EXHIBIT 1.1
SPORTSTRAC SYSTEMS, INC.
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
UNDERWRITING AGREEMENT
▇▇▇▇▇▇▇▇▇ Financial Group, Inc. ___________, 1999
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 10005
Gentlemen:
SportsTrac Systems, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to ▇▇▇▇▇▇▇▇▇ Financial Group, Inc. ("▇▇▇▇▇▇▇▇▇" or the
"Representative") and to each of the other underwriters named in Schedule I
hereto (the "Underwriters"), for each of whom you are acting as Representative,
an aggregate of 585,000 Units (each Unit consisting of one share of Common
Stock, ("Common Stock"), and two Class A Common Stock Purchase Warrants (the
"Warrants") of the Company) at a public offering price of $6.00 per Unit. Each
Warrant shall entitle the holder to purchase one share of Common Stock for a two
year period commencing one year after the Effective Date (hereinafter defined)
at a price of $7.20 per share. The Warrants will not be detachable from the
Common Stock until the close of business on __________, 2000 unless ▇▇▇▇▇▇▇▇▇
permits earlier separation. The Warrants may be called by the Company commencing
thirteen months from Effective Date upon at least thirty days prior written
notice at a price of $.10 per Warrant at any time provided the closing bid for
the Common Stock is at least $10.80 per share during the twenty consecutive (20)
trading day period ending three days preceding the date of the written notice.
The 585,000 Units are hereinafter sometimes referred to as the "Firm Units."
Upon the request of the Representative, and as provided in Section 3 hereof, the
Company will also issue and sell to the Underwriters up to a maximum of an
additional 87,750 Units for the purpose of covering over-allotments. Such
additional Units are hereinafter sometimes referred to as the "Optional Units."
Both the Firm Units and the Optional Units are sometimes collectively referred
to herein as the "Units." All of the securities which are the subject of this
Agreement are more fully described in the Prospectus of the Company described
below. In the event that the Representative does not form an underwriting group
but decides to act as the sole Underwriter, then all references to ▇▇▇▇▇▇▇▇▇
herein as Representative shall be deemed to be to it as such sole Underwriter
and Section 14 hereof shall be deemed deleted in its entirety.
The Company understands that the Underwriters propose to make a public
offering of the Units as soon as the Representative deems advisable after the
Registration
Statement hereinafter referred to becomes effective. The Company hereby confirms
its agreement with the Representative and the other Underwriters as follows:
SECTION 1. Description of Securities. The Company's authorized and
outstanding capitalization when the public offering of securities contemplated
hereby is permitted to commence, under the Securities Act of 1933, as amended
(the "Act"), and at the Closing Date (hereinafter defined) and the terms of the
Warrants will be as set forth in the Prospectus (hereinafter defined).
SECTION 2. Representations and Warranties of the Company. The Company
hereby represents and warrants to, and agrees with, the Underwriters as follows:
(a) A Registration Statement on Form SB-2 and amendments thereto
(No. 333-________) with respect to the Units, including a form of prospectus
relating thereto, copies of which have been previously delivered to you, have
been prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder, and has been filed with the Commission under the Act.
The Company, subject to the provisions of Section 6(a) hereof, may file one or
more amendments to such Registration Statement and Prospectus. The Underwriters
will receive copies of each such amendment.
The date on which such Registration Statement is declared
effective under the Act and the public offering of the Units as contemplated by
this Agreement is therefore authorized to commence, is herein called the
"Effective Date." The Registration Statement and Prospectus, as finally amended
and revised immediately prior to the Effective Date, are herein called
respectively the "Registration Statement" and the "Prospectus." If, however, a
prospectus is filed by the Company pursuant to Rule 424(b) of the Rules and
Regulations which differs from the Prospectus, the term "Prospectus" shall also
include the prospectus filed pursuant to Rule 424(b).
(b) The Registration Statement (and Prospectus), at the time it
becomes effective under the Act, (as thereafter amended or as supplemented if
the Company shall have filed with the Commission an amendment or supplement),
and, with respect to all such documents, on the Closing Date (hereinafter
defined), will in all material respects comply with the provisions of the Act
and the rules and regulations promulgated thereunder, and will not contain an
untrue statement of a material fact and will not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that none of the representations and warranties
contained in this subsection (b) shall extend to the Underwriters in respect of
any statements in or omissions from the Registration Statement and/or the
Prospectus, based upon information furnished in writing to the Company by the
Underwriters specifically for use in connection with the preparation thereof.
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(c) The Company has been duly incorporated and is now, and on the
Closing Date will be, validly existing as a corporation in good standing under
the laws of the State of Delaware, having all required corporate power and
authority to own its properties and conduct its business as described in the
Prospectus. The Company is now, and on the Closing Date will be, duly qualified
to do business as a foreign corporation in good standing in all of the
jurisdictions in which it conducts its business or the character or location of
its properties requires such qualifications except where the failure to so
qualify would not materially adversely affect the Company's business, properties
or financial condition. The Company has no subsidiaries, except as are set forth
in the Prospectus.
(d) The financial statements of the Company included in the
Registration Statement and Prospectus present fairly the financial position and
results of operations and changes in financial condition of the Company at the
respective dates and for the respective periods to which they apply; and such
financial statements have been prepared in conformity with generally accepted
accounting principles, consistently applied throughout the periods involved, and
are in accordance with the books and records of the Company.
(e) To the best of the Company's knowledge, Morrison, Brown, ▇▇▇▇▇ &
Co. independent auditors, who have given their report on certain financial
statements which are included as a part of the Registration Statement and the
Prospectus are independent public accountants as required under the Act and the
rules and regulations promulgated thereunder.
(f) Subsequent to the respective dates as of which information is
given in the Prospectus and prior to the Closing Date and, except as set forth
in or contemplated in the Prospectus, (i) the Company has not incurred, nor will
it incur, any material liabilities or obligations, direct or contingent, nor has
it, nor will it have entered into any material transactions, in each case not in
the ordinary course of business; (ii) there has not been, and will not have
been, any material change in the Company's certificate of incorporation or in
its capital stock or funded debt; and (iii) there has not been, and will not
have been, any material adverse change in the business, net worth or properties
or condition (financial or otherwise) of the Company whether or not arising from
transactions in the ordinary course of business.
(g) Except as otherwise set forth in the Prospectus, the real and
personal properties of the Company as shown in the Prospectus and Registration
Statement to be owned by the Company are owned by the Company by good and
marketable title free and clear of all liens and encumbrances, except those
specifically referred to in the Prospectus, and except those which do not
materially adversely affect the use or value of such assets and except the lien
for current taxes not now due, or are held by the Company by valid leases, none
of which is in default. Except as disclosed in the Prospectus and Registration
Statement, the Company in all material respects has full right and licenses,
permits and governmental authorizations required to maintain and operate its
business and properties as the same are now operated and, to its best knowledge,
none of the activities or
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business of the Company is in material violation of, or causes the Company to
violate any laws, ordinances and regulations applicable thereto, the violation
of which would have a material adverse impact on the condition (financial or
otherwise), business, properties or net worth of the Company.
(h) The Company has no material contingent obligations, nor are its
properties or business subject to any material risks, which may be reasonably
anticipated, which are not disclosed in the Prospectus.
(i) Except as disclosed in the Prospectus and Registration
Statement, there are no material actions, suits or proceedings at law or in
equity of a material nature pending, or to the Company's knowledge, threatened
against the Company which are not adequately covered by insurance, which might
result in a material adverse change in the condition (financial or otherwise),
properties or net worth of the Company, and there are no proceedings pending or,
to the knowledge of the Company, threatened against the Company before or by any
federal or state commission, regulatory body, or administrative agency or other
governmental body, wherein an unfavorable ruling, decision or finding would
materially adversely affect the business, properties or net worth or financial
condition or income of the Company, which are not disclosed in the Prospectus.
