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EXHIBIT 1.1
MLB-NY DRAFT
4/23/99
JAKKS PACIFIC, INC.
2,350,000 Shares(1)
Common Stock
($.001 par value)
UNDERWRITING AGREEMENT
New York, New York
April ___, 1999
Advest, Inc.
Morgan Keegan & Company, Inc.
Southwest Securities, Inc.
As Representatives of the several Underwriters
c/o Advest, Inc.
One Rockefeller Plaza, 20th Floor
New York, New York 10020
Ladies and Gentlemen:
JAKKS Pacific, Inc., a Delaware corporation (the "Company"), and the
persons named in Schedule I hereto (the "Selling Stockholders") propose to sell
to the several underwriters named in Schedule II hereto (the "Underwriters"),
for whom you (the "Representatives") are acting as representatives, a total of
2,350,000 shares of Common Stock, $.001 par value ("Common Stock"), of the
Company (said shares to be sold by the Company and the Selling Stockholders
collectively are hereinafter called the "Underwritten Securities"). Of the
2,350,000 shares of Underwritten Securities, 2,100,000 are being sold by the
Company and 250,000 by the Selling Stockholders. The Company and the Selling
Stockholders also propose to grant to the Underwriters an option to purchase up
to 352,500 additional shares of Common Stock to cover over-allotments (the
"Option Securities"; the Option Securities, together with the Underwritten
Securities, are hereinafter called the "Securities"). Of the 352,500 Option
Securities, 307,500 are being offered by the Company and 45,000 by the Selling
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(1) Plus an option to purchase from the Company up to 352,500 additional
shares of Common Stock to cover over-allotments.
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Stockholders; in the event that the Underwriters do not purchase all of the
Option Securities, the Company and the Selling Stockholders will sell their
respective pro rata portions of the Option Securities actually purchased. To the
extent there are no additional Underwriters listed on Schedule II other than
you, the terms Representatives and Underwriters, shall mean either the singular
or plural as the context requires. The use of the neuter in this Agreement shall
include the feminine and masculine wherever appropriate. Certain terms used
herein are defined in Section 18 hereof.
1. Representations and Warranties.
(a) The Company. The Company represents and warrants to, and agrees
with, each Underwriter as set forth below in this Section 1:
(i) Registration Statement; Amendments; Final Prospectus. The
Company meets the requirements for the use of Form S-3 under the Act and has
prepared and filed with the Commission a registration statement (Registration
Number 333-74717) on Form S-3, including a related preliminary prospectus, for
the registration under the Act of the offering and sale of the Securities. The
Company may have filed one or more amendments thereto, including a related
preliminary prospectus, each of which has previously been furnished to you. The
Company will next file with the Commission either (1) prior to the Effective
Date of such registration statement, a further amendment to such registration
statement (including the form of final prospectus) or (2) after the Effective
Date of such registration statement, a final prospectus in accordance with
Rules 430A and 424(b). In the case of clause (2), the Company has included in
such registration statement, as amended at the Effective Date, all information
(other than Rule 430A Information) required by the Act and the rules thereunder
to be included in such registration statement and the Prospectus. As filed, such
amendment and form of final prospectus, or such final prospectus, shall contain
all Rule 430A Information, together with all other such required information,
and, except to the extent the Representatives shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to you
prior to the Execution Time or, to the extent not completed at the Execution
Time, shall contain only such specific additional information and other changes
(beyond that contained in the latest Preliminary Prospectus) as the Company has
advised you, prior to the Execution Time, will be included or made therein.
(ii) Compliance. On the Effective Date, the Registration
Statement did or will, and when the Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date (as defined herein) and on
any date on which Option Securities are purchased, if such date is not the
Closing Date (a "settlement date"), the Prospectus (and any supplements thereto)
will, comply in all material respects with the applicable requirements of the
Act and the Exchange Act and the respective rules thereunder; on the Effective
Date and at the Execution Time, the Registration Statement did not or will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading; and, on the Effective Date, the Prospectus, if not filed
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pursuant to Rule 424(b), did or will not, and on the date of any filing pursuant
to Rule 424(b) and on the Closing Date and any settlement date, the Prospectus
(together with any supplement thereto) will not, include any 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 Company makes no
representations or warranties as to the information contained in or omitted from
the Registration Statement or the Prospectus (or any supplement thereto) in
reliance upon and in conformity with information furnished herein or in writing
to the Company by or on behalf of any Underwriter through the Representatives
specifically for inclusion in the Registration Statement or the Prospectus (or
any supplement thereto).
(iii) Subsidiaries. The subsidiaries of the Company (the
"Subsidiaries") listed in Exhibit 21 to the Company's Annual Report on Form
10-KSB most recently filed with the Commission are the only material
subsidiaries of the Company.
(iv) Due Organization. Each of the Company and the
Subsidiaries has been duly organized and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it is organized with
full corporate power and authority to own its properties and conduct its
business as described in the Prospectus, and is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification.
(v) Capitalization of Subsidiaries. All the outstanding shares
of capital stock of each Subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable and, except as otherwise set forth
in the Prospectus, all outstanding shares of capital stock of the Subsidiaries
are owned by the Company either directly or through wholly owned Subsidiaries or
through a designated nominee of the Company, free and clear of any security
interests, claims, liens or encumbrances, except that all of the outstanding
shares of each of the Subsidiaries have been pledged in connection with the
issuance of the Company's Convertible Debentures described in the Prospectus.
(vi) Capitalization. The authorized, issued and outstanding
capital stock of the Company, as of December 31, 1998, was as set forth under
the caption "Capitalization" in the Prospectus and there will be no material
change in such authorized, issued and outstanding capital stock prior to the
Closing Date. The capital stock of the Company conforms in all material respects
to the description thereof contained in the Prospectus. The outstanding shares
of capital stock of the Company have been duly and validly authorized and issued
free of preemptive rights, and are fully paid and nonassessable. The Securities
being sold hereunder by the Company and by the Selling Stockholders have been
duly and validly authorized and, when issued and delivered to and paid for by
the Underwriters pursuant to this Agreement, will be duly issued, fully paid and
nonassessable. The Securities have been approved for listing on the Nasdaq
National Market upon notice of issuance. The certificates for the Securities are
in valid and sufficient form; no holder of capital stock of the Company is
entitled to preemptive or other
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rights to subscribe for the Securities and, except as set forth in the
Prospectus, no options, warrants or other rights to purchase, agreements or
other obligations to issue, or rights to convert any obligations into or
exchange any securities for, shares of capital stock of or other ownership
interests in the Company are outstanding.
(vii) Registration Statement. There is no franchise, contract
or other document of a character required to be described in the Registration
Statement or Prospectus, or to be filed as an exhibit thereto, which is not
described or filed as required; and the statements in the Prospectus under the
headings "Risk Factors -- Our ability to issue "blank check" preferred stock and
our obligation to make severance payments could prevent or delay takeovers",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -Impact of Year 2000", "Certain Relationships and Related
Transactions" and "Description of Securities" fairly summarize the matters
therein described.
(viii) Due Authorization. This Agreement has been duly
authorized, executed and delivered by the Company and constitutes its legal,
valid and binding obligation.
(ix) Investment Company. The Company is not and, after giving
effect to the offering and sale of the Securities and the application of the
proceeds thereof as described in the Prospectus, will not be an "investment
company" as defined in the Investment Company Act of 1940, as amended.
(x) Consents. No consent, approval, authorization, filing with
or order of any court or governmental agency or body is required to be obtained
or made by the Company or the Selling Stockholders in connection with the
transactions contemplated herein, except such as have been obtained under the
Act and such as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Underwriters in the manner contemplated herein and in the Prospectus.
(xi) Market Manipulation. The Company has not taken and will
not take, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result, under the
Exchange Act or otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities.
(xii) No Conflicts. Neither the issue and sale of the
Securities nor the consummation of any other of the transactions herein
contemplated nor the fulfillment of the terms hereof will conflict with, or
result in a breach or violation of, or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to, (A) the charter or by-laws of the Company or any of
the Subsidiaries, (B) the terms of any indenture, contract, lease, mortgage,
deed of trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company or any of the
Subsidiaries is a party or bound or to which its or their property is subject or
(C) any statute,
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law, rule, regulation, judgment, order or decree applicable to the Company or
any of the Subsidiaries of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over the
Company or any of the Subsidiaries or any of its or their properties.
(xiii) Registration Rights. As indicated in the Prospectus,
the Company has registered all applicable securities of any persons or entities
which have registration rights.
(xiv) Financial Statements. The consolidated financial
statements of the Company and its consolidated subsidiaries included or
incorporated by reference in the Prospectus and the Registration Statement
present fairly in all material respects the financial condition, results of
operations and cash flows of the Company and its consolidated subsidiaries as of
the dates and for the periods indicated. Such consolidated financial statements
comply as to form with the applicable accounting requirements of the Act, the
Exchange Act and the respective rules and regulations of the Commission
thereunder and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as otherwise noted therein).
(xv) Litigation. No action, suit or proceeding by or before
any court or governmental agency, authority or body or any arbitrator involving
the Company or any of the Subsidiaries or its or their property is pending or,
to the best knowledge of the Company, threatened that (A) could reasonably be
expected to have a material adverse effect on the performance of this Agreement
or the consummation of any of the transactions contemplated hereby or (B) could
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or properties of the
Company and the Subsidiaries, taken as a whole, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto).
(xvi) Properties. Each of the Company and the Subsidiaries
owns or leases all such properties as are necessary to the conduct of its
operations as currently conducted.
(xvii) Violations. Neither the Company nor any of the
Subsidiaries is in violation or default of (A) any provision of its charter or
bylaws, (B) the terms of any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or bound or to which its property
is subject or (C) any statute, law, rule, regulation, judgment, order or decree
of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or any of the
Subsidiaries or any of its or their properties, as applicable, except for any
such violation or default which would not, singly or in the aggregate, result in
a material adverse change in the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and the Subsidiaries, taken as a
whole, except as set forth in or contemplated in the Prospectus (exclusive of
any supplement thereto).
