EXHIBIT 1.1
2,400,000 Shares
WORLDQUEST NETWORKS, INC.
Common Stock, $.01 par value
UNDERWRITING AGREEMENT
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____________, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇▇▇ BROS., L.P.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND COMPANY, INCORPORATED
EBI SECURITIES CORPORATION
As Representatives of the Several Underwriters
named in Schedule A hereto
▇/▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
1. Introductory. WorldQuest Networks, Inc., a Delaware corporation (the
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"Company"), proposes to sell, pursuant to the terms of this Agreement, to the
several underwriters named in Schedule A hereto (the "Underwriters," or, each,
an "Underwriter"), an aggregate of 2,400,000 shares of common stock, $.01 par
value (the "Common Stock"), of the Company. The aggregate of 2,400,000 shares
so proposed to be sold is hereinafter referred to as the "Firm Stock." The
Company also proposes to sell to the Underwriters, upon the terms and conditions
set forth in Section 3 hereof, up to an additional 360,000 shares of Common
Stock (the "Option Stock"). The Firm Stock and the Option Stock are hereinafter
collectively referred to as the "Stock" and the Stock and Representatives'
Warrant (as defined in Section 13 herein) and the shares of Common Stock
issuable pursuant to the exercise of the Representatives' Warrant are herein
collectively referred to as the "Securities." Ladenburg ▇▇▇▇▇▇▇▇ & Co., Inc.
("Ladenburg"), and ▇▇▇▇▇▇▇ Bros., L.P. ("▇▇▇▇▇▇▇ Bros.") are acting as joint
back-running managers and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company, Incorporated and EBI
Securities Corporation are acting as co-managers, collectively, the joint back-
running managers and the co-managers are acting as representatives of the
several Underwriters and in such capacity are hereinafter referred to as the
"Representatives."
2. Representations and Warranties of the Company. The Company represents
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and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement on Form SB-2 (File No. 333-82721) in the
form in which it became or becomes effective and also in such form as it may be
when any post-effective amendment thereto shall become effective with respect to
the Securities, including any pre-effective prospectuses included as part of the
registration statement as originally filed or as
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part of any amendment or supplement thereto, or filed pursuant to Rule 424 under
the Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, copies of which have heretofore been
delivered to you, has been carefully prepared by the Company in conformity with
the requirements of the Securities Act and has been filed with the Commission
under the Securities Act; one or more amendments to such registration statement,
including in each case an amended pre-effective prospectus, copies of which
amendments have heretofore been delivered to you, have been so prepared and
filed. Such registration statement is referred to hereinafter as the
"Registration Statement." If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the Registration Statement will be
filed and must be declared effective before the offering of the Stock may
commence, the term "Registration Statement" as used in this Agreement means the
Registration Statement as amended by said post-effective amendment. The term
"Registration Statement" as used in this Agreement shall also include any
registration statement relating to the Stock that is filed pursuant to Rule
462(b) under the Securities Act. The term "Prospectus" as used in this Agreement
means the prospectus in the form included in the Registration Statement, or, (A)
if the prospectus included in the Registration Statement omits information in
reliance on Rule 430A under the Securities Act and such information is included
in a prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act, the term "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement as supplemented by
the addition of the Rule 430A information contained in the prospectus filed with
the Commission pursuant to Rule 424(b) and (B) if prospectuses that meet the
requirements of Section 10(a) of the Securities Act are delivered pursuant to
Rule 434 under the Securities Act, then (i) the term "Prospectus" as used in
this Agreement means the "Prospectus subject to completion" (as such term is
defined in Rule 434(g) under the Securities Act) as supplemented by (a) the
addition of Rule 430A information or other information contained in the form of
prospectus delivered pursuant to Rule 434(b)(2) under the Securities Act or (b)
the information contained in the term sheets described in Rule 434(b)(3) under
the Securities Act, and (ii) the date of such prospectuses shall be deemed to be
the date of the term sheets. The term "Pre-effective Prospectus" as used in this
Agreement means the prospectus subject to completion in the form included in the
Registration Statement at the time of the initial filing of the Registration
Statement with the Commission, and as such prospectus shall have been amended
from time to time prior to the date of the Prospectus.
(b) The Commission has not issued or threatened to issue any order
preventing or suspending the use of any Pre-effective Prospectus, and, at its
date of issue, each Pre-effective Prospectus conformed in all material respects
with the requirements of the Securities Act and did not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, not misleading; and,
when the Registration Statement becomes effective and at all times subsequent
thereto up to and including the Closing Dates (as hereinafter defined), the
Registration Statement and the Prospectus and any amendments or supplements
thereto contained and will contain all material statements and information
required to be included therein by the Securities Act and conformed and will
conform in all materials respects to the requirements of the Securities Act and
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, included or will include any untrue statement of a material
fact or omit to state any material fact required to be stated therein, in light
of the circumstances under which they were
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made in the case of the Prospectus, or necessary to make the statements therein
not misleading, provided, however, that the foregoing representations,
warranties and agreement shall not apply to information contained in or omitted
from any Pre-effective Prospectus or the Registration Statement or the
Prospectus or any such amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Underwriter, directly or through you, specifically for use in the
preparation thereof; and each Pre-effective Prospectus and Prospectus delivered
to the Underwriters for use in connection with the offering of the Stock will,
at the time of such delivery, be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to ▇▇▇▇▇, except to the extent
permitted by Regulation S-T under the Securities Act. There is no franchise,
lease, agreement or document required to be described in the Registration
Statement or Prospectus or to be filed as an exhibit to the Registration
Statement which is not described or filed therein as required; and all
descriptions of any such franchises, leases, contracts, agreements or documents
contained in the Registration Statement are accurate and complete descriptions
of such documents in all material respects.
(c) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as set forth or
contemplated in the Prospectus, the Company has not incurred any liabilities or
obligations, direct or contingent, nor entered into any transactions not in the
ordinary course of business, and there has not been any material adverse change
in the condition (financial or otherwise), properties, business, management,
prospects, net worth or results of operations of the Company, individually or in
the aggregate (a "Material Adverse Effect"), or any change in the capital stock,
short-term or long-term debt of the Company.
(d) The audited consolidated financial statements of the Company
(which include the consolidated accounts of each of ___________, [the Costa
Rican corporation] and BDC, LLC (the "Subsidiaries"), in each case together with
related notes and schedules, as set forth in the Registration Statement and/or
any Pre-Effective Prospectus as applicable, present fairly the financial
position and the results of operations and cash flows of the Company and the
Subsidiaries on a consolidated basis, at the indicated dates and for the
indicated periods. Such financial statements and related schedules have been
prepared in accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved, except as disclosed
therein, and all adjustments necessary for a fair presentation of results for
such periods have been made. The summary historical and statistical data
included in the Registration Statement present fairly the information shown
therein and such data have been compiled on a basis consistent with the
financial statements presented therein and the books and records of the Company
and the Subsidiaries. The selected financial information included under the
captions "Capitalization" and "Selected Financial Data" in the Prospectus
presents fairly the information shown therein and has been compiled on a basis
consistent with that of the audited consolidated financial statements of the
Company and the Subsidiaries. No other financial statements or schedules of the
Company or the Subsidiaries are required by the Securities Act or the Rules and
Regulations to be included in the Registration Statement or Prospectus. None of
the Company or any of the Subsidiaries is currently planning any probable
acquisition for which disclosure of pro forma financial information would be
required by the Securities Act.
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(e) Ernst & Young LLP, who have expressed their opinions on the
audited financial statements included in the Registration Statement and the
Prospectus are independent public accountants as required by the Securities Act
and the Rules and Regulations.
(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware with full
corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Prospectus. Each of the Subsidiaries
has been duly incorporated and is validly existing as a corporation or limited
liability company, as applicable, in good standing under the laws of the
jurisdiction of its incorporation, with full corporate or limited liability
company power and authority to own, lease and operate its properties and conduct
its business as described in the Prospectus. As of the Effective Date, the
outstanding capital stock of each of the Subsidiaries, as set forth in the
Prospectus, is owned by the Company, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest; and no preemptive
right, co-sale right, registration right, right of first refusal or other
similar right of stockholders exists with respect to any shares of any of the
Subsidiaries. The Company and each of the Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to be so
qualified or be in good standing would not have a Material Adverse Effect, and
to the knowledge of the Company, no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification. The Company does not own or
control, directly or indirectly, any corporation, association or other entity
other than the Subsidiaries. Neither of the Subsidiaries owns or controls,
direct or indirect, any corporation, association or other entity. None of the
stockholders of the Company immediately prior to the Effective Date owns or
controls, directly or indirectly, any interest in any corporation, association
or other entity (other than the Company and the Subsidiaries) engaged in the
business conducted by, or related to the business conducted by, the Company or
the Subsidiaries. Except as described in the Registration Statement and the
Prospectus, the Company is not engaged in any discussions or party to any
agreement or understanding, written or oral, regarding the acquisition of, or of
an interest in, any corporation, firm, partnership, joint venture, association
or other entity.
(g) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable, have
been issued in compliance with all federal and sate securities laws, were not
issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, and the authorized and outstanding capital
stock of the Company is as set forth in the Prospectus under the caption
"Capitalization" and conforms in all material respects to the statements
relating thereto contained in the Registration Statement and the Prospectus (and
such statements correctly state the substance of the instruments defining the
capitalization of the Company); the Firm Stock and the Option Stock to be
purchased from the Company hereunder have been duly and validly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in accordance with
the terms of this Agreement, will be duly authorized and validly issued and
fully paid and nonassessable, and will be sold free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest; and no
preemptive right, co-sale right, registration right, right of first refusal or
other similar right of stockholders exists with respect to any shares of the
Firm Stock or Option Stock
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to be purchased from the Company hereunder or the issuance and sale thereof. The
certificates evidencing the Stock are in valid and proper legal form. The
Representatives' Warrant will be exercisable for shares of Common Stock of the
Company in accordance with the terms of the Representatives' Warrant and at the
price therein provided for. The shares of Common Stock issuable upon the
exercise of the Representatives' Warrant have been duly authorized and reserved
for issuance upon such exercise, and such shares, when issued upon such exercise
in accordance with the terms of the Representatives' Warrant and when the
exercise price is paid, shall be fully paid and non-assessable. No further
approval or authorization of any stockholder, the Board of Directors of the
Company or others is required for the issuance and sale of the Securities except
as may be required under state or other securities or blue sky laws. Except as
disclosed in the Prospectus and the audited consolidated financial statements of
the Company and the related notes thereto, included in the Prospectus, the
Company does not have outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations. The description of the Company's 1997 Stock Option Plan (the
"Option Plan"), and the options or other rights granted and exercised
thereunder, set forth in the Prospectus accurately and fairly presents the
information required to be shown with respect to the Option Plan and the options
granted thereunder. The description of the Securities set forth in the
Prospectus accurately and fairly presents the information required to be shown
with respect thereto.