(j) All of the outstanding shares of Common Stock are duly
authorized and validly issued and outstanding, fully paid, and non-assessable,
and are free of preemptive rights. The Common Stock and the shares of Common
Stock issuable upon exercise of the Warrants, when paid for, issued and
delivered in accordance with this Agreement and the Warrant Agreement between
the Company and its transfer/warrant agent will be duly authorized, validly
issued, fully paid and non-assessable and will not be issued in violation of any
preemptive rights. The Underwriters will receive good and marketable title to
the Units purchased by them from the Company, free and clear of all liens,
encumbrances, claims, security interests, restrictions, stockholders' agreements
and voting trusts whatsoever. Except as set forth in the Prospectus, there are
no outstanding options, warrants, or other rights, providing for the issuance
of, and no commitments, plans or arrangements to issue, any shares of any class
of capital stock of the Company, or any security convertible into, or
exchangeable for, any shares of any class of capital stock of the Company. All
of the securities of the Company to which this Agreement relates conform to the
statements relating to them that are contained in the Registration Statement and
Prospectus.
(k) The certificate or certificates required to be furnished to the
Underwriters pursuant to the provisions of Section 11 hereof will be true and
correct.
(l) The execution and delivery by the Company of this Agreement has
been duly authorized by all necessary corporate action and it is a valid and
binding obligation of the Company, enforceable against it in accordance with its
terms except as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws pertaining to creditors
rights generally.
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(m) No default exists, and no event has occurred which, with notice
or lapse of time, or both, would constitute a default in the due performance and
observance of any material term, covenant or condition by the Company or any
other party, of any material indenture, mortgage, deed of trust, note or any
other material agreement or instrument to which the Company is a party or by
which it or its business or its properties may be bound or affected, except (i)
as disclosed in the Prospectus, (ii) such defaults as have been waived by all
parties who would otherwise have a remedy or right with respect thereto or (iii)
such defaults which will not cause any material adverse change in the business,
net worth, properties or conditions (financial or otherwise), of the Company.
The Company has full power and lawful authority to authorize, issue and sell the
Units to be sold by it hereunder on the terms and conditions set forth herein
and in the Registration Statement and in the Prospectus. No consent, approval,
authorization or other order of any regulatory authority is required for such
authorization, issue or sale, except as may be required under the Act or state
securities laws. The execution and delivery of this Agreement, the consummation
of the transactions herein contemplated, and compliance with the terms hereof
will not conflict with, or constitute a default under any indenture, mortgage,
deed of trust, note or any other agreement or instrument to which the Company is
now a party or by which it or its business or its properties may be bound or
affected; the certificate of incorporation and any amendments thereto; the
by-laws of the Company, as amended; or any law, order, rule or regulation, writ,
injunction or decree of any government, governmental instrumentality, or court,
domestic or foreign, having jurisdiction over the Company or its business or
properties.
(n) No officer or director of the Company has taken, and each
officer and director has agreed that he will not take, directly or indirectly,
any action designed to stabilize or manipulate the price of the Units, the
Common Stock or the Warrants in the open market following the Closing Date or
any other type of action designed to, or that may reasonably be expected to
cause or result in such stabilization or manipulation, or that may reasonably be
expected to facilitate the initial sale, or resale, of any of the securities
which are the subject of this Agreement.
(o) The Warrants to purchase Units to be issued to the
Representative (the "Underwriters' Unit Warrants") hereunder will be, when
issued, duly and validly authorized and executed by the Company and will
constitute valid and binding obligations of the Company, legally enforceable in
accordance with their terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
pertaining to creditors rights generally), and the Company will have duly
authorized, reserved and set aside the shares of its Common Stock issuable upon
exercise of the Underwriters' Unit Warrants and the underlying warrants, and
such stock, when issued and paid for upon exercise of the Underwriters' Unit
Warrants and the underlying warrants in accordance with the provisions thereof,
will be duly authorized and validly issued, fully-paid and non-assessable.
(p) All of the aforesaid representations, agreements, and warranties
shall survive delivery of, and payment for, the Units.
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SECTION 3. Issuance, Sale and Delivery of the Firm Units, the Optional
Units and the Underwriters' Warrants.
(a) Upon the basis of the representations, warranties, covenants and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the several
Underwriters, and the Underwriters, severally and not jointly, agree to purchase
from the Company, the number of the Firm Units set forth opposite the respective
names of the Underwriters in Schedule I hereto, plus any additional Units which
such Underwriter may become obligated to purchase pursuant to the provisions of
Section 14 hereof.
The purchase price of the Units to be paid by the several
Underwriters shall be $5.40 per Unit ($6.00 per Unit less a ten percent
discount).
In addition, and upon the same basis, and subject to the same
terms and conditions, the Company hereby grants an option to you to purchase,
but only for the purpose of covering over-allotments, upon not less than two
days' notice from the Representative, the Optional Units, or any portion
thereof, at the same price per Unit as that set forth in the preceding sentence;
and each Underwriter agrees, severally and not jointly, to purchase Optional
Units in the same proportion in which it has agreed to purchase Firm Units.
Notwithstanding anything contained herein to the contrary, you individually and
not as Representative may purchase all or any part of the Optional Units and are
not obligated to offer the Optional Units to the other Underwriters. The
Optional Units may be exercised at any time, and from time to time, thereafter
within a period of 45 calendar days following the Effective Date. The time(s)
and date(s) (if any) so designated for delivery and payment for the Optional
Units shall be set forth in the notice to the Company. Such dates are herein
defined as the Additional Closing Date(s).
(b) Payment for the Firm Units shall be made by certified or
official bank checks in New York Clearing House funds, payable to the order of
the Company, at the offices of the Representative, or its clearing agent, or at
such other place as shall be agreed upon by the Representative and the Company,
upon delivery of the Firm Units to the Representative for the respective
accounts of the Underwriters. In making payment to the Company, the
Representative may, at its option, first deduct all sums due to it for the
non-accountable expense allowance and under the Financial Consulting Agreement
(as hereinafter defined). Such delivery and payment shall be made at 10:00 A.M.,
New York City Time on the third business day after the first trade date (i.e.
T+3) which may be extended by the Representative to not later than the fifth
business day after the trade date (i.e. T+5) (unless postponed in accordance
with the provisions of Section 14 hereof), or at such other time as shall be
agreed upon by the Representative and the Company. The time and date of such
delivery and payment are hereby defined as the Closing Date. It is understood
that each Underwriter has authorized the Representative, for the account of such
Underwriter, to accept delivery of, receipt for, and make payment of the
purchase price for, the Firm Units which it has agreed to purchase. You,
individually, and not as Representative may (but shall not be obligated to) make
payment of the purchase price for
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the Firm Units to be purchased by any Underwriter whose check shall not have
been received by the Closing Date, for the account of such Underwriter, but any
such payment shall not relieve such Underwriter from its obligations hereunder.
(c) Payment for the Optional Units shall be made at the offices of
the Representative, or its clearing agent or at such other place as shall be
agreed upon by the Representative and the Company, in accordance with the notice
delivered pursuant to Section 3(a) which shall be no later than five business
days from the expiration of the forty-five day option period.
(d) Certificates for the Firm Units and for the Optional Units shall
be registered in such name or names and in such authorized denominations as the
Representative may request in writing at least two business days prior to the
Closing Date, and the Additional Closing Date(s) (if any). The Company shall
permit the Representative to examine and package said certificates for delivery
at least one full business day prior to the Closing Date and prior to the
Additional Closing Date(s). The Company shall not be obligated to sell or
deliver any of the Firm Units except upon tender of payment by the Underwriters
for all of the Firm Units agreed to be purchased by them hereunder. The
Representative, however, shall have the sole discretion to determine the number
of Optional Units, if any, to be purchased.
