EXHIBIT 1
1,100,000 SHARES
YOUNG MINDS, INC.
COMMON STOCK
($.[ ] PAR VALUE)
AGREEMENT AMONG UNDERWRITERS
OCTOBER _, 1996
Sharpe Capital, Inc. As Representative of the several Underwriters named in
Schedule I to the Purchase Contract 120 Broadway, New York, New York 10271.
1. PURCHASE CONTRACT. We understand that YOUNG MINDS, INC. (the
"Company"), a [ ] corporation, is planning to enter into an
agreement substantially in the form of Exhibit A hereto (which agreement as
and when executed, is herein called the "Purchase Contract") with you and
other prospective Underwriters (including ourselves) providing for the
purchase, severally, by the Underwriters of an aggregate of 1,100,000 shares
of Common Stock, $.[ ] par value ("Common Stock") of the Company (the
"Company Shares") from the Company. In addition, certain shareholders of the
Company named in Schedule II to the Purchase Contract (the "Selling
Shareholders") propose severally to sell to the Underwriters an aggregate of
375,000 shares (the "Selling Shareholder Shares") of Common Stock. The
Company Shares and the Selling Shareholder Shares are herein called the "Firm
Shares". In addition, to cover over-allotments in connection with the sale of
the Firm Shares, the Company proposes to grant to the Underwriters an option
to purchase up to an additional 165,000 shares (the "Option Shares") of
Common Stock. The Firm Shares and any Option Shares purchased pursuant to the
Purchase Contract are herein called the "Stock". Pursuant to the Purchase
Contract we will agree, in accordance with the terms thereof, to purchase the
number of shares of Common Stock set forth opposite our name in Schedule I
thereto, subject to increase as provided herein.
At or prior to the time of the offering, you will advise us, to the
extent applicable, as to the expected offering date, the expected closing
date, the initial public offering price, the underwriting discount, the
selling concession and the reallowance, except that if the public offering
price of the securities is to be determined as contemplated by Rule 430A
under the Securities Act of 1933 (such procedure being hereinafter referred
to as "430A Pricing"), you shall so advise us and shall specify the maximum
underwriting discount and selling concession. Such information may be
conveyed by you in one or more communications. If the Purchase Contract
provides for the granting of an option to purchase additional securities to
cover over-allotments, you will notify us, of such option and of our maximum
obligation upon exercise of such option.
2. REGISTRATION STATEMENT AND PROSPECTUS. The Stock is more particularly
described in a registration statement (Registration No. [ ]) filed on
September __, 1996 with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"). One
or more amendments to such registration statement have been or may be filed
in which, with our consent hereby confirmed, we have been named as the
Underwriters of the Stock. Copies of the registration statement and any
amendments so filed ( excluding exhibits ) have heretofore been delivered to
us. The registration statement and the related prospectus may be further
amended, but no such amendment shall release or affect our obligations
hereunder or under the Purchase Contract. The registration statement and
related prospectus, as finally amended and revised prior to becoming
effective, are hereinafter respectively referred to as the "Registration
Statement" and the "Prospectus". The Registration Statement has not yet
become effective.
3. AUTHORITY OF THE REPRESENTATIVE. We hereby authorize you, as our
representative (the "Representative"), and on our behalf (a) to complete,
execute and deliver the Purchase Contract in substantially the form attached
hereto, with such variations, if any, as in your judgment are appropriate and
are not materially adverse to the Underwriters, provided that the number of
Firm Shares set forth opposite our name in Schedule I thereto shall not be
increased without our consent, except as provided herein, (b) to waive
performance or satisfaction by the Company of obligations or conditions
included in the Purchase Contract if in your judgment such waiver will not
have a material adverse effect upon the interests of the Underwriters, (c) to
exercise all authority and discretion vested in the Underwriters and in you
by the provisions of the Purchase Contract and to take such action as in your
discretion may be necessary or advisable to carry out the provisions of the
Purchase Contract, this Agreement, the transactions for the accounts of the
several Underwriters contemplated thereby and hereby and the sale and
distribution of the Stock. To the extent applicable, you are also authorized
to determine (i) the amount of Options Shares, if any, to be purchased by the
Underwriters pursuant to any over-allotment option and (ii) with respect to
offerings using 430A Pricing, the initial public offering price and the price
at which the Stock is to be purchased in accordance with the Purchase
Contract. We also authorize you to determine all matters relating to the
public advertisement of the Offering. The parties on whose behalf you execute
the Purchase Contract are herein collectively called the "Underwriters".
4. PUBLIC OFFERING AND OFFERING TO DEALERS. A public offering of the
Firm Shares is to be made, as herein provided, as in your judgment is
advisable as soon after the Registration Statement relating to the Stock
becomes effective. The purchase price to be paid by the Underwriters for the
Stock and the initial public offering price are to be determined by agreement
between you and the Company, as set forth in the Purchase Contract and on the
cover page of the Prospectus, respectively. You will advise us by wire,
telegraph or telephone when the Firm Shares have been released for offering,
when the Registration Statement relating to the Stock shall become effective
and the price at which the Firm Shares are to be initially offered. We agree
not to offer the Firm Shares until they have been released for public
offering. We authorize you, with respect to any of the Stock which we agree
to purchase, to reserve for offering and sale, and on our behalf to sell, to
dealers selected by you (such dealers, including you or any of the other
Underwriters so selected, being hereinafter referred to as "Dealers") and to
others, including institutions or other retail purchasers, all or part of our
Stock as you may determine. Except for such sales which are designated by a
purchaser to be for the account of a particular underwriter, such
reservations and sales to persons other than Dealers shall be as nearly as
practicable in proportion to the respective underwriting obligations of the
Underwriters, unless you agree to a smaller proportion at our request.
Reservations for sales to Dealers need not be in such proportion. All sales
of reserved Stock shall be as nearly as practicable in proportion to the
respective reservations as calculated from day to day.
We authorize you to determine the form and manner of any communications
or agreements with Dealers. In the event that there shall be any such
agreements with Dealers, you are authorized to act as Representative
thereunder and we agree, in such event, to be governed by the terms and
conditions of such agreements. The form of Selected Dealers Agreement
attached hereto as Exhibit B is satisfactory to us. You may arrange for any
Underwriter, including yourself to become one such Dealer. Each Underwriter
agrees that it will not offer any Stock for sale at a price below the
offering price or allow any concession therefrom, except as herein otherwise
provided.
In your discretion, from time to time, you may add to the reserved Stock
any Stock retained by us remaining unsold, and you may upon our request
release to us any of our Stock reserved but not sold. Any Stock so released
shall not thereafter be deemed to have been reserved. Upon termination of this
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Agreement, or prior thereto at your discretion, you shall deliver to us any
of our Stock reserved but not sold and delivered, except that if the
aggregate number of Stock of all reserved but unsold and undelivered Stock is
less than 155,000 of the aggregate number of shares of Stock, you are
authorized to sell such Stock for the accounts of the several Underwriters at
such price or prices as you may determine.
Sales of reserved Stock shall be made to Dealers at the public offering
price less a Dealers' concession, initially not in excess of $. per share and
to others, including institutions and other retail purchasers at the public
offering price. Underwriters and Dealers may reallow a concession from the
public offering price, initially not in excess of $. per share to other
dealers, who are (a) members of the National Association of Securities
Dealers, Inc. ("NASD") and conform to the provisions of Section 24 of Article
III of the Rules of Fair Practice of the NASD or (b) foreign dealers not
eligible for membership in the NASD who also agree (i) that, in making sales
of any Stock outside the United States of America, they will comply with the
requirements of the NASD's Interpretation with Respect to Free-Riding and
Withholding and (ii) (A) that, if they are registered broker-dealers under
the Securities Exchange Act of 1934 as amended (the "1934 Act"), they will
conform to Sections 8, 25 and 36 of Article III of the NASD's Rules of Fair
Practice in making sales of Stock in the United States or (B) that they will
not offer or sell any Stock in the United States.
After advice from you that the Firm Shares are released for sale to the
public, we will offer to the public, in conformity with the terms of offering
set forth in the Prospectus, such of our Firm Shares as to which you advise
us are not reserved. We authorize you, as Representative of the Underwriters,
after the Firm Shares are released for sale to the public, in your
discretion, to change the public offering price of the Stock and the
concessions at any time or from time to time by reason of changes in the
general market or otherwise.
Nothing contained in this Agreement will be deemed to restrict our
right, subject to the provisions of this Paragraph 4, to offer the Stock
prior to the effective date of the Registration Statement, provided that any
such offer will be made in full compliance with all applicable requirements
of the Act, and the 1934 Act and the rules and regulations of the Commission
thereunder and with all applicable state securities laws.
5. PAYMENT AND DELIVERY. At your request, and in all events at or before
9:00 a.m., New York time on the Closing Date, as defined in Section 3 of the
Purchase Contract, we will deliver to you at your offices at 120 Broadway,
New York, New York 10271, or at such other place as you may specify, by
certified or bank cashier's check in New York Clearing House Funds, payable
to your order, the funds needed to make payment pursuant to the Purchase
Contract for the Stock to be purchased by us or funds in an amount equal to
the initial public offering price of such Stock, as you may specify in such
request, and we authorize you to use such funds to make such payment pursuant
to the Purchase Contract. Any remaining balance shall be credited to our
account. If we fail (whether or not such failure constitutes a default
hereunder) to deliver to you, or you fail to receive our check for the Stock
which we have agreed to purchase at the time and in the manner provided in
this Section 5, you individually, and not as the Representative, are
authorized (but will not be obligated) to make payment to the Company and the
Selling Shareholders for such Stock for our account.
We also agree on demand to take up and pay for or deliver to you funds
sufficient to pay for at cost any Stock you purchase for our account pursuant
to the provisions of Section 7 hereof, and to deliver to you on demand any
Stock sold or over-allotted by you for our account pursuant to any provisions
of this Agreement.
We authorize you to deliver our Stock and any other Stock purchased by you
for our account
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pursuant to the provisions of Section 7 hereof, against sales made by you for
our account pursuant to any provision of this Agreement.
In case any Stock reserved for sale to Dealers or others is not
purchased and paid for in due course as contemplated hereby, we agree (a) to
accept delivery when tendered by you of any Stock so reserved for our account
and not so purchased and paid for, and (b) in case we shall have received
payment from you in respect of any such Stock, to reimburse you on demand for
the full amount which you shall have paid us in respect of such Stock. Any
such payment by you shall not relieve us from any of our obligations
hereunder or under the Purchase Contract and we agree to repay you on demand
the amount so advanced for our account.
We authorize you, for our account, to accept delivery of the Stock from
the Company, to give receipts therefor, and to hold such of our Stock as you
have reserved for sale to Dealers and others and to deliver such Stock
against such sales. You will deliver to us our unreserved Stock as promptly
as practicable. Unless we notify you at least three full business days prior
to the date of delivery of the Stock to make other arrangements, you may, in
your discretion, advise the Company to register our Stock in our name.
As promptly as practicable after you receive payment for reserved Stock
sold for our account, you will remit to us the lesser of the amount of such
payment or the purchase price of such Stock under the Purchase Contract.