(h) All the issued and outstanding capital stock of each of the
Subsidiaries has been duly authorized and validly issued and is fully paid and
nonassessable, and was not issued in violation of or subject to any preemptive
right, or other rights to subscribe for or purchase any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations, and is owned of record and beneficially, as of the date hereof,
and will be owned of record and beneficially at or prior to the closing of the
issuance of the Firm Stock, by the Company free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest; and no preemptive
right, co-sale right, registration right, right of first refusal or other
similar right of stockholders exists with respect to any shares of the
Subsidiaries. There are no outstanding rights, warrants or options to acquire,
or instruments convertible into or exchangeable for, any shares of capital stock
or other equity interest in any of the Subsidiaries. Except as described in the
Registration Statement and the Prospectus or as may be restricted by the terms
and provisions of any credit or loan facility to which the Company or any of the
Subsidiaries is a party and which is described in the Registration Statement and
the Prospectus, or by relevant state law with respect to the need for sufficient
surplus, none of the Subsidiaries is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on its capital stock, or from transferring any of the property or
assets of any such Subsidiary to the Company.
(i) Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of the Subsidiaries
is a party or of which any property of the Company or any Subsidiary is subject,
which, if determined adversely to the Company or any such Subsidiary, might
individually or in the aggregate (i) prevent or adversely affect the
transactions contemplated by this Agreement and the Representatives' Warrant,
(ii) suspend the effectiveness of the Registration Statement, (iii) prevent or
suspend the use of the Pre-effective Prospectus in any jurisdiction or (iv)
result in a Material Adverse Effect; and to the
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best of the Company's knowledge no such proceedings are threatened against the
Company or any Subsidiary by governmental authorities or others. Neither the
Company nor any Subsidiary is a party or subject to the provisions of any
material injunction, judgment, decree or order of any court, regulatory body or
other governmental agency or body.
(j) The execution, delivery and performance of this Agreement and the
Representatives' Warrant and the consummation of the transactions herein and
therein contemplated will not result (with or without due notice or lapse of
time or both) in the creation of any lien or in a breach or violation of or
constitute a default under any of the terms or provisions of, or give rise to
any right of termination, cancellation or acceleration under (i) any material
indenture, license, mortgage, deed of trust, note agreement or other agreement
or instrument to which the Company or any of the Subsidiaries is a party or by
which it or any of them or any of their properties is or may be bound, (ii) the
charter, by-laws or other organizational documents of the Company, or any of the
Subsidiaries or (iii) any law, statute, order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or any of
the Subsidiaries or any of their properties.
(k) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company
and/or any of the Subsidiaries of the transactions contemplated by this
Agreement and the Representatives' Warrant, except such as may be required by
the National Association of Securities Dealers, Inc. (the "NASD") or under the
securities or blue sky laws of any jurisdiction in connection with the purchase
and distribution of the Stock by the Underwriters.
(l) The Company has the full corporate power and authority to enter
into this Agreement and the Representatives' Warrant and to perform its
obligations hereunder and thereunder (including to issue, sell and deliver the
Securities), and this Agreement and the Representatives' Warrant have been duly
and validly authorized, executed and delivered by the Company and are the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except to the extent that rights to
indemnify and contribution hereunder and thereunder may be limited by federal or
state securities laws or the public policy underlying such laws or by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles.
(m) The Company and each of the Subsidiaries possesses all
authorizations, approvals, orders, licenses, certificates, franchises and
permits of and from, and have made all declarations and filings with, all
regulatory or governmental officials, bodies and tribunals ("Permits") to own,
lease or operate their respective properties and to conduct their respective
businesses described in the Registration Statement and the Prospectus, except
where the failure to have obtained or made the same would not have a Material
Adverse Effect and neither the Company nor any of the Subsidiaries has received
any notice of proceedings relating to the revocation or modification of any such
Permits.
(n) The Company and each of the Subsidiaries owns, and/or possesses
adequate rights to use, free and clear of all liens, charges, encumbrances,
pledges, security
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interests or defects, all patents, trademarks, service marks, logos, trade
names, trade secrets, know how, copyrights, proprietary technology and licenses,
and rights with respect to the foregoing (collectively, "Intellectual
Property"), used in the conduct of their respective businesses as described in
the Registration Statement and the Prospectus, and none of the Intellectual
Property presently owned, held or used by the Company or any of the Subsidiaries
infringes or conflicts with any Intellectual Property of any other person or
entity or are in dispute, and neither the Company nor any Subsidiaries has
received a notice, or knows of any basis, of any infringement of or conflict
with the asserted rights of others in any such respect.
(o) The Company and each of the Subsidiaries owns and has the right to
use all other trade secrets, know-how (including all other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
inventions, designs, processes, works or authorship, computer programs and
technical data and information that are material to its business, properties and
operations.
(p) The Company and each of the Subsidiaries is in compliance with,
and conducts its business in conformity with, all applicable federal, state,
local and foreign laws, rules and regulations of each court or governmental
agency or body having jurisdiction over the Company or any of the Subsidiaries,
except where the failure to be in compliance would not have a Material Adverse
Effect; to the knowledge of the Company, otherwise than as set forth in the
Registration Statement and the Prospectus, no prospective change in any of such
federal or state laws, rules or regulations has been adopted which, when made
effective, would have a Material Adverse Effect.
(q) The Company and each of the Subsidiaries is in compliance with all
federal, state, local or foreign laws or regulations relating to pollution or
protection of human health or the environment ("Environmental Laws"), except
where the failure to be in compliance would not have a Material Adverse Effect.
Neither the Company nor any of the Subsidiaries has authorized, conducted or
generated, transported, stored, used, treated, disposed or released any
hazardous substance, hazardous waste, hazardous material, hazardous constituent,
toxic substance, pollutant, contaminant, petroleum product, natural gas,
liquified gas or synthetic gas, defined or regulated under any Environmental Law
on, in or under any property currently leased or owned or by any means
controlled by the Company or any of the Subsidiaries (the "Real Property") in
violation of any applicable law, except for any violation which would not have a
Material Adverse Effect; there is no pending or, to the Company's knowledge,
threatened claim, action litigation or any administrative agency proceeding
involving the Company, any of the Subsidiaries or their respective properties,
nor has the Company or any of the Subsidiaries received any written notice, or
any oral notice to any executive officer of the Company or any other employee
responsible for receipt of any such notice, from any governmental entity and
third party, that (A) alleges a violation of any Environmental Laws by the
Company or any of the Subsidiaries or any person or entity whose liability for a
violation of an Environmental Law the Company or any of the Subsidiaries has
retained or assumed either contractually or by operation of law, which liability
or violation could be reasonably expected to have a Material Adverse Effect, (B)
alleges the Company or any of the Subsidiaries is a liable party under the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S) 9601 et seq., or any state superfund law, (C) alleges possible contamination
of the environment by the Company or any of the Subsidiaries or (D) alleges
possible contamination of the Real Property.
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(r) The Company and each of the Subsidiaries has filed all necessary
federal, state, local and foreign income, payroll, franchise and other tax
returns and has paid all taxes shown as due thereon or with respect to any of
its properties, and there is no tax deficiency that has been, or to the
knowledge of the Company is likely to be, asserted against the Company or any of
the Subsidiaries or any of their respective properties or assets and all tax
liabilities are adequately provided for on the books of the Company and each of
the Subsidiaries.
(s) Neither the Company nor any of its officers, directors or
affiliates has taken or will take, directly or indirectly, any action designed
or intended to stabilize or manipulate the price of any security of the Company,
or which caused or resulted in, or which might in the future reasonably be
expected to cause or result in, stabilization or manipulation of the price of
any security of the Company.
(t) Neither the Company nor any of the Subsidiaries is in violation of
its respective charter or by-laws. The Company and each of the Subsidiaries has
performed all obligations required to be performed by the Company or any such
Subsidiary under any material license, indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which it is a party or by which it
is or any of its properties may be bound, and neither the Company nor any of the
Subsidiaries, nor to the knowledge of the Company or any Subsidiary, any other
party to such material license, indenture, mortgage, deed of trust, note
agreement or other agreement or instrument is in default under or in breach of
any such obligations. Neither the Company nor any of the Subsidiaries has
received or sent any notice of such default or breach.
(u) Neither the Company nor any of the Subsidiaries is involved in any
labor dispute nor, to their knowledge, is any such dispute threatened. Neither
the Company nor any of the Subsidiaries is aware that (A) any executive, key
employee or significant group of employees of the Company or any Subsidiary
plans to terminate employment with the Company or any such Subsidiary or (B) any
such executive or key employee is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreement that would be
violated by the present or proposed business activities of the Company or any of
the Subsidiaries. Neither the Company nor any Subsidiary has or expects to have
any liability for any prohibited transaction or funding deficiency or any
complete or partial withdrawal liability with respect to any pension, profit
sharing or other plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to which the Company or any
Subsidiary makes or ever has made a contribution and in which any employee of
the Company or any Subsidiary is or has ever been a participant. With respect
to such plans, the Company and each Subsidiary is in compliance in all material
respects with all applicable provisions of ERISA.
(v) The Company has obtained the written agreement described in
Section 8(h) of this Agreement from each of its officers, directors, director
designees and holders of Common Stock listed on Schedule B hereto.
(w) Neither the Company nor the Subsidiaries own any real property,
and subject to the qualifications stated in the Prospectus, and as of the
Closing Dates, each of the Company and the Subsidiaries will have, good and
marketable title to all properties and assets free and clear of all liens,
encumbrances and defects except such as are described in the
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Prospectus or such as would not have a Material Adverse Effect; and any real
property and buildings held under lease by the Company or any of the
Subsidiaries are as of the Closing Dates, held by them under valid, subsisting
and enforceable leases with such exceptions as would not have a Material Adverse
Effect, in each case except as described in the Prospectus. All personal
property used by the Company and each of the Subsidiaries in their business is
either owned or leased by the Company or the Subsidiaries and is in good working
order and condition, ordinary wear and tear excepted.
