Initial Public Offering (IPO): 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. 3 to Form S-1 106 603K
2: EX-1 Form of Underwriting Agreement 40 120K
3: EX-2.1 Rights Agreement 66 201K
4: EX-5 Opinion of Shack & Siegel, P.C. 2 9K
8: EX-10.17 Credit Agreement 50 162K
5: EX-10.4 Patent License Agreement 7 19K
6: EX-10.5 Employment Agreement-Mr. Neil D. Nicastro 15 37K
7: EX-10.7 Stock Option Plan of the Registrant 10 43K
9: EX-21 Subsidiaries of the Registrant 1 6K
10: EX-23.2 Consent of Ernst & Young LLP 1 7K
5,100,000 Shares
Midway Games Inc.
Common Stock
UNDERWRITING AGREEMENT
----------------------
October __, 1996
Oppenheimer & Co., Inc.
Hambrecht & Quist LLC
UBS Securities LLC
Wasserstein Perella Securities, Inc.
c/o Oppenheimer & Co., Inc.
Oppenheimer Tower
World Financial Center
New York, New York 10281
On behalf of the Several
Underwriters named in
Schedule I attached hereto.
Gentlemen:
Midway Games Inc., a Delaware corporation (the "Company"), proposes to sell
to you and the other underwriters named in Schedule I to this Agreement (the
"Underwriters"), for whom you are acting as Representatives, an aggregate of
5,100,000 shares (the "Firm Shares") of the Company's common stock, $0.01 par
value (the "Common Stock"). In addition, the Company proposes to grant to the
Underwriters an option to purchase up to
an additional 765,000 shares (the "Option Shares") of Common Stock from it for
the purpose of covering over-allotments in connection with the sale of the Firm
Shares. The Firm Shares and the Option Shares are together called the "Shares."
A portion of the proceeds to be received by the Company hereunder will be
used to pay promissory notes previously distributed as a dividend to WMS
Industries Inc. ("WMS), the Company's sole stockholder. WMS has executed this
Agreement and agrees to be bound by the provisions of Sections 7 and 8 hereof as
an inducement to the Underwriters to enter into this Agreement.
1. Sale and Purchase of the Shares.
-------------------------------
On the basis of the representations, warranties and agreements contained
in, and subject to the terms and conditions of, this Agreement:
(a) The Company agrees to sell to each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from the
Company, at $[ ] per share (the "Initial Price"), the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I to this
Agreement.
(b) The Company grants to the several Underwriters an option to
purchase, severally and not jointly, all or any part of the Option Shares
at the Initial Price. The number of Option Shares to be purchased by each
Underwriter shall be the same percentage (adjusted by the Representatives
to eliminate fractions) of the total number of Option Shares to be
purchased by the Underwriters as such Underwriter is purchasing of the Firm
Shares. Such option may be exercised only to cover over-allotments in the
sales of the Firm Shares by the Underwriters and may be exercised in whole
or in part at any time on or before 12:00 noon, New York City time, on the
business day before the Firm Shares Closing Date (as defined below), and
only once thereafter within 30 days after the date of this Agreement, in
each case upon written or telegraphic notice, or verbal or telephonic
notice confirmed by written or telegraphic notice, by the Representatives
to the Company no later than 12:00 noon,
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New York City time, on the business day before the Firm Shares Closing Date
or at least two business days before the Option Shares Closing Date (as
defined below), as the case may be, setting forth the number of Option
Shares to be purchased and the time and date (if other than the Firm Shares
Closing Date) of such purchase.
2. DELIVERY AND PAYMENT. Delivery by the Company of the Firm Shares to the
Representatives for the respective accounts of the Underwriters, and payment of
the purchase price by certified or official bank check or checks payable in New
York Clearing House (next day) funds to the Company, shall take place at the
offices of Oppenheimer & Co., Inc., at Oppenheimer Tower, World Financial
Center, New York, New York 10281, at 10:00 a.m., New York City time, on the
third business day following the date of this Agreement, provided, however, that
if the Shares sold hereunder are priced after 4:30 p.m., New York time, on any
business day, payment and delivery in respect of the Firm Shares shall take
place on the fourth business day following the date of this Agreement; if it is
determined that settlement within the foregoing time frame is not feasible, then
payment and delivery in respect of the Firm Shares shall occur at such time on
such other date, not later than 10 business days after the date of this
Agreement, as shall be agreed upon by the Company and the Representatives (such
time and date of delivery and payment are called the "Firm Shares Closing
Date").
In the event the option with respect to the Option Shares is exercised,
delivery by the Company of the Option Shares to the Representatives for the
respective accounts of the Underwriters and payment of the purchase price by
certified or official bank check or checks payable in New York Clearing House
(next day) funds to the Company shall take place at the offices of Oppenheimer &
Co., Inc. specified above at the time and on the date (which may be the same
date as, but in no event shall be earlier than, the Firm Shares Closing Date)
specified in the notice referred to in Section 1(b) (such time and date of
delivery and payment are called the "Option Shares Closing Date"). The Firm
Shares Closing Date and the Option Shares Closing Date are called, individually,
a "Closing Date" and, together, the "Closing Dates."
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Certificates evidencing the Shares shall be registered in such names and
shall be in such denominations as the Representatives shall request at least two
full business days before the Firm Shares Closing Date or, in the case of Option
Shares, on the day of notice of exercise of the option as described in Section
l(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, at least one
full business day before the Firm Shares Closing Date (or the Option Shares
Closing Date in the case of the Option Shares).
3. REGISTRATION STATEMENT AND PROSPECTUS; PUBLIC OFFERING. The Company has
prepared in conformity with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the published rules and regulations
thereunder (the "Rules") adopted by the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-11919), including a
preliminary prospectus relating to the Shares, and has filed with the Commission
the Registration Statement and such amendments thereto as may have been required
to the date of this Agreement. Copies of such Registration Statement (including
all amendments thereto) and of the related preliminary prospectus have
heretofore been delivered by the Company to you. The Company may also file a
related registration statement with the Commission pursuant to Rule 462(b) under
the Securities Act for the purpose of registering additional Shares, which
registration shall be effective upon filing with the Commission. The term
"Registration Statement" means (i) the Registration Statement as amended at the
time and on the date it becomes effective (the "Effective Date"), including all
exhibits and information, if any, deemed to be part of the Registration
Statement pursuant to Rule 424(a) and Rule 430A of the Rules and (ii) any
related registration statement filed with the Commission pursuant to Rule 462(b)
of the Rules. The term "preliminary prospectus" means any preliminary prospectus
(as described in Rule 430 of the Rules) included at any time as a part of the
Registration Statement. The term "Prospectus" means the prospectus in the form
first used to confirm sales of the Shares (whether such prospectus was included
in the Registration Statement at the time of effectiveness or was subsequently
filed with the Commission pursuant to Rule 424(b) of the Rules) or the
preliminary prospectus forming part of the Registration Statement at the time it
was declared effective
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together with the term sheet permitted under Rule 434(b) and filed with the
Commission pursuant to Rule 424(b), as applicable.