6. AUTHORITY TO BORROW. In connection with the transactions contemplated
in the Purchase Contract or this Agreement, we authorize you, in your
discretion, to advance your own funds for our account, charging current
interest rates, to arrange loans for our account, and in connection therewith
to execute and deliver any notes or other instruments and hold or pledge as
security any of our Stock. Any lender may rely upon your instructions in all
matters relating to any such loan. We will repay any such advances or loans
on demand.
Any of our Stock and any other securities purchased for our account
hereunder held by you may, from time to time, be delivered to us for carrying
purposes, and, if so delivered, any such securities will be redelivered to
you upon demand.
7. STABILIZATION AND OVER-ALLOTMENT. We authorize you, until the
termination of this Agreement, (a) to make purchases and sales of Stock in
the open market or otherwise, for long or short account, and on such terms
and at such prices as you in your sole discretion may deem desirable, (b) in
arranging for sales of Stock to Dealers, to over-allot, and (c) either before
or after the termination of this Agreement, to cover any short position or
liquidate any long position incurred pursuant to this Section 7, subject,
however, to the applicable rules and regulations of the Commission under the
1934 Act. All such purchases, sales and over-allotments shall be made for the
accounts of the several Underwriters as nearly as practicable in proportion
to their respective underwriting obligations; provided, however, that our net
position, in the case of short accounts computed on the assumption that all
the Option Shares are acquired, resulting from such purchases and sales and
over-allotments shall not at the end of any business day exceed, either for
long or short account, 15% of the aggregate number of shares of Firm Stock
agreed to be purchased by us on the assumption that all Option Shares are
purchased. We will on demand take up at cost any Stock so purchased and
deliver any Stock so sold or over-allotted for our account, and, if any other
Underwriter, defaults in its corresponding obligations we will assume our
proportionate share of such obligation without relieving the defaulting
Underwriter from liability.
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If you effect any stabilizing purchases pursuant to this Section, you
shall promptly notify us of the date and time of the first stabilizing
purchase and the date and time when stabilizing was terminated. You shall
prepare and maintain such records as are required to be maintained by you as
manager pursuant to Rule 17a-2 under the 1934 Act.
We agree to advise you, from time to time upon request until the
settlement of accounts hereunder, of the number of shares of Stock at any
time retained by us remaining unsold, and we will upon request sell to you
for the accounts of one or more of the several Underwriters such number of
our unsold Stock as you may designate, at the Offering Price less such
amount, not in excess of the concession to Dealers, as you may determine.
8. OPEN MARKET TRANSACTIONS. We agree that, except with your consent and
except as herein provided, we will not, prior to the termination of this
Agreement, bid for, purchase or sell directly or indirectly for our own
account, in the open market or otherwise, or attempt to induce others to bid
for, purchase or sell, either before or after the issuance or sale of the
Stock, and, either for long or short account, any Stock, and prior to the
completion (as defined in Rule 10b-6 under the 1934 Act) of our participation
in the distribution, and we will otherwise comply with said Rule 10b-6.
Nothing contained in this Section 8 shall prohibit us from acting as broker
or agent in the execution of unsolicited orders of customers for the purchase
or sale of any securities of the Company.
9. REPURCHASES IN THE OPEN MARKET. In recognition of the importance of
distributing the Stock to bona fide investors, we agree to repurchase on
demand any Stock sold by us and purchased by you in the open market or
otherwise during a period terminating as provided in Section 12, at a price
equal to the cost of such purchase, including commissions and transfer and
other taxes, if any, on redelivery. The certificates delivered to us need not
be the identical certificates delivered to you in respect of the Stock
purchased. In lieu of requiring repurchase, you may, in your discretion, sell
such Stock for our account at such prices, upon such terms and to such
persons, including any of the other Underwriters, as you may determine,
charging the amount of any loss and expense, or crediting the amount of any
net profit, resulting from such sale, to our account, or you may charge our
account with an amount determined by you not in excess of the Dealers'
concession.
10. BLUE SKY. Prior to the initial offering by Underwriters, you will
inform us as to the jurisdictions in which it is believed that the Stock has
been qualified or registered or is exempt for sale under the respective
securities or "blue sky" laws of such jurisdictions, but you do not assume
any responsibility or obligation as to the accuracy of such information or as
to the right of any Underwriter or Dealer to sell the Stock in any
jurisdiction. You agree, however, to cause to be filed a Further State Notice
with respect to the Stock if, in the opinion of counsel for the Underwriters,
such filing is required by Article 23-A of the General Business Law of the
State of New York.
We authorize you, if you deem it inadvisable in arranging sales of Stock
for our account hereunder to sell any of our Stock to any particular Dealer
or other buyer because of the securities or "blue sky" laws of any
jurisdiction, to sell our Stock to one or more other Underwriters at the
offering price less, in the case of a sale for resale to a Dealer, such
amount, not in excess of the concession to Dealers thereon, as you may
determine. The transfer tax, if any, on any such sales among Underwriters
shall be treated as an expense and charged to the respective accounts of the
several Underwriters in proportion to their respective underwriting
obligations.
Upon the completion of the public offering contemplated herein, each
Underwriter agrees to promptly furnish to you, upon your request, territorial
distribution reports setting forth each jurisdiction
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in which sales of the Stock were made by such Underwriter, the number of
shares of Stock sold in such jurisdiction, and any further information as you
may request, in order to permit you to file on a timely basis any report
which you as Representative may be required to file pursuant to the
securities or "blue sky" laws of any jurisdiction.
11. ALLOCATION OF EXPENSES AND SETTLEMENT. We authorize you to charge
our account with and we agree to pay, to the extent not covered by the
accountable expense allowance provided for in Section 3(c) of the Purchase
Contract, (a) all transfer taxes on the Stock purchased by us pursuant to the
Purchase Contract and sold by you for our account, (b) any and all expenses
incurred by you as Representative in connection with the purchase, marketing
and sale of the Stock for our account and (c) our proportionate share (based
on our underwriting obligation) of all other expenses incurred by you in
connection with this Agreement and in connection with the purchase, carrying,
sale and distribution of the Stock. Your determination of the amount of such
expenses and your allocation thereof shall be final and conclusive. In the
event of the default of any Underwriter in carrying out its obligations
hereunder, the expenses chargeable to such Underwriter pursuant to this
Agreement and not paid by it, as well as any additional losses or expenses
arising from such default, may be proportionately charged by you against the
other Underwriters not so defaulting subject to the provisions of Section 12
hereof without, however, relieving such defaulting Underwriter from its
liability therefor.
As soon as practicable after termination of this Agreement, the accounts
hereunder will be settled, but you may reserve from distribution such amount
as you deem necessary to cover possible additional expenses. You may at any
time make partial distribution of credit balances or call for payment of
debit balances. Any of our funds in your hands may be held with your general
funds without accountability for interest. Notwithstanding the termination of
this Agreement or any settlement, we will pay (a) our proportionate share
(based on our underwriting obligation) of all expenses and liabilities which
may be incurred by or for the accounts of the Underwriters, including any
liability based on the claim that the Underwriters constitute an association,
unincorporated business or other separate entity, and of any expenses
incurred by you or any other Underwriter with your approval in contesting any
such claim or liability, and (b) any transfer tax paid after such settlement
on account of any sale or transfer for our account.
12. TERMINATION OF AGREEMENT. Unless earlier terminated by you, the
provisions of Sections 4, 6, 7, 8, 9, 11 and 12 of this Agreement shall,
except as otherwise provided therein, terminate 45 full business days after
the effective date of the Registration Statement herein referred to, but may
be extended by you for an additional period or periods not exceeding an
additional 15 full business days in the aggregate. You may however, terminate
this Agreement or any provisions hereof at any time by written or telegraphic
notice to us. All other provisions of this Agreement shall remain operative
and in full force and effect with respect to such offering.
13. DEFAULT BY UNDERWRITERS. In conformity with and in furtherance of
the provisions of Section 8 of the Purchase Contract, the default by one or
more Underwriters in respect of their respective obligations under the
Purchase Contract shall not release us from any of our obligations hereunder
or in any way affect the liability of any defaulting Underwriter to you or to
the other Underwriters for damages resulting from such default. In case of
such default by one or more Underwriters you are authorized to increase, as
nearly as practicable pro rata with the other non-defaulting Underwriters,
the Stock which we shall be obligated to purchase under the Purchase
Contract, provided, however, that the aggregate amount of all such increases
for all non-defaulting Underwriters will not exceed 10% of the Firm Shares
and, if the aggregate number of shares of Common Stock not taken up by such
defaulting Underwriters exceed such 10%, you are further authorized, but not
obligated, to arrange for the purchase by other persons, who may include
yourself, of all or a portion of the Stock not taken up by such Underwriters.
In the event any
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such increases or arrangements are made, the Stock to be purchased by the
non-defaulting Underwriters and by such other person or persons will be taken
as the basis for the purchase obligation under this Agreement, but this shall
not in any way affect the liability of any defaulting Underwriters to the
other Underwriters for damages resulting from such default.
In the event of default by one or more Underwriters in respect of its or
their respective obligations under this Agreement to take up and pay for any
Stock including any Stock purchased by you for their respective accounts
pursuant to Section 8 hereof, or to deliver any such securities sold or
over-allotted by you for their respective accounts pursuant to any provision
of this Agreement, and to the extent that arrangements shall not have been
made by you or the Company for other persons to assume the obligations of
such defaulting Underwriter or Underwriters, each non-defaulting Under writer
shall assume its proportionate share (without regard to the obligation of
such defaulting Underwriter or Underwriters) of the aforesaid obligations of
each such defaulting Underwriter without relieving such Underwriter of its
liability therefor.
14. GENERAL POSITION OF THE REPRESENTATIVE. In taking action under this
Agreement, you shall act only as agent of the several Underwriters. Your
authority as the Representative of the several Underwriters shall include the
taking of such actions as you may deem advisable in respect of all matters
pertaining to any and all offers and sales of the Stock, including the right
to make any modifications which you consider necessary or desirable in the
arrangements with Dealers or others. You shall be under no liability for or
in respect of the value of the Stock or the validity or the form thereof, the
Registration Statement, the Prospectus, the Purchase Contract or other
instruments executed by the Company or others; or for or in respect of the
issuance, transfer or delivery of the Stock; or for the performance by the
Company or others of any agreement on its or their part of the exercise or
failure to exercise the Options granted pursuant to Section 2(a) of the
Purchase Contract; nor shall you, as such Representative or otherwise, be
liable to the several Underwriters under any of the provisions hereof or for
any matters connected herewith, except for want of good faith; and no
obligation not expressly assumed by you as such Representative herein shall
be implied from this Agreement. Nothing herein contained will constitute a
waiver of any liability arising under the Act and no obligation not expressly
assumed by you as such Representative herein will be inferred from this
Agreement. In representing the Underwriters hereunder, you shall act as the
Representative of each of them respectively. Nothing herein contained shall
constitute the several Underwriters partners with you or with each other, or
render any Underwriter liable for the commitments of any other Underwriter,
except as otherwise provided in Section 13 hereof. The commitments and
liabilities of each of the several Underwriters are several in accordance
with their respective underwriting obligations and are not joint or joint and
several.
