3,000,000 SHARES OF COMMON STOCK
AND
4,000,000 WARRANTS
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
UNDERWRITING AGREEMENT
New York, New York
_____________, 2001
▇▇▇▇▇ & Company, Inc.
As Representative of the
Several Underwriters listed
on Schedule A hereto
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Nevada corporation (the "Company") confirms
its agreement with ▇▇▇▇▇ & Company, Inc. ("▇▇▇▇▇") and each of the several
underwriters named in Schedule A hereto (collectively, the "Underwriters", which
term shall also include any underwriter substituted as hereinafter provided in
Section 11) for whom ▇▇▇▇▇ is acting as representative (in such capacity, ▇▇▇▇▇
shall hereinafter be referred to as "you" or the "Representative"), with respect
to the sale by the Company of 3,000,000 shares of its common stock ("Common
Stock") and 4,000,000 Common Stock purchase warrants ("Warrants"), each to
purchase one share of Common Stock and the purchase by the Underwriters, acting
severally and not jointly, of such Common Stock and Warrants. The Common Stock
and Warrants will be offered for sale by the Underwriters to the public as units
("Units"), each Unit consisting of three shares of Common Stock and four
Warrants. The shares of Common Stock and Warrants comprising the Units will be
separately tradable two hundred seventy (270) days after issuance. The 1,000,000
Units and the Common Stock and Warrants underlying the Units are hereinafter
referred to as the "Firm Securities." Each Warrant is exercisable commencing
twelve months after the date of the Prospectus and terminating ten years after
the date of the Prospectus at an initial exercise price of $_______ per share.
Upon the Representative's request, as provided in Section 2(c) of this
Agreement, the Company shall also sell to the Underwriters up to an additional
150,000 Units consisting of 450,000 shares of Common Stock and 600,000 Warrants
for the purpose of covering over-allotments, if any (the "Option Securities").
The Company also proposes to issue and sell warrants to the Representative (the
"Representative's Warrants") pursuant to the Representative's Warrant Agreement
(the "Representative's Warrant Agreement") for the purchase of an additional
100,000 Units. The shares of Common Stock and Warrants issuable upon exercise of
the Representative's Warrants are hereinafter referred to as the
"Representative's Securities." The Firm Securities, the Option Securities, the
Representative's Warrants and the Representative's Securities (collectively,
hereinafter referred to as the "Securities") are more fully described in the
Registration Statement and the Prospectus referred to below.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to, and agrees with, the
Representative as of the date hereof, and as of the Closing Date (hereinafter
defined) and the Option Closing Date (hereinafter defined), if any, as follows:
(i) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form SB-2 (No. 333-_______), for the
registration of the Securities under the Securities Act of 1933, as amended
(the "Act"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of the
Act, and the rules and regulations (the "Regulations") of the Commission
under the Act. The Company will promptly file a further amendment to said
registration statement in the form heretofore delivered to the
Representative and will not, file any other amendment thereto to which the
Representative shall have objected in writing after having been furnished
with a copy thereof. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at the time
the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as
a part thereof or incorporated therein (including, but not limited to those
documents or information incorporated by reference therein) and all
information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the Regulations), is hereinafter called the
"Registration Statement", and the form of prospectus in the form first
filed with the Commission pursuant to Rule 424(b) of the Regulations, is
hereinafter called the "Prospectus." "Preliminary Prospectus" means each
prospectus included in the Registration Statement or any amendments
thereof, before the Registration Statement becomes effective under the Act,
and any prospectus filed with the Commission by the Company with the
consent of the Representative pursuant to Rule 424(a) of the Rules and
Regulations. For purposes hereof, "Rules and Regulations" mean the rules
and regulations adopted by the Commission under either the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable. For purposes hereof, "Material Adverse Effect" means a material
adverse effect on the business, condition (financial or otherwise),
earnings, management, properties, assets, results of operations,
stockholders' equity or prospects of the Company.
(ii) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary
Prospectus, the Registration Statement or the Prospectus or any part of any
thereof and no proceedings for a stop order suspending the effectiveness of
the Registration Statement or any of the Company's securities have been
instituted or are pending or to the Company's knowledge, threatened. Each
of the Registration Statement and Prospectus at the time of filing thereof
conformed with the requirements of the Act and the Rules and Regulations,
and neither of the Registration Statement or Prospectus at the time of
filing thereof contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein and necessary to
make the statements therein, in
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light of the circumstances under which they were made, not misleading,
except that this representation and warranty does not apply to statements
made in reliance upon and in conformity with written information furnished
to the Company with respect to the Underwriters by or on behalf of the
Underwriters expressly for use in such Registration Statement or
Prospectus.
(iii) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and each Option Closing
Date, if any, and during such longer period as the Prospectus may be
required to be delivered in connection with sales by the Underwriters or a
dealer, the Registration Statement and the Prospectus will contain all
statements which are required to be stated therein in accordance with the
Act and the Rules and Regulations, and will conform to the requirements of
the Act and the Rules and Regulations; neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto at the time of
effectiveness or filing as the case may be, up to the Closing Date and
Option Closing Date, will contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided, however, that this
representation and warranty does not apply to statements made or statements
omitted in reliance upon and in conformity with information furnished to
the Company in writing by or on behalf of any Underwriters expressly for
use in the, Registration Statement or Prospectus or any amendment thereof
or supplement thereto.
(iv) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of its
incorporation. The Company does not own an interest in any corporation,
partnership, trust, joint venture or other business entity. The Company is
duly qualified and licensed and in good standing as a foreign corporation
in each jurisdiction in which its ownership or leasing of any properties or
the character of its operations requires such qualification or licensing.
The Company has all requisite corporate power and authority, and the
Company has obtained any and all necessary authorizations, approvals,
orders, licenses, including, but not limited to certificates, franchises
and permits of and from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; the Company is and has
been doing business in compliance with all such authorizations, approvals,
orders, licenses, including, but not limited to certificates, franchises
and permits and all federal, state and local laws, rules and regulations;
and the Company has not received any notice of proceedings relating to the
revocation or modification of any such authorization, approval, order,
license, including, but not limited to certificate, franchise, or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
condition, financial or otherwise, or the earnings, position, prospects,
value, operation, properties, business or results of operations of the
Company. The disclosures in the Registration Statement concerning the
effects of federal, state and local laws, rules and regulations on the
Company's business as currently conducted and as contemplated are correct
in all material respects and do not omit to state a material fact necessary
to make the statements contained therein not misleading in light of the
circumstances in which they were made.
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(v) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set
forth therein on the Closing Date and the Option Closing Date, if any,
based upon the assumptions set forth therein, and the Company is not a
party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options or
other securities, except for this Agreement, the Representative's Warrant
Agreement and as described in the Prospectus. The Securities and all other
securities issued or issuable by the Company conform or, when issued and
paid for, will conform, in all respects to all statements with respect
thereto contained in the Registration Statement and the Prospectus. All
issued and outstanding securities of the Company have been duly authorized
and validly issued and are fully paid and non-assessable and the holders
thereof have no rights of rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and none of
such securities were issued in violation of the preemptive rights of any
holders of any security of the Company or similar contractual rights
granted by the Company. The Securities are not and will not be subject to
any preemptive or other similar rights of any stockholder, have been duly
authorized and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and non-assessable and
will conform to the description thereof contained in the Prospectus; the
holders thereof will not be subject to any liability solely as such
holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities will be in due and proper form.
Upon the issuance and delivery pursuant to the terms hereof of the
Securities to be sold by the Company hereunder, the Underwriters will
acquire good and marketable title to such Securities free and clear of any
lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction or equity of any kind whatsoever.
(vi) The financial statements, including the related notes and
schedules thereto, included in the Registration Statement and the
Prospectus fairly present the financial position, income, changes in cash
flow, changes in stockholders' equity, and the results of operations of the
Company at the respective dates and for the respective periods to which
they apply and the pro forma financial information included in the
Registration Statement and Prospectus presents fairly the information shown
therein and to the extent based upon or derived from the financial
statements, have been compiled on a basis consistent with the financial
statements presented therein. Such financial statements have been prepared
in conformity with generally accepted accounting principles and the Rules
and Regulations, consistently applied throughout the periods involved.