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(xviii) Accountants. Pannell Kerr Forster, Certified Public
Accountants, A Professional Corporation, which has certified the consolidated
financial statements of the Company and its consolidated subsidiaries and
delivered its report with respect to the consolidated financial statements and
schedules included or incorporated by reference in the Prospectus, are
independent accountants with respect to the Company within the meaning of the
Act and the rules and regulations of the Commission thereunder.
(xix) Taxes. Except as set forth in or contemplated by the
Prospectus (exclusive of any supplement thereto), the Company and the
Subsidiaries have filed all foreign, federal, state and local tax returns that
are required to be filed by it or them or have requested extensions thereof
(except in any case in which the failure so to file would not have a material
adverse effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and the Subsidiaries, taken as a whole,
and have paid all taxes required to be paid by it and them, and any other
assessment, fine or penalty levied against it or them, to the extent that any of
the foregoing is due and payable, except for any such assessment, fine or
penalty that is currently being contested in good faith or which would not have
a material adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and the Subsidiaries, taken as a
whole.
(xx) Labor Relations. No labor disturbance exists or is
threatened or imminent that could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and the Subsidiaries, taken as a whole,
except as set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto).
(xxi) Insurance. The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged; neither the Company nor any such
Subsidiary has been refused any insurance coverage sought or applied for; and
neither the Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a currently anticipated cost that would
not have a material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the Subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(xxii) Dividends. No Subsidiary of the Company is currently
prohibited, directly or indirectly, from paying any dividends to the Company,
from making any other distribution on such Subsidiary's capital stock, from
repaying to the Company any loans or advances to such Subsidiary from the
Company or from transferring any of such Subsidiary's property or assets to the
Company or any other Subsidiary of the Company, except as described
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in or contemplated by the Prospectus (exclusive of any amendment thereto) and
subject to the provisions of The Norwest Bank Minnesota, NA Conditional Credit
Line, dated October 9, 1997, and all Guarantee Agreements, Security Agreements
and Indentures related thereto.
(xxiii) Permits. Except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto), the Company and the
Subsidiaries (A) possess all certificates, authorizations and permits, whether
from federal, state or foreign regulatory authorities, necessary to conduct
their respective businesses, except where the failure to possess such
certificates, authorizations and permits would not, singly or in the aggregate,
result in a material adverse change in the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the Subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business and (B) have not received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a material adverse change in the
condition (financial or otherwise), prospects, earnings, business or properties
of the Company and the Subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business.
(xxiv) Internal Systems Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (A) transactions are executed in accordance
with management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(xxv) Intellectual Property. The Company and the Subsidiaries
own or have obtained licenses or other rights for all patents, patent
applications, trade and service marks, trade names, copyrights, inventions,
trade secrets, technology, know-how and other intellectual properties
(collectively, the "Intellectual Property"), necessary for the conduct of their
businesses as now conducted or as proposed to be conducted in the Prospectus,
except where the failure to so own or obtain licenses or other rights would not
singly or in the aggregate have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, businesses or properties of the
Company and the Subsidiaries, taken as a whole. Except as set forth in the
Prospectus, (A) there are no rights of third parties to any such Intellectual
Property that would materially impair the rights of the Company or any
Subsidiary therein; (B) to the Company's knowledge, there is no material
infringement by third parties of any such Intellectual Property; (C) there is no
pending or, to the Company's knowledge, threatened action, suit, proceeding or
claim by others challenging the Company's or any Subsidiary's rights in or to
any such Intellectual Property, and the Company is unaware of any facts which
would form a reasonable basis for any such claim; (D) there is no pending or, to
the Company's knowledge, threatened
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action, suit, proceeding or claim by others challenging the validity or scope of
any such Intellectual Property, and the Company is unaware of any facts which
would form a reasonable basis for any such claim; and (E) there is no pending
or, to the Company's knowledge, threatened action, suit, proceeding or claim by
others that the Company or any of the Subsidiaries infringes or otherwise
violates any patent, trademark, copyright, trade secret or other proprietary
rights of others, and the Company is unaware of any fact which would form a
reasonable basis for any such claim.
(xxvi) Relationship with Underwriters. Except as disclosed in
the Registration Statement and the Prospectus, the Company (A) does not have any
material lending or other relationship with any bank affiliate or lending
affiliate of Advest, Inc. and (B) does not intend to use any of the proceeds
from the sale of the Securities hereunder to repay any outstanding debt owed to
any affiliate of any of the Underwriters.
Any certificate signed by any officer of the Company and delivered
to the Representatives or counsel for the Underwriters in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company, as to matters covered thereby, to each Underwriter.
(b) Selling Stockholders. Each Selling Stockholder severally
represents and warrants to, and agrees with, each Underwriter as set forth below
in this Section 1:
(i) Title. Such Selling Stockholder is the lawful owner of the
Securities to be sold by it hereunder and upon sale and delivery of, and payment
for, such Securities, as provided herein, such Selling Stockholder will convey
to the Underwriters good and marketable title to such Securities, free and clear
of all liens, encumbrances, equities and claims whatsoever.
(ii) Market Manipulation. Such Selling Stockholder has not
taken and will not take, directly or indirectly, any action designed to or which
has constituted or which might reasonably be expected to cause or result, under
the Exchange Act or otherwise, in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Securities.
(iii) Consents and Approvals. No consent, approval,
authorization or order of any court, governmental agency or body or other person
is required for the consummation by such Selling Stockholder of the transactions
contemplated herein, except such as may have been obtained under the Act and
such as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Underwriters and such other approvals as have been obtained.
(iv) No Violation. Neither the sale of the Securities being
sold by such Selling Stockholder nor the consummation of any other of the
transactions herein contemplated
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by such Selling Stockholder nor the fulfillment of the terms hereof by such
Selling Stockholder will conflict with, result in a breach or violation of, or
constitute a default under any law or the terms of any indenture or other
agreement or instrument to which such Selling Stockholder is a party or by which
he is bound, or any judgment, order or decree applicable to such Selling
Stockholder of any court, regulatory body, administrative agency, governmental
body or arbitrator having jurisdiction over such Selling Stockholder.
Any certificate signed by any representative of a Selling
Stockholder and delivered to the Representatives or counsel for the Underwriters
in connection with the offering of the Securities shall be deemed a
representation and warranty by such Selling Stockholder, as to the matters
covered thereby, to each Underwriter.
2. Purchase and Sale.
(a) Purchase Price. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, (i) the
Company agrees to sell 2,100,000 shares of Underwritten Securities, as well as
up to 307,500 shares of Option Securities, (ii) each Selling Stockholder agrees,
severally and not jointly, to sell the number of Underwritten Securities and
Option Securities set forth opposite the name of each such Selling Stockholder
on Schedule I hereto and (iii) each Underwriter agrees, severally and not
jointly, to purchase, at a purchase price of [$ ] per share, the amount of the
Underwritten Securities set forth opposite such Underwriter's name in Schedule
II hereto.
(b) Option Grant. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, (i) the
Company agrees to grant an option to the several Underwriters to purchase,
severally and not jointly, up to 307,500 shares of Option Securities and (ii)
each Selling Stockholder hereby grants an option to the several Underwriters to
purchase, severally and not jointly, the number of Option Securities set forth
opposite the name of each such Selling Stockholder on Schedule I, all of which
shall be exercised at the same purchase price per share as the Underwriters
shall pay for the Underwritten Securities. Said options may be exercised only to
cover over-allotments in the sale of the Underwritten Securities by the
Underwriters. Said options may be exercised in whole or in part at any time on
or before the 30th day after the date of the Prospectus upon written notice by
the Representatives to the Company setting forth the number of shares of the
Option Securities as to which the several Underwriters are exercising the
options and the settlement date. In the event that the Underwriters exercise
less than their full over-allotment option, (A) the number of shares of the
Option Securities to be purchased by each Underwriter shall be the same
percentage of the total number of shares of the Option Securities to be
purchased by the several Underwriters as such Underwriter is purchasing of the
Underwritten Securities, subject to such adjustments as you in your absolute
discretion shall make to eliminate any fractional shares, and (B) the Company
and each Selling Stockholder shall sell that number of Option Securities based
on the same, respective percentage of Option Securities which they offered had
the Underwriters exercised their full over-allotment option.
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3. Delivery and Payment. Delivery of and payment for the
Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third Business
Day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
May __, 1999, or at such time on such later date not more than three Business
Days after the foregoing date as the Representatives shall designate, which date
and time may be postponed by agreement among the Representatives, the Company
and the Selling Stockholders or as provided in Section 9 hereof (such date and
time of delivery and payment for the Securities being herein called the "Closing
Date"). Delivery of the Securities shall be made to the Representatives for the
respective accounts of the several Underwriters against payment by the several
Underwriters through the Representatives of the respective aggregate purchase
prices of the Securities being sold by the Company and each of the Selling
Stockholders to or upon the order of the Company and the Custodian on behalf of
the Selling Stockholders, respectively, by wire transfer payable in same-day
funds to the accounts specified by the Company and an Attorney-in-Fact (as
defined in the Custody Agreement) on behalf of the Selling Stockholders.
Delivery of the Underwritten Securities and the Option Securities shall be made
through the facilities of the Depository Trust Company, 55 North Water Street,
New York, New York 10041 unless the Representatives shall otherwise instruct.
Each Selling Stockholder will pay all applicable state transfer
taxes, if any, involved in the transfer to the several Underwriters of the
Securities to be purchased by them from such Selling Stockholder and the
respective Underwriters will pay any additional stock transfer taxes involved in
further transfers.
If the option provided for in Section 2(b) hereof is exercised after
the third Business Day prior to the Closing Date, the Company and the Selling
Stockholders will deliver the Option Securities (at the expense of the Company)
to the Representatives on the date specified by the Representatives (which shall
be within three Business Days after exercise of said option) for the respective
accounts of the several Underwriters, against payment by the several
Underwriters through the Representatives of the purchase price thereof to or
upon the order of the Company and the Selling Stockholders, as appropriate, by
wire transfer payable in same-day funds to the accounts specified by the Company
and the Selling Stockholders. If settlement for the Option Securities occurs
after the Closing Date, the Company and the Selling Stockholders will deliver to
the Representatives on the settlement date for the Option Securities, and the
obligation of the Underwriters to purchase the Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
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5. Agreements.
