1
Draft of June 3, 1996
Subject to Change
THE FIRST YEARS INC.
1,600,000 SHARES
COMMON STOCK
($.01 PAR VALUE)
UNDERWRITING AGREEMENT
June __, 1996
A.G. EDWARDS & SONS, INC.
ADAMS, HARKNESS & HILL, INC.
As Representatives of the Several Underwriters
c/o A.G. Edwards & Sons, Inc.
One North Jefferson Avenue
St. Louis, Missouri 63103
The undersigned, The First Years Inc., a Massachusetts corporation (the
"Company"), and the persons listed on Schedule I hereto (the "Selling
Shareholders"), hereby address you as the representatives (the
"Representatives") of each of the persons, firms and corporations listed on
Schedule II hereto (collectively, the "Underwriters") and hereby confirm their
agreement with the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell to the
Underwriters 400,000 shares of its Common Stock, par value $.10 per share, and
the Selling Shareholders severally propose to sell to the Underwriters a total
of 1,200,000 shares of the Company's Common Stock, par value $.10 per share, as
set forth on Schedule I hereto (such 1,600,000 shares of Common Stock are herein
referred to as the "Firm Shares"). Solely for the purpose of covering
over-allotments in the sale of the Firm Shares, the Company further proposes to
grant the right to the Underwriters to purchase up to an additional 240,000
shares of Common Stock, par value $.10 per share (the "Option Shares"), as
provided in Section 3 of this Agreement. The Firm Shares and the Option Shares
are herein sometimes referred to as the "Shares" and are more fully described in
the Prospectus hereinafter defined.
2. PURCHASE, SALE AND DELIVERY OF FIRM SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees and each Selling
Shareholder agrees, severally and not jointly, to sell to the Underwriters, and
each such Underwriter agrees, severally and not jointly, (a) to purchase from
the Company and from each of the Selling
2
Shareholders, pro rata, at a purchase price of $ per share, the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule II
hereto and (b) to purchase from the Company any additional number of Option
Shares which such Underwriter may become obligated to purchase pursuant to
Section 3 hereof.
The Company and the Selling Shareholders will deliver definitive
certificates for the Firm Shares at the office of A.G. Edwards & Sons, Inc., 77
Water Street, New York, New York ("Edwards' Office"), or such other place as you
and the Company may mutually agree upon, for the accounts of the Underwriters
against payment to the Company and the Selling Shareholders of the purchase
price for the Firm Shares sold by them to the several Underwriters by wire
transfer or certified or bank cashier's check in clearing house (next day
available) funds payable to the order of the Company and the Selling
Shareholders, respectively, and delivered to the offices of Ropes & Gray, One
International Place, Boston, MA 02110, or at such other place as may be agreed
upon between you and the Company (the "Place of Closing"), at 10:00 a.m., Boston
time, on ____________, 1996, or at such other time and date not later than three
full business days thereafter as you and the Company may agree, such time and
date of payment and delivery being herein called the "Closing Date."
The certificates for the Firm Shares so to be delivered will be made
available to you for inspection at Edwards' Office (or such other place as you
and the Company may mutually agree upon) at least one full business day prior to
the Closing Date and will be in such names and denominations as you may request
at least three full business days prior to the Closing Date.
It is understood that an Underwriter, individually, may (but shall not be
obligated to) make payment on behalf of the other Underwriters whose checks
shall not have been received prior to the Closing Date for Shares to be
purchased by such Underwriter. Any such payment by an Underwriter shall not
relieve the other Underwriters of any of their obligations hereunder.
It is understood that the Underwriters propose to offer the Shares to the
public upon the terms and conditions set forth in the Registration Statement
hereinafter defined.
3. PURCHASE, SALE AND DELIVERY OF THE OPTION SHARES. The Company hereby
grants an option to the Underwriters to purchase from them on a pro rata basis
up to 240,000 Option Shares on the same terms and conditions as the Firm Shares;
provided, however, that such option may be exercised only for the purpose of
covering any over-allotments which may be made by them in the sale of the Firm
Shares. No Option Shares shall be sold or delivered unless
-2-
3
the Firm Shares previously have been, or simultaneously are, sold and delivered.
The option is exercisable on behalf of the several Underwriters by you, as
Representatives, at any time, and on one occasion, before the expiration of 30
days from the date of this Agreement, for the purchase of all or part of the
Option Shares covered thereby, by notice given by you to the Company in the
manner provided in Section 13 hereof, setting forth the number of Option Shares
as to which the Underwriters are exercising the option, and the date of delivery
of said Option Shares, which date shall not be less than three business days
after such notice unless otherwise agreed to by the parties. You may terminate
the option at any time, as to any unexercised portion thereof, by giving written
notice to the Company to such effect.
You, as Representatives, shall make such allocation of the Option Shares
among the Underwriters as may be required to eliminate purchases of fractional
Shares.
Delivery of the Option Shares with respect to which the option shall have
been exercised shall be made to or upon your order at Edwards' Office (or at
such other place as you and the Company may mutually agree upon), against
payment by you of the per share purchase price to the Company by wire transfer
or certified or bank cashier's check or checks, payable in clearing house (next
day available) funds. Such payment and delivery shall be made at 10:00 a.m., St.
Louis time, on the date designated in the notice given by you as above provided
for, unless some other date and time are agreed upon, which date and time of
payment and delivery are called the "Option Closing Date." The certificates for
the Option Shares so to be delivered will be made available to you for
inspection at Edwards' Office at least one full business day prior to the Option
Closing Date and will be in such names and denominations as you may request at
least two full business days prior to the Option Closing Date. On the Option
Closing Date, the Company shall provide the Underwriters such representations,
warranties, opinions and covenants with respect to the Option Shares as are
required to be delivered on the Closing Date with respect to the Firm Shares.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
SELLING SHAREHOLDERS. (a) The Company represents and warrants to and agrees with
each Underwriter that:
(i) A Registration statement (Registration No. 33-62673) on Form S-1
with respect to the Shares, including a preliminary prospectus, and such
amendments to such Registration statement as may have been required to the
date of this Agreement, has been carefully prepared by the Company
-3-
4
pursuant to and in conformity with the requirements of the Securities Act
of 1933, as amended (the "Act"), and the Rules and Regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission under the
Act. Copies of such Registration Statement, including any amendments
thereto, each related preliminary prospectus (meeting the requirements of
Rule 430 or 430A of the Rules and Regulations) contained therein, the
exhibits, financial statements and schedules have heretofore been delivered
by the Company to you. If such Registration Statement has not become
effective under the Act, a further amendment to such Registration
Statement, including a form of final prospectus, necessary to permit such
Registration Statement to become effective will be filed promptly by the
Company with the Commission. If such Registration Statement has become
effective under the Act, a final prospectus containing information
permitted to be omitted at the time of effectiveness by Rule 430A of the
Rules and Regulations will be filed promptly by the Company with the
Commission in accordance with Rule 424(b) of the Rules and Regulations. The
term "Registration Statement" as used herein means the Registration
statement as amended at the time it becomes or became effective under the
Act (the "Effective Date"), including financial statements and all exhibits
and, if applicable, the information deemed to be included by Rule 430A of
the Rules and Regulations. The term "Prospectus" as used herein means the
prospectus as first filed with the Commission pursuant to Rule 424(b) of
the Rules and Regulations or, if no such filing is required, the form of
final prospectus included in the Registration Statement at the Effective
Date. The term "Preliminary Prospectus" as used herein shall mean a
preliminary prospectus as contemplated by Rule 430 or 430A of the Rules and
Regulations included at any time in the Registration Statement.
