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EXHIBIT 1.1
1,200,000 SHARES OF COMMON STOCK
▇▇▇▇▇▇▇.▇▇▇ CORPORATION
UNDERWRITING AGREEMENT
New York, New York
August __, 1999
▇▇▇▇▇▇▇ AND COMPANY SECURITIES, INC.
As Representative of the Several Underwriters
named in Schedule I hereto
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇▇▇▇.▇▇▇ Corporation, a Delaware corporation (the
"Company"), hereby confirms its agreement with ▇▇▇▇▇▇▇ and Company Securities,
Inc. ("▇▇▇▇▇▇▇"), and each of the underwriters named in Schedule I hereto
(collectively the "Underwriters," which term shall also include any underwriter
substituted as hereinafter provided in Section 11), for whom ▇▇▇▇▇▇▇ is acting
as the Representative (in such capacity ▇▇▇▇▇▇▇ shall hereinafter be referred to
as the "Representative"), with respect to the sale by the Company and the
purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of the Company's common stock, $.0001 par value per
share ("Common Stock"), set forth in Schedule I hereto (the "Offering"). Such
shares are hereinafter referred to as the "Firm Securities." Upon your request,
as provided in Section 2(b) of this Agreement, the Company shall also issue and
sell to the Underwriters, acting severally and not jointly, up to an additional
180,000 shares of Common Stock for the purpose of covering over-allotments, if
any. Such additional shares of Common Stock are hereinafter referred to as the
"Option Securities." The Firm Securities and Option Securities, if purchased,
are hereinafter referred to as the "Underwritten Securities."
The Company also proposes to sell to the Representative for
nominal consideration, warrants (the "Warrants") pursuant to a warrant agreement
(the "Warrant Agreement") for the purchase, during a period commencing one year
after the date hereof and
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expiring on the fifth anniversary of the date hereof, of 120,000 shares of
Common Stock, subject to adjustment as provided in the Warrant Agreement (the
"Warrant Shares"), at an initial exercise price of $_______ per share, subject
to adjustment as provided in the Warrant Agreement. The Underwritten Securities,
the Warrants and the Warrant Shares (collectively, the "Securities") are more
fully described in the Registration Statement and the Prospectus referred to
below.
1. Representations and Warranties of the Company. The Company
represents and warrants to the several Underwriters as of the date hereof, and
as of the Closing Date (as defined in Section 2(c) hereof) and the Option
Closing Date (as defined in Section 2(b) hereof), if any, as follows:
(a) 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 (File No. 333-80849), including
the related preliminary prospectus dated June 17, 1999 and any subsequent
preliminary prospectus subject to completion ("Preliminary Prospectus"), for the
registration of the Securities, under the Securities Act of 1933, as amended
(the "Securities Act"), which registration statement and amendment or amendments
have been prepared by the Company in conformity with the requirements of the
Securities Act, and the rules and regulations (the "Regulations") of the
Commission under the Securities Act. The Company has complied with the
conditions for the use of Form SB-2. The Company will promptly file a further
amendment to said registration statement in the form heretofore delivered to the
Underwriters and will not file any other amendment thereto 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 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." The Company may also file a related registration statement with
the Commission pursuant to Rule 462(b) of the Regulations for the purpose of
registering certain additional securities, which registration shall be effective
upon filing with the Commission. For purposes hereof, the "Rule 462 Registration
Statement" means any registration statement filed with the Commission pursuant
to Rule 462(b) of the Regulations including the Registration Statement and any
prospectus incorporated therein at the time such Registration Statement becomes
effective. For purposes hereof, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under either the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor, to the Company's knowledge,
any state regulatory authority has issued any order preventing or suspending the
use of any Preliminary Prospectus, the Registration Statement or Prospectus or
any part of any thereof and no proceedings for a stop order suspending the
effectiveness of the Registration Statement has been instituted or are pending
or, to the best of the Company's knowledge, threatened. Each of any Preliminary
Prospectus, the Registration Statement and Prospectus at the time of filing
thereof contained all statements required to be stated therein and complied in
all material respects with
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the requirements of the Securities Act and the Rules and Regulations, and none
of any Preliminary Prospectus, 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 light of the circumstances under which they were
made, not misleading, provided, however, that this representation and warranty
does not apply to statements made or statements omitted in reliance upon and in
strict conformity with information furnished to the Company in writing by or on
behalf of any Underwriter expressly for use in any Preliminary Prospectus,
Registration Statement or Prospectus or any amendment thereof or supplement
thereto (the "Underwriters' Information"). The Company acknowledges that the
Underwriters' Information shall include only such written information that is
contained under the caption "Underwriting."
(c) When the Registration Statement or any amendment thereto
becomes effective and through the last to occur of the Closing Date, Option
Closing Date, if any, or the last date 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 required
to be stated therein, and will comply in all material respects with the
requirements of the Securities Act and the Rules and Regulations. Neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, provided, however, that this representation and warranty does
not apply to statements made or statements omitted in reliance upon and in
strict conformity with the Underwriters' Information.
(d) If the Company has elected to rely on Rule 462(b) and the
Rule 462(b) Registration Statement has not been declared effective (i) the
Company has filed a Rule 462(b) Registration Statement in compliance with and
that is effective upon filing pursuant to Rule 462(b) and has received
confirmation of its receipt and (ii) the Company has given irrevocable
instructions for transmission of the applicable filing fee in connection with
the filing of the Rule 462(b) Registration Statement, in compliance with Rule
111 promulgated under the Securities Act or the Commission has received payment
of such filing fee.
(e) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. The Company has no subsidiaries. Except as set forth in the
Prospectus, the Company does not, directly or indirectly, 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 conduct of its business requires such qualification or
licensing, except where the failure to be so qualified or licensed would not
have a material adverse effect on the condition, financial or otherwise,
earnings, stockholders' equity, value, operations, business, prospects or
results of operations of the Company (a "Material Adverse Effect.")
(f) The Company has all requisite corporate power and
authority and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits (collectively, the
"Approvals") of and from all governmental or regulatory officials
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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, except where the failure to have
such Approval would not have a Material Adverse Effect; the Company is and has
been doing business in compliance with all such Approvals and all federal, state
and local laws, rules and regulations, except where the failure to comply would
not have a Material Adverse Effect; and the Company has not received any notice
of proceedings relating to the revocation or modification of any Approval. 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 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.
(g) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus and will have the adjusted
capitalization set forth therein on the Closing Date and each Option Closing
Date, if any, based upon the assumptions set forth therein. The Company is not a
party to or bound by any instrument, agreement or other arrangement, including,
but not limited to, any voting trust agreement, stockholders' agreement or other
agreement or instrument, affecting the securities or rights or obligations of
securityholders of the Company or providing for any of them to issue, sell,
transfer or acquire any capital stock, rights, warrants, options or other
securities of the Company, except for this Agreement, the Warrant Agreement, the
Licensing and Distribution Agreement dated May 18, 1998, between the Company and
Warner Bros. Publications U.S. Inc., as amended, and as described in the
Registration Statement. The Securities and all other securities issued or
issuable pursuant to existing plans, agreements or arrangements relating to the
issuance of securities or currently outstanding options, warrants, rights or
other securities of the Company 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 offered and sold by the Company
in compliance with or pursuant to an exemption from registration under the
Securities Act and applicable state securities law, 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 securityholders of the
Company or similar contractual rights granted by the Company. The Underwritten
Securities 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. The Warrants have been duly authorized and when issued, paid for
and delivered in the manner contemplated by the Warrant Agreement, will be
validly issued and outstanding obligations of the Company entitled to the
benefits of the Warrant Agreement. The Warrant Shares issuable upon exercise of
the Warrants will, assuming payment therefore as set forth in the Warrant
Agreement, upon such issuance be duly authorized, validly issued, fully paid and
non-assessable, and the Company has duly authorized and reserved for issuance of
the Warrant Shares. The Securities are not and will not be subject to any
preemptive or other similar rights of any stockholder of the Company, all
corporate action required to be taken for the authorization, issue and sale of
the Securities and, in the case of Warrant Shares, reservation, 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 of
this Agreement of the Underwritten Securities to be sold by the Company
hereunder, the
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Underwriters will acquire good and marketable title to the Underwritten
Securities free and clear of any liens, charges, claims, encumbrances, pledges,
security interests, defects or other restrictions or equities of any kind
whatsoever (collectively, the "Liens"), except for Liens created or permitted to
exist by an Underwriter. Upon the issuance and delivery pursuant to the terms of
the Warrant Agreement, of the Warrants to be sold by the Company thereunder, the
Representative will acquire good and marketable title to the Warrants free and
clear of any Liens, except for Liens created or permitted to exist by the
Representative.