(a) Agreements by the Company. The Company agrees with the several
Underwriters that:
(i) Effectiveness; Filing of Amendments. The Company will use
its best efforts to cause the Registration Statement, if not effective at the
Execution Time, and any amendment thereof, to become effective. Prior to the
termination of the offering of the Securities, the Company will not file any
amendment of the Registration Statement or supplement to the Prospectus or any
Rule 462(b) Registration Statement unless the Company has furnished you a copy
for your review prior to filing and will not file any such proposed amendment or
supplement to which you reasonably object. Subject to the foregoing sentence, if
the Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectus is otherwise required under Rule 424(b), the
Company will cause the Prospectus, properly completed, and any supplement
thereto to be filed with the Commission pursuant to the applicable paragraph of
Rule 424(b) within the time period prescribed and will provide evidence
satisfactory to the Representatives of such timely filing. The Company will
promptly advise the Representatives (A) when the Registration Statement, if not
effective at the Execution Time, shall have become effective, (B) when the
Prospectus, and any supplement thereto, shall have been filed (if required) with
the Commission pursuant to Rule 424(b) or when any Rule 462(b) Registration
Statement shall have been filed with the Commission, (C) when, prior to
termination of the offering of the Securities, any amendment to the Registration
Statement shall have been filed or become effective, (D) of any request by the
Commission or its staff for any amendment of the Registration Statement, or any
Rule 462(b) Registration Statement, or for any supplement to the Prospectus or
for any additional information, (E) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (F) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the institution
or threatening of any proceeding for such purpose. The Company will use its best
efforts to prevent the issuance of any such stop order or the suspension of any
such qualification and, if issued, to obtain as soon as possible the withdrawal
thereof.
(ii) Amendments. If, at any time when a prospectus relating to
the Securities is required to be delivered under the Act, any event occurs as a
result of which the Prospectus as then supplemented would include any 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 under which they
were made not misleading, or if it shall be necessary to amend the Registration
Statement or supplement the Prospectus to comply with the Act or the Exchange
Act or the respective rules thereunder, the Company promptly will (A) notify the
Representatives of any such event; (B) prepare and file with the Commission,
subject to the second sentence of Section 5(a)(i) hereof, an amendment or
supplement which will correct such statement or omis-
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sion or effect such compliance; and (C) supply any supplemented Prospectus to
you in such quantities as you may reasonably request.
(iii) Earnings Statement. As soon as practicable, the Company
will make generally available to its security holders and to the Representatives
an earnings statement or statements of the Company and the Subsidiaries which
will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the
Act.
(iv) Copies of the Registration Statement. The Company will
furnish, without charge, to the Representatives and counsel for the Underwriters
signed copies of the Registration Statement (including exhibits thereto) and to
each other Underwriter a copy of the Registration Statement (without exhibits
thereto) and, so long as delivery of a prospectus by an Underwriter or dealer
may be required by the Act, as many copies of each Preliminary Prospectus and
the Prospectus and any supplement thereto as the Representatives may reasonably
request. The Company will pay the expenses of printing and producing all
documents relating to the offering.
(v) Qualification of Securities. The Company will arrange, if
necessary, for the qualification of the Securities for sale under the laws of
such jurisdictions as the Representatives may designate, will maintain such
qualifications in effect so long as required for the distribution of the
Securities and will pay any fee of the National Association of Securities
Dealers, Inc. (the "NASD") in connection with NASD's review of the offering;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action that would subject it to service of process in suits, other than those
arising out of the offering or sale of the Securities, in any jurisdiction where
it is not now so subject.
(vi) Lock-Up. The Company will not, without the prior written
consent of the Representatives, for a period commencing on the date of the final
prospectus relating to the offering contemplated by the Registration Statement
and continuing for 180 days thereafter, offer, sell, offer to sell, solicit an
offer to buy, contract to sell, encumber, distribute, pledge, grant any option
for the sale of, or otherwise transfer or dispose of, directly or indirectly, in
one or a series of transactions (or enter into any transaction which is designed
to, or reasonably might be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company) any shares of Common
Stock, any options or warrants to purchase any shares of Common Stock or any
securities convertible or exercisable into or exchangeable for shares of Common
Stock; provided, however, that (i) the Company may make automatic quarterly
grants of options to its non-employee directors and may issue and sell Common
Stock pursuant to any director or employee stock option plan, stock ownership
plan or dividend reinvestment plan of the Company in effect at the Execution
Time, (ii) the Company may issue Common Stock issuable upon the conversion of
securities or the exercise of warrants outstanding at the Execution Time, (iii)
the Company may issue warrants to purchase up to 125,000 shares of Common Stock
to Titan Sports, Inc. and a related party as well as warrants to purchase up to
150,000 shares of Common Stock to THQ Inc. pursuant to the Company's joint
venture, as described in the Prospectus, and (iv)
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the Company may issue and sell up to 188,235 shares of Common Stock, subject to
reasonable adjustments, in connection with the Company's acquisition of Berk
Corporation.
(vii) Market Manipulation. The Company will not take, directly
or indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or otherwise,
in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.
(viii) Certificate, Letters and Opinions. The Company will
cause (i) the certificate and the letters to be delivered to the several
Underwriters pursuant to paragraphs (b) and (e) of Section 6 at the Execution
Time and the Closing Date, also to be addressed to the directors of the Company
and (ii) each opinion of counsel delivered to the Underwriters pursuant to
paragraph (b) of Section 6 on the Closing Date to be accompanied by a letter
from the counsel authorizing the directors to rely upon such opinion to the same
extent as if it had been addressed to them.
(ix) Financial Advisory Fee. The Company will pay to Advest,
Inc. a one-time financial advisory fee in the amount of $50,000 for general
financial advisory services rendered by Advest, Inc. to the Company, which fee
shall be due and payable on the Closing Date.
(x) Right of First Offer. Pending the completion of the
offering contemplated herein and for a nine month period following the Closing
Date, the Company agrees to grant Advest, Inc. the right of first offer to
provide the Company with investment banking services in connection with (i)
subsequent public offerings of equity securities and (ii) merger and acquisition
advisory services relating to a sale or other disposition of the Company or a
material portion of the assets thereof. In connection with such investment
banking services, the Company will, prior to contacting other investment banking
or financial advisory firms, provide Advest, Inc. with a description of the
scope of the contemplated investment banking services and invite Advest, Inc. to
submit a proposal within five business days for providing such investment
banking services to the Company. After contacting Advest, Inc., the Company may
contact other investment banking firms concerning fees for contemplated
investment banking services. Thereafter, the Company will give Advest, Inc. the
opportunity to modify its proposal in light of other proposals the Company may
receive. Provided that Advest, Inc.'s fees are no less favorable than those
submitted by another nationally recognized investment banking firm, the Company
will engage Advest, Inc. exclusively to provide such investment banking
services.
(b) Agreements of the Selling Stockholders. Each Selling Stockholder
agrees with the several Underwriters that:
(i) Lock-Up. The Selling Stockholders shall have executed the
form of Lock-up Agreement attached hereto as Exhibit B.
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(ii) Notice of Change. Such Selling Stockholder will advise
you promptly, and if requested by you, will confirm such advice in writing, so
long as delivery of a prospectus relating to the Securities by an underwriter or
dealer may be required under the Act, of (A) any material change in the
Company's condition (financial or otherwise), prospects, earnings, business or
properties which comes to the attention of such Selling Stockholder or (B) any
material change in the information set forth in the Registration Statement or
the Prospectus relating to such Selling Stockholder.
(iii) Market Manipulation. Such Selling Stockholder will not
take any action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.
(c) Fees and Expenses. The Company agrees to pay the costs and
expenses relating to the following matters: (i) the preparation, printing or
reproduction and filing with the Commission of the Registration Statement
(including the financial statements therein and the exhibits thereto), each
Preliminary Prospectus, the Prospectus, and each amendment or supplement to any
of them; (ii) the printing (or reproduction) and delivery (including postage,
air freight charges and charges for counting and packaging) of such copies of
the Registration Statement, each Preliminary Prospectus, the Prospectus, and all
amendments or supplements to any of them, as may, in each case, be reasonably
requested for use in connection with the offering and sale of the Securities;
(iii) the preparation, printing, authentication, issuance and delivery of
certificates for the Securities, including any stamp or transfer taxes in
connection with the original issuance or the sale of the Securities; (iv) the
printing (or reproduction) and delivery of this Agreement, any other
underwriting-related agreement, any blue sky memorandum and all other agreements
or documents printed (or reproduced) and delivered in connection with the
offering of the Securities; (v) the listing of the Securities on the Nasdaq
National Market; (vi) any registration or qualification of the Securities for
offer and sale under the securities or blue sky laws of the several states
(including filing fees and the reasonable fees and expenses of counsel for the
Underwriters relating to such registration and qualification); (vii) any filings
required to be made with the NASD (including filing fees and the reasonable fees
and expenses of counsel for the Underwriters relating to such filings, which
fees, together with the counsel fees described in subparagraph (vi) shall not
exceed $5,000); (viii) the transportation and other expenses incurred by or on
behalf of Company representatives in connection with presentations to
prospective purchasers of the Securities; (ix) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local and
special counsel) for the Company; and (x) all other costs and expenses incident
to the performance by the Company of its obligations hereunder. Each Selling
Stockholder agrees to pay the fees and expenses of its counsel (including local
and special counsel) and all costs and expenses, other than those set forth
above, incident to the performance of his obligations hereunder.
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6. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Company and the Selling Stockholders made in any certificates pursuant to
the provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective obligations hereunder and to the following
additional conditions:
(a) Effective Time. If the Registration Statement has not become
effective prior to the Execution Time, unless the Representatives agree in
writing to a later time, the Registration Statement will become effective not
later than (i) 6:00 PM New York City time on the date of determination of the
public offering price, if such determination occurs at or prior to 3:00 PM New
York City time on such date or (ii) 9:30 AM on the Business Day following the
day on which the public offering price is determined, if such determination
occurs after 3:00 PM New York City time on such date. If filing of the
Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the
Prospectus, and any such supplement, will be filed in the manner and within the
time period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) Opinion of Counsel to the Company. The Company shall have
furnished to the Representatives the opinion of Feder, Kaszovitz, Isaacson,
Weber, Skala & Bass LLP, counsel for the Company, dated the Closing Date and
addressed to the Representatives, to the effect that:
(i) Organization. Each of the Company and each of its
Subsidiaries has been duly incorporated and is validly existing as a corporation
in good standing under the laws of the jurisdiction in which it is organized,
with full corporate power and authority to own or lease, as the case may be, and
to operate its properties and conduct its business as described in the
Prospectus, and is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each jurisdiction set forth on a schedule to
such opinion.