(e) At the time of making payment for the Firm Units, the Company
also hereby agrees to sell to the Representative, Underwriters' Unit Warrants to
purchase 58,500 Units for an aggregate purchase price of $100. Each Unit
issuable upon exercise of the Underwriters' Unit Warrants shall be identical to
the Units sold to the public, except that the exercise price of the underlying
warrants shall be 165% of the then effective exercise price of the publicly held
Class A Warrants. Each Underwriters' Unit Warrant shall entitle the owner
thereof to purchase one Unit of the Company at an exercise price of $9.90 per
Unit (165% of the initial public offering price per Unit). Such Underwriters'
Unit Warrants are to become exercisable immediately after from the Effective
Date, and thereafter shall remain exercisable for a period of five years. For a
period of one year after the Effective Date, the Underwriters Unit Warrants
shall not be transferable except to co-underwriters, selling group members and
their officers or partners. The Underwriters Unit Warrants shall contain
customary clauses protecting the holders thereof in the event the Company pays
stock dividends, effects stock splits, or effects a sale of assets, merger or
consolidation.
(f) On and subject to the Closing Date, the Company will give
irrevocable instructions to its transfer agent named in the Prospectus to
deliver to the Representative (at the Company's expense) for a period of five
years from the Closing Date, daily advice sheets showing any transfers of Units,
shares of common stock and Warrants and from time to time during the aforesaid
period a complete stockholders' list will be promptly furnished by the Company
when requested by the Representative on not more than two occasions per year.
Furthermore, the Company will give irrevocable instructions to Depository Trust
Company for a period of five years from the Closing Date to deliver
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weekly transfer sheets showing any transfers of Units, shares of common stock
and Warrants, at the sole expense of the Company.
SECTION 4. Public Offering. The several Underwriters agree, subject to the
terms and provisions of this Agreement, to offer the Units to the public as soon
as practicable after the Effective Date, at the initial offering price of $6.00
per Unit and upon the terms described in the Prospectus. The Representative may,
from time to time, decrease the public offering price, after the initial public
offering, to such extent as the Representative may determine, however, such
decreases will not affect the price payable to the Company hereunder.
SECTION 5. Registration Statement and Prospectus. The Company will furnish
the Representative, without charge, two signed copies of the Registration
Statement and of each amendment thereto, including all exhibits thereto and such
amount of conformed copies of the Registration Statement and Amendments as may
be reasonably requested by the Representative for distribution to each of the
Underwriters and Selected Dealers.
The Company will furnish, at its expense, as many printed
copies of a Preliminary Prospectus and of the Prospectus as the Representative
may request for the purposes contemplated by this Agreement. If, while the
Prospectus is required to be delivered under the Act or the rules and
regulations promulgated thereunder, any event known to the Company relating to
or affecting the Company shall occur which should be set forth in a supplement
to or an amendment of the Prospectus in order to comply with the Act (or other
applicable law) or with the rules and regulations promulgated thereunder, the
Company will forthwith prepare, furnish and deliver to the Representative and to
each of the other Underwriters and to others whose names and addresses are
designated by the Representative, in each case at the Company's expense, a
reasonable number of copies of such supplement or supplements to or amendment or
amendments of, the Prospectus.
The Company authorizes the Underwriters and the selected
dealers, if any, in connection with the distribution of the Units and all
dealers to whom any of the Units may be sold by the Underwriters, or by any
Selected Dealer, to use the Prospectus, as from time to time amended or
supplemented, in connection with the offering and sale of the Units and in
accordance with the applicable provisions of the Act and the applicable rules
and regulations promulgated thereunder and applicable state securities laws.
SECTION 6. Covenants of the Company. The Company covenants and agrees with
each Underwriter that:
(a) After the date hereof, the Company will not at any time, whether
before or after the Effective Date, file any amendment to the Registration
Statement or the Prospectus, or any supplement to the Prospectus, of which the
Representative shall not previously have been advised and furnished with a copy,
or to which the Representative or the Underwriters' counsel shall have
reasonably objected in writing on the ground that it is not in compliance with
the Act or the rules and regulations promulgated thereunder.
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(b) The Company will use its best efforts to cause the Registration
Statement to become effective (provided, however, the Company shall not cause
the Registration Statement to become effective without the written consent of
▇▇▇▇▇▇▇▇▇) and will advise the Representative, (i) when the Registration
Statement shall have become effective and when any amendment thereto shall have
become effective, and when any amendment of or supplement to the Prospectus
shall be filed with the Commission, (ii) when the Commission shall make request
or suggestion for any amendment to the Registration Statement or the Prospectus
or for additional information and the nature and substance thereof, and (iii) of
the issuance by the Commission of an order suspending the effectiveness of the
Registration Statement or of the initiation of any proceedings for that purpose,
and will use its best efforts to prevent the issuance of such an order, or if
such an order shall be issued, to obtain the withdrawal thereof at the earliest
possible moment.
(c) The Company will prepare and file with the Commission, promptly
upon the request of the Representative, such amendments, or supplements to the
Registration Statement or Prospectus, in form and substance satisfactory to
counsel to the Company, as in the reasonable opinion of ▇▇▇▇▇▇ ▇▇▇▇▇ P.C., as
counsel to the Underwriters, may be necessary or advisable in connection with
the offering or distribution of the Units, and will diligently use its best
efforts to cause the same to become effective.
(d) The Company will, at its expense, when and as requested by the
Representative, supply all necessary documents, exhibits and information, and
execute all such applications, instruments and papers as may be required, in the
opinion of the Underwriters' counsel, to qualify the Units or such part thereof
as the Representative may determine, for sale under the so-called "blue sky"
laws of such states as the Representative shall designate, and to continue such
qualification in effect so long as required for the purposes of the distribution
of the Units, provided, however, that the Company shall not be required to
qualify as a foreign corporation or dealer in securities or to file a consent to
service of process in any state in any action other than one arising out of the
offering or sale of the Units.
(e) The Company will, at its own expense, file and provide, and
continue to file and provide, such reports, financial statements and other
information as may be required by the Commission, or the proper public bodies of
the states in which the Units may be qualified for sale, for so long as required
by applicable law, rule or regulation and will provide the Representative with
copies of all such registrations, filings and reports on a timely basis.
(f) So long as ▇▇▇▇▇▇▇▇▇ is a market maker of the Company's
Securities, the Company will deliver to ▇▇▇▇▇▇▇▇▇ a copy of each annual report,
proxy statement, information statement and news release of the Company, and will
deliver to ▇▇▇▇▇▇▇▇▇ (i) within 50 days after the end of each of the Company's
first three quarter-yearly fiscal periods, a balance sheet of the Company as at
the end of such quarter-yearly period, together with a statement of its income
and a statement of changes in its cash flow for such period (Form 10-QSB or Form
10-Q), all in reasonable detail, signed by its principal
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financial or accounting officer, (ii) within 105 days after the end of each
fiscal year, a balance sheet of the Company as at the end of such fiscal year,
together with a statement of its income and statement of cash flow for such
fiscal year (Form 10-KSB or Form 10-K), such balance sheet and statement of cash
flow for such fiscal year to be in reasonable detail and to be accompanied by a
certificate or report of independent public accountants, (who may be the regular
accountants for the Company), (iii) as soon as available a copy of every other
report (financial or other) mailed to the stockholders, and (iv) as soon as
available a copy of every non-confidential report and financial statement
furnished to or filed with the Commission or with any securities exchange
pursuant to requirements by or agreement with such exchange or the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), or
any regulations of the Commission thereunder.