(x) The Company and each Subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as is customary in the businesses in which it is engaged or proposes to
engage after giving effect to the transactions described in the Prospectus; and
neither the Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue their business at a cost that would not have a Material Adverse
Effect.
(y) Other than as contemplated by this Agreement, the Registration
Statement or the Prospectus, there is no broker, finder or other party that is
entitled to receive from the Company any brokerage or finder's fee or other fee
or commission as a result of any of the transactions contemplated by this
Agreement.
(z) The Company and each of the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(aa) The Company shall, upon the initial filing of the Registration
Statement, make all filings required to obtain approval for the inclusion of the
Shares for quotation on the Nasdaq National Market and will use its best efforts
to effect concurrently with the effectiveness of the Registration Statement and
maintain the aforesaid approval for at least five (5) years from the date of
this Agreement. Within ten (10) days after the Effective Date, the Company
shall cause the Company to be listed in the ▇▇▇▇▇'▇ OTC Industrial Manual and
cause such listing to be maintained for five years from the date of this
Agreement.
(bb) To the Company's knowledge, neither the Company nor any of the
Subsidiaries nor any employee or agent of the Company or any of the Subsidiaries
has made any payment of funds of the Company or any of the Subsidiaries or
received or retained any funds in violation of any law, rule or regulation,
which payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.
(cc) Neither the Company nor any of the Subsidiaries is an "investment
company," or an entity "controlled" by an "investment company" required to be
registered under
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the Investment Company Act of 1940, as amended (the "1940 Act"), as such terms
are defined in the 1940 Act, and neither the Company nor any of the Subsidiaries
expects to be treated as such by reason of the receipt and application of the
net proceeds from the sale of the Stock.
(dd) The Stock has been duly approved for quotation on the Nasdaq
National Market, subject to notice of effectiveness.
(ee) No holder of any security of the Company has the right to have
any security owned by such holder included in the Registration Statement and,
except as described in the Registration Statement and the Prospectus, no holder
of any security of the Company has the right to demand registration of any
security owned by such holder during the period ending 12 months after the date
of the Prospectus.
(ff) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters pursuant to this
Agreement shall be deemed to be a representation and warranty by the Company as
to the matters covered thereby.
(gg) The Company has appointed at least two independent directors to
the Company's Board of Directors who have no material business relationship or
family relationship with the Company or any other director or officer thereof,
and which independent directors constitute at least half of the members of the
Company's Compensation Committee and Audit Committee. The Company has provided
to the Representatives the charter of the Audit Committee or resolutions
establishing such committee, which provides, among other things, for the Audit
Committee to approve in advance transactions between the Company and any of its
affiliates.
(hh) To the Company's knowledge, there are no affiliations or
associations between any member of the National Association of Securities
Dealers, Inc. ("NASD") and any of the Company's officers, directors or 5% or
greater securityholders, except as set forth in the Registration Statement.
(ii) The execution and delivery of the Agreement and Plan of Merger
dated as of September 15, 1999 (the "Merger Agreement") between World Quest
Networks, Inc., a Texas corporation (the "Texas Corporation"), and the Company,
effecting the reincorporation of the Texas Corporation under the laws of the
State of Delaware, was duly authorized by all necessary corporate action on the
part of each of the Texas Corporation and the Company. Each of the Texas
Corporation and the Company had all corporate power and authority to execute and
deliver the Merger Agreement, to file the Merger Agreement with the Secretary of
State of Texas and the Secretary of State of Delaware and to consummate the
reincorporation contemplated by the Merger Agreement, and the Merger Agreement
at the time of execution and filing constituted a valid and binding obligation
of each of the Texas Corporation and the Company, enforceable in accordance with
its terms and except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally, or by general equitable principles.
(jj) To the extent necessary to comply with the regulation of Internet
telecommunications services providers and telecommunications carriers, the
Company has all
10
necessary material consents, authorizations, approvals, orders, certificates and
permits of and from, and have made all declarations and filings with, all United
States federal and state and foreign authorities (the "Authorizations") to own,
lease, license and use their properties and assets and to conduct their business
in the manner described in the Prospectus, except as described in the
Prospectus, and all material agreements or arrangements of the Company comply
with all applicable United States federal and state and foreign laws. The
Company is not aware of any breach, violation or default with respect to such
Authorizations.
(kk) Solely with respect to matters specifically relating to the
regulation of Internet telecommunications services providers and
telecommunications carriers administered by United States federal or state or
foreign governmental authorities, including, but not limited to, the Federal
Communications Commission (the "FCC") and state public utility commissions or
similar state authorities (collectively, "PUCs" and, individually, a "PUC"), the
execution and delivery by the Company of, and the performance by the Company of
its obligations under, this Agreement will not contravene any provision of
applicable law or any judgment, order or decree of any governmental body,
agency, or court having jurisdiction over the Company or any subsidiary, and no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company of
its obligations under this Agreement.
3. Purchase by, and Sale and Delivery to, Underwriters-Closing Dates.
-----------------------------------------------------------------
The Company agrees to sell to the Underwriters the Firm Stock, and on the basis
of the representations, warranties, covenants and agreements herein contained,
but subject to the terms and conditions herein set forth, the Underwriters
agree, severally and not jointly, to purchase the Firm Stock from the Company,
the number of shares of Firm Stock to be purchased by each Underwriter being set
opposite its name in Schedule A, subject to adjustment in accordance with
Section 12 hereof.
The purchase price per share to be paid by the Underwriters to the Company
will be $________ per share (the "Purchase Price").
The Company will deliver the Firm Stock, to the Representatives for the
respective accounts of the several Underwriters (in the form of definitive
certificates, issued in such names and in such denominations as the
Representatives may direct by notice in writing to the Company given at or prior
to 12:00 Noon, New York City time, on the second full business day preceding the
First Closing Date (as defined below) or, if no such direction is received, in
the names of the respective Underwriters or in such other names as Ladenburg may
designate (solely for the purpose of administrative convenience) and in such
denominations as Ladenburg may determine), against payment of the aggregate
Purchase Price therefor by wire transfer of same-day funds to an account
specified by the Company in writing at least two (2) business days prior to the
First Closing Date, all at the offices of Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ &
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or
such other place as the parties may designate. The time and date of the
delivery and closing shall be at 10:00 A.M., New York City time, on , 1999,
in accordance with Rule 15c6-1 of the Exchange Act. The time and date of such
payment and delivery are herein referred to as the "First Closing Date." The
First Closing Date and the location of delivery of, and the form of payment for,
the Firm
11
Stock may be varied by agreement between the Company, and the Representatives.
The First Closing Date may be postponed pursuant to the provisions of Section
12.
The Company shall make the certificates for the Stock available to the
Representatives for examination on behalf of the Underwriters not later than
10:00 A.M., New York City time, on the business day preceding the First Closing
Date at the offices of Ladenburg, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇.
It is understood that either of the Representatives, individually and not
as a Representative of the several Underwriters, may (but shall not be obligated
to) make payment to the Company on behalf of any Underwriter or Underwriters,
for the Stock to be purchased by such Underwriter or Underwriters. Any such
payment by any one of the Representatives shall not relieve such Underwriter or
Underwriters from any of its or their other obligations hereunder.
The several Underwriters agree to make an initial public offering of the
Firm Stock at the initial public offering price set forth on the cover page of
the Prospectus as soon after the effectiveness of the Registration Statement as
in their judgment is advisable. The Representatives shall promptly advise the
Company of the making of the initial public offering.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Company hereby grants to the Underwriters an option to purchase, severally and
not jointly, an aggregate of up to 360,000 shares of Common Stock. The price
per share to be paid for the Option Stock shall be the Purchase Price. The
option granted hereby may be exercised as to all or any part of the Option Stock
at any time, and from time to time, not more than forty-five (45) days
subsequent to the effective date of this Agreement. No Option Stock shall be
sold and delivered unless the Firm Stock previously has been, or simultaneously
is, sold and delivered. The right to purchase the Option Stock or any portion
thereof may be surrendered and terminated at any time upon notice by the
Underwriters to the Company.
The option granted hereby may be exercised by the Underwriters by giving
written notice from the Representatives to the Company setting forth the number
of the Option Stock to be purchased by them and the date and time for delivery
of and payment for the Option Stock. Each date and time for delivery of and
payment for the Option Stock (which may be the First Closing Date, but not
earlier) is herein called the "Option Closing Date") and shall in no event be
earlier than two (2) business days nor later than ten (10) business days after
written notice is given. (The Option Closing Date and the First Closing Date are
herein called the "Closing Dates.") Option Stock shall be purchased for the
account of each Underwriter in the same proportion as the number of shares of
Firm Stock set forth opposite such Underwriter's name in Schedule A hereto bears
to the total number of shares of Firm Stock (subject to adjustment by the
Underwriters to eliminate odd lots). Upon exercise of the option by the
Underwriters, the Company agrees to sell to the Underwriters the number of
shares of Option Stock set forth in the written notice of exercise and the
Underwriters agree, severally and not jointly and subject to the terms and
conditions herein set forth, to purchase the number of such shares as determined
as aforesaid.
12
The Company will deliver the Option Stock to the Underwriters (in the form
of definitive certificates, issued in such names and in such denominations as
the Representatives may direct by notice in writing to the Company given at or
prior to 12:00 Noon, New York City time, on the second full business day
preceding the Option Closing Date or, if no such direction is received, in the
names of the respective Underwriters or in such other names as Ladenburg and
▇▇▇▇▇▇▇ Bros. may designate (solely for the purpose of administrative
convenience) and in such denominations as Ladenburg and ▇▇▇▇▇▇▇ Bros. may
determine), against payment of the aggregate Purchase Price therefor by wire
transfer of same day funds to an account specified by the Company in writing at
least two (2) business days prior to the Option Closing Date, all at the offices
of Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇-▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Option Closing Date and the
location of delivery of, and the form of payment for, the Option Stock may be
varied by agreement among the Company and the Representatives. The Option
Closing Date may be postponed pursuant to the provisions of Section 12.