(ii) Capitalization of Subsidiaries. All the outstanding
shares of capital stock of each Subsidiary have been duly and validly authorized
and issued and are fully paid and nonassessable and, except as otherwise set
forth in the Prospectus, all outstanding shares of capital stock of the
Subsidiaries are held of record by the Company, either directly or through
wholly owned subsidiaries, free and clear of any perfected security interest
and, to the knowledge of such counsel, after due inquiry, any other security
interest, claim, lien or encumbrance, except that all of the outstanding shares
of each of the Subsidiaries have been pledged in connection with the issuance of
the Company's Convertible Debentures described in the Prospectus.
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(iii) Capital Stock. The capital stock of the Company conforms
in all material respects to the description thereof contained in the Prospectus;
the outstanding shares of Common Stock (including the Securities being sold
hereunder by the Selling Stockholders) have been duly and validly authorized and
issued and are fully paid and nonassessable; the Securities being sold hereunder
by the Company have been duly and validly authorized, and, when issued and
delivered to and paid for by the Underwriters pursuant to this Agreement, will
be fully paid and nonassessable; all of the Securities have been approved for
listing on the Nasdaq National Market; the form of certificates for the
Securities complies with the requirements of the Delaware General Corporation
Law; the holders of outstanding shares of capital stock of the Company are not
entitled to preemptive or other rights to subscribe for the Securities; and,
except as set forth in the Prospectus, no options, warrants or other rights to
purchase, agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of capital stock of or
other ownership interests in the Company are, to the knowledge of such counsel,
outstanding.
(iv) Litigation. To the knowledge of such counsel, there is no
pending or threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of the Subsidiaries or its or their property of a character required to
be disclosed in the Registration Statement that is not adequately disclosed in
the Prospectus, and there is no franchise, contract or other document of a
character required to be described in the Registration Statement or Prospectus,
or to be filed as an exhibit thereto, that is not described or filed as
required.
(v) Effectiveness; Compliance. Such counsel has been advised
that the Registration Statement has become effective under the Act; any required
filing of the Prospectus, and any supplements thereto, pursuant to Rule 424(b)
has been made in the manner and within the time period required by Rule 424(b);
to the knowledge of such counsel, no stop order suspending the effectiveness of
the Registration Statement has been issued, no proceedings for that purpose have
been instituted or threatened and the Registration Statement and the Prospectus
(other than the financial statements and other financial information contained
therein, as to which such counsel need express no opinion) comply as to form in
all material respects with the applicable requirements of the Act and the
Exchange Act and the respective rules thereunder.
(vi) Due Authorization. This Agreement has been duly
authorized, executed and delivered by the Company.
(vii) Investment Company. The Company is not and, after giving
effect to the offering and sale of the Securities and the application of the
proceeds thereof as described in the Prospectus, will not be, an "investment
company" as defined in the Investment Company Act of 1940, as amended.
(viii) Consents. No consent, approval, authorization, filing
with or order of any court or governmental agency or body is required for the
consummation by the Company or the Selling Stockholders of the transactions
contemplated herein, except such as have been
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obtained under the Act and such as may be required under the blue sky laws of
any jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters in the manner contemplated in this Agreement and
in the Prospectus and such other approvals (specified in such opinion) as have
been obtained.
(ix) Conflicts. Neither the issue and sale of the Securities,
nor the consummation of any other of the transactions herein contemplated nor
the fulfillment of the terms hereof will, in any material respect, conflict
with, result in a breach or violation of or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or the Subsidiaries
pursuant to, (A) the charter or by-laws of the Company or the Subsidiaries, or
(B) the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument, known to such counsel, to which the Company or any of the
Subsidiaries is a party or bound or to which its or their property is subject,
or (C) any statute, law, rule, regulation, judgment, order or decree applicable
to the Company or any of the Subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or the Subsidiaries or any of its or their
properties.
(x) No Registration Rights. As indicated in the Prospectus,
the Company has registered all applicable securities of any persons or entities
which have registration rights.
Such counsel shall further state that they have no reason to believe that on the
Effective Date or at the Execution Time the Registration Statement contains or
contained any untrue statement of a material fact or omitted or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus as of its date and on
the Closing Date includes or included any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (in each case, other
than the financial statements and other financial information contained therein,
as to which such counsel need express no belief).
In rendering the foregoing opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York, the Federal laws of the United States or the General Corporation Law
of the State of Delaware, to the extent they deem proper and specified in such
opinion, upon the opinion of other counsel of good standing whom they believe to
be reliable and who are satisfactory to counsel for the Underwriters and (B) as
to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. References to the
Prospectus in this paragraph 6(b) include any supplements thereto at the Closing
Date. The opinion of any such other counsel shall be rendered to the
Underwriters at the request of the Company and shall so state therein and shall
further state that counsel for the Underwriters may rely upon such opinion in
rendering their opinion to the Underwriters.
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(c) Opinion of Counsel to the Selling Stockholders. Each of the
Selling Stockholders shall have furnished to the Representatives the opinion of
its counsel (who shall be acceptable to the Representatives) dated the Closing
Date and addressed to the Representatives, to the effect that:
(i) Due Authorization. This Agreement has been duly
authorized, executed and delivered by such Selling Stockholder. Such Selling
Stockholder has full legal right and authority to sell, transfer and deliver, in
the manner provided in this Agreement, the Securities being sold by it
hereunder.
(ii) Title. Good and valid title to the Securities being sold
hereunder by such Selling Stockholder, free and clear of all liens,
encumbrances, equities or claims, has been transferred to each Underwriter that
has purchased such Securities without notice of an adverse claim thereto (within
the meaning of the Uniform Commercial Code of the State of New York).
(iii) No Consent. All consents, approvals, authorizations and
filings required to be made or obtained by such Selling Stockholder for the sale
and delivery of the Securities being sold by it to the Underwriters hereunder
have been made or obtained, as the case may be.
(iv) No Conflict. Neither the sale of the Securities being
sold by such Selling Stockholder, nor the consummation of the transactions
herein contemplated by such Selling Stockholder nor the fulfillment of the terms
hereof by such Selling Stockholder will result in a breach or violation of, or
constitute a default under, (A) the charter or by-laws or other organizational
documents of such Selling Stockholder, or (B) the terms of any indenture or
other agreement or instrument, known to such counsel and to which such Selling
Stockholder is a party or by which it or its properties are bound, or (C) any
law, judgment, order or decree known to such counsel of any court, regulatory
body, administrative agency, governmental body or arbitrator having jurisdiction
over such Selling Stockholder.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the State of New York, the
Federal laws of the United States and the General Corporation Law of the State
of Delaware, to the extent they deem proper and specified in such opinion, upon
the opinion of other counsel of good standing whom they believe to be reliable
and who are satisfactory to counsel for the Underwriters, and (B) as to matters
of fact, to the extent they deem proper, on certificates of officers or other
representatives of such Selling Stockholder and public officials. The opinion of
any such other counsel shall be rendered to the Underwriters at the request of
such Selling Stockholder and shall so state therein and shall further state that
counsel for the Underwriters may rely upon such opinion in rendering their
opinion to the Underwriters.
(d) Opinion of Counsel to the Underwriters. The Representatives
shall have received from Morgan, Lewis & Bockius LLP, counsel for the
Underwriters, such opinion or
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opinions, dated the Closing Date and addressed to the Representatives, with
respect to the issuance and sale of the Securities, the Registration Statement,
the Prospectus (together with any supplement thereto) and other related matters
as the Representatives may reasonably require, and the Company and each Selling
Stockholder shall have furnished to such counsel such documents as they request
for the purpose of enabling them to pass upon such matters.
(e) Certificate from the Company. The Company shall have furnished
to the Representatives a certificate of the Company, signed by the Chairman of
the Board or the President and the principal financial or accounting officer of
the Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the Prospectus,
any supplements to the Prospectus and this Agreement and that:
(i) Bring-down of Representations and Warranties. The
representations and warranties of the Company in this Agreement are true and
correct in all material respects on and as of the Closing Date with the same
effect as if made on the Closing Date and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied by it at or prior to the Closing Date.
(ii) Stop Orders. The Company has not received or become aware
of the issuance of any stop order suspending the effectiveness of the
Registration Statement, nor, to the Company's knowledge, have proceedings for
that purpose been instituted or threatened.
(iii) Adverse Change. Since the date of the most recent
financial statements included or incorporated by reference in the Prospectus
(exclusive of any supplement thereto), there has been no material adverse change
in the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and the Subsidiaries, taken as a whole, except as set
forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
(f) Certificate from the Selling Stockholders. Each Selling
Stockholder shall have furnished to the Representatives a certificate, signed by
a duly authorized person and dated the Closing Date, to the effect that the
representations and warranties of such Selling Stockholder in this Agreement are
true and correct in all material respects on and as of the Closing Date to the
same effect as if made on the Closing Date and such Selling Stockholder has
complied with all the agreements and satisfied all the conditions on its part to
be performed or satisfied by it at or prior to the Closing Date.
(g) Accountant's Letters. At the Execution Time and at the Closing
Date, the Company shall have caused Pannell Kerr Foster, Certified Public
Accountants, A Professional Corporation to furnish to the Representatives
letters, dated respectively as of the Execution Time and as of the Closing Date,
in form and substance satisfactory to the Representatives, confirming that they
are independent accountants within the meaning of the Act and the Exchange Act
and
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the applicable published rules and regulations thereunder and covering other
customary matters with respect to the Registration Statement, the Preliminary
Prospectus and the Prospectus.