(g) The Company represents that with respect to the Warrants and the
shares of Common Stock included in the Units, it will prepare and file a
Registration Statement with the Commission pursuant to Section 12(g) of the 1934
Act, prior to the Effective Date with a request that such Registration Statement
will become effective on the Effective Date. The Company understands that, to
register, it must prepare and file with the Securities and Exchange Commission a
General Form of Registration of Securities (Form 8-A or Form 10). In addition,
the Company agrees to qualify its Units, Common Stock and the Warrants for
listing on the Nasdaq system and Boston Stock Exchange on the first trading date
of each respective security and will take all reasonable and necessary and
appropriate action so that the securities continue to be listed for trading in
the Nasdaq system and Boston Stock Exchange for at least five years from the
Effective Date provided the Company otherwise complies with the prevailing
maintenance requirements. In addition, at such time as the Company qualifies for
listing its securities on the National Market System of Nasdaq, the Company will
use its best efforts to have the Company's Units and components thereof listed
on the National Market System of Nasdaq in lieu of listing as Small-Cap Issues
on Nasdaq and Boston Stock Exchange. For so long as the Company is a reporting
company under the 1934 Act, the Company shall comply with all periodic reporting
and proxy solicitation requirements imposed by the Commission pursuant to the
1934 Act.
(h) The Company will make generally available to its security
holders, as soon as practicable, but in no event later than 15 months after the
Effective Date, an earnings statement of the Company (which need not be audited)
in reasonable detail, covering a period of at least twelve months beginning
after the Effective Date, which earnings statement shall satisfy the provisions
of Section 11(a) of the Act.
(i) The Company will, on or about the Effective Date, apply for
listing in Standard and Poor's Corporation Records and Standard & Poor's Monthly
Stock Guide and shall use its best efforts to have the Company listed in such
reports for a period of not less than five (5) years from the Closing Date. The
Company will request accelerated treatment in the Daily News Supplement of
Standard and Poor's Corporation Records.
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(j) The Company shall appoint American stock Transfer & Trust Co.,
Brooklyn, New York, as transfer agent for the Common Stock (the "Transfer
Agent") and as warrant agent for the Warrants.
(k) Prior to the Effective Date, the Company will enter into an
employment contract with ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in the form approved by the
Representative. Such employment contract shall provide that within ninety (90)
days subsequent to the Effective Date, the Company will furnish "Key Man" Life
Insurance in the amount of $1,000,000 on the life of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ with the
Company as the beneficiary thereof and the Company shall pay the annual
premiums, therefore, for a period of not less than three years from the
Effective Date.
(l) Until such time as the securities of the Company are listed on
the New York Stock Exchange, the American Stock Exchange or Nasdaq/Nms, the
Company shall cause its legal counsel or an independent third party acceptable
to the Representative to provide the Representative with a survey with the first
one to be delivered at Closing, to be updated at least annually, of those states
in which the securities of the Company may be traded in non-issuer transactions
under the blue sky laws of the states and the basis for such authority.
(m) As soon as practicable after the Closing Date, the Company will
deliver to the Representative and its counsel a total of two bound volumes of
copies of all documents relating to the public offering which is the subject of
this Agreement.
(n) Stock certificates and Warrant certificates shall be first
submitted to the Representative for approval prior to printing. The Company
shall, as promptly as possible, after filing the Registration Statement with the
Commission, obtain a CUSIP number for the Units, Common Stock and Warrants and
have each of the securities eligible for closing through the facilities of
Depository Trust Company.
(o) The Company will not offer its securities pursuant to Regulation
S of the Act, for a period of three years from the Effective Date without the
Representative's prior written consent.
SECTION 7. Expenses of the Company.
The Company shall be responsible for and shall bear all expenses directly
and necessarily incurred in connection with the proposed financing, including:
(i) the preparation, printing and filing of the Offering Documents and
amendments thereto, including Nasd, Sec, Boston Stock Exchange and Nasdaq filing
and/or application fees, preliminary and final Prospectus and the printing of
the Underwriting Agreement, the Agreement Among Underwriters and the Selected
Dealers' Agreement, a blue sky memorandum, material to be circulated to the
Underwriters by us and other incidental
11
material; (ii) the issuance and delivery of certificates representing the Common
Stock and Warrants, including original issue and transfer taxes, if any; (iii)
the qualifications of the Company's Units (covered by the "firm commitment"
offering) under state securities or blue sky laws, including counsel fees of the
Representative relating thereto in the sum of Thirty Thousand ($30,000) Dollars,
none of which has been paid prior to the Effective Date, together with
appropriate state filing fees plus disbursements relating to, but not limited
to, long-distance telephone calls, photocopying, messengers, excess postage,
overnight mail and courier services; (iv) the fees and disbursements of counsel
for the Company and the accountants for the Company; and (v) any other costs of
qualifying the Units and components thereof for listing on Nasdaq and the Boston
Stock Exchange. State filing fees and disbursements shall be paid by the Company
as incurred. The fees of ▇▇▇▇▇▇ ▇▇▇▇▇ P.C. shall be paid at the closing or
termination of the Offering, whichever event first occurs.
The Company shall, upon receipt of an invoice from the Representative,
reimburse the Representative for any costs of otherwise unreimbursed postage and
including mailing of preliminary and final prospectuses incurred by or on behalf
of the Representative and the Underwriters in preparation for, or in connection
with the offering and sale and distribution of the Units on an accountable
basis. After closing of the public offering, the Company shall bear the costs of
tombstone announcements not to exceed $10,000.
SECTION 8. Payment of Underwriters' Expenses.
On the Closing Date and Additional Closing Date(s) (if any)
the Company will pay to ▇▇▇▇▇▇▇▇▇ an expense allowance equal to three (3%)
percent of the total gross proceeds derived from the public offering
contemplated by this Agreement for the fees and disbursements of counsel to the
Underwriters and for costs of otherwise unreimbursed advertising, traveling,
postage, telephone and telegraph expenses and other miscellaneous expenses
incurred by or on behalf of the Representative and the Underwriters in
preparation for, or in connection with the offering and sale and distribution of
the Units; and ▇▇▇▇▇▇▇▇▇ shall not be obligated to account to the Company for
such disbursements and expenses. In the event that the Company terminates this
agreement pursuant to the provisions of Section 12(b), the Representative shall
be entitled to reimbursement of all of its expenses on an accountable basis.
SECTION 9. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters, and each person who controls each of the Underwriters within the
meaning of Section 15 of the Act, from and against any and all losses, claims,
damages, expenses, or liabilities, joint or several, to which they or any of
them may become subject under the Act or any other statute or at common law or
otherwise, and to reimburse persons indemnified as above for any reasonable
legal or other expense (including the cost of any
12
investigation and preparation) incurred by them (as incurred), or any of them,
in connection with investigating, defending against or appearing as a third
party witness in connection with any claim or litigation, whether or not
resulting in any liability, but only insofar as such losses, claims,
liabilities, expenses or litigation arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented, if amended
or supplemented), or in any "blue sky" application, or arising out of or based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading;
provided, however, that the indemnity agreement contained in this subsection (a)
shall not apply to amounts paid in settlement of any such claims or litigation
if such settlement is effected without the consent of the Company, nor shall it
apply to the Underwriters or any person controlling the Underwriters in respect
of any such losses, claims, damages, expenses, liabilities or litigation arising
out of, or based upon, any such untrue statement or alleged untrue statement, or
any such omission or alleged omission, if such statement or omission was made in
reliance upon and in conformity with written information furnished in writing to
the Company by such Underwriter, or on its behalf, specifically for use in
connection with the preparation of the Registration Statement or the Prospectus
or any such amendment thereof or supplement thereto or any such blue sky
application.
(b) Each of the Underwriters severally agrees, in the same manner
and to the same extent as set forth in subsection (a) above, to indemnify and
hold harmless the Company, each of the directors and officers who have signed
the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act, with respect to any statement in or
omission from the Registration Statement, or the Prospectus (as amended or as
supplemented, if amended or supplemented), or in any "blue sky" application, if
such statement or omission was made in reliance upon and in conformity with
written information furnished in writing to the Company by such Underwriter, or
on its behalf, specifically for use in connection with the preparation of the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto, or any such application. An Underwriter shall not be liable
for amounts paid in settlement of any such claim or litigation if such
settlement was effected without its consent.
