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EXHIBIT 1.0
TEAM COMMUNICATIONS GROUP, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
UNDERWRITING AGREEMENT
________________, 1997
▇.▇. ▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
TEAM COMMUNICATIONS GROUP, INC., a California corporation (the
"Company"), proposes to issue and sell pursuant to this Underwriting Agreement
(the "Agreement"), an aggregate of 1,500,000 shares of Common Stock, no par
value per share (the "Shares"), commencing on the effective date of the
Registration Statement (the "Effective Date"). In addition, each of the
Company and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Selling Shareholder") proposes to grant the
option referred to in Section 2(b) to purchase all or any part of an aggregate
of 225,000 additional Shares.
The aggregate of 1,500,000 Shares, together with all or any part of
the 225,000 Shares you have the option to purchase, are herein called the
"Shares." The Common Stock of the Company to be outstanding after giving
effect to the sale of the Shares (including the 225,000 Shares Underwriters
have the option to purchase) is herein called the "Common Stock."
You have advised the Company and the Selling Shareholder that you
desire to purchase the Shares. The Company and the Selling Shareholder confirm
the agreements made by each of them with respect to the purchase of the Shares
by you, as follows:
1. Representations and Warranties of the Company and the Selling
Shareholder.
A. The Company represents and warrants to, and agrees with you
that:
(a) A registration statement (File No. 333-26307) on Form
SB-2 relating to the public offering of the Shares, including a preliminary
form of prospectus, copies of which have heretofore been delivered to you, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, and has
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been filed with the Commission under the Act. "Preliminary Prospectus" shall
mean each prospectus filed pursuant to Rule 430 of the Rules and Regulations.
The registration statement (including all financial schedules and exhibits) as
amended at the time it becomes effective and the final prospectus included
therein are respectively referred to as the "Registration Statement" and the
"Prospectus," except that (i) if the prospectus first filed by the Company
pursuant to Rule 424(b) or Rule 430A of the Rules and Regulations or otherwise
utilized and not required to be so filed shall differ from said prospectus as
then amended, the term "Prospectus" shall mean the prospectus first filed
pursuant to Rule 424(b) or Rule 430A or so utilized from and after the date on
which it shall have been filed or utilized, and (ii) if such registration
statement or prospectus is amended or such prospectus is supplemented, after
the effective date of such registration statement and prior to the Option
Closing Date (as defined in Section 2(b)), the term "Registration Statement"
shall include such registration statement as so amended, and the term
"Prospectus" shall include the prospectus as so amended or supplemented, or
both, as the case may be.
(b) At the time the Registration Statement becomes
effective and at all times subsequent thereto up to the Option Closing Date
(hereinafter defined), (i) the Registration Statement and Prospectus will in
all material respects conform to the requirements of the Act and the Rules and
Regulations; and (ii) neither the Registration Statement nor the Prospectus
will include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were
made; provided, however, that the Company makes no representations, warranties
or agreements as to information contained in or omitted from the Registration
Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of you specifically for
use in the preparation thereof. It is understood that the statements set forth
in the Prospectus with respect to stabilization, the material set forth under
the heading "Underwriting" and the identity of counsel to you under the heading
"Legal Matters" constitute the only information furnished in writing by you for
inclusion in the Registration Statement and Prospectus, as the case may be.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation, with full power and authority (corporate and other) to
own its properties and conduct its business as described in the Prospectus and
is duly qualified to do business as a foreign corporation and is in good
standing in all other jurisdictions in which the nature of its business or the
character or location of its properties requires such qualification, except
where failure to so qualify is not reasonably likely to materially adversely
affect the Company's business, properties or financial condition.
(d) The authorized capital stock of the Company as of the
Effective Date was as set forth under "Capitalization" in the Prospectus. The
shares of issued and outstanding capital stock of the Company set forth
thereunder have been duly authorized, validly issued and are fully paid and
non-assessable; except as set forth in the Prospectus, as of the date specified
in the Prospectus no options, warrants or other rights to purchase, agreements
or other obligations to issue, or agreements or other rights to convert any
obligation into, any shares of capital stock of the Company have been granted
or entered into by the Company. The Shares and Underwriter's Warrant (as that
term is
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defined in Section 11 herein, the Underwriter's Warrant) conform in all
material respects to all statements relating thereto contained in the
Registration Statement and Prospectus.
(e) The Shares are duly authorized and, when issued,
delivered and paid for pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights of
any security holder of the Company. The certificates evidencing the Shares are
and will be in valid and proper legal form. The Underwriter's Warrant will be
exercisable for shares of Common Stock of the Company in accordance with the
terms of the Underwriter's Warrant and at the prices therein provided for. The
shares of Common Stock 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 Underwriter's Warrant and when the price is paid, shall
be fully paid and non-assessable. Neither the filing of the Registration
Statement nor the offering or sale of the Shares as contemplated in this
Agreement gives rise to any rights, other than those which have been waived or
satisfied, for or relating to the registration of any securities of the
Company, except as described in the Registration Statement.
(f) This Agreement and the Underwriter's Warrant have
been duly and validly authorized, executed and delivered by the Company, and
assuming due execution by the other party or parties hereto and thereto,
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as rights to
indemnity and contribution hereunder may be limited by applicable law and
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally or by general equitable principles.
The Company has full power and lawful authority to authorize, issue and sell
the Shares to be sold by it hereunder on the terms and conditions set forth
herein, and no consent, approval, authorization or other order of any
governmental authority is required in connection with such authorization,
execution and delivery or with the authorization, issue and sale of the Shares
or the Underwriter's Warrant, except such as may be required under the Act or
state securities laws.
(g) Except as described in the Prospectus, the Company is
not in material violation, breach or default of or under, and consummation of
the transactions herein contemplated and the fulfillment of the terms of this
Agreement and the Underwriter's Warrant will not conflict with, or result in a
breach of, any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
pursuant to the terms of, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the property or assets of
the Company are subject, which would have a material adverse effect on the
business, properties or financial condition of the Company, nor will such
action result in any violation of the provisions of the articles of
incorporation or the by-laws of the Company, as amended, or any statute or any
order, rule or regulation applicable to the Company of any court or of any
regulatory authority or other governmental body having jurisdiction over the
Company, which would have a material adverse effect on the business, properties
or financial condition of the Company.
(h) The Company owns no real property and, subject to the
qualifications stated in the Prospectus, the Company has good and marketable
title to all properties and assets described in the Prospectus as owned by it,
free and clear of all liens, charges, encumbrances or restrictions,
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except such as are not materially significant or important in relation to its
business; all of the leases and subleases under which the Company is the lessor
or sublessor of properties or assets or under which the Company holds
properties or assets as lessee or sublessee as described in the Prospectus are
in full force and effect, and, except as described in the Prospectus, the
Company is not in default in any respect with respect to any of the terms or
provisions of any of such leases or subleases which would have a material
adverse effect on the business, properties or financial condition of the
Company, and no claim has been asserted by anyone adverse to rights of the
Company as lessor, sublessor, lessee or sublessee under any of the leases or
subleases mentioned above, or affecting or questioning the right of the Company
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus,
which would have a material adverse effect on the business properties or
financial condition of the Company; and the Company owns or leases all such
properties described in the Prospectus as are necessary to its operations as
now conducted and, except as otherwise stated in the Prospectus, as proposed to
be conducted as set forth in the Prospectus.
(i) Each of Price Waterhouse LLP and Stonefield
▇▇▇▇▇▇▇▇▇, Inc., who have given their respective reports on certain financial
statements filed and to be filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are with respect
to the Company independent public accountants as required by the Act and the
Rules and Regulations.
(j) The financial statements and schedules, together with
related notes, set forth in the Prospectus or the Registration Statement
present fairly the financial position and results of operations and changes in
financial position of the Company on the basis stated in the Registration
Statement, at the respective dates and for the respective periods to which they
apply. Said statements and schedules and related notes have been prepared in
accordance with generally accepted accounting principles applied on a basis
which is consistent during the periods involved, [provided, however, that the
quarterly statements do not contain all notes to such statements as are
required under such principles and such statements do not contain normal year
end adjustments].