(h) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in Section 6(g) hereof or (ii) any change, or any
development involving a prospective change, in or affecting the condition
(financial or otherwise), earnings, business or properties of the Company and
the Subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto) the effect of which, in any
case referred to in clause (i) or (ii) above, is, in the sole judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any supplement thereto).
(i) Lock-Up Agreements. At or prior to the Execution Time, a letter
substantially in the form of Exhibit B hereto, shall have been furnished to the
Representatives by each officer and director of the Company.
(j) Listing of Securities. The Securities shall have been approved
for listing on the Nasdaq National Market upon official notice of issuance.
(k) Additional Information. Prior to the Closing Date, the Company
and the Selling Stockholders shall have furnished to the Representatives such
further information, certificates and documents as the Representatives may
reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of such
cancellation shall be given to the Company and each Selling Stockholder in
writing or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of Morgan, Lewis & Bockius LLP, counsel for the
Underwriters, at 101 Park Avenue, New York, New York 10178, on the Closing Date.
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7. Reimbursement of Underwriters' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company or any Selling
Stockholder to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally through Advest, Inc. on demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the proposed purchase
and sale of the Securities. If the Company is required to make any payments to
the Underwriters under this Section 7 because of any Selling Stockholder's
refusal, inability or failure to satisfy any condition to the obligations of the
Underwriters set forth in Section 6, the Selling Stockholders pro rata in
proportion to the percentage of Securities to be sold by each shall reimburse
the Company on demand for all amounts so paid.
8. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify
and hold harmless each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person who controls any Underwriter within
the meaning of either the Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar 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 for the registration of the
Securities as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company specifically for inclusion therein by or on behalf of any
Underwriter through the Representatives. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Indemnification by Selling Stockholders. Each Selling
Stockholder agrees to indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter, and each person
who controls any Underwriter within the meaning of either
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the Act or the Exchange Act, to the same extent as the foregoing indemnity to
each Underwriter, but only with reference to written information relating to
such Selling Stockholder furnished to the Company by or on behalf of such
Selling Stockholder specifically for inclusion in the documents referred to in
paragraph (a) above. This indemnity agreement will be in addition to any
liability which any Selling Stockholder may otherwise have. The Underwriters
acknowledge that the information related to such Selling Stockholder set forth
in the table and the footnotes thereto appearing under the heading "Principal
and Selling Stockholders" in any Preliminary Prospectus and the Prospectus
constitutes the only information furnished in writing by or on behalf of such
Selling Stockholder for inclusion in any Preliminary Prospectus or the
Prospectus.
(c) Indemnification by Underwriters. Each Underwriter severally and
not jointly agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers who signs the Registration Statement, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act and each Selling Stockholder, to the same extent as the foregoing
indemnities to each Underwriter, but only with reference to written information
relating to such Underwriter furnished to the Company by or on behalf of such
Underwriter through the Representatives specifically for inclusion in the
documents referred to in paragraph (a) above. This indemnity agreement will be
in addition to any liability which any Underwriter may otherwise have. The
Company and the Selling Stockholders acknowledge that the statements set forth
in the last paragraph of the cover page regarding delivery of the Securities and
paragraphs 1, 2, 3, 4, 10 and 11 under the heading "Underwriting" in any
Preliminary Prospectus and the Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in any Preliminary Prospectus or the Prospectus.
(d) Notice of Action. Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof, but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph (a),
(b) or (c) above unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a), (b) or (c) above. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses
of any separate counsel retained by the indemnified party or parties except as
set forth below); provided, however, that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying
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party to represent the indemnified party would present such counsel with a
conflict of interest, (ii) the actual or potential defendants in, or targets of,
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, (iii)
the indemnifying party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
(e) Contribution. In the event that the indemnity provided in
paragraph (a), (b) or (c) of this Section 8 is unavailable or insufficient to
hold harmless an indemnified party for any reason, the Company and the
Underwriters severally agree to contribute to the aggregate of the losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively,
"Losses") to which the Company and one or more of the Underwriters may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Company, the Selling Stockholders and the Underwriters from the
offering of the Securities; provided, however, that in no case shall any
Underwriter (except as may be provided in any agreement among underwriters
relating to the offering of the Securities) be responsible for any amount in
excess of the underwriting discount or commission applicable to the Securities
purchased by such Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company, the
Selling Stockholders and the Underwriters severally shall contribute in such
proportion as is appropriate to reflect the relative fault of the Company, the
Selling Stockholders and the Underwriters in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Underwriters shall be deemed to be
equal to the total underwriting discounts and commissions, in each case as set
forth on the cover page of the Prospectus and under the heading "Underwriting",
and the Company shall be deemed to receive all remaining benefits (which shall
be deemed to be equal to the total net proceeds from the Offering (before
deducting expenses) received by it and the Selling Stockholders. Relative fault
shall be determined by reference to, among other things, whether any untrue or
any alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information provided by the
Company, the Selling Stockholders or the Underwriters, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such untrue statement or omission. The Company, the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method of
allocation which does not take
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account of the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (e), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls an
Underwriter within the meaning of either the Act or the Exchange Act and each
director, officer, employee and agent of an Underwriter shall have the same
rights to contribution as such Underwriter, and each person who controls the
Company within the meaning of either the Act or the Exchange Act, each officer
of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (e).
9. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule II hereto bears to the aggregate amount
of Securities set forth opposite the names of all the remaining Underwriters)
the Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase; provided, however, that in the event that the aggregate
amount of Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase shall exceed 10% of the aggregate amount of Securities set
forth in Schedule II hereto, the remaining Underwriters shall have the right to
purchase all, but shall not be under any obligation to purchase any, of the
Securities, and if such nondefaulting Underwriters do not purchase all the
Securities, this Agreement will terminate without liability to any nondefaulting
Underwriter, the Selling Stockholders or the Company. In the event of a default
by any Underwriter as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding five Business Days, as the
Representatives shall determine in order that the required changes in the
Registration Statement and the Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting Underwriter of its liability, if any, to the Company, the Selling
Stockholders and any nondefaulting Underwriter for damages occasioned by its
default hereunder.
10. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Representatives, by notice given to the Company
prior to delivery of and payment for the Securities, if at any time prior to
such time (i) trading in the Company's Common Stock shall have been suspended by
the Commission or the Nasdaq National Market or trading in securities generally
on the Nasdaq National Market shall have been suspended or limited or minimum
prices shall have been established on such Exchange, (ii) a banking moratorium
shall have been declared either by Federal or New York State authorities or
(iii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the sole judgment of the Representatives, impractical or
24
25
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers, of each Selling Stockholder and of the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter,
any Selling Stockholder or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 5(c), 7 and 8
hereof shall survive the termination or cancellation of this Agreement. The
provision of Sections 5(a)(vi) and 5(b)(i) shall terminate upon the termination
or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and:
(a) if sent to the Representatives, will be mailed, delivered or
telefaxed to Advest, Inc., One Rockefeller Plaza, 20th Floor, New York, New York
10020, Attention: Brett A. Chamberlain (Fax number: (212) 584-4292) (with a copy
forwarded to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178,
Attention: Christopher T. Jensen, Esq.
(Fax number: (212) 309-6273));
(b) if sent to the Company, will be mailed, delivered or telefaxed
to JAKKS Pacific, Inc., 22761 Pacific Coast Highway, Malibu, CA 90265,
Attention: Stephen G. Berman (Fax number: (310) 456-7099) (with a copy forwarded
to Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, 750 Lexington Avenue,
New York, New York 10022, Attention: Murray L. Skala (Fax number: (212)
888-7776)); or
(c) if sent to any Selling Stockholder, will be mailed, delivered or
telefaxed and confirmed to it at the address set forth in Schedule I hereto.
13. Successors and Reliance. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and the officers and directors and controlling persons referred to in
Section 8 hereof, and no other person will have any right or obligation
hereunder.
14. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed within the State of New York.
15. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
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16. Headings. The section headings used herein are for convenience
only and shall not affect the construction hereof.
17. Submission to Jurisdiction, Etc. (a) To the fullest extent
permitted by applicable law, the Company and the Selling Stockholders
irrevocably submit to the jurisdiction of any federal or state court in the
City, County and State of New York, United States of America, in any suit or
proceeding based on or arising under this Agreement, the Custody Agreement, the
Registration Statement, the Prospectus or any Preliminary Prospectus, and
irrevocably agree that all claims in respect of any such suit or proceeding may
be determined in any such court. The Company and the Selling Stockholders
irrevocably and fully waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. They hereby irrevocably designate and
appoint Murray L. Skala (the "Process Agent"), as their authorized agent upon
whom process may be served in any such suit or proceeding, it being understood
that the designation and appointment of the Process Agent as such authorized
agent shall become effective immediately without any further action on the part
of the Selling Stockholders. The Selling Stockholders represent to the
Underwriters that they have notified the Process Agent of such designation and
appointment and that the Process Agent has accepted the same in writing. The
Selling Stockholders hereby irrevocably authorize and direct the Process Agent
to accept such service. They further agree that service of process upon the
Process Agent and written notice of said service to the Selling Stockholders
mailed by prepaid registered first-class mail or delivered to the Process Agent
at its principal office, shall be deemed in every respect effective service of
process upon the Selling Stockholders in any such suit or proceeding. Nothing
herein shall affect the right of any Underwriter or any person controlling such
Underwriter to serve process in any other manner permitted by law. The Selling
Stockholders further agree to take any and all action, including the execution
and filing of any and all such documents and instruments as may be necessary to
continue the designation and appointment of the Process Agent in full force and
effect so long as they have any outstanding obligations under this Agreement or
the Custody Agreement. If for any reason the Process Agent is no longer able to
serve as such authorized agent, the Selling Stockholders shall appoint another
agent reasonably satisfactory to Advest, Inc. To the extent that the Selling
Stockholders have or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service of note, attachment
prior to judgment, attachment in aid of execution, executor or otherwise) with
respect to themselves or their properties, they hereby irrevocably waive such
immunity in respect of their obligations under this Agreement and the Custody
Agreement, to the extent permitted by law.
