Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Amendment No. 2 to Registration Statement 85 512K
2: EX-1.1 Form of Underwriting Agreement 32 137K
3: EX-3.1(A) Certificate of Incorporation 11 27K
4: EX-3.1(B) Certificate of Amendment to the Certificate of 1 5K
Incorporation
5: EX-5.1 Opinion of Weil, Gotshal & Manges LLP 2 10K
6: EX-23.1 Consent of Price Waterhouse LLP 1 6K
Exhibit 1.1
2,392,866 Shares
GALOOB TOYS, INC.
Common Stock
UNDERWRITING AGREEMENT
November __, 1996
GERARD KLAUER MATTISON & CO., LLC
WILLIAM BLAIR & COMPANY, L.L.C.
JEFFERIES & COMPANY, INC.
As Representatives of the
several Underwriters
c/o Gerard Klauer Mattison & Co., LLC
529 Fifth Avenue
New York, New York 10017
Ladies and Gentlemen:
Galoob Toys, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell 2,000,000 shares (the "Firm Shares") of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), to you and to the other
underwriters named in Schedule II (collectively, the "Underwriters"), for whom
you are acting as Representatives (the "Representatives"). In addition, a
certain security holder of the Company named in Schedule I (the "Selling
Security Holder") proposes to assign and sell to the Underwriters a warrant
(the "Warrant") to purchase an aggregate of 392,866 shares of authorized and
unissued Common Stock at an exercise price of $4.44 per share. The Underwriters
propose to exercise the Warrant and sell the 392,866 shares of Common Stock
issuable upon such exercise (the "Warrant Shares") pursuant to this Agreement.
The Company has also agreed to grant to you and the other Underwriters an
option (the "Option") to purchase up to an additional 358,930 shares of Common
Stock (the "Option Shares") on the terms and for the purposes set forth in
Section 1(b). The Firm Shares, the Warrant Shares and the Option Shares are
referred to collectively herein as the "Shares".
The public offering price per share at which the Shares are initially
offered and the purchase price per share for the Shares (other than the Warrant
Shares) to be paid by the several Underwriters shall be agreed upon by the
Company and the Representatives, acting on behalf of the several Underwriters,
and such agreement shall be set forth in a separate written instrument
substantially in the form of Exhibit A hereto (the "Price Determination
Agreement"). The purchase price for the Warrant to be paid by the several
Underwriters shall be agreed upon by the
Selling Security Holder and the Representatives, acting on behalf of the several
Underwriters, and such agreement shall also be set forth in the Price
Determination Agreement. The Price Determination Agreement may take the form of
an exchange of any standard form of written telecommunication among the Company,
the Selling Security Holder and the Representatives and shall specify such
applicable information as is indicated in Exhibit A hereto. The offering of the
Shares shall be governed by this Agreement, as supplemented by the Price
Determination Agreement. From and after the date of the execution and delivery
of the Price Determination Agreement, this Agreement shall be deemed to
incorporate, and, unless the context otherwise indicates, all references
contained herein to "this Agreement" and to the phrase "herein" shall be deemed
to include, the Price Determination Agreement.
The Company and the Selling Security Holder confirm as follows their
respective agreements with the Representatives and the several other
Underwriters.
1. Agreement to Sell and Purchase.
(a) On the basis of the respective representations, warranties and
agreements of the Company and the Selling Security Holder herein contained and
subject to all the terms and conditions of this Agreement: (i) the Selling
Security Holder agrees to assign and sell the Warrant to the Underwriters; (ii)
the Company agrees to issue and sell to the several Underwriters an aggregate of
2,000,000 of the Firm Shares and an aggregate of 392,866 of the Warrant Shares
(upon exercise of the Warrant by the Underwriters in accordance with the terms
thereof); and (iii) each of the Underwriters, severally and not jointly, agrees
to purchase from the Company at the purchase price per share for the Firm Shares
to be agreed upon by the Company and the Representatives, in accordance with
Section 1(c) hereof and set forth in the Price Determination Agreement, the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule II, plus such additional number of Firm Shares which such Underwriter
may become obligated to purchase pursuant to Section 9 hereof; (iv) each of the
Underwriters, severally and not jointly, agrees to purchase from the Selling
Security Holder, at the purchase price per underlying Warrant Share to be agreed
upon by the Selling Security Holder and the Representatives, in accordance with
Section 1(c) hereof and set forth in the Price Determination Agreement, that
portion of the Warrant, based on underlying Warrant Shares which (as nearly as
practicable, as determined by the Representatives) bears to 392,866 the same
proportion as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule II bears to the total number of Firm Shares; and (v)
each of the Underwriters, severally and not jointly, agrees to exercise that
portion of the Warrant purchased by such Underwriter by tendering such portion
to the Company together with the payment of the exercise price of $4.44 per
Warrant Share and the Company agrees upon such exercise to issue and sell to
such Underwriter such number of validly issued, fully paid and nonassessable
shares of Common Stock to which such Underwriter is entitled upon exercise of
the Warrant, and the Underwriters agree to offer the Warrant Shares resulting
from such exercise to the public as set forth in the Prospectus. Schedule II may
be attached to the Price Determination Agreement.
(b) Subject to all the terms and conditions of this Agreement, the
Company grants the Option to the several Underwriters to purchase, severally and
not jointly, up to
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358,930 Option Shares from the Company at the same price per share as the
Underwriters shall pay for the Firm Shares. The Option may be exercised only to
cover over-allotments in the sale of the Firm Shares and the Warrant Shares by
the Underwriters and may be exercised in whole or in part at any time (but not
more than once) on or before the 45th day after the date of this Agreement (or,
if the Company has elected to rely on Rule 430A, on or before the 45th day after
the date of the Price Determination Agreement), upon written or telegraphic
notice (the "Option Shares Notice") by the Representatives to the Company no
later than 12:00 noon, New York City time, at least two and no more than five
business days before the date specified for closing in the Option Shares Notice
(the "Option Closing Date") setting forth the aggregate number of Option Shares
to be purchased and the time and date for such purchase. On the Option Closing
Date, the Company shall issue and sell to the Underwriters the number of Option
Shares set forth in the Option Shares Notice, and each Underwriter shall
purchase such percentage of the Option Shares as is equal to the percentage of
Firm Shares that such Underwriter is purchasing, as adjusted by the
Representatives in such manner as they deem advisable to avoid fractional
shares.
(c) The public offering price per share at which the Shares are
initially offered and the purchase price per share for the Firm Shares and for
the Warrant to be paid by the several Underwriters shall be agreed upon and set
forth in the Price Determination Agreement. In the event such prices have not
been agreed upon and the Price Determination Agreement has not been executed by
the close of business on the fourteenth business day following the date on which
the Registration Statement (as hereinafter defined) becomes effective, this
Agreement shall terminate forthwith, without liability of any party to any other
party except that Section 7 shall remain in effect.
2. Delivery and Payment. Delivery of (i) the Firm Shares and the
Warrant shall be made to the Representatives for the accounts of the
Underwriters against payment of the respective purchase prices therefor by wire
transfer of immediately available funds to the order of each of the Company and
the Selling Security Holder, as the case may be, and (ii) the Warrant Shares
shall be made to the Representatives for the accounts of the Underwriters
against payment of the exercise price therefor by wire transfer of immediately
available funds to the order of the Company, in each case at the offices of
Morrison & Foerster LLP, counsel to the Underwriters, located at 1290 Avenue of
the Americas, 40th Floor, New York, New York 10104. Such payments shall be made
at 10:00 a.m., New York City time, on the third business day (the fourth
business day, should the offering be priced after 4:30 PM, EST) after the date
on which the first bona fide offering of the Shares to the public is made by the
Underwriters or at such time on such other date, not later than ten business
days after such date, as may be agreed upon by the Company and the
Representatives (such date is hereinafter referred to as the "Closing Date").