There has been no adverse change or development involving a material
prospective change in the condition, financial or otherwise, or in the
earnings, position, prospects, value, operation, properties, business, or
results of operations of the Company whether or not arising in the ordinary
course of business, since the date of the financial statements included in
the Registration Statement and the Prospectus and the outstanding debt, the
property, both tangible and intangible, and the business of the Company
conform in all material respects to the descriptions thereof contained in
the Registration Statement and the Prospectus. Financial information set
forth in the Prospectus under the headings "Summary Financial Data,"
"Capitalization," "Selected Financial Information," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
fairly present, on the basis stated in the Prospectus, the information set
forth therein, have been derived from or compiled on a basis consistent
with that of the audited financial statements included in the Prospectus.
4
(vii) The Company (i) has paid all federal, state, local, and foreign
taxes for which it is liable, including, but not limited to, withholding
taxes and amounts payable under Chapters 21 through 24 of the Internal
Revenue Code of 1986 (the "Code"), and has furnished all information
returns it is required to furnish pursuant to the Code, (ii) has
established adequate reserves for such taxes which are not due and payable,
and (iii) does not have any tax deficiency or claims outstanding, proposed
or assessed against it, which if determined adversely to the Company may
have a Material Adverse Effect.
(viii) No transfer tax, stamp duty or other similar tax is payable by
or on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriters of the
Firm Securities and Option Securities, and the purchase by the
Representative of the Representative's Warrants from the Company, (iii) the
consummation by the Company of any of its obligations under this Agreement
or the Representative's Warrant Agreement, or (iv) resales of the Firm
Securities and the Option Securities in connection with the distribution
contemplated hereby.
(ix) The Company maintains insurance policies, including, but not
limited to, general liability and property insurance, which insures the
Company and its employees, against such losses and risks as is customary in
the case of entities engaged in the same or similar business and similarly
situated. The Company (A) has not failed to give notice or present any
insurance claim with respect to any matter, including but not limited to
the Company's business, property or employees, under the insurance policy
or surety bond in a due and timely manner, (B) does not have any disputes
or claims against any underwriter of such insurance policies or surety
bonds or has not failed to pay any premiums due and payable thereunder, or
(C) has not failed to comply with all conditions contained in such
insurance policies and surety bonds. There are no facts or circumstances
under any such insurance policy or surety bond which would relieve any
insurer of its obligation to satisfy in full any valid claim of the
Company.
(x) Except as described in the Registration Statement, there is no
action, suit, proceeding, inquiry, arbitration, investigation, litigation
or governmental proceeding (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
pending or to the Company's knowledge threatened against (or circumstances
that may give rise to the same), or involving the properties or business
of, the Company which (i) questions the validity of the capital stock of
the Company, this Agreement or the Representative's Warrant Agreement or of
any action taken or to be taken by the Company pursuant to or in connection
with this Agreement or the Representative's Warrant Agreement, (ii) is
required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all material respects), or (iii)
would reasonably be expected to have a Material Adverse Effect.
(xi) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities, enter into this
Agreement and the Representative's Warrant Agreement and to consummate the
transactions provided for in such agreements; and this Agreement and the
Representative's Warrant Agreement have each been duly and properly
authorized, executed and delivered by the Company. Each of this Agreement
and the Representative's Warrant Agreement constitutes a legal, valid and
binding agreement of the Company enforceable against the Company in
5
accordance with its terms, except (i) as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification or contribution
provisions may be limited under applicable laws or the public policies
underlying such laws and (iii) that the remedies of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceedings may be brought. None of the Company's issue and sale of the
Securities, execution or delivery of this Agreement or the Representative's
Warrant Agreement, its performance hereunder and thereunder, its
consummation of the transactions contemplated herein and therein, the
Prospectus, and any amendments or supplements thereto, conflicts with or
will conflict with or results or will result in any breach or violation of
any of the terms or provisions of, or constitutes or will constitute a
default under, or result in the creation or imposition of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction
or equity of any kind whatsoever upon, any property or assets (tangible or
intangible) of the Company pursuant to the terms of, (i) the certificate of
incorporation or by-laws of the Company, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement, stockholders
agreement, note, loan or credit agreement or any other agreement or
instrument to which the Company is a party or by which it is or may be
bound or to which any of its properties or assets (tangible or intangible)
is or may be subject, or any indebtedness, or (iii) any statute, judgment,
decree, order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those having
jurisdiction over environmental or similar matters), domestic or foreign,
having jurisdiction over the Company or any of its activities or
properties.
(xii) Except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court, regulatory body,
government agency or other body, domestic or foreign, is required for the
issuance of the Firm Securities and the Option Securities pursuant to the
Prospectus and the Registration Statement, the issuance of the
Representative's Warrants, the performance of this Agreement and the
Representative's Warrant Agreement and the transactions contemplated hereby
and thereby, including without limitation, any waiver of any preemptive,
first refusal or other rights that any entity or person may have for the
issue and/or sale of any of the Firm Securities and the Option Securities,
or the Representative's Warrants, except such as have been or may be
obtained under the Act or may be required under state securities or Blue
Sky laws in connection with the Underwriters' purchase and distribution of
the Firm Securities and the Option Securities, and the Representative's
Warrants to be sold by the Company hereunder.
(xiii) All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which it
may be bound or to which any of its assets, properties or business may be
subject have been duly and validly authorized, executed and delivered by
the Company, and constitute the legal, valid and binding agreements of the
Company, enforceable against the Company, in accordance with their
respective terms. The descriptions in the Registration Statement of
agreements, contracts and other documents are accurate in all material
respects and fairly present the information required to be shown with
6
respect thereto by Form SB-2, and there are no contracts or other documents
which are required by the Act to be described in the Registration Statement
or filed as exhibits to the Registration Statement which are not described
or filed as required, and the exhibits which have been filed are in all
material respects complete and correct copies of the documents of which
they purport to be copies.
(xiv) Subsequent to the respective dates as of which information is
set forth in the Registration Statement and Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company has
not (i) issued any securities or incurred any liability or obligation,
direct or contingent, for borrowed money, (ii) entered into any transaction
other than in the ordinary course of business, or (iii) declared or paid
any dividend or made any other distribution on or in respect of its capital
stock of any class, and there has not been any change in the capital stock,
or any material change in the debt (long or short term) or liabilities or
material adverse change in or affecting the business, condition (financial
or otherwise), earnings, management, properties, assets, results of
operations, stockholders' equity or prospects of the Company.
(xv) No default exists in the due performance and observance of any
term, covenant or condition of any license, contract, indenture, mortgage,
installment sale agreement, lease, deed of trust, voting trust agreement,
stockholders agreement, partnership agreement, note, loan or credit
agreement, purchase order, or any other agreement or instrument evidencing
an obligation for borrowed money, or any other material agreement or
instrument to which the Company is a party or by which the Company may be
bound or to which the property or assets (tangible or intangible) of the
Company is subject or affected.
(xvi) The Company is in compliance with all federal, state, local, and
foreign laws and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours. There
are no pending investigations involving the Company by the U.S. Department
of Labor, or any other governmental agency responsible for the enforcement
of such federal, state, local, or foreign laws and regulations. There is no
unfair labor practice charge or complaint against the Company pending
before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any predecessor entity, and none has ever
occurred. No collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements to which the Company is a party.
(xvii) Except as described in the Prospectus, the Company does not
maintain, sponsor or contribute to any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a
"multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") ("ERISA Plans"). The Company does not maintain
or contribute, now or at any time previously, to a defined benefit plan, as
defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created
thereunder) has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code, which could subject the
Company to any tax penalty on prohibited transactions and which has not
7
adequately been corrected. Each ERISA Plan is in compliance with all
reporting, disclosure and other requirements of the Code and ERISA as they
relate to any such ERISA Plan. Determination letters have been received
from the Internal Revenue Service with respect to each ERISA Plan which is
intended to comply with Code Section 401(a), stating that such ERISA Plan
and the attendant trust are qualified thereunder. The Company has never
completely or partially withdrawn from a "multiemployer plan."
(xviii) Neither the Company nor any of its employees, directors,
stockholders, partners, or affiliates (within the meaning of the Rules and
Regulations) of any of the foregoing has taken or will take, directly or
indirectly, any action designed to or which has constituted or which might
be expected to cause or result in, under the Exchange Act, or otherwise,
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities or otherwise.
