EXHIBIT 1 (a)
2,400,000 Shares of Common Stock and
1,200,000 Redeemable Common Stock Purchase Warrants
DIGITAL LAVA INC.
FORM OF UNDERWRITING AGREEMENT
New York, New York
_____________, 1998
▇▇▇▇▇ & Company, Inc.
As Representative of the
Several Underwriters listed
on Schedule A hereto
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Digital Lava Inc., a Delaware corporation (the "Company") confirms its agreement
with ▇▇▇▇▇ & Company, Inc. ("▇▇▇▇▇") and each of the several underwriters named
in Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 11) for
whom ▇▇▇▇▇ is acting as representative (in such capacity, Security Capital shall
hereinafter be referred to as "you" or the "Representative"), with respect to
the sale by the Company and the purchase by the Underwriters, acting severally
and not jointly, of the respective number of shares ("Shares") of the Company's
common stock, $0.0001 par value per share ("Common Stock"), and redeemable
Common Stock purchase warrants ("the Redeemable Warrants"), each to purchase one
share of Common Stock set forth in Schedule A hereto. The aggregate 2,400,000
Shares of Common Stock and 1,200,000 Redeemable Warrants will be separately
tradable upon issuance and are hereinafter referred to as the "Firm Securities."
Each Redeemable Warrant is exercisable commencing on [____________] [twelve
months after the date of the Prospectus] until [______________] [five years
after the date of the Prospectus], unless previously redeemed by the Company, at
an initial exercise price of $[____________] per share [120% of the initial
public offering price of the Common Stock] of Common Stock. The Redeemable
Warrants may be redeemed by the Company, in whole but not in part, at a
redemption price of $.10 per warrant at any time commencing [__________]
[eighteen months after the date of the Prospectus] on thirty (30) days' prior
written notice, provided that the average closing sale price of the Common Stock
as reported on the American Stock Exchange equals or exceeds $11.25 per share,
for any twenty (20) days within a period of thirty (30) consecutive trading days
ending on the fifth (5th) trading day prior to the date of the notice of
redemption, all in accordance with the terms and conditions of the Warrant
Agreement (herein defined).
Upon the Representative's request, as provided in Section 2(b) of this
Agreement, the Company shall also issue and sell to the Underwriters up to an
additional 360,000 Shares of Common
Stock and/or 180,000 Redeemable Warrants for the purpose of covering
over-allotments, if any. Such 360,000 shares of Common Stock and 180,000
Redeemable Warrants are hereinafter collectively referred to as the "Option
Securities". The Company also proposes to issue and sell to you warrants (the
"Representative's Warrants") pursuant to the Representative's Warrant Agreement
(the "Representative's Warrant Agreement") for the purchase of an additional
240,000 shares of Common Stock and/or 120,000 Redeemable Warrants. The shares of
Common Stock and Redeemable Warrants issuable upon exercise of the
Representative's Warrants are hereinafter referred to as the "Representative's
Securities." The Firm Securities, the Option Securities, the Representative's
Warrants and the Representative's Securities (collectively, hereinafter referred
to as the "Securities") are more fully described in the Registration Statement
and the Prospectus referred to below.
1. Representations and Warranties of the Company.
(a) The Company represents and warrants to, and agrees with, the
Underwriters as of the date hereof, and as of the Closing Date (hereinafter
defined) and each Option Closing Date (hereinafter defined), if any, as follows:
(i) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (No. 333-66099), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Firm Securities, the Option Securities and the
Representative's Securities under the Securities Act of 1933, as amended
(the "Act"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Regulations") of the Commission
under the Act. The Company will promptly file a further amendment to said
registration statement in the form heretofore delivered to the Underwriters
and will not file any other amendment thereto which the Underwriters shall
have objected to in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as
a part thereof or incorporated therein (including, but not limited to those
documents or information incorporated by reference therein) and all
information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the Regulations), is hereinafter called the
"Registration Statement", and the form of prospectus in the form first
filed with the Commission pursuant to Rule 424(b) of the Regulations, is
hereinafter called the "Prospectus." For purposes hereof, "Rules and
Regulations" mean the rules and regulations adopted by the Commission under
either the Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable.
(ii) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of
the Registration Statement or any of the Company's securities have been
instituted or are pending or to the Company's knowledge,
threatened. Each of the Preliminary Prospectus, Registration Statement and
Prospectus at the time of filing thereof conformed with the requirements of
the Act and the Rules and Regulations, and none of the Preliminary
Prospectus, Registration Statement or Prospectus at the time of filing
thereof contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein and necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except that this representation and warranty does not
apply to statements made in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriters by or
on behalf of the Underwriters expressly for use in such Preliminary
Prospectus, Registration Statement or Prospectus or any amendment thereof
or supplement thereto. The Company has filed all reports, forms or other
documents required to be filed under the Act or the Exchange Act and the
respective Rules and Regulations thereunder, and all such reports, forms or
other documents, when so filed or as subsequently amended, complied in all
material respects with the Act and the Exchange Act and the respective
rules and regulations thereunder.
(iii) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date (as defined herein) and
each Option Closing Date (as defined herein), if any, and during such
longer period as the Prospectus may be required to be delivered in
connection with sales by the Underwriters or a dealer, the Registration
Statement and the Prospectus will contain all statements which are required
to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules
and Regulations; neither the Registration Statement nor the Prospectus, nor
any amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided,
however, that this representation and warranty does not apply to statements
made or statements omitted in reliance upon and in strict conformity with
information furnished to the Company in writing by or on behalf of any
Underwriters expressly for use in the Preliminary Prospectus, Registration
Statement or Prospectus or any amendment thereof or supplement thereto.
(iv) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of its
incorporation. The Company does not own an interest in any corporation,
partnership, trust, joint venture or other business entity. The Company is
duly qualified and licensed and in good standing as a foreign corporation
in each jurisdiction in which its ownership or leasing of any properties or
the character of its operations requires such qualification or licensing.
The Company has all requisite power and authority (corporate and other),
and the Company has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits of and
from all governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing business in
compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all applicable federal, state, local and foreign laws, rules
and regulations; and the Company has not received any notice of proceedings
relating to the revocation or modification of any such 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 materially and adversely affect the condition, financial or
otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company. The
disclosures in the Registration Statement concerning the effects of
federal, state and local laws, rules and regulations on the Company's
business as currently conducted and as contemplated are correct in all
material respects and do not omit to state a material fact required to be
stated therein necessary to make the statements contained therein not
misleading, in light of the circumstances in which they were made.
(v) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set
forth therein on the Closing Date and the Option Closing Date, if any,
based upon the assumptions set forth therein, and the Company is not a
party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or
other securities, except for this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement and as described in the Prospectus. The
Securities and all other securities issued or issuable by the Company
conform or, when issued and paid for, will conform, in all respects to all
statements with respect thereto contained in the Registration Statement and
the Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable and the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of
the preemptive rights of any holders of any security of the Company or
similar contractual rights granted by the Company. The Securities are not
and will not be subject to any preemptive or other similar rights of any
stockholder, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof, will be validly issued,
fully paid and non-assessable and will conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action required to be taken
for the authorization, issue and sale of the Securities has been duly and
validly taken; and the certificates representing the Securities will be in
due and proper form. Upon the issuance and delivery pursuant to the terms
hereof and the Representative's Warrant Agreement of the Securities to be
sold by the Company hereunder, the Underwriters or the Representative, as
the case may be, will acquire good and marketable title to such Securities
free and clear of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever.
(vi) The financial statements of the Company, together with the
related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly present
the financial position, income,
changes in cash flow, changes in stockholders' equity, and the results of
operations of the Company at the respective dates and for the respective
periods to which they and such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules and
Regulations, consistently applied throughout the periods involved and such
financial statements as are audited have been examined by Pricewaterhouse
Coopers LLP, who are independent certified public accountants within the
meaning of the Act and the Rules and Regulations, as indicated in their
reports filed herewith. There has been no adverse change or development
involving a material prospective change in the condition, financial or
otherwise, or in the earnings, position, prospects, stockholders' equity,
value, operation, properties, business, or results of operations of the
Company, whether or not arising in the ordinary course of business, since
the date of the financial statements included in the Registration Statement
and the Prospectus and the outstanding debt, the property, both tangible
and intangible, and the business of the Company conform in all material
respects to the descriptions thereof contained in the Registration
Statement and the Prospectus. Financial information (including, without
limitation, any pro forma financial information) set forth in the
Prospectus under the headings "Summary Financial Information," "Selected
Financial Information," "Capitalization," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," fairly present,
on the basis stated in the Prospectus, the information set forth therein,
have been derived from or compiled on a basis consistent with that of the
audited financial statements included in the Prospectus; and in the case of
pro forma financial information, if any, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred
to therein.
(vii) The Company (i) has paid all federal, state, local, and foreign
taxes for which it is liable, including, but not limited to, withholding
taxes and amounts payable under Chapters 21 through 24 of the Internal
Revenue Code of 1986 (the "Code"), and has furnished all information
returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable,
and (iii) does not have any tax deficiency or claims outstanding, proposed
or assessed against it.