(h) The financial statements, including the related notes and
schedules of the Company, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus fairly present in accordance with
generally accepted accounting principles the financial position, income, changes
in cash flow, changes in stockholder's equity and the results of operations of
the Company at the respective dates and for the respective periods to which they
apply and the as adjusted financial information included in the Registration
Statement, the Preliminary Prospectus and the Prospectus presents fairly on a
basis consistent with that of the audited financial statements included therein,
what the Company's as adjusted capitalization would have been for the respective
periods and as of the respective dates to which they apply after giving effect
to the adjustments described 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.
Except as disclosed in the Prospectus, there has been no adverse change or
development involving an adverse change in the condition, financial or
otherwise, or in the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company taken as a whole,
whether or not arising in the ordinary course of business, since the date of the
financial statements included in the Registration Statement, the Preliminary
Prospectus and the Prospectus, and the outstanding debt, the property, both
tangible and intangible, and the business of the Company conforms in all
material respects to the descriptions thereof contained in the Registration
Statement, the Preliminary Prospectus and the Prospectus. Financial information
set forth in the Preliminary Prospectus and Prospectus under the headings
"Summary Financial Information," "Selected Financial Data," "Capitalization,"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," fairly presents, in all respects, on the basis stated in the
Preliminary Prospectus and Prospectus, the information set forth therein and has
been derived from or compiled on a basis consistent with that of the audited
financial statements included in the Preliminary Prospectus and Prospectus.
(i) The Company (i) has timely filed all federal, state, local
and foreign tax returns that it is required to file through the date hereof or
has timely requested extensions thereof, other than those filings being
contested in good faith, and has timely paid all federal, state, local and
foreign taxes shown to be due on such returns for which it is liable and has
timely furnished all information returns it is required to furnish; (ii) has
established adequate reserves for such taxes which are not due and payable or
which are being contested in good faith; and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(j) 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 from the Company of the
Underwritten Securities by the Underwriters, (iii) the purchase from the Company
of the Warrants by the Representative, (iv) the consummation by
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the Company of any of its obligations under this Agreement or the Warrant
Agreement or (v) resales of the Underwritten Securities in connection with the
distribution contemplated hereby.
(k) The Company maintains with insurers of recognized
financial responsibility insurance policies and surety bonds, including, but not
limited to, general liability and property insurance, which insures the Company
and its employees, against such losses and, to the best knowledge of the
Company, risks generally insured against by comparable businesses in amounts
which are prudent and customary in its business. The Company has not (i) 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; (ii) had
any disputes or claims against any underwriter of such insurance policies or
surety bonds or has failed to pay any premiums due and payable thereunder; or
(iii) failed to comply with all conditions contained in such insurance policies
and surety bonds wherein such failure or dispute would have a Material Adverse
Effect. To the best knowledge of the Company, 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.
(l) 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 best knowledge,
threatened against (or circumstances that may give rise to the same), or
involving the Company, its properties or its business which (i) questions the
validity of the capital stock of the Company, this Agreement, the Warrant
Agreement or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement or the Warrant Agreement; (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately and
completely summarized in all respects); or (iii) except as disclosed in the
Prospectus, might reasonably be expected to have a Material Adverse Effect.
(m) The Company has full legal right, corporate power and
authority to authorize, issue, deliver and sell the Securities, enter into this
Agreement and the Warrant Agreement and to consummate the transactions provided
for in such agreements. This Agreement has been duly and properly authorized,
executed and delivered by the Company. This Agreement constitutes, and when the
Company has duly executed and delivered the Warrant Agreement (assuming the due
execution and delivery thereof by the Representative), the Warrant Agreement
will constitute a legal, valid and binding agreement and obligation of the
Company enforceable against the Company in accordance with its respective 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 therefor may be brought. None of the Company's issue and sale of
the Securities, execution or delivery of this Agreement or the Warrant
Agreement, its performance hereunder and thereunder, its
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consummation of the transactions contemplated herein and therein, or the conduct
of its business as described in the Registration Statement, any Preliminary
Prospectus, 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 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
material 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 is or may be bound or
to which 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, in each case, except, in the case of clauses (ii)
and (iii) such conflicts, breaches, violations, defaults, creations or
impositions which do not and would not have a Material Adverse Effect.
(n) 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 performance by the Company of this
Agreement and the Warrant Agreement and the transactions contemplated hereby and
thereby, except such as (i) have been obtained or (ii) may be required under
state securities or blue sky laws or the Rules of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with the Underwriters'
purchase and distribution of the Underwritten Securities and the
Representative's purchase of the Warrants or with respect to listing of the
Underwritten Securities or Warrant Shares on the Nasdaq SmallCap Market and the
Pacific Stock Exchange.
(o) 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 the
Company may be currently bound or to which the Company's assets, properties or
businesses may be subject are in full force and effect, have been executed and
delivered by the Company and constitute 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 and fairly present the information required to
be shown with respect thereto by Form SB-2, and there are no contracts or other
documents which are required by the Securities 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 complete and correct copies of the documents of which they purport to be
copies.
(p) 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 with respect to its capital stock of any class, and
there has not been any
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change in the capital stock, or any change in the debt (long or short term) or
liabilities or material adverse change in or affecting the general affairs,
management, financial operations, prospects, stockholders' equity or results of
operations of the Company.
(q) The Company is not in violation of its certificate of
incorporation or its by-laws, and except as disclosed in the Prospectus, to the
Company's knowledge, no default exists, and no event has occurred which with
notice or lapse of time or both, would constitute a default in the due
performance and observance of any material term, covenant or condition 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 material 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
or any of its properties is or may be bound or which may affect the property
(tangible or intangible) of the Company.
(r) 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 either the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or, to the Company's knowledge, threatened against or involving the
Company or any predecessor entity, and none has ever occurred. To the Company's
knowledge, no representation question exists respecting the employees of the
Company, and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. To the Company's knowledge, no
grievance or arbitration proceeding is pending or threatened under any expired
or existing collective bargaining agreements of the Company. No labor dispute
with the employees of the Company exists, or, is imminent.
(s) 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 "accumulated funding deficiency" (as defined in Section 302 of
ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than
events with respect to which the 30-day notice under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan which could
reasonably be expected to have a Material Adverse Effect. 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 Internal Revenue Code,
which could subject the Company to any tax penalty on prohibited transactions
and which has not adequately been corrected. Each ERISA Plan is in compliance
with all material reporting, disclosure and other requirements of the Internal
Revenue Code of 1986, as amended (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
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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."
(t) 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.
(u) The Company owns or has sufficient right to use, free and
clear of all Liens, all patents, trademarks, service marks, trade secrets, trade
names and copyrights, technology and licenses and rights used in the conduct of
its business as now conducted or proposed to be conducted without infringement
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,
except as set forth in each of the Preliminary Prospectus and the Prospectus, is
not obligated or under any liability whatsoever to make any payment by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service ▇▇▇▇, 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.
(v) The Company has taken reasonable security measures to
protect the secrecy, confidentiality and value of all its intellectual property
in all material aspects.
(w) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in each Preliminary Prospectus and the Prospectus, as owned or leased by it free
and clear of all Liens, other than those referred to in each Preliminary
Prospectus and the Prospectus and Liens for taxes not yet due and payable.
(x) Ernst & Young LLP, whose report is filed with the
Commission as a part of the Registration Statement, are independent certified
public accountants of the Company as required by the Securities Act and the
Rules and Regulations.