(xix) Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, service names,
domain names, trade names and copyrights and none of the licenses and
rights to the foregoing presently owned or held by the Company are in
dispute or to the Company's knowledge are in any conflict with the right of
any other person or entity. The Company (i) owns or has the right to use,
free and clear of all liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever, all patents, patent applications, trademarks, service marks,
service names, domain names, trade names and copyrights, technology and
licenses and rights with respect to the foregoing, used in the conduct of
its business as now conducted or proposed to be conducted without
infringing upon or otherwise acting adversely to the right or claimed right
of any person, corporation or other entity under or with respect to any of
the foregoing and (ii) is not obligated or under any liability whatsoever
to make any payment by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any patent, patent application,
trademark, service ▇▇▇▇, service names, domain names, trade name,
copyright, know-how, technology or other intangible asset, with respect to
the use thereof or in connection with the conduct of its business or
otherwise. There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental or other proceeding, domestic or
foreign, pending or threatened (or circumstances that may give rise to the
same) against the Company which challenges the exclusive rights of the
Company with respect to any trademarks, trade names, service marks, service
names, domain names, copyrights, patents, patent applications or licenses
or rights to the foregoing used in the conduct of its business, or which
challenge the right of the Company to use any technology presently used or
contemplated to be used in the conduct of its business.
(xx) The Company owns and has the unrestricted right to use all trade
secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
inventions, technology, designs, processes, works of authorship, computer
programs and technical data and information (collectively herein
"intellectual property") that are material to the development, manufacture,
operation and sale of all products and services sold or proposed to be sold
by the Company, free and clear of and without violating any right, lien, or
claim of others, including without limitation, former employers of its
employees; provided, however, that the possibility exists that other
8
persons or entities, completely independently of the Company, or its
employees or agents, could have developed trade secrets or items of
technical information similar or identical to those of the Company. The
Company is not aware of any such development of similar or identical trade
secrets or technical information by others.
(xxi) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property
stated in the Prospectus, to be owned or leased by it free and clear of all
liens, charges, claims, encumbrances, pledges, security interests, defects,
or other restrictions or equities of any kind whatsoever, other than those
referred to in the Prospectus and liens for taxes not yet due and payable.
(xxii) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇▇▇▇"), whose report is
filed with the Commission as a part of the Registration Statement, are
independent certified public accountants as required by the Act and the
Rules and Regulations.
(xxiii) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of a
finder's or origination fee with respect to the sale of the Securities
hereunder or any other arrangements, agreements, understandings, payments
or issuance with respect to the Company or any of its officers, directors,
stockholders, partners, employees or affiliates that may affect the
Underwriters' compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
(xxiv) The Common Stock and Warrants have been approved for quotation
on the American Stock Exchange.
(xxv) Neither the Company nor any of its officers, directors
employees, agents, or any other person associated with or acting on behalf
of the Company has used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political
activity; made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; violated or
is in violation of any provision of the Foreign Corrupt Practices Act of
1977; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(xxvi) Except as set forth in the Prospectus, no officer, director or
stockholder of the Company, or any "affiliate" or "associate" (as these
terms are defined in Rule 405 promulgated under the Rules and Regulations)
of any of the foregoing persons or entities has, either directly or
indirectly, (i) an interest in any person or entity which (A) furnishes or
sells services or products which are furnished or sold or are proposed to
be furnished or sold by the Company, or (B) purchases from or sells or
furnishes to the Company any goods or services, or (ii) a beneficial
interest in any contract or agreement to which the Company is a party or by
which it may be bound or affected. Except as set forth in the Prospectus
under "Certain Transactions," there are no existing agreements,
arrangements, understandings or transactions, or proposed agreements,
arrangements, understandings or transactions, between or among the Company
and any officer, director, or Principal Stockholder (as such term is
defined in the Prospectus) of the Company or any partner, affiliate or
associate of any of the foregoing persons or entities.
9
(xxvii) Any certificate signed by any officer of the Company, and
delivered to the Representative or to Underwriters' Counsel (as defined
herein) shall be deemed a representation and warranty by the Company to the
Representative as to the matters covered thereby.
(xxiii) The Company: (i) has made and kept accurate books and records;
(ii) has maintained internal and accounting controls which provide
reasonable assurance that: (A) transactions are executed in accordance with
management's authorization; (B) transactions are recorded as necessary to
permit preparation of the financial statements and to maintain
accountability for its assets; (C) access to its assets have been permitted
only in accordance with management's authorization; and (D) the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(xxix) Except and to the extent described in the Prospectus, no
holders of any securities of the Company or of any options, warrants or
other convertible or exchangeable securities of the Company have the right
to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or to
require the Company to file a registration statement under the Act and no
person or entity holds any anti-dilution rights with respect to any
securities of the Company.
(xxx) The properties and business of the Company conform in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus; and the Company has good and marketable title
to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or leased by it, in
each case free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of
any kind whatsoever, other than those referred to in the Prospectus and
liens for taxes not yet due and payable.
2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND REPRESENTATIVE'S
WARRANTS.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter
agrees severally and not jointly to purchase from the Company at a price of
$____ per share of Common Stock and $____ per Warrant, that number of Firm
Securities set forth opposite the name of such Underwriter in Schedule A hereto.
(b) In addition, on the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters to purchase
all or any part of an additional 150,000 Units (450,000 shares of Common Stock
and 600,000 Warrants) at a price of $___ per Unit. The option granted hereby
will expire 45 days after (i) the date the Registration Statement becomes
effective, if the Company has elected not to rely on Rule 430A under the Rules
and Regulations, or (ii) the date of this Agreement if the Company has elected
to rely upon Rule 430A under the Rules and Regulations, and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
10
distribution of the Firm Securities upon notice by the Representative to the
Company setting forth the number of Option Securities as to which Representative
is then exercising the option and the time and date of payment and delivery for
any such Option Securities. Any such time and date of delivery (an "Option
Closing Date") shall be determined by the Representative, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Date, as hereinafter defined, unless otherwise agreed
upon by the Representative and the Company. Nothing herein contained shall
obligate the Underwriters to make any over-allotments. No Option Securities
shall be delivered unless the Firm Securities shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
(c) The Company will deliver the Firm Securities to the Representative in
the forms described below for the accounts of the Underwriters, against payment
of the purchase price in Federal (same day) funds by official bank check or
checks or wire transfer to an account at a bank acceptable to the Representative
drawn to the order of the Company, in the case of the Firm Securities to be sold
by the Company, at the office ▇▇▇▇▇ & Company, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ at 9:30 AM, New York time, on _________, 2001, or at such other time
not later than seven full business days thereafter as you and the Company
determine, such time being herein referred to as the "Closing Date". In
addition, in the event that any or all of the Option Securities are purchased by
the Underwriters, payment of the purchase price for, and delivery of
certificates for, such Option Securities shall be made at the above-mentioned
office of the Representative or at such other place as shall be agreed upon by
the Representative and the Company on each Option Closing Date as specified in
the notice from the Representative to the Company. Delivery of the certificates
for the Firm Securities and the Option Securities, if any, shall be made to the
Underwriters against payment by the Underwriters of the purchase price for the
Firm Securities and the Option Securities, if any, to the order of the Company
for the Firm Securities of the Company and the Option Securities, if any, by New
York Clearing House funds. Certificates for the Firm Securities and the Option
Securities, if any, shall be in definitive, fully registered form, shall bear no
restrictive legends and shall be in such denominations and registered in such
names as the Representative may request in writing at least two (2) business
days prior to the Closing Date or the relevant Option Closing Date, as the case
may be. The certificates for the Firm Securities and the Option Securities, if
any, shall be made available to the Representative at such office or such other
place as the Representative may designate for inspection, checking and packaging
no later than 9:30 a.m. on the last business day prior to Closing Date or the
relevant Option Closing Date, as the case may be.
(d) On the Closing Date, the Company shall issue and sell the
Representative's Warrants to the Representative at a purchase price in the
aggregate of $50.00, such warrants shall entitle the holders thereof to purchase
up to 100,000 Units consisting of 300,000 shares of Common Stock and 400,000
Warrants. The Representative's Warrants shall be exercisable for a period of
four years commencing one year from the effective date of the Registration
Statement at a price equaling one hundred twenty percent (120%) of the initial
public offering price of the Units. The Representative's Warrant Agreement and
form of Warrant Certificate shall be substantially in the form filed as Exhibit
1.2 to the Registration Statement. Payment for the Representative's Warrants
shall be made on the Closing Date.
11
3. PUBLIC OFFERING OF THE SHARES. As soon after the Registration Statement
becomes effective as the Representative deems advisable, the Underwriters shall
make a public offering of the Units (other than to residents of or in any
jurisdiction in which qualification of the Units is required and has not become
effective) at the price and upon the other terms set forth in the Prospectus.