(k) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, the Company
has not incurred any liabilities or obligations, direct or contingent, not in
the ordinary course of business, or entered into any transaction not in the
ordinary course of business, which is material to the business of the Company,
and there has not been any change in the capital stock of, or any incurrence of
long-term debt by, the Company or any issuance of options, warrants or other
rights to purchase the capital stock of the Company or any adverse change or
any development involving, so far as the Company can now reasonably foresee, a
prospective adverse change in the condition (financial or other), net worth,
results of operations, business, key personnel or properties of it which would
be material to the business or financial condition of the Company, and the
Company has not become party to, and neither the business nor the property of
the Company has become the subject of, any material litigation whether or not
in the ordinary course of business.
(l) Except as set forth in the Prospectus, there is not
now pending nor, to the knowledge of the Company, threatened, any action, suit
or proceeding (including those related to
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environmental matters or discrimination on the basis of age, sex, religion or
race) to which the Company is a party before or by any court or governmental
agency or body, which, if adversely determined, would result in any material
adverse change in the condition (financial or otherwise), business prospects,
net worth or properties of the Company; and, except as set forth in the
Prospectus, no labor disputes involving the employees of the Company exist
which, if adversely determined, would result in any material adverse change in
the condition (financial or otherwise), business prospects, net worth or
property of the Company.
(m) Except as disclosed in the Prospectus, the Company
has filed all necessary federal, state and foreign income and franchise tax
returns and has paid all taxes shown as due thereon; and there is no tax
deficiency which has been or to the knowledge of the Company might be asserted
against the Company which has not been adequately reserved for on the Company's
balance sheet.
(n) The Company has sufficient licenses, permits and
other governmental authorizations currently required for the conduct of its
business or the ownership of its property as described in the Prospectus and is
in all material respects complying therewith and owns or possesses adequate
rights to use all material patents, patent applications, trademarks, ▇▇▇▇
registrations, copyrights and licenses necessary for the conduct of such
business and has not received any notice of conflict with the asserted rights
of others in respect thereof. To the best knowledge of the Company, none of
the activities or business of the Company is in violation of, or causes the
Company to violate, any law, rule, regulation or order of the United States,
any state, county or locality, or of any agency or locality, the violation of
which would have a material adverse effect upon the condition (financial or
otherwise), business prospects, net worth or properties of the Company.
(o) The Company has not, directly or indirectly, at any
time (i) made any contributions to any candidate for foreign political office,
or if made, failed to disclose fully any such contribution made in violation of
law, or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or
quasi-public duties, other than payments or contributions required or allowed
by applicable law. The Company's internal accounting controls and procedures
are sufficient to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(p) On the Closing Dates (as defined in Section 2(c)),
all transfer or other taxes (including franchise, capital stock or other tax,
other than income taxes imposed by any jurisdiction), if any, which are
required to be paid in connection with the sale and transfer of the Shares to
you hereunder will have been fully paid or provided for by the Company or the
Selling Shareholder, as applicable and all laws imposing such taxes will have
been fully complied with.
(q) All contracts and other documents of the Company
which are, under the Rules and Regulations, required to be filed as exhibits to
the Registration Statement have been so filed.
(r) The Company has not taken and will not take, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to
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constitute, the stabilization or manipulation of the price of the Shares or to
facilitate the sale or resale of the Shares.
(s) The Company has no subsidiaries.
(t) Except for this Agreement and other agreements with
you, the Company has not entered into any agreement pursuant to which any
person is entitled either directly or indirectly to compensation from the
Company for services as a finder in connection with the proposed public
offering.
(u) The Shares have been approved for listing on the
Nasdaq SmallCap Market.
(v) The Company is not, and upon consummation of the
transactions contemplated hereby will not be, subject to registration as an
"investment company" under the Investment Company Act of 1940.
(w) The Company (i) is in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental Laws"),
(ii) has received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its respective business and (iii) is
in compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals will not in the aggregate have a
material adverse effect on the Company.
(x) Each employee benefit plan, within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that is maintained, administered or contributed to by the Company
for employees or former employees of the Company has been maintained in
compliance with its respective terms and the requirements of any applicable
statutes, orders, rules and regulations, including but not limited to ERISA and
the Internal Revenue Code of 1986, as amended (the "Code"). No prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of the
Code, has occurred with respect to any such plan, excluding transactions
effected pursuant to a statutory or administrative exemption. For each such
plan that is subject to the funding rules of Section 412 of the Code or Section
302 of ERISA, no "accumulated funding deficiency," as defined in Section 412 of
the Code, has been incurred, whether or not waived, and the fair market value
of the assets of each such plan (excluding for these purposes accrued but
unpaid contributions) exceeded the present value of all benefits accrued under
such plan determined using reasonable actuarial assumptions.
(y) The Company maintains a system of internal accounting
controls that, taken as a whole, are sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in
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accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(z) The Company maintains insurance of the types and in
the amounts generally deemed adequate for its respective business, including,
without limitation, insurance covering real and personal property owned or
leased by it against theft, damage, destruction, acts of vandalism and all
other material risks customarily insured against, all of which insurance is in
full force and effect. The Company has no reason to believe that it will not
be able to renew existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its respective business.
B. Representations and Warranties of the Selling Shareholder.
(a) The Selling Shareholder is the lawful owner of the
Shares of Common Stock to be sold by him pursuant to this Agreement and has,
and on the Option Closing Date will have, good and clear title to such Shares,
free of all restrictions on transfer, liens, encumbrances, security interests
and claims whatsoever.
(b) Upon delivery of and payment for such Shares pursuant
to this Agreement, good and clear title to such Shares will pass to you, free
of all restrictions on transfer, liens, encumbrances, security interests and
claims whatsoever.
(c) The Selling Shareholder has, and on the Option
Closing Date will have, full legal right, power and authority to enter into
this Agreement and the Custody Agreement between the Selling Shareholder and
U.S. Stock Transfer Corporation, Custodian (the "Custody Agreement") and to
sell, assign, transfer and deliver such Shares in the manner provided herein
and therein, and this Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of such Selling Shareholder
and each of this Agreement and the Custody Agreement is a valid and binding
agreement of the Selling Shareholder enforceable against the Selling
Shareholder in accordance with its terms, except as rights to indemnity and
contribution hereunder may be limited by applicable law and except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(d) All information furnished by or on behalf of the
Selling Shareholder relating to the Selling Shareholder and the Selling
Shareholder's Shares that is set forth in the Registration Statement and the
Prospectus is, and at the time the Registration Statement became or becomes, as
the case may be, effective and at all times subsequent thereto up to and on the
Option Closing Date (hereinafter defined) was or will be, true, correct and
complete, and does not, and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up
to and on the Option Closing Date, will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make such information not misleading.
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(e) Neither the Selling Shareholder nor any of the
Selling Shareholder's affiliates directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
or had any other association with (within the meaning of Article I of the
Bylaws of the National Association of Securities Dealers, Inc. (the "NASD")),
any member firm of the NASD.
(f) This Agreement has been duly and validly authorized,
executed and delivered by the Selling Shareholder, and assuming due execution
by the other party or parties hereto and thereto, constitutes valid and binding
obligations of the Selling Shareholder enforceable against the Selling
Shareholder in accordance with their respective terms, except as rights to
indemnity and contribution hereunder may be limited by applicable law and
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally or by general equitable principles.
The Selling Shareholder has full power and lawful authority to authorize, issue
and sell the Securities to be sold by it hereunder on the terms and conditions
set forth herein, and no consent, approval, authorization or other order of any
governmental authority is required in connection with such authorization,
execution and delivery or with the authorization, issue and sale of the Shares,
except such as may be required under the Act or state securities laws.
(g) Except as described in the Prospectus, the Selling
Shareholder is not in material violation, breach or default of or under, and
consummation of the transactions herein contemplated and the fulfillment of the
terms of this Agreement, will not conflict with, or result in a breach of, any
of the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance pursuant to the terms
of, any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Selling Shareholder is a party or by which the
Selling Shareholder may be bound or to which any of the property or assets of
the Selling Shareholder are subject, which would have a material adverse effect
on the business, properties or financial condition of the Selling Shareholder,
nor will such action result in any violation of any statute or any order, rule
or regulation applicable to the Selling Shareholder of any court or of any
regulatory authority or other governmental body having jurisdiction over the
Selling Shareholder, which would have a material adverse effect on the
business, properties or financial condition of the Selling Shareholder.