4. Covenants and Agreements of the Company. The Company covenants and
---------------------------------------
agrees with the several Underwriters that:
(a) The Company will (i) if the Company and the Representatives have
determined not to proceed pursuant to Rule 430A, use its best efforts to cause
the Registration Statement to become effective, (ii) if the Company and the
Representatives have determined to proceed pursuant to Rule 430A, use its best
efforts to comply with the provisions of and make all requisite filings with the
Commission pursuant to Rule 430A and Rule 424 of the Rules and Regulations and
(iii) if the Company and the Representatives have determined to deliver
Prospectuses pursuant to Rule 434 of the Rules and Regulations, to use its best
efforts to comply with all the applicable provisions thereof. The Company will
advise the Representatives promptly as to the time at which the Registration
Statement becomes effective, will advise the Representatives promptly of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for that
purpose, and will use its best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible the lifting thereof, if issued. The
Company will advise the Representatives promptly of the receipt of any comments
of the Commission or any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for additional
information and will not at any time file any amendment to the Registration
Statement or supplement to the Prospectus which shall not previously have been
submitted to the Representatives a reasonable time prior to the proposed filing
thereof or to which the Representatives shall reasonably object in writing or
which is not in compliance with the Securities Act and the Rules and
Regulations.
(b) The Company will prepare and file with the Commission, promptly
upon the request of the Representatives, any amendments or supplements to the
Registration Statement or the Prospectus which in the opinion of the
Representatives may be necessary to enable the several Underwriters to continue
the distribution of the Stock and will use its best efforts to cause the same to
become effective as promptly as possible.
(c) If at any time after the effective date of the Registration
Statement when a prospectus relating to the Stock is required to be delivered
under the Securities Act any event
13
relating to or affecting the Company or any of the Subsidiaries occurs as a
result of which the Prospectus or any other prospectus as then in effect would
include an untrue statement of a material fact, or omit to state any material
fact necessary to make the statements therein, in 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 Securities Act, the Company will
promptly notify the Representatives thereof and will prepare an amended or
supplemented prospectus which will correct such statement or omission; and in
case any Underwriter is required to deliver a prospectus relating to the Stock
nine (9) months or more after the effective date of the Registration Statement,
the Company upon the request of the Representatives and at the expense of such
Underwriter will prepare promptly such prospectus or prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Securities Act.
(d) The Company will deliver to the Representatives, at or before the
Closing Dates, signed copies of the Registration Statement, as originally filed
with the Commission, and all amendments thereto including all financial
statements and exhibits thereto, and will deliver to the Representatives such
number of copies of the Registration Statement, including such financial
statements but without exhibits, and all amendments thereto, as the
Representatives may reasonably request. The Company will deliver or mail to or
upon the order of the Representatives, from time to time until the effective
date of the Registration Statement, as many copies of the Pre-effective
Prospectus as the Representatives may reasonably request. The Company will
deliver or mail to or upon the order of the Representatives on the date of the
initial public offering, and thereafter from time to time during the period when
delivery of a prospectus relating to the Stock is required under the Securities
Act, as many copies of the Prospectus, in final form or as thereafter amended or
supplemented as the Representatives may reasonably request; provided, however,
that the expense of the preparation and delivery of any prospectus required for
use nine (9) months or more after the effective date of the Registration
Statement shall be borne by the Underwriters required to deliver such
prospectus.
(e) Company will make generally available to its stockholders as soon
as practicable, but not later than fifteen (15) months after the effective date
of the Registration Statement, an earnings statement which will be in reasonable
detail (but which need not be audited) and which will comply with Section 11(a)
of the Securities Act, covering a period of at least twelve (12) months
beginning after the "effective date" (as defined in Rule 158 under the
Securities Act) of the Registration Statement.
(f) The company will cooperate with the Representatives to enable the
Stock to be registered or qualified for offering and sale by the Underwriters
and by dealers under the securities laws of such jurisdictions as the
Representatives may reasonably designate and at the request of the
Representatives will make such applications and furnish such consents to service
of process or other documents as may be required of it as the issuer of the
Stock for that purpose; provided, however, that the Company shall not be
required to qualify to do business in any such jurisdiction where it is not now
so subject. The Company will, from time to time, prepare and file such
statements and reports as are or may be required of it as the issuer of the
Stock to continue such qualifications in effect for so long a period as the
Representatives may reasonably request for the distribution of the Stock. The
Company will advise the Representatives promptly after the Company becomes aware
of the suspension of the qualifications or registration of (or any such
exception relating to) the Common Stock of the Company for offering, sale or
trading
14
in any jurisdiction or of any initiation or threat of any proceeding for any
such purpose, and in the event of the issuance of any orders suspending such
qualifications, registration or exception, the Company will, with the
cooperation of the Representatives use its best efforts to obtain the withdrawal
thereof.
(g) The Company will furnish to its stockholders annual reports
containing financial statements certified by independent public accountants and
with quarterly summary financial information in reasonable detail which may be
audited. During the period of five (5) years from the date hereof, the Company
will deliver to the Representatives, as soon as they are available, copies of
each annual report of the Company containing the balance sheet of the Company as
of the close of such fiscal year and statements of income, stockholders' equity
and cash flows for the year then ended and the opinion thereon of the Company's
independent public accountants and each other report or communication furnished
by the Company to its stockholders and will deliver to the Representatives, (i)
as soon as they are available, copies of any other reports or communication
(financial or other) which the Company shall publish or otherwise make available
to any of its stockholders as such and (ii) as soon as they are available,
copies of any reports and financial statements furnished to or filed with the
Commission, or the NASD or any national securities exchange. So long as the
Company has active subsidiaries, such financial statements will be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally. Separate financial statements shall be furnished for all
subsidiaries whose accounts are not consolidated but which at the time are
significant subsidiaries as defined in the Rules and Regulations.
(h) The Company will use its best efforts to qualify for inclusion,
subject to notice of effectiveness on the Nasdaq National Market, the Stock to
be issued and sold by the Company.
(i) The Company will maintain a transfer agent and registrar for its
Common Stock.
(j) The Company will not, without the prior written consent of
Ladenburg and ▇▇▇▇▇▇▇ Bros., offer, sell, assign, transfer, encumber, contract
to sell, grant an option to purchase or otherwise dispose of any of Common Stock
or securities convertible into or exercisable or exchangeable for Common Stock
during the 180 days following the date of the Prospectus, other than: (i) the
Company's sale of Common Stock hereunder, (ii) upon the exercise of stock
options granted or issued prior to the date hereof and as described in the
Registration Statement and (iii) the gram of stock options pursuant to the
Option Pan.
(k) The Company will apply the net proceeds from the sale of the Stock
as set forth in the description under "Use of Proceeds" in the Prospectus, which
description complies in all respects with the requirements of Item 504 of
Regulation S-B.
(1) The Company will supply you with copies of all correspondence to
and from, and all documents issued to and by, the Commission in connection with
the registration of the Stock under the Securities Act.
15
(m) Prior to the Closing Dates the Company will furnish to you, as
soon as they have been prepared, copies of any unaudited interim consolidated
financial statements of the Company and each of the Subsidiaries for any periods
subsequent to the periods covered by the financial statements appearing in the
Registration Statement and the Prospectus.
(n) Prior to the Closing Dates the Company will issue no press release
or other communications directly or indirectly and hold no press conference with
respect to the Company or any of the Subsidiaries, the financial condition,
results of operation, business, prospects, assets or liabilities of any of them,
or the offering of the Stock, without your prior written consent.
(o) The Company will not at any time, directly or indirectly, take any
action designed or intended to stabilize or manipulate the price of any security
of the Company, or which caused or resulted in, or which might in the future
reasonably be expected to cause or result in, stabilization or manipulation of
the price of any security of the Company.
(p) Until the expiration of one year from the effective date of the
Offering contemplated hereby, the Company shall not grant any options, warrant
or other convertible securities or stock purchase rights, pursuant to the Option
Plan or otherwise, at an exercise or conversion price below the then applicable
fair market value of the security issuable upon exercise or conversion thereof.
(q) The Company will reserve and keep available that maximum number of
its authorized but unissued securities which are issuable upon exercise of the
Representatives' Warrant outstanding from time to time.
(r) The Company shall deliver to you, at the Company's expense, three
(3) bound volumes in form and content acceptable to you, containing the
Registration Statement and all exhibits filed therewith, and all amendments
thereto, and all other material correspondence, filings, certificates and other
documents filed and/or delivered in connection with this offering. The Company
shall use its best efforts to deliver such volumes within six (6) months of the
First Closing Date.
5. Payment of Expenses. Whether or not this Agreement becomes effective
-------------------
or the sale of the Stock to the Underwriters is consummated, (a) (1) the Company
will pay (directly or by reimbursement) all costs, fees and expenses incurred in
connection with expenses incident to the performance of its obligations under
this Agreement and in connection with the transactions contemplated hereby,
including but not limited to (i) all expenses and taxes incident to the issuance
and delivery of the Stock to the Representatives; (ii) all expenses incident to
the registration of the Stock under the Securities Act; (iii) the costs of
preparing stock certificates (including printing and engraving costs); (iv) all
fees and expenses of the registrar and transfer agent of the Stock; (v) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Stock to the Underwriters; (vi) fees and expenses of the
Company's counsel and the Company's independent accountants; (vii) all costs and
expenses incurred in connection with the preparation, printing, filing, shipping
and distribution of the Registration Statement, each Pre-effective Prospectus
and the Prospectus (including all exhibits and financial statements) and all
amendments and supplements provided for herein, the "Agreement Among
Underwriters" between the Representatives and the Underwriters, the Selling
Agreements, the
16
Underwriters' Questionnaire and the Blue Sky memoranda, if any, and this
Agreement; (viii) all filing fees, attorneys' fees and expenses incurred by the
Company or the Underwriters in connection with exemptions from the qualifying or
registering (or obtaining qualification or registration of) all or any part of
the Stock for offer and sale and determination of its eligibility for investment
under the Blue Sky or other securities laws of such jurisdictions as the
Representatives may designate and all fees and expenses, including attorneys'
fees, paid or incurred in connection with filings made with the NASD; (ix) all
fees and expenses in connection with qualifying the Stock for inclusion on the
Nasdaq National Market and (x) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section 5.
(2) In addition to the foregoing expenses, the Company shall at the
First Closing Date pay to you the balance of a non-accountable expense allowance
of 2.0% of the gross proceeds of the offering, of which a portion has been paid.