The Representative may from time to time increase or decrease the public
offering price after distribution of the Units has been completed to such extent
as the Representative, in its discretion deems advisable. The Underwriters may
enter into one of more agreements as the Underwriters, in each of their sole
discretion, deem advisable with one or more broker-dealers who shall act as
dealers in connection with such public offering.
4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and
agrees with each of the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Act or Exchange
Act before termination of the offering of the Units by the Underwriters of which
the Representative shall not previously have been advised and furnished with a
copy, or to which the Representative shall have objected or which is not in
compliance with the Act, the Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Representative and confirm the notice in writing, (i)
when the Registration Statement, as amended, becomes effective, if the
provisions of Rule 430A promulgated under the Act will be relied upon, when the
Prospectus has been filed in accordance with said Rule 430A and when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto, or the
institution of proceedings for that purpose, (iii) of the issuance by the
Commission or by any state securities commission of any proceedings for the
suspension of the qualification of any of the Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the receipt of any comments from the Commission; and (v)
of any request by the Commission for any amendment to the Registration Statement
or any amendment or supplement to the Prospectus or for additional information.
If the Commission or any state securities commission authority shall enter a
stop order or suspend such qualification at any time, the Company use its best
efforts to obtain prompt the withdrawal of the order.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representative) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to Rule
424(b)(1) (or, if applicable and if consented to by the Representative, pursuant
to Rule 424(b)(4)) not later than the Commission's close of business on the
earlier of (i) the second business day following the execution and delivery of
this Agreement and (ii) the fifteenth business day after the effective date of
the Registration Statement.
12
(d) The Company will give the Representative notice of its intention to
file or prepare any amendment to the Registration Statement (including any
post-effective amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by the
Representative in connection with the offering of the Securities which differs
from the corresponding prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the Rules and Regulations),
and will furnish the Representative with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file any such prospectus to which the
Representative or Schifino and ▇▇▇▇▇▇▇▇▇, P.A. ("Underwriters' Counsel"), shall
object.
(e) The Company shall endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective, to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as the Representative may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution, and shall make such applications, file such documents
and furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign corporation
or file a general or limited consent to service of process in any such
jurisdiction. In each jurisdiction where such qualification shall be effected,
the Company will, unless the Representative agrees that such action is not at
the time necessary or advisable, use all reasonable efforts to file and make
such statements or reports at such times as are or may reasonably be required by
the laws of such jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered under the
Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it by the Act and the Exchange Act, as now and
hereafter amended and by the Rules and Regulations, as from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Securities in accordance with the provisions hereof and the Prospectus, or
any amendments or supplements thereto. If at any time when a prospectus relating
to the Securities is required to be delivered under the Act, any event shall
have occurred as a result of which, in the opinion of counsel for the Company or
Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Representative copies
of such amendment or supplement as soon as available and in such quantities as
the Representative may request.
(g) As soon as practicable, but in any event not later than 45 days after
the end of the 12-month period beginning on the day after the end of the fiscal
quarter of the Company during which the effective date of the Registration
Statement occurs (90 days in the event that the end of such fiscal quarter is
the end of the Company's fiscal year), the Company shall make generally
13
available to its security holders, in the manner specified in Rule 158(b) of the
Rules and Regulations, and to the Representative, an earnings statement which
will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Rules and
Regulations, which statement need not be audited unless required by the Act,
covering a period of at least 12 consecutive months after the effective date of
the Registration Statement.
(h) During a period of five years after the date hereof, the Company will
furnish to its stockholders, as soon as practicable, annual reports (including
financial statements audited by independent public accountants) and unaudited
quarterly reports of earnings, and will deliver to the Representative:
(i) concurrently with furnishing such quarterly reports to its
stockholders, statements of income of the Company for each quarter in the form
furnished to the Company's stockholders and certified by the Company's principal
financial or accounting officer;
(ii) concurrently with furnishing such annual reports to its stockholders,
a balance sheet of the Company as at the end of the preceding fiscal year,
together with statements of operations, stockholders' equity, and cash flows of
the Company for such fiscal year, accompanied by a copy of the certificate
thereon of independent certified public accountants;
(iii) as soon as they are available, copies of all reports (financial or
other) mailed to stockholders;
(iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, the NASD or any securities
exchange;
(v) every press release and every material news item or article of interest
to the financial community in respect of the Company, or its affairs which was
released or prepared by or on behalf of the Company; and
(vi) any additional information of a public nature concerning the Company
(and any future subsidiary) or its businesses which the Representative may
request.
(vii) during such five-year period, if the Company has an active
subsidiary, the foregoing financial statements will be on a consolidated basis
to the extent that the accounts of the Company and its subsidiary are
consolidated, and will be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(i) The Company will maintain a Transfer Agent and Warrant Agent ("Transfer
Agent") and, if necessary under the jurisdiction of incorporation of the
Company, a Registrar (which may be the same entity as the Transfer Agent) for
its Common Stock and Warrants.
(j) The Company will furnish to the Representative or on Representative's
order, without charge, at such place as the Representative may designate, copies
of each Preliminary Prospectus, the Registration Statement and any pre-effective
or post-effective amendments thereto (two of which copies will be signed and
14
will include all financial statements and exhibits), the Prospectus, and all
amendments and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as available
and in such reasonable quantities as the Representative may request.
(k) On or before the effective date of the Registration Statement, the
Company shall provide the Representative with true copies of duly executed,
legally binding and enforceable agreements pursuant to which all of the
officers and directors of the Company, Liviakis Financial Communications,
Inc. and Thomson Kernaghan & Co., Ltd., acting on behalf of itself and as
agent have agreed not to, directly or indirectly, offer, sell, grant any
option for the sale of, assign, transfer, pledge, hypothecate, distribute
or otherwise encumber or dispose of any shares of Common Stock or
securities convertible into, exercisable or exchangeable for or evidencing
any right to purchase or subscribe for any shares of Common Stock (either
pursuant to Rule 144 of the Rules and Regulations or otherwise) or dispose
of any beneficial interest therein for a period of not less than 270 days
following the effective date of the Registration Statement without the
prior written consent of the Representative and the Company (the "Lock-up
Agreement"). In addition, the Company shall not sell or offer for sale any
of its securities for a period of thirteen (13) months from the effective
date of the Registration Statement without the consent of the
Representative except pursuant to options and warrants issued and
outstanding on the effective date of the Registration Statement, and except
that the Company may conduct a secondary offering of its securities in an
amount not less than thirty million dollars ($30,000,000) if the
Representative is given the opportunity to participate in the secondary
offering. The Company will cause the Transfer Agent, as defined below, to
▇▇▇▇ an appropriate legend on the face of stock certificates representing
all of such securities and to place "stop transfer" orders on the Company's
stock ledgers.
(l) Neither the Company, nor any of its officers or directors, nor any
of their respective affiliates (within the meaning of the Rules and
Regulations) will take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any securities of the
Company.
(m) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under
"Use of Proceeds" in the Prospectus. Except as described in the Prospectus,
no portion of the net proceeds will be used, directly or indirectly, to
acquire any securities issued by the Company.
(n) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange
Act, and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act, and the Rules and
Regulations.
(o) The Company shall furnish to the Representative as early as
practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two (2) full business days
prior thereto, a copy of the latest available unaudited interim financial
statements of the Company (which in no event shall be as of a date more
15
than thirty (30) days prior to the date of the Registration Statement)
which have been read by the Company's independent public accountants, as
stated in its letter to be furnished pursuant to Section 6(k) hereof.
(p) The Company shall cause the Common Stock and the Warrants to be
quoted on the American Stock Exchange and for a period of five (5) years
from the date hereof, use its best efforts to maintain a quotation of the
Common Stock and the Warrants to the extent outstanding.
(q) For a period of five (5) years from the Closing Date, the Company
shall furnish to the Representative at the Representative's request and at
the Company's sole expense, (i) weekly consolidated transfer sheets
relating to the Common Stock and the Warrants (ii) the list of holders of
all of the Company's securities and (iii) a Blue Sky "Trading Survey" for
secondary sales of the Company's securities prepared by counsel to the
Company.
(r) Until the completion of the distribution of the Firm Securities
and the Option Securities, the Company shall not without the prior written
consent of the Representative and Underwriters' Counsel, issue, directly or
indirectly, any press release or other communication or hold any press
conference with respect to the Company or its activities or the offering
contemplated hereby, other than trade releases issued in the ordinary
course of the Company's business consistent with past practices with
respect to the Company's operations.