(h) The Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Shares or to facilitate the
sale or resale of the Shares.
(i) The Selling Shareholder has not entered into any
agreement pursuant to which any person is entitled either directly or
indirectly to compensation from the Company for services as a finder in
connection with the proposed public offering.
2. Purchase, Delivery and Sale of the Shares.
(a) Subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company agrees to issue and
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sell to you, and you agree to buy from the Company at $_____ per Share at the
place and time hereinafter specified, the number of Shares set forth opposite
your name in Schedule I hereto (the "Firm Shares").
Delivery of the Firm Shares against payment therefor
shall take place at the offices of ▇.▇. ▇▇▇▇▇▇ & Co., Inc., ▇▇▇▇ ▇▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or at such other place as may be designated
by agreement between you and the Company) at ________a.m. New York time on
_____________, 1997, or at such other time and date, not later than ten (10)
business days thereafter, as you may designate, such time and date of payment
and delivery for the Firm Shares being herein called the "First Closing Date."
Time shall be of the essence and delivery at the time and place specified in
this subsection (a) is a further condition to your obligations hereunder.
(b) In addition, subject to the terms and conditions of
this Agreement, and upon the basis of the representations, warranties and
agreements herein contained, the Company and the Selling Shareholder hereby
grant you an option to purchase all or any part of an aggregate of 225,000
additional Shares at the same price per Share as you shall pay for the Shares
being sold pursuant to the provisions of subsection (a) of this Section 2 (such
additional Shares being referred to herein as the "Option Shares"). This
option may be exercised on one occasion within thirty (30) business days after
the Effective Date upon notice by you to the Company and the Selling
Shareholder advising each of them as to the amount of Option Shares as to which
the option is being exercised, the names and denominations in which the
certificates for such Option Shares are to be registered and the time and date
when such certificates are to be delivered. Such time and date shall be
determined by you but shall not be earlier than four and not later than 10 full
business days after the exercise of said option, nor in any event prior to the
First Closing Date (although if such option is exercised within one day after
the Effective Date, the closing of the option shall occur on the First Closing
Date), and such time and date is referred to herein as the "Option Closing
Date." Delivery of the Option Shares against payment therefor shall take place
at the offices of ▇.▇. ▇▇▇▇▇▇ & Co., Inc., ▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇. Time shall be of the essence and delivery at the time and place
specified in this subsection (b) is a further condition to your obligations
hereunder.
The Option granted hereunder may be exercised only to
cover over-allotments in the sale by you of Firm Shares referred to in
subsection (a) above.
(c) The Company and the Selling Shareholder, as
applicable, will make the certificates for the Shares to be purchased by you
hereunder available to you for checking at least one full business day prior to
the First Closing Date or the Option Closing Date (which are collectively
referred to herein as the "Closing Dates" and individually as a "Closing
Date"), as the case may be. The certificates shall be in such names and
denominations as you may request, at least two full business days prior to the
relevant Closing Dates. Time shall be of the essence and the availability of
the certificates at the time and place specified in this Agreement is a further
condition to your obligations.
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Definitive engraved certificates in negotiable form
for the Shares to be purchased by you hereunder will be delivered by the
Company and the Selling Shareholder, as applicable, to you for your account
against payment of the purchase price by you, at your option, by certified or
bank cashier's checks in New York Clearing House funds or by wire transfer,
payable to the order of the Company.
In addition, in the event you exercise the option to
purchase from the Company and the Selling Shareholder all or any portion of the
Option Shares pursuant to the provisions of subsection (b) above, payment for
such Option Shares shall be made to or upon the order of the Company and the
Selling Shareholder by you, at your option, by certified or bank cashier's
checks payable in New York Clearing House funds or by wire transfer, at the
offices of ▇.▇. ▇▇▇▇▇▇ & Co., Inc. at the time and date of delivery of such
Option Shares as required by the provisions of subsection (b) above, against
receipt of the certificates for such Option Shares by you, registered in such
names and in such denominations as you may request.
It is understood that you propose to offer the Shares
to be purchased hereunder to the public upon the terms and conditions set forth
in the Registration Statement, after the Registration Statement becomes
effective.
3. Covenants of the Company.
The Company covenants and agrees with you that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective and, upon notification from the
Commission that the Registration Statement has become effective, will so advise
you and will not at any time, whether before or after the Effective Date, file
any amendment to the Registration Statement or supplement to the Prospectus of
which you shall not previously have been advised and furnished with a copy or
to which you or your counsel shall have reasonably objected in writing or which
is not in compliance with the Act and the Rules and Regulations. At any time
prior to the later of (A) the completion by you of the distribution of the
Shares contemplated hereby (but in no event more than nine (9) months after the
Effective Date) and (B) twenty-five (25) days after the Effective Date, the
Company will prepare and file with the Commission, promptly upon your request,
any amendments or supplements to the Registration Statement or Prospectus
which, in your reasonable opinion, may be necessary or advisable in connection
with the distribution of the Shares.
Promptly after you or the Company is advised thereof,
you will advise the Company or the Company will advise you, as the case may be,
and confirm the advice in writing, of the receipt of any comments of the
Commission, of the effectiveness of any post-effective amendment to the
Registration Statement, of the filing of any supplement to the Prospectus or
any amended Prospectus, of any request made by the Commission for amendment of
the Registration Statement or for supplementing of the Prospectus or for
additional information with respect thereto, of the issuance by the Commission
or any state or regulatory body of any stop orders or other order suspending
the effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus or the Prospectus, or of the
suspension of the qualification of
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the Shares for offering in any jurisdiction, or the institution of any
proceedings for any of such purposes, and will use its best efforts to prevent
the issuance of any such order and, if issued, to obtain as soon as possible
the lifting thereof.
The Company has caused to be delivered to you copies
of each Preliminary Prospectus, and the Company has consented and hereby
consents to the use of such copies for the purposes permitted by the Act. The
Company authorizes you and selected dealers to use the Prospectus in connection
with the sale of the Shares for such period not to exceed nine months from the
Effective Date as in the reasonable opinion of counsel for you the use thereof
is required to comply with the applicable provisions of the Act and the Rules
and Regulations. In case of the happening, at any time within such period as a
Prospectus is required under the Act to be delivered in connection with sales
by an underwriter or dealer, of any event of which the Company has knowledge
and which materially affects the Company or the Shares, or which in the opinion
of counsel for the Company or counsel for you should be set forth in an
amendment to the Registration Statement or a supplement to the Prospectus in
order to make the statements therein not then misleading, in light of the
circumstances existing at the time the Prospectus is required to be delivered
to a purchaser of the Shares, or in case it shall be necessary to amend or
supplement the Prospectus to comply with the Act or with the Rules and
Regulations, the Company will notify you promptly and forthwith prepare and
furnish to you copies of such amended Prospectus or of such supplement to be
attached to the Prospectus, in such quantities as you may reasonably request,
in order that the Prospectus, as so amended or supplemented, will not contain
any untrue statement of a material fact or omit to state any material facts
necessary in order to make the statements in the Prospectus, in the light of
the circumstances under which they are made, not misleading. The preparation
and furnishing of any such amendment or supplement to the Registration
Statement or amended Prospectus or supplement to be attached to the Prospectus
shall be without expense to the Underwriters, except that in case you are
required, in connection with the sale of the Shares, to deliver a Prospectus
nine (9) months or more after the Effective Date, the Company will upon request
of and at your expense, amend or supplement the Registration Statement and
Prospectus and furnish you with reasonable quantities of prospectuses complying
with Section 10(a)(3) of the Act.
(b) The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations thereunder in connection with the offering
and issuance of the Shares.
The Company will use its best efforts to qualify or
register the Shares for sale under the securities or "blue sky" laws of such
jurisdictions as you may have designated in writing prior to the execution
hereof and will make such applications and furnish such information to counsel
for you as may be required for that purpose and to comply with such laws,
provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent to
service process in any jurisdiction. The Company will, from time to time,
prepare and file such statements and reports as are or may be required to
continue such qualification in effect for so long a period as you may
reasonably request. Legal fees for such qualifications shall be itemized based
on the time expended and costs incurred, shall be reasonable and shall not in
any event exceed $35,000.00, exclusive of filing fees (unless otherwise
agreed). You shall supply copies of all applications for the registration of
Shares and related documents
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(except for the Registration Statement and Prospectus) filed with the various
states to the Company's counsel, concurrently with their transmission to the
various states, and copies of all comments and orders received from the various
states shall be supplied to the Company's counsel. You have advised counsel
for the Company in writing of all states wherein the Offering has been
registered for sale, canceled, withdrawn or denied.