To the extent the Option is exercised, delivery of the Option Shares
against payment by the Underwriters (in the manner specified above) shall take
place at the offices specified above for the closing, at the time and date
(which may be the Closing Date) specified in the Option Shares Notice.
Certificates evidencing the Shares shall be in definitive form and
shall be registered in such names and in such denominations as the
Representatives shall request at least two full
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business days prior to the Closing Date or the Option Closing Date, as the case
may be, by written notice to the Company. For the purpose of expediting the
checking and packaging of certificates for the Shares, the Company agrees to
make such certificates available for inspection at least 24 hours prior to the
Closing Date or the Option Closing Date, as the case may be.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Shares by the Company to the respective
Underwriters shall be borne by the Company. The cost of tax stamps, if any, in
connection with the sale of the Warrant or the Warrant Shares shall be borne by
the Selling Security Holder. The Company shall pay and hold each Underwriter and
any subsequent holder of the Firm Shares and the Option Shares harmless from,
any and all liabilities with respect to or resulting from any failure or delay
in paying Federal and state stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original issuance or
sale to such Underwriter of the Firm Shares and the Option Shares. The Selling
Security Holder shall pay and hold each Underwriter and any subsequent holder of
the Warrant Shares harmless from, any and all liabilities with respect to or
resulting from any failure or delay in paying Federal and state stamp and other
transfer taxes, if any, which may be payable or determined to be payable in
connection with the assignment and sale to such Underwriter of the Warrant or
the original issuance or sale to such Underwriter of the Warrant Shares.
3. Representations and Warranties of the Company. The Company
represents and warrants to, and covenants with, each Underwriter that:
(a) A registration statement (Registration No. 333-12953) on Form
S-1 relating 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 prepared by the Company under the provisions of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(collectively referred to as the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed with the
Commission. The term "preliminary prospectus" as used herein means a preliminary
prospectus as contemplated by Rule 430 or Rule 430A ("Rule 430A") of the Rules
and Regulations included at any time as part of the registration statement.
Copies of such registration statement and amendments and of each related
preliminary prospectus have been delivered to the Representatives. The term
"Registration Statement" means the registration statement as amended at the time
it becomes or became effective (the "Effective Date"), including financial
statements and all exhibits and any information deemed to be included by Rule
430A or Rule 434 of the Rules and Regulations. If the Company files a
registration statement to register a portion of the Shares and relies on Rule
462(b) of the Rules and Regulations for such registration statement to become
effective upon filing with the Commission (the "Rule 462 Registration
Statement"), then any reference to the "Registration Statement" shall be deemed
to include the Rule 462 Registration Statement, as amended from time to time.
The term "Prospectus" 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.
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(b) On the Effective Date, the date the Prospectus is first filed
with the Commission pursuant to Rule 424(b) (if required), at all times
subsequent to and including the Closing Date and, if later, the Option Closing
Date and when any post-effective amendment to the Registration Statement becomes
effective or any amendment or supplement to the Prospectus is filed with the
Commission, the Registration Statement and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
or supplement thereto), including the financial statements included in the
Prospectus, did or will comply in all material respects with all applicable
provisions of the Act and the Rules and Regulations and will contain all
statements required to be stated therein in accordance with the Act and the
Rules and Regulations. On the Effective Date and when any post-effective
amendment to the Registration Statement becomes effective, no part of the
Registration Statement or any such amendment did or will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. At the Effective Date, the date the Prospectus or any amendment or
supplement to the Prospectus is filed with the Commission and at the Closing
Date and, if later, the Option Closing Date, the Prospectus did not or will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The foregoing representations and
warranties in this Section 3(b) do not apply to any statements or omissions made
in reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by the Representatives specifically for
inclusion in the Registration Statement or Prospectus or any amendment or
supplement thereto. For all purposes of this Agreement, the amounts of the
selling concession and reallowance set forth in the Prospectus under
"Underwriting" constitute the only information relating to any Underwriter
furnished in writing to the Company by or on behalf of the Representatives
specifically for inclusion in the preliminary prospectus, the Registration
Statement or the Prospectus. The Company has not distributed any offering
material in connection with the offering or sale of the Shares other than the
Registration Statement, the preliminary prospectus, the Prospectus or any other
materials, if any, permitted by the Act.
(c) The only subsidiaries (as defined in the Rules and Regulations)
of the Company are the subsidiaries listed on Exhibit 21 to the Registration
Statement (the "Subsidiaries"). The Company and each of its Subsidiaries is, and
at the Closing Date will be, a corporation duly organized, validly existing and
in good standing (if such status is recognized by governmental authorities)
under the laws of its jurisdiction of incorporation. The Company and each of its
Subsidiaries has, and at the Closing Date will have, full power and authority to
conduct all the activities conducted by it, to own or lease all the assets owned
or leased by it and to conduct its business as described in the Registration
Statement and the Prospectus. The Company and each of its Subsidiaries is, and
at the Closing Date will be, duly licensed or qualified to do business in and in
good standing as a foreign corporation in all jurisdictions in which the nature
of the activities conducted by it or the character of the assets owned or leased
by it makes such licensing or qualification necessary, except where the failure
to be so qualified would not have a material adverse effect, singly or in the
aggregate, on the business, properties, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole (a "Material
Adverse Effect"). All of the issued and outstanding shares of capital stock of
the
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Subsidiaries have been duly authorized and validly issued, and are fully paid
and non-assessable and are owned by the Company free and clear of all liens,
encumbrances and claims. Except for the stock of the Subsidiaries and as
disclosed in the Registration Statement, the Company does not own, and at the
Closing Date will not own, directly or indirectly, any shares of stock or any
other equity or long-term debt securities of any corporation or have any equity
interest in any firm, partnership, joint venture, association or other entity.
Complete and correct copies of the certificate of incorporation and of the
by-laws of the Company and each of its Subsidiaries and all amendments thereto
have been delivered to the Representatives, and no changes therein will be made
subsequent to the date hereof and prior to the Closing Date or, if later, the
Option Closing Date.
(d) The outstanding shares of Common Stock have been, the Shares to
be issued and sold by the Company upon such issuance will be, duly authorized,
validly issued, fully paid and nonassessable and will not be subject to any
preemptive, first refusal, or similar right. The description of the Common Stock
in the Registration Statement and the Prospectus under the caption "Description
of Capital Stock" is now, and at the Closing Date will be, complete and accurate
in all respects. Except as set forth in the Prospectus, the Company does not
have outstanding, and at the Closing Date will not have outstanding, any options
to purchase, or any rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
any shares of Common Stock, any shares of capital stock of any Subsidiary or any
such warrants, convertible securities or obligations. The Warrant has been duly
authorized, executed and delivered by, and is a valid and binding obligation of,
the Company and, when delivered to the Underwriters in accordance with the terms
of this Agreement, will entitle the several Underwriters to purchase their
respective portions of the Warrant Shares upon payment to the Company of $4.44
per Warrant Share; the Warrant Shares to be purchased from the Company pursuant
to the exercise of the Warrant by the several Underwriters have been duly
authorized and, when issued and delivered by the Company against payment
therefor in accordance with the terms of the Warrant, will be duly and validly
issued and fully paid and nonassessable; and no preemptive right, right of first
refusal or other similar right of security holders exists with respect to any of
the Warrant Shares or the issuance and sale of the Warrant Shares, other than
any such right which has been satisfied or waived. No further approval of any
security holder, the Board of Directors or others is required for the issuance
of the Warrant Shares upon payment of the exercise price, except such as may be
required under the Act or under state or other securities or Blue Sky laws.