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any claim asserted against it and of any action commenced
against it in respect of which indemnity may be sought hereunder. The omission
to so notify an indemnifying party shall relieve such party of its obligation to
indemnify pursuant to this Agreement, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to
13
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party; provided that the fees and expenses of such counsel shall
be at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party or
(ii) the defendants in any such action include both the indemnified and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be a conflict between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of such indemnified party or parties), it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the indemnified party which firm shall be
designated in writing by the indemnified party.
(d) The respective indemnity agreements between the Underwriters and
the Company contained in subsections (a) and (b) above, and the representations
and warranties of the Company set forth in Section 2 hereof or elsewhere in this
Agreement, shall remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the Underwriters or by or on behalf of
any controlling person of the Underwriters or the Company or any such officer or
director or any controlling person of the Company, and shall survive the
delivery of the Units. Any successor of the Company, or of the Underwriters, or
of any controlling person of the Underwriters or the Company, as the case may
be, shall be entitled to the benefit of such respective indemnity agreements.
(e) In order to provide for just and equitable contribution under
the Act in any case in which (i) any person entitled to indemnification under
this Section 9 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 9 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of any
such person in circumstances for which indemnification is provided under this
14
Section 9, then, and in each such case, the Company and the Underwriters shall
contribute to the aggregate losses, claims, damages, expenses or liabilities to
which they may be subject (after any contribution from others) in such
proportions so that the Underwriters are responsible in the aggregate for the
proportion of such losses, claims, damages or liabilities represented by the
percentage that the underwriting discounts and commissions appearing on the
cover page of the Prospectus bears to the public offering price appearing
thereon, and the Company is responsible for the remaining portion; provided,
that, in any such case, no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Within twenty days after receipt by any party to this
Agreement (or its representative) of notice of the commencement of any action,
suit or proceeding, such party will, if a claim for contribution in respect
thereof is to be made against another party (the "contributing party"), notify
the contributing party, in writing, of the commencement thereof, but the
omission so to notify the contributing party will not relieve it from any
liability which it may have to any other party other than for contribution
hereunder. In case any such action, suit or proceeding is brought against any
party, and such party so notifies a contributing party or his or its
representative of the commencement thereof within the aforesaid twenty days, the
contributing party will be entitled to participate therein with the notifying
party and any other contributing party similarly notified. Any such contributing
party shall not be liable to any party seeking contribution on account of any
settlement of any claim, action or proceeding effected by such party seeking
contribution without the written consent of such contributing party. The
contribution provisions contained in this Section 9 are in addition to any other
rights or remedies which either party hereto may have with respect to the other
or hereunder.
SECTION 10. Effectiveness of Agreement. This Agreement shall become
effective (i) at 10:00 A.M., New York Time, on the first full business day after
the Effective Date, or (ii) at the time of the initial public offering by the
Underwriters of the Units, whichever shall first occur. The time of the initial
public offering by the Underwriters of the Units for the purposes of this
Section 10, shall mean the time, after the Registration Statement becomes
effective, of the release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the Units,
or the time, after the Registration Statement becomes effective, when the Units
are first released by the Representative for offering by the Underwriters or
dealers by letter or telegram, whichever shall first occur. The Representative
agrees to notify the Company immediately after it shall have taken any action,
by release or otherwise, whereby this Agreement shall have become effective.
This Agreement shall, nevertheless, become effective at such time earlier than
the time specified above, after the Effective Date, as the Representative may
determine by notice to the Company.
SECTION 11. Conditions of the Underwriters' Obligations. The obligations
of the several Underwriters to purchase and pay for the Units which the
Underwriters have agreed to purchase hereunder are subject to: the accuracy, as
of the date hereof and as
15
of the Closing Dates, of all of the representations and warranties of the
Company contained in this Agreement; the Company's compliance with, or
performance of, all of its covenants, undertakings and agreements contained in
this Agreement that are required to be complied with or performed on or prior to
each of the Closing Dates and to the following additional conditions:
(a) On or prior to the Closing Date, no order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or be pending or, to the
knowledge of the Company, shall be threatened by the Commission; 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 satisfaction of the Commission; and neither the Registration
Statement nor any amendment thereto shall have been filed to which counsel to
the Underwriters shall have reasonably objected, in writing.
(b) The Representative shall not have disclosed in writing to the
Company that the Registration Statement or Prospectus or any amendment or
supplement thereto contained, as of the date thereof, an untrue statement of a
fact which, in the opinion of counsel to the Underwriters, is material, or omits
to state a fact which, in the opinion of such counsel, is material and is
required to be stated therein, or is necessary to make the statements therein
not materially misleading.
(c) Between the date hereof and the Closing Date, the Company shall
not have sustained any loss on account of fire, explosion, flood, accident,
calamity or other cause, of such character as materially adversely affects its
business or property, whether or not such loss is covered by insurance.
(d) Between the date hereof and the Closing Date, there shall be no
litigation instituted or threatened against the Company, and there shall be no
proceeding instituted or threatened against the Company before or by any federal
or state commission, regulatory body or administrative agency or other
governmental body, domestic or foreign, wherein an unfavorable ruling, decision
or finding would materially adversely affect the business, licenses, permits,
operations or financial condition or income of the Company.
(e) Other than as contemplated herein or as set forth in the
Registration Statement and Prospectus, during the period subsequent to the
Effective Date and prior to the Closing Date, (A) the Company shall have
conducted its business in the usual and ordinary manner as the same was being
conducted on the date of the filing of the initial Registration Statement and
(B) the Company shall not have incurred any material liabilities or obligations
(direct or contingent), or disposed of any of its assets, or entered into any
material transaction, except in the ordinary course of business and (C) the
Company shall not have suffered or experienced any material adverse change in
its business, affairs or in its condition, financial or otherwise. On the
Closing Date, the capital stock and surplus accounts of the Company shall be
substantially as great as at its last financial report
16
without considering the proceeds from the sale of the Units except to the extent
that any decrease is disclosed in or contemplated by the Prospectus.
(f) The authorization of the Units, the Common Stock and the
Warrants, the Registration Statement, the Prospectus and all corporate
proceedings and other legal matters incident thereto and to this Agreement,
shall be reasonably satisfactory in all respects to counsel to the Underwriters.
(g) The Company shall have furnished to the Representative the
opinions, dated the Closing Date, and Additional Closing Date(s), addressed to
you, of Doerner, Sanders, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP counsel for the Company, that:
(i) The Company has been duly incorporated and is a validly
existing corporation in good standing under the laws of the State of Delaware
with full corporate power and authority to own and operate its properties and to
carry on its business as set forth in the Registration Statement and Prospectus;
it has authorized and outstanding capital as set forth in the Registration
Statement and Prospectus; and the Company is duly licensed or qualified as a
foreign corporation in all jurisdictions in which the ownership or leasing of
its properties requires such qualification or license, except where failure to
be so qualified or licensed would have no material adverse effect on the
business of the Company.
(ii) All of the outstanding shares of Common Stock are duly
authorized, validly issued, fully paid, and non-assessable, and do not have any
preemptive rights. The Company will have duly authorized, reserved and set aside
shares of Common Stock issuable upon exercise of the Warrants and any other
outstanding options, warrants or stock option plans and when issued in
accordance with the terms contained therein against payment therefor, will be
duly and validly issued, fully paid and non-assessable.
(iii) The Common Stock, Warrants and the Underwriter's Unit
Warrant conform to descriptions thereof under "Description of Securities"
contained in the Prospectus.
(iv) The Underwriters will receive good and marketable title
to the Units purchased by them from the Company in accordance with the terms and
provisions of this Agreement, to the best of such counsel's knowledge, free and
clear of all liens, encumbrances, claims, security interests, restrictions,
stockholders' agreements and voting trusts whatsoever.
(v) Except as set forth in the Prospectus, there are no
outstanding options, warrants, or other rights, providing for the issuance of,
and, to the best of the knowledge of such counsel, no commitments, plans or
arrangements to issue, any shares of any class of capital stock of the Company,
or any security convertible into, or exchangeable for, any shares of any class
of capital stock of the Company.