(c) The Company will instruct its transfer agent to
provide you with copies of the Depository Trust Company stock transfer sheets
on a weekly basis for a period of six (6) weeks from the First Closing Date and
on a monthly basis thereafter for six (6) additional months.
(d) The Company will use its best efforts to cause a
Registration Statement under the Exchange Act to be declared effective on the
Effective Date.
(e) For so long as the Company is a reporting company
under either Section 12(g), 13 or 15(d) of the Exchange Act, the Company, at
its expense, will furnish to its shareholders an annual report (including
financial statements audited by independent public accountants), in reasonable
detail and at its expense, will furnish to you during the period ending five
(5) years from the date hereof, (i) as soon as practicable after the end of
each fiscal year, a balance sheet of the Company and any subsidiaries as at the
end of such fiscal year, together with statements of income, shareholders
equity and cash flows of the Company and any subsidiaries as at the end of such
fiscal year, all in reasonable detail and accompanied by a copy of the
certificate or report thereon of independent accountants; (ii) as soon as they
are available, a copy of all reports (financial or other) mailed to security
holders; (iii) as soon as they are available, a copy of all non-confidential
reports and financial statements furnished to or filed with the Commission; and
(iv) such other information of a public nature as you may from time to time
reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company and
its subsidiary or subsidiaries are consolidated in reports furnished to its
shareholders generally.
(g) The Company will deliver to you at or before the
First Closing Date one signed copy of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto. The Company will deliver to or upon your order, from time to time
until the Effective Date as many copies of any Preliminary Prospectus filed
with the Commission prior to the Effective Date as the Underwriters may
reasonably request. The Company will deliver to you on the Effective Date and
thereafter for so long as a Prospectus is required to be delivered under the
Act, from time to time, as many copies of the Prospectus, in final form, or as
thereafter amended or supplemented, as you may from time to time reasonably
request.
(h) The Company will make generally available to its
security holders and deliver to you as soon as it is practicable to do so, but
in no event later than ninety (90) days after the end of twelve (12) months
after its current fiscal quarter, an earnings statement (which need not be
audited) covering a period of at least twelve (12) consecutive months beginning
after the Effective Date which shall satisfy the requirements of Section 11(a)
of the Act.
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(i) The Company will apply the net proceeds from the sale
of the Shares substantially for the purposes set forth under "Use of Proceeds"
in the Prospectus, and will file such reports with the Commission with respect
to the sale of the Shares and the application of the proceeds therefrom as may
be required pursuant to Rule 463 of the Rules and Regulations.
(j) The Company will, promptly upon your request, prepare
and file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action,
which in the opinion of Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to
you, may be reasonably necessary or advisable in connection with the
distribution of the Shares and will use its best efforts to cause the same to
become effective as promptly as possible.
(k) Prior to the Effective Date, the Company will use its
best efforts to cause the Selling Shareholder and the shareholders holding the
Registered Warrant Shares (as defined in the Prospectus) and the Restricted
Shares and Warrant Shares (as each is defined in the Prospectus) to enter into
a written agreement with you, which, among other things, shall provide that for
a period of 12 and 18 months, respectively, following the closing date of the
Offering, such shareholders will not sell, assign, hypothecate or pledge any of
the shares of Common Stock of the Company owned by them on the Effective Date,
or subsequently acquired by the exercise of any options or warrants or
conversion of any convertible security of the Company held by them on the
Effective Date directly or indirectly, except with your prior written consent
and such shareholders will permit all certificates evidencing those shares to
be stamped with an appropriate restrictive legend, and the Company will cause
the transfer agent for the Company to note such restrictions on the transfer
books and records of the Company.
(l) The Company shall, upon the initial filing of the
Registration Statement, make all filings required to obtain approval for the
quotation of the Shares on the Nasdaq SmallCap Market and will use its best
efforts to effect and maintain the aforesaid approval for at least five (5)
years from the date of this Agreement. Within ten (10) business days after the
Effective Date, the Company shall cause the Company to be listed in the
Standard & Poor's Corporate Records and cause such listing to be maintained for
five years from the date of this Agreement. The Company will use its best
efforts to cause the Shares to be accepted for listing upon the Pacific Stock
Exchange and/or other exchange acceptable to you, prior to the Effective Date.
In the event that listing cannot take place prior to the Effective Date the
Company agrees to cause such listing to occur as soon as practicable after the
Closing Date.
(m) The Company represents that it has not taken, and
agrees that it will not take, directly or indirectly, any action designed to or
which has constituted or which might reasonably be expected to cause or result
in the stabilization or manipulation of the price of the Shares or to
facilitate the sale or resale the Shares.
(n) During the period of the offering, and for a period
of twelve (12) months from the Effective Date, the Company will not sell or
otherwise dispose of any securities of the Company without your prior written
consent, which consent shall not be unreasonably withheld, except for shares of
Common Stock issuable upon exercise of options or warrants or conversion of
convertible
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securities outstanding on the Effective Date. For a period of twenty-four (24)
months from the Effective Date, the Company will not issue, sell or otherwise
dispose of any securities of the Company pursuant to Regulation S or Regulation
D under the Act without your prior written consent.
(o) During the five (5) year period after the First
Closing Date, you shall be given the right to purchase for your own account or
sell for the account of the Company's officers, directors, and principal
shareholders (any person holding five percent (5%) or more of the Company's
voting securities). any securities sold pursuant to Rule 144 under the Act.
(p) Prior to the Effective Date, the Company shall retain
a public relations firm acceptable to you, and shall continue to retain such
firm, or any alternate firm acceptable to you, for a minimum period of two (2)
years.
(q) The Company will reserve and keep available that
maximum number of its authorized but unissued securities which are issuable
upon exercise of the Underwriter's 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 reasonably 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 with
one hundred eighty (180) days of the First Closing Date.
(s) For a period of twenty-four (24) months from the
closing of the offering, you shall have the right to designate an observer to
the Board of Directors provided that the designee is acceptable to the Company.
If notified by you of its election to designate said member, the Company will
cause such election to occur within thirty (30) days of the date of election.
If you request said inclusion of designee, this request shall be satisfied by a
resolution of the Board of Directors of the Company increasing the authorized
number of directors to accommodate the designee and then electing such designee
to fill the newly-created vacancy. In addition, the Company shall cause such
designee to be on the slate of directors presented to the Company's
shareholders for election at any annual or special meeting of shareholders
where directors of the Company are elected and the Company shall cause such
designee to be included in any of their respective proxy material prepared for
use at such meeting. Such members shall be entitled to the same compensation,
reimbursements and indemnification as other members of the Company's Board of
Directors. In the event that the Company is unable to obtain the Directors'
and Officers' Liability Insurance described in subparagraph (v) below, you
shall have the right for such forty-eight (48) month period to designate a
consultant to the Board of Directors of the Company, which consultant shall
have the right to attend all Board and Board committee meetings and shall be
compensated on the same basis as outside members of the Board. The Company
shall hold at least four (4) meetings per year.
(t) The Company shall deliver to you an executed
financial consulting agreement in form and substance acceptable to you whereby
you agree to act as a financial consultant for a
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period of twelve (12) months from the effective date for a non-refundable fee
of $6,000 per month payable on a monthly basis. The entire one year fee shall
be paid to you by the Company on the Closing Date.
(u) The Company shall have acquired reasonable amount of
Director and Officer Liability Insurance (provided that such insurance can be
obtained at a reasonable cost as determined by the Company and you) from a
responsible insurer, all satisfactory you.