(ii) The Commission has not issued, and is not to the knowledge of the
Company threatening to issue, an order preventing or suspending the use of
any Preliminary Prospectus or the Prospectus nor instituted proceedings for
that purpose. Each Preliminary Prospectus at its date of issue, the
Registration Statement and the Prospectus and any amendments or supplements
thereto contains or will contain, as the case may be, all statements which
are required to be stated therein by, and in all material respects conform
or will conform, as the case may be, to the requirements of, the Act and
the Rules and Regulations. Neither the Registration Statement nor any
amendment thereto, as of the applicable effective date, and neither the
Prospectus nor any supplement thereto contains or will contain, as the case
may be, any
-4-
5
untrue statement of a material fact or omits or will omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representation or warranty as to information contained in or omitted from
the Registration Statement or the Prospectus, or any such amendment or
supplement, in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Underwriters specifically
for use in the preparation thereof.
(iii) The filing of the Registration Statement and the execution and
delivery of this Agreement have been duly authorized by the Board of
Directors of the Company; this Agreement constitutes a valid and legally
binding obligation of the Company enforceable in accordance with its terms
(except to the extent the enforceability of the indemnification and
contribution provisions of Section 7 hereof may be limited by public policy
considerations as expressed in the Act as construed by courts of competent
jurisdiction, and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditors'
rights generally and by general principles of equity); the issue and sale
of the Shares by the Company and the performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
violation of the Company's articles of organization or bylaws or result in
a breach or violation of any of the terms and provisions of, or constitute
a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any properties or assets of the Company under,
any statute, or under any indenture, mortgage, deed of trust, note, loan
agreement, sale and leaseback arrangement or other agreement or instrument
to which the Company is a party or by which they are bound or to which any
of the properties or assets of the Company is subject, or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or its properties, except to such extent as
does not materially adversely affect the business of the Company (a
"Material Adverse Effect"); no consent, approval, authorization, order,
registration or qualification of or with any court or governmental agency
or body is required for the consummation of the transactions herein
contemplated, except such as may be required by the National Association of
Securities Dealers, Inc. (the "NASD") or any state securities laws.
(iv) Except as described in the Prospectus, the Company has not
sustained since the date of the latest audited
-5-
6
financial statements included in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree. Except as contemplated in
the Prospectus, subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, the Company has
not incurred any material liabilities or material obligations, direct or
contingent, other than in the ordinary course of business, or entered into
any material transactions not in the ordinary course of business, and there
has not been any material change in the capital stock or long-term debt of
the Company or any material adverse change in the condition (financial or
other), net worth, business, affairs, management, prospects or results of
operations of the Company. The Company has filed all necessary federal,
state and foreign income and franchise tax returns and paid all taxes shown
as due thereon; all tax liabilities are adequately provided for on the
books of the Company except to the extent such business would not have a
Material Adverse Effect; the Company has made all necessary payroll tax
payments and is current and up-to-date as of the date of this Agreement;
and the Company has no knowledge of any tax proceeding or action pending or
threatened against the Company that would have a Material Adverse Effect.
(v) Except as described in the Prospectus, there is not now pending
or, to the knowledge of the Company, threatened or contemplated, any
action, suit or proceeding to which the Company is a party before or by any
court or public, regulatory or governmental agency or body which, if
determined adversely to the Company, might be expected to result
(individually or in the aggregate) in a Material Adverse Effect; and there
are no contracts or documents of the Company which would be required to be
filed as exhibits to the Registration Statement by the Act or by the Rules
and Regulations which have not been filed as exhibits to the Registration
Statement.
(vi) The Company has duly and validly authorized capital stock as
described in the Prospectus; all outstanding shares of Common Stock of the
Company and the Shares conform, or when issued will conform, to the
description thereof in the Registration Statement and the Prospectus and
have been, or, when issued and paid for will be, duly authorized, validly
issued, fully paid and nonassessable; and the issuance of the Shares to be
purchased from the Company hereunder is not subject to preemptive rights.
-6-
7
(vii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the Commonwealth of
Massachusetts, with full power and authority (corporate and other) to own,
lease and operate its properties and conduct its business as described in
the Registration Statement; the Company is duly qualified to do business as
a foreign corporation in good standing in each state or other jurisdiction
in which its ownership or leasing of property or conduct of business
legally requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect; the Company has no
subsidiaries, does not control, directly or indirectly, any corporation,
firm, partnership, association, or other business organization, and does
not own any shares of stock or any other securities of (other than bank
certificates of deposit, shares or units of interest in "money market"
funds, or as set forth in the Prospectus) or have any interest in, any
corporation, firm, partnership, association, or other business
organization.
(viii) Deloitte & Touche LLP, the accounting firm which has certified
or reviewed portions of the financial statements filed with the Commission
as a part of the Registration Statement, some of which are included in the
Prospectus, is an independent public accounting firm within the meaning of
the Act and the Rules and Regulations.
(ix) The financial statements and schedules of the Company, including
the notes thereto, filed with and as a part of the Registration Statement,
present fairly in all material respects the financial position of the
Company as of the respective dates thereof and the results of operations
and statements of cash flow for the respective periods covered thereby, all
in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved except as otherwise
disclosed in the Prospectus. The selected financial data included in the
Registration Statement and Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with that of the
audited financial statements in the Registration Statement and Prospectus.
(x) The Company is not in default with respect to any contract or
agreement to which it is a party, except such defaults which in the
aggregate would not have a Material Adverse Effect.
(xi) The Company is not in violation of any laws, ordinances or
governmental rules or regulations to which it is subject, and the Company
has not failed to obtain any
-7-
8
licenses, permits, franchises, easements, consents, or other governmental
authorizations necessary to the ownership, leasing and operation of its
properties or to the conduct of its business, except such violations or
failures as would not have a Material Adverse Effect. The Company has not
at any time during the past five years (A) made any unlawful contributions
to any candidate for any political office, or failed fully to disclose any
contribution in violation of law, or (B) made any payment to state, federal
or foreign government officer or officers, or other person charged with
similar public or quasi-public duty (other than payment required or
permitted by applicable law).
(xii) Except as described in the Prospectus, the Company owns or
possesses, adequate patents, patent licenses, trademarks, trademark
licenses, service marks and trade names necessary to conduct the business
now operated by it, and the Company has not received any notice of
infringement of or conflict with asserted rights of others with respect to
any patents, patent licenses, trademarks, trademark licenses, service marks
or trade names which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse
Effect.
(xiii) The Company has good and marketable title to all property owned
by it, free and clear of all liens, encumbrances, restrictions and defects
except such as are described in the Registration Statement or do not
interfere with the use made and proposed to be made of such property; and
any property held under lease or sublease by the Company is held under
valid, subsisting and enforceable leases or subleases with such exceptions
as are not material and do not interfere with the use made and proposed to
be made of such property by the Company, and the Company has no notice or
knowledge of any material claim of any sort which has been, or may be,
asserted by anyone adverse to the Company's rights as lessee or sublessee
under any lease or sublease described above, or affecting or questioning
the Company's rights to the continued possession of the leased or subleased
premises under any such lease or sublease in conflict with the terms
thereof.