17
(vi) To the best of such counsel's knowledge, no consents,
approvals, authorizations or orders of agencies, officers or other regulatory
authorities are necessary for the valid authorization, issue or sale of the
Units hereunder, except such as may be required under the Act or state
securities or blue sky laws.
(vii) The Registration Statement has become effective under
the Act and, to the best of the knowledge of such counsel, no order suspending
the effectiveness of the Registration Statement is in effect and no proceedings
for that purpose have been instituted or are pending before or threatened by,
the Commission;
(viii) To the best of such counsel's knowledge and based upon
the investigation described below, the Registration Statement and Prospectus,
and each amendment thereof and supplement thereto, comply as to form in all
material respects with the applicable requirements of the Act and the rules and
regulations promulgated thereunder (except that no opinion need be expressed as
to financial statements, notes thereto, and financial data contained in the
Registration Statement or Prospectus). Such counsel has participated in
conferences with officers and representatives of the Company and with its
certified public accountants in the preparation of the Registration Statement
and the Prospectus. At such conferences counsel has made inquiries of such
officers, representatives and accountants, and discussed the contents of the
Registration Statement and the Prospectus. Such counsel has not independently
verified, and, accordingly, does not assume any responsibility for, the
accuracy, completeness or fairness of the information contained in the
Registration Statement or the Prospectus, other than as set forth the Prospectus
insofar as such statements relate to the contents of particular documents
therein described. On the basis of the foregoing, nothing has come to the
attention of such counsel to cause such counsel to believe that the Registration
Statement, the Prospectus or any amendment or supplement thereto contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make statements therein, in light of the circumstances under which
they were made, not misleading (except, in the case of both the Registration
Statement and any amendment thereto and the Prospectus and any supplement
thereto, for the financial statements, notes thereto and other financial and
statistical data and schedules contained therein, as to which such counsel need
express no opinion); and such counsel is familiar with all contracts referred to
in the Registration Statement or in the Prospectus and such contracts are
sufficiently summarized or disclosed therein, or filed as exhibits thereto, as
required, and such counsel does not know of any other contracts required to be
summarized or disclosed or filed; and such counsel does not know of any legal or
governmental proceedings to which the Company is a party, or in which property
of the Company is the subject, of a character required to be disclosed in the
Registration Statement or the Prospectus which are not so disclosed therein.
(ix) This Agreement has been duly authorized and executed by
the Company and is a valid and binding agreement of the Company enforceable in
accordance
18
with its terms subject to bankruptcy, insolvency, reorganization, moratorium and
other laws affecting creditors rights generally and except that no opinion need
be given with regard to the enforceability of Section 9 hereof or the
availability of equitable relief.
(x) To the best knowledge of such counsel: (a) no default
exists, and no event has occurred which, with notice or lapse of time, or both,
would constitute a default in the due performance and observance of any material
term, covenant or condition by the Company, of any indenture, mortgage, deed of
trust, note or any other agreement or instrument to which the Company is a party
or by which it or its business or its properties may be bound or affected,
except where such default would not have a material adverse effect on the
business of the Company and except as disclosed in the Prospectus; (b) the
Company has full power and lawful authority to authorize, issue and sell the
Units on the terms and conditions set forth herein and in the Registration
Statement and in the Prospectus; (c) no consent, approval, authorization or
other order of any regulatory authority is required for such authorization,
issue or sale, except as may be required under the Act or state securities laws,
clearance with the NASD and such other consent, approval, authorization or order
as has been obtained and is in full force and effect; and (d) the execution and
delivery of this Agreement, the consummation of the transactions herein
contemplated, and compliance with the terms hereof will not conflict with, or
constitute a default under, any material indenture, mortgage, deed of trust,
note or any other agreement or instrument to which the Company is now a party or
by which it or its business or its properties may be bound or affected, the
certificate of incorporation and any amendments thereto, the by-laws of the
Company, or any order, rule or regulation, writ, injunction or decree of any
government, governmental instrumentality, or court, domestic or foreign, having
jurisdiction over the Company or its business or properties.
(xi) Except as disclosed in the Registration Statement and
Prospectus, to the best knowledge of such counsel, there are no material
actions, suits or proceedings at law or in equity of a material nature pending,
or to such counsel's knowledge, threatened against the Company which are not
adequately covered by insurance and there are no proceedings pending or, to the
knowledge of such counsel, threatened against the Company before or by any
federal or state commission, regulatory body, or administrative agency or other
governmental body, wherein an unfavorable ruling, decision or finding would
materially and adversely affect the business, operation or condition (financial
or otherwise) of the Company, which are not disclosed in the Prospectus.
(xii) The Underwriters' Unit Warrants to be issued to the
Representative hereunder will be, when issued, duly and validly authorized and
executed by the Company and will constitute valid and binding obligations of the
Company, legally enforceable in accordance with their terms except as
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws pertaining to creditors rights generally and the
Company will have duly authorized, reserved and set aside the shares of its
Common Stock issuable upon exercise of the Underwriters' Unit Warrants and the
underlying warrants and such stock, when issued and paid for upon exercise of
the
19
Underwriters' Unit Warrants and the underlying warrants in accordance with the
provisions thereof, will be duly and validly issued, fully-paid and
non-assessable.
Such opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement as the Representative shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact.
(h) The Company shall have furnished to the Representative
certificates of the President and a Vice-President of the Company, dated as of
the Closing Date, and Additional Closing Date(s), to the effect that:
(i) Each of the representations and warranties of the Company
contained in Section 2 hereof is true and correct in all material respects at
and as of such Closing Date, and the Company has performed or complied with all
of its agreements, covenants and undertakings contained in this Agreement and
has performed or satisfied all the conditions contained in this Agreement on its
part to be performed or satisfied at the Closing Date;
(ii) The Registration Statement has become effective and no
order suspending the effectiveness of the Registration Statement has been
issued, and, to the best of the knowledge of the respective signers, no
proceeding for that purpose has been initiated or is threatened by the
Commission;
(iii) The respective signers have each carefully examined the
Registration Statement and the Prospectus and any amendments and supplements
thereto, and to the best of their knowledge the Registration Statement and the
Prospectus and any amendments and supplements thereto and all statements
contained therein are true and correct in all material respects, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth except changes which the
Registration Statement and Prospectus indicate might occur.
(iv) Except as set forth or contemplated in the Registration
Statement and Prospectus, since the respective dates as of which, or periods for
which, information is given in the Registration Statement and Prospectus and
prior to the date of such certificate (A) there has not been any material
adverse change, financial or otherwise, in the business, business prospects,
earnings, general affairs or condition (financial or otherwise), of the Company
(in each case whether or not arising in the ordinary course of business), and
(B) the Company has not incurred any material liabilities, direct or contingent,
or entered into any material transactions, otherwise than in the ordinary course
20
of business other than as referred to in the Registration Statement or
Prospectus and except changes which the Registration Statement and Prospectus
indicate might occur.
(i) The Company shall have furnished to the Representative on the
Closing Date, such other certificates of executive officers of the Company
additional to those specifically mentioned herein, as the Representative may
have reasonably requested, as to: the accuracy and completeness of any statement
in the Registration Statement or the Prospectus, or in any amendment or
supplement thereto; the representations and warranties of the Company herein;
the performance by the Company of its obligations hereunder; or the fulfillment
of the conditions concurrent and precedent to the obligations of the
Underwriters hereunder, which are required to be performed or fulfilled on or
prior to the Closing Date.