(y) The Company has caused to be duly executed and delivered
agreements, in such form as the Company and Underwriters have heretofore
mutually agreed (collectively, the "Lock-up Agreements"), pursuant to which each
of the Company's officers, directors, stockholders and persons holding options,
warrants, rights or other securities of the Company has agreed not to, directly
or indirectly, offer to sell, sell, grant any option for the sale of, assign,
transfer, pledge, hypothecate 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 24 months following
date hereof without the prior written consent of the Representative.
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(z) Except: (i) for payments in the aggregate amount of
$35,000 which have been made by the Company to Representative prior to the date
hereof in connection with investment banking advisory services rendered by the
Representative and (ii) as set forth in the Prospectus and herein, 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. Except as contemplated hereby,
since the inception of the Company, no compensation has been paid to or on
behalf of any member of the NASD, or any affiliate or employee thereof, in
connection with any offering by the Company of the Company's securities.
(aa) The Underwritten Securities and Warrant Shares have been
approved for trading, subject to official notice of issuance, on the Nasdaq
SmallCap Market, and the Company has received no notice of any delisting
procedures.
(bb) Neither the Company, nor any of its respective officers,
employees, agents or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is, or may be in a position to help or hinder the business of the
Company (or assist the Company in connection with any actual or proposed
transaction) which (i) might subject the Company or any other such person to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign); (ii) if not given in the past, might have had
a Material Adverse Effect; or (c) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
The Company's internal accounting controls are sufficient to enable the Company
to comply with the Foreign Corrupt Practices Act of 1977, as amended.
(cc) Except as set forth in each Preliminary Prospectus and
the Prospectus, no officer, director, stockholder or partner 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 or has had, 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 each
Preliminary Prospectus and 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 stockholder of the Company, or
any partner, affiliate or associate of any of the foregoing persons or entities.
(dd) Any certificate signed by the President, any Vice
President or the Secretary of the Company, and delivered to the Representative
or ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP (to
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the "Underwriters' Counsel") shall be deemed a representation and warranty by
the Company to the Underwriters as to the matters covered thereby.
(ee) The minute books of the Company have been made available
to the Representative and the Underwriters' Counsel, contain a complete summary
of all meetings and actions of the directors and stockholders of the Company
since the time of its incorporation, and reflect all transactions referred to in
such minutes accurately in all respects.
(ff) Except and to the extent described in each Preliminary
Prospectus and 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 Securities
Act and no person or entity holds any anti-dilution rights with respect to any
securities of the Company.
(gg) Except as described in the Prospectus, the Company is not
aware of any bankruptcy, labor disturbance or other event affecting any of its
trademark licensees, principal suppliers or customers which is reasonably likely
to have a Material Adverse Effect.
(hh) The Company has not been notified nor is otherwise aware
that it is potentially liable, or is considered potentially liable, under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or any similar law ("Environmental Laws"). To the Company's knowledge,
the Company is in compliance with all applicable existing Environmental Laws,
except for such instances of non-compliance which would not have a Material
Adverse Effect. The term "Hazardous Material" means (i) any "hazardous
substance" as defined by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended; (ii) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act, as amended; (iii) any petroleum or
petroleum product; (iv) any polychlorinated biphenyl; and (v) any pollutant or
contaminant or hazardous, dangerous or toxic chemical, material, waste or
substance regulation under or within the meaning of any other Environmental
Laws. To the Company's knowledge, no disposal, release or discharge of Hazardous
Material has occurred on, in, at or about any of the facilities or properties of
the Company, except for those instances which are in compliance with
Environmental Laws or in the aggregate would not have a Material Adverse Effect.
Except as described in the Prospectus, to the Company's knowledge: (i) there has
been no storage, disposal, generation, transportation, handling or treatment of
Hazardous Material by the Company (or to the knowledge of the Company, any of
its predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or which would
require remedial action which has not been taken, under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit, except for such
violations and failures to take remedial action which would not result in,
singularly or in the aggregate, a Material Adverse Effect; and (ii) there has
been no material spill, discharge, leak, emission, injection, escape, dumping or
release of any kind onto such property or into the environment surrounding such
property by the Company of any Hazardous Materials, except for such spills,
discharges, leaks, emissions, injections, escapes,
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dumping or releases which are in compliance with Environmental Laws or would not
result in, singularly or in the aggregate, a Material Adverse Effect.
(ii) The Company is not an "investment company," a company
controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
(jj) None of the proceeds of the sale of the Underwritten
Securities or Warrants will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the
Underwritten Securities or Warrants to be considered a "purpose credit" within
the meanings of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve Board.
(kk) The Company has complied and will comply with all the
provisions of Florida H.B. 1771, codified as Section 517.075 of the Florida
Statutes, and all regulations promulgated thereunder relating to issuers doing
business with Cuba.
2. Purchase by the Underwriters; Delivery and Payment.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, and subject to the terms and conditions herein
set forth, the Company agrees to issue and sell to each Underwriter, and each
Underwriter, severally and not jointly, agrees to purchase from the Company, at
a price of $_________ per share, that proportion of the number of Firm
Securities set forth in Schedule I opposite the name of such Underwriter bears
to the total number of Firm Securities, subject to such adjustment as to
eliminate any sales or purchases of fractional shares, plus any additional
number of Firm Securities which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 11 of this Agreement.
(b) In addition, on the basis of the representations,
warranties, covenants and agreements herein contained, and subject to the terms
and conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of an
additional 180,000 shares of Common Stock at a price of $______ per share. The
option granted hereby will expire 30 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 (or
if such 30th day shall be a Saturday, Sunday or holiday, on the next business
day thereafter when the Nasdaq SmallCap Market is open for trading), and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Firm Securities upon notice in writing or by telephone
(confirmed in writing) by the Representative to the Company setting forth the
number of Option Securities as to which the Underwriters are then exercising the
option and the time and date of payment and delivery for any such Option
Securities. Upon exercise of the option as provided herein, the Company shall
become obligated to sell to each of the Underwriters and subject to the terms
and conditions herein set forth, each of the Underwriters (severally and not
jointly) shall become obligated to
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purchase from the Company that proportion of the total number of Option
Securities then being purchased which the number of Firm Securities set forth in
Schedule I hereto opposite the name of such Underwriter bears to the total
number of Firm Securities, subject in each case to such adjustments as the to
eliminate any sales or purchases of fractional shares. Any such time and date of
delivery (an "Option Closing Date") shall be determined by the Representative,
but shall not be earlier than two nor later than five 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. The Underwriters shall not be under any obligation to purchase any of
the Option Securities prior to the exercise of such option. No Option Securities
shall be delivered unless the Firm Securities shall be simultaneously delivered
or shall theretofore have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of
certificates for, the Firm Securities shall be made at the offices of the
Representative, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, or at such other place
as shall be agreed upon by the Representative and the Company. Such delivery and
payment shall be made at 10:00 a.m. (New York City time) on August __, 1999 or
at such other time and date as shall be agreed upon by the Representative and
the Company (such time and date of payment and delivery being herein called 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 Option Securities, if any, shall be
made to the Representative against payment by or on behalf of the Underwriters,
severally and not jointly, of the purchase price for the Firm Securities and the
Option Securities, if any, by wire transfer, certified or official bank check or
checks drawn upon or by a New York Clearing House Bank and payable in same-day
funds to the order of the Company, such payment to be net of all amounts owed to
the Underwriters and Representative under the terms of this Agreement upon such
date of payment including the underwriting discount, net non-accountable
expenses and additional amounts owed under Section 5 of this Agreement and such
other amounts as the Company and Underwriters may agree. Certificates for the
Underwritten Securities 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 48 hours prior
to Closing Date or the relevant Option Closing Date, as the case may be. The
certificates for the Underwritten Securities shall be made available to the
Representative at such office or such other place as the Representative may
designate for inspection, checking and packaging at least 24 hours prior to
Closing Date or the relevant Option Closing Date, as the case may be.
Notwithstanding the foregoing, the Underwritten Securities may be delivered via
electronic transfer by the Depository Trust Company or an affiliate thereof.