15. ACKNOWLEDGEMENT OF REGISTRATION STATEMENT, ETC. We confirm that we
have examined the Registration Statement (including all subsequent amendments
thereto) relating to the Stock as heretofore filed with the Commission, that
we are familiar with any amendment or amendments to the Registration
Statement and the final form of Prospectus proposed to be filed, that we are
willing to accept the responsibilities of an underwriter thereunder, and that
we are willing to proceed as therein contemplated. We further confirm that
the statements made under the heading "Underwriting" in such proposed final
form of Prospectus, insofar as they relate to us, are correct, that there is
no information about us required to be stated in the Registration Statement
or Prospectus or any preliminary prospectus other than as set forth in the
Underwriters' Questionnaire previously delivered by us to you and the
Company, and we authorize you to so advise the Company on our behalf. We
understand that the aforementioned documents are subject to further change
and that we will be supplied with copies of any amendment or amendments to
the Registration Statement and Prospectus promptly, if and when received by
you, but the making of such changes and amendments shall not release us or
affect our obligations hereunder or under the Purchase
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Contract.
16. INDEMNIFICATION.
(a) We agree to indemnify and hold harmless each other Underwriter
and each person, if any, who controls any such Underwriter within the meaning
of Section 15 of the Act or Section 20(a) of the 1934 Act, to the extent and
upon the terms on which we agree to indemnify and hold harmless the Company
as set forth in the Purchase Contract.
(b) Each Underwriter (including you) will pay, upon your request, as
contribution, its proportionate share, based upon its underwriting
obligation, of any losses, claims, damages or liabilities, joint or several,
paid or incurred by any Underwriter, arising out of or based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, the Prospectus, any amendment or supplement thereto
or any preliminary prospectus or any other selling or advertising material
approved by you for use by the Underwriters in connection with the sale of
the Stock, 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 (other than an untrue statement or alleged untrue
statement or omission or alleged omission made in conformity with written
information furnished to the Company by or on behalf of an Underwriter
through you expressly for use therein or relating to any transaction
contemplated by this Agreement); and will pay such proportionate share of any
legal or other expenses reasonably incurred by you or with your consent in
connection with investigating or defending any such loss, claim, damage or
liability, on any action in respect thereof. In determining the amount of our
obligation under this paragraph, appropriate adjustment may be made by you to
reflect any amounts received by any one or more Underwriters in respect of
such claim from the Company pursuant to Section 7 of the Purchase Contract or
otherwise. There will be credited against any amount paid or payable by us
pursuant to this paragraph any loss, damage, liability or expense which is
incurred by us as a result of any such claim asserted against us, and if such
loss, claim, damage, liability or expense is incurred by us subsequent to any
payment by us to this paragraph, appropriate provision will be made to effect
such credit by refund or otherwise. If any such claim is asserted, you may
take such action in connection therewith as you deem necessary or desirable,
including retention of counsel for the Underwriters, and in your discretion
separate counsel for any particular Underwriter or group of Underwriters, and
the fees and disbursements of any counsel so retained by you shall be
included in the amounts payable pursuant to this paragraph. In determining
amounts payable pursuant to this paragraph, any loss, claim, damage,
liability or expense incurred by any person who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20(a) of the 1934 Act
which has been incurred by reason of such control relationship shall be
deemed to have been incurred by such Underwriter. Any Underwriter may elect
to retain at its own expense its own counsel. You may settle or consent to
the settlement of any such claim, on advice of counsel retained by you, with
approval of a majority in interest of the Underwriters. Whenever you receive
notice of the assertion of any claim to which the provisions of this
paragraph would be applicable, you will give prompt notice thereof to each
Underwriter. If any Underwriter or Underwriters default in their obligation
to make any payments under this paragraph, each non-defaulting Underwriter
shall be obligated to pay its proportionate share of all defaulted payments
based upon such Underwriter's underwriting obligation related to the
underwriting obligations of all non-defaulting Underwriters. Nothing
contained herein shall relieve a defaulting Underwriter from liability for
its default.
(c) Our indemnity and contribution agreement contained in this
Section 16 shall remain in full force and effect regardless of any
investigation made by or on behalf of such other Underwriter or controlling
person and shall survive the delivery of and payment for the Stock and the
termination of this Agreement and the similar agreements entered into with
the other Underwriters.
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17. COMPENSATION TO THE REPRESENTATIVE. As compensation for your
services in connection with the purchase of the Stock and the management of
the public offering thereof, we agree to pay you, and authorize you to charge
our account on the Closing Date, as defined in the Purchase Contract, with an
amount equal to $.[ ] per share of Common Stock for each share of Common
Stock which we have agreed to purchase pursuant to the Purchase Contract.
18. CAPITAL REQUIREMENTS. We confirm that our ratio of aggregate
indebtedness to net capital is such that we may, in accordance with and
pursuant to Rule 15c3-1, promulgated by the Commission under the 1934 Act,
and any applicable rules relating to capital requirements of the NASD and any
securities exchange to which we are subject, agree to purchase the number of
shares of Common Stock we may be obligated to purchase under any provision of
the Purchase Contract or this Agreement.
19. UNDERTAKING TO MAIL PROSPECTUS. As contemplated by Rule 15c2-8 under
the 1934 Act, you agree to mail a copy of the Prospectus mentioned in the
Purchase Contract to any person making a written request therefor during the
period referred to in the rules and regulations adopted under such Act, the
mailing to be made to the address given in the request. We confirm that we
have delivered all preliminary prospectuses and amended preliminary
prospectuses, if any, required to be delivered under the provisions of Rule
15c2-8 and agree to deliver all Prospectuses required to be delivered
thereunder. You have heretofore delivered to us such preliminary prospectuses
as have been required by us, receipt of which is hereby acknowledged, and
will deliver such Prospectuses as may be requested by us.
20. MISCELLANEOUS. Any notice hereunder from you to us shall be deemed
to have been duly given if sent by registered mail, wire, telegram or
teletype, to us at our address as set forth in our Underwriters'
Questionnaire previously delivered to you.
We agree that we will not, without your consent, sell any Stock to an
account over which we exercise discretionary authority.
We understand that you are a member in good standing of the NASD. We
hereby confirm that each of us is actually engaged in the investment banking
or securities business and is a member in good standing of the NASD and each
of us agrees to comply with all applicable rules of the NASD including,
without limitation, the NASD's Interpretation with Respect to Free-Riding and
Withholding and Section 24 of Article III of the NASD's Rule of Fair
Practice, or, if we are not such a member, that we are a foreign dealer who
is not eligible for membership in the NASD (a) who agrees to make no sales
within the United States, its territories or its possessions (except that we
may participate in sales to others, including sales to institutions or other
retail purchasers under Section 4 above) or to persons who are citizens
thereof or residents therein, and, in making sales, to comply with the NASD's
Interpretation with Respect to Free-Riding and Withholding and Section 2, 8,
and 35 of Article III of the NASD's Rules of Fair Practice as if we were a
NASD member and Section 25 of Such Article III as it applies to a non-member
broker or dealer in a foreign country, and (b) who in connection with sales
and offers to sell Stock made by us outside the United States, (i) will
either furnish to each person to whom any such sale or offer to sell is made,
a copy of the then current preliminary prospectus or the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), as the case may be, or inform such person that such
preliminary prospectus or Prospectus will be available upon request, and (ii)
will furnish to each person to whom any such sale or offer to sell is made
such prospectus, advertisement or other offering document containing
information relating to the Stock of the Company as may be required under the
law of the jurisdiction in which such sale or offer to sell is made. Any
prospectus, advertisement or other offering document furnished by us to any
person in accordance with clause (b) (ii) of the preceding sentence, and any
such additional offering material as we may furnish to any
-9-
person, (i) shall comply in all respects with the law of the jurisdiction in
which it is so furnished, (ii) shall be prepared and so furnished at our sole
risk and expense, and (iii) shall not contain information relating to the
Stock or the Company which is inconsistent in any respect with the
information contained in the then current preliminary prospectus or in the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), as the case may be.
This Agreement may be signed by the Underwriters in various counterparts
which together shall constitute one and the same agreement among all the
Underwriters and shall become effective at such time as all the Underwriters
shall have signed such counterparts and you shall have confirmed all such
counterparts. Your signature to such confirmation may be by facsimile.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without giving effect to
conflicts of law.
Please confirm that the foregoing correctly states the understanding
between us by signing and returning to us a counterpart hereof.
Very truly yours,
By:
(AS ATTORNEY-IN-FACT FOR EACH OF THE SEVERAL UNDERWRITERS
NAMED IN SCHEDULE I TO THE PURCHASE CONTRACT)
Confirmed as of the date first above written
New York, New York
SHARPE CAPITAL, INC. As Representative of the several Underwriters
By
Frank J. Lockwood
VICE-PRESIDENT
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EXHIBIT A
1,100,000 Shares
Young Minds, Inc.
Common Stock
($.[_] Par Value)
PURCHASE CONTRACT
October _, 1996
Sharpe Capital, Inc., As Representative of the Several Underwriters named in
Schedule I hereto, 120 Broadway New York, New York 10271
Dear Sirs:
YOUNG MINDS, INC. (the "Company"), a [ ] corporation, proposes to issue
and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters"), 725,000 shares of Common Stock, $.[ ] par value of the
Company (the "Company Shares"). In addition, certain shareholders of the
Company named in Schedule II hereto (the "Selling Shareholders") propose
severally to sell to the Underwriters an aggregate of 375,000 shares of
Common Stock (the "Selling Shareholder Shares"). The Company Shares and the
Selling Shareholder Shares are herein called the "Firm Shares". In addition,
to cover over-allotments in connection with the sale of the Firm Shares, the
Company proposes to grant to the Underwriters an option to purchase up to an
additional 165,000 shares (the "Option Shares") of Common Stock. The Firm
Shares and any Option Shares purchase pursuant to this Purchase Contract are
herein called the "Stock".
The Company and each of the Selling Shareholders severally hereby
confirm their agreement contained herein with respect to the purchase of
Stock by you and the Underwriters. You represent and warrant that you are
acting as the representative (the "Representative") of the Underwriters and
that you have been authorized by each of the other Underwriters to enter into
this Agreement on its behalf and to act for it in the manner herein provided.