(xiv) Except as described in the Prospectus, the Company is in
compliance in all material respects with the requirements of federal, state
or local regulation relating to air, water, solid waste management,
hazardous or toxic substances, or the protection of health or the
environment. Except as described in the Prospectus, there is not present on
property owned or leased by the Company any waste or hazardous substances
in violation of law and the Company will
-8-
9
not be deemed an "owner or operator" of a "facility" or "vessel" which
owns, possesses, transports, generates or disposes of a "hazardous
substance" in violation of applicable law as those terms are defined in ss.
9601 of the Comprehensive, Response Compensation and Liability Act of 1980,
42 U.S.C. ss. 9601 ET SEQ.
(xv) No labor disturbance exists with the employees of the Company or
is imminent that would have a Material Adverse Effect.
(xvi) The Company has not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in stabilization or manipulation of the price of the
Company's Common Stock, and the Company is not aware of any such action
taken or to be taken by affiliates of the Company.
(b) Each Selling Shareholder severally represents and warrants to and
agrees with each Underwriter and the Company that:
(i) All authorizations and consents necessary for the execution and
delivery by him or it of this Agreement and the sale and delivery of the
Shares to be sold by such Selling Shareholder hereunder have been given and
are in full force and effect on the date hereof and will be in full force
and effect on the Closing Date.
(ii) Such Selling Shareholder has, and on the Closing Date will have,
good and valid title to the Shares to be sold by such Selling Shareholder,
free and clear of all liens, mortgages, pledges, encumbrances, claims,
equities and security interests whatsoever, and will have full right, power
and authority to enter into this Agreement and to sell, assign, transfer
and deliver the Shares to be sold by such Selling Shareholder hereunder.
(iii) Upon delivery of and payment for such Shares hereunder, the
several Underwriters will acquire valid and unencumbered title to such
Shares to be sold by such Selling Shareholder hereunder, free and clear of
all liens, mortgages, pledges, encumbrances, claims, equities and security
interests whatsoever.
(iv) The consummation by such Selling Shareholder of the transactions
contemplated herein and the fulfillment by such Selling Shareholder of the
terms hereof will not result in a violation or breach of any terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, note, loan agreement, sale and leaseback arrangement
-9-
10
or other agreement or instrument to which such Selling Shareholder is a
party, or of any order, rule or regulation applicable to such Selling
Shareholder of any court or of any regulatory body of an administrative
agency or other governmental body having jurisdiction.
(v) Such Selling Shareholder has not taken and will not take, directly
or indirectly, any action designed to or which might be reasonably expected
to cause or result in stabilization or manipulation of the price of the
Company's Common Stock, and such Selling Shareholder is not aware of any
such action taken or to be taken by affiliates of such Selling Shareholder.
(vi) The information in the Registration Statement and Prospectus and
any amendments or supplements thereto as specifically refers to such
Selling Shareholder does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(vii) Certificates in negotiable form representing all of the Shares
to be sold by such Selling Shareholder hereunder have been placed in the
custody of the Company (the "Custodian") under a Custody Agreement (the
"Custody Agreement"), duly executed and delivered by such Selling
Shareholder, with the Custodian having the authority to deliver the Shares
to be sold by such Selling Shareholder hereunder, and that such Selling
Shareholder has duly executed and delivered a Power of Attorney (the "Power
of Attorney") appointing Ronald J. Sidman and Benjamin Peltz as such
Selling Shareholder's attorneys-in-fact (the "Attorneys-in-Fact") with the
Attorneys-in-Fact having authority to execute and deliver this Agreement on
behalf of such Selling Shareholder, to determine the purchase price to be
paid by the Underwriters to the Selling Shareholders as provided in Section
2, to authorize the delivery of the Shares to be sold by him or it
hereunder and otherwise to act on behalf of such Selling Shareholder in
connection with the transactions contemplated by this Agreement and such
Custody Agreement.
(viii) The Shares represented by the certificates held in custody for
such Selling Shareholder under the Custody Agreement are subject to the
interests of the Underwriters hereunder, and the arrangements made by such
Selling Shareholder for such custody, and the appointment by such Selling
Shareholder of the Custodian under the Custody Agreement and the
Attorneys-in-Fact by the Power of Attorney, are to that extent irrevocable.
-10-
11
(ix) The obligations of such Selling Shareholders hereunder shall not
be terminated by operation of law, whether by the death or incapacity of
any individual Selling Shareholder or by the occurrence of any other event,
and if any Selling Shareholder should die or become incapacitated, or if
any other such event should occur before the delivery of the Shares
hereunder, certificates representing the Shares shall be delivered by or on
behalf of each Selling Shareholder in accordance with the terms and
conditions of this Agreement and of the Custody Agreement, and actions
taken by the Custodian pursuant to the Custody Agreement or by the
Attorneys-in-Fact pursuant to the Power of Attorney shall be as valid as if
such death, incapacity or other event had not occurred, regardless of
whether or not the Custodian or Attorneys-in-Fact, or any of them, shall
have received notice of such death, incapacity of other event.
(x) Such Selling Shareholder is not prompted to sell shares of Common
Stock by any information concerning the Company which is not included in
the Registration Statement.
(c) Any certificate signed by any officer of the Company and delivered to
you or to counsel for the Underwriters shall be deemed a representation and
warranty by the Company to each Underwriter as to the matters covered thereby;
and any certificate signed by or on behalf of a Selling Shareholder as such and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by such Selling Shareholder to each Underwriter as
to the matters covered thereby.
5. ADDITIONAL COVENANTS. The Company and, where expressly indicated, the
Selling Shareholders, covenant and agree with the several Underwriters that:
(a) If the Registration Statement is not effective under the Act, the
Company will use its best efforts to cause the Registration Statement to become
effective as promptly as possible, and it will notify you, promptly after it
shall receive notice thereof, of the time when the Registration Statement has
become effective. The Company (i) will prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations, if required, a
Prospectus containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations or otherwise; (ii) will not file any amendment to the
Registration Statement or supplement to the Prospectus of which the Underwriters
shall not previously have been advised and furnished with a copy or to which the
Underwriters shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations; and (iii) will promptly notify you
-11-
12
after it shall have received notice thereof of the time when any amendment to
the Registration Statement becomes effective or when any supplement to the
Prospectus has been filed.
(b) The Company will advise the Underwriters promptly, after it shall
receive notice or obtain knowledge thereof, of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information, or of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the use of
the Prospectus or of the institution or threatening of any proceedings for that
purpose, and the Company will use its best efforts to prevent the issuance of
any such stop order preventing or suspending the use of the Prospectus and to
obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Underwriters and their counsel in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as they may have designated and will make such applications, file
such documents, and furnish such information as may be necessary for that
purpose, provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a consent
or to subject itself to taxation as doing business in any jurisdiction where it
is not now so taxed. The Company will, from time to time, file such statements,
reports, and other documents, as are or may be required to continue such
qualifications in effect for so long a period as the Underwriters may reasonably
request.
(d) The Company will deliver to, or upon the order of, the Underwriters,
without charge from time to time, as many copies of any Preliminary Prospectus
as they may reasonably request. The Company will deliver to, or upon the order
of, the Underwriters without charge as many copies of the Prospectus, or as it
thereafter may be amended or supplemented, as they may from time to time
reasonably request. The Company consents to the use of such Prospectus by the
Underwriters and by all dealers to whom the Shares may be sold, both in
connection with the offering or sale of the Shares and for such other purposes
and for such period of time thereafter as the Prospectus is required by law to
be delivered in connection therewith. The Company will deliver to the
Underwriters at or before the Closing Date two signed copies of the Registration
Statement and all amendments thereto including all exhibits filed therewith, and
will deliver to the Underwriters such number of copies of the Registration
Statement, without exhibits, and of all amendments thereto, as they may
reasonably request.