(d) On the Closing Date, the Company shall issue and sell to
the Representative, and at the direction of the Representative, to any
co-managing underwriter or to bona fide officers of the Representative or member
of the underwriting group with respect to the Offering, Warrants to purchase an
aggregate of 120,000 shares of Common Stock at a purchase price of $.001 per
warrant. The Warrants shall be exercisable for a period of three years
commencing two year from the date hereof at a price equal to 134% of the initial
public offering
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price of the Underwritten Securities. The Warrant Agreement and form of Warrant
shall be substantially in the form filed as Exhibit 1.2 to the Registration
Statement. Payment for the Warrants shall be made by the Representative to or
upon the order of the Company on the Closing Date.
3. Public Offering of the Underwritten Securities. As soon after
the effective time of the Registration Statement as the Representative deems
advisable, the Underwriters shall make a public offering of the Underwritten
Securities (other than to residents of any jurisdiction in which the
qualification of the Underwritten Securities 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 the distribution of the Underwritten Securities has been
completed to such extent as the Representative in its sole discretion deems
advisable. The Representative may enter into one or 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, if not effective at the time
of execution of this Agreement, 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 Securities Act or
Exchange Act during any time that a prospectus relating to the securities is
required to be delivered under the Securities Act of which the Representative
and Underwriters' Counsel shall not previously have been advised and furnished
with a copy a reasonable period of time prior to the proposed filing, or to
which the Representative shall have reasonably objected or which is not in
compliance with the Securities 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 and,
if the provisions of Rule 430A promulgated under the Securities 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. The Company will use its best efforts to prevent the
issuance of any stop or suspension order and if the Commission or any state
securities commission authority shall enter a stop order or suspend such
qualification at any time, the
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Company will make every effort to obtain promptly the lifting or withdrawal of
such order or suspension.
(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)) on or before the date it is required to be filed
under the Securities Act and the Rules and Regulations.
(d) The Company shall, in cooperation with the Representative,
at or prior to the time the Registration Statement becomes effective, arrange
for the qualification of the Securities for offering and sale under the
securities or Blue Sky laws of such jurisdictions as the Representative may
designate to permit the continuance of sales and dealings therein for as long as
may be reasonably necessary to complete the distribution contemplated hereby 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, subject itself to taxation or file
a general 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.
(e) During the time when a Prospectus is required to be
delivered under the Securities Act, the Company shall comply with all
requirements imposed upon it by the Securities 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 Securities 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, would include an 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 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 Securities Act or the Rules and Regulations, 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
Securities Act that corrects such statement or omission or effects such
compliance, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to, or at the direction of,
the Representative copies of such amendment or supplement as soon as available
and in such quantities as the Representative may request.
(f) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the first day after the
end of the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year) the Company shall make
generally available to its security holders, in the manner specified in Rule
158(b) of
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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 Securities Act and Rule 158(a) of the Rules
and Regulations, which statement need not be audited unless required by the
Securities Act.
(g) During the three-year period commencing on the date
hereof, the Company will furnish to its stockholders (i) as soon as practicable,
but in any event not later than 120 days after the last day of each annual
fiscal period, its audited statements of income, stockholders' equity and cash
flows for such period and its audited balance sheet as of the end of such period
as to which the Company's independent accountants have rendered an opinion; and
(ii) as soon as practicable, but in any event not later than 45 days after each
of the first three quarterly fiscal periods, its unaudited statements of income,
stockholders' equity and cash flows, for such period and its unaudited balance
sheet as of the end of such period. In addition, during the three-year period
commencing on the date hereof, the Company will deliver to the Representative:
i. concurrently with furnishing such quarterly
reports to its stockholders, summary financial information of the
Company, together with a letter from the Company's President or Chief
Executive Officer, 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 at the end of the
preceding fiscal year, together with statements of income,
stockholders' equity and cash flows of the Company for such fiscal
year, accompanied by a copy of the report thereon of the Company's
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. within a reasonable amount of time prior to its
release, every press release and every material news item or article of
interest to the financial community with respect to 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 subsidiaries) or its businesses
which the Representative may reasonably request.
During such three-year period, if the Company has active subsidiaries,
the foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the
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Company and its subsidiaries are consolidated, and will be accompanied by
similar financial statements for any significant subsidiary which is not so
consolidated.
(h) The Company will maintain a 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.
(i) The Company will furnish to the Representative or on the
Representative's order, without charge, at such place as the Representative may
designate, copies of each Preliminary Prospectus, the Registration Statement and
any pre-effective or post-effective amendments thereto (two of which copies will
be signed and will include all financial statements and exhibits), the
Prospectus, and all amendments and supplements thereto, including any prospectus
prepared after the effective date of the Registration Statement, in each case as
soon as available and in such quantities as the Representative may request.
(j) On or before the effective date of the Registration
Statement, the Company shall provide the Representative with true copies of the
Lock-up Agreements duly executed and delivered by each of the Company's
officers, directors, stockholders and persons holding warrants, options, rights
or other securities of the Company. For a period of 24 months following the
effective date of the Registration Statement, without the prior written consent
of the Representative, the Company shall not, directly or indirectly, issue,
offer to sell, sell, grant any option for the purchase or sale of, assign,
transfer, pledge, hypothecate or otherwise encumber or dispose of any securities
of the Company, including shares of capital stock of the Company, or securities
or other rights convertible into, exercisable or exchangeable for or evidencing
any right to purchase or subscribe for any shares of capital stock of the
Company (either pursuant to Rule 144 of the Rules and Regulations or otherwise)
or dispose of any beneficial interest therein except for (i) shares of Common
Stock issued pursuant to this Agreement, (ii) the Warrants and (iii) the Warrant
Shares, provided, however, that the grant of options during the lock-up period
shall be conditioned upon receipt from the person to whom such options have been
granted of a duly executed Lock-up Agreement. For a period of three years after
the effective date of the Registration Statement, the Company shall give ▇▇▇▇▇▇▇
written notice at least five business days, or as soon as practicable, prior to
any sales of the Company's securities to take place pursuant to Rule 144 of the
Rules and Regulations. Notwithstanding anything to the contrary in this
Agreement, for a period of 24 months following the effective date of the
Registration Statement, the Company will not file any Registration Statement
relating to any securities of the Company, without the prior consent of the
Representative.
(k) Neither the Company, nor any of its officers, 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 reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(l) The Company shall apply the net proceeds from the sale of
the Shares in substantially the manner, and subject to the conditions, set forth
under "Use of Proceeds" in the Prospectus. No portion of the net proceeds will
be used, directly or indirectly, to acquire any securities issued by the
Company. In addition, pending ultimate application, the Company shall
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invest all unused proceeds in short and medium term interest-bearing securities
guaranteed by the U.S. Government or its agencies.
(m) The Company shall timely file all such reports, forms or
other documents as may be required from time to time, under the Securities 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 Securities Act, the Exchange Act, and the Rules and
Regulations.
(n) 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 full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than 30 days prior
to the date of the Registration Statement) which have been read by the Company's
independent public accountants, as stated in their letters to be furnished
pursuant to Section 6(j) hereof.
(o) The Company shall use its best efforts to cause the Common
Stock to be traded on the Nasdaq SmallCap Market and for a period of five years
from the date hereof, use its best efforts to maintain the Nasdaq SmallCap
Market listing of the Common Stock to the extent outstanding.
(p) For a period of two years from the Closing Date, the
Company shall cause to be furnished to the Representative directly from the
Company's transfer agent, at the Company's sole expense, daily consolidated
transfer sheets relating to the Common Stock.
(q) Within 30 days from the effective date of the Registration
Statement, take all necessary and appropriate actions to be included in Standard
and Poor's Corporation descriptions and to continue such inclusion for a period
of not less than five years from the effective date of the Registration
Statement.
(r) Except as contemplated by the Warrant Agreement, the
Company hereby agrees that it will not for a period of 24 months from the
effective date of the Registration Statement, adopt, propose to adopt or
otherwise permit to exist any employee, officer, director, consultant or
compensation plan or arrangement permitting (i) the grant, issue, sale or entry
into any agreement to grant, issue or sell any option, warrant or other contract
right at an exercise price that is less than the greater of the initial public
offering price of the Shares set forth herein and the fair market value on the
date of grant or sale except for 80,000 shares of Common Stock issuable upon
exercise of stock options granted pursuant to the Company's 1996 Stock Option
Plan as of the effective date of the Registration Statement which have an
exercise price below the initial public offering price; (ii) the maximum number
of shares of Common Stock or other securities of the Company purchasable at any
time pursuant to options or warrants issued by the Company to exceed 303,526
shares; (iii) the payment for such securities with any form of consideration
other than cash; or (iv) the existence of stock appreciation rights, phantom
options or similar arrangements.