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus, as soon
after the Effective Date and the date of this Agreement as the Representatives
deem advisable. The Company hereby confirms that the Underwriters and dealers
have been authorized to distribute or cause to be distributed each preliminary
prospectus and are authorized to distribute the Prospectus (as from time to time
amended or supplemented if the Company furnishes amendments or supplements
thereto to the Underwriters).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Underwriter as follows:
(a) On the Effective Date the Registration Statement complied, and on
the date of the Prospectus, on the date any post-effective amendment to the
Registration Statement or any related registration statement filed with the
Commission pursuant to Rule 462(b) of the Rules shall become effective, on
the date any supplement or amendment to the Prospectus is filed with the
Commission and on each Closing Date, the Registration Statement and the
Prospectus (and any amendment thereof or supplement thereto) will comply in
all material respects with the applicable provisions of the Securities Act
and the Rules and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission
thereunder; the Registration Statement did not, as of the Effective Date,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading; and on the other dates referred to
above neither the Registration Statement nor the Prospectus, nor any
amendment thereof or supplement thereto, will contain any untrue statement
of a material fact or will omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. When any related preliminary prospectus was first filed with
the
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Commission (whether filed as part of the Registration Statement or any
amendment thereto or pursuant to Rule 424(a) of the Rules) and when any
amendment thereof or supplement thereto was first filed with the
Commission, such preliminary prospectus as amended or supplemented complied
in all material respects with the applicable provisions of the Securities
Act and the Rules and did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The
Company makes no representation or warranty as to the paragraph with
respect to stabilization on the inside front cover page of the Prospectus
and the statements contained under the caption "Underwriting" in the
Prospectus. The Company acknowledges that such statements constitute the
only information furnished in writing by the Representatives on behalf of
the several Underwriters specifically for inclusion in the Registration
Statement, any preliminary prospectus or the Prospectus.
(b) All contracts and other documents required to be filed as exhibits
to the Registration Statement have been filed with the Commission as
exhibits to the Registration Statement.
(c) The financial statements of the Company and of Atari Games
Corporation ("Atari") (including all notes and schedules thereto) included
in the Registration Statement and Prospectus fairly present the financial
position, the results of operations and cash flows and the stockholders'
equity (deficit) and the other information purported to be shown therein of
the Company or Atari, as the case may be, at the respective dates and for
the respective periods to which they apply; and such financial statements
have been prepared in conformity with generally accepted accounting
principles, consistently applied throughout the periods involved, and all
adjustments necessary for a fair presentation of the results for such
periods have been made. The schedules included in the Registration
Statement present fairly in all material respects the information required
to be stated therein; and the historical financial information and
statistical data set
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forth in the Prospectus under the captions "Summary Financial Data,"
"Capitalization," and "Selected Financial Data" are fairly stated in all
material respects in relation to the financial statements from which they
have been derived. The pro forma financial data included in the
Registration Statement and the Prospectus present fairly the information
shown therein, comply in all material respects with the requirements of the
Act and the Rules and Regulations with respect to pro forma financial
statements, have been properly compiled on the pro forma basis described
therein and the assumptions used in the preparation thereof are reasonable
and the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(d) Ernst & Young LLP, whose reports are filed with the Commission as
a part of the Registration Statement, is and, during the periods covered by
its reports, were independent public accountants as required by the
Securities Act and the Rules.
(e) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware. Each
subsidiary of the Company has been duly incorporated or formed and is an
existing corporation in good standing under the laws of the jurisdiction of
its incorporation or organization. All of the capital stock of each
subsidiary set forth on Schedule II hereto is owned by the Company, free
and clear of any liens or encumbrances. The Company has no subsidiary or
subsidiaries other than as set forth on Schedule II hereto and does not
control, directly or indirectly, any other corporation, partnership, joint
venture, association or other business organization. Each of the Company
and its subsidiaries is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
assets or properties (owned, leased or licensed) or the nature of its
business makes such qualification necessary, except for such jurisdictions
where the failure to so qualify individually or in the aggregate would not
have a material adverse effect on the assets or properties, business,
results of operations or financial condition of
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the Company and its subsidiaries, taken as a whole. Except as disclosed in
the Registration Statement and the Prospectus, the Company and its
subsidiaries do not own, lease or license any asset or property or conduct
any business outside the United States of America. Each of the Company and
its subsidiaries has all requisite corporate power and authority, and all
necessary authorizations, approvals, consents, orders, licenses,
certificates and permits of and from all governmental or regulatory bodies
or any other person or entity, to own, lease and license its assets and
properties and conduct its businesses as now being conducted and as
described in the Registration Statement and the Prospectus; no such
authorization, approval, consent, order, license, certificate or permit
contains a materially burdensome restriction other than as disclosed in the
Registration Statement and the Prospectus; and the Company has all such
corporate power and authority, and such authorizations, approvals,
consents, orders, licenses, certificates and permits to enter into, deliver
and perform this Agreement and to issue and sell the Shares (except as may
be required under the Securities Act and state and foreign Blue Sky laws).
(f) Except as disclosed in the Registration Statement and the
Prospectus, the Company owns or possesses adequate and enforceable rights
to use all (to the extent any of them exist) patents, patent applications,
trademarks, trademark applications, service marks, copyrights, copyright
applications, licenses and other similar rights (collectively, the
"Intangibles") necessary for the conduct of its business as now being
conducted and as described in the Registration Statement and the
Prospectus. The Company has not received any notice of, and is not aware
of, any infringements of, or conflicts with asserted rights of others with
respect to, any Intangibles which, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
material adverse effect upon the assets or properties, business, results of
operations or financial condition of the Company and its subsidiaries,
taken as a whole. The Company has not made any material claim of violation
or infringement by
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others of rights to, or in connection with, the Intangibles, and the
Company knows of no basis for making any such claim.
(g) Each of the Company and its subsidiaries has good and marketable
title in fee simple to each of the items of personal property which are
reflected in the financial statements referred to in Section 4(c) or are
referred to in the Registration Statement and the Prospectus as being owned
by it and valid and enforceable leasehold interests in each of the items of
real and personal property which are referred to in the Registration
Statement and the Prospectus as being leased by it, in each case free and
clear of all liens, encumbrances, claims, security interests and defects,
other than those described in the Registration Statement and the
Prospectus.