Prior to the purchase and public offering of the Stock by the
Representative, the Company and the Representative shall enter into an
agreement substantially in the form of Exhibit A hereto (the "Pricing
Agreement"). The Pricing Agreement may take the form of an exchange of any
standard form of written telecommunication between the Company and the
Underwriters and shall specify such applicable information as is indicated in
Exhibit A hereto. The offering of the Stock will be governed by this Purchase
Contract, as supplemented by the Pricing Agreement. From and after the date
of the execution and delivery of the Pricing Agreement, this Agreement shall
be deemed to incorporate the Pricing Agreement.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (No. [ ] and a related
preliminary prospectus for the registration of the Stock under the Securities
Act of 1933 (the "1933 Act") and has filed such amendments thereto, if any,
and such amended preliminary prospectuses as may have been required to the
date hereof, and will file such additional amendments thereto and such
amended prospectuses as may hereafter be required. Such registration
statement (as amended, if applicable) and the prospectus constituting a part
thereof (including, in each case, the information, if any, deemed to be part
thereof pursuant to Rule 430A(b) of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations"), as from time to
time amended or supplemented pursuant to the 1933 Act, are hereinafter
referred to as the "Registration
Statement" and the "Prospectus", respectively, except that if any revised
prospectus shall be provided to the Underwriters by the Company for use in
connection with the offering of the Stock which differs from the Prospectus
on file at the Commission at the time the Registration Statement becomes
effective (whether or not such revised prospectus is required to be filed by
the Company pursuant to Rule 424(b) of the 1933 Act 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.
The Company understands that you propose to make a public offering of
the Stock as soon as you deem advisable after the Registration Statement
becomes effective and the Pricing Agreement has been executed and delivered.
1. REPRESENTATIONS AND WARRANTIES. (I) The Company represents and
warrants to the Underwriters as of the date hereof and as of the date of the
Pricing Agreement as follows:
(a) As of the above times and at the time the Registration Statement
becomes effective, the Registration Statement will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations
and will not 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. The Prospectus, (unless the term
"Prospectus" refers to a prospectus which has been provided to the
Underwriters by the Company for use in connection with the offering of the
Stock which differs from the Prospectus on file at the Commission at the time
the Registration Statement becomes effective, in which case at the time it is
first provided to the Underwriters for such use) and at Closing Dates as
herein defined, will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the representations and warranties in
this subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in conformity
with information furnished to the Company in writing by the Underwriters
expressly for use in the Registration Statement or Prospectus.
(b) The Registration Statement has become effective under the 1933
Act.
(c) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus, at
the time of the filing thereof, did not contain 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; except that the
foregoing shall not apply to statements in, or omissions from, any
Preliminary Prospectus which are based upon and conform to written
information furnished to the Company by you or any Underwriter through you
specifically for use in the preparation thereof.
(d) The financial statements of the Company, together with the
related schedules and notes as set forth, or incorporated by reference, in
the Registration Statement and Prospectus, or in any amendment thereof or
supplement thereto, do and will fairly present the financial condition and
results of operations and changes in financial condition of the Company at
the respective dates or for the respective periods to which they apply; such
financial statements and schedules (including the related notes) have been
and will be prepared in accordance with generally accepted principles of
accounting consistently applied throughout the periods concerned; and BDO
Seidman & Co., who have certified or shall certify certain of the financial
statements and schedules and who shall have performed a limited review on
certain of the interim financial statements filed or to be filed with the
Commission as parts of the Registration Statement and Prospectus, are
independent public accountants as required by the Act and Regulations.
-2-
(e) The Company has an authorized and outstanding capitalization as
set forth in the Prospectus; all of the outstanding shares of Common Stock,
including the Selling Shareholder Shares, [and preferred stock of the Company]
have been duly and validly authorized and issued, are fully paid and
nonassessable, and conform to the description thereof contained in the
Prospectus; and the Stock, when issued, will be registered under the Act; no
sales of securities have been made by the Company in violation of the Act or
the Securities Exchange Act of 1934 (the "1934 Act"); and there are no
preemptive or other rights to subscribe for or purchase any Common Stock or,
except as set forth in the Prospectus, any options, warrants, agreements or
similar rights calling for the issuance by the Company of any of its
securities. Except as set forth in the Registration Statement and the
Prospectus, there is no restriction upon the voting or transfer of any shares
of Stock pursuant to the Company's articles of incorporation, by-laws or any
agreement or other instrument to which the Company or any subsidiary is a
party. Neither the filing of the Registration Statement nor the offering or
sale of the Stock as contemplated in this Agreement gives rise to any rights,
other than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock.
(f) The Stock has been duly authorized and upon delivery and payment
therefore as contemplated herein, will be duly and validly issued, fully paid
and nonassessable.
(g) The Stock conforms to the description thereof in the Prospectus.
(h) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, and prior to the delivery of
the Stock hereunder (a) the Company has not incurred nor contemplates it will
have incurred any material liabilities or obligations, direct or contingent,
nor entered into any material transaction not in the ordinary course of
business and (b) there has not been and there is not contemplated any
material change in the Common Stock, preferred stock or long term
indebtedness of the Company or any material adverse change in the general
affairs, capitalization, financial position, results of operations or net
worth of the Company, in each case otherwise than as indicated or
contemplated in the Registration Statement and Prospectus or any supplement
or amendment thereto.
(i) Each of the Company and its material subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation with full corporate power
to own and hold its properties and to conduct its business as described in
the Prospectus and is duly registered or qualified to conduct business and
holds all material licenses in each jurisdiction or place in which its
ownership of property or its conduct of business legally requires such
licenses, registration or qualification and its said ownership of property
and conduct of its business is in compliance in all material respects with
all laws, ordinances and regulations applicable thereto.
(j) The Company has no significant subsidiaries, other than as set
forth in the Registration Statement.
(k) This Agreement has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding agreement of the Company,
enforceable in accordance with its terms with respect to the Company, except
as enforceability of the indemnification provisions may be limited under
federal securities laws and except to the extent enforceability may be
limited by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and by general equitable principles; and the
performance of this Agreement and the consummation of the transactions
contemplated hereby will not conflict with or result in any breach or
violation of any of the terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, note agreement or
other agreement or instrument to which the Company is a party or by which it
is bound or to which any of its property is subject, nor will it conflict
with or result in any breach or violation of any of the terms or provisions
of, or constitute a
-3-
default under the Company's articles of incorporation, as amended, or
by-laws, or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its respective
activities or properties; and no consent, approval, authorization or order of
any court or governmental agency is required for the consummation of the
transactions contemplated hereby, or thereby, except such as may be required
under the Act or state securities or Blue Sky laws.
(l) Except as set forth in the Registration Statement or Prospectus,
the Company is not (i) in default in the performance of any obligations,
agreements or conditions contained in any material contract to which it is a
party, including, without limitation, any instruments evidencing
indebtedness, (ii) a party to any contract or agreement or subject to any
charter or other corporate restriction materially adversely affecting its
business, financial condition, property or assets, or (iii) a party to, or to
the knowledge of the Company threatened by, any material legal proceedings or
governmental action which might result in a material adverse change in the
business operations, property, assets, or in the condition, financial or
otherwise, of the Company. All material operations of the Company have been
duly and validly authorized and approved by all Federal and state regulatory
authorities having jurisdiction thereof to the extent that such authorization
or approval is legally required and the material franchises, licenses,
easements, consents and permits which may be held by the Company are in all
material respects adequate and sufficient for the conduct of its business and
are free of burdensome restrictions, except as set forth in the Registration
Statement or Prospectus.
(m) Except as set forth in the Registration Statement or Prospectus,
the Company has not received any material notice of infringement of, or
conflict with asserted rights of others with respect to, any patent, patent
rights, inventions, trademarks, trade names or copyrights.
(n) The Company has filed all federal, state, local and foreign tax
returns which are required to be filed, and has paid all taxes shown on such
returns and on all assessments received to the extent that such taxes have
become due. All taxes with respect to which the Company is obligated have
been paid or adequate accruals have been set up to cover any such unpaid
taxes.
(o) The Company has good and marketable title in fee simple to all
material real property described in the Prospectus as being owned by it, free
and clear of all liens, encumbrances and defects, other than as reflected in
the Registration Statement, except such as are not material and do not
interfere with the use made and proposed to be made thereof by the Company;
and the material properties referred to in the Prospectus as held under lease
by the Company are held under valid and enforceable leases with such
exceptions as do not materially interfere with the conduct of its business.
(p) There are no contracts or other documents to which the Company
is a party which are required to be described or incorporated in the
Registration Statement or Prospectus or to be filed with the Commission, as
required by the Act or Regulations, as exhibits to the Registration Statement
which have not been so described or filed as required.
(q) The Company knows of no outstanding claims for services in the
nature of a finder's or origination fee with respect to the sale of the Stock
hereunder resulting from its acts for which the Underwriters may be
responsible except as disclosed in the Prospectus.
(r) Except as described in the Prospectus, there is no material
suit, action or proceeding to which the Company is a party, or to which the
property of the Company is subject, pending before or brought by a court or
governmental agency or body nor is any such action, suit or proceeding to the
knowledge of the Company threatened which would result in any material
adverse change in the business, financial position or results of operation,
presently or prospectively, or which would materially adversely
-4-
affect the properties or assets of the Company.
(s) Neither the Company nor any subsidiary has, directly or
indirectly, at any time during the past five years (i) made any unlawful
contribution to any candidate for political office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
federal, state or foreign 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. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply, in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(II) Each Selling Shareholder, for such Selling Shareholder only and not
for any other Selling Shareholder, represents and warrants to, and agrees
with, each Underwriter that:
(a) Such Selling Shareholder has full right, power and authority to
enter into this Agreement, the Power of Attorney (the "Power of Attorney")
and the Custody Agreement (the "Custody Agreement") hereinafter referred to,
and at the date hereof such Selling Shareholder has, and at the time of
delivery of the Selling Shareholder Shares to the Underwriters hereunder such
Selling Shareholder will have, full right, power and authority to sell and
deliver the Selling Shareholder Shares to be sold by such Selling Shareholder
to the Underwriters, and at the date hereof such Selling Shareholder is, and
at the time of delivery of the Selling Shareholder Shares to the Underwriters
such Selling Shareholder will be, the lawful owner of and has, and will have,
marketable title to such shares free and clear of any claims, liens,
encumbrances or security interests.
(b) The performance of this Agreement, the Power of Attorney and the
Custody Agreement, and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach of, or
default under, any agreement, indenture or other instrument to which such
Selling Shareholder is a party or by which such Selling Shareholder is bound,
or any law, rule, administrative regulation or court decree applicable to
such Selling Shareholder. This Agreement, the Power of Attorney and the
Custody Agreement have been validly executed and delivered by such Selling
Shareholder and each constitutes the valid and binding agreement of such
Selling Shareholder.
(c) When the Registration Statement becomes effective, the
Registration Statement and Prospectus, and any amendments thereof and
supplements thereto at the time they become effective, will not contain an
untrue statement of a material fact regarding such Selling Share holder or
omit to state a material fact regarding such Selling Shareholder required to
be stated therein or necessary in order to make the statements therein
regarding such Selling Shareholder not misleading, and at such time such
Selling Shareholder shall be unaware of any material misstatement in or
omission from the Registration Statement and Prospectus or of any material
adverse information regarding the business or operations of the Company or
its subsidiaries which is not set forth in the Registration Statement and
Prospectus.
(d) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to cause or result in, or which
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock to
facilitate the sale or resale of the Stock hereby.