(e) The financial statements and schedules included in the
Registration Statement or the Prospectus present fairly in all material respects
the consolidated financial condition of the Company and its Subsidiaries as of
the respective dates thereof and the consolidated results of operations and cash
flows of the Company and its Subsidiaries for the respective periods covered
thereby, all in conformity with generally accepted accounting principles applied
on a consistent basis throughout the entire period involved, except as otherwise
disclosed in the Prospectus. No other financial statements or schedules of the
Company are required by the Act or the Rules and Regulations to be included in
the Registration Statement or the Prospectus. Price Waterhouse LLP (the
"Accountants") who have reported on such financial statements and schedules, are
independent accountants with respect to the
6
Company as required by the Act and the Rules and Regulations. The statements
included in the Registration Statement with respect to the Accountants pursuant
to Rule 509 of Regulation S-K of the Rules and Regulations are true and correct
in all material respects.
(f) The Company maintains a system of internal accounting control
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(g) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior to the Closing
Date, except as set forth in or contemplated by the Registration Statement and
the Prospectus, (i) there has not been and will not have been any material
change in the capitalization of the Company (except for the issuance of Common
Stock upon the exercise of stock options granted under the Company's stock
option or other employee benefit plans), (ii) there has not been and will not
have been any material adverse change in the business, properties, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole (a "Material Adverse Change"), (iii) neither the
Company nor any of its Subsidiaries has incurred, nor will it incur any material
liabilities or obligations, direct or contingent, nor has it entered into, nor
will it enter into any material transactions other than pursuant to this
Agreement and the transactions referred to herein, except license agreements
entered into in the ordinary course of business, and (iv) the Company has not
and will not have paid or declared any dividends or other distributions of any
kind on any class of its capital stock.
(h) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
(i) Except as set forth in the Registration Statement and the
Prospectus, there are no actions, suits or proceedings pending against or
affecting the Company or any of its Subsidiaries or any of their respective
officers in their capacity as such, before or by any Federal or state court,
commission, regulatory body, administrative agency or other governmental body,
domestic or foreign, wherein an unfavorable ruling, decision or finding could
reasonably be expected to have a Material Adverse Effect and, to the knowledge
of the Company, no such proceedings are threatened. Neither the Company nor any
of its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any authorization, approval, order, license,
certificate, franchise or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect. There are no pending investigations known to the Company
involving the Company or any of its Subsidiaries by any governmental agency
having jurisdiction over the Company or its Subsidiaries or their respective
businesses or operations.
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(j) Except as would not have a Material Adverse Effect, each of the
Company and its Subsidiaries has, and at the Closing Date will have, (i) all
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to carry on its business as contemplated in the
Prospectus, (ii) complied in all respects with all laws, regulations and orders
applicable to it or its business and (iii) performed all obligations required to
be performed by it, and is not, and at the Closing Date will not be, in default
under any indenture, mortgage, deed of trust, voting trust agreement, loan
agreement, bond, debenture, note agreement, lease, license agreement, contract
or other agreement or instrument (collectively, a "Contract or Other Agreement")
to which it is a party or by which its property is bound or affected. Except as
would not have a Material Adverse Effect, or except as otherwise disclosed in
the Prospectus, to the knowledge of the Company and each of its Subsidiaries, no
other party under any Contract or Other Agreement to which it is a party is in
default in any respect thereunder or has given written or oral notice to the
Company, its Subsidiaries or any of their respective officers or directors of
such other party's intention to terminate, cancel or refuse to renew any
Contract or Other Agreement. Except as would not have a Material Adverse Effect,
each of the Company and its Subsidiaries is not now, and at the Closing Date
will not be, in violation of any provision of its certificate of incorporation
or by-laws.
(k) No consent, approval, authorization or order of, or any filing
or declaration with, any court or governmental agency or body is required in
connection with the authorization, issuance, transfer, sale or delivery of the
Shares by the Company, in connection with the execution, delivery and
performance of this Agreement by the Company or in connection with the taking by
the Company of any action contemplated hereby or thereby, except as have been
obtained under the Act or the Rules and Regulations and such as may be required
under state securities or Blue Sky laws or the by-laws and rules of the National
Association of Securities Dealers, Inc. (the "NASD") or regulations of any
jurisdiction in the United States in connection with the purchase and
distribution by the Underwriters of the Shares to be sold by the Company.
(l) The Company has and will have full corporate power and authority
to enter into this Agreement. This Agreement has been duly authorized, executed
and delivered by the Company and (assuming the due authorization, execution and
delivery by the Representatives) constitutes a valid and binding agreement of
the Company and is enforceable against the Company in accordance with the terms
hereof. The performance of this Agreement and the consummation of the
transactions contemplated hereby, and the application of the net proceeds from
the offering and sale of the Shares to be sold by the Company in the manner set
forth in the Prospectus under "Use of Proceeds" will not result in the creation
or imposition of any lien, charge or encumbrance upon any of the assets of the
Company or any of its Subsidiaries pursuant to the terms or provisions of, or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, or give any other party a right to terminate any of
its obligations under, or result in the acceleration of any obligation under,
(x) the certificate of incorporation or by-laws of the Company or any of its
Subsidiaries, or (y) any material Contract or other Agreement to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of its properties is bound or affected, or violate or
conflict with any judgment, ruling, decree, order, statute, rule or regulation
of any court or other governmental agency or body applicable to the business or
properties of the Company or any of
8
its Subsidiaries, except where such breach, violation or default would not have
a Material Adverse Effect.
(m) Each of the Company and its Subsidiaries has good and marketable
title to all properties and assets described in the Prospectus to be owned
respectively by it, free and clear of all liens, charges, encumbrances or
restrictions, except such as are described in the Prospectus or are not material
to the business of the Company or its Subsidiaries. Each of the Company and its
Subsidiaries has valid, subsisting and enforceable leases or licenses, as the
case may be, for the properties (whether tangible or intangible) described in
the Prospectus to be leased or licensed by it, with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such properties by the Company and such Subsidiaries.
(n) There is no document or Contract or Other Agreement of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement which is
not described or filed as required. All such Contracts or Other Agreements to
which the Company or any Subsidiary is a party have been duly authorized,
executed and delivered by the Company or such Subsidiary and (assuming the due
authorization, execution and delivery thereof by the other parties to such
Contracts and Other Agreements) constitute valid and binding agreements of the
Company or such Subsidiary and are enforceable against the Company or such
Subsidiary in accordance with the terms thereof.
(o) No statement, representation, warranty or covenant made by the
Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to the Representatives was or will be, when made,
inaccurate, untrue or incorrect.
(p) Neither the Company nor, to the knowledge of the Company, any of
its directors, officers or controlling persons has taken, directly or
indirectly, any action intended to cause or result in, or which might reasonably
be expected to cause or result in, or which has constituted, stabilization or
manipulation, under the Act or otherwise, of the price of any security of the
Company to facilitate the sale or resale of the Shares.
(q) Except for the Selling Security Holder, no holder of securities
of the Company has rights to register any securities of the Company because of
the filing of the Registration Statement, except for rights that have been duly
waived by such holder.
(r) The Shares are duly authorized for listing on the New York Stock
Exchange, subject only to notice of issuance of the Shares.
(s) Neither the Company nor any of its Subsidiaries is involved in
any material labor dispute, except such as would not have a Material Adverse
Effect, nor, to the knowledge of the Company, is any such dispute threaten.
(t) The Company and its Subsidiaries own, or are licensed or
otherwise have the full right to use, all material trademarks and trade names
which are used in or necessary for the conduct of their respective businesses as
described in the Prospectus. Except as otherwise disclosed in the Prospectus,
neither the Company nor any of its Subsidiaries has received any
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notice of any claims asserted by any person with respect to the use of any such
trademarks or trade names, or challenging or questioning the validity or
effectiveness of any such trademark or trade name. The use, in connection with
the business and operations of the Company and its Subsidiaries of such
trademarks and trade names does not, to the Company's knowledge, infringe on the
rights of any person.
(u) Neither the Company, its Subsidiaries nor, to the best of the
Company's knowledge, any of their respective officers, directors, partners,
employees, agents or affiliates or any other person acting on behalf of the
Company or any of its Subsidiaries has made or agreed to make any payment of
funds or other items of value, or received or retained any funds or other items
of value, in violation of any law or regulation or of a character required to be
disclosed in the Prospectus.