(viii) No transfer tax, stamp duty or other similar tax is payable by
or on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriters of the
Firm Securities and Option Securities from the Company, and the purchase by
the Representative of the Representative's Warrants from the Company, (iii)
the consummation by the Company of any of its obligations under this
Agreement or the Representative's Warrant Agreement, or (iv) resales of the
Firm Securities and the Option Securities in connection with the
distribution contemplated hereby.
(ix) The Company maintains insurance policies, including, but not
limited to, general liability and property insurance, which insures the
Company and its employees, against such losses and risks generally insured
against by comparable
businesses. The Company (A) has not failed to give notice or present any
insurance claim with respect to any matter, including but not limited to
the Company's business, property or employees, under any insurance policy
or surety bond in a due and timely manner, (B) does not have any disputes
or claims against any underwriter of such insurance policies or surety
bonds or has failed to pay any premiums due and payable thereunder, or (C)
has failed to comply with all conditions contained in such insurance
policies and surety bonds. There are no facts or circumstances under any
such insurance policy or surety bond which would relieve any insurer of its
obligation to satisfy in full any valid claim of the Company.
(x) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, pending or threatened against (or
circumstances that may give rise to the same), or involving the properties
or business of, the Company which (i) questions the validity of the capital
stock of the Company, this Agreement, the Representative's Warrant
Agreement or the Warrant Agreement or of any action taken or to be taken by
the Company pursuant to or in connection with this Agreement, the
Representative's Warrant Agreement or the Warrant Agreement, (ii) is
required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all material respects), or (iii)
might materially and adversely affect the condition, financial or
otherwise, or the earnings, position, prospects, stockholders' equity,
value, operation, properties, business or results of operations of the
Company.
(xi) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, enter into this
Agreement, the Representative's Warrant Agreement and the Warrant Agreement
and to consummate the transactions provided for in such agreements; and
this Agreement, the Representative's Warrant Agreement and the Warrant
Agreement have each been duly and properly authorized, executed and
delivered by the Company. Each of this Agreement, the Representative's
Warrant Agreement and the Warrant Agreement constitutes a legal, valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms. None of the Company's issue and sale of the
Securities, execution or delivery of this Agreement, the Representative's
Warrant Agreement or the Warrant Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein and
therein, or the conduct of its business as described in the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
conflicts with or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or
will constitute a default under, or result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever upon, any property or
assets (tangible or intangible) of the Company pursuant to the terms of,
(i) the certificate of incorporation or by-laws of the Company, (ii) any
license, contract, indenture, mortgage, deed of trust, voting trust
agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which the Company is or
may be bound or to which any of its properties or assets (tangible or
intangible) is or may be subject, or any indebtedness, or (iii) any
statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative agency
or other governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, having jurisdiction over the Company or any of its activities or
properties.
(xii) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic
or foreign, is required for the issuance of the Securities pursuant to the
Prospectus and the Registration Statement, the issuance of the
Representative's Warrants, the performance of this Agreement, the
Representative's Warrant Agreement and the Warrant Agreement and the
transactions contemplated hereby and thereby, including without limitation,
any waiver of any preemptive, first refusal or other rights that any entity
or person may have for the issue and/or sale of any of the Securities,
except such as have been or may be obtained under the Act or may be
required under state securities or Blue Sky laws and the rules of the
National Association of Securities Dealers, Inc. (the "NASD") in connection
with the Underwriters' purchase and distribution of the Firm Securities,
the Option Securities and the Representative's Warrants to be sold by the
Company hereunder.
(xiii) All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which it
may be bound or to which any of its assets, properties or business may be
subject have been duly and validly authorized, executed and delivered by
the Company, and constitute the legal, valid and binding agreements of the
Company, enforceable against the Company, in accordance with their
respective terms. The descriptions in the Registration Statement of
agreements, contracts and other documents are accurate in all material
respects and fairly present the information required to be shown with
respect thereto by Form SB-2, and there are no contracts or other documents
which are required by the Act to be described in the Registration Statement
or filed as exhibits to the Registration Statement which are not described
or filed as required, and the exhibits which have been filed are in all
material respects complete and correct copies of the documents of which
they purport to be copies.
(xiv) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or 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
other than in the ordinary course of business, or (iii) declared or paid
any dividend or made any other distribution on or in respect of its capital
stock of any class, and there has not been any change in the capital stock,
or any material change in the debt (long or short term) or liabilities or
material adverse change in or affecting the
condition, financial or otherwise, earnings, prospects, stockholders'
equity, value, operations, properties, business or results of operations of
the Company.
(xv) Except as described in the Prospectus, no default exists in the
due performance and observance of any term, covenant or condition of any
license, contract, indenture, mortgage, installment sale agreement, lease,
deed of trust, voting trust agreement, stockholders agreement, partnership
agreement, note, loan or credit agreement, purchase order, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other material agreement or instrument to which the Company is a party or
by which the Company may be bound or to which the property or assets
(tangible or intangible) of the Company is subject or affected.
(xvi) The Company has generally enjoyed a satisfactory
employer-employee relationship with its employees and is in compliance with
all federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours. There are no pending investigations involving the Company
by the U.S. Department of Labor, or any other governmental agency
responsible for the enforcement of such federal, state, local, or foreign
laws and regulations. There is no unfair labor practice charge or complaint
against the Company pending before the National Labor Relations Board or
any strike, picketing, boycott, dispute, slowdown or stoppage pending or
threatened against or involving the Company or any predecessor entity, and
none has ever occurred. No representation question exists respecting the
employees of the Company, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company. No
grievance or arbitration proceeding is pending under any expired or
existing collective bargaining agreements of the Company. No labor dispute
with the employees of the Company exists, or is imminent.
(xvii) The Company does not maintain, sponsor or contribute to any
program or arrangement that is an "employee pension benefit plan," an
"employee welfare benefit plan," or a "multiemployer plan" as such terms
are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA
Plans"). The Company does not maintain or contribute, now or at any time
previously, to a defined benefit plan, as defined in Section 3(35) of
ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Code, which could subject the Company to any tax
penalty on prohibited transactions and which has not adequately been
corrected. Each ERISA Plan is in compliance with all reporting, disclosure
and other requirements of the Code and ERISA as they relate to any such
ERISA Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to comply
with Code Section 401(a), stating that such ERISA Plan and the attendant
trust are qualified thereunder. The Company has never completely or
partially withdrawn from a "multiemployer plan."
(xviii) Neither the Company nor any of its employees, directors,
stockholders, partners, or affiliates (within the meaning of the Rules and
Regulations) of any of the foregoing has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might
be expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities or otherwise.
(xix) None of the patents, patent applications, trademarks, service
marks, service names, trade names and copyrights and none of the licenses
and rights to the foregoing presently owned or held by the Company are in
dispute or are in any conflict with the right of any other person or
entity. The Company (i) owns or has the right to use, free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects
or other restrictions or equities of any kind whatsoever, all patents,
patent applications, trademarks, service marks, service names, trade names
and copyrights, technology and licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted or proposed
to be conducted without infringing upon or otherwise acting adversely to
the right or claimed right of any person, corporation or other entity under
or with respect to any of the foregoing and (ii) except as described in the
Prospectus, is not obligated or under any liability whatsoever to make any
payment by way of royalties, fees or otherwise to any owner or licensee of,
or other claimant to, any patent, patent application, trademark, service
mark, service names, trade name, copyright, know-how, technology or other
intangible asset, with respect to the use thereof or in connection with the
conduct of its business or otherwise. There is no action, suit, proceeding,
inquiry, arbitration, investigation, litigation or governmental or other
proceeding, domestic or foreign, pending or threatened (or circumstances
that may give rise to the same) against the Company which challenges the
exclusive rights of the Company with respect to any trademarks, trade
names, service marks, service names, copyrights, patents, patent
applications or licenses or rights to the foregoing used in the conduct of
its business, or which challenge the right of the Company to use any
technology presently used or contemplated to be used in the conduct of its
business.
(xx) The Company owns and has the unrestricted right to use all trade
secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
inventions, technology, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein
"intellectual property") that are material to the development, manufacture,
operation and sale of all products and services sold or proposed to be sold
by the Company, free and clear of and without violating any right, lien, or
claim of others, including without limitation, former employers of its
employees; provided, however, that the possibility exists that other
persons or entities.
(xxi) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
stated in the Prospectus, to be owned or leased by it free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects,
or other restrictions or equities of any
kind whatsoever, other than those referred to in the Prospectus and liens
for taxes not yet due and payable.
(xxii) Pricewaterhouse Coopers LLP ("PriceWaterhouse Coopers"), whose
report is filed with the Commission as a part of the Registration
Statement, are independent certified public accountants as required by the
Act and the Rules and Regulations.