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(s) Until the completion of the distribution of the
Underwritten Securities, if any, 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.
(t) For a period equal to the lesser of (i) seven years from
the date hereof, and (ii) the sale to the public of the Warrant Shares, the
Company will not take any action or actions which may prevent or disqualify the
use by the Company of Form S-1, Form SB-2 or Form S-3 (or other appropriate
form) for the registration under the Securities Act of the Warrant Shares.
(u) For a period of three years following the Closing Date,
the Company will permit a designee of ▇▇▇▇▇▇▇ (which ▇▇▇▇▇▇▇ hereby currently
designates as ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇) to observe meetings of the Company's board of
directors and shall provide to such designee, at the same time provided to the
members of the Company's board of directors, all notices, minutes, documents,
information and other materials generally provided to the members of the
Company's board of directors. The Company will reimburse the designee directly
for reasonable out-of-pocket expenses incurred in attending board meetings,
including, but not limited to, expenses for food, transportation and lodging,
and shall pay that designee the greater of (i) $1,500 per meeting attended or
(ii) the same cash attendance fee the Company pays to its outside directors.
During such three-year period, the Company will hold no less than four formal
and "in person" meetings of its board of directors each year.
(v) Prior to the 90th day after the Closing Date, the Company
will provide the Representative and its designees with five sets of bound
volumes of the transaction documents relating to the Offering, in form and
substance reasonably satisfactory to the Representative.
(w) For a period of 12 months subsequent to the Closing Date,
the Company will retain the Representative in an investment banking advisory
capacity and the Company will pay the Representative as consideration for such
advisory services a one-time fee of $36,000 due at the Closing Date.
(x) Prior to the Closing Date, the Company will deliver to the
Representative a reasonably detailed budget covering the period from the Closing
Date to the end of the Company's first fiscal year following the Closing Date.
In addition, during each of the next two succeeding fiscal years, the Company
will provide to the Representative, not more than 45 days after the beginning of
such fiscal year, a reasonably detailed budget covering such fiscal year. For
each budget period, the Company will also provide to the Representative
financial statements prepared in sufficient detail so as to allow comparison to
the budgets.
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 clause (iv) below) incident to the performance of the obligations of
the Company under this Agreement and the Warrant
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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, each Preliminary
Prospectus, 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, the Underwriters' Powers of Attorney 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 Representative and such dealers as the Representative may request; (iii) the
printing, engraving, issuance and delivery of the Securities, including, but not
limited to, (A) the purchase from the Company of the Underwritten Securities by
the Underwriters, (B) the purchase from the Company of the Warrants by the
Representative, (C) the consummation by the Company of any of its obligations
under this Agreement and the Warrant Agreement and (D) the resale of the
Underwritten 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" and the "Supplemental Blue Sky
Memorandum," and fees and disbursements of counsel incurred in connection
therewith, which fees of counsel shall not exceed $30,000; (v) advertising costs
and expenses, including, but not limited to, costs and expenses in connection
with the "road show," information meetings and presentations (including travel
and hotel expenses of the Representative), up to six copies of bound volumes,
prospectus memorabilia and expenses relating to "tomb-stone" advertisements
which expenses shall not exceed $12,000; (vi) costs and expenses in connection
with due diligence investigations, including, but not limited to, the reasonable
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 (x) the fees and expenses incurred in connection with the
inclusion of the Underwritten Securities and Warrant Shares on the Nasdaq
SmallCap Market, any other over-the-counter market or any exchange.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) or Section 12, 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, provided, however,
that the maximum reimbursement for which the Company shall be liable pursuant to
this Section 5(b) shall not exceed $120,000, and provided, further, that if the
Agreement is terminated in accordance to Section 10(a)(v) due to the outbreak of
hostilities between the United States and any foreign power (or in the case of
any ongoing hostilities, a material escalation thereof) or an outbreak of any
other insurrection or armed conflict involving the United States, the Company
shall reimburse and indemnify the Representative for an amount equal to 50% of
the Representative's actual out-of-pocket expenses subject to the maximum
reimbursement of $120,000.
(c) The Company further agrees that, in addition to the
expenses payable pursuant to Section 5(a), it will pay to the Representative on
the Closing Date by certified or bank cashier's check or, at the
Representative's election, by deduction from the proceeds of the
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Offering, a non-accountable expense allowance equal to 2% of the gross proceeds
received by the Company from the sale of the Firm Securities, $35,000 of which
has been paid to date. In the event the Underwriters elect to exercise the
over-allotment option described in Section 2(b) hereof, the Company further
agrees to pay to the Representative, on each Option Closing Date, by certified
or bank cashier's check or, at the Representative's election, by deduction from
the proceeds of the Offering, a non-accountable expense allowance equal to 2% of
the gross proceeds received by the Company from the sale of the Option
Securities on such Option Closing Date.
(d) The Company warrants, represents and agrees that all
payments and reimbursements due pursuant to this Section 5 will be promptly and
fully made. If the Company shall fail to promptly and fully pay all amounts due
pursuant to this Section 5, the Company shall be liable to the Representative
for all attorneys' fees and costs incurred in connection with the collection of
such amounts.
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, as if they 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 5:00 p.m., New York time, on the date hereof or such later date and
time as shall be approved in writing by the Representative, and, at the Closing
Date and each Option Closing Date, if any, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of Underwriters' Counsel. If the Company has elected to rely upon
Rule 430A of the Rules and Regulations, the price of the Securities and any
price-related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Rules and Regulations
within the prescribed time period, and prior to Closing Date the Company shall
have provided evidence satisfactory to the Representative of such timely filing,
or a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the requirements of
Rule 430A of the Rules and Regulations.
(b) The Representative shall not have advised the Company that
the Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representative's opinion, is material, or omits
to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is necessary to make the statements therein not
misleading, or that the Prospectus, or any supplement thereto, contains an
untrue statement of fact which, in the Representative's opinion, is material, or
omits to state a fact which, in the Representative's opinion, is material and is
required to be stated therein or is
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necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. No order suspending the sale of the
Securities in any jurisdiction shall have been issued on either the Closing Date
or the relevant Option Closing Date, if any, and no proceedings for that purpose
shall have been instituted or shall, to the knowledge of the Representative, be
threatened.
(c) On or prior to the Closing Date, the Representative shall
have received from Underwriters' Counsel, such opinion or opinions with respect
to the organization of the Company, the validity of the Underwritten Securities,
Warrants, Warrant Shares, the Registration Statement, the Prospectus and other
related matters as the Representative may request and Underwriters' Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
(d) At Closing Date, the Representative shall have received
the opinion of The ▇▇▇▇ Law Group, PLLC, 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
the State of Delaware; (B) is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of its
operations requires such qualification or licensing; and (C) has all
requisite corporate power and authority, and has obtained any and all
necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory
officials and bodies (including, without limitation, those having
jurisdiction over environmental or similar matters), to own or lease
its properties and conduct its business as described in the Prospectus,
except where the failure to hold such authorizations, approvals,
orders, licenses, certificates, franchises and permits would not cause
a Material Adverse Effect; the Company is and has been doing business
in material compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state
and local laws, rules and regulations; the Company has not received any
notice of proceedings relating to the revocation or modification of any
such authorization, approval, order, license, certificate, franchise or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially adversely
affect the business, operations, condition, financial or otherwise, or
the earnings, business affairs, position, prospects, value, operation,
properties, business or results of operations of the Company;
ii. the Company does not have any subsidiaries and
does not own any interest in any 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 the caption "Capitalization,"
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 and the Warrant Agreement and as described in the Prospectus.