4. Representations and Warranties of the Selling Security Holder. The
Selling Security Holder represents and warrants to, and covenants with, each
Underwriter that:
(a) The Selling Security Holder has full power and authority to
enter into this Agreement and the Assignment Agreement (the "Assignment"), which
transfers and assigns to the Underwriters all of the Selling Security Holder's
right, title and interest in the Warrant. All authorizations and consents
necessary for the execution and delivery by such Selling Security Holder of this
Agreement and the Assignment have been given. Each of this Agreement and the
Assignment has been duly authorized, executed and delivered by or on behalf of
the Selling Security Holder and constitutes a valid and binding agreement of the
Selling Security Holder and is enforceable against the Selling Security Holder
in accordance with the terms hereof or thereof, as the case may be.
(b) The Selling Security Holder now has, and on the Closing Date
will have, sole beneficial ownership of, and good and valid title to the
Warrant, which is exercisable to purchase 392,866 shares of Common Stock, free
and clear of any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction of any kind, other than pursuant to this Agreement
or the Assignment, and has full legal right and power, and all authorizations
and approvals necessary, to sell, assign, transfer and deliver the Warrant to be
sold hereunder and under the Assignment; and upon delivery of such Warrant
hereunder and thereunder and payment of the purchase price as herein
contemplated, each of the Underwriters will obtain valid marketable title to the
Warrant purchased by it from the Selling Security Holder, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest,
including any liability for estate or inheritance taxes, or any liability to or
claims of any creditor, devisee, legatee or beneficiary of such Selling Security
Holder.
(c) The Selling Security Holder has duly authorized, executed and
delivered a Power of Attorney (the "Warrant Power of Attorney") appointing the
persons named therein as attorneys-in-fact (collectively, the "Warrant
Attorneys" and individually, a "Warrant Attorney") and a Letter of Transmittal
and Custody Agreement (the "Warrant Custody Agreement") with the agent named
therein, as custodian (the "Warrant Custodian"); each of the Warrant Power of
Attorney and the Warranty Custody Agreement constitutes a valid and binding
agreement of the
10
Selling Security Holder, enforceable in accordance with its terms, and each of
the Selling Security Holder's Warrant Attorneys, acting alone, is authorized to
execute and deliver this Agreement, the Assignment, the Price Determination
Agreement and the certificate referred to in Section 6(j) hereof on behalf of
the Selling Security Holder, to determine, subject to the limitations set forth
in the Warrant Power of Attorney, the purchase price to be paid for the Warrant
by the several Underwriters to such Selling Warrantholder as provided in Section
1 hereof, to authorize the delivery of the Warrant to be sold under this
Agreement and the Assignment and to duly endorse (in blank or otherwise) the
Assignment, to accept payment therefor, and otherwise to act on behalf of such
Selling Security Holder in connection with this Agreement.
(d) All authorizations, approvals, consents and orders necessary for
the execution and delivery by the Selling Security Holder of the Warrant Power
of Attorney and the Warrant Custody Agreement, the execution and delivery by or
on behalf of the Selling Security Holder of this Agreement and the Assignment
and the sale and delivery of the Warrant under this Agreement and such
Assignment have been obtained; the Selling Security Holder has been duly
organized and is validly existing and in good standing under the laws of
California as a trust; and such the Selling Security Holder has full right,
power and authority to enter into and perform its obligations under this
Agreement, the Assignment, the Warrant Power of Attorney and the Warrant Custody
Agreement, and to sell, assign, transfer and deliver the Warrant to be sold
under this Agreement and the Assignment.
(e) No consent, approval, authorization or order of, or any filing
or declaration with, any court or governmental agency or body is required for
the consummation by the Selling Security Holder of the transactions on its part
contemplated herein, except such as have been obtained under the Act or the
Rules and Regulations and such as may be required under state securities or Blue
Sky laws or the by-laws and rules of the NASD in connection with the purchase
and distribution by the Underwriters of the Warrant Shares.
(f) All information with respect to the Selling Security Holder
contained in the Registration Statement and the Prospectus (as amended or
supplemented, if the Company shall have filed with the Commission any amendment
or supplement thereto) and furnished by the Selling Security Holder specifically
for inclusion in the Registration Statement or the Prospectus complied and will
comply with all applicable provisions of the Act and the Rules and Regulations,
contains and will contain all statements required to be stated therein in
accordance with the Act and the Rules and Regulations, and does not and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in light of the circumstances under which they were made.
(g) The Selling Security Holder has not taken, directly or
indirectly, any action intended to cause or result in, or which might reasonably
be expected to cause or result in, or which has caused or resulted in,
stabilization or manipulation, under the Act or otherwise, of the price of any
security of the Company to facilitate the sale or resale of the Shares.
11
5. Agreements of the Company and the Selling Security Holder. The
Company agrees (as to Sections 5(a) through 5(m)) and the Selling Security
Holder agrees (as to Sections 5(i), (n) and (o)) with the several Underwriters
as follows:
(a) The Company shall not, either prior to the Effective Date or
thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by an Underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representatives within a reasonable period of time prior to the filing thereof
and the Representatives shall not have objected thereto in good faith.
(b) The Company shall use every reasonable effort to cause the
Registration Statement to become effective, and shall notify the Representatives
promptly (1) when the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective, (2) of any request by the
Commission for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (3) of the commencement by the
Commission or by any state securities commission or other securities regulator
of any proceedings for the suspension of the qualification of any of the Shares
for offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose, including, without limitation,
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that purpose
or the threat thereof, (4) of the happening of any event during the period
mentioned in the second sentence of Section 5(e) hereof that in the judgment of
the Company makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or that requires the making of any changes in
the Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances in which they are made, not misleading
and (5) of receipt by the Company or any Representatives of the Company of any
other communication from the Commission or other securities regulator relating
to the Company, the Registration Statement, any preliminary prospectus or the
Prospectus. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement, if so requested by the
Representatives, the Company shall make every reasonable effort to obtain the
withdrawal of such order at the earliest possible moment. The Company shall use
its best efforts to comply with the provisions of and make all requisite filings
with the Commission pursuant to Rule 430A and to notify the Representatives
promptly of all such filings.
(c) The Company shall furnish to counsel for the Underwriters,
without charge, one signed copy of the Registration Statement and of any
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto and shall furnish to the Representatives, without
charge, for transmittal to each of the other Underwriters, a copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules but without exhibits.
(d) The Company shall comply with all the provisions of any
undertakings contained in the Registration Statement.
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(e) On the Effective Date, and thereafter from time to time, the
Company shall deliver to each of the Underwriters, without charge, as many
copies of the Prospectus or any amendment or supplement thereto as the
Representatives may reasonably request. The Company consents to the use of the
Prospectus or any amendment or supplement thereto by the several 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 any period of time thereafter during
which the Prospectus is required by law to be delivered in connection therewith.
If during such period of time any event shall occur which in the judgment of the
Company or counsel to the Underwriters is necessary to be set forth in the
Prospectus in order to make any statement therein, in the light of the
circumstances under which it was made, not misleading, or if it is necessary to
supplement or amend the Prospectus to comply with law, the Company shall, as
promptly as practicable, prepare and duly file with the Commission an
appropriate supplement or amendment thereto, and shall deliver to each of the
Underwriters, without charge, such number of copies thereof as the
Representatives may reasonably request.
(f) Prior to any public offering of the Shares by the Underwriters,
the Company shall cooperate with the Representatives and counsel to the
Underwriters in connection with the registration or qualification of the Shares
for offer and sale under the securities or Blue Sky laws of such jurisdictions
as the Representatives may request, including, without limitation, the provinces
and territories of Canada and other jurisdictions outside of the United States;
provided, however, that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to general service of process in any jurisdiction
where it is not now so subject.