(b) The obligation of the parties to make payments hereunder
is in U.S. dollars (the "Obligation Currency") and such obligation shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any currency other than the Obligation Currency
or any other realization in such other currency, whether as proceeds of set-off,
security, guarantee, distributions, or otherwise, except to the extent to which
such tender, recovery or realization shall result in the effective receipt by
the party which is to receive such payment of the full amount of the Obligation
Currency expressed to be payable
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27
hereunder, and the party liable to make such payment agrees to indemnify the
party which is to receive such payment (as an additional, separate and
independent cause of action) for the amount (if any) by which such effective
receipt shall fall short of the full amount of the Obligation Currency expressed
to be payable hereunder and such obligation to indemnify shall not be affected
by judgment being obtained for any other sums due under this Agreement.
18. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"amend," "amendment" or "supplement" with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall
mean and include the filing of any document under the Exchange Act after
the Effective Date, or the issue date of any Preliminary Prospectus or the
Prospectus, as the case may be, deemed to be incorporated therein by
reference.
"Business Day" shall mean any day other than a Saturday, a Sunday or
a legal holiday or a day on which banking institutions or trust companies
are authorized or obligated by law to close in New York City.
"Commission" shall mean the Securities and Exchange Commission.
"Effective Date" shall mean each date and time that the Registration
Statement, any post-effective amendment or amendments thereto and any Rule
462(b) Registration Statement became or become effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in Section 1(a)(i) above and any preliminary prospectus
included in the Registration Statement at the Effective Date that omits
Rule 430A Information. Such term shall include the documents incorporated
by reference therein pursuant to Item 12 of Form S-3 which were filed on
or before the issue date of such Preliminary Prospectus.
"Prospectus" shall mean the prospectus relating to the Securities
that is first filed pursuant to Rule 424(b) after the Execution Time or,
if no filing pursuant to Rule 424(b) is required, shall mean the form of
final prospectus relating to the Securities included in
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the Registration Statement at the Effective Date. Such term shall include
the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 which were filed on or before the issue date of such Prospectus.
"Registration Statement" shall mean the registration statement
referred to in Section 1(a)(i) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in
the event any post-effective amendment thereto or any Rule 462(b)
Registration Statement becomes effective prior to the Closing Date, shall
also mean such registration statement as so amended or such Rule 462(b)
Registration Statement, as the case may be. Such term shall include any
Rule 430A Information deemed to be included therein at the Effective Date
as provided by Rule 430A and the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which are filed on or before the
Effective Date.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules under the
Act.
"Rule 430A Information" shall mean information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b)
relating to the offering covered by the initial registration statement.
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If the foregoing Underwriting Agreement is in accordance with your
understanding of our agreement, please sign and return to us the enclosed
duplicate hereof, whereupon this letter and your acceptance shall represent a
binding agreement among the Company and the several Underwriters.
Very truly yours,
JAKKS Pacific, Inc.
By:
-----------------------------
Name:
Title:
SELLING STOCKHOLDERS:
--------------------------------
Jack Friedman
--------------------------------
Stephen G. Berman
The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above
written.
ADVEST, INC.
MORGAN KEEGAN & COMPANY, INC.
SOUTHWEST SECURITIES, INC.
Acting on behalf of themselves and as the
Representatives of the other several
Underwriters named in Schedule II hereof.
By: Advest, Inc.
By:________________________
Name: Brett A. Chamberlain
Title: Director
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30
SCHEDULE I TO UNDERWRITING AGREEMENT
NUMBER OF NUMBER OF OPTION
SELLING STOCKHOLDERS UNDERWRITTEN SECURITIES SECURITIES TO BE SOLD
TO BE SOLD
Jack Friedman 192,000 35,000
c/o JAKKS Pacific, Inc.
2271 Pacific Coast Highway
Malibu, CA 90265
Fax No. (310) 456-7099
Stephen G. Berman 58,000 10,000
c/o JAKKS Pacific, Inc.
2271 Pacific Coast Highway
Malibu, CA 90265
Fax No. (310) 456-7099
TOTAL.............. 250,000 45,000
31
SCHEDULE II TO UNDERWRITING AGREEMENT
NUMBER OF UNDERWRITTEN [NUMBER OF OPTION
UNDERWRITERS SECURITIES TO BE PURCHASED SECURITIES TO BE PURCHASED]
Advest, Inc.
Morgan Keegan & Company, Inc.
Southwest Securities, Inc.
Total 2,350,000 352,500
32
EXHIBIT A
Jack Friedman
Stephen Berman
(Names of Selling Stockholders)
CUSTODY AGREEMENT AND POWER OF ATTORNEY
FOR SALE OF COMMON STOCK OF
JAKKS PACIFIC, INC.
Murray L. Skala
As Attorney-in-Fact as provided herein
c/o Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP
750 Lexington Avenue
New York, New York 10022-1200
Boston Safe and Deposit Company, as Custodian as provided herein
Gentlemen:
The undersigned stockholders (the "Selling Stockholders") of JAKKS
Pacific, Inc., a Delaware corporation (the "Company"), propose to sell shares of
Common Stock, $.001 par value, of the Company ("Common Stock") to certain
underwriters (the "Underwriters") for whom Advest, Inc., Morgan Keegan &
Company, Inc. and Southwest Securities, Inc. will act as the representatives
(the "Representatives"). The shares are being registered for distribution under
a Registration Statement on Form S-3 (the "Registration Statement") for
distribution by the Underwriters to the public at a price and on terms to be
hereafter determined. It is understood that at this time there is no commitment
on the part of the Underwriters to purchase any shares of Common Stock and no
assurance that an offering of Common Stock will take place. The shares of Common
Stock which the undersigned propose to sell to the Underwriters pursuant to the
Underwriting Agreement (hereinafter defined) are referred to herein as the
"Securities".
1. Appointment and Powers of Attorney-in-Fact.
A. Each of the undersigned hereby irrevocably constitutes and appoints
Murray L. Skala (the "Attorney-in-Fact") as his agent and attorney-in-fact, with
full power of substitution with respect to all matters arising in connection
with the public offering and sale by the undersigned of the Securities,
including, but not limited to, the power and authority on behalf of the
undersigned to do or cause to be done any of the following things:
(i) negotiate, determine and agree upon (a) the price at which the
Securities will be initially offered to the public by the Underwriters pursuant
to the Underwriting Agreement, (b) the underwriting discount with respect to the
Securities, and (c) the price at which the
33
Securities will be sold to the Underwriters by the Selling Stockholders pursuant
to the Underwriting Agreement;
(ii) execute and deliver on behalf of the undersigned an
Underwriting Agreement (the "Underwriting Agreement"), substantially in the form
of the draft dated April ___, 1999, delivered to the undersigned herewith,
receipt of which is acknowledged, but with such insertions, changes (including a
change in the number of shares of Common Stock to be sold by the undersigned),
additions or deletions as the Attorney-in-Fact, acting in his sole discretion,
shall approve, which approval shall be conclusively evidenced by the execution
and delivery of the Underwriting Agreement by an Attorney-in-Fact, including the
making of all representations and agreements provided in the Underwriting
Agreement to be made by, and the exercise of all authority thereunder vested in,
the undersigned;
(iii) sell, assign, transfer and deliver the Securities to the
Underwriters pursuant to the Underwriting Agreement and deliver to the
Underwriters certificates for the Securities so sold;
(iv) endorse (in blank or otherwise) on behalf of the undersigned
the certificate or certificates for the Securities to be sold by the undersigned
pursuant to the Underwriting Agreement or to execute and deliver a stock
power(s) with respect to such certificates;
(v) take any and all steps deemed necessary or desirable by the
Attorney-in-Fact in connection with the registration of the Securities under the
Securities Act of 1933, as amended (the "Securities Act" ), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and under the securities
or "blue sky" laws of various states and jurisdictions, including, without
limitation, the giving or making of such undertakings, representations and
agreements and the taking of such other steps as the Attorney-in-Fact may deem
necessary or advisable;
(vi) instruct the Company and the Custodian, as hereinafter defined,
on all matters pertaining to the sale of the Securities and delivery of
certificates therefor;
(vii) make any assurances, communications and reports (including in
the form of a signed certificate pursuant to Section 6(f) of the Underwriting
Agreement) for and on behalf of the undersigned to the Underwriters, which may
be necessary or advisable for facilitating the sale of the Securities, or to
appropriate state or governmental authorities, which may be necessary or
advisable for effecting the registration of the Securities under the state
securities or blue sky laws;
(viii) provide, in accordance with the Underwriting Agreement, for
the payment of any expenses of the offering and sale of the Common Stock covered
by the Registration Statement to be paid by the Selling Stockholders;
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34
(ix) exercise any power conferred upon, and to take any action
authorized to be taken by, the undersigned pursuant to the Underwriting
Agreement, in the sole discretion of the Attorney-in-Fact; and
(x) otherwise take all actions and do all things necessary or
proper, required, contemplated or deemed advisable or desirable by the
Attorney-in-Fact in his discretion, including the execution and delivery of any
documents, and generally act for and in the name of the undersigned with respect
to the sale of the Securities to the Underwriters and the offering of the
Securities by the Underwriters as fully as could the undersigned if then
personally present and acting.
B. Power to Act. The Attorney-in-Fact may act alone in exercising the
rights and powers conferred on him by this Custody Agreement and Power of
Attorney (the "Agreement"). The Attorney-in-Fact is hereby empowered to
determine, individually, in his sole and absolute discretion, the time or times
when, the purposes for which, and the manner in which, any power herein
conferred upon him shall be exercised.
C. Reliance. The Custodian, the Underwriters, the Company and all other
persons dealing with the Attorney-in-Fact as such may rely and act upon any
writing believed in good faith to be signed by the Attorney-in-Fact.
D. Compensation. The Attorney-in-Fact shall not receive any compensation
for his services rendered hereunder, except that he shall be entitled to cause
the Custodian to pay, from the proceeds payable to the undersigned, each of the
undersigned's proportionate share of any out-of-pocket expenses incurred under
this Agreement.