-12-
13
(e) If, during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, any event shall occur as a result of
which, in the judgment of the Company or in your judgment or in the opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law.
(f) The Company will make generally available to its Shareholders, as soon
as it is practicable to do so, but in any event not later than 17 months after
the effective date of the Registration Statement, an earnings statement in
reasonable detail, covering a period of at least 12 consecutive months beginning
after the effective date of the Registration Statement, which earnings statement
shall satisfy the requirements of Section 11(a) of the Act and Rule 158 of the
Rules and Regulations and will advise the Underwriters in writing when such
statement has been so made available.
(g) The Company will, for a period of five years from the Closing Date,
deliver to the Underwriters at their principal executive offices a reasonable
number of copies of annual reports, quarterly reports, current reports and
copies of all other documents, reports and information furnished by the Company
to its shareholders or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Act or the
Securities and Exchange Act of 1934, as amended. The Company will deliver to the
Underwriters similar reports with respect to any significant subsidiaries, as
that term is defined in the Rules and Regulations, which are not consolidated in
the Company's financial statements. Any report, document or other information
required to be furnished under this paragraph (g) shall be furnished as soon as
practicable after such report, document or information becomes available.
(h) The Company will apply the proceeds from the sale of the Shares as set
forth in the description under "Use of Proceeds" in the Prospectus, which
description complies in all respects with the requirements of Item 504 of
Regulation S-K.
(i) The Company will supply you with copies of all correspondence to and
from, and all documents issued to and by,
-13-
14
the Commission in connection with the registration of the Shares under the Act.
(j) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company will furnish to you, as soon as they have been prepared,
copies of any unaudited interim financial statements of the Company for any
periods subsequent to the periods covered by the financial statements appearing
in the Registration Statement and the Prospectus.
(k) Prior to the Closing Date (and, if applicable, the Option Closing
Date), neither the Company nor any Selling Shareholder will issue any press
releases or other communications directly or indirectly and will hold no press
conferences with respect to the Company or any of its subsidiaries, the
financial condition, results or operations, business, properties, assets or
liabilities of the Company or any of its subsidiaries, or the offering of the
Shares, without your prior written consent, except as may be required by law.
(l) The Company will use its best efforts to maintain the quotation of
the shares on the Nasdaq National Market System (the "NNM") or a substantially
comparable national securities exchange or trading system.
(m) For a period of 180 days from the Effective Date, the Company will
not, and will use its best efforts to cause its directors to not, directly or
indirectly sell, contract to sell or otherwise dispose of any shares of the
Company's Common Stock or rights to acquire such shares without your prior
written consent, except for the Shares sold hereunder and except for sales of
shares of Common Stock to the Company's employees pursuant to the exercise of
options described in the Prospectus under the Company's stock option plans.
(n) For a period of 180 days from the Effective Date, the Selling
Shareholders will not directly or indirectly sell, contract to sell or otherwise
dispose of any shares of the Company's Common Stock or rights to acquire such
shares without your prior written consent, except for the Shares sold hereunder.
(o) The Company will maintain and keep accurate books and records
reflecting their assets and maintain internal accounting controls which provide
reasonable assurance that (1) transactions are executed in accordance with
management's authorization, (2) transactions are recorded as necessary to permit
the preparation of the Company's financial statements and to maintain
accountability for the assets of the Company, (3) access to the assets of the
Company is permitted only in accordance with management's authorization, and (4)
the recorded accounts of the
-14-
15
assets of the Company are compared with existing assets at reasonable intervals.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the
Underwriters to purchase and pay for the Shares, as provided herein, shall be
subject to the accuracy as of the date hereof and as of the Closing Date (and,
if applicable, the Option Closing Date), of the representations and warranties
of the Company and the Selling Shareholders contained herein, to the performance
by the Company and the Selling Shareholders of their covenants and obligations
hereunder, and to the following additional conditions:
(a) All filings required by Rule 424 and Rule 430A of the Rules and
Regulations shall have been made. No stop order suspending the effectiveness of
the Registration Statement, as amended from time to time, shall have been issued
and no proceeding for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened or contemplated by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the reasonable satisfaction of the Underwriters.
(b) On the Closing Date (and, if applicable, the Option Closing Date), you
shall have received the opinion of Ropes & Gray, counsel for the Company and
Selling Shareholders, addressed to you and dated the Closing Date (and, if
applicable, the Option Closing Date), to the effect that:
(i) The Company is a corporation duly organized, validly existing and
in good standing with the Secretary of State under the laws of the
Commonwealth of Massachusetts with corporate power to own its properties
and conduct its business as described in the Prospectus. The Company is
duly qualified to do business as a foreign corporation in each jurisdiction
in which it owns or leases property.
(ii) The authorized capital stock of the Company is as set forth in
the Capitalization table contained in the Prospectus. The Shares to be sold
by the Selling Shareholders have been duly authorized and validly issued
and are fully paid and nonassessable. The Shares to be sold by the Company
have been duly authorized and, when delivered and paid for in accordance
with this Agreement, will be validly issued, fully paid and nonassessable.
(iii) The Shares conform as to matters of law with the description
thereof contained in the Prospectus under "Description of Capital Stock."
-15-
16
(iv) The filing of the Registration Statement has been duly authorized
by the Company. The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.
(v) The issuance and sale by the Company of the Shares to be sold by
it will not (x) violate the Articles of Organization or By-Laws of the
Company, (y) breach or result in a default under any agreement or
instrument listed as an Exhibit to the Registration Statement or (z)
violate any applicable law or regulation, or, to the knowledge of such
counsel, any order, writ, injunction or decree, of any jurisdiction, court
or governmental instrumentality binding upon the Company or any of its
properties, except that such counsel need express no opinion as to state
securities or blue sky laws and except that such counsel need express no
opinion in this paragraph (v) as to compliance with the antifraud
provisions of federal and state securities laws.
(vi) To such counsel's knowledge, after reasonable investigation, no
holder of any security of the Company has the right to require registration
of shares of Common Stock of the Company.
(vii) No authorizations or consents of any governmental entity are
required to permit the Company to issue and sell the Shares except such as
may be required under state securities or blue sky laws, as to which
counsel need express no opinion, and except for such as have been obtained
under the Act.
(viii) The Company is not an "investment company" as defined in
Section 3(a) of the Investment Company Act of 1940, as amended.
(ix) The Underwriting Agreement has been duly authorized, executed and
delivered by each of the Selling Shareholders (through their duly
authorized attorney-in-fact).
(x) A Power of Attorney and Custody Agreement has been duly
authorized, executed and delivered by each of the Selling Shareholders and,
pursuant to such Power of Attorney and Custody Agreement, each Selling
Shareholder has authorized its Attorney-in-Fact to carry out transactions
contemplated in the Underwriting Agreement on its behalf, and to deliver
the Shares being sold by him, her or it pursuant to the Underwriting
Agreement.