(e) Certificates in negotiable form representing all of the Selling
Shareholder Shares to be sold by such Selling Shareholders have been placed
in custody under a Custody Agreement, in the form heretofore furnished to
you, duly executed and delivered by such Selling Shareholders to David H.
Cote as custodian (the "Custodian"), and such Selling Shareholders have duly
executed and delivered a Power of Attorney, in the form heretofore furnished
to you, appointing David H. Cote or [ ] and
-5-
each of them as such Selling Shareholders' attorney-in-fact (the
"Attorney-in-Fact") with authority to execute and deliver this Agreement on
behalf of such Selling Shareholders, to authorize the delivery of the Selling
Shareholders Shares to be sold by such Selling Shareholders hereunder and
otherwise to act on behalf of such Selling Shareholders in connection with
the transactions contemplated by this Agreement and the Custody Agreement.
(f) The Selling Shareholders Shares represented by the certificates
held in custody for such Selling Shareholders under the Custody Agreement are
subject to the interests of the Underwriters hereunder, and the arrangements
made by such Selling Shareholders for such Selling Shareholders for such
custody, as well as the appointment by such Selling Shareholders of the
Attorney-in-Fact, are, to that extent, irrevocable. Each Selling Shareholder
specifically agrees that the obligations of such Selling Shareholders
hereunder shall not be terminated by operation of law, whether by the death
or incapacity of any such Selling Shareholders, or by the occurrence of any
other event. If any individual Selling Shareholder should die or become
incapacitated, or if any other such event should occur, before the delivery
of the Selling Shareholder's Shares hereunder, certificates representing the
Selling Shareholder's Shares shall be delivered by or on behalf of such
Selling Shareholder in accordance with the terms and conditions of this
Agreement and of the Custody Agreement, and the actions taken by the
Attorney-in-Fact pursuant to the Power of Attorney shall be as valid as if
such death, incapacity or other event had not occurred. whether or not the
Custodian or the Attorney-in-Fact shall have received notice of such death,
incapacity or other event.
2. PURCHASE AND SALE OF THE SHARES. (a) On the basis of the
representations and warranties herein contained but subject to the terms and
conditions herein set forth, the Company, hereby agrees to issue and sell the
Company Shares to the Underwriters and each of the Underwriters, severally
and not jointly, hereby agrees to purchase from the Company and the Selling
Shareholders the number of Firm Shares set forth opposite such Underwriter's
name in Schedule I hereto, at the purchase price per share set forth in the
Pricing Agreement. Each of the Selling Shareholders, agrees, severally and
not jointly, to sell the number of Selling Shareholder Shares set forth
opposite his name in Schedule II hereto, to each of the Underwriters set
forth in Schedule I hereto, severally and not jointly, in the proportion that
the number of shares of Common Stock opposite the name of each Underwriter on
Schedule I bears to the total number of shares of Common Stock to be
purchased by the Underwriters as set forth on Schedule I hereto. The
Underwriters agree to offer the Firm Shares to the public as set forth in the
Prospectus.
(b) In addition, the Company hereby grants to the Representative an
option to purchase from the Company, solely for the purpose of covering
over-allotments in the sale of Firm Shares, all or any portion of the Option
Shares at the purchase price per Share set forth in the Pricing Agreement for
30 days after the date the Registration Statement becomes effective (or, if
the Company has elected to rely upon Rule 430A, 30 days after execution of
the Pricing Agreement), which option may be exercised in whole or part from
time to time. Option Shares shall be purchased, severally and not jointly,
for the accounts of the several Underwriters in proportion to the number of
Firm Shares set forth opposite such Underwriter's name in Schedule I hereto,
except that the respective purchase obligations of each Underwriter may be
adjusted by the Representative so that no Underwriter shall be obligated to
purchase Option Shares other than in 100 Share amounts.
(c) (i) If the Company has elected not to rely upon Rule 430A under
the 1933 Act Regulations, the public offering price and the purchase price
per share to be paid by the Underwriters for the Stock have been or will be
determined and set forth in the Pricing Agreement, and an amendment to the
Registration Statement and the Prospectus will be filed before the
Registration Statement becomes effective.
-6-
(ii) If the Company has elected to rely upon Rule 430A under the
1933 Act Regulations, the purchase price per share to be paid by the
Underwriter for the Stock shall be an amount equal to the public offering
price, less an amount per share to be determined by agreement between the
Representative and the Company. The public offering price per share of the
Stock shall be a fixed price to be determined by agreement between the
Representative, the Company and the Selling Shareholders. The public offering
price and the purchase price, when so determined, shall be set forth in the
Pricing Agreement. In the event that such prices have not been agreed upon
and the Pricing Agreement has not been executed and delivered by all parties
thereto by the close of business on the fourth business day following the
date of this Agreement, this Agreement shall terminate forthwith, without
liability of any party to any other party, unless otherwise agreed to by the
Company, the Selling Shareholders and the Representative.
(d) It is understood that, in making this Agreement, the
Underwriters are contracting severally and not jointly or jointly and
severally, and that their several agreements to purchase Firm Shares on the
basis of the representations, warranties and agreements of the Company herein
contained shall be several and not joint and shall apply only to the
respective number of Firm Shares set forth opposite their respective names in
Schedule I hereto, except as provided in Section 8 hereof.
3. PAYMENT AND DELIVERY. (a) Payment of the purchase price for, and
delivery of certificates for, the Stock shall be made at the office of Sharpe
Capital, Inc., 120 Broadway, New York, New York 10271, or at such other place
as shall be agreed upon by you and the Company at 10:00 A.M. on the fifth
business day following the date the Registration Statement becomes effective
(or, if the Company has elected to rely upon Rule 430A, at 10:00 A.M. on the
fifth business day following execution of the Pricing Agreement), or such
other time not later than ten business days after such date as shall be
agreed upon by you and the Company. In addition, in the event that any or all
of the Option Shares are purchased by the Underwriter, payment of the
purchase price for, and delivery of certificates for, such Option Shares
shall be made at the above mentioned office of Sharpe Capital, Inc. or at
such other place as shall be agreed upon by you and the Company, on each
Delivery Date as specified in the notice from you to the Company. Payment
shall be made to the Company and the Selling Shareholders by certified or
official bank check or checks drawn in New York Clearing House funds or
similar next day funds payable to the order of the Company and the Selling
Shareholders against delivery to you of certificates for the Stock to be
purchased by you. Certificates for the Firm Shares and the Option Shares
shall be in such denominations and registered in such names as the case may
be.
(b) The certificates for Firm Shares shall be made available to you
at the office of Sharpe Capital, Inc. for inspection, checking and packaging
at least one full business day in advance of the Closing Date and shall be
delivered to you on the Closing Date for the respective accounts of the
several Underwriters against payment of the purchase price.
(c) On the Closing Date, at the time of the delivery of the Firm
Shares and payment therefor, the Company shall pay a maximum sum equal to
three (3%) percent of the gross proceeds from the public offering of the Firm
Shares, as a non-accountable expense allowance to the Representative, by
certified or official bank check to the order of Sharpe Capital, Inc., for
the expenses (excluding fees and expenses of its counsel for other than blue
sky purposes) incurred by the Representative incidental to the public
offering, as to which the Representative shall not be required to account.
4. COVENANTS. The Company covenants and agrees with each Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement and any subsequent amendments thereto to become effective as
promptly as possible and will notify you, promptly
-7-
after it shall receive notice thereof, of the time when the Registration
Statement or any subsequent amendment to the Registration Statement has
become effective or any supplement to the Prospectus has been filed; it will
notify you promptly of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; it will prepare and file with the Commission, promptly upon your
request, any amendments or supplements to the Registration Statement or
Prospectus which, in your reasonable opinion may be necessary or advisable in
connection with the distribution of the Stock by the Underwriters; and it
will file no amendment or supplement to the Registration Statement or
Prospectus, or any document incorporated in the Prospectus by reference, to
which you shall reasonably object by notice to the Company after having been
furnished a copy within a reasonable time prior to the filing.
(b) The Company will advise you, promptly after it shall receive or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of the Registration Statement or the initiation
or threatening of any proceeding for that purpose and it will use promptly
its best efforts to prevent the issuance of any stop order or to obtain the
withdrawal thereof if such a stop order should be issued.
(c) Within the time during which a Prospectus relating to the Stock
is required to be delivered under the Act, the Company will comply with all
requirements imposed upon it by the Act, as now and hereafter amended, and by
the Regulations as from time to time in force, so far as necessary to permit
the continuance of sales of, or, dealings in the Stock as contemplated by the
provisions hereof and the Prospectus. If during such period any event occurs
as a result of which the Prospectus, as then amended or supplemented, would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances then existing, not misleading, or if during such period it is
necessary to amend or supplement the Prospectus to comply with the Act, the
Company will promptly notify you and will amend or supplement the Prospectus
(at the expense of the Company) so as to correct such statement or omission
or effect such compliance.
(d) The Company will use its best efforts to qualify the Stock for
sale under the securities laws of such jurisdictions as you reasonably
designate and to continue such qualifications in effect so long as required
for the distribution of the Stock, provided that the Company shall not be
required in connection therewith to qualify as a foreign corporation or to
execute a general consent to service of process in any state.
(e) The Company will furnish to the Underwriters, as soon as
available and without charge, copies of the Registration Statement (three of
which will be signed and will include all exhibits and conformed copies in
such reasonable quantities as you may request), each Preliminary Prospectus,
the Prospectus, and all amendments and 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.
(f) The Company will make generally available to its security
holders and deliver to you as soon as practicable but in any event not later
than 15 months after the end of the Company's current fiscal quarter, an
earnings statement (which need not be audited) covering a twelve month period
beginning after the effective date of the Registration Statement conforming
to the requirements of Section 11 (a) of the Act.
(g) The Company will apply the net proceeds from the sale of the
Stock for the purposes set forth under "Use of Proceeds" in the Prospectus.
-8-
(h) The Company will not, during the 120 days following the
effective date of the Registration Statement, except with the prior consent
of the Representative, sell or otherwise dispose of any shares of Common
Stock or sell or grant options, rights of warrants with respect to the
Company's Common Stock, otherwise than in accordance with this Agreement or
in connection with the exercise of outstanding stock options or warrants or
as contemplated in the Prospectus.
(i) On or before the effective date of the Registration Statement,
the Company shall have caused to be duly executed and shall have in its
possession and make available to the Representative for review, legally
binding and enforceable agreements pursuant to which the officers and
directors shall have agreed that for a period of not less than eighteen (18)
months following such effective date, no such person will sell securities of
the Company whether pursuant to Rule 144 or otherwise, without the prior
written consent of Sharpe Capital, Inc.
(j) Each of the Selling Shareholders covenants and agrees, severally
and not jointly, that such Selling Shareholder will not, during the 120 days
following the effective date of the Registration Statement, except with the
prior written consent of the Representative, offer for sale, sell, distribute
or otherwise dispose of any shares of Common Stock, otherwise than in
accordance with this Agreement or as contemplated in the Prospectus.
(k) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A of the 1933 Act Regulations, then immediately following the
execution of the Pricing Agreement, the Company will prepare, and file or
transmit for filing with the Commission in accordance with such Rule 430A and
Rule 424(b) of the 1933 Act Regulations, copies of an amended Prospectus, or,
if required by such Rule 430A, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted.