2. Appointment of Custodian; Deposit of Securities.
A. Deposit of Certificates. In connection with and to facilitate the sale
of the Securities to the Underwriters, each of the undersigned hereby appoints
Boston Safe and Deposit Company as custodian (the "Custodian") and herewith
deposits with the Custodian one or more certificates for Common Stock that in
the aggregate represent not less than the total number of Securities to be sold
by him to the Underwriters, which number is set forth on Schedule I hereto. Each
such certificate so deposited on the date hereof is in negotiable and proper
deliverable form, endorsed in blank with the signature of the undersigned or the
Attorney-in-Fact thereon guaranteed by a commercial bank or trust company in the
United States or by a member firm of the Nasdaq National Market, or is
accompanied by a duly executed stock power or powers in blank, bearing the
signature of the undersigned or the Attorney-in-Fact so guaranteed. The
Custodian is hereby authorized and directed, subject to the instructions of the
Attorney-in-Fact, (a) to hold in custody the certificate or certificates
deposited herewith, (b) to deliver or to authorize the Company's transfer agent
to deliver the certificate or certificates deposited hereunder (or replacement
certificate(s) for the Securities) to or at the direction of the
Attorney-in-Fact in accordance with the terms of the Underwriting Agreement and
(c) to return or cause the Company's transfer agent to return to the
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35
undersigned new certificate(s) for the shares of Common Stock represented by any
certificate deposited hereunder which are not sold pursuant to the Underwriting
Agreement.
B. Retention of Rights of Ownership. Until the Securities have been
delivered to the Underwriters against payment therefor in accordance with the
Underwriting Agreement, the undersigned shall retain all rights of ownership
with respect to the Securities deposited hereunder, including the right to vote
and to receive all dividends and payment thereon, except the right to retain
custody of or dispose of such Securities, which right is subject to this
Agreement, lock-up agreements between each of the undersigned and Advest, Inc.
and the Underwriting Agreement.
C. Compensation. The Custodian shall be entitled to customary compensation
for the services to be rendered hereunder as set forth in Schedule II attached
hereto. Such compensation shall be paid to the Custodian by the Company.
3. Sale of Securities; Remitting Net Proceeds.
A. Delivery of Securities upon Payment. The Attorney-in-Fact is hereby
authorized and directed to deliver or cause the Custodian or the Company's
transfer agent to deliver certificates for the Securities to the
Representatives, as provided in the Underwriting Agreement, against delivery to
the Attorney-in-Fact for the account of the undersigned of the purchase price of
the Securities, at the time and in the funds specified in the Underwriting
Agreement. The Attorney-in-Fact is authorized, on behalf of the undersigned, to
accept and acknowledge receipt of the payment of the purchase price for the
Securities and shall promptly deposit such proceeds with the Custodian. After
reserving an amount of such proceeds for fees and expenses as provided below,
the Custodian shall promptly remit to the undersigned their respective,
proportionate shares of the proceeds.
B. Retention of Fees and Expenses. Before any proceeds of the sale of the
Securities are remitted to the undersigned, the Attorney-in-Fact is authorized
and empowered to direct the Custodian to reserve from the proceeds an amount
determined by the Attorney-in-Fact to be sufficient to pay all expenses of the
Selling Stockholders, which amount shall be allocated between the undersigned
according to their respective, proportionate shares of the proceeds. The Selling
Stockholders' expenses shall include those items, if any, of expense of the
offering and sale of the Common Stock to be borne by them as provided in the
Underwriting Agreement. The Custodian is authorized to pay such expenses from
the amount reserved for that purpose pursuant to the written direction of the
Attorney-in-Fact. After payment of expenses from this reserve, the Custodian
will remit to the undersigned their respective, proportionate shares of any
balance. To the extent expenses exceed the amount reserved, the Selling
Stockholders shall remain liable for their respective, proportionate shares of
such expenses.
4. Representations, Warranties and Agreements. Each of the undersigned
represents and warrants to, and agrees with each other, the Company, the
Attorney-in-Fact, the Custodian and the Underwriters as follows:
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36
A. Authority. Each of the undersigned has full legal right, power and
authority to enter into and perform this Agreement and the Underwriting
Agreement and to sell, transfer, assign and deliver the Securities to be sold by
him pursuant to the Underwriting Agreement, free and clear of all liens,
encumbrances, equities and claims whatsoever. If either of the undersigned is
acting as a fiduciary, officer, partner, or agent, he is enclosing with this
Agreement certified copies of the appropriate instruments pursuant to which the
undersigned is authorized to act hereunder.
B. Bring-down of Representations, Warranties and Covenants. Each of the
undersigned has reviewed the representations and warranties to be made by the
undersigned as a Selling Stockholder contained in the Underwriting Agreement,
and hereby represents, warrants and covenants that each of such representations
and warranties is true and correct as of the date hereof and, except as the
undersigned shall have notified the Attorney-in-Fact and Advest, Inc. pursuant
to paragraph F of the attached instructions, will be true and correct at all
times from the date hereof through and including the time of the closing of the
sale of the Securities to the Underwriters. Each of the undersigned will
promptly notify the Attorney-in-Fact of any development that would make any such
representation or warranty untrue.
C. Absence of Changes. Each of the undersigned has reviewed the
Registration Statement, including the preliminary prospectus included therein,
and (i) the undersigned have no knowledge of any material adverse information
with regard to the current and prospective operations of the Company or the
Subsidiaries (as defined in the Underwriting Agreement) except as disclosed in
such preliminary prospectus, (ii) the information contained in such preliminary
prospectus with respect to the undersigned is true and correct, and (iii) to the
best of the knowledge and belief of the undersigned, such preliminary prospectus
does not contain any misstatement of a material fact or omit to state any
material fact.
D. Non-affiliation. Neither of the undersigned is directly or indirectly
an affiliate of or associated with any member of the National Association of
Securities Dealers, Inc.
E. Lock-up. The undersigned will not sell, offer to sell, contract to sell
or otherwise dispose of any shares of Common Stock (or any securities
convertible into or exercisable or exchangeable for shares of Common Stock)
except in accordance with the terms of the Lock-Up Agreement referred to in
Section 5(b)(i) of the Underwriting Agreement.
F. Indemnification. Upon execution and delivery of the Underwriting
Agreement by the Attorney-in-Fact on behalf of each of the undersigned, each of
the undersigned agrees to indemnify and hold harmless the Underwriters, the
Company, each of its directors and each of its officers who signs the
Registration Statement, and each person, if any, who controls any Underwriter or
the Company, and to contribute to amounts paid as a result of losses, claims,
damages, liabilities and expenses, as provided in Section 8 of the Underwriting
Agreement.
G. Agreement to be Bound. Upon execution and delivery of the Underwriting
Agreement by each of the undersigned or the Attorney-in-Fact on behalf of him,
each of the
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undersigned agrees to be bound by and to perform each of the covenants and
agreements made by each of the undersigned as a Selling Stockholder in the
Underwriting Agreement.
H. Additional Information. Each of the undersigned agrees to deliver to
the Attorney-in-Fact such documentation as the Attorney-in-Fact, the Company,
the other Selling Stockholder or the Underwriters or any of their respective
counsel may reasonably request in order to effectuate any of the provisions
hereof or of the Underwriting Agreement, all of the foregoing to be in form and
substance satisfactory in all respects to the requesting party.
The foregoing representations, warranties and agreements are made for the
benefit of, and may be relied upon by, each of the undersigned with respect to
the other Selling Stockholder, the Attorney-in-Fact, the Company, the Custodian,
the Underwriters and their respective representatives, agents and counsel and
are in addition to, and not in limitation of, the representations, warranties
and agreements of the Selling Stockholders in the Underwriting Agreement.
5. Irrevocability of Instruments; Termination of this Agreement.
A. Irrevocability. This Agreement, the deposit of the Securities pursuant
hereto and all authority hereby conferred, is granted, made and conferred
subject to and in consideration of (i) the interests of the Attorney-in-Fact,
the Underwriters and the Company for the purpose of completing the transactions
contemplated hereunder and by the Underwriting Agreement and (ii) the completion
of the registration of Common Stock pursuant to the Registration Statement and
the other acts of the above-mentioned parties from the date hereof to and
including the execution and delivery of the Underwriting Agreement in
anticipation of the sale of Common Stock, including the Securities, to the
Underwriters. The Attorney-in-Fact is hereby further vested with an estate,
right, title and interest in and to the Securities deposited herewith for the
purpose of irrevocably empowering and securing to him authority sufficient to
consummate said transactions. Accordingly, this Agreement shall be irrevocable
prior to the Closing Date (as defined in the Underwriting Agreement), and shall
remain in full force and effect until that date. The undersigned further agree
that this Agreement shall not be terminated by operation of law or upon the
occurrence of any event whatsoever, including the death, disability or
incompetence of either or both of the undersigned. If any event referred to in
the preceding sentence shall occur, whether with or without notice thereof to
the Attorney-in-Fact, the Custodian, any of the Underwriters or any other
person, the Attorney-in-Fact and the Custodian nevertheless shall be authorized
and empowered to deliver and deal with the Securities deposited under this
Agreement by the undersigned in accordance with the terms and provisions of the
Underwriting Agreement and this Agreement as if such event had not occurred.
B. Termination. If the sale of the Securities contemplated by this
Agreement is not completed by the 60th day after the date of the Prospectus (as
defined in the Underwriting Agreement), this Agreement shall terminate (without
affecting any lawful action of the Attorney-in-Fact or the Custodian prior to
such termination or the agreement of the undersigned to indemnify the
Attorney-in-Fact and the Custodian), and the Attorney-in-Fact shall cause the
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Custodian to return to the undersigned all certificates for the Securities
deposited hereunder, but only after having received payment of each of the
undersigned's proportionate part of any expenses to be paid or borne by the
Selling Stockholders. The undersigned hereby covenant with the Attorney-in-Fact
and with each other that if for any reason the sale of the Securities
contemplated hereby shall not be consummated, each of the undersigned shall pay
his proportionate share of all expenses payable by the Selling Stockholders
hereunder or under the Underwriting Agreement.