The Securities and all other securities
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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; 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 Securities to be sold
by the Company hereunder and under the Warrant Agreement are not and
will not be subject to any preemptive or other similar rights of any
stockholder, have been duly authorized and, when issued, paid for and
delivered in accordance with the terms hereof and thereof, 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 by reason of being such
holders; all corporate action required to be taken for the
authorization, issue and sale of the Securities has been duly and
validly taken; and the certificates representing the Securities are in
due and proper form. The Warrants have been duly authorized and when
validly issued, delivered and paid for in the manner contemplated by
the Warrant Agreement will constitute valid and binding obligations of
the Company entitled to the benefits of the Warrant Agreement. The
Warrant Shares will, upon exercise and payment therefor in accordance
with the Warrant Agreement, be duly authorized, validly issued, fully
paid and non-assessable, the Company has duly authorized and reserved
the Warrant Shares for issuance upon exercise of the Warrants. Upon the
issuance and delivery pursuant to this Agreement and the Warrant
Agreement of the Underwritten Securities and Warrants, and assuming
that the Underwriters are acquiring the Underwritten Securities and the
Representative is acquiring the Warrants in good faith without notice
of any adverse claim (within the meaning of the Uniform Commercial Code
as in effect in the State of New York), the Underwriters, will acquire
good and marketable title to the Underwritten Securities and the
Representative will acquire good and marketable title to the Warrants,
each free and clear of any pledge, lien, charge, claim, encumbrance,
pledge, security interest or other restriction or equity of any kind
whatsoever. No transfer tax is payable by or on behalf of the
Underwriters or the Representative in connection with (A) the issuance
by the Company of the Underwritten Securities, (B) the purchase from
the Company of the Underwritten Securities by the Underwriters, (C) the
purchase from the Company of the Warrants by the Representative, (D)
the consummation by the Company of any of its obligations under this
Agreement or the Warrant Agreement or (E) the resales of the
Underwritten Securities in connection with the distribution
contemplated hereby;
iv. the Registration Statement is effective under the
Securities 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 after due inquiry,
threatened or contemplated under the Securities Act;
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v. each of any 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 Securities Act and the Rules and Regulations;
vi. to the best of such counsel's knowledge, (A)
there are no agreements, contracts or other documents required by the
Securities Act to be described in the Registration Statement and the
Prospectus and filed as exhibits to the Registration Statement other
than those described in the Registration Statement and the Prospectus
and filed as exhibits thereto, and the exhibits which have been filed
are correct copies of the documents of which they purport to be copies;
(B) the descriptions in the Registration Statement and the Prospectus
and any supplement or amendment thereto of contracts and other
documents to which the Company is a party or by which it is bound,
including any document to which the Company is a party or by which it
is bound, incorporated by reference into the Prospectus and any
supplement or amendment thereto, are accurate in all material respects
and fairly represent the information required to be shown by Form SB-2;
(C) there is not pending or threatened against the Company any action,
arbitration, suit, proceeding, inquiry, investigation, litigation,
governmental or other proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, pending or threatened against (or circumstances that may give
rise to the same), or involving the properties or business of the
Company which (x) is required to be disclosed in the Registration
Statement which is not so disclosed (and such proceedings as are
summarized in the Registration Statement are accurately summarized in
all respects), (y) questions the validity of the capital stock of the
Company or this Agreement and the Warrant Agreement or of any action
taken or to be taken by the Company pursuant to or in connection with
any of the foregoing; (D) no statute or regulation or legal or
governmental proceeding required to be described in the Prospectus that
is not described as required; and (E) except as disclosed in the
Prospectus, there is no action, suit or proceeding pending, or
threatened, against or affecting the Company before any court or
arbitrator or governmental body, agency or official (or any basis
thereof known to such counsel) in which there is a reasonable
possibility of an adverse decision which may result in a material
adverse change in the condition, financial or otherwise, earnings,
prospects, stockholders' equity, value, operations, properties,
business or results of operations of the Company;
vii. the Company has all necessary, corporate power
and authority to enter into each of this Agreement and the Warrant
Agreement and to consummate the transactions provided for herein and
therein; and each of this Agreement and the Warrant Agreement has been
duly authorized, executed and delivered by the Company. Each of this
Agreement and the Warrant Agreement, constitutes a legal, valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
general equitable principles, bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and
except as to those provisions relating to indemnity or contribution for
liabilities arising under the Act, as to which no opinion need be
expressed; and none of the Company's execution or delivery of this
Agreement and the Warrant Agreement, its
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performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its
businesses 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, except as disclosed in
the Prospectus, pursuant to the terms of, (A) the certificate of
incorporation or by-laws of the Company; (B) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company is a party or by which it
is or may be currently bound or to which any of its properties or
assets (tangible or intangible) is or may be subject, or any
indebtedness; or (C) any statute, judgment, decree, order, rule or
regulation applicable to the Company of any arbitrator, court,
regulatory body or administrative agency or other governmental agency
or body (including, without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, having
jurisdiction over the Company or any of its respective activities or
properties except with respect to clauses (B) or (C) for conflicts,
breaches, violations, defaults, creations or impositions which do not
and would not have a material adverse effect on the condition,
financial or otherwise, prospects, stockholders' equity, value,
operations, properties, business or results of operation of the
Company;
viii. no consent, approval, authorization or order,
and no filing with, any court, regulatory body, government agency or
other body (other than such as may be required under Blue Sky laws or
Rules of the NASD, as to which no opinion need be rendered) is required
in connection with the issuance of the Underwritten Securities, the
issuance of the Warrants and the Warrant Shares, and the Registration
Statement, the performance of this Agreement and the Warrant Agreement,
and the transactions contemplated hereby and thereby (except consents,
approvals, authorizations or orders, and filings which have been
properly made or obtained);
ix. the properties and business of the Company
conform in all material respects to the description thereof contained
in the Registration Statement and the Prospectus; and the Company has
good and marketable title to (in all material respects), or valid and
enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus to be owned or leased by it, in each
case free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities
of any kind whatsoever, other than those referred to in the Prospectus
and liens for taxes not yet due and payable;
x. the Company is not in breach of, or in default
under, any term or provision of any material license, contract,
indenture, mortgage, installment sale agreement, deed of trust, lease,
voting trust agreement, stockholders' agreement, partnership agreement,
note, loan or credit agreement or any other material 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
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be bound or to which the property or assets (tangible or intangible) of
the Company is subject or affected, the effect of which could
materially and adversely affect the condition, financial or otherwise,
earnings, prospects, stockholders' equity, value, operations,
properties, business or results of operation of the Company; the
Company is not in violation of any term or provision of its certificate
of incorporation, or by-laws or in violation of any franchise, license,
permit, judgment, decree, order, statute, rule or regulation;
xi. the statements in the Prospectus under
"Business," "Management," "Certain Transactions," "Principal
Shareholders" and "Description of Securities," have been reviewed by
such counsel, and insofar as they refer to statements of law,
descriptions of statutes, licenses, rules or regulations or legal
conclusions, are correct in all material respects;
xii. the Underwritten Securities and Warrant Shares
have been accepted for quotation, subject to official notice of
issuance, on the Nasdaq SmallCap Market;
xiii. to the best of such counsel's knowledge after
due inquiry, the persons listed under the caption "Principal
Shareholders" in the Prospectus are the respective "beneficial owners"
(as such phrase is defined in Regulation 13d-3 under the Exchange Act)
of the securities set forth opposite their respective names thereunder
as and to the extent set forth therein;
xiv. to the best of such counsel's knowledge after
due inquiry, 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;
xv. neither the execution and delivery by the Company
of, nor the performance of its obligations under this Agreement and the
Warrant Agreement nor the sale, issuance, execution or delivery by the
Company of the Underwritten Securities or Warrants will violate
Regulation G, T, U or X of the Federal Reserve Board; and
xvi. the Company is not an "investment company," a
company controlled by, under common control with, or controlling an
"investment company" or a "promoter" or "principal underwriter" for an
"investment company" as such terms are defined in the Investment
Company Act of 1940, as amended.
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 and 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
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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. 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.
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 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, on the basis of the foregoing, no facts have come to the
attention of such counsel which has 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, statistical and
accounting data included in the Registration Statement or Prospectus or excluded
therefrom).