(1) For a period of five years from the effective date of the
Registration Statement, the Company will provide you with copies of all
documents made available to security holders generally, and at the same time
as filed, copies of all filings made with the Commission.
5. PAYMENT OF EXPENSES. The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is prevented from
becoming effective under the provisions of Section 10(a) hereof or is
terminated, will pay all costs and expenses incident to the performance of
the obligations of the Company hereunder, including, without limitation, the
fees and expenses of the Company's accountants and counsel, all costs
incident to the preparation, printing, reproducing and filing under the Act
of the Registration Statement (including all exhibits thereto),
post-effective amendments, each Preliminary Prospectus, the Prospectus and
all amendments and supplements thereto, the fee payable to the NASD, all fees
and disbursements incurred by the Company and by the Underwriters in
connection with the qualification of the Stock under the laws of various
jurisdictions as provided in Section 6(e) hereof (including the legal fees
and disbursements, of counsel for the Underwriters in connection with
assisting the Company's counsel in such qualification, provided such legal
fees shall be at regular hourly rates for the persons performing actual
services in such matters and in no event more than $25,000, and which such
fees plus disbursements (including filing fees) shall be paid by the Company
in addition to any payments under Section 3(c) hereof), the cost of
furnishing to the Underwriters copies of the Registration Statement, each
Preliminary Prospectus, the Prospectus and each amendment and supplement
thereto, in such numbers as you may reasonably request, the cost of printing
the Agreement Among Underwriters, and exhibits thereto, and the costs and
charges of any transfer agent or registrar and the cost of preparing,
engraving, printing and delivering the certificates for the Stock, including
any original issue taxes payable in connection therewith. If the sale of the
Stock provided for herein is not consummated by reason of action by the
Company pursuant to Section 10(a) hereof which prevents this Agreement from
becoming effective,
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or by reason of any failure, refusal or inability on the part of the Company
to perform any agreement on its part to be performed, or because any other
condition of the Underwriters' obligations hereunder required to be fulfilled
by the Company is not fulfilled, or by reason of any event set forth in
subparagraph 10(b) (i) or 10(b) (vi) hereof, the Company will reimburse the
several Underwriters for all reasonable out-of-pocket disbursements
(including fees and disbursements of counsel) incurred by the Underwriters in
connection with their investigation, marketing and preparing to market the
Stock or in contemplation of performing their obligations hereunder. The
Company shall not in any event be liable to any of the Underwriters for loss
of anticipated profits from the transactions covered by this Agreement.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock as provided herein,
shall be subject to the accuracy and compliance and the continuing accuracy
and compliance in all material respects of, and with, the representations and
warranties of the Company as of the date hereof and as of both Closing Dates,
to the accuracy in all material respects of statements of officers of the
Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective and on
the Closing Date no stop order shall have been issued or proceedings therefor
initiated or, to the knowledge of the Company or any Underwriter, threatened
by the Commission, and any request by 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 counsel
for the Underwriters, and no Underwriter shall have discovered and advised
the Company prior to such Closing Date that the Registration Statement or the
Prospectus, or any amendment or supplement thereto, contains an untrue
statement of a fact which, in the opinion of counsel for the Underwriters, is
material, or omits to state a fact which, in the opinion of such counsel is
material and is required to be stated therein, or is necessary to make the
statements therein not misleading. If the Company has elected to rely upon
Rule 430A of the 1933 Act Regulations, the price of the Stock and any price
related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the 1933 Act Regulations
within the prescribed time period, and prior to Closing Time the Company
shall have provided evidence satisfactory to the Representative of such
timely filing, or a post effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the 1933 Act Regulations.
(b) On the Closing Dates you shall have received the favorable
opinion of Messrs. Swanson and Meepos, counsel for the Company, dated the
Closing Date, addressed to the Underwriters and in form, scope and substance
satisfactory to counsel for the Underwriters, with reproduced copies or
signed counterparts thereof for each of the Underwriters, to the effect that:
(i) Each of the Company and its subsidiaries (the
"Subsidiaries") is a corporation validly existing and in good standing under
the laws of the jurisdiction of its incorporation, has full corporate power
and authority under such laws to own its properties and to conduct its
business as described in the Prospectus and is duly qualified to do business
as a foreign corporation and is in good standing in such jurisdictions as the
Representative may request.
(ii) the Company has an authorized and outstanding
capitalization as set forth under the caption "Capitalization" in the
Prospectus; and the Common Stock [and preferred stock] conform in all
material respects as to legal matters to the description thereof contained in
the Prospectus. The Company has all requisite corporate power and authority
to issue, sell and deliver the Company Shares and Option Shares in accordance
with and upon the terms and conditions set forth in this Agreement and in the
Registration Statement and Prospectus, and all corporate action required to
be taken by the Company for
- 10 -
the due and proper authorization, issuance, sale and delivery of the Company
Shares has been validly and sufficiently taken. The Company Shares, upon
issuance and delivery and payment therefor in the manner herein described,
will be, duly authorized, validly issued, fully paid and nonassessable. The
Selling Shareholder Shares are duly authorized, validly issued, fully paid
and non-assessable. The terms and provisions of the capital stock of the
Company conform in all material respects to the description thereof contained
under the caption "Description of Capital Stock" in the Prospectus; and
except as set forth in the Registration Statement and the Prospectus and
except as previously disclosed to the Representative in writing, there are no
preemptive or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of Stock pursuant to
the Company's certificate of incorporation, or by-laws.
(iii) the Registration Statement has become effective under
the Act and to the best knowledge of such counsel no stop ordering suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act;
(iv) this Agreement and the execution and performance by the
Company has been duly and validly authorized, executed and delivered by the
Company;
(v) no consent, approval, authorization or order of any
court or governmental agency or body is required in connection with the
consummation of the transactions contemplated by this Agreement, except such
as may be required under the Act or state or foreign securities or Blue Sky
laws;
(vi) the Registration Statement and the Prospectus and any
amendments or supplements thereto (other than the financial statements and
other financial and statistical data included therein, as to which no
opinion, need be rendered) as of their respective dates comply as to form in
all material respects with the requirements of the Act and the Rules and
Regulations thereunder;
(vii) except as set forth in the Registration Statement and
the Prospectus and except as previously disclosed to the Representative in
writing, there are no preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the voting or transfer of, any shares of
Stock pursuant to any agreement or other instrument known to such counsel to
which the Company or any subsidiary is a party; and to the best of such
counsel's knowledge, neither the filing of the Registration Statement nor the
offering or sale of the Stock as contemplated by this Agreement gives rise to
any registration rights or other rights, other than those which have been
waived or satisfied for or relating to the registration of any shares of
Common Stock;
(viii) to the best of such counsel's knowledge, there are no
contracts or other documents required to be filed as exhibits to the
Registration Statement other than those filed as exhibits thereto, and, there
are no legal or governmental proceedings pending or threatened before or by
any court or governmental agency or body against the Company of a character
required to be disclosed in the Registration Statement and the Prospectus
which have not been so disclosed;
(ix) the statements in the Prospectus under "Capitalization",
"Business", "Properties" and "Description of Capital Stock" insofar as they
are descriptions of contracts or other documents filed as exhibits to the
Registration Statement, have been prepared or reviewed by such counsel and,
to the best of such counsel's knowledge, are accurate and correct in all
material respects;
(c) On the Closing Dates, you shall have received from Snow Becker
Krauss P.C., counsel for the several Underwriters, such opinion or opinions
with respect to the incorporation of the Company,
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the Registration Statement, the Prospectus and other related matters as you
reasonably may request and such counsel, shall have received such papers and
information as it may reasonably request to enable them to pass upon such
matters. In addition, such counsel shall also state that they have
participated in conferences with representatives of the Underwriters and with
representatives of the Company and its accountants concerning the
Registration Statement and the Prospectus and have considered the matters
required to be stated therein and the statements contained therein, although
they have not independently verified the accuracy, completeness or fairness
of such statements. Such counsel shall also state that based upon and subject
to the foregoing, nothing has come to their attention to cause them to
believe that the Registration Statement, at its issue date, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, at the time it was first filed with the
Commission pursuant to Rule 424(b) under the 1933 Act or as of the date of
their opinion contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading (it being understood that they have not been
requested to and do not make any comment with respect to the financial
statements, schedules and other financial and statistical information
contained in the Registration Statement or the Prospectus).
(d) Prior to either Closing Date (i) there shall have been no
material adverse change in the condition of the Company or its business or
business activities, financial or otherwise, from the date as of which such
condition is set forth in the Registration Statement and Prospectus, except
as referred to therein; (ii) there shall have been no material transaction,
not in the ordinary course of business, entered into by the Company from the
date as of which the financial condition of the Company is set forth in the
Registration Statement and Prospectus, other than transactions referred to or
contemplated therein or to which you have given your written consent; (iii)
the Company shall not be in default under any provisions of any instruments
relating to any outstanding indebtedness; (iv) no material amount of the
assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (v) no action, suit or
proceeding, at law or in equity, shall have been pending or to the Company's
knowledge threatened against the Company or affecting its properties or
business before or by any court or federal or state commission, board or
other administrative agency wherein an unfavorable decision, ruling or
finding would materially adversely affect the business, operations, income or
financial condition of the Company, except as set forth in the Registration
Statement and Prospectus; and (vi) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated or threatened
by the Commission.
(e) On the Closing Dates the Representative shall have received a
certificate of the President, Chairman of the Board and Treasurer of the
Company, dated the Closing Date, to the effect that the conditions set forth
in subsection (d) above have been satisfied, as to the accuracy as of the
Closing Date of the representations and warranties set forth in Section 1
hereof, and that the Company has performed all its obligations and satisfied
all conditions on its part to be performed or satisfied at or prior to the
Closing Date.