-16-
17
(xi) Immediately prior to the closing date, each Selling Shareholder
was the sole registered owner of the Shares to be sold by such Selling
Shareholder; each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than any approval
required by the applicable state securities and blue sky laws) to sell,
assign, transfer and deliver the Shares to be sold by him, her or it in the
manner provided in the Underwriting Agreement and the Selling Shareholder's
Power of Attorney and Custody Agreement; upon registration of the Shares in
the names of the Underwriters in the stock records of the Company, assuming
the underwriters purchased the Shares in good faith and without notice of
any adverse claim within the meaning of Section 8-302 of the Massachusetts
Uniform Commercial Code, the Underwriters will have acquired good and valid
title to the Shares being sold by such Selling Shareholder free of any
adverse claim, any lien in favor of the Company, and any restrictions on
transfer imposed by the Company; and the owner of the Shares, if other than
such Selling Shareholder, is precluded from asserting against the
Underwriters the ineffectiveness of any unauthorized endorsement.
Such counsel shall also state the date on which the Registration Statement
became effective and that such counsel does not know of the issuance of any stop
order suspending the effectiveness of the Registration Statement by the
Commission or of any proceeding for that purpose under the Act.
Such counsel may state that it has not independently verified the accuracy,
completeness or fairness of the statements made or the information contained in
the Registration Statement or the Prospectus, and, except with respect to the
description referred to in paragraph (iii) above, such counsel is not passing
upon and does not assume any responsibility therefor. Such counsel shall also
state its belief that the Registration Statement, as of its effective date, and
the Prospectus, as of its date, complied as to form in all material respects
with the requirements of the Act and the published rules and regulations of the
Commission thereunder and that such counsel does not know of any legal or
governmental proceeding to which the Company is a party or to which any of its
property is subject required to be described in the Prospectus which is not so
described, nor of any contract or other document of a character required to be
described in the Prospectus or to be filed as an exhibit to the Registration
Statement which is not so described or filed. Further, such counsel shall state
that nothing has come to its attention that has caused it to believe that as of
its effective date, the Registration Statement contained any untrue statement or
a material fact or omitted to state any material fact required to be stated
therein or necessary
-17-
18
to make the statements therein not misleading, or that as of the effective date
of the Registration Statement or as of the date hereof the Prospectus contained
or contains any untrue statement of a material fact or omitted or omits to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Counsel need not
express an opinion as to the financial statements, including the notes and
schedules thereto, or any other financial or accounting information set forth or
referred to in the Registration Statement or the Prospectus.
In rendering the foregoing opinion, such counsel may rely, provided that
the opinion shall state that you and they are entitled to so rely, as to matters
involving laws of any jurisdiction other than Massachusetts or Federal law, upon
opinions addressed to the Underwriters of other counsel satisfactory to them and
Hale and Dorr, counsel to the Underwriters.
(c) On the Closing Date (and, if applicable, the Option Closing Date), you
shall have received the opinion of Fish & Richardson, intellectual property
counsel to the Company, addressed to you and dated the Closing Date (and, if
applicable, the Option Closing Date), to the effect that:
(i) To the best knowledge of such counsel, neither the Registration
Statement nor the Prospectus (A) contains any untrue statement of a
material fact with respect to trademarks, trade names, patents, mask works,
copyrights, licenses, trade secrets or other intellectual property rights
owned or used by the Company, or the manner of its use thereof, or any
allegation on the part of any person or entity that the Company is
infringing any trademarks, trade names, patent rights, mask works,
copyrights, licenses, trade secrets or other intellectual property rights
of any such person or entity or (B) omits to state any material fact
relating to trademarks, trade names, patents, mask works, copyrights,
licenses, trade secrets or other intellectual property rights owned or used
by the Company, or the manner of its use thereof, or any allegation of
which such counsel has knowledge, that is required to be stated in the
Registration Statement or the Prospectus or is necessary to make the
statements therein not misleading;
(ii) To the best knowledge of such counsel, there are no legal or
governmental proceedings pending relating to trademarks, trade names,
patent rights, mask works, copyrights, licenses, trade secrets or other
-18-
19
intellectual property rights of the Company other than prosecution by the
Company of its patent applications before the United States Patent Office
and appropriate foreign government agencies, and to the best knowledge of
such counsel no such proceedings are threatened or contemplated by
governmental authorities or others;
(iii) The Company duly and properly holds the trademarks, patents, and
has duly and properly filed trademark registrations, patent applications
and patent cooperation treaty applications, listed in the Prospectus under
the caption "Business - Trademarks, Patents and Copyrights". [To be
updated]
(iv) Such counsel does not know of any contracts or other documents
relating to the Company's trademarks, trade names, patents, mask works,
copyrights, licenses, trade secrets or other intellectual property rights
of a character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement or the
Prospectus that are not filed or described as required;
(v) To the best knowledge of such counsel, the Company is not
infringing or otherwise violating any trademarks, trade names, patents,
mask works, copyrights, licenses, trade secrets or other intellectual
property rights of others, and to the best knowledge of such counsel, there
are no infringements by others of any of the Company's trademarks, trade
names, patents, mask works, copyrights, licenses, trade secrets or other
intellectual property rights which in the judgment of such counsel could
affect materially the use thereof by the Company or the ability of the
Company to transfer any or all of such property or rights to a third party;
and
(vi) To the best knowledge of such counsel, the Company owns or
possesses sufficient licenses or other rights to use all trademarks, trade
names, patents, mask works, copyrights, licenses, trade secrets or other
intellectual property rights necessary to conduct the business now being or
proposed to be conducted by the Company as described in the Prospectus.
In rendering the foregoing opinion, such counsel may rely, provided that
the opinion shall state that you and they are entitled to so rely, as to matters
involving laws of any jurisdiction other than Massachusetts or Federal law, upon
-19-
20
opinions adverse to the Underwriters of other counsel satisfactory to them and
Hale and Dorr, counsel to the Underwriters.
(d) You shall have received on the Closing Date (and, if applicable, the
Option Closing Date), from Hale and Dorr counsel to the Underwriters, such
opinion or opinions, dated the Closing Date (and, if applicable, the Option
Closing Date) with respect to the incorporation of the Company, the validity of
the Shares, the Registration Statement, the Prospectus and other related matters
as you may reasonably require; the Company and the Selling Shareholders shall
have furnished to such counsel such documents as they reasonably request for the
purpose of enabling them to pass on such matters.
(e) You shall have received at or prior to the Closing Date a memorandum or
memoranda, in form and substance satisfactory to you, with respect to the
qualification for offering and sale by the Underwriters of the Shares under
state securities or Blue Sky laws of such jurisdictions as the Underwriters may
have designated to the Company.
(f) On the business day immediately preceding the date of this Agreement
and on the Closing Date (and, if applicable, the Option Closing Date), you shall
have received from Deloitte & Touche LLP, a letter or letters, dated the date of
this Agreement and the Closing Date (and, if applicable, the Option Closing
Date), respectively, in the form and substance satisfactory to you, confirming
that they are independent public accountants with respect to the Company within
the meaning of the Act and the published Rules and Regulations, and the answer
to Item 509 of Regulation S-K set forth in the Registration Statement is correct
insofar as it relates to them, and stating to the effect set forth in Schedule
III hereto.
(g) Except as contemplated in the Prospectus, (i) the Company shall not
have sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree; and (ii)
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, the Company shall not have incurred
any liability or obligation, direct or contingent, or entered into transactions,
and there shall not have been any change in the capital stock or long-term debt
of the Company any change in the condition (financial or other), net worth,
business, affairs, management, prospect or results of operations of the Company,
the effect of which, in any such case described in clause (i) or (ii), is in
your judgment so material and adverse as to make it impracticable
-20-
21
or inadvisable to proceed with the public offering or the delivery of the Shares
being delivered on such Closing Date (and, if applicable, the Option Closing
Date) on the terms and in the manner contemplated in the Prospectus.