(xxiii) The Company has caused to be duly executed legally binding and
enforceable agreements ("Lock-Up Agreement") pursuant to which each of the
Company's officers and directors of the Company, holders of [_____] shares
of Common Stock and holders of securities exchangeable or exercisable for
or convertible into shares of Common Stock have agreed not to, directly or
indirectly, offer, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate, distribute or otherwise encumber or dispose
of any shares of Common Stock or securities convertible into, exercisable
or exchangeable for or evidencing any right to purchase or subscribe for
any shares of Common Stock (either pursuant to Rule 144 of the Rules and
Regulations or otherwise) or dispose of any beneficial interest therein for
a period of not less than twelve (12) months following the effective date
of the Registration Statement without the prior written consent of the
Representative and the Company. Any shares of Common Stock issued in
connection with a private placement which occurs after the date hereof
shall be subject to Lock-Up Agreements for a period of six (6) months
following the effective date of the Registration Statement. Holders of
[_______] shares of Common Stock have agreed not to, directly or
indirectly, offer, sell, transfer, pledge, assign, hypothecate, or
otherwise encumber any such shares of Common Stock or any securities
convertible into, exercisable or exchangeable for or evidencing any right
to purchase or subscribe for any shares of Common Stock (either pursuant to
Rule 144 of the Rules and Regulations or otherwise) or dispose of any
beneficial interest therein for a period of not less than nine (9) months
following the effective date of the Registration Statement without the
prior written consent of the Representative and the Company. If at any time
commencing 180 days after the effective date of the Registration Statement,
the closing sale or bid price of the Common Stock is greater than 150% of
the initial public offering price of the Common Stock for a period of five
(5) consecutive trading days, the Representative will, upon request,
release any securities subject to a lock-up agreement specified above. In
addition, the Company shall not sell or offer for sale any of its
securities for a period of six (6) months from the effective date of the
Registration Statement without the consent of the Representative except
pursuant to options and warrants issued on the effective date of the
Registration Statement. The Company will cause the Transfer Agent, as
defined below, to mark an appropriate legend on the face of stock
certificates representing all of such securities and to place "stop
transfer" orders on the Company's stock ledgers.
(xxiv) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities
hereunder or any other arrangements, agreements, understandings, payments
or issuance with respect to the
Company or any of its officers, directors, stockholders, partners,
employees or affiliates that may affect the Underwriters' compensation, as
determined by the NASD.
(xxv) The Common Stock and Redeemable Warrants have been approved for
listing on the American Stock Exchange ("Amex").
(xxvi) Neither the Company nor any of its directors, officers,
employees, agents, or any other person acting on behalf of the Company,
has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent
of a customer or supplier, or official or employee of any governmental
agency (domestic or foreign) or instrumentality of any government (domestic
or foreign) or any political party or candidate for office (domestic or
foreign) or other person who was, is, or may be in a position to help or
hinder the business of the Company (or assist the Company in connection
with any actual or proposed transaction) which (a) might subject the
Company, or any other such person to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign),
(b) if not given in the past, might have had a material adverse effect on
the assets, business or operations of the Company, or (c) if not continued
in the future, might adversely affect the assets, business, condition,
financial or otherwise, earnings, position, properties, value operations or
prospects of the Company. The Company's internal accounting controls are
sufficient to cause the Company to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
(xxvii) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, An Act Relating to Disclosure of Doing Business with Cuba, and the
Company further agrees that if it or any affiliate commences engaging in
business with the government of Cuba or with any person or affiliate
located in Cuba after the date the Registration Statement becomes or has
become effective with the Commission or with the Florida Department of
Banking and Finance (the "Department"), whichever date is later, or if the
information reported or incorporated by reference in the Prospectus, if
any, concerning the Company's, or any affiliate's, business with Cuba or
with any person of affiliate located in Cuba changes in any material way,
the Company will provide the Department notice of such business or change,
as appropriate, in a form acceptable to the Department.
(xxviii) Except as set forth in the Prospectus, no officer, director
or stockholder of the Company, or any "affiliate" or "associate" (as these
terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any of the foregoing persons or entities has, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or
sells services or products which are furnished or sold or are proposed to
be furnished or sold by the Company, or (B) purchases from or sells or
furnishes to the Company any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus
under "Certain Transactions," there are no
existing agreements, arrangements, understandings or transactions, or
proposed agreements, arrangements, understandings or transactions, between
or among the Company and any officer, director, or Principal Stockholder
(as such term is defined in the Prospectus) of the Company or any partner,
affiliate or associate of any of the foregoing persons or entities.
(xxix) Any certificate signed by any officer of the Company, and
delivered to the Representative or to Underwriters' Counsel (as defined
herein) shall be deemed a representation and warranty by the Company to the
Representative as to the matters covered thereby.
(xxx) The minute books of the Company have been made available to the
Representative and contain a complete summary of all meetings and actions
of the directors, stockholders, audit committee, compensation committee and
any other committee of the Board of Directors of the Company, respectively,
since the time of its incorporation, and reflects all transactions referred
to in such minutes accurately in all material respects.
(xxxi) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or
other convertible or exchangeable securities of the Company have the right
to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or to
require the Company to file a registration statement under the Act and no
person or entity holds any anti-dilution rights with respect to any
securities of the Company.
(xxxii) The Company has as of the effective date of the Registration
Statement entered into employment agreements with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in the forms filed as Exhibits to the Registration
Statements.
(xxxiii) The Company has entered into a warrant agreement,
substantially in the form filed as Exhibit 4(b) to the Registration
Statement (the "Warrant Agreement"), with American Stock Transfer & Trust
Company, as Warrant Agent, in form and substance satisfactory to the
Representative, with respect to the Redeemable Warrants and providing for
the payment of warrant solicitation fees. The Warrant Agreement has been
duly and validly authorized by the Company and, assuming due execution by
the parties thereto other than the Company, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application relating to or affecting the enforcement of
creditors' rights and the application of equitable principles in any
action, legal or equitable, and except as obligations to indemnify or
contribute to losses may be limited by applicable law).
(xxxiv) The Company has entered into a financial advisory and
consulting agreement substantially in the form filed as Exhibit _____ to
the Registration
Statement (the "Consulting Agreement") with the Representative, with
respect to the rendering of consulting services by the Underwriter to the
Company. The Consulting Agreement has been duly and validly authorized by
the Company and assuming due execution by the parties thereto other than
the Company, constitutes a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal or equitable, and
except as rights to indemnify or contribution may be limited by applicable
law).
(xxxv) The Company has filed a Form 8-A with the Commission providing
for the registration under the Exchange Act of the Securities and such Form
8-A has been declared effective by the Commission.
2 2. Purchase, Sale and Delivery of the Securities and Representative's
Warrants.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter
agrees to purchase from the Company at a price of $____ per share of Common
Stock [90% of the initial public offering price per share of Common Stock] and
$____ per Redeemable Warrant [90% of the initial public offering price per
Redeemable Warrant], that number of Firm Securities set forth in Schedule A
opposite the name of such Underwriter, subject to adjustment as the
Representative in its sole discretion shall make to eliminate any sales or
purchases of fractional shares, plus any additional number of Firm Securities
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 11 hereof.
(b) In addition, on the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters to purchase
all or any part of an additional 360,000 share of Common Stock at a price of
$___ per share of Common Stock [90% of the initial public offering price per
share of Common Stock] and 180,000 warrants at a price of $____ per Redeemable
Warrant [90% of the initial public offering price per Redeemable Warrant]. The
option granted hereby will expire 45 days after (i) the date the Registration
Statement becomes effective, if the Company has elected not to rely on Rule 430A
under the Rules and Regulations, or (ii) the date of this Agreement if the
Company has elected to rely upon Rule 430A under the Rules and Regulations, and
may be exercised in whole or in part from time to time only for the purpose of
covering over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for any such Option Securities. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Representative, but shall not
be later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Date, as hereinafter defined, unless otherwise
agreed upon by the Representative and the Company. Nothing herein contained
shall obligate the Underwriters to make any over-allotments. No Option
Securities shall be delivered unless the Firm Securities shall be simultaneously
delivered or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates for,
the Firm Securities shall be made at the offices of ▇▇▇▇▇ & Company, Inc. at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, or at such other place as
shall be agreed upon by the Representative and the Company. Such delivery and
payment shall be made at 10:00 a.m. (New York City time) on __________, 1998 or
at such other time and date as shall be agreed upon by the Representative and
the Company, but not less than three (3) nor more than seven (7) full business
days after the effective date of the Registration Statement (such time and date
of payment and delivery being herein called "Closing Date"). In addition, in the
event that any or all of the Option Securities are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Securities shall be made at the above-mentioned office of the
Representative or at such other place as shall be agreed upon by the
Representative and the Company on each Option Closing Date as specified in the
notice from the Representative to the Company. Delivery of the certificates for
the Firm Securities and the Option Securities, if any, shall be made to the
Underwriters against payment by the Underwriters of the purchase price for the
Firm Securities and the Option Securities, if any, to the order of the Company
for the Firm Securities and the Option Securities, if any, by New York Clearing
House funds. Certificates for the Firm Securities and the Option Securities, if
any, shall be in definitive, fully registered form, shall bear no restrictive
legends and shall be in such denominations and registered in such names as the
Representative may request in writing at least two (2) business days prior to
the Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the Firm Securities and the Option Securities, if any, shall be
made available to the Representative at such office or such other place as the
Representative may designate for inspection, checking and packaging no later
than 9:30 a.m. on the last business day prior to Closing Date or the relevant
Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell to the
Representative the Representative's Warrants to the Representative at a purchase
price of $.0001 per warrant, which warrants shall entitle the holders thereof to
purchase an aggregate of 240,000 shares of Common Stock and/or 120,000
Redeemable Warrants. The Representative's Warrants shall be exercisable for a
period of four (4) years commencing one (1) year from the effective date of the
Registration Statement at a price equaling one hundred twenty percent (120%) of
the initial public offering price of the Common Stock and Redeemable Warrants.
The Representative's Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit 4(c) to the Registration Statement.