(h) Except as disclosed in the Registration Statement and the
Prospectus, there is no litigation or governmental or other proceeding or
investigation before any court or before or by any public body or board
pending or, to the Company's best knowledge, threatened (and the Company
does not know of any basis therefor) against, or involving the assets,
properties or businesses of, the Company or any of its subsidiaries which,
if determined adversely to the Company or any of its subsidiaries, would
materially adversely affect the value or the operation of any such assets
or properties or the business, results of operations or financial condition
of the Company and its subsidiaries, taken as a whole.
(i) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as described
therein; there has not been any material adverse change or any material
adverse development or event involving a prospective change in the assets
or properties, earnings, business affairs or business prospects, results of
operations or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business; each of the Company and its subsidiaries
has not entered into
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any transaction, other than in the ordinary course of business, that is
material to the Company and its subsidiaries, taken as a whole; each of the
Company and its subsidiaries has not sustained any material loss or
interference with its assets, businesses or properties from fire,
explosion, earthquake, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree; and since the date of the latest
balance sheet included in the Registration Statement and the Prospectus,
except as reflected therein, each of the Company and its subsidiaries has
not undertaken any liability or obligation, direct or contingent, except
for liabilities or obligations undertaken in the ordinary course of
business.
(j) Each agreement listed in the Exhibits to the Registration
Statement is in full force and effect and is valid and enforceable by the
Company or one of its subsidiaries in accordance with its terms, assuming
the due authorization and execution thereof by each of the other parties
thereto. Neither the Company, nor to the best of the Company's knowledge,
any other party is in default in the observance or performance of any term
or obligation to be performed by it under any such agreement, and no event
has occurred which with notice or lapse of time or both would constitute
such a default which default or event would have a material adverse effect
on the assets or properties, business, results of operations or financial
condition of the Company and its subsidiaries, taken as a whole. No default
exists, and no event has occurred which with notice or lapse of time or
both would constitute a default, in the due performance and observance of
any term, covenant or condition, by the Company of any other indenture,
mortgage, deed of trust, note or any other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which any of them
or their properties or businesses is bound or affected which default or
event would have a material adverse effect on the assets or properties,
business, results of operations or financial condition of the Company and
its subsidiaries, taken as a whole.
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(k) Each of the Company and its subsidiaries is not in violation of
any term or provision of its charter or by-laws or of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation,
where the consequences of such violation would have a material adverse
effect on the assets or properties, business, results of operations or
financial condition of the Company.
(l) Neither the execution, delivery and performance of this Agreement
by the Company nor the consummation of any of the transactions contemplated
hereby (including, without limitation, the issuance and sale by the Company
of the Shares) will (i) give rise to a right to terminate or accelerate the
due date of any payment due under, or conflict with or result in the breach
of any term or provision of, or constitute a default (or any event which
with notice or lapse of time or both would constitute a default) under, or
require any consent or waiver under, or result in the execution or
imposition of any lien, charge or encumbrance upon any properties or assets
of the Company or any of its subsidiaries pursuant to the terms of, any
indenture, mortgage, deed of trust, note or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which any
of them or their properties or businesses is bound, or any franchise,
license, permit, judgment, decree, order, statute, rule or regulation
applicable to the Company or any of its subsidiaries or (ii) violate any
provision of the charter or by-laws of the Company or any of its
subsidiaries.
(m) The Company has an authorized and outstanding capitalization as
set forth under the caption "Capitalization" in the Prospectus. All of the
outstanding shares of Common Stock have been duly and validly authorized
and have been duly and validly issued and are fully paid and nonassessable
and none of them was issued in violation of any preemptive or other similar
statutory right. The Shares, when issued and sold pursuant to this
Agreement, will be duly and validly issued, fully paid and nonassessable
and none of them will be issued in violation of any preemptive or other
similar statutory right. Except as disclosed in the Registration
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Statement and the Prospectus, there is no outstanding option, warrant or
other right calling for the issuance of, and no commitment, plan or
agreement to issue, any share of stock of the Company or any security
convertible into, or exercisable or exchangeable for, stock of the Company.
The Common Stock and the preferred stock, $0.01 par value (the "Preferred
Stock") and the Shares conform to all statements in relation thereto
contained in the Registration Statement and the Prospectus.
(n) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as described
or referred to therein (including any borrowings from WMS described or
referred to therein), the Company has not (i) issued any securities or
incurred any liability or obligation, direct or contingent, for borrowed
money, (ii) entered into any transaction not in the ordinary course of
business or (iii) declared or paid any dividend or made any distribution on
any shares of its stock or redeemed, purchased or otherwise acquired or
agreed to redeem, purchase or otherwise acquire any shares of its stock.
(o) No holder of any security of the Company has any right to have any
security owned by such holder included in the Registration Statement or to
demand registration of any security owned by such holder during the period
ending 180 days from the date of this Agreement. The Company has obtained
from certain officers and directors of the Company, and from WMS, the
Company's sole stockholder prior to the sale of the Firm Shares, who
together hold all the outstanding shares of Common Stock and all
outstanding options to purchase shares of Common Stock, their enforceable
written agreement that for a period of at least 180 days from the date of
this Agreement they will not, without the prior written consent of
Oppenheimer & Co., Inc., offer, sell, contract to sell, distribute, pledge,
grant any option for the sale of, or otherwise dispose of, directly or
indirectly, or encumber, or exercise any registration rights with respect
to, any shares of Common Stock (or any securities convertible into or
exercisable or exchangeable for any shares of Common Stock).
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(p) All necessary corporate action has been duly and validly taken by
the Company to authorize the execution, delivery and performance of this
Agreement and the issuance and sale of the Shares. This Agreement has been
duly and validly executed and delivered by the Company and constitutes and
will constitute the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except (A) as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles and (B)
with respect to this Agreement, to the extent that rights to indemnity or
contribution under this Agreement may be limited by federal and state
securities laws or the public policy underlying such laws.
(q) Each of the Company and its subsidiaries is conducting its
business in compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations, except where the failure to be so in compliance would not have
a material adverse effect on the assets or properties, business, results of
operations or financial condition of the Company and its subsidiaries,
taken as a whole.
(r) No transaction has occurred between or among the Company or any of
its affiliates and any of its officers or directors or any affiliate or
affiliates of any such officer or director that is required to be described
in and is not described in the Registration Statement and the Prospectus.
(s) The Company has not taken, nor will it take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of any of the Shares.
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(t) The Company has filed all federal, state, local and foreign tax
returns which are required to be filed through the date hereof, or has
received extensions thereof, and has paid all taxes shown on such returns
and all assessments received by it.
(u) The Shares have been approved for listing on the New York Stock
Exchange (the "NYSE"), subject to official notice of issuance.
(v) The Company has complied with all of the requirements and filed
the required forms as specified in Florida Statutes Section 517.075.