6. Liability and Indemnification of the Attorney-in-Fact and Custodian. The
Attorney-in-Fact and the Custodian assume no responsibility or liability to the
undersigned or to any other person, other than to deal with the Securities, the
proceeds from the sale of the Securities and any other shares of Common Stock
deposited with the Custodian pursuant to the terms of this Agreement in
accordance with the provisions hereof. The duties and obligations of the
Custodian shall be limited to and determined solely by the express provisions of
this Agreement, and no implied duties or obligations shall be read into this
Agreement against the Custodian. The undersigned hereby agree to indemnify and
hold harmless the Attorney-in-Fact and the Custodian, and their respective
officers, agents, successors, assigns and personal representatives with respect
to any act or omission of or by any of them in good faith in connection with any
and all matters within the scope of this Agreement or the Underwriting
Agreement; provided, however, that the Attorney-in-Fact and the Custodian may be
liable to the undersigned for any such act or omission to the extent
attributable to gross negligence or fraud. The Custodian may consult with
counsel of its own choice and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
7. Interpretation.
A. Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements of each of the undersigned contained
herein and in the Underwriting Agreement shall survive the sale and delivery of
the Securities and the termination of this Agreement.
B. Governing Law. The validity, enforceability, interpretation and
construction of this Agreement shall be determined in accordance with the laws
of the State of New York applicable to contracts made and to be performed within
the State of New York, and this Agreement shall inure to the benefit of, and be
binding upon, the undersigned and the undersigned's respective heirs, executors,
administrators, successors and assigns, as the case may be.
C. Validity. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any such provision shall be prohibited by or invalid under applicable
law, it shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
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D. Usage. The use of the masculine gender in this Agreement includes the
feminine and neuter, and the use of the singular includes the plural, wherever
appropriate.
E. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall constitute an
original and all together shall constitute one instrument.
F. Binding Effect. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by and against, the respective successors, heirs,
personal representatives and assigns of the parties hereto.
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IN WITNESS WHEREOF, the undersigned have executed this Custody Agreement
and Power of Attorney this ____ day of ______________, 1999.
Selling Stockholder: Jack Friedman Guaranteed by (2):
By:(1) ______________________________ By:______________________________
Name: Name:
Title: Title:
Name and address to which notices and funds shall be sent:
Name: _______________________________
Address: _____________________________
(Street)
_____________________________
(City) (State) (Zip)
ACCEPTED by the Attorney-in-Fact as of ACCEPTED by the Custodian as of the date
the date above set forth: above set forth:
By: _______________________________ Boston Safe and Deposit Company
Name: Murray L. Skala
By: _______________________________
Name:
Title:
SEE THE ATTACHED INSTRUCTIONS
- --------------------------
(1) NOTE: Please sign exactly as your name appears on your stock certificate(s).
(2) NOTE: The signature must be guaranteed by a commercial bank or trust company
in the United States or by a member firm of the Nasdaq National
Market.
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Selling Stockholder: Stephen G. Berman Guaranteed by (2): ______________
By:(1)____________________________ By:______________________________
Name: Name:
Title: Title:
Name and address to which notices and
funds shall be sent:
Name: _______________________________
Address: _____________________________
(Street)
_____________________________
(City) (State) (Zip)
ACCEPTED by the Attorney-in-Fact as of ACCEPTED by the Custodian as of the date
the date above set forth: above set forth:
By: _______________________________ Boston Safe and Deposit Company
Name: Murray L. Skala
By: _______________________________
Name:
Title:
SEE THE ATTACHED INSTRUCTIONS
- --------------------------
(1) NOTE: Please sign exactly as your name appears on your stock certificate(s).
(2) NOTE: The signature must be guaranteed by a commercial bank or trust company
in the United States or by a member firm of the Nasdaq National
Market.
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INSTRUCTIONS
(For completing the Custody Agreement and Power of Attorney)
A. You have been sent five copies of the Custody Agreement and Power of
Attorney (the "Agreement"). Please complete and return four copies of the
Agreement and stock certificate(s) as set forth in paragraph D below. A fully
executed copy of the Agreement will be returned to you; a fully executed copy of
the Agreement and your stock certificate(s) will be retained by the Custodian;
and a fully executed copy of the Agreement will be delivered to each
Attorney-in-Fact and to Counsel for the Underwriters.
B. Complete Schedule I attached hereto.
C. Each copy of the Agreement and each stock certificate or stock power
deposited hereunder must be executed by you (or by the Attorney-in-Fact) with
your signature on the Agreement and the stock certificate(s) or the accompanying
stock power guaranteed by a commercial bank or trust company in the United
States or any broker which is a member firm of the Nasdaq National Market. The
stock certificate(s) or stock power and the Agreement should be signed exactly
as your name appears on your stock certificate(s).
D. Endorsed stock certificate(s) or stock certificate(s) with stock powers
attached along with all four executed copies of the completed Agreement should
be promptly returned by hand delivery or by certified mail appropriately insured
to the Custodian at:
Boston Safe and Deposit Company
Attn: Keith Jackson
If sent through the mail, it is recommended that the certificate(s) not be
endorsed, but an executed stock power be sent under separate cover from the
certificate(s).
E. If any certificate that you submit represents a greater number of
Securities than the aggregate number of Securities which you agree to sell
pursuant to the Underwriting Agreement (including any additional shares which
you agree to sell), the Custodian will cause to be delivered to you in due
course, but not earlier than ten days after the final closing for the purchase
of Securities by the Underwriters pursuant to the exercise by the Underwriters
of the over-allotment option described in the Underwriting Agreement, a
certificate for the excess number of shares.
F. For purposes of discharging your obligations under Section 6(f) of the
Underwriting Agreement and Section 4B of the Agreement please contact Brett A.
Chamberlain of Advest, Inc. by phone at (212) 584-4274 or by facsimile at (212)
584-4292 if any information or representation included in the foregoing
Agreement or the Underwriting Agreement should change, or if you become aware of
any new information, at any time prior to termination of the period applicable
to you referred to in Section 6(b)(ii) of the Underwriting Agreement.
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Jack Friedman
(Name of Selling Stockholder)
SCHEDULE I
Certificate(s) for Securities of Common Stock of JAKKS Pacific, Inc.
deposited under
Custody Agreement and Power of Attorney
Number of Shares Number of Shares of
Certificate of Common Stock Common Stock from
Number Represented by Certificate this Certificate to Be Sold*
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
Total:____________ Total: 192,000
*If fewer than all shares represented by a certificate are to be sold, indicate
below, if desired for income tax purposes, the date of purchase or purchase
price of the particular shares to be sold.
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Stephen Berman
(Name of Selling Stockholder)
SCHEDULE I
Certificate(s) for Securities of Common Stock of JAKKS Pacific, Inc.
deposited under
Custody Agreement and Power of Attorney
Number of Shares Number of Shares of
Certificate of Common Stock Common Stock from
Number Represented by Certificate this Certificate to Be Sold*
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
------------- ------------- -------------
Total:____________ Total: 58,000
*If fewer than all shares represented by a certificate are to be sold, indicate
below, if desired for income tax purposes, the date of purchase or purchase
price of the particular shares to be sold.
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SCHEDULE II
Fees of Custodian
[TO COME]
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EXHIBIT B
JAKKS PACIFIC, INC.
LOCK-UP AGREEMENT
March 19, 1999
Advest, Inc.
Morgan Keegan & Company
Southwest Securities, Inc.
As Representatives of the Underwriters
One Rockefeller Plaza
New York, New York 10020
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the
underwriters (the "Underwriters"), propose to enter into an underwriting
agreement (the "Underwriting Agreement") with JAKKS Pacific, Inc. (the
"Company") providing for the public offering (the "Public Offering") by the
Underwriters, including yourself, of common stock of the Company, par value
$.001 (the "Common Stock"), pursuant to the Company's Registration Statement on
Form S-3 (the "Registration Statement").
In consideration of the Underwriters' agreement to purchase and make the
Public Offering of the Common Stock, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned hereby
agrees, for a period commencing on the date of the final prospectus relating to
the Public Offering and continuing for 180 days thereafter (but not to extend
beyond December 15, 1999) (the "Lock-Up Period"), not to offer, sell, offer to
sell, solicit an offer to buy, contract to sell, encumber, distribute, pledge,
grant any option for the sale of, or otherwise transfer or dispose of, directly
or indirectly, in one or a series of transactions (collectively, a
"Disposition"), any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock or any securities convertible or exercisable into or
exchangeable for shares of Common Stock (collectively, "Securities"), now owned
or hereafter acquired by the undersigned or with respect to which the
undersigned has acquired or hereafter acquires the power of disposition, without
the prior written consent of Advest, Inc., other than (i) any shares of Common
Stock to be sold pursuant to the Underwriting Agreement and (ii) shares of
Common Stock disposed of as bona fide gifts approved by Advest, Inc. Prior to
the expiration of the Lock-Up Period, the undersigned agrees that it will not
announce or disclose any intention to do anything after the expiration of such
period which the undersigned is prohibited, as provided in the preceding
sentence, from doing during the Lock-Up Period. In addition, for the benefit of
the Company and the Underwriters, the undersigned hereby (i) waives during the
Lock-up Period any right it may have to cause the Company to register pursuant
to the Securities Act of 1933, as amended, shares of Common Stock now owned or
hereafter acquired or received by the undersigned as a result of the Public
Offering and (ii) during the Lock-Up Period, agrees not to
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exercise any such registration rights and further agrees that the Company shall
not be obligated to register any shares in violation of the Underwriting
Agreement.
The undersigned acknowledges and agrees that the restrictions above are
expressly agreed to preclude the holder of the Securities from engaging in any
hedging or other transaction which is designed to or reasonably expected to lead
to or result in a Disposition of Securities (or the economic equivalent thereof)
during the Lock-Up Period even if such Securities would be disposed of by
someone other than the undersigned. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based marked basket or index) that
includes, relates to or derives any significant part of its value from the
Securities.
The undersigned hereby also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent against the transfer of
the Securities held by the undersigned except in compliance with this Lock-Up
Agreement.
It is understood that, if the Underwriting Agreement is not executed, or
if the Underwriting Agreement shall terminate or be terminated prior to payment
for and delivery of the Common Stock the subject thereof, this Lock-Up Agreement
shall automatically terminate and be of no further force or effect.
This Lock-Up Agreement shall be governed by and construed in accordance
with the laws of the State of New York (without giving effect to its conflict of
laws provisions).
Very truly yours,
-----------------------------
Name:
Address:
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