(s) For a period equal to the lesser of (i) three (3) years from the
date hereof, and (ii) the sale to the public of the Representative's
Securities, the Company will not take any action or actions which may
prevent or disqualify the Company's use of Form SB-2 or Form S-1 (or other
appropriate form) for the registration under the Act of the
Representative's Securities.
(t) For a period of one (1) year after the effective date of the
Registration Statement, the Representative shall have the right to
designate one (1) individual to attend all meetings of the Company's Board
of Directors (the "Board"). The Company shall notify the Representative of
each meeting of the Board and the Company shall send to such individual all
notices and other correspondence and communications sent by the Company to
members of the Board. Such individual shall be reimbursed for all
out-of-pocket expenses incurred in connection with his attendance of
meetings of the Board.
(u) Subject to the rules of the NASD, thirteen (13) months from the
effective date of the registration statement the Company will appoint ▇▇▇▇▇
& Company, Inc. as Warrant Solicitation Agent for which it will be entitled
to a five (5) percent fee upon exercise of the Warrants contained in the
Units solicited by them. No solicitation fee shall be paid in connection
with the exercise of the Underwriter's Warrants or the Warrants included in
the Underwriter's Warrants.
16
5. PAYMENT OF EXPENSES.
(a) The Company hereby agrees to pay on each of the Closing Date and
the Option Closing Date (to the extent not paid at the Closing Date) all
expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations of
the Company under this Agreement and the Representative's Warrant
Agreement, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses
incurred in connection with the preparation, duplication, printing,
(including mailing and handling charges) filing, delivery and mailing
(including the payment of postage with respect thereto) of the Registration
Statement and the Prospectus and any amendments and supplements thereto and
the printing, mailing (including the payment of postage with respect
thereto) and delivery of this Agreement, the Agreement Among Underwriters,
the Selected Dealer Agreements, and related documents, including the cost
of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments thereof or supplements thereto supplied to
the Underwriters and such dealers as the Underwriters may request, in
quantities as hereinabove stated, (iii) the printing, engraving, issuance
and delivery of the Securities including, but not limited to, (x) the
purchase by the Underwriters of the Firm Securities and the Option
Securities and the purchase by the Representative of the Representative's
Warrants from the Company, (y) the consummation by the Company of any of
its obligations under this Agreement and the Representative's Warrant
Agreement, and (z) resale of the Firm Securities and the Option Securities
by the Underwriters in connection with the distribution contemplated
hereby, (iv) the qualification of the Securities under state or foreign
securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky
Memorandum" and "Legal Investments Survey," if any, and disbursements and
fees of Underwriter's Counsel in connection therewith, provided that such
Blue Sky counsel fees shall not exceed $15,000 if the Securities are listed
on a national securities exchange or $30,000 if the Securities are listed
on the Nasdaq Small Cap Market or traded on the Bulletin Board, (v)
advertising costs and expenses, including but not limited to costs and
expenses in connection with the "road show", information meetings and
presentations, bound volumes and prospectus memorabilia and "tomb-stone"
advertisement expenses, provided that the Representative's road show
expenses shall not exceed $50,000, (vi) costs and expenses in connection
with due diligence investigations, including but not limited to the fees of
any independent counsel or consultant retained, (vii) fees and expenses of
the transfer agent and registrar, (viii) the fees payable to the Commission
and the NASD, and (ix) the fees and expenses incurred in connection with
the quotation of the Securities on Nasdaq or any other exchange.
(b) If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 6 or Section 11, (i) the Company shall
reimburse and indemnify the Representative for all of its actual
out-of-pocket expenses, including the fees and disbursements of
Underwriters' Counsel, less any amounts already paid pursuant to Section
5(c) hereof.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to subsection (a) of this Section 5, it will pay to the
Representative on the Closing Date by certified or bank cashier's check or,
at the election of the Representative, by deduction from the proceeds of
the offering contemplated herein a non-accountable expense allowance equal
17
to three percent (3.0%) of the gross proceeds received by the Company from
the sale of the Firm Securities, $50,000 of which has been paid to date. In
the event the Representative elects to exercise the over-allotment option
described in Section 2(b) hereof, the Company agrees to pay to the
Representative on the Option Closing Date (by certified or bank cashier's
check or, at the Representative's election, by deduction from the proceeds
of the Option Securities) a non-accountable expense allowance equal to
three percent (3.0%) of the gross proceeds received by the Company from the
sale of the Option Securities.
6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, with respect to the
Company as if it had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date or
Option Closing Date, if any, of the statements of the officers of the Company
made pursuant to the provisions hereof; and the performance by the Company on
and as of the Closing Date and each Option Closing Date, if any, of its
covenants and obligations hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than on the date of this Agreement or such later date and time as shall be
consented to in writing by the Representative, and, at Closing Date and
each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending
or threatened by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel. If the Company has
elected to rely upon Rule 430A of the Rules and Regulations, the price of
the Shares and any price-related information previously omitted from the
effective Registration Statement pursuant to such Rule 430A shall have been
transmitted to the Commission for filing pursuant to Rule 424(b) of the
Rules and Regulations within the prescribed time period, and prior to the
Closing Date the Company shall have provided evidence satisfactory to the
Representative of such timely filing, or a post-effective amendment
providing such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A of the Rules and
Regulations.
(b) The Representative shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material
and is required to be stated therein or is necessary to make the statements
therein not misleading, or that the Prospectus, or any supplement thereto,
contains an untrue statement of fact which, in the Representative's
opinion, is material, or omits to state a fact which, in the
Representative's opinion, is material and is required to be stated therein
or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
18
(c) On or prior to the Closing Date, the Representative shall have
received from Underwriters' Counsel, such opinion or opinions with respect
to such matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable
them to pass upon such matters.
(d) At Closing Date, the Underwriter shall have received the favorable
opinion of Johnson, Blakely, Pope, Bokor, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.A. ("▇▇▇▇▇▇▇
▇▇▇▇▇▇▇"), counsel to the Company, dated the Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters'
Counsel, to the effect that:
(i) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction and (B) is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its
operations requires such qualification or licensing,;
(ii) to the best of such counsel's knowledge, the Company does
not own an interest in any other corporation, partnership, joint
venture, trust or other business entity;
(iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "Capitalization" and "Description of
Securities," and the Company, to the best knowledge of Counsel, is not
a party to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants, options
or other securities, except for this Agreement, the Representative's
Warrant Agreement and as described in the Prospectus. The Securities,
and all other securities issued or issuable by the Company conform in
all material respects to all statements with respect thereto contained
in the Registration Statement and the Prospectus. All issued and
outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and
none of such securities were issued in violation of the preemptive
rights of any holders of any security of the Company. The Firm
Securities, the Option Securities, the Representative's Warrants and
the Representative's Securities to be sold by the Company hereunder
and under the Representative's Warrant Agreement are not and will not
be subject to any preemptive or other similar rights of any
stockholder, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof, will be validly issued,
fully paid and non-assessable and conform to the description thereof
contained in the Prospectus; the holders thereof will not be subject
to any liability solely as such holders; all corporate action required
to be taken for the authorization, issue and sale by the Company of
the Firm Securities, the Option Securities, the Representative's
Warrants and the Representative's Securities has been duly and validly
taken; and the certificates representing the Firm Securities, the
Option Securities and the Representative's Warrants are in due and
proper form. The Representative's Warrants constitute valid and
binding obligations of the Company to issue and sell, upon exercise
thereof and payment therefor, the number and type of securities of the
Company called for thereby. The Securities have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement,
and when issued and delivered by the Company pursuant to this
Agreement against payment of the consideration set forth herein, will
19
be validly issued, fully paid and non-assessable free and clear of any
pledge, lien, charge, claim, encumbrance, pledge, security interest,
or other restriction or equity of any kind whatsoever. There are no
restrictions upon the voting or transfer of, any of the Securities
pursuant to the Company's certificate of incorporation or bylaws. No
transfer tax is payable by or on behalf of the Underwriters in
connection with (A) the issuance by the Company of the Firm
Securities, the Option Securities, and the Representatives' Warrants
(B) the purchase by the Underwriters of the Firm Securities, the
Option Securities and the Representative's Warrants, respectively,
from the Company, (C) the consummation by the Company of any of its
obligations under this Agreement or the Representative's Warrant
Agreement, or (D) resales of the Firm Securities and the Option
Securities in connection with the distribution contemplated hereby;
(iv) the Registration Statement is effective under the Act, and,
if applicable, filing of all pricing information has been timely made
in the appropriate form under Rule 430A, and no stop order suspending
the use of the Preliminary Prospectus, the Registration Statement or
Prospectus or any part of any thereof or suspending the effectiveness
of the Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or, to the best of
such counsel's knowledge, threatened by the Commission;
(v) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements
thereto (other than the financial statements and other financial and
statistical data included therein, as to which no opinion need be
rendered) comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations;
(vi) to the best of such counsel's knowledge: (i) the
descriptions in the Registration Statement and Prospectus of statutes,
legal and governmental proceedings, contracts and other documents are
accurate in all material respects; (ii) there are no statutes, legal
or governmental proceedings, contracts or documents that are required
to be described in the Prospectus, or documents that are required to
be filed as exhibits to the Registration Statement that are not
discussed or filed as required and the exhibits which have been filed
are correct copies of the documents of which they purport to be
copies; (iii) there is no action, suit, proceeding, inquiry or
investigation before or by any court or governmental body or agency,
domestic or foreign, now pending or threatened against the Company or
its property or assets, which is required to be disclosed in the
Registration Statement which is not so disclosed therein, or which, if
determined adversely, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or which
would adversely affect the present or prospective ability to perform
its obligations under this Agreement.