At each Option Closing Date, if any, the Representative shall have
received the favorable opinion of The ▇▇▇▇ Law Group, PLLC, 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 The ▇▇▇▇ Law Group, PLLC, in its opinion
delivered on the Closing Date.
(e) At Closing Date, the Representative shall have received
the opinion of _______________________, patent and trademark 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. any patents, trademarks, and patent or trademark searches
conducted with respect to any patent and/or trademark applications of the
Company are identified in such opinion;
ii. the descriptions in the Registration Statement with
respect to the status of such patents, trademarks and patent or trademark
applications are accurate;
iii. the Company owns the entire right, title and interest in
and to such patents, trademarks and patent or trademark applications as
described in the Prospectus and has not received any notice of conflict with the
asserted rights of others in respect thereof; and
iv. the statements in the Prospectus under the captions
"Prospectus Summary," "Risk Factors - We depend upon our intellectual property
rights, which are subject to infringement by others," "Risk Factors -- Our
rights to our domain names are subject to regulatory change," "Risk Factors --
We may face intellectual property infringement and other claims in connection
with the use of our technology," "Risk Factors -- Asserting our intellectual
property rights may subject us to litigation" and
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"Business - Intellectual Property" relating to such patents, trademarks and
patent or trademark applications, are true and correct.
At each Option Closing Date, if any, the Representative shall have
received the favorable opinion of _______________________, patent and trademark
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.
(f) 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 and have
requested reasonably in advance for the purpose of enabling them to review or
pass upon the matters referred to in Section 6(c), or in order to evidence the
accuracy, completeness or satisfaction of any of the representations, warranties
or conditions of the Company, or herein contained.
(g) On and as 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 material adverse 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 material outstanding indebtedness of
the Company; (iv) the Company shall not have issued any securities (other than
the Underwritten Securities and Warrants) or declared or paid any dividend or
made any distribution with respect to its capital stock of any class and there
has not been any change in the capital stock or any change in the debt (long or
short term), except in the ordinary course of business, or liabilities or
obligations of the Company (contingent or otherwise); (v) no material amount of
the assets of the Company shall have been pledged or mortgaged, except as set
forth in the Registration Statement and Prospectus; (vi) no action, suit or
proceeding, at law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company, or affecting any of its
properties or business before or by any court or federal, state or foreign
commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the condition,
financial or otherwise, results of operations, business or prospects of the
Company, except as set forth in the Registration Statement and Prospectus; and
(vii) no stop order shall have been issued under the Securities Act and no
proceedings therefor shall have been initiated, threatened or contemplated by
the Commission or any state regulatory authority.
(h) At each of the Closing Date and each Option Closing Date,
if any, the Representative 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 person has carefully
examined the Registration Statement, the Prospectus and this Agreement, and
that:
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i. The representations and warranties of the Company
in this Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be, and the
Company has complied with all agreements and covenants and satisfied
all conditions contained in this Agreement on its part to be performed
or satisfied at or prior to such Closing Date or Option Closing Date,
as the case may be;
ii. No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are pending or, to
the best of each of such person's knowledge, after due inquiry are
contemplated or threatened under the Securities 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, 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 Prospectus or 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, 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
through the Closing Date or the Option Closing Date, as the case may
be: (a) the Company has not incurred other than in the ordinary course
of its business, any material liabilities or obligations, direct or
contingent, except as disclosed in the Prospectus; (b) the Company has
not paid or declared any dividends or other distributions on its
capital stock, except as disclosed in the Prospectus; (c) the Company
has not entered into any transactions not in the ordinary course of
business, except as disclosed in the Prospectus; (d) there has not been
any change in the capital stock or long-term debt or any increase in
the short-term borrowings (other than any increase in the short-term
borrowings in the ordinary course of business) of the Company; (e) the
Company has not sustained any loss or damage to its property or assets,
whether or not insured; (f) 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 (g) 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.
(i) On or prior to the date hereof, the Representative shall
have received clearance from the NASD as to the amount of compensation allowable
or payable to the Underwriters, as described in the Registration Statement.
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(j) At the time this Agreement is executed, the Representative
shall have received a letter, dated such date, addressed to the Underwriters in
form and substance satisfactory (including the nature of the changes or
decreases, if any, referred to in clause (iii) below) in all respects to the
Representative and Underwriters' Counsel, from Ernst & Young LLP:
i. confirming that they are independent certified
public accountants with respect to the Company within the meaning of
the Securities 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 Securities
Act and the Rules and Regulations thereunder and that the Underwriters
may rely upon the opinion of Ernst & Young LLP with respect to the
financial statements and supporting schedules included in the
Registration Statement;
iii. stating that, on the basis of procedures which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the
latest available minutes of meetings and actions of the stockholders,
the board of directors and the Audit Committee of the board 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
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 Securities 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 (B) at a
specified date not more than five days prior to the date of delivery of
such letter, there has been any change in the capital stock or
long-term debt of the Company, or any decrease in the shareholders'
equity or net current assets or net assets of the Company as compared
with amounts shown in the January 31, 1999 balance sheet 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 (C) during the
period from September 30, 1998 to a specified date not more than five
days prior to the date of delivery of such letter, there was any
decrease in gross revenue, gross profit, operating income, net income
or net income per share of the Company, in each case as compared with
the corresponding period beginning October 1, 1997 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 days
prior to the date of delivery of such letter, the amount of liabilities
of the Company (including a break-down of commercial paper and notes
payable to banks);
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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;
vi. stating that they have never brought to the
attention of any of the Company's management any "weakness," as defined
in Statement of Auditing Standard No. 60 "Communication of Internal
Control Structure Related Matters Noted in an Audit," in any of the
Company's internal controls; and
vii. statements as to such other matters incident to
the transaction contemplated hereby as the Representative may request.
(k) At Closing Date and each Option Closing Date, if any, the
Representative shall have received from Ernst & Young LLP, a letter, dated as of
the Closing Date or the Option Closing Date, as the case may be, to the effect
that they reaffirm that statements made in the letter furnished pursuant to
Section 6(i) hereof, except that the specified date referred to shall be a date
not more than five days prior to 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 Section 6(i) with respect to certain amounts,
percentages and financial information as specified by the Representative 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).
(l) On each of the Closing Date and Option Closing Date, if
any, there shall have been duly tendered to, or at the direction of, the
Representative the appropriate number of Underwritten Securities.
(m) No order suspending the sale of the Securities in any
jurisdiction designated by the Representative shall have been issued on either
the Closing Date or the Option Closing Date, if any, and no proceedings for that
purpose shall have been instituted or shall be contemplated.
(n) On or before the Closing Date, the Company shall have
executed and delivered to the Representative, (i) the 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
Warrants in such denominations and to such designees as shall have been provided
by the Representative to the Company.
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(o) On or before Closing Date, the Underwritten Securities and
Warrant Shares shall have been duly approved for quotation on the Nasdaq Small
Cap Market, subject to official notice of issuance.
(p) On or before Closing Date, there shall have been delivered
to the Representative, Lock-up Agreements from each of the Company's directors,
officers, stockholders, and persons holding warrants, options, rights or other
securities of the Company, in form and substance satisfactory to Underwriters'
Counsel.
(q) Trading in the Common Stock shall not have been suspended
by the Nasdaq SmallCap Market at any time after the date hereof.
(r) Prior to the Closing Date, the Representative shall have
received from the Company a reasonably detailed budget covering the period from
the Closing Date to the end of the Company's first fiscal year following the
Closing Date together with financial statements of the Company prepared in
sufficient detail so as to allow comparison to the budget.
(s) All relevant terms, conditions and circumstances relating
to the Offering shall be reasonably satisfactory to the Representative.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to the Representative.