4. Conditions of Obligations of ▇.▇. ▇▇▇▇▇▇ & Co., Inc.
Your obligations to purchase and pay for the Shares which you
have agreed to purchase hereunder are subject to the accuracy (as of the date
hereof, and as of the Closing Dates) of and compliance with the representations
and warranties of the Company herein, to the performance by the Company of its
obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become
effective and you shall have received notice thereof not later than 10:00 a.m.,
New York time, on the date of this Agreement, or at such later time or on such
later date as to which you may agree in writing; on the Closing Dates, no stop
order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that or any similar purpose shall have been
instituted or shall be pending or, to your knowledge or to the knowledge of the
Company, shall be contemplated by the Commission; any request on the part of
the Commission for additional information shall have been complied with to the
reasonable satisfaction of Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel
to you; and no stop order shall be in effect denying or suspending
effectiveness of the Registration Statement nor shall any stop order
proceedings with respect thereto be instituted or pending or threatened under
the Act.
(b) At the First Closing Date, you shall have received
the opinion, dated as of the First Closing Date, of ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇
LLP, counsel for the Company, in form and substance reasonably satisfactory to
counsel for you, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of California and is duly qualified or licensed to do
business as a foreign corporation in good standing in each other
jurisdiction in which the ownership or leasing of its properties or
the conduct of its business requires such qualification, except where
failure to so qualify will not have a material adverse effect on the
business, properties or financial condition of the Company. The
Company has the corporate power to own, lease and operate its
properties and to conduct its business as described in the Prospectus
and to enter into and perform its obligations under this Agreement and
the Underwriter's Warrant;
(ii) The authorized capitalization of the Company
as of the date of the Prospectus was as set forth in the Prospectus;
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
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description thereof contained in the Prospectus; the outstanding
shares of Common Stock of the Company, to such counsel's knowledge,
have not been issued in violation of the preemptive rights of any
shareholder and the shareholders of the Company do not have any
preemptive rights or other rights to subscribe for or to purchase the
Shares; except for the transfer restrictions regarding "affiliates"
contained in Rule 144 promulgated under the Act, there are no
restrictions upon the voting or transfer of any of the Shares; the
Common Stock and the Underwriter's Warrant conform in all material
respects to the respective descriptions thereof contained in the
Prospectus; the Shares to be issued as contemplated in the
Registration Statement and this Agreement have been duly authorized
and, when paid for in accordance with the terms of the Agreement, will
be validly issued, fully paid and non-assessable and free of
preemptive rights contained in the Company's certificate or articles
of incorporation or By-laws, or any other document, instrument or
agreement known to counsel; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the
Underwriter's Warrant; to such counsel's knowledge, neither the filing
of the Registration Statement nor the offering or sale of the Shares
as contemplated by this Agreement gives rise to any registration
rights or other rights, other than those contemplated by the
Underwriter's Warrant or described in the prospectus or which have
been waived or satisfied, for or relating to the registration of the
Shares;
(iii) This Agreement and the Underwriter's Warrant
(sometimes hereinafter collectively referred to as the "Underwriter
Agreements") have been duly and validly authorized, executed and
delivered by the Company, and assuming due execution and delivery of
this Agreement by you, such agreements are, or when duly executed will
be, the valid and legally binding obligations of the Company except as
enforceability may be limited by bankruptcy, insolvency, moratorium or
other laws affecting the rights of creditors, or by general equitable
principles; provided that no opinion need be expressed as to the
enforceability of the indemnity provisions contained in Section 6 or
the contribution provisions contained in Section 7 of this Agreement;
(iv) The certificates evidencing the Shares are in
valid and proper legal form; the Underwriter's Warrant will be
exercisable for shares of Common Stock of the Company in accordance
with the terms of the Underwriter's Warrant and at the prices therein
provided for; the shares of Common Stock of the Company issuable upon
exercise of the Underwriter's 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 Underwriter's
Warrant and when the price is paid shall be fully paid and
non-assessable;
(v) Such counsel knows of no pending or
threatened legal or governmental proceedings to which the Company is a
party which are required to be described or referred to in the
Registration Statement which are not so described or referred to;
(vi) The execution and delivery of this Agreement
and the Underwriter's Warrant and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions
herein or therein contemplated will not result in a violation
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of, or constitute a default under, the articles of incorporation or
by-laws of the Company, or in a violation of or default under any
obligation, agreement, covenant or condition contained in any material
bond, debenture, note or other evidence of indebtedness or in any of
the material contracts, indentures, mortgages, loan agreements,
leases, joint ventures or other agreements or instruments to which the
Company is a party that are filed as Exhibits to the Registration
Statement or otherwise known to counsel;
(vii) The Registration Statement has become
effective under the Act, and to such counsels knowledge, no stop order
suspending the effectiveness of the Registration Statement is in
effect, no proceedings for that purpose have been instituted or are
pending before, or threatened by, the Commission and the Registration
Statement and the Prospectus (except, in the case of both the
Registration Statement and any Amendment thereto, and the Prospectus
and any supplement thereto for the financial statements and notes and
schedules thereto, and other financial information or statistical data
contained therein, or omitted therefrom, as to which such counsel need
express no opinion) comply as to form in all material respects with
the applicable requirements of the Act and the Rules and Regulations;
(viii) All descriptions in the Registration
Statement and the Prospectus, and any amendment or supplement thereto,
of contracts, plans, options and other documents are accurate and
fairly present the information required to be shown, and such counsel
is familiar with all contracts and other documents referred to in the
Registration Statement and the Prospectus and any such amendment or
supplement, or filed as exhibits to the Registration Statement, and
such counsel does not know of any contracts or documents of a
character required to be summarized or described therein or to be
filed as exhibits thereto which are not so summarized, described or
filed;
(ix) No authorization, approval, consent
or license of any governmental or regulatory authority or agency is
necessary in connection with the authorization, issuance, transfer,
sale or delivery of the Shares by the Company, in connection with the
execution, delivery and performance of this Agreement or the
Underwriter's Warrant by the Company or in connection with the taking
of any action contemplated herein or therein, or the issuance of the
Underwriter's Warrant or the Shares underlying the Underwriter's
Warrant, other than registration or qualification of the Shares under
applicable state or foreign securities or blue sky laws (as to which
such counsel need express no opinion) and registration under the Act;
(x) The statements in the Registration Statement
under the caption "Description of Capital Securities," to the extent
that such statements constitute a matter of law or legal conclusion
have been reviewed by such counsel and are correct in all material
respects;
(xi) The Shares have been approved for listing on
the Nasdaq SmallCap Market;
(xii) The Company is not, and after receipt of
payment for the Shares will not be an "investment company" within the
meaning of Investment Company Act;
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(xiii) Except as disclosed in the Prospectus under
the caption "Shares Eligible for Future Sale," to the best knowledge
of such counsel, there are no persons with registration or other
similar rights to have any equity or debt securities registered for
sale under the Registration Statement or included in the offering
contemplated by this Agreement; and
(xiv) The Company is not in violation of its
articles or by-laws or any law, administrative regulation or
administrative or court decree applicable to the Company or is in
default in the performance and observance of any obligation,
agreement, covenant or condition contained in any material existing
instrument, except in each such case for such violations or defaults
as would not, individually or in the aggregate, result in a material
adverse change in the financial condition or results of operations of
the Company.
Such counsel has participated in the preparation of
the Registration Statement and the Prospectus and although such counsel has not
reviewed the accuracy or completeness of the statements contained in the
Registration Statement or Prospectus nothing has come to the attention of such
counsel that caused such counsel to have reason to believe that the
Registration Statement or any amendment thereto at the time it became effective
contained 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 not misleading or that the Prospectus or any 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 and schedules
thereto and other financial information and statistical data contained therein,
as to which such counsel need express no opinion);
In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact; and in rendering such opinion may either (i) rely as to all matters of
law other than the law of the United States or of the State of California upon
opinions of counsel satisfactory to you, in which case the opinion shall state
that they have no reason to believe that you and they are not entitled to so
rely or (ii) assume that the laws of any state other than the State of
California are identical to the laws of the State of California, in rendering
such opinion.
(c) 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 you, and you shall have
received from such counsel a signed opinion, dated as of the First Closing
Date, with respect to the validity of the issuance of the Shares, the form of
the Registration Statement and Prospectus (other than the financial statements
and other financial data contained therein), the execution of this Agreement
and other related matters as you may reasonably require. The Company shall
have furnished to counsel for you such documents as they may reasonably request
for the purpose of enabling them to render such opinion.