(h) There shall not have occurred any of the following: (i) a suspension or
material limitation in trading in securities generally on the New York Stock
Exchange or the American Stock Exchange or the establishing on such exchanges by
the Commission or by such exchanges of minimum or maximum prices which are not
in force and effect on the date hereof; (ii) a general moratorium on commercial
banking activities declared by either federal or state authorities; (iii) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this clause (iii) in your judgment makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares in the manner contemplated in the Prospectus; (iv) any calamity or
crisis, change in national, international or world affairs, act of God, change
in the international or domestic markets, or change in the existing financial,
political or economic conditions in the United States or elsewhere, if the
effect of any such event specified in this clause (iv) makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares in
the manner contemplated in the Prospectus; or (v) the enactment, publication,
decree, or other promulgation of any federal or state statute, regulation, rule,
or order of any court or other governmental authority, or the taking of any
action by any federal, state or local government or agency in respect of fiscal
or monetary affairs, if the effect of any such event specified in this clause
(v) in your judgment makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares in the manner contemplated in the
Prospectus.
(i) You shall have received certificates, dated the Closing Date (and, if
applicable, the Option Closing Date) and signed by the President and the Chief
Financial Officer of the Company stating that (i) they have carefully examined
the Registration Statement and the Prospectus as amended or supplemented and
nothing has come to their attention that would lead them to believe that either
the Registration Statement or the Prospectus, or any amendment or supplement
thereto as of their respective effective or issue dates, contained, and the
Prospectus as amended or supplemented at such Closing Date, contains any untrue
statement of a material fact, or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and, that (ii) all
representations and warranties made herein by the Company are true and correct
in all material respects at such Closing Date, with the same effect as if
-21-
22
made on and as of such Closing Date, and all agreements herein to be performed
by the Company on or prior to such Closing Date have been duly performed in all
material respects.
(j) The Company and each of the Selling Shareholders shall not have failed,
refused, or been unable, at or prior to the Closing Date (and, if applicable,
the Option Closing Date) to have performed any agreement on their part to be
performed or any of the conditions herein contained and required to be performed
or satisfied by them at or prior to such Closing Date.
(k) The Company and the Selling Shareholders shall have furnished to you at
the Closing Date (and, if applicable, the Option Closing Date) such other
certificates as you may have reasonably requested as to the accuracy, on and as
of such Closing Date, of the representations and warranties of the Company and
the Selling Shareholders herein and as to the performance by the Company and the
Selling Shareholders of their obligations hereunder.
(l) The Shares shall have been approved for trading upon official notice of
issuance on the NNM.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Hale and Dorr, counsel for the several Underwriters and they
provide that Hale and Dorr may rely thereon for purposes of rendering the legal
opinion referred to in paragraph (d), above. The Company and Selling
Shareholders will furnish you with such conformed copies of such opinions,
certificates, letters and documents as you may request.
If any of the conditions specified above in this Section 6 shall have been
satisfied at or prior to the Closing Date (and, if applicable, the Option
Closing Date) or waived by you in writing, this Agreement may be terminated by
you on notice to the Company and the Selling Shareholders.
7. INDEMNIFICATION. (a) The Company will indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or in any blue sky application or
-22-
23
other document executed by the Company or based on any information furnished in
writing by the Company, filed in any jurisdiction in order to qualify any or all
of the Shares under the securities laws thereof ("Blue Sky Application"), or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of circumstances under which they were made, not
misleading; and will reimburse each Underwriter and each such controlling person
for any legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
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 an untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
statement, such Preliminary Prospectus or the Prospectus, or such amendment or
supplement, or any Blue Sky Application in reliance upon and in conformity with
written information furnished to the Company by you or by any Underwriter
through you, specifically for use in the preparation thereof; and provided,
further, that if any Preliminary Prospectus or the Prospectus contained any
alleged untrue statement or allegedly omitted to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading and such statement or omission shall have been corrected in a revised
Preliminary Prospectus or in the Prospectus or in an amended or supplemented
Prospectus, the Company shall not be liable to any Underwriter or controlling
person under this subsection (a) with respect to such alleged untrue statement
or alleged omission to the extent that any such loss, claim, damage or liability
of such Underwriter or controlling person results from the fact that such
Underwriter sold Shares to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, such revised Preliminary
Prospectus or Prospectus or amended or supplemented Prospectus. This indemnity
agreement shall be in addition to any liabilities which the Company may
otherwise have.
(b) Each Selling Shareholder will indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or controlling person may become subject,
under the Act 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 any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or any Blue Sky Application or arise out of or
are based upon the omission or the alleged omission to state
-23-
24
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, such Preliminary
Prospectus or the Prospectus, or such amendment or supplement, or any Blue Sky
Application, in reliance upon and in conformity with written information
furnished to the Company or any Underwriter by such Selling Shareholder
specifically for use in the preparation thereof; and will reimburse any legal or
other expenses reasonably incurred by each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Act, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity contained in this subsection (b) with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) in
respect of any action or claim asserted by a person who purchased any Shares
from such Underwriter, if, within the time required by the Act such person was
not sent or given a copy of the Prospectus, as then amended or supplemented.
This indemnity agreement shall be in addition to any liabilities which the
Selling Shareholders may otherwise have.
(c) Each Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement
and, each person, if any, who controls the Company within the meaning of the
Act, and each Selling Shareholder, against any losses, claims, damages or
liabilities, joint or several, to which the Company or any such director,
officer or controlling person or any such Selling Shareholder may become
subject, under the Act 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 any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, any
amendment or supplement thereto, or any Blue Sky Application or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, such
amendment or supplement, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by any such
Underwriter specifically for use in the preparation thereof; and will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer or controlling person or any such Selling Shareholder in
connection
-24-
25
with investigating or defending any such loss, claim, damage, liability or
action. This indemnity agreement shall be in addition to any liabilities which
the Underwriters may otherwise have.
(d) Any party which proposes to assert the right to be indemnified under
this Section 7 shall, within ten days after receipt of notice of commencement of
any action, suit or proceeding against such party in respect of which a claim is
to be made against an indemnifying party under this Section 7, notify each such
indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served, but the omission so to notify such
indemnifying party of any such action, suit or proceeding shall not relieve such
indemnifying party from any liability which it may have to any indemnified party
otherwise than under this Section 7. In case any such action, suit or proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish, jointly with
any other indemnifying party, similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses, other than reasonable costs
of investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the right to employ
its own counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the employment of
counsel by such indemnified party at the expense of the indemnifying party has
been authorized by the indemnifying party, (ii) the indemnified party shall have
been advised by such counsel in a written opinion that there is a conflict of
interest between the indemnifying party and the indemnified party in the conduct
of the defense, or certain aspects of the defense, of such action (in which case
the indemnifying party shall not have the right to direct the defense of such
action with respect to those matters or aspects of the defense on which a
conflict exists or may exist on behalf of the indemnified party) or (iii) the
indemnifying party shall not in fact have employed counsel to assume the defense
of such action, in any of which events such fees and expenses to the extent
applicable shall be borne by the indemnifying party. An indemnifying party shall
not be liable for any settlement of any action or claim effected without its
consent. Each indemnified party, as a condition of such indemnity, shall
cooperate in good faith with the indemnifying party in the defense of any such
action or claim.