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Representative may terminate this
Agreement or, if the Representative so elects, it may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
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 and employees of each 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
Securities 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, suits and litigation with respect thereto), whatsoever
(including, but not limited to, any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any action, suit,
proceeding or litigation, commenced or threatened, or any claim whatsoever), as
such are incurred, to which any Underwriter or any such controlling person may
become subject under the Securities Act, the Exchange Act or any other statute
or at common law or otherwise, insofar as such losses, claims, damages, expenses
or liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained (i) in any Preliminary Prospectus,
the Registration Statement or the Prospectus (as from time to time amended and
supplemented); (ii) in any post-effective amendment or amendments or any new
registration statement and
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prospectus in which is included securities of the Company issued or issuable
upon exercise of the Securities; or (iii) in any application or other document
or written communication (in this Section 7 collectively called "application")
executed by the Company or based upon written information furnished by the
Company 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, Nasdaq or any other securities exchange; or arise out of
or are based upon 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 Preliminary Prospectus and Prospectus, in the
light of the circumstances under which they were made), unless such statement or
omission was made in reliance upon and in conformity with the Underwriters'
Information and provided, further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any Preliminary
Prospectus or the Prospectus, the indemnification provided for herein shall not
apply to any loss, liability, claim, damage or expense to the extent the same
results from the sale of Securities to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus, or in the case of an untrue statement or omission or alleged untrue
statement or omission in the Prospectus, a copy of the amended Prospectus or
supplement thereto, if the Company has previously furnished sufficient copies
thereof, based upon the number of copies requested by the Underwriters, to the
Underwriters a reasonable time in advance and the claim, damage or expense of
such person results from an untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in a Preliminary
Prospectus or Prospectus that was corrected in the Prospectus or amendment or
supplement thereto.
The indemnity agreement in this Section 7(a) shall be in
addition to any liability which the Company may have at common law or otherwise.
(b) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement and each other person,
if any, who controls the Company within the meaning of the Securities Act, to
the same extent as the foregoing indemnity from the Company to the Underwriters
but only with respect to statements or omissions, if any, made in any
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment thereof or supplement thereto or in any application made in reliance
upon, and in strict conformity with the Underwriters' Information.
(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 with respect thereto 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: (i)
any liability which it may have under this Section 7(a) or (b) hereof unless and
to the extent that it has been prejudiced in any material respect by such
failure or from the forfeiture of substantial rights and defenses or (ii) any
liability which it may have otherwise). In case any such action, 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 the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party,
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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 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 or separate but similar or related actions 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.
(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 Securities 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, suits, proceedings or litigation with respect thereto) (A) in such
proportion as is appropriate to reflect the relative benefits received by each
of the contributing parties, on the one hand, and the party to be indemnified on
the other hand, from the offering of the Securities; or (B) if the allocation
provided by clause (A) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each of the contributing
parties, on the one hand, and the party to be indemnified on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by of the Company on
the one hand, and the Underwriters, on the other, shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Securities
(before deducting expenses) bear to the total underwriting discounts received by
the Underwriters hereunder, in each case as set forth in the table on the cover
page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, or by the Underwriters, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages,
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expenses or liabilities (or actions, suits, proceedings or litigation with
respect thereto) referred to above in this Section 7(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,
suit, proceeding or litigation. Notwithstanding the provisions of this Section
7(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by the Underwriter
hereunder. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 7, each person, if any, who controls the Company within the
meaning of the Securities 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 Section
7(d). Any party entitled to contribution will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party with
respect to which a claim for contribution may be made against another party or
parties under this Section 7(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
Section 7(d), or to the extent that such party or parties were not adversely
affected by such omission. The contribution agreement set forth above shall be
in addition to any liabilities which any indemnifying party may have at common
law or otherwise.
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, as the case may be, and the respective
indemnity agreements contained in Section 7 hereof, shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
any Underwriter, the Company, any controlling person of any Underwriter or the
Company, and shall survive termination of this Agreement or the issuance and
delivery of the Underwritten Securities to the Underwriters and Warrants to the
Representative.
9. Effective Date. 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
Underwritten Securities for the sale to the public; provided, however, that the
provisions of this Section 9 and 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 Underwriters for publication of the
first newspaper advertisement which is subsequently published relating to the
Underwritten Securities.
10. Termination.
(a) This agreement may be terminated with respect to the Firm
Securities or Option Securities, if any, in the sole discretion of the
Representative by notice to the Company
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given prior to the Closing Date or the relevant Option Closing Date,
respectively, in the event that all obligations set forth in Section 6 have not
been performed or satisfied or the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or if at or prior to the
Closing Date or such Option Closing Date, respectively:
i. the Company sustains a loss by reason of
explosion, fire, flood, accident or other calamity, which, in the
reasonable opinion of the Representative, substantially affects the
value of the properties of the Company or which materially interferes
with the operation of the business of the Company regardless of whether
such loss shall have been insured; there shall have been a Material
Adverse Effect, or any development involving a prospective Material
Adverse Effect (including, without limitation, a change in management
or control of the Company), in the business, operations, condition,
financial or otherwise, earnings, prospects, stockholders' equity,
value, operations, properties, business or results of operations of the
Company, except in each case as described in or contemplated by the
Prospectus (exclusive of any amendment or supplement thereto); or ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇ shall have suffered any injury or disability of a nature
that could materially adversely affect his ability to function as
President and Chief Executive Officer of the Company for more than six
months;
ii. any material action, suit or proceeding shall be
threatened, instituted or pending, at law or in equity, against the
Company or any of its directors or executive officers, by any person or
by any federal, state or other governmental or regulatory commission,
board or agency;
iii. trading in the Common Stock shall have been
suspended by the Commission or the NASD or trading in securities
generally on the New York Stock Exchange, American Stock Exchange or
the over-the-counter market shall have been suspended or minimum or
maximum prices shall have been established on either such exchange or
quotation system;
iv. a moratorium on banking activities shall have
been declared by New York or United States authorities; or
v. there shall have been (A) an outbreak of
hostilities between the United States and any foreign power (or, in the
case of any ongoing hostilities, a material escalation thereof); (B) an
outbreak of any other insurrection or armed conflict involving the
United States; or (C) any other calamity or crisis or material change
in financial, political or economic conditions, having an effect on the
financial markets that, in any case referred to in this clause (v), any
of which of the above events or aberrational market-related events, in
the sole judgment of the Representative, makes it impracticable or
inadvisable to proceed with the Offering or the delivery of the
Securities as contemplated by the Registration Statement, as amended,
as of the date hereof.
(b) If this Agreement is terminated by the Representative in
accordance with the provisions of Section 10(a) or Section 12, or if this
Agreement shall not be carried out within the time specified herein, or any
extension thereof granted to the Representative, by reason of
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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, Section 10(a) or Section 12), the
Company shall promptly reimburse and indemnify the Representative for all of its
out-of-pocket expenses, including the fees and disbursements of Underwriters'
Counsel (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 Blue Sky 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, 11 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 Underwritten 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 48 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 48-hour period, then:
i. 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
ii. 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 with respect to 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 shall fail at the
Closing Date or 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
Representative may at their option, by notice from 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,
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Section 7 and Section 10 hereof. No action taken pursuant to this Section 12
shall relieve the Company from liability, if any, with respect to such default.
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 Underwriters shall be directed to them at
▇▇▇▇▇▇▇ and Company Securities, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇▇▇▇
& ▇▇▇▇▇▇ LLP, Two Stamford Plaza, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq. Notices to the Company shall be
directed to the Company at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Chief Executive Officer, with a copy to The
▇▇▇▇ Law Group, PLLC, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
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 with respect to or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from any Underwriter 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 Warrant
Agreement constitute the entire agreement of the parties hereto and supersede
all prior written or oral agreements, understandings and negotiations with
respect to the subject matter hereof. This Agreement may not be amended except
in a writing, signed by the Representative and the Company.
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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,
▇▇▇▇▇▇▇.▇▇▇ CORPORATION
By:_____________________________________
Name:
Title:
Confirmed and accepted as of
the date first above written.
▇▇▇▇▇▇▇ AND COMPANY SECURITIES, INC.
As Representative of the Several Underwriters
named in Schedule I hereto
By:____________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
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SCHEDULE I
Number of Firm
Securities to
Name of Underwriters be Purchased
-------------------- --------------
▇▇▇▇▇▇▇ and Company Securities, Inc.
▇▇▇▇▇ Securities Corporation
Win Capital Corp.
TOTAL ............................................. 1,200,000
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