(vii) the Company has full legal right, power and authority to
enter into each of this Agreement and the Representative's Warrant
Agreement and to consummate the transactions provided for herein and
therein; and each of this Agreement and the Representative's Warrant
Agreement has been duly authorized, executed and delivered by the
Company. Each of this Agreement and the Representative's Warrant
Agreement, assuming due authorization, execution and delivery by each
other party thereto constitutes a legal, valid and binding agreement
of the Company enforceable against the Company in accordance with its
20
terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action,
legal or equitable, and except as rights to indemnity or contribution
may be limited by applicable law), and none of the Company's execution
or delivery of this Agreement and the Representative's Warrant
Agreement, its performance hereunder or thereunder, its consummation
of the transactions contemplated herein or therein, or the conduct of
its business as described in the Registration Statement, the
Prospectus, and any amendments or supplements thereto, conflicts with
or will conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or result in the creation or imposition of
any lien, charge, claim, encumbrance, pledge, security interest,
defect or other restriction or equity of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company pursuant to
the terms of, (A) the certificate of incorporation or by-laws of the
Company, and to such Counsel's best knowledge (B) any license,
contract, indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company is a party or by which it
is or may be bound or to which any of its respective properties or
assets (tangible or intangible) is or may be subject, or (C) any
statute, judgment, decree, order, rule or regulation applicable to the
Company of any arbitrator, court, regulatory body or administrative
agency or other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the Company or
any of its activities or properties;
(viii) except as described in the Prospectus, no consent,
approval, authorization or order of, and no filing with, any court,
regulatory body, government agency or other body (other than such as
may be required under Blue Sky laws, as to which no opinion need be
rendered) is required in connection with the issuance or sale of the
Shares pursuant to the Prospectus, the issuance of the
Representative's Warrants, the performance of this Agreement and the
Representative's Warrant Agreement, and the transactions contemplated
hereby and thereby except as have been obtained;
(ix) to the best knowledge of such counsel, the Company is not in
breach of, or in default under, any term or provision of any contract,
indenture, mortgage, installment sale agreement, deed of trust, lease,
voting trust agreement, stockholders' agreement, partnership
agreement, note, loan or credit agreement or any other agreement or
instrument evidencing an obligation for borrowed money, or any other
agreement or instrument to which the Company is a party or by which
the Company may be bound or to which the property or assets (tangible
or intangible) of the Company is subject or affected; and the Company
is not in violation of any term or provision of its certificate of
incorporation by-laws, or in violation of any franchise, permit,
judgment, decree, order, statute, rule or regulation;
(x) the statements in the Prospectus under "BUSINESS,"
"MANAGEMENT," "PRINCIPAL STOCKHOLDERS," "CERTAIN TRANSACTIONS,"
"DESCRIPTION OF SECURITIES," "RESALES BY SELLING STOCKHOLDERS" and
"SHARES ELIGIBLE FOR FUTURE SALE" have been reviewed by such counsel,
and insofar as they refer to
21
statements of law, descriptions of statutes, licenses, rules or
regulations or legal conclusions, are correct in all material
respects;
(xi) the Firm Securities and Option Securities have been accepted
for quotation on the American Stock Exchange;
(xii) except as described in the Prospectus, no person,
corporation, trust, partnership, association or other entity has the
right to include and/or register any securities of the Company in the
Registration Statement, require the Company to file any registration
statement or, if filed, to include any security in such registration
statement;
(xiii) To the best of counsel's knowledge, except as described in
the Prospectus, there are no claims, payments, issuances, arrangements
or understandings for services in the nature of a finder's or
origination fee with respect to the sale of the Securities hereunder
or financial consulting arrangement or any other arrangements,
agreements, understandings, payments or issuances that may affect the
Underwriters' compensation, as determined by the NASD;
(xiv) assuming due execution and delivery by the parties thereto
other than the Company, the Lock-up Agreements are legal, valid and
binding obligations of parties thereto, enforceable against the party
and any subsequent holder of the securities subject thereto in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to or
affecting enforcement of creditors' rights and the application of
equitable principles in any action, legal or equitable, and except as
rights to indemnity or contribution may be limited by applicable law);
and
(xv) except as described in the Prospectus, the Company does not
(A) maintain, sponsor or contribute to any ERISA Plans, (B) maintain
or contribute, now or at any time previously, to a defined benefit
plan, as defined in Section 3(35) of ERISA, and (C) has never
completely or partially withdrawn from a "multiemployer plan".
Such counsel shall state that such counsel has participated in
conferences with officers and other representatives of the Company and
representatives of the independent public accountants for the Company
at which conferences such officers, representatives and accountants
discussed the contents of the Preliminary Prospectus, the Registration
Statement, the Prospectus, and related matters were discussed and,
although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and Prospectus, on
the basis of the foregoing, no facts have come to the attention of
such counsel which lead them to believe that either the Registration
Statement or any amendment thereto, at the time such Registration
Statement or amendment became effective or the Prospectus or amendment
or supplement thereto as of the date of such opinion contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and
schedules and other financial and statistical data included in the
Preliminary Prospectus, the Registration Statement or Prospectus).
22
Such opinion shall not state that it is to be governed or qualified by,
or that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991), or any comparable
State bar accord.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company, and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to Underwriters' Counsel if requested. The opinion shall also
state that the Underwriters' Counsel is entitled to rely thereon. The opinion of
such counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and that the Underwriters and
they are justified in relying thereon.
At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, counsel to the Company, dated
the Option Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, confirming as of Option Closing Date the
statements made by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in its opinion delivered on the Closing Date.
(e) On or prior to each of the Closing Date and the Option Closing Date, if
any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in subsection (c)
of this Section 6, or in order to evidence the accuracy, completeness or
satisfaction of any of the representations, warranties or conditions of the
Company, or herein contained.
(f) On or prior to each of the Closing Date and each Option Closing Date,
if any, (i) there shall have been no material adverse change nor development
involving a prospective change in the condition, financial or otherwise,
prospects, stockholders' equity or the business activities of the Company,
whether or not in the ordinary course of business, from the latest dates as of
which such condition is set forth in the Registration Statement and Prospectus;
(ii) there shall have been no transaction, not in the ordinary course of
business, entered into by the Company, from the latest date as of which the
financial condition of the Company is set forth in the Registration Statement
and Prospectus which is materially adverse to the Company; (iii) the Company
shall not be in default under any provision of any instrument relating to any
outstanding indebtedness; (iv) the Company shall not have issued any securities
(other than the Securities); the Company shall not have declared or paid any
dividend or made any distribution in respect of its capital stock of any class;
23
and there shall not have been any change in the capital stock of the Company, or
any material change in the debt (long or short term) or liabilities or
obligations of the Company (contingent or otherwise); (v) no material amount of
the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company, or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding could reasonably be expected to have a Material
Adverse Effect; and (vii) no stop order shall have been issued under the Act and
no proceedings therefor shall have been initiated or threatened by the
Commission.