Payment for the Representative's Warrants shall be made on the Closing Date.
3. Public Offering of the Units. As soon after the Registration Statement
becomes effective as the Representative deems advisable, the Underwriters shall
make a public offering of the Firm Securities and such Option Securities as the
Representative may determine (other than to residents of or in any jurisdiction
in which qualification of the Units is required and has not
become effective) at the price and upon the other terms set forth in the
Prospectus. The Representative may from time to time increase or decrease the
public offering price after distribution of the Units has been completed to such
extent as the Representative, in its discretion deems advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
1. Covenants and Agreements of the Company. The Company covenants and
agrees with each of the Underwriters as follows:
(e) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or Exchange
Act before termination of the offering of the Units by the Underwriters of which
the Representative shall not previously have been advised and furnished with a
copy, or to which the Representative shall have objected or which is not in
compliance with the Act, the Exchange Act or the Rules and Regulations.
(f) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Representative and confirm the notice in writing, (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission authority shall enter a
stop order or suspend such qualification at any time, the Company will make
every effort to obtain promptly the lifting of such order.
(g) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Representative, pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement and (ii) the fifteenth business day after the effective date of
the Registration Statement.
(h) The Company will give the Representative notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the
Representative or ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP ("Underwriters' Counsel"),
shall object.
(i) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Representative may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign corporation
or file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
(j) During the time when a prospectus is required to be delivered under the
Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the copies of such
amendment or supplement as soon as available and in such quantities as the
Underwriters may request.
(k) As soon as practicable, but in any event not later than 45 days after
the end of the 12-month period beginning on the day after the end of the fiscal
quarter of the Company
during which the effective date of the Registration Statement occurs (90 days in
the event that the end of such fiscal quarter is the end of the Company's fiscal
year), the Company shall make generally available to its security holders, in
the manner specified in Rule 158(b) of the Rules and Regulations, and to the
Representative, an earnings statement which will be in the detail required by,
and will otherwise comply with, the provisions of Section 11(a) of the Act and
Rule 158(a) of the Rules and Regulations, which statement need not be audited
unless required by the Act, covering a period of at least twelve (12)
consecutive months after the effective date of the Registration Statement.
(l) During a period of seven (7) years after the date hereof, the Company
will furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public accountants) and
unaudited quarterly reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company for each quarter in the
form furnished to the Company's stockholders and certified by the Company's
principal financial or accounting officer;
(ii) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of the preceding
fiscal year, together with statements of operations, stockholders' equity,
and cash flows of the Company for such fiscal year, accompanied by a copy
of the certificate thereon of independent certified public accountants;
(iii) as soon as they are available, copies of all reports (financial
or other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, the NASD or
any securities exchange;
(v) every press release and every material news item or article of
interest to the financial community in respect of the Company, or its
affairs which was released or prepared by or on behalf of the Company; and
(vi) any additional information of a public nature concerning the
Company (and any future subsidiary) or its businesses which the
Representative may request.
(vii) During such seven-year period, if the Company has an active
subsidiary, the foregoing financial statements will be on a consolidated
basis to the extent that the accounts of the Company and its
subsidiary(ies) are consolidated, and will be accompanied by similar
financial statements for any significant subsidiary which is not so
consolidated.
(m) The Company will maintain a transfer agent and warrant agent ("Transfer
Agent") and, if necessary under the jurisdiction of incorporation of the
Company, a Registrar (which may be the same entity as the Transfer Agent) for
its Common Stock and Redeemable Warrants.
(n) The Company will furnish to the Representative or on Representative's
order, without charge, at such place as the Representative may designate, copies
of each Preliminary Prospectus, the Registration Statement and any pre-effective
or post-effective amendments thereto (two of which copies will be signed and
will include all financial statements and exhibits), the Prospectus, and all
amendments and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as available
and in such quantities as the Representative may request.
(o) On or before the effective date of the Registration Statement, the
Company shall provide the Representative with true copies of duly executed,
legally binding and enforceable agreements pursuant to which, for a period of
twelve (12) months from the effective date of the Registration Statement, the
officers and directors of the Company, holders of [____] shares of Common Stock
and holders of securities exchangeable or exercisable for or convertible into
shares of Common Stock, agree that it or he or she will not directly or
indirectly, issue, offer to sell, sell, grant an option for the sale of, assign,
transfer, pledge, hypothecate, distribute or otherwise encumber or dispose of
any shares of Common Stock or securities convertible into, exercisable or
exchangeable for or evidencing any right to purchase or subscribe for any shares
of Common Stock (either pursuant to Rule 144 of the Rules and Regulations or
otherwise) or dispose of any beneficial interest therein without the prior
written consent of the Representative and the Company. On or before the
effective date of the Registration Statement, the Company shall provide the
Representative with true copies of duly executed, legally binding and
enforceable agreements, pursuant to which, for a period of nine (9) months from
the effective date of the Registration Statement, holders of [_____] shares of
Common Stock agree that it or he or she will not, directly or indirectly, issue,
offer, sell, grant an option for the sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise encumber or dispose of such shares of
Common Stock or any securities convertible into, exercisable or exchangeable for
or evidencing any right to purchase or subscribe for any shares of Common Stock
(either pursuant to Rule 144 of the Rules and Regulations or otherwise) or
dispose of any beneficial interest therein without the prior written consent of
the Representative and the Company (together with the agreements described
above, the "Lock-up Agreements"). During the six (6) month period commencing
with the effective date of the Registration Statement, the Company shall not,
without the prior written consent of the Representative, sell, contract or offer
to sell, issue, transfer, assign, pledge, hypothecate, distribute, or otherwise
dispose of, directly or indirectly, any shares of Common Stock or any options,
rights or warrants with respect to any shares of Common Stock, except as set
forth in clause(s) of Section 4 hereof. On or before the Closing Date, the
Company shall deliver instructions to the Transfer Agent authorizing it to place
appropriate legends on the certificates representing the securities subject to
the Lock-up Agreements and to place appropriate stop transfer orders on the
Company's ledgers.
(p) Neither the Company, nor any of its officers, directors, stockholders,
nor any of their respective affiliates (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed to, or which
might in the future reasonably be expected to cause or result in, stabilization
or manipulation of the price of any securities of the Company.
(q) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. Except as described in the Prospectus, no portion
of the net proceeds will be used, directly or indirectly, to acquire any
securities issued by the Company.
(r) The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, any reports or
forms as may be required pursuant to Rule 463 under the Act) from time to time,
under the Act, the Exchange Act, and the Rules and Regulations, and all such
reports, forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(s) The Company shall furnish to the Representative as early as practicable
prior to each of the date hereof, the Closing Date and each Option Closing Date,
if any, but no later than two (2) full business days prior thereto, a copy of
the latest available unaudited interim financial statements of the Company
(which in no event shall be as of a date more than thirty (30) days prior to the
date of the Registration Statement) which have been read by the Company's
independent public accountants, as stated in its letter to be furnished pursuant
to Section 6(j) hereof.
(t) The Company shall cause the Common Stock and the Redeemable Warrants to
be quoted on Amex and for a period of seven (7) years from the date hereof, use
its best efforts to maintain the Amex quotation of the Common Stock and the
Redeemable Warrants to the extent outstanding.
(u) For a period of five (5) years from the Closing Date, the Company shall
furnish to the Representative at the Representative's request and at the
Company's sole expense, (i) daily consolidated transfer sheets relating to the
Common Stock and the Redeemable Warrants (ii) the list of holders of all of the
Company's securities and (iii) a Blue Sky "Trading Survey" for secondary sales
of the Company's securities prepared by counsel to the Company.
(v) As soon as practicable, (i) but in no event more than five (5) business
days before the effective date of the Registration Statement, file a Form 8-A
with the Commission providing for the registration under the Exchange Act of the
Securities and (ii) but in no event more than 30 days from the effective date of
the Registration Statement, take all necessary and appropriate actions to be
included in Standard and Poor's Corporation Descriptions and ▇▇▇▇▇'▇ OTC Manual
and to continue such inclusion for a period of not less than seven (7) years.
(w) The Company hereby agrees that it will not, for a period of twelve (12)
months from the effective date of the Registration Statement, adopt, propose to
adopt or otherwise permit to exist any employee, officer, director, consultant
or compensation plan or
similar arrangement permitting (i) the grant, issue, sale or entry into any
agreement to grant, issue or sell any option, warrant or other contract right
(x) at an exercise price that is less than the greater of the public offering
price of the Shares set forth herein and the fair market value on the date of
grant or sale or (y) to any of its executive officers or directors or to any
holder of 5% or more of the Common Stock except pursuant to the Company's 1996
Incentive and Non-Qualified Stock Option Plan; (ii) the maximum number of shares
of Common Stock or other securities of the Company purchasable at any time
pursuant to options or warrants issued by the Company to exceed the aggregate
250,000 shares reserved for future issuance under the Company's 1996 Incentive
and Non-Qualified Stock Option Plan; (iii) the payment for such securities with
any form of consideration other than cash; or (iv) the existence of stock
appreciation rights, phantom options or similar arrangements.
(x) Until the completion of the distribution of the Firm Securities and the
Option Securities, the Company shall not without the prior written consent of
the Representative and Underwriters' Counsel, issue, directly or indirectly, any
press release or other communication or hold any press conference with respect
to the Company or its activities or the offering contemplated hereby, other than
trade releases issued in the ordinary course of the Company's business
consistent with past practices with respect to the Company's operations.