5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters under this Agreement are several and not joint. The respective
obligations of the Underwriters to purchase the Shares are subject to each of
the following terms and conditions:
(a) The Prospectus shall have been timely filed with the Commission in
accordance with Section 6(A)(a) hereof.
(b) The Registration Statement shall have become effective. No order
preventing or suspending the use of any preliminary prospectus or the
Prospectus shall have been or shall be in effect, and no order suspending
the effectiveness of the Registration Statement shall be in effect and no
proceedings for such purpose shall be pending before or threatened by the
Commission, and any requests for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the satisfaction of the
Representatives.
(c) The representations and warranties of the Company contained in
this Agreement and in the certificates delivered pursuant to Section 5(d)
shall be true and correct when made and on and as of each Closing Date as
if made on such date and the Company shall have performed all covenants and
agreements and satisfied all the conditions contained in this Agreement
required to be
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performed or satisfied by it at or before such Closing Date.
(d) The Representatives shall have received on each Closing Date a
certificate, addressed to the Representatives and dated such Closing Date,
of the chief executive or chief operating officer and the chief financial
officer or chief accounting officer of the Company, to the effect that the
signers of such certificate have carefully examined the Registration
Statement, the Prospectus and this Agreement and that the representations
and warranties of the Company in this Agreement are true and correct on and
as of such Closing Date with the same effect as if made on such Closing
Date and the Company has performed all covenants and agreements and
satisfied all conditions contained in this Agreement required to be
performed or satisfied by it at or prior to such Closing Date.
(e) The Representatives shall have received at the time this Agreement
is executed and on each Closing Date a letter or letters signed by Ernst &
Young LLP, addressed to the Representatives and dated, respectively, the
date of this Agreement and each such Closing Date, in form and substance
satisfactory to the Representatives, confirming that they are independent
public accountants within the meaning of the Securities Act and the Rules,
that the response to Item 10 of the Registration Statement is correct
insofar as it relates to them and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules and pro forma financial statements
included in the Registration Statement and the Prospectus and reported
on by them comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the
Rules;
(ii) on the basis of a reading of the amounts included in the
Registration Statement and the Prospectus under the headings "Summary
Financial Data" and "Selected Financial Data;" their limited
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review in accordance with standards established by the American Institute
of Certified Public Accountants of the unaudited financial statements of
Atari for the three months ended March 29, 1996 and March 31, 1995;
carrying out certain procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily reveal
matters of significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the stockholders and
directors and audit committee of the Company, and inquiries of certain
officials of the Company who have responsibility for financial and
accounting matters of the Company as to transactions and events subsequent
to the date of the latest audited financial statements, nothing came to
their attention which caused them to believe that:
(A) the amounts in "Summary Financial Data" and "Selected
Financial Data" included in the Registration Statement and the
Prospectus do not agree with the corresponding amounts in the audited
and unaudited financial statements from which such amounts were
derived; or
(B) the unaudited financial statements of Atari for the three
months ended March 29, 1996 and March 31, 1995 included in the
Registration Statement (i) do not comply in form in all material
respects with the applicable accounting requirements of the Securities
Act and the Rules and (ii) are not in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements of Atari; or
(C) (i) with respect to the Company there were, at a specified
date not more than five business days prior to the date of the letter,
any increases in the total current liabilities, long-term debt or
capital stock of the Company or decreases in working capital
(deficit), total current assets, total assets or total
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stockholders' equity (deficit), of the Company, as compared with the
amounts shown on the Company's audited June 30, 1996 balance sheet
included in the Registration Statement and the Prospectus, or (ii) for
the period from June 30, 1996 to such specified date not more than
five business days prior to the date of the letter, there were any
decreases in revenues, operating income or net income;
(iii) they have performed certain other procedures as a result of
which they determined that certain information of an accounting, financial
or statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Company) set forth in the Registration Statement and the Prospectus and
specified by the Representatives agrees with the accounting records of the
Company; and
(iv) on the basis of a reading of the unaudited pro forma financial
statements included in the Registration Statement and the Prospectus (the
"pro forma financial statements"); carrying out certain specified
procedures; inquiries of certain officials of the Company who have
responsibility for financial and accounting matters; and proving the
arithmetic accuracy of the application of the pro forma adjustments to the
historical amounts in the pro forma financial statements, nothing came to
their attention which caused them to believe that the pro forma financial
statements do not comply in form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation S-X or that
the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such statements.
References to the Registration Statement and the Prospectus in this paragraph
(e) are to such documents as amended and supplemented at the date of the letter.
-17-
(f) The Representatives shall have received on each Closing Date from Shack
& Siegel, P.C., counsel for the Company, an opinion, addressed to the
Representatives and dated such Closing Date, and stating in effect that:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware. Each
U.S. subsidiary of the Company has been duly incorporated or formed and is
an existing corporation in good standing under the laws of the jurisdiction
of its incorporation or organization, except for such jurisdictions where
the failure to so qualify, individually or in the aggregate, would not have
a material adverse effect on the assets or properties, business, results of
operations or financial condition of the Company and its subsidiaries,
taken as a whole.
(ii) Each of the Company and its U.S. subsidiaries has all requisite
corporate power and authority to own, lease and license its assets and
properties and conduct its business as described in the Registration
Statement and the Prospectus; and the Company has all requisite corporate
power and authority and all necessary governmental, and all other necessary
authorizations, approvals, consents, orders, licenses, certificates and
permits, to enter into, deliver and perform this Agreement and to issue and
sell the Shares, other than those required under the Securities Act and
state and foreign Blue Sky laws.
(iii) The Company has authorized and issued capitalization as set
forth under the caption "Capitalization" in the Prospectus; the
certificates evidencing the Shares are in due and proper legal form and
have been duly authorized for issuance by the Company; all of the
outstanding shares of Common Stock of the Company have been duly and
validly authorized and have been duly and validly issued and, assuming full
payment therefor, are fully paid and nonassessable and none of them was
issued in
-18-
violation of any preemptive or other similar statutory right. The Shares,
when issued and sold pursuant to this Agreement, will be duly and validly
issued, fully paid and nonassessable and none of them will have been issued
in violation of any preemptive or other similar statutory right. Except as
disclosed in the Registration Statement and the Prospectus, to such
counsel's knowledge, there is no outstanding option, warrant or other right
calling for the issuance of, and no commitment, plan or agreement to issue,
any share of stock of the Company or any security convertible into, or
exercisable or exchangeable for, stock of the Company. The Common Stock,
the Preferred Stock and the Shares conform in all material respects to all
statements in relation thereto contained in the Registration Statement and
the Prospectus.
(iv) All necessary corporate action has been duly and validly taken by
the Company to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly and validly executed and delivered
by the Company and constitutes and will constitute the legal, valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms except (A) as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles and (B) with respect to this Agreement, to
the extent that rights to indemnity or contribution under this Agreement
may be limited by federal or state securities laws or the public policy
underlying such laws.