In the event the over-allotment option is exercised in part or in full, the
Company shall pay to you at the Option Closing Date an additional amount equal
to 2.0% of the gross proceeds received upon exercise of the overallotment
option.
(b) In addition to its other obligations under Section 6(a) hereof,
the Company agrees that, as an interim measure during the pendency of any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
(i) any statement or omission or any alleged statement or omission or (ii) any
breach or inaccuracy in its representations and warranties, it will reimburse
each Underwriter on a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
obligation to reimburse each Underwriter for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Underwriter shall promptly return
it to the Company together with interest, determined on the basis of the prime
rate (or other commercial lending rate for borrowers of the highest credit
standing) announced from time to time by Citibank, NA, New York, New York (the
"Prime Rate"). Any such interim reimbursement payments which are not made to an
Underwriter in a timely manner as provided below shall bear interest at the
Prime Rate from the due date for such reimbursement. This expense reimbursement
agreement will be in addition to any other liability which the Company may
otherwise have. The request for reimbursement will be sent to the Company.
(c) In addition to its other obligations under Section 6(b) hereof,
each Underwriter severally agrees that, as an interim measure during the
pendency of any claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged statement
or omission, described in Section 6(c) hereof which relates to written
information furnished to the Company by the Representatives on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus, it will reimburse the Company (and, to the extent applicable, each
officer, director or controlling person) on a quarterly basis for all reasonable
legal or other expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of
17
the Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director or controlling person) for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company (and, to the
extent applicable, each officer, director or controlling person) shall promptly
return it to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company within thirty (30) days of a request
for reimbursement shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(d) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in paragraph (b) and/or (c) of
this Section 5, including the amounts of any requested reimbursement payments
and the method of determining amounts, shall be settled by arbitration conducted
under the provisions of the Constitution and Rules of the Board of Governors of
the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration
Procedure of the NASD. Any such arbitration must be commenced by service of a
written demand for arbitration or written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration would be limited to the operation of
the interim reimbursement provisions contained in paragraph (b) and/or (c) of
this Section 5 and would not resolve the ultimate propriety or enforceability of
the obligation to reimburse expenses which is created by the provisions of
Section 6.
6. Indemnification and Contribution. (a) The Company agrees to indemnify
--------------------------------
and hold harmless each Underwriter and each person, if any, who controls such
Underwriter within the meaning of the Securities Act and the respective
officers, directors, partners, employees, representatives and agents of each of
such Underwriter (collectively, the "Underwriter Indemnified Parties" and, each,
an "Underwriter Indemnified Party"), against any losses, claims, damages,
liabilities or expenses (including the reasonable cost of investigating and
defending against any claims therefor and counsel fees incurred in connection
therewith), joint or several, which may be based upon the Securities Act, or any
other statute or at common law, on the ground that any Pre-effective Prospectus,
the Registration Statement or the Prospectus (or any Pre-effective Prospectus,
the Registration Statement or the Prospectus as from time to time amended or
supplemented) includes or allegedly includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that such
indemnity shall not inure to the benefit of any Underwriter (or any person
controlling such) on account of any losses, claims, damages, liabilities or
expenses arising from the sale of the Stock to any person by such Underwriter
(i) if such untrue statement or omission or alleged untrue statement or omission
was made in any Pre-effective Prospectus, the Registration Statement or the
Prospectus, or such amendment or supplement, in reliance upon and in conformity
with information furnished in writing to the Company by the Representatives on
behalf of any Underwriter specifically for use therein or (ii) as to any Pre-
effective Prospectus, with respect to any Underwriter, to the extent that any
such loss, claim, damage, liability or expense of such Underwriter results from
an untrue statement of a material fact contained in, or
18
the omission of a material fact from, such Pre-effective Prospectus, which
untrue statement or omission was corrected in the Prospectus, if such
Underwriter sold Stock to the person alleging such loss, claim, damage or
liability without sending or giving, at or prior to the written confirmation of
such sale, a copy of the Prospectus, unless such failure resulted from the
failure of the Company to deliver copies of the Prospectus to such Underwriter
on a timely basis to permit such sending or giving. The Company will be entitled
to participate at its own expense in the defense or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but if the
Company elects to assume the defense, such defense shall be conducted by counsel
chosen by it. In the event the Company elects to assume the defense of any such
suit and retain such counsel, any Underwriter Indemnified Parties, defendant or
defendants in the suit, may retain additional counsel but shall bear the fees
and expenses of such counsel unless (i) the Company shall have specifically
authorized the retaining of such counsel or (ii) the parties to such suit
include any such Underwriter Indemnified Parties, and the Company and such
Underwriter Indemnified Parties at law or in equity have been advised by counsel
to the Underwriters that one or more legal defenses may be available to it or
them which may not be available to the Company, in which case the Company shall
not be entitled to assume the defense of such suit notwithstanding its
obligation to bear the fees and expenses of such counsel. This indemnity
agreement is not exclusive and will be in addition to any liability which the
Company might otherwise have and shall not limit any rights or remedies which
may otherwise be available at law or in equity to each Underwriter Indemnified
Party. The Company agrees that the statements with respect to the price and
underwriting discount set forth on the cover page of the Prospectus, and the
table of Underwriters, the paragraph regarding price and underwriting discount,
the paragraph regarding the amounts of the selling concession and reallowance
and the paragraphs regarding stabilization all set forth under the caption
"Underwriting" in the Prospectus and the identity of counsel to the Underwriters
under the heading "Legal Matters," constitute the only information provided in
writing by the Representatives on behalf of any Underwriter expressly for use in
the Registration Statement or the Prospectus.
(b) Each Underwriter severally and not jointly agrees to indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act (collectively, the "Company
Indemnified Parties") against any losses, claims, damages, liabilities or
expenses (including, unless the Underwriter or Underwriters elect to assume the
defense, the reasonable cost of investigating and defending against any claims
therefor and counsel fees incurred in connection therewith), joint or several,
which arise out of or are based in whole or in part upon the Securities Act, the
Exchange Act or any other federal, state, local or foreign statute or
regulation, or at common law, on the ground or alleged ground that any Pre-
effective Prospectus, the Registration Statement or the Prospectus (or any Pre-
effective Prospectus, the Registration Statement or the Prospectus, as from time
to time amended and supplemented) includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading, but only insofar as any such statement
or omission was made in reliance upon, and in conformity with, written
information furnished to the Company by such Underwriter, directly or through
the Representatives, specifically for use in the preparation thereof; provided,
however, that in no case is such Underwriter to be liable with respect to any
claims made against any Company Indemnified Party against whom the action is
brought unless such Company Indemnified Party shall have notified such
Underwriter in writing
19
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Company
Indemnified Party, but failure to notify such Underwriter of such claim shall
not relieve it from any liability which it may have to any Company Indemnified
Party otherwise than an account of its indemnity agreement contained in this
paragraph. Such Underwriter shall be entitled to participate at its own expense
in the defense, or, if it so elects, to assume the defense of any suit brought
to enforce any such liability, but, if such Underwriter elects to assume the
defense, such defense shall be conducted by counsel chosen by it. In the event
that any Underwriter elects to assume the defense of any such suit and retain
such counsel, the Company Indemnified Parties and any other Underwriter or
Underwriters or controlling person to persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, respectively. The Underwriter against whom indemnity may be sought shall
not be liable to indemnify any person for any settlement of any such claim
effected without such Underwriter's consent. This indemnity agreement is not
exclusive and will be in addition to any liability which such Underwriter might
otherwise have and shall not limit any rights or remedies which may otherwise be
available at law or in equity to any Company Indemnified Party.
(c) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to herein, then
each indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Underwriters on the other from the offering of the Stock. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. 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 (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue 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 the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by each indemnified party in connection with investigating,
defending, settling or compromising any such claim. Notwithstanding the
provisions of this subsection (c), no Underwriter shall be required to
20
contribute any amount in excess of the amount by which the total price at which
the shares of the Stock underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. The Underwriters' obligations to
contribute are several in proportion to their respective underwriting
obligations and not joint. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
7. Survival of Indemnities, Representations, Warranties, etc. The
----------------------------------------------------------
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by them respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter, the Company or any of its officers or directors or
any controlling person, and shall survive delivery of and payment for the Stock.
8. Conditions of Underwriters' Obligations. The respective obligations
---------------------------------------
of the several Underwriters hereunder shall be subject to the accuracy, at and
(except as otherwise stated herein) as of the date hereof and at and as of the
Closing Dates, of the representations and warranties made herein by the Company,
to compliance at and as of the Closing Dates by the Company with its covenants
and agreements herein contained and other provisions hereof to be satisfied at
or prior to the Closing Dates, and to the following additional conditions:
(a) The Registration Statement shall have become effective and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge
of the Company or the Representatives, shall be threatened by the
Commission, and any request for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus
or otherwise) shall have been complied with to the reasonable satisfaction
of the Representatives. Any filings of the Prospectus, or any supplement
thereto, required pursuant to Rule 424(b) or Rule 434 of the Rules and
Regulations, shall have been made in the manner and within the time period
required by Rule 424(b) and Rule 434 of the Rules and Regulations, as the
case may be.
(b) The Representatives shall have been satisfied that there shall not
have occurred any change, on a consolidated basis, prior to the Closing
Dates in the condition (financial or otherwise), properties, business,
management, prospects, net worth or results of operations of the Company
and the Subsidiaries, or any change in the capital stock, short-term or
long-term debt of the Company and the Subsidiaries, taken as a whole, such
that (i) the Registration Statement or the Prospectus, or any amendment or
supplement thereto, contains an untrue statement of fact which is material,
or omits to state a fact which is required to be stated therein or is
necessary to make the statements therein not misleading, or (ii) it is
impracticable in the reasonable judgment of the Representatives to proceed
with the public offering or purchase the Stock as contemplated hereby.