(j) At the time this Agreement is executed, and on each Closing Date
you shall have received a letter from Morrison, Brown, Argiz & Co., addressed to
the Representative, as representative of the Underwriters, and dated,
respectively, as of the date of this Agreement and as of each Closing Date in
form and substance reasonably satisfactory to the representative, to the effect
that:
(i) They are independent public accountants within the meaning
of the Act and the applicable published rules and regulations promulgated
thereunder;
(ii) In their opinion, the financial statements and related
schedules of the Company included in the Registration Statement and Prospectus
and covered by their reports comply as to form in all material respects with the
applicable accounting requirements of the Act and the published rules and
regulations of the Commission issued thereunder;
(iii) On the basis of limited procedures in accordance with
standards established by the American Institute of Certified Public Accountants,
including (1) a reading of the latest available financial statements of the
Company (a copy of which shall be attached to such letter), (2) a reading of the
latest available minutes of the meetings of the stockholders and the Board of
Directors of the Company as set forth in the minute books of the Company,
officials of the Company having advised you and them that the minutes of all
such meetings through that date were set forth therein, (3) consultations with
officials of the Company responsible for financial and accounting matters of the
Company, which procedures do not constitute an examination in accordance with
generally accepted accounting standards, and would not necessarily reveal
material adverse changes in the financial position or results of operations or
inconsistencies in the application of generally accepted accounting principles,
nothing has come to their attention which in their judgment would lead them to
believe that (a) the unaudited financial statements and related schedules of the
Company included in the Registration Statement and Prospectus do not comply as
to form in all material respects with the applicable accounting requirements of
21
the Act and the published Rules and Regulations of the Commission issued
thereunder, or were not prepared in accordance with generally accepted
accounting principles and practices consistent in all material respects with
those followed in the preparation of the comparable financial statements and
schedules covered by their reports included in the Registration Statement and
Prospectus, or would require any material adjustments for a fair presentation of
the information purported to be shown thereby or (b) during the period from the
date of the Capitalization table included in the Prospectus to a specified date
not more than four business days prior to the date of such letter, there has
been any material change in the capital stock or debt of the Company, or (c)
during the period from the date of the latest balance sheet and related
statements of operations, changes in stockholders' equity and changes in
financial position included in the Prospectus and covered by their reports
contained therein to the date of the letter, there has been any material adverse
change in the financial condition, or results of operations, of the Company; and
(iv) In addition to the examination referred to in their
reports included in the Registration Statement and the Prospectus and the
limited procedures referred to in clause (iii) above, they have carried out
certain specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are derived from the
general accounting records of the Company which appear in the Prospectus under
the captions "Capitalization", "Management's Discussion and Analysis of
Financial Condition", "Director and Executive Compensation", "Certain
Relationships and Related Transactions", "Selected Financial Information,"
"Dilution," and "Risk Factors," as well as such other financial information as
may be specified by the Representative, and that they have compared such
amounts, percentages and financial information with the accounting records of
the Company and have found them to be in agreement.
All the opinions, letters, certificates and evidence mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel to the Underwriters, whose approval shall not be
unreasonably withheld, conditioned or delayed.
If any of the conditions specified in this Section shall not
have been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement and all obligations of the Underwriters hereunder may be terminated
and canceled by the Representative by notifying the Company of such termination
and cancellation in writing or by telegram at any time prior to, or on, the
Closing Date and any such termination and cancellation shall be without
liability of any party hereto to any other party, except with respect to the
provisions of Sections 7 and 8 hereof. The Representative may, of course, waive,
in writing, any conditions which have not been fulfilled or extend the time for
their fulfillment.
SECTION 12. Termination.
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(a) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company at any time before it becomes
effective pursuant to Section 10.
(b) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company, at any time after it becomes
effective, in the event that the Company, after notice from the Representative
and an opportunity to cure, shall have failed or been unable to comply with any
of the terms, conditions or provisions of this Agreement on the part of the
Company to be performed, complied with or fulfilled within the respective times
herein provided for, including without limitation Section 6(g) hereof, unless
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Representative in writing. This Agreement may also be
terminated if (i) qualifications are received or provided by the Company's
independent public accountants or attorneys to the effect of either inabilities
in furnishing certifications as to material items including, without limitation,
information contained within the footnotes to the financial statements, or as
affecting matters incident to the issuance and sale of the securities
contemplated or as to corporate proceedings or other matters or (ii) there is
any action, suit or proceeding, threatened or pending, at law or equity against
the Company, or by any federal, state or other commission, board or agency
wherein any unfavorable result or decision could materially adversely affect the
business, property, or financial condition of the Company which was not
disclosed in the Prospectus.
(c) This Agreement may be terminated by the Representative by
written or telegraphic notice to the Company at any time after it becomes
effective, if the offering of, or the sale of, or the payment for, or the
delivery of, the Units is rendered impracticable or inadvisable because (i)
additional material governmental restriction, not in force and effect on the
date hereof, shall have been imposed upon trading in securities generally or
minimum or maximum prices shall have been generally established on the New York
Stock Exchange or trading in securities generally on such exchange shall have
been suspended or a general banking moratorium shall have been established by
Federal or New York State authorities or (ii) a war or other national calamity
shall have occurred involving the United States or (iii) the condition of the
market for securities in general shall have materially and adversely changed, or
(iv) the condition of any matter materially affecting the Company or its
business or business prospects, is such that it would be undesirable,
impractical or inadvisable to proceed with, or consummate, this Agreement or the
public offering of the Units.
(d) Any termination of this Agreement pursuant to this Section 12
shall be without liability of any character (including, but not limited to, loss
of anticipated profits or consequential damages) on the part of any party
hereto, except that the Company shall remain obligated to pay the costs and
expenses provided to be paid by it specified in Sections 6, 7 and 8, to the
extent therein provided.
23
SECTION 13. Finder. The Company and the Underwriters mutually represent
that they know of no person who rendered any service in connection with the
introduction of the Company to the Underwriters and that they know of no claim
by anyone for a "finder's fee" or similar type of fee, in connection with the
public offering which is the subject of this Agreement. Each party hereby
indemnifies the other against any such claims by any person known to it, and not
known to the other party hereto, who shall claim to have rendered services in
connection with the introduction of the Company to the Underwriters and/or to
have such a claim.
SECTION 14. Substitution of Underwriters.
(a) If one or more Underwriters default in its or their obligations
to purchase and pay for Units hereunder and if the aggregate amount of such
Units which all Underwriters so defaulting have agreed to purchase does not
exceed 10% of the aggregate number of Units constituting the Units, the
non-defaulting Underwriters shall have the right and shall be obligated
severally to purchase and pay for (in addition to the Units set forth opposite
their names in Schedule I) the full amount of the Units agreed to be purchased
by all such defaulting Underwriters and not so purchased, in proportion to their
respective commitments hereunder. In such event the Representative, for the
accounts of the several non-defaulting Underwriters, may take up and pay for all
or any part of such additional Units to be purchased by each such Underwriter
under this subsection (a), and may postpone the Closing Date to a time not
exceeding seven full business days; or
(b) If one or more Underwriters (other than the Representative)
default in its or their obligations to purchase and pay for the Units hereunder
and if the aggregate amount of such Units which all Underwriters so defaulting
shall have agreed to purchase shall exceed 10% of the aggregate number of Units,
or if one or more Underwriters for any reason permitted hereunder cancel its or
their obligations to purchase and pay for Units hereunder, the non-canceling and
non-defaulting Underwriters (hereinafter called the "Remaining Underwriters")
shall have the right, but shall not be obligated to purchase such Units in such
proportion as may be agreed among them, at the Closing Date. If the Remaining
Underwriters do not purchase and pay for such Units at such Closing Date, the
Closing Date shall be postponed for one business day and the remaining
Underwriters shall have the right to purchase such Units, or to substitute
another person or persons to purchase the same or both, at such postponed
Closing Date. If purchasers shall not have been found for such Units by such
postponed Closing Date, the Closing Date shall be postponed for a further two
business days and the Company shall have the right to substitute another person
or persons, satisfactory to you to purchase such Units at such second postponed
Closing Date. If the Company shall not have found such purchasers for such Units
by such second postponed Closing Date, then this Agreement shall automatically
terminate and neither the Company nor the remaining Underwriters (including the
Representative) shall be under any obligation under this Agreement (except that
the Company shall remain liable to the extent provided in Paragraph 7 hereof).