(v) Neither the execution, delivery and performance of this Agreement
by the Company nor the consummation of any of the transactions contemplated
hereby (including, without limitation, the issuance and sale by the Company
of the Shares) will (i) give rise to a right to terminate or accelerate the
due date of any payment due under, or conflict with or
-19-
result in the breach of any term or provision of, or constitute a default
(or any event which with notice or lapse of time, or both, would constitute
a default) under, or require any consent or waiver under, or result in the
execution or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company or any of its subsidiaries pursuant to
the terms of, any indenture, mortgage, deed of trust, note or other
agreement or instrument of which such counsel is aware and to which the
Company or any of its subsidiaries is a party or by which any of them or
their properties or businesses is bound, or any franchise, license, permit,
judgment, decree, order, statute, rule or regulation of which such counsel
is aware and applicable to the Company or any of its subsidiaries or (ii)
violate any provision of the charter or by-laws of the Company or any of
its subsidiaries.
(vi) To such counsel's knowledge, no default exists, and no event has
occurred which with notice or lapse of time or both would constitute a
default, in the due performance and observance of any term, covenant or
condition, of any indenture, mortgage, deed of trust, note or any other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which any of them or their assets or properties or businesses
is bound or affected which default would have a material adverse effect on
the assets or properties, business, results of operations or financial
condition of the Company and its subsidiaries, taken as a whole.
(vii) To such counsel's knowledge, each of the Company and its
subsidiaries is not in violation of any term or provision of its charter or
by-laws or of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation, where the consequences of such violation would
have a material adverse effect on the assets or properties, businesses,
results of operations or financial condition of the Company and its
subsidiaries, taken as a whole.
-20-
(viii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the performance of this
Agreement by the Company or the consummation of the transactions
contemplated hereby, except such as have been obtained under the Securities
Act and such as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the several
Underwriters.
(ix) Except as described in the Registration Statement and the
Prospectus, to such counsel's knowledge, there is no litigation or
governmental or other proceeding or investigation before any court or
before or by any public body or board pending or threatened (and such
counsel does not know of any basis therefor) against, or involving the
assets, properties or businesses of, the Company or any of its subsidiaries
which, if determined adversely to the Company or any of its subsidiaries,
would materially adversely affect the value or the operation of any such
assets or properties or the business, results of operations or financial
condition of the Company and its subsidiaries, taken as a whole.
(x) The agreement of the Company, certain of its officers and
directors, and WMS, the Company's sole stockholder prior to the sale of the
Firm Shares stating that for a period of 180 days from the date of the
Prospectus they will not, without Oppenheimer & Co., Inc.'s prior written
consent issue, offer, sell, contract to sell, distribute, pledge, grant any
option for the sale of, or otherwise dispose of, directly or indirectly, or
encumber, or exercise any registration rights with respect to, or register
with the Commission, as applicable, any shares of Common Stock owned by
them (or any securities convertible into, exercisable for, or exchangeable
for any shares of Common Stock) has been duly and validly delivered by such
persons and constitutes a legal, valid and binding obligations of each such
person (assuming due and valid execution
-21-
thereof by each such person) enforceable against each such person in
accordance with its terms, except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles.
(xi) The statements in the Prospectus under the captions "Risk
Factors-Anti-Takeover Provisions;" "-Shares Eligible for Future Sale";
"Business-Platform Licenses"; "-Intellectual Property Licenses"; "-Patent,
Trademark, Copyright and Product Protection"; "-Legal Proceedings";
"Management-Compensation Committee Interlocks and Insider Participation;"
"-Executive Compensation;" "-Employment Agreements"; "-Stock Option Plan;"
"Certain Transactions"; "Arrangements With WMS"; "Description of Capital
Stock"; and "Shares Eligible for Future Sale", insofar as such statements
constitute a summary of documents referred to therein or matters of law,
are fair summaries of the material provisions thereof and accurately
present the information called for with respect to such documents and
matters. All contracts and other documents, of which such counsel is aware,
required to be filed as exhibits to, or described in, the Registration
Statement have been so filed with the Commission or are fairly described in
the Registration Statement, as the case may be.
(xii) The Registration Statement, all preliminary prospectuses and the
Prospectus and each amendment or supplement thereto (except for the
financial statements and notes and schedules and other financial and
statistical data included therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the requirements
of the Securities Act and the Rules.
(xiii) The Registration Statement has become effective under the
Securities Act, and, to such
-22-
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are threatened, pending or contemplated.
To the extent deemed advisable by such counsel, they may rely as to matters
of fact on certificates of responsible officers of the Company and public
officials and on the opinions of other counsel satisfactory to the
Representatives as to matters which are governed by laws other than the laws of
the State of New York, the General Corporation Law of the State of Delaware and
the federal laws of the United States; provided that such counsel shall state
that in their opinion the Underwriters and they are justified in relying on such
other opinions. Copies of such certificates and other opinions shall be
furnished to the Representatives and counsel for the Underwriters.
In addition, such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the Representatives and representatives of the independent
certified public accountants of the Company, at which conferences the contents
of the Registration Statement and the Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus (except as specified
in the foregoing opinion), on the basis of the foregoing no facts have come to
the attention of such counsel which lead such counsel to believe that the
Registration Statement at the time it became effective (except with respect to
the financial statements and notes and schedules thereto and other financial and
statistical data, as to which such counsel need make no statement) contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or that the Prospectus as amended or supplemented (except with respect to the
financial statements and notes and schedules thereto and other financial and
statistical data, as to which such counsel need make no statement) on the date
thereof contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements
-23-
therein, in the light of the circumstances under which they were made, not
misleading.
(g) All proceedings taken in connection with the sale of the Firm
Shares and the Option Shares as herein contemplated shall be reasonably
satisfactory in form and substance to the Representatives and their counsel
and the Underwriters shall have received from Morgan, Lewis & Bockius LLP a
favorable opinion, addressed to the Representatives and dated such Closing
Date, with respect to the Shares, the Registration Statement and the
Prospectus, and such other related matters, as the Representatives may
reasonably request, and the Company shall have furnished to Morgan, Lewis &
Bockius LLP such documents as they may reasonably request for the purpose
of enabling them to pass upon such matters.
(h) The Representatives shall have received on each Closing Date a
certificate, including exhibits thereto, addressed to the Representatives
and dated such Closing Date, of the Secretary or an Assistant Secretary of
the Company, signed in such officer's capacity as such officer, as to the
(i) certificate of incorporation and bylaws of the Company, (ii)
resolutions authorizing the execution and delivery of the Registration
Statement, this Agreement and the performance of the transactions
contemplated by this Agreement, the Registration Statement, the Prospectus
and the offering of the Shares, and (iii) incumbency of the person or
persons authorized to execute and deliver the Registration Statement, this
Agreement and any other documents contemplated by the offering of the
Shares.
