of such indemnified party or parties.
Upon receipt of notice from the indemnifying party to such indemnified party
of the indemnifying party's election so to assume the defense of such action
and approval by the indemnified party of counsel, the indemnifying party will
not be liable to such indemnified party hereunder for any legal or other
expenses subsequently incurred by such indemnified party in connection with
the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall not
be liable for the expenses of more than one separate counsel (together with
appropriate local counsel) approved by the indemnifying party representing
all the indemnified parties under SECTION 9(a) or 9(b) hereof who are parties
to such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event
shall any indemnifying party be liable in respect of any amounts paid in
settlement of any action unless the indemnifying party shall have approved
the terms of such settlement; PROVIDED that such consent shall not be
unreasonably withheld. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnification could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on all
claims that are the subject matter of such proceeding.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this SECTION
9 but it is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this SECTION 9 provides
for indemnification in such case, all the parties hereto shall contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that the
Underwriters severally and not jointly are responsible pro rata for the
portion represented by the percentage that the underwriting discount bears to
the public offering price, and the Company, jointly and severally with the
Selling Stockholders (each obligated severally in proportion to the relative
number of Shares sold by each Selling Stockholder hereunder ) will be
responsible for the remaining portion, PROVIDED, HOWEVER, that (i) no
Underwriter shall be required to contribute any amount in excess of the
amount by which the underwriting discount applicable to the Shares purchased
by such Underwriter exceeds the amount of damages which such Underwriter has
otherwise been required to pay and (ii) no person guilty of a
30
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The contribution agreement in this SECTION
9(d) shall extend upon the same terms and conditions to, and shall inure to
the benefit of, each person, if any, who controls any Underwriter or the
Company within the meaning of the Act or the Exchange Act and each officer of
the Company who signed the Registration Statement and each director of the
Company and each Selling Stockholder.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation,
the provisions of this SECTION 9, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this SECTION 9
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 and Prospectus as required
by the Act and the Exchange Act.
(f) Notwithstanding anything herein to the contrary, the aggregate
liability of each Selling Stockholder in respect of all obligations in
indemnity or contribution under this SECTION 9, or in respect of any breach
or inaccuracy of any representation or warranty hereunder, will not exceed
the total price at which the Shares sold by such Selling Stockholder were
offered to the public less the underwriting discounts and commissions and
non-accountable expense allowance attributable to those Shares.
10. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company, the Selling Stockholders and the Underwriters herein or in
certificates delivered pursuant hereto, and the indemnity and contribution
agreements contained in SECTION 9 shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter within the meaning of
the Act or the Exchange Act, or by or on behalf of any Selling Stockholder or
the Company, or any of the Company's officers, directors or controlling
persons within the meaning of the Act or the Exchange Act, and shall survive
the delivery of the Shares to the several Underwriters hereunder or
termination of this Agreement.
11. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such
Firm Shares in accordance with the terms hereof, and if the aggregate number
of Firm Shares which such defaulting Underwriter or Underwriters so agreed
but failed to purchase does not exceed 10% of the Firm Shares, the remaining
Underwriters shall be obligated, severally in proportion to their respective
commitments hereunder, to take up and pay for the Firm Shares of such
defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate number
of Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm
Shares which the defaulting Underwriter or Underwriters so agreed but failed
to purchase. If such remaining Underwriters do not, at the Closing Date,
take up and pay for the Firm Shares which the defaulting Underwriter or
Underwriters so agreed but failed to purchase, the Closing Date shall be
postponed for twenty-four (24) hours to allow the several Underwriters the
privilege of substituting within twenty-
31
four (24) hours (including non-business hours) another underwriter or
underwriters (which may include any nondefaulting Underwriter) satisfactory
to the Principal Selling Stockholder. If no such underwriter or underwriters
shall have been substituted as aforesaid by such postponed Closing Date, the
Closing Date may, at the option of the Principal Selling Stockholder, be
postponed for a further twenty-four (24) hours, if necessary, to allow the
Principal Selling Stockholder the privilege of finding another underwriter or
underwriters, satisfactory to you, to purchase the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If
it shall be arranged for the remaining Underwriters or substituted
underwriter or underwriters to take up the Firm Shares of the defaulting
Underwriter or Underwriters as provided in this SECTION 11, (i) the Principal
Selling Stockholder shall have the right to postpone the time of delivery for
a period of not more than seven (7) full business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement
or the Prospectus, or in any other documents or arrangements, and the Company
and the Principal Selling Stockholder agree promptly to file any amendments
to the Registration Statement, supplements to the Prospectus or other such
documents which may thereby be made necessary, and (ii) the respective number
of Firm Shares to be purchased by the remaining Underwriters and substituted
underwriter or underwriters shall be taken as the basis of their underwriting
obligation. If the remaining Underwriters shall not take up and pay for all
such Firm Shares so agreed to be purchased by the defaulting Underwriter or
Underwriters or substitute another underwriter or underwriters as aforesaid
and the Principal Selling Stockholder shall not find or shall not elect to
seek another underwriter or underwriters for such Firm Shares as aforesaid,
then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this SECTION 11, then neither the Company nor the
Principal Selling Stockholder shall be liable to any Underwriter (except as
provided in SECTIONS 6 and 9 hereof) nor shall any Underwriter (other than an
Underwriter who shall have failed, otherwise than for some reason permitted
under this Agreement, to purchase the number of Firm Shares agreed by such
Underwriter to be purchased hereunder, which Underwriter shall remain liable
to the Company, the Principal Selling Stockholder and the other Underwriters
for damages, if any, resulting from such default) be liable to the Company or
the Principal Selling Stockholder (except to the extent provided in SECTIONS
6 and 9 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this SECTION 11.
12. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of (i)
6:30 A.M., California time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the public offering shall mean the
time of the release by you, for publication, of the first newspaper
advertisement relating to the Shares, or the time at which the Shares are
first generally offered by the Underwriters to the public by letter,
telephone, telegram or telecopy, whichever shall first occur. By giving
notice as set forth in SECTION 13 before the time this Agreement becomes
effective, you, as Representative of the several Underwriters, the Company,
or the Principal Selling Stockholder, may prevent this Agreement from
becoming effective without liability of any party to any other party, except
as provided in SECTIONS 5(i) and 9.
32
(b) You, as Representative of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter
specified at any time on or prior to the Closing Date or on or prior to any
later date on which Option Shares are to be purchased, as the case may be,
(i) if the Company or any Selling Stockholder 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, any change in the
financial condition, earnings, operations, business or business prospects of
the Company from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse, or (ii) if additional
governmental restrictions, not in force and effect on the date hereof, shall
have been imposed upon trading in securities generally or minimum or maximum
prices shall have been generally established on the New York Stock Exchange
or on the American Stock Exchange or in the over the counter market by the
NASD, or trading in securities generally shall have been suspended on either
such exchange or in the over the counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (iii) if 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, or
(iv) if there shall have been a material adverse change in the general
political or economic conditions or financial markets as in your judgment
makes it inadvisable or impracticable to proceed with the offering, sale and
delivery of the Shares, or (v) if there shall have been an outbreak or
escalation of hostilities or of any other insurrection or armed conflict or
the declaration by the United States of a national emergency which, in the
opinion of the Representative, makes it impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus. In the event of termination pursuant to subparagraph (i) above,
the Selling Stockholders and the Company shall remain obligated to pay costs
and expenses pursuant to SECTIONS 5(i), 6 and 9. Any termination pursuant to
any of subparagraphs (ii) through (v) above shall be without liability of any
party to any other party except as provided in SECTIONS 5(i) and 9.
If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this SECTION 12, you shall
promptly notify the Company by telephone, telecopy or telegram, in each case
confirmed by letter, which notice shall be sufficient to notify each Selling
Stockholder as well. If the Company or the Principal Selling Stockholder
shall elect to prevent this Agreement from becoming effective, the Company
shall promptly notify you by telephone, telecopy or telegram, in each case,
confirmed by letter.
13. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall
be mailed, delivered, telegraphed (and confirmed by letter) or telecopied
(and confirmed by letter) to you c/o Cruttenden Xxxx Incorporated, 00000 Xxx
Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, telecopier number (714)
852-9603, Attention: General Counsel; if sent to the Company, such notice
shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to 00000 Xxxxxxxxxx Xxxx., Xxxxxx xxx
Xxx, Xxxxxxxxxx 00000, telecopier number (000) 000-0000, Attention: Chief
Executive Officer.
14. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters, the Company and each Selling
Stockholder and their respective executors, administrators, successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person or entity, other than the parties
hereto and their respective
33
executors, administrators, successors and assigns, and the controlling
persons within the meaning of the Act or the Exchange Act, officers and
directors referred to in SECTION 9, any legal or equitable right, remedy or
claim in respect of this Agreement or any provisions herein contained, this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the parties hereto and their
respective executors, administrators, successors and assigns and said
controlling persons and said officers and directors, and for the benefit of
no other person or entity. No purchaser of any of the Shares from any
Underwriter shall be construed a successor or assign by reason merely of such
purchase.
In all dealings with the Company or any Selling Stockholder under this
Agreement, you shall act on behalf of each of the several Underwriters, and
the Company and each Selling Stockholder shall be entitled to act and rely
upon any statement, request, notice or agreement made or given by you jointly
or by Cruttenden Xxxx Incorporated on behalf of you.
15. APPLICABLE LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California.
16. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will constitute an original.
[remainder of page intentionally left blank]
34
If the foregoing correctly sets forth the understanding among the
Company, the Selling Stockholders, and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement of the Company, the Selling
Stockholders, and the several Underwriters.
Very truly yours,
XXXXXX VINEYARDS INC.
By: ____________________________
Name: __________________________
Title: _________________________
_________________________________ _________________________________
Xxxxxx X. Xxxxxx, individually and Xxxxx X. Xxxxxx
as Trustee of the Xxxxxx X. Xxxxxx
Revocable Trust dated October 8,
1992
_________________________________ _________________________________
Xxxxx X. Xxxxxx Xxxx X. Xxxxxxxx
_________________________________ _________________________________
Xxxxx X. Liberty Xxxxx X. Xxxxxx
_________________________________
Xxxxxxx Xxxxxxx Xxxxxx,
individually and as Trustee Under
Declaration of Trust dated
March 12, 1997
Accepted as of the date first above written:
CRUTTENDEN XXXX INCORPORATED
On its behalf and on behalf of each of the
several Underwriters named in SCHEDULE A hereto.
By CRUTTENDEN XXXX INCORPORATED
By: ______________________________
Name: ____________________________
Title: ___________________________
35
SCHEDULE A
Number of Firm Shares
Underwriters to be Purchased
------------ ---------------
Cruttenden Xxxx Incorporated 650,000
NationsBanc Xxxxxxxxxx Securities LLC 100,000
Advest, Inc. 50,000
Imperial Capital, LLC 50,000
Josephthal & Co. Inc. 50,000
Sutro & Co. Incorporated 50,000
Wedbush Xxxxxx Securities Inc. 50,000
------------
------------
Total 1,000,000
36
SCHEDULE B
Number of Shares of Class B
Common Stock
Selling Stockholder Subject to this Agreement
------------------- ---------------------------
Xxxxxx X. Xxxxxx, individually and as Trustee of the 1,000,000
Xxxxxx X. Xxxxxx Revocable Trust dated October 8, 1992
Xxxxx X. Xxxxxx 30,000
Xxxxx X. Xxxxxx 30,000
Xxxx X. Xxxxxxxx 30,000
Xxxxx X. Liberty 25,000
Xxxxx X. Xxxxxx 25,000
Xxxxxxx Xxxxxxx Xxxxxx, individually and as Trustee 10,000
Under Declaration of Trust dated March 12, 1997
---------
---------
Total 1,150,000
37