(y) For a period equal to the lesser of (i) five (5) years from the date
hereof, and (ii) the sale to the public of the Representative's Securities, the
Company will not take any action or actions which may prevent or disqualify the
Company's use of Form SB-2 or Form S-1 (or other appropriate form) for the
registration under the Act of the Representative's Securities. The Company
further agrees to use its best efforts to file such post-effective amendments to
the Registration Statement as may be necessary, in order to maintain its
effectiveness and to keep such Registration Statement effective while any of the
Redeemable Warrants or Representative's Warrants remain outstanding.
(z) For a period of five (5) years after the effective date of the
Registration Statement, the Representative shall have the right to designate for
election one (1) individual to the Company's Board of Directors (the "Board").
Such person shall be mutually acceptable to the Company and the Representative.
In the event the Representative elects not to exercise such right, then it may
designate one (1) individual to attend meetings of the Company's Board. The
Company shall notify the Representative of each meeting of the Board and the
Company shall send to such individual all notices and other correspondence and
communications sent by the Company to members of the Board. Such individual
shall be reimbursed for all out-of-pocket expenses incurred in connection with
his attendance of meetings of the Board.
(aa) For a period of twenty four (24) months after the effective date of
the Registration Statement, the Company shall not restate, amend or alter any
term of any written employment, consulting or similar agreement entered into
between the Company and any officer, director or key employee as of the
effective date of the Registration Statement in a manner which is more favorable
to such officer, director or key employee, without the prior written consent of
the Representative.
(bb) For a period of three (3) years after the effective date of the
Registration Statement, the Company, any subsidiaries and any affiliates hereby
grant a right of first refusal for any sale of securities to be made by the
Company, any affiliates and any subsidiaries.
(cc) The Company will use its best efforts to maintain the effectiveness of
the Registration Statement for a period of five years after the date hereof.
2. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date and the
Option Closing Date (to the extent not paid at the Closing Date) all expenses
and fees (other than fees of Underwriters' Counsel, except as provided in (iv)
below) incident to the performance of the obligations of the Company under this
Agreement, the Warrant Agreement and the Representative's Warrant Agreement,
including, without limitation, (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of postage
with respect thereto) and delivery of this Agreement, the Warrant Agreement, the
Representative's Warrant Agreement, the Agreement Among Underwriters, the
Selected Dealer Agreements, and related documents, including the cost of all
copies thereof and of the Preliminary Prospectuses and of the Prospectus and any
amendments thereof or supplements thereto supplied to the Underwriters and such
dealers as the Underwriters may request, in quantities as hereinabove stated,
(iii) the printing, engraving, issuance and delivery of the Securities
including, but not limited to, (x) the purchase by the Underwriters of the Firm
Securities and the Option Securities and the purchase by the Representative of
the Representative's Warrants from the Company, (y) the consummation by the
Company of any of its obligations under this Agreement, the Warrant Agreement
and the Representative's Warrant Agreement, and (z) resale of the Firm
Securities and the Option Securities by the Underwriters in connection with the
distribution contemplated hereby, (iv) the qualification of the Securities under
state or foreign securities or "Blue Sky" laws and determination of the status
of such securities under legal investment laws, including the costs of printing
and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and fees
of counsel in connection therewith, (v) advertising costs and expenses,
including but not limited to costs and expenses in connection with the "road
show", information meetings and presentations, bound volumes and prospectus
memorabilia and "tomb-stone" advertisement expenses, (vi) costs and expenses in
connection with due diligence investigations, including but not limited to the
fees of any independent counsel or consultant retained, (vii) fees and expenses
of the transfer agent and registrar, (viii) applications for assignments of a
rating of the Securities by qualified rating agencies, (ix) the fees payable to
the Commission and the NASD, and (x) the fees and expenses incurred in
connection with the quotation of the Securities on Amex and any other exchange.
(b) If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 6 or Section 11, (i) the Company shall reimburse and
indemnify the
Underwriters for all of their actual out-of-pocket expenses, including the fees
and disbursements of Underwriters' Counsel, less any amounts already paid
pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the expenses payable
pursuant to subsection (a) of this Section 5, it will pay to the Representative
on the Closing Date by certified or bank cashier's check or, at the election of
the Representative, by deduction from the proceeds of the offering of the Firm
Securities a non-accountable expense allowance equal to three percent (3%) of
the gross proceeds received by the Company from the sale of the Firm Securities,
$25,000 of which has been paid to date. In the event the Representative elects
to exercise the over-allotment option described in Section 2(b) hereof, the
Company agrees to pay to the Representative on the Option Closing Date (by
certified or bank cashier's check or, at the Representative's election, by
deduction from the proceeds of the Option Securities) a non-accountable expense
allowance equal to three percent (3%) of the gross proceeds received by the
Company from the sale of the Option Securities.
3. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if it had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; the accuracy on and as of the Closing Date or Option Closing Date, if any,
of the statements of the officers of the Company made pursuant to the provisions
hereof; and the performance by the Company on and as of the Closing Date and
each Option Closing Date, if any, of its covenants and obligations hereunder and
to the following further conditions:
(a) The Registration Statement shall have become effective not later than
12:00 Noon, New York time, on the date of this Agreement or such later date and
time as shall be consented to in writing by the Representative, and, at Closing
Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Shares and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Representative of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representative's opinion, is material, or omits to state a
fact which, in the Representative's opinion, is material and is required to be
stated therein or is necessary to make the statements
therein not misleading, or that the Prospectus, or any supplement thereto,
contains an untrue statement of fact which, in the Representative's opinion, is
material, or omits to state a fact which, in the Representative's opinion, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) On or prior to the Closing Date, the Representative shall have received
from Underwriters' Counsel, such opinion or opinions with respect to the
organization of the Company, the validity of the Securities, the
Representative's Warrants, the Registration Statement, the Prospectus and other
related matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
(d) At Closing Date, the Underwriter shall have received the favorable
opinion of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to the Company,
dated the Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(i) the Company (A) has been duly organized and is validly existing as
a corporation in good standing under the laws of its jurisdiction, (B) is
duly qualified and licensed and in good standing as a foreign corporation
in each jurisdiction in which its ownership or leasing of any properties or
the character of its operations requires such qualification or licensing,
and (C) has all requisite corporate power and authority; and the Company
has obtained any and all necessary authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental
or regulatory officials and bodies (including, without limitation, those
having jurisdiction over environmental or similar matters), to own or lease
its properties and conduct its business as described in the Prospectus; the
Company is and has been doing business in material compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises and
permits and all federal, state and local laws, rules and regulations; the
Company has not received any notice of proceedings relating to the
revocation or modification of any such 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 materially adversely affect the business, operations, condition,
financial or otherwise, or the earnings, business affairs, position,
prospects, value, operation, properties, business or results of operations
of the Company. The disclosures in the Registration Statement concerning
the effects of federal, state and local laws, rules and regulations on the
Company's business as currently conducted and as contemplated are correct
in all material respects and do not omit to state a fact necessary to make
the statements contained therein not misleading in light of the
circumstances in which they were made;
(ii) the Company does not own an interest in any other corporation,
partnership, joint venture, trust or other business entity;
(iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "Capitalization" and "Description of Securities,"
and the Company is not a party to or bound by any instrument, agreement or
other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement, the
Representative's Warrant Agreement and the Warrant Agreement and as
described in the Prospectus. The Securities, and all other securities
issued or issuable by the Company conform in all material respects to all
statements with respect thereto contained in the Registration Statement and
the Prospectus. All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable; the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of
the preemptive rights of any holders of any security of the Company or any
similar rights granted by the Company. The Securities to be sold by the
Company hereunder and under the Representative's Warrant Agreement and the
Warrant Agreement are not and will not be subject to any preemptive or
other similar rights of any stockholder, have been duly authorized and,
when issued, paid for and delivered in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable and conform to the
description thereof contained in the Prospectus; the holders thereof will
not be subject to any liability solely as such holders; all corporate
action required to be taken for the authorization, issue and sale of the
Securities has been duly and validly taken; and the certificates
representing the Securities are in due and proper form. The
Representative's Warrants and the Redeemable Warrants constitute valid and
binding obligations of the Company to issue and sell, upon exercise thereof
and payment therefor, the number and type of securities of the Company
called for thereby. Upon the issuance and delivery pursuant to this
Agreement, Representative's Warrant Agreement and the Warrant Agreement of
the Securities to be sold by the Company, the Underwriters and the
Representative, respectively, will acquire good and marketable title to
such Securities free and clear of any pledge, lien, charge, claim,
encumbrance, pledge, security interest, or other restriction or equity of
any kind whatsoever. No transfer tax is payable by or on behalf of the
Underwriters in connection with (A) the issuance by the Company of the
Securities, (B) the purchase by the Underwriters of the Firm Securities and
the Option Securities from the Company and the purchase by the
Representative of the Representative's Warrants from the Company, (C) the
consummation by the Company of any of its obligations under this Agreement,
the Representative's Warrant Agreement or the Warrant Agreement, or (D)
resales of the Firm Securities and the Option Securities in connection with
the distribution contemplated hereby;
(iv) the Registration Statement is effective under the Act, and, if
applicable, filing of all pricing information has been timely made in the
appropriate form under Rule 430A, and no stop order suspending the use of