(i) The Representatives shall have received on each Closing Date
certificates of the Secretaries of State of each State where the Company or
any of its U.S. subsidiaries is incorporated and doing business as to the
good standing of the Company or such subsidiary, listing all charter
documents on file, if applicable, qualification of the Company or such
subsidiary to do business as a foreign corporation, if applicable, payment
of taxes and filing of annual reports. In addition, the Representatives
shall have received copies of all charter
-24-
documents of the Company and each of its subsidiaries certified by the
Secretary of State of the State of such corporation's incorporation.
(j) The Representatives shall have received on each Closing Date a
certificate, addressed to the Representatives, and dated such Closing Date,
of an executive officer of the Company to the effect that the signer of
such certificate has reviewed and understands the provisions of Section
517.075 of the Florida Statutes, and represents that the Company has
complied, and at all times will comply, with all provisions of Section
517.075 and further, that as of such Closing Date, neither the Company nor
any of its affiliates does business with the government of Cuba or with any
person or affiliate located in Cuba.
6. Covenants of the Company.
------------------------
(A) The Company covenants and agrees as follows:
(a) The Company shall prepare the Prospectus in a form approved by the
Representatives and file such Prospectus pursuant to Rule 424(b) under the
Securities Act not later than the Commission's close of business on the
second business day following the execution and delivery of this Agreement,
or, if such second business day would be more than fifteen business days
after the Effective Date of the Registration Statement or any
post-effective amendment thereto, such earlier date as would permit such
Prospectus to be filed without filing a post-effective amendment as set
forth in Rule 430A(a)(3) under the Securities Act, and shall promptly
advise the Representatives (i) when the Registration Statement shall have
become effective, (ii) when any amendment thereof or any related
registration statement filed with the Commission pursuant to Rule 462(b) of
the Rules shall have become effective, (iii) of any request by the
Commission for any amendment of the Registration Statement or the
Prospectus or for any additional information, (iv) of the prevention or
suspension of the use of any preliminary prospectus or the Prospectus or of
the issuance by the Commission of any stop order suspending the
effectiveness
-25-
of the Registration Statement or the institution or threatening of any
proceeding for that purpose and (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. If contemplated by this Agreement, the Company
shall prepare and file with the Commission in conformity with the
Securities Act and the Rules a related registration statement pursuant to
Rule 462(b) under the Securities Act for the purpose of registering
additional shares. The Company shall not file any amendment of the
Registration Statement or amendment or supplement to the Prospectus unless
the Company has furnished the Representatives a copy for its review prior
to filing and shall not file any such proposed amendment or supplement to
which the Representatives reasonably object. The Company shall use its best
efforts to prevent the issuance of any such stop order and, if issued, to
obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Shares is
required to be delivered under the Securities Act and the Rules, any event
occurs as a result of which the Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall be
necessary to amend or supplement the Prospectus to comply with the
Securities Act or the Rules, the Company promptly shall prepare and file
with the Commission, subject to the third sentence of paragraph (a) of this
Section 6(A), an amendment or supplement which shall correct such statement
or omission or an amendment which shall effect such compliance.
(c) The Company shall make generally available to its security holders
and to the Representatives as soon as practicable, but not later than 45
days after the end of the 12-month period beginning at the end of the
fiscal quarter of the Company during which the Effective Date occurs (or 90
days if such 12-month period coincides with
-26-
the Company's fiscal year), an earnings statement (which need not be
audited) of the Company, covering such 12-month period, which shall satisfy
the provisions of Section 11(a) of the Securities Act or Rule 158 of the
Rules.
(d) The Company shall furnish to the Representatives and counsel for
the Underwriters, without charge, signed copies of the Registration
Statement (including all exhibits thereto and amendments thereof) and to
each other Underwriter a copy of the Registration Statement (without
exhibits thereto) and all amendments thereof and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Securities
Act or the Rules, as many copies of any preliminary prospectus and the
Prospectus and any amendments thereof and supplements thereto as the
Representatives may reasonably request.
(e) The Company shall cooperate with the Representatives and their
counsel in endeavoring to qualify the Shares for offer and sale under the
laws of such jurisdictions as the Representatives may designate and shall
maintain such qualifications in effect so long as required for the
distribution of the Shares; provided, however, that the Company shall not
be required in connection therewith, as a condition thereof, to qualify as
a foreign corporation or to execute a general consent to service of process
in any jurisdiction or subject itself to taxation as doing business in any
jurisdiction.
(f) For a period of five years after the date of this Agreement, the
Company shall supply to the Representatives, and to each other Underwriter
who may so request in writing, 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
to furnish to the Representatives a copy of each annual or other report it
shall be required to file with the Commission.
(g) Without the prior written consent of Oppenheimer & Co., Inc., for
a period of 180 days after the date of this Agreement, the Company shall
not issue, offer, sell,
-27-
contract to sell, distribute, grant any option for the sale of, or register
with the Commission, or otherwise encumber or dispose of, directly or
indirectly, any equity securities of the Company (or any securities
convertible into or exercisable or exchangeable for equity securities of
the Company), except for (i) the issuance of the Shares pursuant to the
Registration Statement and (ii) the issuance of options, and the issuance
of shares pursuant to the exercise of outstanding options, under the
Company's existing stock option plans.
(h) On or before completion of this offering, the Company shall make
all filings required under applicable securities laws and by the NYSE
(including any required registration under the Exchange Act).
(B) The Company agrees to pay, or reimburse if paid by the Representatives,
whether or not the transactions contemplated hereby are consummated or this
Agreement is terminated, all costs and expenses of the Company incident to the
public offering of the Shares and the performance of the obligations of the
Company under this Agreement including those relating to (i) the preparation,
printing, filing and distribution of the Registration Statement including all
exhibits thereto, each preliminary prospectus, the Prospectus, all amendments
and supplements to the Registration Statement and the Prospectus, and the
printing, filing and distribution of this Agreement; (ii) the preparation and
delivery of certificates for the Shares to the Underwriters; (iii) the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the various jurisdictions referred to in Section
6(A)(e), including the fees and disbursements of counsel for the Underwriters in
connection with such registration and qualification and the preparation,
printing, distribution and shipment of preliminary and supplementary Blue Sky
memoranda; (iv) the furnishing (including costs of shipping and mailing) to the
Representatives and to the Underwriters of copies of each preliminary
prospectus, the Prospectus and all amendments or supplements to the Prospectus,
and of the several documents required by this Section to be so furnished, as may
be reasonably 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; (v) the
filing fees of the National Association of
-28-
Securities Dealers, Inc. in connection with its review of the terms of the
public offering; (vi) the furnishing (including costs of shipping and mailing)
to the Representatives and to the Underwriters of copies of all reports and
information required by Section 6(A)(f); and (vii) inclusion of the Shares for
listing on the NYSE.