(g) During the period of five years commencing on the Effective
Date, the Company shall furnish to the Representatives and each other
Underwriter who may so request copies of such financial statements and other
periodic and special reports as the Company may from time to time distribute
generally to the holders of any class of its capital stock, and will furnish to
the Representatives and each other Underwriter who may so request a copy of each
annual or other report it shall be required to file with the Commission.
(h) The Company shall make generally available to holders of its
securities as soon as reasonably practicable but in no event later than the last
day of the fifteenth full calendar month following the calendar quarter in which
the Effective Date falls, an earnings statement (which need not be audited but
shall be in reasonable detail) for a period of 12 months commencing after the
Effective Date, and satisfying the provisions of Section 11(a) of the Act
(including Rule 158 of the Rules and Regulations).
(i) Subject to the proviso set forth below, whether or not any of
the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Company and the Selling Security Holder, jointly
and severally, shall pay, or reimburse if paid by the Representatives, all costs
and expenses incident to the performance of the obligations of the Company and
the Selling Security Holder under this Agreement, including but not limited to
costs and expenses of or relating to (1) the preparation, printing and filing of
the Registration Statement and exhibits to it, each preliminary prospectus, the
Prospectus and any amendment or
13
supplement to the Registration Statement or the Prospectus, (2) the preparation
and delivery of certificates representing the Shares, (3) the printing of this
Agreement, the Agreement Among Underwriters, any Dealer Agreements, any
Underwriters' Questionnaire and the Agreement and Power of Attorney, (4)
furnishing (including costs of shipping, mailing and courier) such copies of the
Registration Statement, the Prospectus and any preliminary prospectus, and all
amendments and supplements thereto, as may be requested for use in connection
with the offering and sale of the Shares by the Underwriters or by dealers to
whom Shares may be sold, (5) the listing of the Shares on the New York Stock
Exchange, (6) any filings required to be made by the Underwriters with the NASD,
and the fees, disbursements and other charges of counsel for the Underwriters in
connection therewith, (7) the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of such jurisdictions
designated pursuant to Section 5(f) hereof, including the fees, disbursements
and other charges of counsel to the Underwriters in connection therewith, and
the preparation and printing of preliminary, supplemental and final Blue Sky
memoranda, (8) counsel to the Company and counsel to the Selling Security
Holder, (9) the transfer agent for the Shares, (10) the Accountants and (11) the
marketing of the offering by representatives of the Company, including, without
limitation, all costs and expenses of aircraft rentals, commercial airline
tickets, hotels, meals and other travel expenses of representatives of the
Company and all fees, costs and expenses for consultants used by the Company in
connection with the offering; provided, however, that the Selling Security
Holder's obligations under this Section 5(i) shall under no circumstances exceed
its pro rata share of all such costs and expenses, based on the proportion that
the number of Warrant Shares bears to the total number of Shares sold pursuant
to this Agreement.
(j) If this Agreement shall be terminated by the Company pursuant to
any of the provisions hereof (other than pursuant to Section 9) or if for any
reason the Company shall be unable to perform its obligations hereunder, the
Company shall reimburse the several Underwriters for all reasonable
out-of-pocket expenses (including the fees, disbursements and other charges of
counsel to the Underwriters) reasonably incurred by them in connection herewith.
(k) The Company shall not at any time, directly or indirectly, take
any action intended to cause or result in, or which might reasonably be expected
to cause or result in, or which will constitute, stabilization or manipulation,
under the Act or otherwise, of the price of the shares of Common Stock to
facilitate the sale or resale of any of the Shares.
(l) The Company shall apply the net proceeds from the offering and
sale of the Shares to be sold by the Company in the manner set forth in the
Prospectus under "Use of Proceeds" and shall file such reports with the
Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(m) The Company shall not, and shall cause each of its executive
officers and directors to enter into agreements with the Representatives, in
form and substance acceptable to the Representatives, to the effect that they
shall not, for a period of 90 days after the date of the Prospectus, without the
prior written consent of Gerard Klauer Mattison & Co., LLC ("GKM"),
14
offer to sell, sell, contract to sell, grant any option to sell, or otherwise
dispose of, or require the Company to file with the Commission a registration
statement under the Act to register, any shares of Common Stock or securities
convertible into or exchangeable for Common Stock or warrants or other rights to
acquire shares of Common Stock of which such person is now, or may in the future
become, the beneficial owner (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, hereinafter referred to as the
"Exchange Act"), other than as bona fide gifts to persons who agree in writing
with GKM to be bound by the provisions of this Section 5(m).
(n) As soon as the Selling Security Holder is advised thereof, such
Selling Security Holder shall advise the Representatives and confirm such advice
in writing, of receipt by such Selling Security Holder, or by any
Representatives of such Selling Security Holder, of any communication from the
Commission or other securities regulator relating to the Registration Statement,
the Prospectus or any preliminary prospectus, or any notice or order of the
Commission or other securities regulator relating to the Company or the Selling
Security Holder in connection with the transactions contemplated by this
Agreement.
(o) The Selling Security Holder shall deliver to the Representatives
prior to or on the Effective Date a properly completed and executed United
States Treasury Department Form W-9 (or other applicable form or statement
specified by Treasury Department regulations in lieu thereof).
6. Conditions of the Obligations of the Underwriters. In addition to
the execution and delivery of the Price Determination Agreement, the obligations
of each Underwriter hereunder are subject to the following conditions:
(a) Notification that the Registration Statement has become
effective shall be received by the Representatives not later than 6:00 p.m., New
York City time, on the date of this Agreement or at such later date and time as
shall be consented to in writing by the Representatives and all filings required
by Rule 424 of the Rules and Regulations and Rule 430A shall have been made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, which in your reasonable judgment, makes
it impracticable or inadvisable to market the Shares or to enforce the contracts
for the sale of the Shares, (iii) any request for additional information on the
part of the staff of the Commission or any such authorities shall have been
complied with to the satisfaction of the staff of the Commission or such
authorities and (iv) after the date hereof, no amendment or supplement to the
Registration Statement or the Prospectus shall have been filed unless a copy
thereof was first submitted to the Representatives and the Representatives did
not object thereto in good faith, and the Representatives shall have received
certificates, dated the
15
Closing Date and the Option Closing Date and signed by the Chief Executive
Officer or the Chairman of the Board of Directors of the Company and the Chief
Financial Officer of the Company (who may, as to proceedings threatened, rely
upon the best of their information and belief), to the effect of clauses (i),
(ii) and (iii).
(c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, (i) there shall not have been a
Material Adverse Change or development involving a prospective Material Adverse
Change, whether or not arising from transactions in the ordinary course of
business, in each case other than as set forth in or contemplated by the
Registration Statement and the Prospectus, (ii) neither the Company nor any of
its Subsidiaries shall have sustained any material loss or interference with its
business or properties from fire, explosion, flood or other casualty, whether or
not covered by insurance, or from any labor dispute or any court or legislative
or other governmental action, order or decree, which is not set forth in the
Registration Statement and the Prospectus, if in the judgment of the
Representatives any such development makes it impracticable or inadvisable to
consummate the sale and delivery of the Shares by the Underwriters at the public
offering price, (iii) there shall have been no transactions, not in the ordinary
course of business, entered into by the Company or any of its Subsidiaries,
except as set forth in the Registration Statement and the Prospectus, and no
liabilities or obligations incurred by the Company or any of its Subsidiaries,
in each case from the latest date as of which the financial condition of the
Company and its Subsidiaries is set forth in the Registration Statement and the
Prospectus, which would have a Material Adverse Effect, (iv) neither the Company
nor any of its Subsidiaries has issued any securities (other than the Shares) or
declared or paid any dividend or made any distribution in respect of its capital
stock of any class, debt (long term or short term) or, except in the ordinary
course of business, liabilities or obligations of the Company or any of its
Subsidiaries (contingent or otherwise), except as set forth in the Registration
Statement and Prospectus, and (v) no material amount of the assets of the
Company or any of its Subsidiaries shall have been pledged, mortgaged or
otherwise encumbered, except as set forth in the Registration Statement and
Prospectus.