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(d) You shall have received letters on and as of the
Effective Date and again on and as of the First Closing Date, in each instance
describing procedures carried out to a date within five (5) days of the date of
the letter, from each of Stonefield ▇▇▇▇▇▇▇▇▇, Inc. and Price Waterhouse LLP,
independent public accountants for the Company, substantially in the form
approved by you.
(e) At each of the Closing Dates, (i) the representations
and warranties of each of the Company and the Selling Shareholder contained in
this Agreement shall be true and correct with the same effect as if made on and
as of such Closing Date, and each of the Company and the Selling Shareholder
shall have performed all of its obligations hereunder and satisfied all the
conditions on its part to be satisfied at or prior to such Closing Date; (ii)
the Registration Statement and the Prospectus and any amendments or supplements
thereto shall contain all statements which are required to be stated therein in
accordance with the Act and the Rules and Regulations, and shall in all
material respects conform to the requirements thereof, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statements of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made; (iii) there shall have been, since the respective dates as of
which information is given, no material adverse change in the business,
properties, condition (financial or otherwise), results of operations, capital
stock, long-term or short-term debt or general affairs of the Company from that
set forth in the Registration Statement and the Prospectus, except changes
which the Registration Statement and Prospectus indicate might occur after the
Effective Date and the Company shall not have incurred any material liabilities
nor entered into any agreement not in the ordinary course of business other
than as referred to in the Registration Statement and Prospectus; and (iv)
except as set forth in the Prospectus, no action, suit or proceeding at law
shall be pending or threatened against the Company which would be required to
be disclosed in the Registration Statement, and no proceedings shall be pending
or threatened against the Company before or by any commission, board or
administrative agency in the United States or elsewhere, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the business,
property, condition (financial or otherwise), results of operations or general
affairs of the Company. In addition, you shall have received, at the First
Closing Date, a certificate signed by the President and the principal financial
or accounting officer of the Company, dated as of the First Closing Date,
evidencing compliance with the provisions of this subsection (e).
(f) Upon exercise of the option provided for in Section
2(b) hereof, your obligations to purchase and pay for the Option Shares
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain
effective at the Option Closing Date, no stop order suspending the
effectiveness thereof shall have been issued, and no proceedings for
that purpose shall have been instituted or shall be pending, or, to
your knowledge or the knowledge of the Company, shall be contemplated
by the Commission, and any reasonable request on the part of the
Commission for additional information shall have been complied with to
the reasonable satisfaction of Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ &
▇▇▇▇▇, counsel to you.
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(ii) At the Option Closing Date there shall have
been delivered to you the signed opinion of ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇
LLP, counsel for the Company, dated as of the Option Closing Date, in
form and substance reasonably satisfactory to Freshman, Marantz,
Orlanski, ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to you, which opinion shall be
substantially the same in scope and substance as the opinion furnished
to you at the First Closing Date pursuant to Section 4(b) hereof,
except that such opinion, where appropriate, shall cover the Option
Shares rather than the Firm Shares. If the First Closing Date is the
same as the Option Closing Date, such opinions may be combined. In
addition, at the Option Closing Date, you shall have received the
additional opinion, dated as of the Option Closing Date, of
_____________________________, counsel for the Selling Shareholder, in
form and substance reasonably satisfactory to counsel for you, to the
effect that:
(a) The Underwriting Agreement has been
duly authorized, executed and delivered by or on behalf of,
and is a valid and binding agreement of the Selling
Shareholder, enforceable against the Selling Shareholder in
accordance with its terms, except as rights to indemnification
thereunder may be limited by applicable law and except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally or by general
equitable principles;
(b) The execution and delivery by the
Selling Shareholder of, and the performance by the Selling
Shareholder of its obligations under, this Agreement and its
Custody Agreement will not contravene or conflict with, result
in a breach of, or constitute a default under, the charter or
by-laws, partnership agreement, trust agreement or other
organizational documents, as the case may be, of the Selling
Shareholder, or to the best of such counsel's knowledge,
violate or contravene any provision of applicable law or
regulation, or violate, result in a breach of or constitute a
default under the terms of any other agreement or instrument
to which the Selling Shareholder is a party or by which it is
bound or any judgment, order or decree applicable to any
court, regulatory body, administrative agency, governmental
body or arbitrator having jurisdiction over such Selling
Shareholder;
(c) The Selling Shareholder has good and
valid title to all of the Shares which may be sold by the
Selling Shareholder under this Agreement and has the legal
right and power, and all authorizations and approvals required
under its charter and bylaws or other organizational
documents, as the case may be, to enter into this Agreement
and its Custody Agreement, to sell, transfer and deliver all
of the Share which may be sold by the Selling Shareholder
under this Agreement and to comply with its other obligations
under the this Agreement and the Custody Agreement of the
Selling Shareholder has been duly authorized, executed and
delivered by the Selling Shareholder and is a valid and
binding agreement of the Selling Shareholder, enforceable
against the Selling Shareholder in accordance with its terms,
except as rights to indemnification thereunder may be limited
by applicable law and except as the enforcement thereof may be
limited by bankruptcy, insolvency,
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reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally or by general
equitable principles;
(d) Assuming that the Underwriter
purchases the Shares which is sold by the Selling Shareholder
pursuant to this Agreement for value, in good faith and
without notice of any adverse claim, the delivery of the
Shares pursuant to this Agreement will pass good and valid
title to such Shares, free and clear of any security interest,
mortgage, pledge, lieu encumbrance or other claim; and
(e) No consent, approval, authorization
or other order of, or registration or filing with, any court
or governmental authority or agency, is required for the
consummation by the Selling Shareholder of the transactions
contemplated in this Agreement, except as required under the
Securities Act, applicable state securities or blue sky laws,
and from the NASD.
(iii) At the Option Closing Date, there shall have
been delivered to you a certificate of the President and the Chairman
of the Board of the Company and a certificate of the Selling
Shareholder, each dated the Option Closing Date, in form and substance
reasonably satisfactory to Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ &
▇▇▇▇▇, counsel to you, substantially the same in scope and substance
as the certificate furnished to you at the First Closing Date pursuant
to Section 4(e) hereof.
(iv) At the Option Closing Date, there shall have
been delivered to you a letters in form and substance satisfactory to
you from each of Stonefield ▇▇▇▇▇▇▇▇▇, Inc. and Price Waterhouse LLP,
each dated the Option Closing Date and addressed to you, confirming
the information in their letter referred to in Section 4(d) hereof as
of the date thereof and stating that, without any additional
investigation required, nothing has come to their attention during the
period from the ending date of their review referred to in said letter
to a date not more than five (5) days prior to the Option Closing Date
which would require any change in said letter if it were required to
be dated the Option Closing Date.
(v) All proceedings taken at or prior to the
Option Closing Date in connection with the sale and issuance of the
Option Shares shall be reasonably satisfactory in form and substance
to you, and you and Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ & ▇▇▇▇▇,
counsel to you, shall have been furnished with all such documents and
certificates as you may request in connection with this transaction in
order to evidence the accuracy and completeness of any of the
representations, warranties or statements of each of the Company and
the Selling Shareholder, either of their compliance with any of the
covenants or conditions contained therein.
(g) If any of the conditions herein provided for in this
Section shall not have been completely fulfilled as of the date indicated, this
Agreement and all obligations of the Underwriters under this Agreement may be
canceled at, or at any time prior to, each Closing Date by your notification to
the Company of such cancellation in writing or by telegram at or prior to the
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applicable Closing Date. Any such cancellation shall be without liability of
you to the Company and the Selling Shareholder, as applicable, except as
otherwise provided herein.
5. Conditions of the Obligations of the Company and the Selling
Shareholder.
The obligation of the Company and the Selling Shareholder, as
applicable, to sell and deliver the Shares is subject to the following
conditions:
(a) The Registration Statement shall have become
effective not later than 9:00 a.m. New York time, on the date of this
Agreement, or on such later date or time as you and the Company may agree in
writing.
(b) On the Closing Dates, no stop order suspending the
effectiveness of the Registration Statement shall have been issued under the
Act or any proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company and the
Selling Shareholder provided for in this Section have been fulfilled on the
First Closing Date but are not fulfilled after the First Closing Date and prior
to the Option Closing Date, then only the obligation of the Company and the
Selling Shareholder to sell and deliver the Option Shares on exercise of the
option provided for in Section 2(b) hereof shall be affected.