(g) At each of the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date or
the Option Closing Date, as the case may be, and the Company has complied
with all agreements and covenants and satisfied all conditions contained in
this Agreement on its part to be performed or satisfied at or prior to such
Closing Date or Option Closing Date, as the case may be;
(ii) no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no proceedings for that
purpose have been instituted or are pending or, to the best of each of such
person's knowledge, threatened under the Act;
(iii) the Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and neither the Preliminary Prospectus or any supplement
thereto included any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and
(iv) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (a) the Company has
not incurred up to and including the Closing Date or the Option Closing
Date, as the case may be, other than in the ordinary course of its
business, any material liabilities or obligations, direct or contingent;
(b) the Company has not paid or declared any dividends or other
distributions on its capital stock; (c) the Company has not entered into
any transactions not in the ordinary course of business; (d) there has not
been any change in the capital stock of the Company or any material change
in the debt (long or short-term) of the Company; (e) the Company has not
24
sustained any material loss or damage to its property or assets, whether or
not insured; (g) there is no litigation which is pending or threatened (or
circumstances giving rise to same) against the Company, or any affiliated
party of any of the foregoing which is required to be set forth in an
amended or supplemented Prospectus which has not been set forth; and (h)
there has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been set forth. References to the
Registration Statement and the Prospectus in this subsection (h) are to
such documents as amended and supplemented at the date of such certificate.
(h) By the Closing Date, the Underwriters will have received clearance from
the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(i) At the time this Agreement is executed, the Underwriters shall have
received from ▇▇▇▇▇▇▇▇▇ a letter, dated such date, addressed to the Underwriters
in form and substance satisfactory (including the non-material nature of the
changes or decreases, if any, referred to in clause (iii) below) in all respects
to the Underwriters and Underwriters' Counsel;
(i) confirming that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the
applicable Rules and Regulations;
(ii) stating that it is their opinion that the financial statements
and supporting schedules of the Company included in the Registration
Statement comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations thereunder
and that the Underwriters may rely upon the opinion of ▇▇▇▇▇▇▇▇▇ with
respect to such financial statements and supporting schedules included in
the Registration Statement;
(iii) stating that, on the basis of a limited review which included a
reading of the latest available unaudited interim financial statements of
the Company, a reading of the latest available minutes of the stockholders
and board of directors and the various committees of the boards of
directors of the Company, consultations with officers and other employees
of the Company responsible for financial and accounting matters and other
specified procedures and inquiries, nothing has come to their attention
which would lead them to believe that (A) the pro forma financial
information contained in the Registration Statement and Prospectus does not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or is not fairly
presented in conformity with generally accepted accounting principles
applied on a basis consistent with that of the audited financial statements
of the Company or the unaudited pro forma financial information included in
the Registration Statement, (B) the unaudited financial statements and
supporting schedules of the Company included in the Registration Statement
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and Regulations or are not
fairly presented in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of the
audited financial statements of the Company included in the Registration
Statement, or (C) at a specified date not more than five (5) days prior to
the effective date of the Registration Statement, there has been any change
in the capital stock of the Company, any change in the long-term debt of
25
the Company, or any decrease in the stockholders' equity of the Company or
any decrease in the net current assets or net assets of the Company as
compared with amounts shown in the January 31, 2001 balance sheets included
in the Registration Statement, other than as set forth in or contemplated
by the Registration Statement, or, if there was any change or decrease,
setting forth the amount of such change or decrease, and (D) during the
period from January 31, 2001 to a specified date not more than five (5)
days prior to the effective date of the Registration Statement, there was
any decrease in net revenues or net earnings of the Company or increase in
net earnings per common share of the Company, in each case as compared with
the corresponding period beginning August 1, 1999 other than as set forth
in or contemplated by the Registration Statement, or, if there was any such
decrease, setting forth the amount of such decrease;
(iv) setting forth, at a date not later than five (5) days prior to
the date of the Registration Statement, the amount of liabilities of the
Company (including a break-down of commercial paper and notes payable to
banks);
(v) stating that they have compared specific dollar amounts, numbers
of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus
in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting
records, including work sheets, of the Company and excluding any questions
requiring an interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries and other appropriate
procedures (which procedures do not constitute an examination in accordance
with generally accepted auditing standards) set forth in the letter and
found them to be in agreement; and
(vi) statements as to such other matters incident to the transaction
contemplated hereby as the Underwriters may reasonably request.
(j) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from ▇▇▇▇▇▇▇▇▇ a letter, dated as of the
Closing Date or the Option Closing Date, as the case may be, to the effect that
they reaffirm the statements made in the letter furnished pursuant to SUBSECTION
(j) of this Section hereof except that the specified date referred to shall be a
date not more than five days prior to the Closing Date or the Option Closing
Date, as the case may be, and, if the Company has elected to rely on Rule 430A
of the Rules and Regulations, to the further effect that they have carried out
procedures as specified in clause (v) of SUBSECTION (j) of this Section with
respect to certain amounts, percentages and financial information as specified
by the Underwriters and deemed to be a part of the Registration Statement
pursuant to Rule 430A(b) and have found such amounts, percentages and financial
information to be in agreement with the records specified in such clause (v).
(k) The Company shall have delivered to the Representative a letter from
▇▇▇▇▇▇▇▇▇ addressed to the Company stating that they have not during the
immediately preceding two year period brought to the attention of the Company's
management any "weakness" as defined in Statement of Auditing Standards No. 60
"Communication of Internal Control Structure Related Matters Noted in an Audit,"
in any of the Company's internal controls.
26
(l) On each of the Closing Date and Option Closing Date, if any, there
shall be duly tendered to the Representative the appropriate number of
Securities.
(m) No order suspending the sale of the Securities in any jurisdiction
designated by the Representative pursuant to subsection (e) of Section 4 hereof
shall have been issued on either the Closing Date or the Option Closing Date, if
any, and no proceedings for that purpose shall have been instituted or
threatened.
(n) On or before the Closing Date, the Company shall have executed and
delivered to the Representative, (i) the Representative's Warrant Agreement
substantially in the form filed as Exhibit 1.2 to the Registration Statement in
final form and substance satisfactory to the Representative, and (ii) the
Representative's Warrants in such denominations and to such designees as shall
have been provided to the Company.
(o) On or before the Closing Date, the Common Stock and the Warrants shall
have been duly approved for quotation on the American Stock Exchange, subject to
official notice of issuance.
(p) On or before the Closing Date, there shall have been delivered to the
Representative all of the Lock-up Agreements, in form and substance satisfactory
to Representative's Counsel.
If any condition to the Representative's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7, "Underwriters" shall include the
officers, directors, partners, employees, agents and counsel of the
Underwriters, including specifically each person who may be substituted for an
Underwriter as provided in Section 11 hereof), and each person, if any, who
controls the Underwriter ("controlling person") within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, from and against any and all
losses, claims, damages, expenses or liabilities, joint or several (and actions,
proceedings, investigations, inquiries, and suits in respect thereof),
whatsoever (including but not limited to any and all costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending against
such action, proceeding, investigation, inquiry or suit, commenced or
threatened, or any claim whatsoever), as such are incurred, to which the
Underwriter or such controlling person may become subject under the Act, the
Exchange Act or any other statute or at common law or otherwise, arising out of
or based upon (A) any untrue statement or alleged untrue statement of a material
fact contained (i) in the Registration Statement or the Prospectus (as from time
to time amended and supplemented); (ii) in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Securities; or
(iii) in any application or other document or written communication (in this
27
Section 7 collectively called "application") executed by the Company or based
upon written information furnished by the Company filed, delivered or used in
any jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
or any securities exchange, (B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of the Prospectus, in the light of the
circumstances under which they were made), or (C) any breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company or any of its officers
delivered pursuant hereto unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriters expressly for use in the Registration Statement or
any Prospectus, or any amendment thereof or supplement thereto, or in any
application, as the case may be.