(d) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any of its
Subsidiaries or any of their respective officers or directors in their
capacities as such, before or by any Federal, state or local court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, in which litigation or proceeding an unfavorable ruling, decision or
finding would have a Material Adverse Effect.
(e) Each of the representations and warranties of the Company and
the Selling Security Holder contained herein shall be true and correct in all
material respects at the Closing Date and, with respect to the Option Shares, at
the Option Closing Date, as if made at the Closing Date and, with respect to the
Option Shares, at the Option Closing Date, and all covenants and agreements
contained herein to be performed by the Company and the Selling Security Holder
and all conditions contained herein to be fulfilled or complied with by the
Company and the Selling Security Holder at or prior to the Closing Date and,
with respect to the Option Shares, at or prior to the Option Closing Date, shall
have been duly performed, fulfilled or complied with.
16
(f) The Representatives shall have received opinions, each dated the
Closing Date and, with respect to the Option Shares, the Option Closing Date,
satisfactory in form and substance to counsel for the Underwriters, from Weil,
Gotshal & Manges, LLP, counsel to the Company, and from counsel to the Selling
Security Holder.
(g) The Representatives shall have received an opinion, dated the
Closing Date and the Option Closing Date, from Morrison & Foerster LLP, counsel
to the Underwriters, with respect to the Registration Statement, the Prospectus
and this Agreement, which opinion shall be satisfactory in all respects to the
Representatives.
(h) On the date of the Prospectus, the Accountants shall have
furnished to the Representatives a letter, dated the date of its delivery,
addressed to the Representatives and in form and substance satisfactory to the
Representatives, confirming that they are independent accountants with respect
to the Company as required by the Act and the Rules and Regulations and with
respect to the financial and other statistical and numerical information
contained in the Registration Statement. At the Closing Date and, as to the
Option Shares, the Option Closing Date, the Accountants shall have furnished to
the Representatives a letter, dated the date of its delivery, which shall
confirm, on the basis of a review in accordance with the procedures set forth in
the letter from the Accountants, that nothing has come to their attention during
the period from the date of the letter referred to in the prior sentence to a
date (specified in the letter) not more than five days prior to the Closing Date
and the Option Closing Date which would require any change in their letter dated
the date of the Prospectus, if it were required to be dated and delivered at the
Closing Date and the Option Closing Date.
(i) At the Closing Date and, as to the Option Shares, the Option
Closing Date, there shall be furnished to the Representatives an accurate
certificate, dated the date of its delivery, signed by a senior executive
officer and a senior financial officer of the Company, in form and substance
satisfactory to the Representatives, to the effect that:
1. Each signer of such certificate has carefully examined the
Registration Statement and the Prospectus, and (A) as of the date of such
certificate, such documents are true and correct in all material respects and do
not omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading and (B) since the Effective Date, no event
has occurred as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein not untrue or misleading in
any material respect;
2. Each of the representations and warranties of the Company contained
in this Agreement were, when originally made, and are, at the time such
certificate is delivered, true and correct in all material respects; and
3. Each of the covenants required herein to be performed by the
Company on or prior to the date of such certificate has been duly, timely and
fully performed and each condition herein required to be complied with by the
Company on or prior to the delivery of such certificate has been duly, timely
and fully complied with.
17
(j) At the Closing Date and, as to the Option Shares, the Option
Closing Date, there shall have been furnished to the Representatives an accurate
certificate, dated the date of its delivery, signed by an officer or trustee of
the Selling Security Holder, in form and substance satisfactory to the
Representatives, to the effect that the representations and warranties of the
Selling Security Holder contained herein are true and correct in all material
respects on and as of the date of such certificate as if made on and as of the
date of such certificate, and each of the covenants and conditions required
herein to be performed or complied with by the Selling Security Holder on or
prior to the date of such certificate has been duly, timely and fully performed
or complied with.
(k) On or prior to the Closing Date, the Representatives shall have
received the executed agreements referred to in Section 5(m).
(l) The Shares shall be qualified for sale in such states as the
Representatives may reasonably request, each such qualification shall be in
effect and not subject to any stop order or other proceeding on the Closing Date
and the Option Closing Date.
(m) The Shares shall continue to be listed for trading on the New
York Stock Exchange, subject only to the issuance of the Shares.
(n) The Assignment, the Warrant Power of Attorney and the Warrant
Custody Agreement shall have been duly executed and delivered by the parties
thereto and shall be in full force and effect.
(o) The Company and the Selling Security Holder shall have furnished
to the Representatives such certificates, in addition to those specifically
mentioned herein, as the Representatives may have reasonably requested as to the
transactions and matters contemplated hereby.
7. Indemnification.
(a) Each of the Company and the Selling Security Holder (subject to
the provisos set forth below), jointly and severally, shall indemnify and hold
harmless each (i) Underwriter and (ii) the directors, officers, employees,
counsel and agents of each Underwriter and each person, if any, who controls
each Underwriter within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act (any of the persons referred to in clause (i) or (ii) may
hereinafter be referred to as an Indemnified Person or collectively as
Indemnified Persons) from and against any and all losses, claims, liabilities,
expenses and damages (including any and all investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding between any of the Indemnified
Persons and any indemnifying parties or between any indemnified party and any
third party, or otherwise, or any claim asserted), to which they, or any of
them, may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, liabilities, expenses or damages arise out of or are based on
any untrue statement or alleged untrue statement of a material fact contained in
(i) any preliminary prospectus, the Registration Statement or the Prospectus or
any amendment or supplement to the
18
Registration Statement or the Prospectus, (ii) any application, other document
or written communication, executed by the Company or based upon written
information supplied by the Company, filed in any jurisdiction in order to
qualify the Shares under the securities laws of such jurisdiction, or (iii) any
document, executed by the Company or based on written information supplied by
the Company, filed with any securities exchange, or the omission or alleged
omission to state in such documents enumerated in (i-iii) of a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made; provided,
however, that: (i) the Company and the Selling Security Holder shall not be
liable to the extent that such loss, claim, liability, expense or damage arises
from the sale of the Shares in the public offering to any person by an
Underwriter and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
relating to any Underwriter furnished in writing to the Company by the
Representatives on behalf of any Underwriter expressly for inclusion in the
Registration Statement, any preliminary prospectus or the Prospectus; and (ii)
the indemnity and contribution provisions of this Section 7 with respect to any
preliminary prospectus or amended preliminary prospectus shall not inure to the
benefit of any Underwriter (or any director, officer, employee, counsel or agent
or any person who controls such Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act) from whom the person asserting such
loss, claim, liability, expense or damage purchased the securities which are the
subject thereof, if a copy of the Prospectus was not given to such person and
the receipt thereof would have constituted a defense to the asserted claim; and
provided further, that the Selling Security Holder shall be liable under this
Section 7 only insofar as such losses, claims, liabilities, expenses or damages
arise out of or are based upon any untrue statement or omission or alleged
untrue statement or omission of a material fact made in reliance on and in
conformity with information relating to the Selling Security Holder furnished in
writing to the Company by the Selling Security Holder expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus. If
multiple claims are brought against any Indemnified Person in an arbitration
proceeding, and indemnification is permitted under applicable law and is
provided for under this Agreement with respect to at least one such claim, each
of the Company and the Selling Security Holder agrees that any arbitration award
shall be conclusively deemed to be based on claims as to which indemnification
is permitted and provided for, except to the extent the arbitration award
expressly states that the award, or any portion thereof, is based solely on a
claim as to which indemnification is not available. This indemnity agreement
will be in addition to any liability that the Company or any Selling Security
Holder might otherwise have.