6. Indemnification.
(a) Indemnification of the Underwriter by the Company.
The Company agrees to indemnify and hold you harmless and your officers and
employees, and each person, if any, who controls you within the meaning of the
Act and the Exchange Act against any loss, claim, damage, liability or expense,
as incurred, to which you or such controlling person may become subject, under
the Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company), insofar as such loss, claim, damage, liability or expense (or actions
in respect thereof as contemplated below) arises out of or is based (i) upon
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A or Rule 434 under
the Act, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading; or (ii) upon any untrue statements or alleged untrue statement of a
material fact contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; or (iii)
in whole or in part upon any inaccuracy in the representations and warranties
of the Company contained herein, or (iv) in whole or in part upon any failure
of the Company to perform its obligations hereunder or under law, or (v) any
act or failure to act or any alleged act or failure to act by you in connection
with, or relating in any manner to, the Shares or the offering contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage, liability or action arising out of or based upon any
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matter covered by clause (i) or (ii) above, provided that the Company shall not
be liable under this clause (v) to the extent that a court of competent
jurisdiction shall have determined by a final judgment that such loss, claim,
damage, liability or action resulted directly from any such acts or failures to
act undertaken or omitted to be taken by you through bad faith or willful
misconduct; and to reimburse you and each such controlling person for any and
all expenses (including the fees and disbursements of counsel chosen by ▇.▇.
▇▇▇▇▇▇ & Co., Inc.) As such expenses are reasonably incurred by you or such
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the foregoing indemnity agreement shall not
apply to any loss, claim, damage, liability or expense to the extent, but only
to the extent, arising out of or based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by you expressly
for use in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and provided, further,
that with respect to any preliminary prospectus, the foregoing indemnity
agreement shall not inure to the benefit of you from whom the person asserting
any loss, claim, damage, liability or expense purchased Shares, or any person
controlling you, if copies of the Prospectus were timely delivered to you
pursuant to the provision hereunder and a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on your behalf to such person,
if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage, liability or expense. The indemnity agreement set forth
in this Section 6(a) shall be in addition to any liabilities that the Company
may otherwise have.
(b) Indemnification of the Underwriters by the Selling
Shareholder. The Selling Shareholder agrees to indemnify and hold you harmless
and your officers and employees, and each person, if any, who controls you
within the meaning of the Act and the Exchange Act against any loss, claim,
damage, liability or expense, as incurred, to which you or such controlling
person may become subject, under the Act, the Exchange Act or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such loss, claim, damage, liability or
expense (or actions in respect thereof as contemplated below) arises out of or
is based (i) upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto, or arises out of or is
based upon the omission or alleged omission to state therein a material fact
required to be stated thereon or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in the Registration Statement, any preliminary prospectus, the
Prospectus (or any amendment or supplement thereto), in reliance upon and in
conformity with written information furnished to the Company by the Selling
Shareholder expressly for use therein, or (ii) in whole or in part upon any
inaccuracy in the representations and warranties of the Selling Shareholder
contained herein, or (iii) in whole or in part upon any failure of the Selling
Shareholder to perform its obligations hereunder or under law, or (iv) any act
or failure to act or any alleged act or failure to act by you in connection
with, or relating in any manner to, the Shares or the offering contemplated
hereby, and which is included as part of or referred to in any loss, claim,
damage,
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liability or action arising out of or based upon any matter covered by clause
(i) above, provided that the Selling Shareholder shall not be liable under this
clause (iv) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by you through bad faith or willful misconduct; and to
reimburse you and each such controlling person for any and all expenses
(including the fees and disbursements of counsel chosen by ▇.▇. ▇▇▇▇▇▇ & Co.,
Inc.) As such expenses are reasonably incurred by you or such controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that the foregoing indemnity agreement shall not apply to any loss,
claim, damage, liability or expense to the extent, but only to the extent,
arising out of or based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company by you expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto); and provided, further, that with respect to
any preliminary prospectus, the foregoing indemnity agreement shall not inure
to the benefit of you from whom the person asserting any loss, claim, damage,
liability or expense purchased Shares, or any person controlling you, if copies
of the Prospectus were timely delivered to you pursuant to the provision
hereunder and a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not
sent or given by or on your behalf to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. The indemnity agreement set forth in this Section 6(b) shall be in
addition to any liabilities that the Selling Shareholder may otherwise have.
(c) Indemnification of the Company, its Directors and Officers and of the
Selling Shareholder. You agree, to indemnify and hold harmless the Company,
each of its directors, each of its officers who signed the Registration
Statement, the Selling Shareholder and directors and each person, if any, who
controls the Company within the meaning of the Act or the Exchange Act, against
any loss, claim, damage, liability or expense, as incurred to which the Company,
the Selling Shareholder or any such director, officer or controlling person may
become subject, under the Act, the Exchange Act, or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with your written
consent, insofar as such loss, claim, damage, liability or expense (or actions
in respect thereof as contemplated below) arises out of or is based upon any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto, or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
thereon or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus, the Prospectus (or any amendment or
supplement thereto), in reliance upon and in conformity with written information
furnished to the Company and the Selling Shareholder by you expressly for use
therein; and to reimburse the Company, the Selling Shareholder, or any such
director, officer or controlling person for any legal and other expense
reasonably incurred by the Company, the Selling Shareholder, or any such
director, officer or
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controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. Each of the Company and the Selling Shareholder hereby acknowledges
that the only information that you have furnished to the Company and the Selling
Shareholder expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the Prospectus with respect to stabilization, the
material set forth under the heading "Underwriting" and the identity of counsel
to you under the heading "Legal Matters"; and the Underwriters confirm that such
statements are correct. The indemnity agreement set forth in this Section 6(c)
shall be in addition to any liabilities that you may otherwise have.
(d) Notifications and Other Indemnification Procedures.
Promptly after receipt by an indemnified party under this Section 6 of notice
of the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this Section
6, notify the indemnifying party in writing of the commencement thereof, but
the omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section 6 or to
the extent it is not prejudiced as a proximate result of such failure. In case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it shall elect, jointly with all other indemnifying parties similarly notified,
by written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that a conflict may arise 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, the indemnified party or parties shall have the
right to select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of such indemnifying party's election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
provisions to the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with local counsel), approved by the indemnifying
party (▇.▇. ▇▇▇▇▇▇ & Co., Inc. in the case of Section 6(c) and Section 7),
representing the indemnified parties who are parties to such action) or (ii)
the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, in each of which cases the fees and
expenses of counsel shall be at the expense of the indemnifying party.
(e) Settlements. The indemnifying party under this
Section 6 shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such
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consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by Section 6(d) hereof, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than thirty (30) days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement, compromise or
consent to the entry of judgment in any pending or threatened action, suit or
proceeding in respect of which any indemnified party is or could have been a
party and indemnity was or could have been sought hereunder by such indemnified
party, unless such settlement, compromise or consent includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such action, suit or proceeding.
7. Contribution.
If the indemnification provided for in Section 6 is for any reason
held to be unavailable to or otherwise insufficient to hold harmless an
indemnified party of any losses, claims, damages, liabilities or expenses
referred to therein, then each indemnifying party shall contribute to the
aggregate amount paid or payable by such indemnified party, as incurred, as a
result of any losses, claims, damages, liabilities or expenses referred to
therein (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Shareholder, on the one hand,
and you, on the other hand, from the offering of the Shares pursuant to this
Agreement or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company, and the Selling Shareholder, on the one hand,
and you, on the other hand, in connection with the statements or omissions or
inaccuracies in the representations and warranties herein which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, and the Selling Shareholder, on the one hand, and you, on the other
hand, in connection with the offering of the Shares pursuant to this Agreement
shall be deemed to be in the same respective proportions as the total net
proceeds from the offering of the Shares pursuant to this Agreement (before
deducting expenses) received by the Company, and the Selling Shareholder, and
the total underwriting discount received by you, in each case as set forth on
the front cover page of the Prospectus bear to the aggregate initial public
offering price of the Shares as set forth on such cover. The relative fault of
the Company, and the Selling Shareholder, on the one hand, and you, on the
other hand, shall be determined by reference to, among other things, whether
any such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact or any such inaccurate or alleged
inaccurate representation or warranty relates to information supplied by the
Company, or the Selling Shareholder, on the one hand, or you, on the other
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
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The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 6(d), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
Section 6(d) with respect to notice of commencement of any action shall apply
if a claim for contribution is to be made under this Section 7; provided,
however, that no additional notice shall be required with respect to any action
for which notice has been given under Section 6(c) for purposes of
indemnification.