-25-
26
(e) If the indemnification provided for in this Section 7 is for any
reason, other than pursuant to the terms thereof, juridically determined (by the
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right to appeal) to be
unavailable to an indemnified party under subsections (a), (b) or (c) above in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company, the Selling
Shareholders and the Underwriters from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault, as
applicable, of the Company, the Selling Shareholders and the Underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as other
relevant equitable considerations. The relative benefits received by, as
applicable, the Company, the Selling Shareholders and the Underwriters shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling Shareholders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company, the Selling Shareholders or the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company, the Selling Shareholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (e). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (e), no
-26
27
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts and commissions applicable to the Shares purchased by
such Underwriter and no Selling Shareholder shall be required to contribute any
amount in excess of the net proceeds received by such Selling Shareholder in
connection with the sale of the Shares. 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. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint. No Selling Shareholder shall be liable for
contribution under this Section 7(e) except and to the extent that such Selling
Shareholder would have been liable to indemnify under Section 7(b) if such
indemnification had been enforceable under applicable law.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All representations,
warranties, and agreements of the Company and the Selling Shareholders contained
in Sections 7 and 11 herein or in certificates delivered pursuant hereto, and
the agreements of the Underwriters contained in Section 7 hereof, shall remain
operative and in full force and effect regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
Underwriter or any controlling person, the Company or any of its officers,
directors or any controlling persons, or the Selling Shareholders, and shall
survive delivery of the Shares to the Underwriters hereunder.
9. SUBSTITUTION OF UNDERWRITERS. (a) If any Underwriter shall default in
its obligation to purchase the Shares which it has agreed to purchase hereunder,
you may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Shareholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
parties reasonably satisfactory to you to purchase such Shares on such terms. In
the event that, within the respective prescribed periods, you notify the Company
and the Selling Shareholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Shareholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and the Selling
Shareholders shall have the right to postpone the Closing Date for a period of
not more than seven day, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term
-27-
28
"Underwriter" as used in this Agreement shall include any persons substituted
under this Section 9 with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters made by you or the Company
and the Selling Shareholders as provided in subsection (a) above, the aggregate
number of Shares which remains unpurchased does not exceed one tenth of the
total Shares to be sold on the Closing Date, then the Company and the Selling
Shareholders shall have the right to require each non-defaulting Underwriter to
purchase the Shares which such Underwriter agreed to purchase hereunder and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters made by you or the Company
and the Selling Shareholders as provided in subsection (a) above, the number of
Shares which remains unpurchased exceeds one tenth of the total Shares to be
sold on the Closing Date, or if the Company and the Selling Shareholders shall
not exercise the right described in subsection (b) above to require the
non-defaulting Underwriters to purchase Shares of the defaulting Underwriter or
Underwriters, then this Agreement shall thereupon terminate, without liability
on the part of any non-defaulting Underwriter or the Company and the Selling
Shareholders except for the expenses to be borne by the Company and the
Underwriters as provided in Section 11 hereof and the indemnity and contribution
agreements in Section 7 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
10. EFFECTIVE DATE AND TERMINATION. (a) This Agreement shall become
effective at 1:00 p.m., St. Louis time, on the first business day following the
effective date of the Registration Statement, or at such earlier time after the
effective date of the Registration Statement as you in your discretion shall
first release the Shares for offering to the public; provided, however, that the
provisions of Section 7 and 11 shall at all times be effective. For the purposes
of this Section 10(a), the Shares shall be deemed to have been released to the
public upon release by you of the publication of a newspaper advertisement
relating to the Shares or upon release of telegrams, facsimile transmissions
-28-
29
or letters offering the Shares for sale to securities dealers, whichever shall
first occur.
(b) This Agreement may be terminated by you at any time before it becomes
effective in accordance with Section 10(a) by notice to the Company and the
Selling Shareholders; provided, however, that the provisions of this Section 10
and of Section 7 and Section 11 hereof shall at all times be effective. In the
event of any termination of this Agreement pursuant to Section 9 or this Section
10(b) hereof, the Company and the Selling Shareholders shall not then be under
any liability to any Underwriter except as provided in Section 7 or Section 11
hereof.
(c) This Agreement may be terminated by you at any time at or prior to the
Closing Date by notice to the Company and the Selling Shareholders if any
condition specified in Section 6 hereof shall not have been satisfied on or
prior to the Closing Date. Any such termination shall be without liability of
any party to any other party except as provided in Sections 7 and 11 hereof.
(d) This Agreement also may be terminated by you, by notice to the Company
and the Selling Shareholders, as to any obligation of the Underwriters to
purchase the Option Shares, if any condition specified in Section 6 hereof shall
not have been satisfied at or prior to the Option Closing Date or as provided in
Section 9 of this Agreement.
If you terminate this Agreement as provided in Sections 10(b), 10(c) or
10(d), you shall notify the Company and the Selling Shareholders by telephone or
telegram, confirmed by letter.
11. COSTS AND EXPENSES. The Company and the Selling Shareholders will bear
and pay the costs and expenses incident to the registration of the Shares and
public offering thereof, including, without limitation, (a) the fees and
expenses of the Company's accountants and the fees and expenses of counsel for
the Company, (b) the preparation, printing, filing, delivery and shipping of the
Registration Statement, each Preliminary Prospectus, the Prospectus and any
amendments or supplements thereto (except as otherwise expressly provided in
Section 5(d) hereof) and the printing, delivery and shipping of this Agreement,
the Agreement Among Underwriters, the Selected Dealer Agreement, Underwriters'
Questionnaires and Powers of Attorney and Blue Sky Memoranda, (c) the furnishing
of copies of such documents (except as otherwise expressly provided in Section
5(d) hereof) to the Underwriters, (d) the registration or qualification of the
Shares for offering and sale under the securities laws of the various states,
including the reasonable fees and disbursements of
-29-
30
Underwriters' counsel relating to such registration or qualification, (e) the
fees payable to the NASD and the Commission in connection with their review of
the proposed offering of the Shares, (f) all printing and engraving costs
related to preparation of the certificates for the Shares, including transfer
agent and registrar fees, (g) all initial transfer taxes, if any, (h) all fees
and expenses relating to the authorization of the shares for trading on NNM, (i)
all travel expenses, including air fare and accommodation expenses, of
representatives of the Company in connection with the offering of the Shares and
(j) all of the other costs and expenses incident to the performance by the
Company of the Registration and offering of the Shares; provided, however, that
the Underwriters will bear and pay the fees and expenses of the Underwriters'
counsel (other than fees and disbursements relating to the registration or
qualification of the Shares for offering and sale under the securities laws of
the various states), the Underwriters' out-of-pocket expenses, and any
advertising costs and expenses incurred by the Underwriters incident to the
public offering of the Shares; and provided, further, that the Selling
Shareholders will bear and pay the fees and expenses of the Selling
Shareholders' counsel.
If this Agreement is terminated by you in accordance with the provisions of
Section 10(c) (other than as a result of the failure of the conditions set forth
in paragraphs (d), (e) or (h) of Section 6), the Company shall reimburse the
Underwriters for all of their out-of-pocket expenses, including the reasonable
fees and disbursements of counsel to the Underwriters.