(c) At the time of execution of this Agreement and at each of the
Closing Dates, Ernst & Young LLP shall have furnished to the Underwriters a
letter or letters,
21
dated, respectively, the date of execution of this Agreement and each of
the Closing Dates, confirming that they are independent certified public
accountants with respect to the Company and each of the Subsidiaries within
the meaning of the Securities Act and the applicable published Rules and
Regulations thereunder and stating that in their opinion the financial
statements and schedules examined by them and included in the Registration
Statement comply in form in all material respects with the applicable
accounting requirements of the Securities Act and the related published
Rules and Regulations; and containing such other statements and information
as is ordinarily included in accountants' "comfort letters" to Underwriters
with respect to the financial statements and certain financial and
statistical information contained in the Registration Statement and
Prospectus. and based upon the procedures described in such letter
delivered to you concurrently with the execution of this Agreement (herein
called the "Comfort Letter"), but carried out to a date not more than five
(5) business days prior to the First Closing Date or such later date on
which the Option Stock is to be purchased, as the case may be, (i)
confirming, to the extent true, that the statements and conclusions set
forth in the Comfort Letter are accurate as of the First Closing Date or
such later date on which Option Stock is to be purchased, as the case may
be, and (ii) setting forth any revisions and additions to the statements
and conclusions set forth in the Comfort Letter which are necessary to
reflect any changes in the facts described in the Comfort Letter since the
date of such letter, or to reflect the availability of more recent
financial statements, data or information. The letter shall not contain any
disclosure relating to any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company or any of the Subsidiaries from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and
adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Stock as
contemplated by the Prospectus. The Comfort Letter shall be addressed to or
for the use of the Underwriters in form and substance satisfactory to the
Representatives and their counsel.
(d) The Representatives shall have received from Glast, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, counsel for the Company, an opinion, dated each of the Effective
Date and the Closing Dates, to the effect set forth in Exhibit I hereto.
(e) The Representatives shall have received from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
LLP special intellectual property counsel for the Company, an opinion,
dated each of the Effective Date and the Closing Dates, to the effect set
forth in Exhibit II hereto.
(f) The Representatives shall have received from ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇
LLP, special regulatory counsel for the Company, an opinion dated each of
the Effective Date and the Closing Dates, to the effect set forth in
Exhibit III hereto.
(g) All corporate proceedings and other legal matters relating to this
Agreement, the Registration Statement, the Prospectus, and other related
matters shall be reasonably satisfactory to or approved by Freshman,
Marantz, Orlanski, ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Underwriters, and the
Representatives shall have received form Freshman, Marantz, Orlanski,
▇▇▇▇▇▇ & ▇▇▇▇▇, their opinion or opinions dated the Closing Dates with
respect to the incorporation of the Company, the validity of the Stock, the
22
Registration Statement and the Prospectus and such other related matters as
it may reasonably request, and the Company shall have furnished to such
counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters. In rendering such opinion,
Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ & ▇▇▇▇▇ may rely as to all matters
governed other than by the law of California or federal laws on the opinion
of counsel referred to in paragraph (d) of this Section 8.
(h) The Representatives shall have received a certificate, dated the
Closing Dates, of the chief executive officer or the President and the
chief financial officer of the Company to the effect that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and, to the best of the
knowledge of the signers, no proceedings for that purpose have been
instituted or are pending or contemplated under the Securities Act;
(ii) Neither any Pre-effective Prospectus, as of its date, nor
the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, as of the time when the Registration Statement
became effective and at all times subsequent thereto up to the
delivery of such certificate, 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;
(iii) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
and except as set forth or contemplated in the Prospectus, neither the
Company nor any of the Subsidiaries has incurred any material
liabilities or obligations, direct or contingent, nor entered into any
material transactions not in the ordinary course of business and there
has not been any material adverse change in the condition (financial
or otherwise), properties, business, management, prospects, net worth
or results of operations of the Company and the Subsidiaries, or any
change in the capital stock, short-term or long-term debt of the
Company and any of the Subsidiaries;
(iv) The representations and warranties of the Company in this
Agreement are true and correct at and as of the Closing Dates, and the
Company has complied with all the agreements and performed or
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Dates;
(v) Since the respective dates as of which information is given
in the Registration Statement and the Prospectus, and except as
disclosed in or contemplated by the Prospectus, (i) there has not been
any material adverse change or a development involving a material
adverse change in the condition (financial or otherwise), properties,
business, management, prospects, net worth or results of operations of
the Company and the Subsidiaries considered as a whole; (ii) the
business and operations conducted by the Company and the Subsidiaries
have not sustained a loss by strike, fire, flood, accident or other
calamity (whether
23
or not insured) of such a character as to interfere materially with
the conduct of the business and operations of the Company and the
Subsidiaries considered as a whole; (iii) no legal or governmental
action, suit or proceeding is pending or, to the knowledge of the
Company, threatened against the Company or any of the Subsidiaries
which is material to the Company and the Subsidiaries considered as a
whole, whether or not arising from transactions in the ordinary course
of business, or which may materially and adversely affect the
transactions contemplated by this Agreement; (iv) since such dates and
except as so disclosed, the Company has not incurred any material
liability or obligation, direct, contingent or indirect, made any
change in its capital stock (except pursuant to its stock plans), made
any material change in its short-term or funded debt or repurchased or
otherwise acquired any of the Company's capital stock; and (v) the
Company has not declared or paid any dividend, or made any other
distribution, upon its outstanding capital stock payable to
stockholders of record on a date prior to the Closing Date.
(i) The Company shall have furnished to the Representatives such
additional certificates as the Representatives may have reasonably
requested as to the accuracy, at and as of the Closing Dates, of the
representations and warranties made herein by it and as to compliance at
and as of the Closing Dates by it with its covenants and agreements herein
contained and other provisions hereof to be satisfied at or prior to the
Closing Dates, and as to satisfaction of the other conditions to the
obligations of the Underwriters hereunder.
(j) Ladenburg and ▇▇▇▇▇▇▇ Bros. shall have received the written
agreements of the officers, directors, director nominees of the Company and
the holders of securities of the Company listed in Schedule B that each
will not offer, sell assign, transfer, encumber, contract to sell, grant an
option to purchase or otherwise dispose of, any shares of Common Stock
(including, without limitation, Common Stock which may be deemed to be
beneficially owned by such officer, director, director nominee or holder in
accordance with the Rules and Regulations) or securities into or
exercisable or exchangeable for Common Stock during the 180 days following
the date of the Prospectus.
(k) The Nasdaq National Market shall have approved the Stock for
inclusion, subject only to notice of effectiveness.
(l) All opinions, certificates, letters and other documents will be in
compliance with the provisions hereunder only if they are satisfactory in
form and substance to the Representatives. The Company will furnish to the
Representatives conformed copies of such opinions, certificates, letters
and other documents as the Representatives shall reasonably request. If
any of the conditions hereinabove provided for in this Section 8 shall not
have been satisfied when and as required by this Agreement, this Agreement
may be terminated by the Representatives by notifying the Company of such
termination in writing or by telegram at or prior to the Closing Dates, but
Ladenburg shall be entitled to waive any of such conditions.
24
(m) the Representatives shall have received such additional opinions
of counsel as shall be reasonably satisfactory to the Representatives in
their sole discretion.
9. Effective Date. This Agreement shall become effective immediately as
--------------
to Sections 5, 6, 7, 9, 10, 11, 13, 14, 15, 16, 17, 18, 19 and 20 and, as to all
other provisions, at 11:00 A.M. New York City time on the first full business
day following the effectiveness of the Registration Statement or at such earlier
time after the Registration Statement becomes effective as the Representatives
may determine on and by notice to the Company or by release of any of the Stock
for sale to the public. For the purposes of this Section 9, the Stock shall be
deemed to have been so released upon the release for publication of any
newspaper advertisement relating to the Stock or upon the release by you of
telegrams (i) advising Underwriters that the shares of Stock are released for
public offering or (ii) offering the Stock for sale to securities dealers,
whichever may occur first.
10. Termination. This Agreement (except for the provisions of Section 5)
-----------
may be terminated by the Company at any time before it becomes effective in
accordance with Section 9 by notice to the Representatives and may be terminated
by the Representatives at any time before it becomes effective in accordance
with Section 9 by notice to the Company. In the event of any termination of
this Agreement under this or any other provision of this Agreement, there shall
be no liability of any party to this Agreement to any other party, other than as
provided in Sections 5, 6 and 11 and other than as provided in Section 12 as to
the liability of defaulting Underwriters.
This Agreement may be terminated after it becomes effective by the
Representatives by notice to the Company (i) if at or prior to any First Closing
Date trading in securities on any of the New York Stock Exchange, American Stock
Exchange or Nasdaq National Market shall have been suspended or minimum or
maximum prices shall have been established and are then currently in effect on
any such exchange or market, or a banking moratorium shall have been declared by
New York or United States authorities; (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market; (iii) if at or prior to any Closing Date there shall have been (A) an
outbreak or escalation of hostilities between the United States and any foreign
power or of any other insurrection or armed conflict involving the United States
or (B) any change in financial markets or any calamity or crisis which, in the
reasonable judgment of the Representatives, makes it impractical or inadvisable
to offer or sell the Firm Stock on the terms contemplated by the Prospectus;
(iv) if there shall have been any development or prospective development or
prospective development involving particularly the business or properties or
securities of the Company or any of the Subsidiaries or the transactions
contemplated by this Agreement which, in the judgment of the Representatives,
makes it impracticable or inadvisable to offer or deliver the Firm Stock on the
terms contemplated by the Prospectus; (v) if there shall be any litigation or
proceeding, pending or threatened, which, in the reasonable judgment of the
Representatives, makes it impracticable or inadvisable to offer or deliver the
Firm Stock on the terms contemplated by the Prospectus; or (vi) if there shall
have occurred any of the events specified in the immediately preceding clauses
(i) - (v) together with any other such event that makes it, in the reasonable
judgment of the Representatives, impractical or inadvisable to offer or deliver
the Firm Stock on the terms contemplated by the Prospectus.
11. Reimbursement of Underwriters. Notwithstanding any other provisions
-----------------------------
hereof, if this Agreement shall not become effective by reason of any election
of the Company pursuant to
25
the first paragraph of Section 10 or shall be terminated by the Representatives
under Section 8 or Section 10, the Company will bear and pay the expenses
specified in Section 5 hereof and, in addition to its obligations pursuant to
Section 6 hereof, the Company will reimburse the reasonable out-of-pocket
expenses of the several Underwriters (including reasonable fees and
disbursements of counsel for the Underwriters) incurred in connection with this
Agreement and the proposed purchase of the Stock, and promptly upon demand the
Company will pay such amounts to you as Representatives. However, in no way
shall said out-of-pocket expenses and counsel fees exceed an aggregate of
$175,000 less $60,000 previously paid to EBI Securities Corporation.