The Company, the Selling Shareholder and you agree that it would not
be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if you 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 in this Section 7.
Notwithstanding the provisions of this Section 7, you shall be
required to contribute any amount in excess of the underwriting commissions you
received in connection with the Shares underwritten by it and distributed to
the public. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each of your officers and
employees and each person, if any, who controls you within the meaning of the
Act and the Exchange Act shall have the same rights to contribution as you, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company with
the meaning of the Act and the Exchange Act shall have the same rights to
contribution as the Company.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or
the sale of the Shares to you is consummated, the Company will pay all costs
and expenses incident to the performance of this Agreement by the Company,
including but not limited to the fees and expenses of counsel to the Company
and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the
Registration Statement (including the financial statements therein and all
amendments and exhibits thereto), each Preliminary Prospectus and the
Prospectus, as amended or supplemented, the fee of the NASD in connection with
the filing required by the NASD relating to the offering of the Shares
contemplated hereby; all expenses, including reasonable fees (but not in excess
of the amount set forth in Section 3(b)) and disbursements of counsel to you,
in connection with the qualification of the Shares under the State Securities
or Blue Sky Laws which you shall designate; the cost of printing and furnishing
to you copies of the Registration Statement, each Preliminary Prospectus, the
Prospectus, this Agreement, the Warrant Agreement and the Blue Sky Memorandum;
the cost of printing the certificates representing the Shares, the expenses of
Company due diligence meetings and presentations, (but not of you or your
counsel in connection therewith) and the expense (which shall not exceed
$10,000) of placing one or more "tombstone" advertisements as directed by you.
The Company shall pay any and all taxes (including any transfer, franchise,
capital stock or other tax imposed by any jurisdiction) on sales to you
hereunder. The Company will also pay all costs and expenses incident to the
furnishing of
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any amended Prospectus or of any supplement to be attached to the Prospectus as
called for in Section 3(a) of this Agreement except as otherwise set forth in
said Section.
(b) 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 equal to three percent (3%) of the gross proceeds of the
offering. 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 three percent (3%) of the gross proceeds received upon exercise
of the overallotment option. In the event the transactions contemplated hereby
are not consummated due to the Company's breach of this Agreement or any
covenant, condition, representation or warranty contained herein, the Company
shall be liable for your actual accountable out-of-pocket expenses, including
legal fees, provided however, that any portion previously paid by the Company
that has not been utilized by you in connection with the offering on an
accountable basis shall be refunded by you to the Company.
(c) No person is entitled either directly or indirectly
to compensation from the Company, from any Underwriter or from any other person
for services as a finder in connection with the proposed offering, and the
Company agrees to indemnify and hold harmless you, and you agree to indemnify
and hold harmless, the Company from and against any losses, claims, damages or
liabilities, (which shall, for all purposes of this Agreement, include, but not
be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees), to which the indemnified party may become subject
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon the claim of any person (other than an
employee of the party claiming indemnity) or entity that he or it is entitled
to a finder's fee in connection wit the proposed offering by reason of such
person's or entity's influence or prior contact with the indemnifying party.
9. Effective Date.
The Agreement shall become effective upon its execution,
except that you may, at your option, delay its effectiveness until the earlier
to occur of 10:00 A.M., New York time on the first full business day following
the Effective Date as you in your discretion shall first commence the initial
public offering by you of any of the Shares. The time of the initial public
offering shall mean the time of release by you of the first newspaper
advertisement with respect to the Shares, or the time when the Shares are first
generally offered by you to dealers by letter or telecopier, whichever shall
first occur. This Agreement may be terminated by you at any time before it
becomes effective as provided above, except that Sections 3(c), 6, 7, 8, 12,
13, 14 and 15 shall remain in effect notwithstanding such termination.
10. Termination.
(a) This Agreement, except for Sections 3(c), 6, 7, 8,
12, 13, 14 and 15, may be terminated at any time prior to the First Closing
Date, and the option referred to in Section 2(b), if exercised, may be
canceled, at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
you for the resale of the Shares agreed to be purchased hereunder, by reason of
(i) the Company having sustained a material loss,
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whether or not insured, by reason of fire, earthquake, flood, accident or other
calamity, or from any labor dispute or court or government action, order or
decree, (ii) trading in securities on the New York Stock Exchange or the
American Stock Exchange having been suspended or limited, (iii) material
governmental restrictions having been imposed on trading in securities
generally which are not in force and effect on the date hereof, (iv) a banking
moratorium having been declared by federal of New York State authorities, (v)
an outbreak of major international hostilities or other national or
international calamity having occurred, (vi) the passage by the Congress of the
United States or by any state legislative body of similar impact, of any act or
measure, or the adoption of any orders, rules or regulations by any
governmental body or any authoritative accounting institute or board, or any
governmental executive, which is reasonably believed likely by you to have a
material adverse impact on the business, financial condition or financial
statements of the Company, (vii) any material adverse change in the financial
or securities markets beyond normal fluctuations in the United States having
occurred since the date of this Agreement, or (viii) any material adverse
change having occurred, since the respective dates for which information is
given in the Registration Statement and Prospectus, in the earnings, business,
prospects or general condition of the Company, financial or otherwise, whether
or not arising in the ordinary course of business.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10 or in
Section 9, the Company shall be promptly notified by you, by telephone or
facsimile transmission, confirmed by letter.
11. Underwriter's Warrant.
On the First Closing Date, the Company will issue to you, for
a consideration of $5.00 and upon the terms and conditions set forth in the
form of Underwriter's Warrant annexed as an exhibit to the Registration
Statement, an Underwriter's Warrant to purchase 150,000 Shares. In the event
of conflict in the terms of this Agreement and the Underwriter's Warrant, the
language of the Underwriter's Warrant shall control.
12. Representations, Warranties and Agreements to Survive
Delivery.
The respective indemnities, agreements,
representations, warranties and other statements of the Company or the
Selling Shareholder, where appropriate, and you, set forth in or made
pursuant to this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of you, the
Company or any of its officers or directors or any controlling persons
and will survive delivery of and payment for the Shares and the
termination of this Agreement.
13. Notice.
All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to you, will be mailed, delivered
or telecopied and confirmed to it at ▇.▇. ▇▇▇▇▇▇ & Co., Inc., ▇▇▇▇ ▇▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, with a copy sent to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Esq. at Freshman, Marantz, Orlanski, ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or if sent to the
Company, will be
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mailed, delivered, or facsimiled and confirmed to ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with copy sent to ▇▇▇▇▇ ▇.
▇▇▇▇, Esq., ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or if sent to the Selling Shareholder, will
be mailed, delivered or telecopied and confirmed to ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇,
________________________________________________, with a copy sent to
_________________________________.
14. Parties in Interest.
The Agreement herein set forth is made solely for your
benefit, the Company and, to the extent expressed, the Selling Shareholder, any
person controlling the Company, the Selling Shareholder or you, and directors
of the Company, nominees for directors of the Company (if any) named in the
Prospectus, the officers of the Company who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns, and no other person shall acquire for have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include
any purchaser, as such purchaser, from you of the Shares.
15. Applicable Law.
This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.
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If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return this Underwriting Agreement, whereupon it
will become a binding agreement between the Company and you in accordance with
its terms.
Very truly yours,
Team Communications Group, Inc.
Dated: __________, 1997 By:________________________________
Name:
Title:
The Selling Shareholder
____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇
Dated: __________, 1997
The foregoing Underwriting Agreement is hereby confirmed and accepted
as of the date first above written.
▇.▇. ▇▇▇▇▇▇ & Co., Inc.
Dated: __________, 1997 By:________________________________
Authorized Officer
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SCHEDULE I
Underwriting Agreement dated ________, 1997
Number of Firm
Shares
Underwriter to be Purchased
▇.▇. ▇▇▇▇▇▇ & Co., Inc. 1,500,000
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