12. DEFAULT OF SELLING SHAREHOLDERS. Failure or refusal by any of the
Selling Shareholders to sell and deliver on the Closing Date the Shares agreed
to be sold and delivered by such Selling Shareholder shall in no manner relieve
the other Selling Shareholders or the Company of their respective obligations
under this Agreement. If any Selling Shareholder should fail or refuse to sell
and deliver his Shares, the remaining Selling Shareholders shall have the right
hereby granted to increase, pro rata or otherwise, the number of Shares to be
sold by them hereunder to the total number of Shares to be sold by all Selling
Shareholders as set forth in Schedule I. If the remaining Selling Shareholders
do not fully exercise the right to increase the number of Shares to be sold by
them, the Underwriters, at your option, will have the right to elect to purchase
or not to purchase the Shares to be sold by the Company and the remaining
Selling Shareholders. In the event the Underwriters purchase the Shares of the
Company and such other Selling Shareholders pursuant to this Section 12, the
Closing Date shall be postponed for a period of not more than seven days in
order that the Registration Statement and Prospectus or other documents may be
amended or supplemented to the extent necessary under the provisions of the Act
and Rules and
-30-
31
Regulations or under the securities laws of any jurisdiction. If the
Underwriters determine not to purchase the Shares of the Company and the other
Selling Shareholders, if any, this Agreement shall terminate and neither the
Company nor the Underwriters nor any other Selling Shareholder shall be under
any obligation under this Agreement except as provided in Section 7 hereof and
except for the obligation of the Company to pay for such expenses as are set
forth in Section 11 hereof. Nothing herein shall relieve a defaulting Selling
Shareholder from liability for his default or from liability under Section 7
hereof or for expenses imposed by this Agreement upon such Selling Shareholder.
13. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the
Underwriters shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed c/o A.G. Edwards & Sons, Inc. at One North Jefferson
Avenue, St. Louis, Missouri 63103, Attention: Syndicate, facsimile number (314)
289-7387, or if sent to the Company shall be mailed, delivered, sent by
facsimile transmission, or telegraphed and confirmed to the Company at One
Kiddie Drive, Avon, Massachusetts 02322-1171, facsimile number (508) 586-4728,
or if sent to any Selling Shareholder shall be mailed, delivered, sent by
facsimile transmission or telegraphed and confirmed to such Selling Shareholder,
c/o the Attorney-in-Fact at One Kiddie Drive, Avon, Massachusetts 02322-1171.
Notice to any Underwriter pursuant to Section 7 shall be mailed, delivered, sent
by facsimile transmission, or telegraphed and confirmed to such Underwriter's
address as it appears in the Underwriters' Questionnaire furnished in connection
with the offering of the Shares or as otherwise furnished to the Company and the
Selling Shareholder.
14. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the Underwriters and the Selling Shareholders, and the Company and their
respective successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, corporation or
other entity, other than the parties hereto and their respective successors and
assigns and the controlling persons, officers and directors referred to in
Section 7, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision herein contained; this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective successors and
assigns and said controlling persons and said officers and directors, and for
the benefit of no other person, corporation or other entity. No purchaser of any
of the Shares from any Underwriter shall be construed a successor or assign by
reason merely of such purchase.
-31-
32
In all dealings with the Company and the Selling Shareholders under this
Agreement A. G. Edwards & Sons, Inc. shall act on behalf of each of the several
Underwriters, the Company, and the Selling Shareholders shall be entitled to act
and rely upon any statement, request, notice or agreement on behalf of the
Underwriters, made or given by A.G. Edwards & Son, Inc. on behalf of the
Underwriters, as if the same shall have been made or given in writing by the
Underwriters.
15. COUNTERPARTS. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
16. PRONOUNS. Whenever a pronoun of any gender or number is used herein, it
shall, where appropriate, be deemed to include any other gender and number.
17. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts.
If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, each of the Selling
Shareholders and the Underwriters.
THE FIRST YEARS INC.
By: ______________________________
Title: ___________________________
Selling Shareholders Named in
Schedule I Hereto
By: ______________________________
Attorney-in-Fact
-32-
33
Accepted in St. Louis,
Missouri, as of the date
first above written, on
behalf of ourselves and each
of the several Underwriters
named in Schedule II hereto.
A.G. EDWARDS & SONS, INC.
By: ____________________________
Title: Senior Vice President
-33-
34
SCHEDULE I
Number of
Selling Shareholders Firm Shares
- -------------------- -----------
Estate of Marshall B. Sidman 800,000
Jerome M. Karp 160,000
Benjamin Peltz 160,000
Ronald J. Sidman 80,000
-------
Total 1,200,000
-34-
35
SCHEDULE II
Name Number of Firm Shares
- ---- ---------------------
A.G. Edwards & Sons, Inc.
Adams, Harkness & Hill, Inc. _________
Total 1,600,000
-35-
36
SCHEDULE III
Pursuant to Section 6(f) of the Underwriting Agreement, Deloitte & Touche
LLP shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable Rules and Regulations thereunder.
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules audited (and, if applicable,
prospective financial statements and/or pro forma financial information
examined) by them and included in the Prospectus or the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the applicable Rules and Regulations
thereunder; and, if applicable, they have made a review in accordance with
standards established by the American Institute of Certified Public
Accountants of the unaudited consolidated interim financial statements,
selected financial data, pro forma financial information, prospective
financial statements and/or condensed financial statements derived from
audited financial statements of the Company for the periods specified in
such letter, as indicated in their reports thereon, copies of which have
been furnished to the Representative of the Underwriters (the
"Representative").
(iii) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included in the Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:
(A) the unaudited statements of income, balance sheets and
statements of cash flows included in the Prospectus do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the
-36-
37
applicable Rules and Regulations thereunder, or are not in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with the basis for the audited statements of
income, balance sheets and statements of cash flows included in the
Prospectus.
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited financial statements included in
the Prospectus.
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
financial statements included in the Prospectus.
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements.
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the capital stock
or any increase in the long-term debt of the Company and its
subsidiaries, or any decreases in working capital, net current assets
or net assets or other items specified by the Representative, or any
changes in any items specified by the Representative, in each case as
compared with amounts shown in the latest balance sheet included in
the Prospectus, except in each case for changes, increases or
decreases which the Prospectus
-37-
38
discloses have occurred or may occur or which are described in such
letter.
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in net revenues or operating
profit or the total or per share amounts of net income or any other
changes in any other items specified by the Representative, in each
case as compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representative, except in each case for changes, decreases or
increases which the Prospectus discloses have occurred or may occur or
which are described in such letter.
(iv) In addition to the audit referred to in their report(s) included
in the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraph (iii) above, they
have carried out certain specified procedures, not constituting an audit in
accordance with generally accepted auditing standards, with respect to
certain amounts, percentages and financial information specified by the
Representative, which are derived from the general accounting records of
the Company and its subsidiaries for the periods covered by their reports
and any interim or other periods since the latest period covered by their
reports, which appear in the Prospectus, or in Part II of, or in exhibits
and schedules to, the Registration Statement specified by the
Representative, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
(v) In the letters delivered pursuant to Section 6(f) of the
Underwriting Agreement, Deloitte & Touche LLP shall confirm that they have
performed an interim review in accordance with SAS No. 71 of the financial
statements of the Company as of March 31, 1996 and for the three month
period then ended and the Company has advised Deloitte & Touche LLP that
such financial statements are prepared on a basis consistent with the
audited financial statements contained in the Prospectus and these
financial statements indicate no decrease in consolidated net sales or net
income from the corresponding period in the preceding year.
-38-