the Preliminary Prospectus, the Registration Statement or Prospectus or any
part of any thereof or suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or, to the best of such counsel's knowledge,
threatened or contemplated under the Act;
(v) each of the Preliminary Prospectus, the Registration Statement,
and the Prospectus and any amendments or supplements thereto (other than
the financial statements and other financial and statistical data included
therein, as to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations;
(vi) (A) there are no agreements, contracts or other documents
required by the Act to be described in the Registration Statement and the
Prospectus and filed as exhibits to the Registration Statement other than
those described in the Registration Statement (or required to be filed
under the Exchange Act if upon such filing they would be incorporated, in
whole or in part, by reference therein) and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are correct copies
of the documents of which they purport to be copies; (B) the descriptions
in the Registration Statement and the Prospectus and any supplement or
amendment thereto of contracts and other documents to which the Company is
a party or by which it is bound, including any document to which the
Company is a party or by which it is bound, incorporated by reference into
the Prospectus and any supplement or amendment thereto, are accurate and
fairly represent the information required to be shown by Form SB-2; (C)
there is not pending or threatened against the Company any action,
arbitration, suit, proceeding, inquiry, investigation, litigation,
governmental or other proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, pending or threatened against (or circumstances that may give rise
to the same), or involving the properties or business of the Company which
(x) is required to be disclosed in the Registration Statement which is not
so disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all respects), (y) questions the
validity of the capital stock of the Company or this Agreement, the
Representative's Warrant Agreement or the Warrant Agreement, or of any
action taken or to be taken by the Company pursuant to or in connection
with any of the foregoing; (D) no statute or regulation or legal or
governmental proceeding required to be described in the Prospectus is not
described as required; and (E) there is no action, suit or proceeding
pending, or threatened, against or affecting the Company before any court
or arbitrator or governmental body, agency or official (or any basis
thereof known to such counsel) in which there is a reasonable possibility
of a decision which may result in a material adverse change in the
condition, financial or otherwise, or the earnings, position, prospects,
stockholders' equity, value, operation, properties, business or results of
operations of the Company, which could adversely affect the present or
prospective ability of the Company to perform its obligations under this
Agreement, the Representative's Warrant Agreement or the Warrant Agreement
or which in any manner draws into question the validity or enforceability
of this Agreement, the Representative's Warrant Agreement or the Warrant
Agreement;
(vii) the Company has full legal right, power and authority to enter
into each of this Agreement, the Representative's Warrant Agreement and the
Warrant Agreement and to consummate the transactions provided for herein
and therein; and each of this Agreement, the Representative's Warrant
Agreement and the Warrant Agreement
has been duly authorized, executed and delivered by the Company. Each of
this Agreement, the Representative's Warrant Agreement and the Warrant
Agreement, assuming due authorization, execution and delivery by each other
party thereto constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable
law), and none of the Company's execution or delivery of this Agreement,
the Representative's Warrant Agreement and the Warrant Agreement, its
performance hereunder or thereunder, its consummation of the transactions
contemplated herein or therein, or the conduct of its business as described
in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, conflicts with or will conflict with or results or
will result in any breach or violation of any of the terms or provisions
of, or constitutes or will constitute a default under, or result in the
creation or imposition of any lien, charge, claim, encumbrance, pledge,
security interest, defect or other restriction or equity of any kind
whatsoever upon, any property or assets (tangible or intangible) of the
Company pursuant to the terms of, (A) the certificate of incorporation or
by-laws of the Company, (B) any license, contract, indenture, mortgage,
deed of trust, voting trust agreement, stockholders agreement, note, loan
or credit agreement or any other agreement or instrument to which the
Company is a party or by which it is or may be bound or to which any of its
respective properties or assets (tangible or intangible) is or may be
subject, or any indebtedness, or (C) any statute, judgment, decree, order,
rule or regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or
body (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having jurisdiction
over the Company or any of its activities or properties;
(viii) no consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic
or foreign (other than such as may be required under Blue Sky laws, as to
which no opinion need be rendered) is required in connection with the
issuance of the Securities pursuant to the Prospectus, the Registration
Statement, the issuance of the Representative's Warrants, the performance
of this Agreement, the Representative's Warrant Agreement and the Warrant
Agreement, and the transactions contemplated hereby and thereby;
(ix) the properties and business of the Company conform in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus; and the Company has good and marketable title
to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or leased by it, in
each case free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of
any kind whatsoever, other than those referred to in the Prospectus and
liens for taxes not yet due and payable;
(x) the Company is not in breach of, or in default under, any term or
provision of any license, contract, indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, partnership agreement, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company is a party or by
which the Company may be bound or to which the property or assets (tangible
or intangible) of the Company is subject or affected; and the Company is
not in violation of any term or provision of (A) its certificate of
incorporation by-laws, (B) any order, license, certificate, franchise or
permit of any governmental or regulatory official or body or (C) any
judgment, decree, order, statute, rule or regulation to which it is
subject;
(xi) the statements in the Prospectus under "PROSPECTUS SUMMARY," "THE
COMPANY," "RISK FACTORS," "BUSINESS," "MANAGEMENT," "PRINCIPAL
STOCKHOLDERS," "CERTAIN TRANSACTIONS," "DESCRIPTION OF SECURITIES," and
"SHARES ELIGIBLE FOR FUTURE SALE" have been reviewed by such counsel, and
insofar as they refer to statements of law, descriptions of statutes,
licenses, rules or regulations or legal conclusions, are correct in all
material respects;
(xii) the Firm Securities and Option Securities have been accepted for
quotation on Amex;
(xiii) the persons listed under the caption "PRINCIPAL STOCKHOLDERS"
in the Prospectus are the respective "beneficial owners" (as such phrase is
defined in regulation 13d-3 under the Exchange Act) of the securities set
forth opposite their respective names thereunder as and to the extent set
forth therein;
(xiv) other than the Selling Stockholders, no person, corporation,
trust, partnership, association or other entity has the right to include
and/or register any securities of the Company in the Registration
Statement, require the Company to file any registration statement or, if
filed, to include any security in such registration statement;
(xv) there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee
with respect to the sale of the Securities hereunder or financial
consulting arrangement or any other arrangements, agreements,
understandings, payments or issuances that may affect the Underwriters'
compensation, as determined by the NASD;
(xvi) assuming due execution by the parties thereto other than the
Company, the Lock-up Agreements are legal, valid and binding obligations of
parties thereto, enforceable against the party and any subsequent holder of
the securities subject thereto in accordance with their terms;
(i) except as described in the Prospectus, the Company does not
(A) maintain, sponsor or contribute to any ERISA Plans, (B) maintain
or contribute, now
or at any time previously, to a defined benefit plan, as defined in
Section 3(35) of ERISA, and (C) has never completely or partially
withdrawn from a "multiemployer plan";
(ii) the Company is in compliance with all provisions of Section
1 of Laws of Florida, Chapter 92-198, An Act Relating to Disclosure of
Doing Business with Cuba;
(iii) none of the Company or any of its affiliates shall be
subject to the requirements of or shall be deemed an "Investment
Company," pursuant to and as defined under, respectively, the
Investment Company Act;
(iv) the Company owns or possesses, free and clear of all liens
or encumbrances and rights thereto or therein by third parties, the
requisite licenses or other rights to use all trademarks, service
marks, copyrights, service names, trade names, patents, patent
applications and licenses necessary to conduct its business
(including, without limitation, any such licenses or rights described
in the Prospectus as being owned or possessed by the Company), and
there is no claim or action by any person pertaining to, or
proceeding, pending or threatened, which challenges the exclusive
rights of the Company with respect to any trademarks, service marks,
copyrights, service names, trade names, patents, patent applications
and licenses used in the conduct of the Company's business (including,
without limitation, any such licenses or rights described in the
Prospectus as being owned or possessed by the Company); and the
Company's current products, services and processes do not and will not
infringe on the patents currently held by third parties;
(v) Except as described in the Prospectus, the Company is not
under any obligation to pay to any third party, royalties or fees of
any kind whatsoever with respect to any technology or intellectual
properties developed, employed, licensed or used.
Such counsel shall state that such counsel has participated in conferences
with officers and other representatives of the Company and representatives of
the independent public accountants for the Company at which conferences such
counsel made inquiries of such officers, representatives and accountants and
discussed the contents of the Preliminary Prospectus, the Registration
Statement, 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
Preliminary Prospectus, the Registration Statement and Prospectus, on the basis
of the foregoing, no facts have come to the attention of such counsel which lead
them to believe that either the Registration Statement or any amendment thereto,
at the time such Registration Statement or amendment became effective or the
Preliminary Prospectus or Prospectus or amendment or supplement thereto as of
the date of such opinion 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 (it being understood that such
counsel need express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the Preliminary
Prospectus, the Registration Statement or Prospectus), or any supplements or
amendments thereto. Such counsel shall further state that its opinions may be
relied upon by Underwriter's Counsel in rendering its opinion to the
Underwriters.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and
substance satisfactory to Underwriters' Counsel) of other counsel acceptable to
Underwriters' Counsel, familiar with the applicable laws; (B) as to matters of
fact, to the extent they deem proper, on certificates and written statements of
responsible officers of the Company, and certificates or other written
statements of officers of departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be delivered
to Underwriters' Counsel if requested. The opinion shall also state that the
Underwriters' Counsel is entitled to rely thereon. The opinion of such counsel
for the Company shall state that the opinion of any such other counsel is in
form satisfactory to such counsel and that the Representative, Underwriters'
counsel and they are justified in relying thereon. Such opinion shall not state
that it is to be governed or qualified by, or that it is otherwise subject to,
any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991), or any comparable State bar accord.