As used in this
24
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 14. Nothing in this subparagraph (b) will relieve
a defaulting Underwriter from its liability, if any, to the other Underwriters
for damages occasioned by its default hereunder (and such damages shall be
deemed to include, without limitation, all expenses reasonably incurred by each
Underwriter in connection with the proposed purchase and sale of the Units) or
obligate any Underwriter to purchase or find purchasers for any Units in excess
of those agreed to be purchased by such Underwriter under the terms of Sections
3 and 14 hereof.
SECTION 15. Registration of the Underwriters' Unit Warrants and/or
securities underlying the Underwriter's Unit Warrants. The Company agrees that
it will, upon request by the Representative or the holders of a majority of the
Underwriters' Unit Warrants and underlying securities within the period
commencing one year after the Effective Date, and for a period of five years
from the Effective Date, on one occasion only at the Company's sole expense,
cause the Underwriter's Unit Warrants and/or the underlying securities issuable
upon exercise of the Underwriter's Unit Warrants, to be the subject of a
post-effective amendment or a new Registration Statement, if appropriate
(hereinafter referred to as the "demand Registration Statement"), so as to
enable the Representative and/or its assigns to offer publicly the Underwriter's
Unit Warrants and/or the underlying securities. The Company agrees to register
such securities expeditiously and, where possible, within forty-five (45)
business days after receipt of such requests. The Company agrees to use its
"best efforts" to cause the post-effective amendment or new Registration
Statement to become effective and for a period of nine (9) months thereafter to
reflect in the post-effective amendment or new Registration Statement, financial
statements which are prepared in accordance with Section 10(a)(3) of the Act and
any facts or events arising which, individually or in the aggregate, represent a
fundamental and/or material change in the information set forth in such
post-effective amendment or new Registration Statement. The holders of the
Underwriters' Unit Warrants may demand registration without exercising the
Underwriter's Unit Warrants and, in fact, are never required to exercise same.
The Company understands and agrees that if, at any time within
the period commencing one year after the Effective Date and ending seven years
after the Effective Date of the Company's Registration Statement, it should file
a Registration Statement with the Commission pursuant to the Act, regardless of
whether some of the holders of the Underwriters' Unit Warrants and underlying
securities shall have theretofore availed themselves of the right provided
above, the Company, at its own expense, will offer to said holders the
opportunity to register the Underwriters' Unit Warrants and underlying
securities. This paragraph is not applicable to a Registration Statement filed
by the Company with the SEC on Form S-8 or any other inappropriate form.
For purposes of this Section 15, the term "underlying
securities" shall refer to and include the Common Stock and underlying warrants
issuable and issued upon
25
exercise of the Underwriters' Unit Warrants as well as any Common Stock issued
upon the exercise of the underlying warrants.
SECTION 16. Warrant Exercise Fee Agreement. Commencing twelve months after
the Effective Date, the Company will pay ▇▇▇▇▇▇▇▇▇ an amount equal to ten (10%)
percent of the aggregate exercise price of each Warrant exercised of which a
portion may be allowed to the dealer who solicited the exercise (which may also
be ▇▇▇▇▇▇▇▇▇); provided: (1) the market price of the Common Stock on the date
the Warrant was exercised was greater than the Warrant exercise price on that
date; (2) exercise of the Warrant was solicited by a member of the Nasd; (3) the
Warrant was not held in a discretionary account; (4) disclosure of compensation
arrangements was made both at the time of the offering and at the time of
exercise of the Warrant; and (5) the solicitation of the exercise of the Warrant
was not in violation of Regulation M promulgated under the Securities Exchange
Act of 1934 or Rule 2710 of the Nasd Rules of Conduct. The Warrant Exercise Fee
shall be paid in accordance with the provisions of this paragraph and the
Warrant Exercise Fee Agreement filed as an exhibit to the Registration Statement
(the "Warrant Exercise Fee Agreement"). After the Effective Date, the Company
also agrees to execute and deliver the Warrant Exercise Fee Agreement to
▇▇▇▇▇▇▇▇▇ on or before the Closing Date.
SECTION 17. Designation of a Non-voting Advisor to the Board: Unless
waived by us, we shall have the right to designate a non-voting advisor to the
Board for a period of five years after the Effective Date. Said designee, shall
attend meetings of the Board and receive no more or less compensation than is
paid to other non-management directors of the Company and shall be entitled to
receive reimbursement for all reasonable costs incurred in attending such
meetings, including but not limited to, food, lodging and transportation.
Moreover, to the extent permitted by law, the Company will indemnify the
Representative and its designee for the actions of such designee as an advisor
of the Company. In the event that the Company maintains officer and director
liability insurance, the Company will utilize its best efforts to have
Representative and its non-voting advisor covered by such policy.
SECTION 18. Consulting Fee. At Closing, the Company will enter into a one
year financial consulting agreement pursuant to which it will pay the
Representative in advance in full at closing a fee of $100,000.
SECTION 19. Notice. Except as otherwise expressly provided in this
Agreement, (A) whenever notice is required by the provisions hereof to be given
to the Company, such notice shall be given in writing, by certified mail, return
receipt requested, addressed to the Company at Suite 100, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ with a copy to the attention of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq. at
Doerner, Saunders, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and (B) whenever notice is required by the
provisions hereof to be given to the Underwriters, such notice shall be in
writing addressed to the Representative at the address set forth on the first
page of this Agreement, copy to ▇▇▇▇▇▇ ▇▇▇▇▇, Esq., ▇▇▇▇▇▇ ▇▇▇▇▇ P.C., ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇,
▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. Any party may change the address for
notices to be sent by giving written notice to the other persons.
SECTION 20. Representations and Agreements to Survive Delivery. Except as
the context otherwise requires, all representations, warranties, covenants, and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants, and agreements as at the date hereof and as at the
Closing Date and the Additional Closing Date(s), and all representations,
warranties, covenants, and agreements of the several Underwriters and the
Company, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any of the Underwriters or the Company or
any of their respective controlling persons, and shall survive any termination
of this Agreement (whensoever made) and/or delivery of the Firm Units and the
Optional Units to the several Underwriters.
SECTION 21. Miscellaneous. This Agreement is made solely for the benefit
of the Underwriters and the Company and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successor" or the term "successors and assigns" as used in
this Agreement shall not include any purchaser, as such, of any of the Units.
This Agreement shall not be assignable by any party without
the other party's prior written consent. This Agreement shall be binding upon,
and shall inure to the benefit of, our respective successors and permitted
assigns. The foregoing represents the sole and entire agreement between us with
respect to the subject matter hereof and supersedes any prior agreements between
us with respect thereto. This Agreement may not be modified, amended or waived
except by a written instrument signed by the party to be charged. The validity,
interpretation and construction of this Agreement, and of each part hereof,
shall be governed by the internal laws of the State of New York, without giving
effect to the conflict of laws provisions thereof. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall be deemed to be one and the same
instrument. If a party signs this Agreement and transmits an electronic
facsimile of the signature page to the other party, the party who receives the
transmission may rely upon the electronic facsimile as a signed original of this
Agreement.
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
the Company and the Underwriters in accordance with its terms.
Very truly yours,
SPORTSTRAC SYSTEMS, INC.
27
By:
-----------------------------------
President/Chief Executive Officer
CONFIRMED AND ACCEPTED, as of the
date first above written:
▇▇▇▇▇▇▇▇▇ FINANCIAL GROUP, INC.
By:
------------------------------------------------
▇▇▇▇▇ ▇▇▇▇, Chief Operating Officer
For itself and as the Representative of the
other Underwriters named in Schedule I hereto.
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SCHEDULE I
Underwriters Number of Firm Units to be Purchased
------------
▇▇▇▇▇▇▇▇▇ Financial Group, Inc.
Total 585,000
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