12. Substitution of Underwriters. If on the First Closing Date or the
----------------------------
Option Closing Date, as the case may be, any Underwriter or Underwriters shall
default in its or their obligations to purchase shares of Stock hereunder
(otherwise than by reason of default on the part of the Company, you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 48 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and upon
the terms set forth herein, the shares of Stock which the defaulting Underwriter
or Underwriters failed to purchase. If during such 48 hours you, as such
Representatives, shall not have procured such other Underwriters, or any others,
to purchase the shares of Stock agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of shares which
such defaulting Underwriter or Underwriters agreed but failed to purchase does
not exceed ten percent (10%) of the total number of shares underwritten, the
other Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the shares of Stock which such
defaulting Underwriter or Underwriters agreed but failed to purchase, or (b) if
the aggregate number of shares of Stock with respect to which such default or
defaults occur is more than ten percent (10%) of the total number of shares
underwritten, the Company or you, as the Representatives of the Underwriters,
will have the right, by written notice given within the next 48-hour period to
the parties to this Agreement, to terminate this Agreement without liability on
the part of the non-defaulting Underwriters or the Company.
If the remaining Underwriters or substituted Underwriters are required
hereby or agree to take up all or part of the shares of Stock of a defaulting
Underwriter or Underwriters as provided in this Section 12, (i) the Company
shall have the right to postpone the Closing Dates for a period of not more than
five (5) full business days in order that the Company may effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement or supplements to
the Prospectus which may thereby be made necessary, and (ii) the respective
numbers of shares to be purchased by the remaining Underwriters or substituted
Underwriters shall be taken as the basis of their underwriting obligation for
all purposes of this Agreement. Nothing herein contained shall relieve any
defaulting Underwriter of its liability to the Company or the other Underwriters
for damages occasioned by its default hereunder. Any termination of this
Agreement pursuant to this Section 12 shall be without liability on the part of
any non-defaulting Underwriter or the Company, except for expenses to be paid or
reimbursed pursuant to Section 5 and except for the provisions of Section 6.
13. Representatives' Warrant.
------------------------
26
On the First Closing Date, the Company will issue to you, for a
consideration of $240.00 and upon the terms and conditions set forth in the form
of Representatives' Warrant (the "Representatives' Warrant"), annexed as an
exhibit to the Registration Statement, the Representatives' Warrant to purchase
240,000 Shares. In the event of conflict in the terms of this Agreement and the
Representatives' Warrant, the language of the Representatives' Warrant shall
control.
14. Notices. All communications hereunder shall be in writing and, if
-------
sent to the Underwriters shall be mailed, delivered or telegraphed and confirmed
to you, as their Representatives ▇/▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. Inc. at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, attention: Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇, except
that notices given to an Underwriter pursuant to Section 6 hereof shall be sent
to such Underwriter at the address furnished by the Representatives or, if sent
to the Company, shall be mailed, delivered or telegraphed and confirmed
WorldQuest Networks, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
Attention: Mr. B. ▇▇▇▇▇▇▇ ▇▇▇▇▇.
15. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the several Underwriters, the Company and their respective
successors and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the proceeding sentence any legal or equitable right,
remedy or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the person or persons, if any, who control any
Underwriter or Underwriters within the meaning of Section 15 or the Securities
Act or Section 20 of the Exchange Act, and the indemnities of the several
Underwriters shall also be for the benefit of each director of the Company, each
of its officers who has signed the Registration Statement and the person or
persons, if any, who control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act.
16. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of New York without giving effect to the
choice of law principles thereof.
17. Authority of the Representatives. In connection with this Agreement,
--------------------------------
you will act for and on behalf of the several Underwriters, and any action taken
under this Agreement by you, as Representatives, or individually as a
Representative, will be binding on all the Underwriters.
18. Partial Unenforceability. The invalidity or unenforceability of any
------------------------
section, paragraph or provisions of this Agreement shall not affect the validity
or enforceability of any other section, paragraph or provision hereof. If any
section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.
27
19. General. This Agreement constitutes the entire agreement of the
-------
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and the Representatives.
20. Counterparts. This Agreement may be signed in two or more
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter and your acceptance shall constitute a binding agreement between us.
Very truly yours,
WORLDQUEST NETWORKS, INC.
By: ____________________________________________
Name: B. ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chairman of the
Board and Chief Executive Officer
Accepted and delivered in_______________
as of the date first above written.
LADENBURG ▇▇▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇▇▇ BROS., L.P.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND COMPANY, INCORPORATED
EBI SECURITIES CORPORATION
Each acting on its own behalf and as a
Representative of the several Underwriters
referred to in the foregoing Agreement.
By: LADENBURG ▇▇▇▇▇▇▇▇ & CO. INC.
By:__________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Director
28
SCHEDULE A
Number of
Name Firm Stock to be Purchased
------------------------------------------- --------------------------
Ladenburg ▇▇▇▇▇▇▇▇ & Co. Inc...............
▇▇▇▇▇▇▇ Bros. L.P..........................
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Company Incorporated..
EBI Securities Corporation.................
Total...................................... ________
2,400,000
==========================
29
SCHEDULE B
List of Officers, Directors, and Stockholders
Subject to Lock Up Provision
30
EXHIBIT I
Matters to be Covered in
------------------------
Opinion of Glast ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.C., Counsel to the Company/1/
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1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware; each of
the Subsidiaries has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation.
2. The Company has all corporate power and authority necessary to own,
lease, operate or hold its properties and to conduct its business (including,
without limitation, as conducted through the Subsidiaries) as described in the
Prospectus and to enter into and perform its obligations under this Agreement
and the Representative's Warrant; each of the Subsidiaries has all corporate
power and authority necessary to own, lease, operate or hold its properties and
to conduct their respective businesses as described in the Prospectus;
3. The Company and each of the Subsidiaries is duly qualified or licensed
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the ownership or leasing of its properties or the conduct
of its business require such qualification, except where failure to so qualify
will not have a Material Adverse Effect, each of such jurisdictions as set forth
on a Schedule to the opinion; to such counsel's knowledge, the Company does not
own or control, directly or indirectly, any corporation, association or other
entity other than the Subsidiaries and to such counsel's knowledge none of the
Subsidiaries owns or controls, directly or indirectly, any corporation,
association or other entity;
4. All of the authorized, issued and outstanding shares of capital stock
of the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein; all of the shares of the
Company's outstanding stock requiring authorization for issuance by the
Company's Board of Directors have been duly authorized and validly issued, are
fully paid and non-assessable and conform to the description thereof contained
in the Prospectus; have not been issued in violation of or subject to any
statutory pre-emptive right, and, to such counsel's knowledge, have not been
issued in violation of or subject to any contractual preemptive right, co-sale,
right, registration right, right of first refusal or other similar right and,
except as set forth in the Registration Statement, to such counsel's knowledge,
there are no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in the Company; all the issued and outstanding shares of capital
stock of each of the Subsidiaries are owned of record and beneficially by the
Company, free and clear of any security interests, liens, encumbrances, equities
or other claims and there are
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/1/ Capitalized Terms used herein but not defined shall have the meanings
given such terms in the Underwriting Agreement.
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no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or other
equity interest in any of the Subsidiaries.
5. The Common Stock and the Representatives' Warrant conform in all
material respects to the descriptions thereof contained in the Prospectus; the
Stock to be issued as contemplated in the Registration Statement and the
Underwriting Agreement have been duly and validly authorized by the Company for
issuance, and the Company has full corporate power and authority to issue, sell
and deliver the Securities, and, when the Securities are issued and delivered
against payment therefor in accordance with the terms hereof, they will be fully
paid and nonassessable, and will not have been issued in violation of or subject
to any statutory preemptive right, or to such counsel's knowledge, any
contractual preemptive right, co-sale right, registration right, right of first
refusal or other similar right other than those contemplated by the
Representatives' Warrant; and there are no restrictions upon the voting or
transfer of, any of the Stock pursuant to the Certificate of Incorporation (as
hereinafter defined) or By-laws, or pursuant to any agreement or other
instrument of the Company known to such counsel.
6. The certificates evidencing the Stock are in valid and proper legal
form; the Representatives' Warrant will be exercisable for shares of Common
Stock of the company in accordance with the terms of the Representatives'
Warrant and at the price therein provided for; the shares of Common Stock of the
Company issuable upon exercise of the Representatives' Warrant have been duly
authorized and reserved for issuance upon such exercise, and such shares, when
issued upon such exercise in accordance with the terms of the Representatives'
Warrant and when the price is paid shall be fully paid and non-assessable;
7. To such counsel's knowledge, except as set forth in the Prospectus,
there are no legal or governmental proceedings pending to which the Company or
any of the Subsidiaries is a party or of which any property or assets of the
Company or any of the Subsidiaries is the subject which, if determined adversely
to the Company or any of the Subsidiaries, could have a Material Adverse Effect
or prevent or adversely affect the transactions contemplated by the Underwriting
Agreement; and, to such counsel's knowledge, no such proceedings are threatened
by governmental authorities or other third parties and there are no such
proceedings which are required to be described or referred to in the
Registration Statement which are not so described or referred to.
8. The Underwriting Agreement and the Representatives' Warrant have been
duly and validly authorized by all necessary corporate action on the part of the
Company and have been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery of the Underwriting Agreement by you,
are valid and binding agreements of the parties; the Company has full corporate
power and authority to enter into the Underwriting Agreement and the
Representatives' Warrant.
9. The execution, delivery and performance of the Underwriting Agreement
and the Representatives' Warrant, and the incurrence of the obligations as
therein set forth and the consummation of the transactions therein contemplated
will not result, with or without due notice or lapse of time or both, in a
breach or violation of any of the terms or provisions of or constitute a default
under, or give rise to any right of termination, cancellation or acceleration
under, the Company's Certificate of Incorporation (the "Certificate of
Incorporation"), by-laws or other
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organizational documents of the Company or any of the Subsidiaries, or any
material indenture, mortgage, deed of trust, note agreement or other agreement
of instrument known to such counsel to which the Company or any of the
Subsidiaries is a party or by which it or any of them or any of their properties
is or may be bound and will not result in a breach or violation of any law,
statute, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of the Subsidiaries or any of their
properties or result in the creation of a lien.