The indemnity agreement in this subsection (a) shall be in addition to any
liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Company, each of its directors, officers
employees, agents and counsel, and each other person, if any, who controls the
Company within the meaning of the Act, to the same extent as the foregoing
indemnity from the Company to the Underwriter but only with respect to
statements or omissions, if any, made in the Registration Statement or
Prospectus or any amendment thereof or supplement thereto or in any application
made in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to any Underwriter by such Underwriter
expressly for use in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto or in any such application, provided that such
written information or omissions only pertain to disclosures in the Registration
Statement or Prospectus directly relating to the transactions effected by the
Underwriters in connection with this Offering. The Company acknowledges that the
statements with respect to the public offering of the Securities set forth under
the heading "Underwriting" has been furnished by the Underwriter expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
The indemnity agreement in this subsection (b) shall be in addition to any
liability which the Underwriters may have at common law or otherwise.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, suit or proceeding, such indemnified
party shall, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 7, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may have otherwise). In case any such action, investigation,
inquiry, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
28
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such case
but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by the indemnifying parties in connection with
the defense of such action at the expense of the indemnifying party, (ii) the
indemnifying parties shall not have employed counsel reasonably satisfactory to
such indemnified party to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct the defense of such
action, investigation, inquiry, suit or proceeding on behalf of the indemnified
party or parties), in any of which events such fees and expenses of one
additional counsel shall be borne by the indemnifying parties. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action, investigation,
inquiry, suit or proceeding or separate but similar or related actions,
investigations, inquiries, suits or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances. Anything in this Section 7
to the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, investigation, inquiry,
suit or proceeding in respect of which indemnification or contribution may be
sought hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party form all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes claim for indemnification pursuant to this
Section 7, but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that the express provisions of
this Section 7 provide for indemnification in such case, or (ii) contribution
under the Act may be required on the part of any indemnified party, then each
indemnifying party shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or actions, investigations,
inquiries, suits or proceedings in respect thereof) (A) in such proportion as is
appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified on the
other hand, from the offering of the Securities or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
29
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is the contributing
party and the Underwriters are the indemnified party, the relative benefits
received by the Company, on the one hand, and the Underwriters, on the other,
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Securities (before deducting expenses) received by the Company
bears to the total underwriting discounts received by the Underwriters
hereunder, in each case as set forth in the table on the Cover Page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, expenses or liabilities (or
actions, investigations, inquiries, suits or proceedings in respect thereof)
referred to above in this subdivision (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action, claim, investigation, inquiry,
suit or proceeding. Notwithstanding the provisions of this subdivision (d) the
Underwriters shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by the Underwriters
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 7, each person, if any, who controls the Company within the meaning of
the Act, each officer of the Company who has signed the Registration Statement,
and each director of the Company shall have the same rights to contribution as
the Company, subject in each case to this subparagraph (d). Any party entitled
to contribution will, promptly after receipt of notice of commencement of any
action, suit, inquiry, investigation or proceeding against such party in respect
to which a claim for contribution may be made against another party or parties
under this subparagraph (d), notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any
obligation it or they may have hereunder or otherwise than under this
subparagraph (d), or to the extent that such party or parties were not adversely
affected by such omission. The Underwriter's obligations in this subsection (d)
to contribute are several in proportion to their respective underwriting
obligations and not joint. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All representations,
warranties and agreements contained in this Agreement or contained in
certificates of officers of the Company submitted pursuant hereto, shall be
deemed to be representations, warranties and agreements at the Closing Date and
the Option Closing Date, as the case may be, and such representations,
warranties and agreements of the Company and the Underwriters and the indemnity
agreements contained in Section 7 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter, the Company and any controlling person of any Underwriter, or the
Company and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriters.
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9. EFFECTIVE DATE.
(a) This Agreement shall become effective at 10:00 a.m., New York City
time, on the next full business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Representative, in its discretion, shall release the Securities for sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representative of telegrams to securities
dealers releasing such shares for offering or the release by the Representative
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. TERMINATION.
(a) Subject to subsection (b) of this Section 10, the Representative shall
have the right to terminate this Agreement, after the date hereof, (i) if any
domestic or international event or act or occurrence has materially adversely
disrupted, or in the Representative's opinion will in the immediate future
materially adversely disrupt the financial markets; or (ii) if trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Boston Stock Exchange, the Chicago
Board of Trade, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Commission or any other government authority having jurisdiction;
or (iii) if trading of any of the securities of the Company shall have been
suspended; or (iv) if the United States shall have become involved in a war or
major hostilities, or if there shall have been an escalation in an existing war
or major hostilities or a national emergency shall have been declared in the
United States; or (v) if a banking moratorium has been declared by a state or
federal authority; or (vi) if a moratorium in foreign exchange trading has been
declared; or (vii) if the Company shall have sustained a loss material or
substantial to the Company by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act which, whether or not such
loss shall have been insured, will, in the Representative's opinion, make it
inadvisable to proceed with the delivery of the Securities; or (viii) if there
shall have occurred any outbreak or escalation of hostilities or any calamity or
crisis or such material adverse change in the general market, political or
economic conditions, in the United States or elsewhere as in the
Representative's judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities.
(b) If this Agreement is terminated by the Representative in accordance
with the provisions of Section 10(a) the Company shall promptly reimburse and
indemnify the Representative for all of its actual out-of-pocket expenses,
including the fees and disbursements of counsel for the Underwriters (less
amounts previously paid pursuant to Section 5(c) above). Notwithstanding any
contrary provision contained in this Agreement, if this Agreement shall not be
carried out within the time specified herein, or any extension thereof granted
to the Representative, by reason of any failure on the part of the Company to
perform any undertaking or satisfy any condition of this Agreement by it to be
performed or satisfied (including, without limitation, pursuant to Section 6 or
Section 12) then, the Company shall promptly reimburse and indemnify the
Underwriter for all of their actual out-of-pocket expenses, including the fees
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and disbursements of counsel for the Underwriter (less amounts previously paid
pursuant to Section 5(c) above). In addition, the Company shall remain liable
for all Blue Sky counsel fees and expenses and filing fees. Notwithstanding any
contrary provision contained in this Agreement, any election hereunder or any
termination of this Agreement (including, without limitation, pursuant to
Sections 6, 10 and 12 hereof), and whether or not this Agreement is otherwise
carried out, the provisions of Section 5 and Section 7 shall not be in any way
affected by such election or termination or failure to carry out the terms of
this Agreement or any part hereof.
11. SUBSTITUTION OF THE UNDERWRITERS. If one or more of the
Underwriters shall fail otherwise than for a reason sufficient to justify the
termination of this Agreement (under the provisions of Section 6, Section 10 or
Section 12 hereof) to purchase the Securities which it or they are obligated to
purchase on such date under this Agreement (the "Defaulted Securities"), the
Representative shall have the right, within 24 hours thereafter, to make
arrangement for one or more of the non-defaulting Underwriters, or any other
Underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the total
number of Firm Securities to be purchased on such date, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the total number
of Firm Securities, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such Underwriter under
this Agreement.
In the event of any such default which does not result in a termination of
this Agreement, the Representative shall have the right to postpone the Closing
Date for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.
12. DEFAULT BY THE COMPANY. If the Company fails at the Closing Date or at
any Option Closing Date, as applicable, to sell and deliver the number of
Securities which it is obligated to sell hereunder on such date, then this
Agreement shall terminate (or, if such default shall occur with respect to any
Option Securities to be purchased on an Option Closing Date, the Underwriters
may at their option, by notice from the Underwriters or the Representative to
the Company, terminate the Underwriters' obligation to purchase Option
Securities from the Company on such date) without any liability on the part of
any non-defaulting party other than pursuant to Section 5, Section 7 and Section
10 hereof. No action taken pursuant to this Section shall relieve the Company
from liability, if any, in respect of such default.
32
13. NOTICES. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Representative shall be directed to the
Representative at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇
▇▇▇▇▇, with a copy to Schifino and ▇▇▇▇▇▇▇▇▇, P.A., One Tampa City Center, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to the Company at ▇▇▇▇
▇▇▇. ▇▇ ▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇,
President, with a copy to Johnson, Blakely, Pope, Bokor, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.,
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
14. PARTIES. This Agreement shall inure solely to the benefit of and shall
be binding upon, the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provisions herein contained. No
purchaser of Securities from the Underwriters shall be deemed to be a successor
by reason merely of such purchase.
15. CONSTRUCTION. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law or conflict of laws principles.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Representative's
Warrant Agreement constitute the entire agreement of the parties hereto and
supersede all prior written or oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may not be amended
except in writing, signed by the Representative and the Company.
33
If the foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.
Very truly yours,
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By:______________________
Name:
Title:
Acting on behalf of themselves and as the Representatives of the several
Underwriters.
▇▇▇▇▇ & COMPANY, INC.
By: ______________________
Name:
Title:
SCHEDULE A
No. of Shares of Common Stock No. of Warrants
Underwriter to be Purchased to be Purchased
----------- --------------- ---------------
▇▇▇▇▇ & Co., Inc.
--------------------- -------------------
Total 3,000,000 Shares 4,000,000 Warrants
MTC/ej/238784