7. Indemnification.
---------------
(a) Each of the Company and WMS agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act against any and all losses, claims, damages and liabilities,
joint or several (including any reasonable investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted), to which they, or
any of them, may become subject under the Securities Act, the Exchange Act
or other federal or state law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus, the Registration Statement or
the Prospectus or any amendment thereof or supplement thereto, or arise out
of or are based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that such indemnity
shall not inure to the benefit of any Underwriter (or any person
controlling such Underwriter) on account of any losses, claims, damages or
liabilities arising from the sale of the Shares to any person by such
Underwriter if such untrue statement or omission or alleged untrue
statement or omission was made in such preliminary prospectus, the
Registration Statement or the Prospectus, or such amendment or supplement,
in reliance upon and in conformity with information furnished in writing to
the Company by the Representatives on behalf of any Underwriter
specifically for use therein; provided, further, that the Underwriters may
seek to enforce their rights to indemnity against WMS pursuant to this
Section
-29-
7(a) only if the Underwriters believe in good faith that there is a
material risk that they may not obtain such payment from the Company
despite using their best efforts to do so. This indemnity agreement will be
in addition to any liability which the Company or WMS may otherwise have:
provided, however, that notwithstanding anything in this Agreement to the
contrary, WMS shall not be liable under this Section 7(a), or under any
other provision of this Agreement, for any amount in excess of the sum of
$50,000,000 plus the amount of any interest paid on the Dividend Notes (as
such term is defined in the Prospectus). The Company and WMS may agree, as
among themselves and without limiting the rights of the Underwriters under
this Agreement, as to their respective amounts of such liability for which
they each shall be responsible.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, each person, if any, who controls the
Company within the meaning of Section 15 of the Securities 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 WMS to each Underwriter, but only
insofar as such losses, claims, damages or liabilities arise out of or are
based upon any untrue statement or omission or alleged untrue statement or
omission which was made in any preliminary prospectus, the Registration
Statement or the Prospectus, or any amendment thereof or supplement
thereto, contained in the last paragraph of the cover page, in the
paragraph relating to stabilization on the inside front cover page of the
Prospectus and the statements with respect to the public offering of the
Shares under the caption "Underwriting" in the Prospectus; provided,
however, that the obligation of each Underwriter to indemnify the Company
(including any controlling person, director or officer thereof) shall be
limited to the net proceeds received by the Company from such Underwriter.
(c) Any party that proposes to assert the right to be indemnified
under this Section will, promptly after
-30-
receipt of notice of commencement of any action, suit or proceeding against
such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section, notify each such
indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. No indemnification provided for in
Section 7(a) or 7(b) shall be available to any party who shall fail to give
notice as provided in this Section 7(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related
and was prejudiced by the failure to give such notice but the omission so
to notify such indemnifying party of any such action, suit or proceeding
shall not relieve it from any liability that it may have to any indemnified
party for contribution or otherwise than under this Section. In case any
such action, suit or proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in, and,
to the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof and the approval by the indemnified party of such
counsel, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses, except as provided below and except
for the reasonable costs of investigation subsequently incurred by such
indemnified party in connection with the defense thereof. The indemnified
party shall have the right to employ its counsel in any such action, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of counsel by such indemnified
party has been authorized in writing by the indemnifying parties, (ii) the
indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the indemnified
party in the conduct of the defense of such action (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party) or (iii) the indemnifying
-31-
counsel's knowledge, no stop order suspending the parties shall not have
employed counsel to assume the defense of such action within a reasonable
time after notice of the commencement thereof, in each of which cases the
fees and expenses of counsel shall be at the expense of the indemnifying
parties. An indemnifying party shall not be liable for any settlement of
any action, suit, proceeding or claim effected without its written consent.
8. CONTRIBUTION. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 7(a) or 7(b)
is due in accordance with its terms but for any reason is held to be unavailable
from the Company or WMS or the Underwriters, as the case may be, the Company,
WMS and the Underwriters shall contribute to the aggregate losses, claims,
damages and liabilities (including any investigation, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claims asserted, but after deducting any
contribution received by the Company or WMS from persons other than the
Underwriters, such as persons who control the Company or WMS within the meaning
of the Securities Act, officers of the Company who signed the Registration
Statement and directors of the Company, who may also be liable for contribution)
to which the Company, WMS and one or more of the Underwriters may be subject in
such proportion as is appropriate to reflect the relative benefits received by
the Company and WMS on the one hand and the Underwriters on the other from the
offering of the Shares or, if such allocation is not permitted by applicable law
or indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 7 hereof, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and WMS on the one hand and the Underwriters
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and WMS on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as (x) the total proceeds from the offering (net of
underwriting discounts but before deducting expenses) received by the Company,
as set forth in the table on the cover page of the Prospectus, bear to (y) the
-32-
underwriting discounts received by the Underwriters, as set forth in the table
on the cover page of the Prospectus. The relative fault of the Company and WMS,
and the Underwriters, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement or omission or alleged omission
of a material fact related to information supplied by the Company or WMS, or
the Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, WMS and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 8, (i) in no case shall any Underwriter (except as may be
provided in the Agreement Among Underwriters) be liable or responsible for any
amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder, and (ii) the Company and WMS shall be
liable and responsible for any amount in excess of such underwriting discount;
provided, however, that notwithstanding anything in this Agreement to the
contrary, WMS shall not be liable under this Section 8, or under any other
provision of this Agreement, for any amount in excess of the sum of $50,000,000
plus the amount of any interest paid on the Dividend Notes (as such term is
defined in the Prospectus); provided, further, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person, if any, who controls an Underwriter within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act shall have the
same rights to contribution as such Underwriter, and each person, if any, who
controls the Company within the meaning of the Section 15 of the Securities Act
or Section 20(a) of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to clauses
(i) and (ii) in the immediately preceding sentence of this Section 8. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding
-33-
against such party in respect of which a claim for contribution may be made
against another party or parties under this Section, notify such party or
parties from whom contribution may be sought, but the failure so to notify such
party or parties from whom contribution may be sought shall not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have hereunder or otherwise than under this Section. No party
shall be liable for contribution with respect to any action, suit, proceeding
or claim settled without its written consent. The Underwriter's obligations to
contribute pursuant to this Section 8 are several in proportion to their
respective underwriting commitments and not joint.