(b) Each Underwriter shall indemnify and hold harmless the Company,
the Selling Security Holder, each person, if any, who controls the Company or
the Selling Security Holder within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, each director of the Company and each officer of
the Company who signs the Registration Statement to the same extent as the
foregoing indemnity from the Company and the Selling Security Holder to each
Underwriter, but only insofar as losses, claims, liabilities, expenses or
damages arise out of or are based on any untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information relating to any Underwriter furnished in writing to the Company by
the Representatives on behalf of such Underwriter expressly for use
19
in the Registration Statement, any preliminary prospectus or the Prospectus.
This indemnity will be in addition to any liability that each Underwriter might
otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 7 shall, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 7, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party shall not
relieve it from any liability that it may have to any indemnified party under
the foregoing provisions of this Section 7 unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any indemnified party
and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled at its own expense (except as provided below) to
participate in and, to the extent that it elects by delivering written notice to
the indemnified party promptly after receiving notice of the commencement of the
action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with
the defense. The indemnified party will have the right to employ its own counsel
in any such action, but the fees, expenses and other charges of such counsel
will be at the expense of such indemnified party unless (1) the employment of
counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably concluded (based on
written advice of counsel) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based on written advice of counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the indemnifying
party shall not have the right to direct the defense of such action on behalf of
the indemnified party) or (4) the indemnifying party has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel shall be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings, be liable for the reasonable fees, disbursements and other
charges of more than one firm (in addition to local counsel) for all such
indemnified party or parties. All such fees, disbursements and other charges
shall be reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party shall not be liable for any settlement of any action or claim
effected without its written consent (which consent will not be unreasonably
withheld or delayed). No indemnifying party shall, without the prior written
consent of each indemnified party that is or could reasonably be expected to
become a party thereto, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated by this Section 7, unless such settlement, compromise
or consent includes an unconditional release of each such
20
indemnified party from all liability arising or that may arise out of such
claim, action or proceeding.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 7 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company, the Selling Security
Holder or the Underwriters, the Company, the Selling Security Holder and the
Underwriters shall contribute to the total losses, claims, liabilities, expenses
and damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution
received by the Company or the Selling Security Holder from persons other than
the Underwriters, such as persons who control the Company or the Selling
Security Holder within the meaning of the Act, officers of the Company who
signed the Registration Statement and directors of the Company, who also may be
liable for contribution) to which the Company or the Selling Security Holder and
any one or more of the Underwriters may be subject in such proportion as shall
be appropriate to reflect the relative benefits received by the Company, the
Selling Security Holder and the Underwriters, respectively. The relative
benefits received by the Company, the Selling Security Holder and the
Underwriters, respectively, shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by
each the Company and the Selling Security Holder 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. If, but only if, the
allocation provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such proportion as is
appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Company, the Selling
Security Holder and the Underwriters, respectively, with respect to the
statements or omissions which resulted in such loss, claim, liability, expense
or damage, or action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering. Such relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company, the Selling Security Holder or the
Representatives on behalf of the Underwriters, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Selling Security Holder and
the Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 7(d) were to be determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense or damage, or action in
respect thereof, referred to above in this Section 7(d) shall be deemed to
include, for purpose of this Section 7(d), 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
Section 7(d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions received by it, and no
person found guilty of fraudulent misrepre-
21
sentation (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 to contribute as provided in
this Section 7(d) are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 7(d), any person who
controls a party to this Agreement within the meaning of the Act will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 7(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 7(d). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 7 and the representations and warranties of the Company and the Selling
Security Holder contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any investigation made by or on behalf of the
Underwriters, (ii) acceptance of any of the Shares and payment therefor or (iii)
any termination of this Agreement.
(f) The aggregate liability of the Selling Security Holder under the
indemnity, contribution and reimbursement provisions of this Section 7 shall be
limited to the proceeds (net of underwriting discounts and commissions) from the
sale of the Warrant Shares hereunder. The Company and the Selling Security
Holder may agree, as between themselves and without limiting the rights of the
Underwriters hereunder, as to the respective amounts of such liability for which
they shall each be liable.
8. Termination. The obligations of the several Underwriters under this
Agreement may be terminated at any time prior to the Closing Date (or, with
respect to the Option Shares, on or prior to the Option Closing Date), by notice
to the Company and Selling Security Holder from the Representatives, without
liability on the part of any Underwriter to the Company or the Selling Security
Holder, if, prior to delivery and payment for the Shares (or the Option Shares,
as the case may be), in the sole judgment of the Representatives, (i) trading in
any of the equity securities of the Company shall have been suspended by the
Commission or by an exchange that lists the Shares, (ii) trading in securities
generally on the New York Stock Exchange shall have been suspended or limited or
minimum or maximum prices shall have been generally established on such
exchange, or additional material governmental restrictions, not in force on the
date of this Agreement, shall have been imposed upon trading in securities
generally by such exchange or by order of the Commission or any court or other
governmental authority, (iii) a general banking moratorium shall have been
declared by either Federal or New York State authorities, (iv) any material
adverse change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any outbreak
or material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall have occurred, the
effect of any of which is such as to make it impracticable or inadvisable to
market the Shares or the Option Shares on the terms and in the manner
contemplated by the Prospectus, (v) if the Company or any of its Subsidiaries
shall have
22
sustained a loss material or substantial to the Company or any of its
Subsidiaries by reason of flood, fire, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act which, whether or not such loss
shall have been insured, will make it inadvisable to proceed with the offering
and sale of the Shares or the Option Shares, or (vi) if there shall have been a
material adverse change in the condition (financial or otherwise), earnings,
business, prospects, shareholders' equity, operations, properties, business or
results of operations of the Company or the Company and its Subsidiaries taken
as a whole, as would make it inadvisable to proceed with the offering and sale
of the Shares or Option Shares.
9. Substitution of Underwriters. If any one or more of the Underwriters
shall fail or refuse to purchase any of the Firm Shares which it or they have
agreed to purchase hereunder, and the aggregate number of Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate number of Firm Shares to be
purchased on such date, the other Underwriters shall be obligated, severally, to
purchase the Firm Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase, in the proportions which the number of
Firm Shares which they have respectively agreed to purchase pursuant to Section
1 bears to the aggregate number of Firm Shares which all such non-defaulting
Underwriters have so agreed to purchase, or in such other proportions as the
Representatives may specify; provided that in no event shall the maximum number
of Firm Shares which any Underwriter has become obligated to purchase pursuant
to Section 1 be increased pursuant to this Section 9 by more than one-ninth of
the number of Firm Shares agreed to be purchased by such Underwriter without the
prior written consent of such Underwriter. If any Underwriter or Underwriters
shall fail or refuse to purchase any Firm Shares and the aggregate number of
Firm Shares which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase exceeds one-tenth of the aggregate number of the Firm
Shares to be purchased on such date, and arrangements satisfactory to the
Company, the Selling Security Holder and the Representatives for the purchase of
such Firm Shares are not made within 48 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting Underwriter,
or the Company or the Selling Security Holder for the purchase or sale of any
Shares under this Agreement. In any such case, either the Representatives or the
Company and the Selling Security Holder shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. Any action taken
pursuant to this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
10. Miscellaneous. Notice given pursuant to any of the provisions of
this Agreement shall be in writing and, unless otherwise specified, shall be
mailed or delivered (a) if to the Company, at its principal office, 500 Forbes
Boulevard, South San Francisco, California 94080, attention: William G. Catron,
Esq., (b) if to the Selling Security Holder, to Wells Fargo Foundation, 420
Montgomery Street, 12th Floor, San Francisco, California 94014, attention: Tim
Chin, Esq., or (c) if to the Underwriters, to GKM at the offices of GKM, 529
Fifth Avenue, New York, New York 10017, Attention: Dominic A. Petito; or in any
case to such other address as the party to be notified may have requested in
writing. Any such notice shall be effective only upon
23
receipt. Any notice under Section 8 or 9 may be made by telex or telephone, but
if so made shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the
several Underwriters, and the Company and the Selling Security Holder and of the
controlling persons, directors and officers referred to in Section 7, and their
respective successors and assigns, and no other person shall acquire or have any
right under or by virtue of this Agreement. The term "successors and assigns" as
used in this Agreement shall not include a purchaser, as such purchaser, of
Shares from any of the several Underwriters.