10. To such counsel's knowledge, neither the Company nor any of the
Subsidiaries is presently (a) in violation of their respective charter or by-
laws, or (b), to such counsel's knowledge, in breach or default under any lease,
instrument, license, permit or any other agreement to which the Company or any
of the Subsidiaries is bound or to which any property or assets of the Company
or any of the Subsidiaries is the subject, where the consequences of such
violation, breach or default would have a Material Adverse Effect;
11. No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Company of
the transactions contemplated by the Underwriting Agreement or the
Representatives' Warrant (except such as may be required by the NASD or as
required by the securities or "Blue Sky" laws or any jurisdiction as to which
such counsel need express no opinion) in connection with the purchase and
distribution of the Stock by the Underwriters or the issuance of the
Representatives' Warrant or the shares of Common Stock underlying the
Representatives' Warrant except such as have been obtained or made, specifying
the same.
12. The Registration Statement has become effective under the Securities
Act and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceeding
for that purpose is pending or threatened by the Commission.
13. The Registration Statement and the Prospectus and any amendments or
supplements thereto (except for the financial statements and notes thereto and
related schedules and other financial information as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations.
14. There are no contracts, agreements or other documents, known to such
counsel, required to be described in the Registration Statement or Prospectus or
to be filed as an exhibit to the Registration Statement which is not described
or filed therein as required. All descriptions of any such contracts,
agreements or documents contained in the Registration Statement are accurate and
complete descriptions of such documents in all material respects.
15. The statements in the Prospectus under the captions "1997 Stock Option
Plan," "Description of Capital Stock" and "Shares Eligible for Future Sale," to
the extent they constitute a summary of documents referred to therein or matters
of law accurately summarize and fairly present in all material respects the
legal and regulatory matters described therein.
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16. Neither the Company nor any of the Subsidiaries is nor will they be
after receipt of payment for the Stock, an "investment company," or an entity
"controlled" by an "investment company" required to be registered under the 1940
Act, as such terms are defined in the 1940 Act.
17. To such counsel's knowledge, except as set forth in the Registration
Statement and the Prospectus, no holder of any securities of the Company or any
other person has the right, contractual or otherwise, to cause the Company to
sell or otherwise issue to such person, or to permit such person to underwrite
the sale of, any of the Stock or the right to have any Common Stock or other
securities of the Company included in the Registration Statement or the right,
as a result of the filing of the Registration Statement, to require registration
under the Securities Act of any shares of Common Stock or other securities of
the Company that has not been waived or lapsed.
18. The Company and each of the Subsidiaries possesses all authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from,
and have made all declarations and filings with, all regulatory or governmental
officials, bodies and tribunals ("Permits") to own, lease or operate their
respective properties and to conduct their respective businesses described in
the Registration Statement and the Prospectus, except where the failure to have
obtained or made the same would not have a Material Adverse Effect and to the
knowledge of such counsel neither the Company nor any of the Subsidiaries has
received any notice of proceedings relating to the revocation or modification of
any such Permits.
19. The Company and each of the Subsidiaries owns, and/or possesses
adequate rights to use, free and clear of all liens, charges, encumbrances,
pledges, security interests of defects, all patents, trademarks, service marks,
logos, trade names, trade secrets, know how, copyrights, proprietary technology
and licenses, and rights with respect to the foregoing (collectively,
"Intellectual Property"), used in the conduct of their respective businesses as
described in the Registration Statement and the Prospectus, and to the knowledge
of such counsel neither the Company nor any Subsidiary has received a notice, or
knows of any basis, of any infringement of or conflict with the asserted rights
of others in any such respect.
20. To the knowledge of such counsel the Company and each of the
Subsidiaries is in compliance with, and conducts its business in conformity
with, all applicable federal, state, local and foreign laws, rules and
regulations, of each court or governmental agency or boding having jurisdiction
over the Company or any of the Subsidiaries, except where the failure to be in
compliance would not have a Material Adverse Effect; to the knowledge of such
counsel, otherwise than as set forth in the Registration Statement and the
Prospectus, no prospective change in any of such federal or state laws, rules or
regulations has been adopted which, when made effective, would have a Material
Adverse Effect.
21. To the knowledge of such counsel, neither the Company nor any of the
Subsidiaries is in violation of its respective charter or by-laws. To the
knowledge of such counsel, the Company and each of the Subsidiaries has
performed all obligations required to be performed by the Company or any such
Subsidiary under any material license, indenture, mortgage, deed of trust, note
agreement or other agreement or instrument known to such counsel to which it is
a party or by which it is or any of its properties may be bound, and neither the
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Company nor any of the Subsidiaries, nor to the knowledge of such counsel, any
other party to such material license, indenture, mortgage, deed of trust, note
agreement or other agreement or instrument is in default under or in breach of
any such obligations. To the knowledge of such counsel, neither the Company nor
any of the Subsidiaries has received or sent any notice of such default or
breach.
22. The Stock has been duly approved for quotation on the Nasdaq National
Market, subject to notice of effectiveness.
In addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement or any amendment
thereto, as of the time it became effective under the Securities Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Securities Act), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or (ii) that the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the First Closing Date or the Option Closing
Date, as the case may be, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading (except that such counsel need express no view as
to financial statements and notes thereto and schedules or other financial or
statistical information therein). With respect to such statement, such counsel
may state that their belief is based upon the procedures set forth therein, but
is without independent check and verification.
I-5
EXHIBIT II
Matters to be Covered in
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Opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, Special Intellectual Counsel for the Company
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1. The Company is listed in the records of the Patent and Trademark
Office as the holder of record of the patent application and the trademark
registration application to register the trademarks "WorldQuest" and "WorldQuest
Networks" listed on Schedule I to the opinion (the "Applications"). Except as
disclosed in the Prospectus, such counsel knows of no claims of third parties to
any ownership interest or lien with respect to the Applications. To such
counsel's knowledge, none of the Applications has been rejected.
2. The statements under the Prospectus captions "Risk Factors -- We Need
to Protect Our Intellectual Property and Other Proprietary Rights from
Infringement" and "Business --Intellectual Property and Other Proprietary
Rights" (collectively, the "Intellectual Property Portion") in the Prospectus
insofar as such statements constitute summaries of the Company's rights to the
Applications are in all material respects accurate summaries and fairly
summarize in all material respects the legal matters, documents and proceedings
relating to the Applications described therein; to the knowledge of such
counsel, the Company owns the rights to two (2) pending Applications.
3. Such counsel is not aware of any facts that would lead such counsel to
conclude that any patent or trademark issued in respect of an Application would
be invalid.
4. Except as disclosed in the Intellectual Property Portion, such counsel
is not aware that any valid patent is infringed by the activities of the Company
described in the Registration Statement or Prospectus or by the manufacture, use
or sale of any product, device, instrument, drug or other material made and used
according to the Applications.
5. Such counsel is not aware of any material defects of form in the
preparation or filing of the Applications on behalf of the Company. The
Applications are being diligently pursued by the Company.
6. Such counsel knows of no pending or threatened action, suit,
proceeding or claim by others that the Company is infringing or otherwise
violating any patents, copyrights or trade secrets.
7. Except as disclosed in the Prospectus, such counsel is not aware of
any pending or threatened actions, suits proceedings or claim by others
challenging the validity or scope of the Applications.
8. Such counsel is not aware of any infringement on the part of any third
party of the Applications, trade secrets, know-how or other proprietary rights
of the Company.
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9. Nothing has come to the attention of such counsel which causes such
counsel to believe that the information contained in the Intellectual Property
Portion of the Registration Statement, at the time the Registration Statement
became effective, contained an untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or that, at the Closing Date, the information contained in
the Intellectual Property Portion of the Effective Prospectus and Final
Prospectus or any amendment or supplement thereto contained any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
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SCHEDULE I
UNITED STATES PATENTS AND PATENT
AND TRADEMARK APPLICATIONS
United States Patent and Trademark Applications
Docket No. Title Serial No. Filing Date
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II-3
EXHIBIT III
Matters to be Covered in Opinion
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of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇ LLP, Special Regulatory Counsel for the Company
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1. To the knowledge of such counsel, other than as described in the
Registration Statement, no legal, regulatory or governmental proceedings are
pending to which the Company is a party or to which the assets of the Company
are subject which, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), business prospects, net worth or properties of the Company, or
which, individually or in the aggregate, would have a material adverse effect on
the power or ability of the Company to perform its obligations under this
Agreement and the Representative's Warrant or to consummate the transactions
contemplated thereby or by the Registration Statement and no such material
proceedings have been threatened against the Company or with respect to any of
the Company's assets or properties.
2. To the knowledge of such counsel, the Company is not (A) in default
(or, with notice or lapse of time or both, would be in default) in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement authorization, permit, certificate or
other agreement or instrument to which it is a party or by which it may be
bound, or to which any of its respective assets or properties is subject, or (B)
in violation of any law, statute, judgment, decree, order, rule or regulation of
any domestic or foreign court with jurisdiction over the Company or the
Company's assets or properties, or other governmental or regulatory authority,
agency or other body other than such defaults or violations which, individually
or in the aggregate, could not reasonably be expected to have or result in, in
the case of clause (A) or (B), a material adverse effect on the condition
(financial or otherwise), business, net worth or properties of the Company.
3. To the knowledge of such counsel, the Company has obtained all
consents, approvals, orders, certificates, licenses, permits, franchises and
other authorizations of and from, and has made all declarations and filings
with, all governmental and regulatory authorities, all self-regulatory
organizations and all courts and other tribunals necessary to own, lease,
license and use their respective properties and assets and to conduct their
respective businesses in the manner described in the Registration Statement,
except to the extent that the failure to so obtain or file, individually or in
the aggregate, could not reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), business, net worth or
properties of the Company.
4. The statements set forth in the Registration Statement under the
headings "Risk Factors -- The Internet Industry May Become Subject to Increased
Government Regulation" and "Business -- Government Regulation," (collectively,
the "Regulatory Portion") insofar as such statements constitute a summary of
statutes, rules, regulations, legal matters, documents or
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proceedings referred to therein, provide a fair summary of such statutes, rules,
regulations, legal matters, documents and proceedings and the information with
respect thereto.
5. Nothing has come to the attention of such counsel which causes such
counsel to believe that the information contained in the Regulatory Portion of
the Registration Statement, at the time the Registration Statement became
effective, contained an untrue statement of a material fact or omitted or omits
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or that, at the Closing Date, the information contained in the
Regulatory Portion of the Prospectus or any amendment or supplement thereto
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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