(f) At the time this Agreement is executed, and on the Closing
Dates, the Representative shall have received letters, addressed to the
Underwriters in form, scope and substance satisfactory to the Representative
in all respects (including the non-material nature of the changes or
decreases, if any, referred to in clause (iii) below) with reproduced copies
of signed counterparts thereof for each of the Underwriters, from
[ Accountants ] dated, respectively, as of the date of this Agreement and as
of the Closing Date:
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Act and the
applicable published regulations thereunder, including that
-12-
they are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, and stating in effect that the answer to Item 24 of Part II of
the Registration Statement is correct insofar as it relates to it:
(ii) stating in effect that in its opinion the financial
statements and schedules in the Registration Statement and Prospectus
examined by them comply as to form in all material respects with the
applicable accounting requirements of the Act and the regulations thereunder
with respect to registration statements on Form S-1;
(iii) stating that, on the basis of a limited review (but not
an examination made in accordance with generally accepted auditing standards)
which includes a reading of the Interim Results of Operations included in the
Registration Statement for the [ ] period ended
[ ] and the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of meetings of the stockholders and board of directors of
the Company, consultation with officers and other employees of the Company
responsible for financial and accounting matters and inquiries, including a
comparison of amounts contained in such Interim Results of Operations with
amounts contained in the general accounting records (including work sheets)
of the Company, nothing has come to their attention which would lead them to
believe that (A) the unaudited Interim Results of Operations of the Company
included in the Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the regulations
thereunder or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that
of the audited financial statements of the Company included in the Prospectus
(B) at a specified date not more than five business days prior to the date of
such letter, there was any change in the Common Stock, [preferred stock or long
term debt] of the Company, in each case as compared with amounts shown on the
[ 19_] consolidated balance sheets other than as set forth in or contemplated by
the Prospectus, or, if there was any change or decrease, setting forth the
amount of such change or decrease, or (C) during the period from [, 19 to a
specified date not more than five business days prior to the date of such
letter, there was any decrease in revenues, or in earnings before income
taxes, and extraordinary items or in the total or per share amounts of net
earnings or loss of the Company, in each case as compared with the
corresponding period beginning other than as set forth in or contemplated by
the Prospectus, or, if there was any decrease, setting forth the amount of
such decrease; and
(iv) stating that they have performed such review and made
such comparisons as shall be reasonably requested by and shall be
satisfactory in form and substance, to Snow Becker Krauss P.C., counsel for
the Underwriters.
In each case to the extent that such statements and information may be
derived from the general accounting records (including work sheets) of the
Company, and excluding any questions requiring an interpretation by legal
counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter, and found them to be in agreement.
(g) The certificates for the Stock comprising the Firm Shares duly
registered shall have been duly tendered to the Representative for the
accounts of the several Underwriters.
(h) No order suspending the sale of the Firm Shares prior to the
Closing Date in any jurisdiction designated by the Representative shall have
been issued on or before the Closing Dates and no proceedings for that
purpose shall have been instituted or, to the Representative's knowledge or
that of the
-13-
Company, shall be contemplated.
(i) (i) The Company shall deliver to Sharpe Capital, Inc. the
number of warrants of the Company exercisable for four years commencing one
year from the date of the closing to purchase at one hundred twenty (120%)
percent of the offered price to the public Common Stock equal to ten (10%)
percent of the total number of shares sold to the public at a price of $.001
per warrant.
(ii) Pay to Sharpe Capital, Inc. the expenses of the
Underwriters, for which it shall not be required to account, in an amount
equal to three (3%) percent of the gross sales price of the total number of
shares of the Company's Common Stock sold to the public by the Underwriters.
(iii) Execute an agreement in form and substance satisfactory
to Sharpe Capital, Inc. and its counsel, granting Sharpe Capital, Inc. an
irrevocable right of first refusal executed by the Company and its existing
officers and directors for any public sale or financing by the Company or the
sale of securities by such officers and directors in the three (3) years
following the closing.
Any certificate signed by an officer of the Company and delivered to you
or to counsel for the Underwriters shall be deemed a representation and
warranty by the Company to the Underwriters as to the statements made
therein. If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date is not so fulfilled, the
Representative may on behalf of the several Underwriters terminate this
Agreement or, if it so elects, waive any such conditions which have not been
fulfilled or extend the time for their fulfillment.
7. INDEMNIFICATION. (a) Each Underwriter, Selling Shareholder and the
Company severally agree to indemnify and hold harmless each other from and
against any and all losses, claims, damages and liabilities, joint or
several, to which any such person may become subject under the Act or
otherwise, in so far as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of, or, are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, including the information deemed to be a
part of the Registration Statement pursuant to Rule 430A(b) of the 1933 Act
Regulations, if applicable, or arise out of or based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and to
reimburse each other for any legal or other expenses reasonably incurred in
connection with investigating or defending any such loss, claim, damage,
liability or action, but in each case to the extent, and only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any such amendment or supplement, is the responsibility, as
hereinafter set forth, of the party from whom such indemnification is sought;
provided, however, that the indemnity agreement contained in this Section
with respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter (or of any person controlling such Underwriter) on account of
any such losses, claims, damages, liabilities, actions or expenses arising
from the sale of the Stock by such Underwriter to any person if a copy of the
Prospectus as amended or supplemented (if any amendment or supplements
thereto shall have been furnished to such Underwriter) shall not have been
given or sent to such person by or on behalf of such Underwriter with or
prior to the written confirmation of the sale involved. For the purposes of
this paragraph, the Company shall be responsible for all statements in and
omissions from the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, except that each
Underwriter and each Selling Shareholder shall be responsible for all
statements therein and omissions therefrom which were based upon information
furnished in writing to the Company by such Underwriter or by such Selling
Shareholder for use therein or in connection with the preparation thereof.
The indemnification by the Underwriters provided for by this Section shall
also inure to the benefit of the directors and officers of the Company and
each person, if any,
-14-
who controls the Company within the meaning of Section 15 of the Act. The
indemnification by the Company provided for by this paragraph shall also
inure to the benefit of each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act. These indemnity agreements will
be in addition to any liability which any such indemnitor may otherwise have.
(b) Promptly after receipt by a party indemnified under this Section
of notice of the commencement of any action, such indemnified party will, if
a claim based on such action is to be made against an indemnifying party
under this Section, notify the indemnifying party of the commencement of the
action, 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. In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
of the action, the indemnifying party will be entitled to participate in the
action and to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense of the action,
but such defense shall be conducted by counsel of good standing and
reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume such
defense and the retaining of such counsel, the indemnifying party shall not
be liable to the indemnified party under this Section for any legal or other
expenses subsequently incurred by the indemnified party in connection with
such defense, other than reasonable costs of investigation incurred with the
consent of the indemnifying party, which consent shall not be unreasonably
withheld.
(c) The indemnity agreements contained in this Section are intended
solely to define the rights to indemnification as between the Underwriters
and any person controlling any of them on the one hand, and the other parties
to this Agreement on the other, and nothing herein is intended to impair or
amend any other indemnification agreements which such other parties may have
among themselves. In the event that any of the indemnity agreements contained
in this Section are determined by a court of competent jurisdiction to be
unenforceable, and to the extent that the party who, but for such
determination, would have been indemnified hereunder is entitled to
contribution under the Act from the other parties to this Agreement, the
amount of contribution from each other party shall be proportionate to the
portion of the total proceeds of the offering received by such other party.
8. DEFAULT OF UNDERWRITERS. (a) If any Underwriter or Underwriters
default in its or their obligation to purchase the number of shares of the
Stock agreed to be purchased by such Underwriter or Underwriters hereunder,
and if the aggregate number of shares of the Stock which such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed 15%
of the Firm Shares, then, the other Underwriters shall be obligated severally
in proportion to their respective commitments hereunder to purchase the
Stock, including all Option Shares purchased pursuant to the over allotment
provisions, which such defaulting Underwriter or Underwriters agreed but
failed to purchase. If any Underwriter or Underwriters so default and the
aggregate number of shares of the Stock with respect to which such default or
defaults occur is more than 15% of the Firm Shares and arrangements
satisfactory to the Representative and the Company for the purchase of such
Firm Shares by other persons (who may include one or more of the
non-defaulting Underwriters including the Representative) are not made within
36 hours after such default, this Agreement will terminate without liability
on the part of the Representative, any non-defaulting Underwriter or the
Company, except for the expenses to be paid or reimbursed by the Company
pursuant to Section 5 and except for the provisions of Section 7 hereof. As
used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 8. Nothing herein shall
relieve a defaulting Underwriter from liability to the Company, the
Representative and the non-defaulting Underwriters for its default and such
liability will include, without limitation, all expenses reasonably incurred
by the Company and each Underwriter in connection with the proposed purchase
and sale of Stock.
(b) In the event that the Stock to which the default relates is to
be purchased by the
-15-
non-defaulting Underwriters, or is to be purchased by another party or
parties as aforesaid, the Representative or the Company shall have the right
to postpone the Closing Date for a reasonable period, but not in any event
exceeding seven 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 and arrangements, and the Company agrees to file
promptly any amendment to the Registration Statement or the Prospectus which,
in the opinion of counsel for the Underwriters, may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include any
party substituted under this Section 8 with like effect as if it had
originally been a party to this Agreement with respect to such Stock and the
purchase obligation of any Underwriter who has agreed, or is obligated under
this Section 8, to purchase any Stock which the defaulting Underwriter or
Underwriters had agreed to purchase will include such Stock in addition to
the Stock set opposite the name of such Underwriter in Schedule I hereto.
9. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date; and such representations, warranties and
agreements of the Underwriters and the Company, including the indemnity
agreements contained in Section 7 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any controlling person, or by or on behalf of the Company or
any controlling person, and shall survive (i) any termination of this
Agreement and (ii) delivery of the Stock to the several Underwriters and
payment therefor.
10. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF. (a) This
Agreement shall become effective (i) at 9:00 a.m. New York City Time, on the
first full business day following the day on which the Registration Statement
becomes effective or (ii) at the time of the initial public offering by the
Underwriters of the Firm Shares, whichever is earlier. The time of the
initial public offering, for the purpose of this Section 10, shall mean the
time, after the Registration Statement becomes effective, of the release by
the Representative for publication of the first newspaper advertisement which
is subsequently published relating to the Firm Shares or the time, after the
Registration Statement becomes effective, when the Firm Shares are first
released by the Representative for offering by the Underwriters or dealers by
wire, letter or telegram, whichever shall first occur. You or the Company may
prevent this Agreement from becoming effective without liability of any party
to any other party, except as noted below and in Section 5 hereof, by giving
the notice indicated below in this Section 10 before the time this Agreement
becomes effective.
(b) You shall have the right to terminate this Agreement at any time
prior to the Closing Date (i) in the event the Company shall have failed to
comply with any of the provisions of this Agreement to be performed by it, at
or prior to the Closing Date, or any of the representations, warranties,
covenants, agreements or conditions of or applicable to, the Company herein
contained shall not have been complied with or satisfied within the times
specified; or (ii) if any domestic or international event or act or
occurrence has materially disrupted, or in your opinion will in the immediate
future materially disrupt, securities markets; or (iii) if trading on the New
York Stock Exchange, Inc. shall have been suspended, or minimum or maximum
prices for trading shall have been fixed or maximum ranges for prices for
securities shall have been required, on such Exchange by the Exchange or by
order of the Commission or any other governmental authority having
jurisdiction, or (iv) if the United States shall become involved in a war or
major hostilities; or (v) if a banking moratorium has been declared by a
state or federal authority, or a moratorium in foreign exchange trading by
major international banks or persons has been declared; or (vi) if the
Company shall have sustained a material or substantial loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not said loss shall have been insured, in
your opinion, makes it inadvisable to proceed with the delivery of the Stock;
or if, based on facts arising after or first being called to your attention
on or subsequent to the date of this Agreement,
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there shall have been such change in the condition or prospects of the
Company as in your judgment would make it inadvisable to proceed with the
offering, sale and delivery of the Stock; or (vii) in your sole discretion,
acting in good faith, based on facts arising after or first being called to
your attention on or subsequent to the date of this Agreement, you believe no
favorable public market exists for the Stock.