9. TERMINATION. This Agreement may be terminated with respect to the Shares
to be purchased on a Closing Date by the Representatives by notifying the
Company at any time
(a) in the absolute discretion of the Representatives at or before any
Closing Date: (i) if on or prior to such date, any domestic or
international event or act or occurrence has materially disrupted, or in
the reasonable opinion of the Representatives will in the future materially
disrupt, the securities markets; (ii) if there has occurred any new
outbreak or material escalation of hostilities or other calamity or crisis
the effect of which on the financial markets of the United States is such
as to make it, in the reasonable judgment of the Representatives,
inadvisable to proceed with the offering; (iii) if there shall be such a
material adverse change in general financial, political or economic
conditions or the effect of international conditions on the financial
markets in the United States is such as to make it, in the reasonable
judgment of the Representatives, inadvisable or impracticable to market the
Shares; (iv) if trading in the Shares has been suspended by the Commission
or trading generally on the New York Stock Exchange, Inc. or on the
American Stock Exchange, Inc. has been suspended or limited, or minimum or
maximum ranges for prices for securities shall have been fixed, or maximum
ranges for prices for securities have been required, by said exchanges or
by order of the Commission, the National Association of Securities Dealers,
Inc., or any other governmental or regulatory authority; or (v) if a
banking
-34-
moratorium has been declared by any state or federal authority, or
(b) at or before any Closing Date, that any of the conditions
specified in Section 5 shall not have been fulfilled when and as required
by this Agreement.
If this Agreement is terminated pursuant to any of its provisions, the
Company shall not be under any liability to any Underwriter, and no Underwriter
shall be under any liability to the Company, except that (y) if this Agreement
is terminated by the Representatives or the Underwriters because of any failure,
refusal or inability on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company will reimburse the
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of their counsel) incurred by them in connection with the proposed
purchase and sale of the Shares or in contemplation of performing their
obligations hereunder and (z) no Underwriter who shall have failed or refused to
purchase the Shares agreed to be purchased by it under this Agreement, without
some reason sufficient hereunder to justify cancellation or termination of its
obligations under this Agreement, shall be relieved of liability to the Company
or to the other Underwriters for damages occasioned by its failure or refusal.
10. SUBSTITUTION OF UNDERWRITERS. If one or more of the Underwriters shall
fail (other than for a reason sufficient to justify the cancellation or
termination of this Agreement under Section 9) to purchase on any Closing Date
the Shares agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Representatives may find one or more substitute underwriters
to purchase such Shares or make such other arrangements as the Representatives
may deem advisable or one or more of the remaining Underwriters may agree to
purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date,
(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares that
all the Underwriters are
-35-
obligated to purchase on such Closing Date, then each of the nondefaulting
Underwriters shall be obligated to purchase such Shares on the terms herein
set forth in proportion to their respective obligations hereunder;
provided, that in no event shall the maximum number of Shares that any
Underwriter has agreed to purchase pursuant to Section 1 be increased
pursuant to this Section 10 by more than one-ninth of such number of Shares
without the written consent of such Underwriter, or
(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that all
the Underwriters are obligated to purchase on such Closing Date, then the
Company shall be entitled to an additional business day within which it
may, but is not obligated to, find one or more substitute underwriters
reasonably satisfactory to the Representatives to purchase such Shares upon
the terms set forth in this Agreement.
In any such case, either the Representatives or the Company shall have the
right to postpone the applicable Closing Date for a period of not more than five
business days in order that necessary changes and arrangements (including any
necessary amendments or supplements to the Registration Statement or Prospectus)
may be effected by the Representatives and the Company. If the number of Shares
to be purchased on such Closing Date by such defaulting Underwriter or
Underwriters shall exceed 10% of the Shares that all the Underwriters are
obligated to purchase on such Closing Date, and none of the nondefaulting
Underwriters or the Company shall make arrangements pursuant to this Section
within the period stated for the purchase of the Shares that the defaulting
Underwriters agreed to purchase, this Agreement shall terminate with respect to
the Shares to be purchased on such Closing Date without liability on the part of
any nondefaulting Underwriter to the Company and without liability on the part
of the Company, except in both cases as provided in Sections 6(B), 7, 8 and 9.
The provisions of this Section shall not in any way affect the liability of any
defaulting Underwriter to the Company or the nondefaulting Underwriters arising
out of such default. A substitute underwriter hereunder shall become an
Underwriter for all purposes of this Agreement.
-36-
11. MISCELLANEOUS. The respective agreements, representations, warranties,
indemnities and other statements of the Company or its officers, of WMS and of
the Underwriters set forth in or made pursuant to this Agreement shall remain in
full force and effect, regardless of any investigation made by or on behalf of
any Underwriter or the Company or any of the officers, directors or controlling
persons referred to in Sections 7 and 8 hereof, and shall survive delivery of
and payment for the Shares. The provisions of Sections 6(B), 7, 8 and 9 shall
survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the Underwriters and
the Company and WMS and their respective successors and assigns, and, to the
extent expressed herein, for the benefit of persons controlling any of the
Underwriters, or the Company, and directors and officers of the Company, 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" shall not include any purchaser of Shares from any Underwriter merely
because of such purchase.
All notices and communications hereunder shall be in writing and mailed or
delivered or by telephone or telegraph if subsequently confirmed in writing, (a)
if to the Representatives, c/o Oppenheimer & Co., Inc., Oppenheimer Tower, World
Financial Center, New York, New York 10281 Attention: Richard White, (b) if to
the Company, to its agent for service as such agent's address appears on the
cover page of the Registration Statement, and (c) if to WMS, to Neil D.
Nicastro, WMS Industries Inc., 3401 North California Avenue, Chicago, Illinois
60618.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
-37-
Please confirm that the foregoing correctly sets forth the agreement among
us.
Very truly yours,
MIDWAY GAMES INC.
By
--------------------------------
Title:
WMS INDUSTRIES INC.
By
--------------------------------
Title:
Confirmed:
OPPENHEIMER & CO., INC.
HAMBRECHT & QUIST LLC
UBS SECURITIES LLC
WASSERSTEIN PERELLA SECURITIES, INC.
Acting severally on behalf of itself
and as representative of the several
Underwriters named in Schedule I annexed
hereto.
By Oppenheimer & Co., Inc.
By
-------------------------
Title: Managing Director
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[Download Table]
SCHEDULE I
Number of
Firm Shares to
Name Be Purchased
---- --------------
Oppenheimer & Co., Inc.
Hambrecht & Quist LLC
UBS Securities LLC
Wasserstein Perella Securities, Inc.
----------
TOTAL 5,100,000
-i-
SCHEDULE II
Subsidiary Jurisdiction of Incorporation
---------- -----------------------------
Midway Home Entertainment Inc. Delaware
Midway Interactive Inc. Delaware
Atari Games Corporation California
Tengen, Inc. California
K.K. Atari Interactive Japan
-ii-
Dates Referenced Herein and Documents Incorporated by Reference
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