With respect to any obligation of the Company and the Selling Security
Holder hereunder to make any payment, to indemnify for any liability or to
reimburse for any expense, notwithstanding the fact that such obligation is a
joint and several obligation of the Company and the Selling Security Holder, the
Underwriters (or any other person to whom such payment, indemnification or
reimbursement is owed) may pursue the Company with respect thereto prior to
pursuing the Selling Security Holder.
All representations, warranties and agreements of the Company and the
Selling Security Holder contained herein or in certificates or other instruments
delivered pursuant hereto, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter or any
of their controlling persons and shall survive delivery of and payment for the
Shares hereunder.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. Each party hereto hereby irrevocably
submits for purposes of any action arising from this Agreement brought by any
other party hereto to the jurisdiction of the courts of New York State located
in the Borough of Manhattan and the U.S. District Court for the Southern
District of New York. This Agreement may be signed in two or more counterparts
with the same effect as if the signatures thereto and hereto were upon the same
instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
The Company, the Selling Security Holder and the Underwriters each
hereby irrevocably waive any right they may have to a trial by jury in respect
of any claim based upon or arising out of this Agreement or the transactions
contemplated hereby.
This Agreement embodies the entire agreement and understanding between
the parties hereto and supersedes all prior agreements and understandings
relating to the subject matter hereof. This Agreement may not be amended or
otherwise modified or any provision hereof waived except by an instrument in
writing signed by GKM, the Selling Security Holder and the Company.
24
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Security Holder and the several Underwriters.
Very truly yours,
GALOOB TOYS, INC.
By: ________________________
Name:
Title:
WELLS FARGO FOUNDATION
By: ________________________
Name:
Title:
Confirmed as of the date first
above mentioned:
GERARD KLAUER MATTISON & CO., LLC
WILLIAM BLAIR & COMPANY, L.L.C.
JEFFERIES & COMPANY, INC.
Acting on their own behalf and as the
Representatives of the other several Underwriters
named in Schedule II hereof
By: GERARD KLAUER MATTISON & CO., LLC
By:________________________________________
Name:
Title:
WILLIAM BLAIR & COMPANY, L.L.C.
By:________________________________________
Name:
Title:
JEFFERIES & COMPANY, INC.
By:________________________________________
Name:
Title:
25
SCHEDULE I
SELLING SECURITY HOLDERS
Name of Number of Warrant Shares
Selling Underlying Warrant
Shareholder to be Purchased
----------- ---------------
Wells Fargo Foundation 392,866
=======
26
SCHEDULE II
UNDERWRITERS
Number of Number of Warrant
Names of Firm Shares Shares Underlying
Underwriters to be Purchased Warrant to be Purchased
------------ --------------- -----------------------
Gerard Klauer Mattison & Co., LLC ...
William Blair & Company, L.L.C. ....
Jefferies & Company, Inc. .........
--------- -------
Total 2,000,000 392,866
========= =======
27
EXHIBIT A
GALOOB TOYS, INC.
---------------------
PRICE DETERMINATION AGREEMENT
November __, 1996
GERARD KLAUER MATTISON & CO., LLC
WILLIAM BLAIR & COMPANY, L.L.C.
JEFFERIES & COMPANY, INC.
As Representatives of the
several Underwriters
c/o Gerard Klauer Mattison & Co., LLC
529 Fifth Avenue
New York, New York 10017
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated November __,
1996 (the "Underwriting Agreement"), among Galoob Toys, Inc., a Delaware
corporation (the "Company"), the Selling Security Holder named in Schedule I
thereto or hereto (the "Selling Security Holder"), and the several Underwriters
named in Schedule II thereto or hereto (the "Underwriters"), for whom you are
acting as Representatives (the "Representatives"). The Underwriting Agreement
provides, subject to the terms and conditions set forth therein, for the
purchase by the Underwriters (i) from the Company, of 2,000,000 shares (the
"Firm Shares") of the Company's common stock, par value $.01 per share (the
"Common Stock") and (ii) from the Selling Security Holder of a warrant (the
"Warrant") to purchase 392,866 shares of Common Stock (the "Warrant Shares").
The Underwriting Agreement further provides for the exercise of the Warrant by
the Underwriters and the sale by the Underwriters of the Warrant Shares,
together with the Firm Shares. This Agreement is the Price Determination
Agreement referred to in the Underwriting Agreement.
Pursuant to Section 1 of the Underwriting Agreement, the undersigned
agree with the Representatives as follows:
1. The public offering price per share at which the Firm Shares and the
Warrant Shares shall initially be offered shall be $_______.
28
2. The purchase price per share for the Firm Shares to be paid to the
Company by the several Underwriters shall be $_______, representing an amount
equal to the public offering price set forth above, less $______ per share
representing the underwriting discounts.
3. The purchase price to be paid by the several Underwriters to the
Selling Security Holder for the Warrant shall be $______ per underlying Warrant
Share, representing an amount equal to the public offering price set forth
above, less $______ per share representing the underwriting discounts, less
$4.44 per share representing the exercise price per Warrant Share.
The Company represents and warrants to each of the Underwriters that
the representations and warranties of the Company set forth in Section 3 of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof.
The Selling Security Holder represents and warrants to each of the
Underwriters that the representations and warranties of the Selling Security
Holder set forth in Section 4 of the Underwriting Agreement are accurate as
though expressly made at and as of the date hereof.
As contemplated by the Underwriting Agreement, attached as Schedule II
is a completed list of the several Underwriters, which shall be a part of this
Agreement and the Underwriting Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. Each party hereto hereby irrevocably
submits for purposes of any action arising from this Agreement brought by any
other party hereto to the jurisdiction of the courts of New York State located
in the Borough of Manhattan and the U.S. District Court for the Southern
District of New York.
If the foregoing is in accordance with your understanding of the
agreement among the Company, the Selling Security Holder and the Underwriters,
please sign and return to the Company a counterpart hereof, whereupon this
instrument along with all counterparts and together with the Underwriting
Agreement shall be a binding agreement among the Company, the Selling Security
Holder and the Underwriters in accordance with its terms and the terms of the
Underwriting Agreement.
Very truly yours,
GALOOB TOYS, INC.
By:
--------------------------
Name:
Title:
29
WELLS FARGO FOUNDATION
By:
--------------------------
Name:
Title:
Confirmed as of the date first
above mentioned:
GERARD KLAUER MATTISON & CO., LLC
WILLIAM BLAIR & COMPANY, L.L.C.
JEFFERIES & COMPANY, INC.
Acting on their own behalf and as the Representatives of the
other several Underwriters named in Schedule II hereof.
By: GERARD KLAUER MATTISON & CO., LLC
By:________________________________________
Name:
Title:
WILLIAM BLAIR & COMPANY, L.L.C.
By:________________________________________
Name:
Title:
JEFFERIES & COMPANY, INC.
By:________________________________________
Name:
Title:
30
SCHEDULE I
SELLING SECURITY HOLDER
Name of Number of Warrant Shares
Selling Underlying Warrant
Shareholder to be Purchased
----------- ---------------
Wells Fargo Foundation 392,866
=======
31
SCHEDULE II
UNDERWRITERS
Number of Number of Warrant
Names of Firm Shares Shares Underlying
Underwriters to be Purchased Warrant to be Purchased
------------ --------------- -----------------------
Gerard Klauer Mattison & Co., LLC ...
William Blair & Company, L.L.C. ....
Jefferies & Company, Inc. .........
--------- -------
Total 2,000,000 392,866
========= =======
32
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