At each Option Closing Date, if any, the Underwriters shall have received
the favorable opinion of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to
the Company dated the Option Closing Date, addressed to the Underwriters and in
form and substance satisfactory to Underwriters' Counsel, confirming as of
Option Closing Date the statements made by ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP in their opinion delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Option Closing Date, if
any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company, or herein contained.
(f) Prior to each of the Closing Date and each Option Closing Date, if any,
(i) there shall have been no material adverse change nor development involving a
prospective change in the condition, financial or otherwise, earnings, position,
value, properties, results of operations, prospects, stockholders' equity or the
business activities of the Company, whether or not in the ordinary course of
business, from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus; (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the
Company, from the latest date as of which the financial condition of the Company
is set forth in the Registration Statement and Prospectus which is materially
adverse to the Company; (iii) except as described in the Prospectus, the Company
shall not be in default under any provision of any instrument relating to any
outstanding indebtedness; (iv) the Company shall not have issued any securities
(other than the Securities); the Company shall not have declared or paid any
dividend or made any distribution in respect of its capital stock of any class;
and there has not been any change in the capital stock of the Company, or any
material change in the debt (long or short term) or liabilities or obligations
of the Company (contingent or otherwise); (v) no material amount of the assets
of the Company shall have been pledged or mortgaged, except as set forth in the
Registration Statement and Prospectus; (vi) no action, suit or proceeding, at
law or in equity, shall have been pending or threatened (or circumstances giving
rise to same) against the Company, or affecting any of its properties or
business before or by any court or federal, state or foreign commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding may adversely affect the business, operations, prospects or financial
condition or income of the Company, except as set forth in the Registration
Statement and Prospectus; and (vii) no stop order shall
have been issued under the Act and no proceedings therefor shall have been
initiated, threatened or contemplated by the Commission.
(g) At each of the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date or
the Option Closing Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all conditions contained in
this Agreement on its part to be performed or satisfied at or prior to such
Closing Date or Option Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no proceedings for that
purpose have been instituted or are pending or, to the best of each of such
person's knowledge, after due inquiry are contemplated or threatened under
the Act;
(iii) The Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and neither the Preliminary Prospectus or any supplement
thereto included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (a) the Company has
not incurred up to and including the Closing Date or the Option Closing
Date, as the case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct or contingent;
(b) the Company has not paid or declared any dividends or other
distributions on its capital stock; (c) the Company has not entered into
any transactions not in the ordinary course of business; (d) there has not
been any change in the capital stock or long term debt or any increase in
the short term borrowings (other than any increase in the short term
borrowings in the ordinary case of business) of the Company; (e) the
Company has not sustained any material loss or damage to its property or
assets, whether or not insured; (g) there is no litigation which is pending
or threatened (or circumstances giving rise to same) against the Company,
or any affiliated party of any of the foregoing which is required to be set
forth in an amended or supplemented Prospectus
which has not been set forth; and (h) there has occurred no event required
to be set forth in an amended or supplemented Prospectus which has not been
set forth.
References to the Registration Statement and the Prospectus in this subsection
(g) are to such documents as amended and supplemented at the date of such
certificate.
(h) By the Closing Date, the Underwriters will have received clearance from
the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriters shall have
received a letter, dated such date, addressed to the Underwriters in form and
substance satisfactory (including the non-material nature of the changes or
decreases, if any, referred to in clause (iii) below) in all respects to the
Underwriters and Underwriters' Counsel, from Pricewaterhouse Coopers LLP;
(i) confirming that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial statements
and supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations thereunder
and that the Underwriters may rely upon the opinion of Pricewaterhouse
Coopers LLP with respect to such financial statements and supporting
schedules included in the Registration Statement;
(iii) stating that, on the basis of a limited review which included a
reading of the latest available unaudited interim financial statements of
the Company, a reading of the latest available minutes of the stockholders
and board of directors and the various committees of the boards of
directors of the Company, consultations with officers and other employees
of the Company responsible for financial and accounting matters and other
specified procedures and inquiries, nothing has come to their attention
which would lead them to believe that (A) the pro forma financial
information contained in the Registration Statement and Prospectus does not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or is not fairly
presented in conformity with generally accepted accounting principles
applied on a basis consistent with that of the audited financial statements
of the Company or the unaudited pro forma financial information included in
the Registration Statement, (B) the unaudited financial statements and
supporting schedules of the Company included in the Registration Statement
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations or are not
fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the
audited financial statements of the Company included in the Registration
Statement, or (C) at a specified date not more than five (5) days prior to
the effective date of the Registration Statement, there has been any change
in the capital stock of the Company, any change in the long-term debt of
the Company, or any decrease in the stockholders' equity of the Company or
any decrease in the net current assets or net assets of the Company as
compared with amounts shown in the September 30, 1998 balance sheets
included in the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any change or
decrease, setting forth the amount of such change or decrease, and (D)
during the period from September 30, 1998 to a specified date not more than
five (5) days prior to the effective date of the Registration Statement,
there was any decrease in net revenues or net earnings of the Company or
increase in net earnings per common share of the Company, in each case as
compared with the corresponding period beginning September 30, 1998 other
than as set forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five (5) days prior to
the date of the Registration Statement, the amount of liabilities of the
Company (including a break-down of commercial paper and notes payable to
banks);
(v) stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus
in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting
records, including work sheets, of the Company and excluding any questions
requiring an interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries and other appropriate
procedures (which procedures do not constitute an examination in accordance
with generally accepted auditing standards) set forth in the letter and
found them to be in agreement; and
(vi) statements as to such other matters incident to the transaction
contemplated hereby as the Underwriters may request.
(j) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from Pricewaterhouse Coopers LLP a letter,
dated as of the Closing Date or the Option Closing Date, as the case may be, to
the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (i) of this Section hereof except that the specified date
referred to shall be a date not more than five days prior to the Closing Date or
the Option Closing Date, as the case may be, and, if the Company has elected to
rely on Rule 430A of the Rules and Regulations, to the further effect that they
have carried out procedures as specified in clause (v) of subsection (i) of this
Section with respect to certain amounts, percentages and financial information
as specified by the Underwriters and deemed to be a part of the Registration
Statement pursuant to Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records specified in such
clause (v).
(k) On each of the Closing Date and Option Closing Date, if any, there
shall be duly tendered to the Representative the appropriate number of
Securities.
(l) No order suspending the sale of the Securities in any jurisdiction
designated by the Representative pursuant to subsection (e) of Section 4 hereof
shall have been issued on either the Closing Date or the Option Closing Date, if
any, and no proceedings for that purpose shall have been instituted or shall be
contemplated.
(m) On or before the Closing Date, the Company shall have executed and
delivered to the Representative, (i) the Representative's Warrant Agreement
substantially in the form filed as Exhibit 4(c); to the Registration Statement
in final form and substance satisfactory to the Representative, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(n) On or before the Closing Date, the Common Stock and the Redeemable
Warrants shall have been duly approved for quotation on Amex, subject to
official notice of issuance.
(o) On or before the Closing Date, there shall have been delivered to the
Representative all of the Lock-up Agreements, in form and substance satisfactory
to Representative's Counsel.
(p) On or before the effective date of the Registration Statement, the
Company shall have executed and delivered to the Representative and the Transfer
Agent the Warrant Agreement, substantially in the form filed as Exhibit 4(b) to
the Registration Agreement in final form and satisfactory to the Representative.
If any condition to the Underwriters' obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Option Closing Date, as the case
may be, is not so fulfilled, the Representative may terminate this Agreement or,
if the Representative so elects, it may waive any such conditions which have not
been fulfilled or extend the time for their fulfillment.