(c) If you elect to prevent this Agreement from becoming effective
or to terminate this Agreement as provided for in this Section 10, the
Company shall be notified promptly by you by telephone or telegram confirmed
by letter. If the Company elects to prevent this Agreement from becoming
effective, you shall be notified promptly by the Company by telephone or
telegram, confirmed by letter.
(d) Notwithstanding any election hereunder or any termination of
this Agreement, and whether or not this Agreement is otherwise carried out,
the provisions of Section 7 hereof shall not be in any way affected by such
election or termination or failure to carry out the terms of this Agreement
or any part hereof.
11. NOTICES. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to any Underwriter,
shall be mailed, delivered or telegraphed and confirmed to Sharpe Capital,
Inc., 120 Broadway, New York, New York 10271, Attention: Capital Markets; and
if sent to the Company, shall be mailed, delivered or telegraphed and
confirmed to the Company at 1910 Orange Tree Lane, Redlands, CA 92375.
12. PARTIES. You represent that you are authorized to act on behalf of
the several Underwriters named in Schedule I hereto, and the Company shall be
entitled to act and rely on any request, notice, consent, waiver or agreement
purportedly given on behalf of the Underwriters when the same shall have been
given by you on such behalf. This Agreement shall inure solely to the benefit
of, and shall be binding upon, the several Underwriters, the Company and the
controlling persons, directors and officers referred to in Section 7 hereof,
and their respective successors, legal representatives and assigns, and no
other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained.
13. GOVERNING LAW. The validity and interpretation of this Agreement
shall be governed by and construed in accordance with the laws of the State
of New York.
14. EXECUTION BY COUNTERPARTS. This Agreement may be signed in various
counterparts which together will constitute one and the same instrument.
If the foregoing correctly sets forth the understanding between you and
the Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding contract among the parties
hereto.
Very truly yours,
YOUNG MINDS, INC.
By:
-----------------------------
Donald H. Cote
CHIEF EXECUTIVE OFFICER
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Accepted as of the date first above written on behalf of ourselves and the
other several Underwriters named in Schedule I hereto.
SHARPE CAPITAL, INC.
By:
----------------------------
Frank J. Lockwood
VICE-PRESIDENT
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YOUNG MINDS, INC.
SCHEDULE I
LIST OF UNDERWRITERS
PURCHASE AGREEMENT DATED , 1996
NUMBER
UNDERWRITERS OF SHARES
- ------------
Sharpe Capital, Inc. . . . . . . . . . . . . . . . . . . . . .
Meridian Capital Group, Inc. . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . 1,100,000
---------
---------
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YOUNG MINDS, INC.
SCHEDULE II
LIST OF SELLING SHAREHOLDERS
PURCHASE AGREEMENT DATED , 1996
NAME OF SELLING SHAREHOLDER NUMBER OF SELLING SHAREHOLDER SHARES
- --------------------------- ------------------------------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . 1,100,000
---------
---------
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EXHIBIT A
1,100,000 SHARES
YOUNG MINDS, INC.
COMMON STOCK
($.[ ] PAR VALUE)
PRICING AGREEMENT
-----------------
OCTOBER [ ], 1996
Sharpe Capital, Inc.
120 Broadway
New York, N.Y. 10271
Dear Sirs:
Reference is made to the Purchase Contract dated [September ___, 1996 (the
"Purchase Contract"), relating to the sale by Young Minds, Inc. (the "Company")
and the purchase by a group of underwriters represented by Sharpe Capital, Inc.,
Meridian Capital Group, Inc. and _____________________ (the "Underwriters"), of
the above shares of Common Stock of the Company from the Company and from the
Selling Shareholders, and relating to the option granted by the Company to the
Underwriters to purchase up to an additional 165,000 shares of Common Stock to
cover over-allotments. The above 1,100,000 shares of Common Stock together with
all or any portion of the 165,000 shares to cover over-allotments are
collectively herein called the "Stock".
Pursuant to Section 2 of the Purchase Agreement, the Company agrees with
the Underwriters as follows:
1. The public offering price per share for the Stock, determined as
provided in said Section 2, shall be [$ ].
2. The purchase price per share for the Stock to be paid by the
Underwriters shall be [$ ], being an amount equal to the public
offering price set forth above less [$ ] per share.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company in accordance with its
terms.
Very truly yours,
YOUNG MINDS, INC.
By ____________________________
Daniel H. Cote
Chief Executive Officer
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CONFIRMED AND ACCEPTED, as of the date first above written.
_______________________
[David H. Cote]
AS ATTORNEY-IN-FACT FOR
THE SELLING SHAREHOLDERS
SHARPE CAPITAL, INC., AS
Representative of the Underwriters
BY: _______________________________________
Frank J. Lockwood
VICE PRESIDENT
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EXHIBIT B
1,100,000 SHARES
YOUNG MINDS, INC.
COMMON STOCK
($.[ ] PAR VALUE)
SELECTED DEALERS AGREEMENT
_________________, 1996
Sharpe Capital, Inc.
120 Broadway
New York, N.Y. 10271
Dear Sirs:
The Underwriters named in the enclosed Prospectus have severally agreed,
subject to the terms and conditions of the Purchase Contract, to purchase
from YOUNG MINDS, INC. (the "Company") and certain selling shareholders an
aggregate of 1,100,000 shares of Common Stock ("Firm Shares") at a purchase
price of $[ ] per share. The several Underwriters have also been granted an
option to purchase from the Company an additional 165,000 shares as required
to cover over allotments in connection with the sale of the Firm Shares
(which 165,000 shares are herein called the "Option Shares"). The Firm Shares
and any Option Shares to be purchased are herein called the "Stock." The
Stock and the terms under which they are to be offered for sale by the
several Underwriters are more particularly described in the enclosed
Prospectus, the receipt of which you hereby acknowledged.
1. OFFERING TO DEALERS. The Underwriters are offering a portion of the
Stock for sale to certain selected dealers ("Dealers"), of whom you are one,
at the initial public offering price, less a concession of $[ ] per share
("Dealer's Concession"), subject to the terms and conditions stated herein
and in the Prospectus. Sales of Stock to you pursuant to such offering will
be evidenced by our written confirmation and will be on such terms and
conditions as therein set forth. In purchasing Stock, you will rely upon no
statement whatsoever, written or oral, other than statements in the
Prospectus.
2. REOFFERING BY DEALERS. Stock purchased by you may be reoffered in
conformity with the terms of the offering set forth in the Prospectus. You
may reallow a concession from the initial public offering price of not more
than $____ per share with respect to Stock sold by you to any member of the
National Association of Securities Dealers, Inc. ("NASD") or to any foreign
dealer not eligible for membership in the NASD who agrees in making sales to
purchasers in the United States to conform to the Rules of Fair Practice of
the NASD and with the NASD's Interpretation with Respect to Free Riding and
Withholding in making sales to purchasers outside of the United States.
It is assumed that Stock sold by you will be effectively placed for
investment. If we
contract for or purchase in the open market or otherwise for the account of
any Underwriter any Stock sold to you and not effectively placed for
investment; we may charge you the Dealer's concession originally allowed you
on the Stock so repurchased, and you agree to pay such amount to us on demand.
You will advise us, upon request, of Stock purchased by you remaining
unsold, and we shall have the right to repurchase such unsold Stock on demand
for the accounts of the several Underwriters at the initial public offering
price less all or part of the Dealer's concession.
You agree to make prompt delivery of certificates for Stock purchased by
you to all of your customers who request delivery of Stock and represent that
you have delivered a copy of the current Preliminary Prospectus relating to
the Stock to all persons to whom you expect to mail confirmation of sale at
least 48 hours prior to the time you expect to mail such confirmation to such
persons as required under the Securities Act Release No. 4968.
3. PAYMENT AND DELIVERY. Payment for Stock purchased by you shall be
made by you on such dates as we advise you, by certified or bank cashier's
check payable to the order of Sharpe Capital, Inc. in New York Clearing House
funds as we advise and delivered to Sharpe Capital, Inc., 120 Broadway, New
York, New York 10271 against delivery of such Stock.
The above payment shall be made by you at the initial public offering
price or, if we so advise you, at a net price equal to the initial public
offering price less the Dealer's concession. If payment is made by you at the
initial public offering price, the Dealer's concession payable to you
hereunder shall be paid promptly after the termination of this Agreement (or
on such earlier date as we may determine), except that such concession may be
withheld and cancelled, at our discretion, as to Stock which we have
repurchased as set forth in the second paragraph of Section 2 hereof.
4. STATUS OF DEALERS AND UNDERWRITERS. You represent that you are a
member in good standing of the NASD, and have agreed to comply with the
provisions of Section 24 of Article III of the Rules of Fair Practice of the
NASD, or, if a foreign dealer, that in making sales in the United States you
will conform to the Rules of Fair Practice of the NASD, including, without
limitation, Article III, Sections 1, 8, 24, 25 and 36 thereof to the same
extent as though you were a member thereof and with the NASD's Interpretation
with Respect to Free-Riding and Withholding in making sales to purchasers
outside of the United States and will not use the mails or any means or
instrumentality of interstate commerce to effect such sales unless you are
registered under the Securities Exchange Act of 1934, as amended. You are not
authorized to give any information or make any representations other than as
contained in the Prospectus, or to act as agent for us or any other
Underwriter. Nothing herein contained shall constitute the Dealers an
association, or other separate entity or partners with us, any Underwriter,
or with each other, but you shall be liable for your proportionate share of
any tax, liability or expense based on any claim to the contrary. We shall be
under no liability to you, except for obligations expressly assumed by us in
this Agreement and liabilities under the Securities Act of 1933, as amended,
but no obligation on our part shall be implied or inferred
-2-
herefrom.
5. BLUE SKY MATTERS. You will be informed upon application to us as to
the jurisdictions in which we believe that Stock may be offered or sold under
their respective securities laws, but we have no responsibility as to the
right of any Dealer to sell any Stock in any jurisdiction.
6. NOTICES. All communications from you to us shall be addressed to
Sharpe Capital, Inc., 120 Broadway, New York, NY 10271, Attention: Capital
Markets. Any notice from us to you shall be deemed to have been given if
delivered, mailed or telegraphed to you at the address to which this letter
is mailed.
7. TERMINATION. This Agreement shall terminate 45 business days after
the Closing Date specified in the Purchase Contract unless extended by us for
a period or periods not exceeding an additional 15 days in the aggregate, and
whether extended or not, may be terminated by us at any time. Such
termination shall not affect your obligation to pay for any Stock purchased
by you or any of the provisions of Section 4 hereof.
Please confirm your agreement to the foregoing by signing the duplicate
copy of this letter enclosed herewith and promptly returning it to us at the
address set forth in Section 6 above. Upon receipt thereof, this letter and
such signed duplicate copy will evidence the agreement between us.
Very truly yours,
SHARPE CAPITAL, INC.
As Representative of the several Underwriters
BY: ________________________________________
Frank J. Lockwood, Vice President
Confirmed as of the date first above written:
____________________________________________
(Name of Dealer)
BY _________________________________________
(Authorized Officer or Partner)
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