4. Indemnification.
(a) The Company, agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7, "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
losses, claims, damages, expenses or liabilities, joint or several (and claims,
actions, proceedings, investigations, inquiries, suits and litigation in respect
thereof), whatsoever (including but not limited to any and all costs and
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any such claim, action, proceeding, investigation, inquiry, suit or
litigation, commenced or threatened, or any claim whatsoever), as such are
incurred, to which the Underwriter or such controlling person may become subject
under the Act, the Exchange Act or any other statute or at common law or
otherwise or under the laws of foreign countries, arising out of or based upon
(A)
any untrue statement or alleged untrue statement of a material fact contained
(i) in any Preliminary Prospectus, the Registration Statement or the Prospectus
(as from time to time amended and supplemented); (ii) in any post-effective
amendment or amendments or any new registration statement and prospectus in
which is included securities of the Company issued or issuable upon exercise of
the Securities; or (iii) in any application or other document or written
communication (in this Section 7 collectively called "application") executed by
the Company or based upon written information furnished by the Company filed,
delivered or used in any jurisdiction in order to qualify the Securities under
the securities laws thereof or filed with the Commission, any state securities
commission or agency, Amex or any other securities exchange, (B) the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of the
Prospectus, in the light of the circumstances under which they were made), or
(C) any breach of any representation, warranty, covenant or agreement of the
Company contained herein or in any certificate by or on behalf of the Company or
any of its officers delivered pursuant hereto unless, in the case of clause (A)
or (B) above, such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect to any
Underwriter by or on behalf of such Underwriters expressly for use in any
Preliminary Prospectus, the Registration Statement or any Prospectus, or any
amendment thereof or supplement thereto, or in any application, as the case may
be. The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each other person, if
any, who controls the Company within the meaning of the Act, to the same extent
as the foregoing indemnity from the Company to the Underwriter but only with
respect to statements or omissions, if any, made in any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or Prospectus directly relating to the
transactions effected by the Underwriters in connection with this Offering. The
Company acknowledges that the statements with respect to the public offering of
the Securities set forth under the heading "Underwriting" and the stabilization
legend in the Prospectus have been furnished by the Underwriter expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus. The indemnity
agreement in this subsection (b) shall be in addition to any liability which the
Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any claim, action, suit, investigation, inquiry,
proceeding or litigation, such indemnified party shall, if a claim in respect
thereof is to be made against one or more indemnifying parties under this
Section 7, notify each party against whom indemnification
is to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may have
otherwise). In case any such claim, action, investigation, inquiry, suit,
proceeding or litigation, is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense thereof of
such action, on behalf of the indemnified party or parties), in any of which
events such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one claim, action, investigation, inquiry, suit, proceeding or litigation or
separate but similar or related claims, actions, investigations, inquiries,
suits, proceedings or litigation in the same jurisdiction arising out of the
same general allegations or circumstances. Anything in this Section 7 to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim, suit, action, investigation, inquiry, proceeding or
litigation effected without its written consent; provided, however, that such
consent was not unreasonably withheld. An indemnifying party will not, without
the prior written consent of the indemnified parties, settle compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, investigation, inquiry, suit, proceeding or litigation in respect
of which indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim, action,
suit, investigation, inquiry, proceeding or litigation), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party form all liability arising out of such claim, action, suit, investigation,
inquiry, proceeding or litigation and (ii) does not include a statement as to or
an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes claim for indemnification pursuant to this
Section 7, but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express
provisions of this Section 7 provide for indemnification in such case, or (ii)
contribution under the Act may be required on the part of any indemnified party,
then each indemnifying party shall contribute to the amount paid as a result of
such losses, claims, damages, expenses or liabilities (or actions in respect
thereof) (A) in such proportion as is appropriate to reflect the relative
benefits received by each of the contributing parties, on the one hand, and the
party to be indemnified on the other hand, from the offering of the Securities
or (B) if the allocation provided by clause (A) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
each of the contributing parties, on the one hand, and the party to be
indemnified on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages, expenses or liabilities, as well
as any other relevant equitable considerations. In any case where the Company is
the contributing party and the Underwriters are the indemnified party, the
relative benefits received by the Company on the one hand, and the Underwriters,
on the other, shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Securities (before deducting expenses) bear to
the total underwriting discounts received by the Underwriters hereunder, in each
case as set forth in the table on the Cover Page of the Prospectus. Relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, or by the Underwriters, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, expenses or liabilities (or actions,
investigations, inquiries, suits or proceedings in respect thereof) referred to
above in this subdivision (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action, claim, investigation, inquiry, suit
or proceeding. Notwithstanding the provisions of this subdivision (d) the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by the Underwriters
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person, if any, who controls the Company within the meaning of
the Act, each officer of the Company who has 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 this subparagraph (d). Any party entitled
to contribution will, promptly after receipt of notice of commencement of any
action, suit, inquiry, investigation or proceeding against such party in respect
to which a claim for contribution may be made against another party or parties
under this subparagraph (d), notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
5. Representations and Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement or contained in
certificates of officers of
the Company submitted pursuant hereto, shall be deemed to be representations,
warranties and agreements at the Closing Date and the Option Closing Date, as
the case may be, and such representations, warranties and agreements of the
Company and the indemnity agreements contained in Section 7 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Underwriter, the Company, any controlling person of any
Underwriter or the Company, and shall survive termination of this Agreement or
the issuance and delivery of the Securities to the Underwriters and the
Representative, as the case may be.
6. Effective Date.
(a) This Agreement shall become effective at 10:00 a.m., New York City
time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such shares for offering or the release by the Representative
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
7. Termination.
(a) Subject to subsection (b) of this Section 10, the Representative shall
have the right to terminate this Agreement, after the date hereof, (i) if any
domestic or international event or act or occurrence has materially disrupted,
or in the Representative's opinion will in the immediate future materially
adversely disrupt the financial markets; or (ii) any material adverse change in
the financial markets shall have occurred; or (iii) if trading generally shall
have been suspended or materially limited on or by, as the case may be, any of
the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Boston Stock Exchange, the Chicago
Board of Trade, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Commission or any other government authority having jurisdiction;
or (iv) if trading of any of the securities of the Company shall have been
suspended, or any of the securities of the Company shall have been delisted, on
any exchange or in any over-the-counter market; or (v) if the United States
shall have become involved in a war or major hostilities, or if there shall have
been an escalation in an existing war or major hostilities or a national
emergency shall have been declared in the United States; or (vi) if a banking
moratorium has been declared by a state or federal authority; or (vii) if a
moratorium in foreign exchange trading has been declared; or (viii) if the
Company shall have sustained a loss material or substantial to the Company by
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act which, whether or not such loss shall have been insured, will,
in the Representative's opinion, make it inadvisable to proceed with the
delivery of the Securities; or (viii) if there shall have occurred any outbreak
or escalation of hostilities or any calamity or crisis or there shall have been
such a material adverse change in the conditions or prospects of the Company, or
such material adverse change in the general market, political or economic
conditions, in the United States or elsewhere as in the Representative's
judgment would make it inadvisable to proceed with the offering, sale and/or
delivery of the Securities.
(b) If this Agreement is terminated by the Representative in accordance
with the provisions of Section 10(a) the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(c) above). Notwithstanding any
contrary provision contained in this Agreement, if this Agreement shall not be
carried out within the time specified herein, or any extension thereof granted
to the Representative, by reason of any failure on the part of the Company to
perform any undertaking or satisfy any condition of this Agreement by it to be
performed or satisfied (including, without limitation, pursuant to Section 6 or
Section 12) then, the Company shall promptly reimburse and indemnify the
Underwriter for all of their actual out-of-pocket expenses, including the fees
and disbursements of counsel for the Underwriter (less amounts previously paid
pursuant to Section 5(c) above). In addition, the Company shall remain liable
for all Blue Sky counsel fees and expenses and filing fees. Notwithstanding any
contrary provision contained in this Agreement, any election hereunder or any
termination of this Agreement (including, without limitation, pursuant to
Sections 6, 10 and 12 hereof), and whether or not this Agreement is otherwise
carried out, the provisions of Section 5 and Section 7 shall not be in any way
affected by such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
8. Substitution of the Underwriters. If one or more of the Underwriters
shall fail otherwise than for a reason sufficient to justify the termination of
this Agreement (under the provisions of Section 6, Section 10 or Section 12
hereof) to purchase the Securities which it or they are obligated to purchase on
such date under this Agreement (the "Defaulted Securities"), the Representative
shall have the right, within 24 hours thereafter, to make arrangement for one or
more of the non-defaulting Underwriters, or any other Underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the
Representative shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the total
number of Firm Securities to be purchased on such date, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total number
of Firm Securities, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriters (or, if such default shall occur with respect
to any Option Securities to be purchased on an Option Closing Date, the
Underwriters may at the Representative's option, by notice from the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date).
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination of
this Agreement, the Representative shall have the right to postpone the Closing
Date for a period not exceeding seven (7) days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.
9. Default by the Company. If the Company shall fail at the Closing Date or
at any Option Closing Date, as applicable, to sell and deliver the number of
Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at the Representative's option, by notice from the Underwriters or the
Representative to the Company, terminate the Underwriters' obligation to
purchase Option Securities from the Company on such date) without any liability
on the part of any non-defaulting party other than pursuant to Section 5,
Section 7 and Section 10 hereof. No action taken pursuant to this Section shall
relieve the Company from liability, if any, in respect of such default.
10. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Representative shall be directed to the
Representative c/▇ ▇▇▇▇▇ & Company, Inc. at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to
the Company at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
11. Parties. This Agreement shall inure solely to the benefit of and shall
be binding upon, the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from the Underwriters shall be deemed to be a successor
by reason merely of such purchase.
12. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
14. Entire Agreement; Amendments. This Agreement and the Representative's
Warrant Agreement constitute the entire agreement of the parties hereto and
supersede all prior written or oral agreements, understandings and negotiations
with respect to the subject matter
hereof. This Agreement may not be amended except in a writing, signed by the
Representative and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
DIGITAL LAVA INC.
By:/s/ ▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇
------------------------
CEO
Confirmed and accepted as of the date first above written.
▇▇▇▇▇ & COMPANY, INC.
By:
------------------------
Name:
Title:
SCHEDULE A
Underwriter Number of Shares Number of
----------- to be Purchased Redeemable Warrants
--------------- to be Purchased
-------------------
▇▇▇▇▇ & Company, Inc.
Security Capital Trading, Inc.
TOTAL 2,400,000 1,200,000