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Exhibit 1.1
1,400,000 SHARES OF COMMON STOCK
▇▇▇▇▇▇▇.▇▇▇ CORPORATION
UNDERWRITING AGREEMENT
New York, New York
February __, 2000
▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇▇▇▇.▇▇▇ Corporation, a Washington corporation (the "Company"),
hereby confirms its agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC (the "Underwriter"),
with respect to the sale by the Company and the purchase by the Underwriter, of
the numbers of shares of the Company's common stock, no par value ("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
Underwriter, up to an additional 210,000 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 Underwriter 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 expiring on the fifth anniversary of the date hereof, of
140,000 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.
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1. Representations and Warranties of the Company. The Company
represents and warrants to the Underwriter 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
Underwriter and will not file any other amendment thereto to which the
Underwriter 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 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 the Underwriter expressly
for use in any Preliminary Prospectus, Registration Statement or Prospectus or
any
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amendment thereof or supplement thereto (the "Underwriter's Information").
The Company acknowledges that the Underwriter's 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 Underwriter 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 Underwriter's 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 Washington. 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 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
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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 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 by the 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 Underwriter will acquire good and marketable title to the Warrants free and
clear of any Liens, except for Liens created by the Underwriter.
(h) The financial statements, including the related notes and
schedules of the Company, included in the Registration Statement, each
Preliminary Prospectus and the
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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, or the prospect of 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 Underwriter, (iii) the purchase from the Company
of the Warrants by the Underwriter, (iv) the consummation by 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
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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 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 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
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(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.
(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 Underwriter's purchase and distribution
of the Underwritten Securities and the Underwriter'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 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 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.
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(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
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
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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 Underwriter 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 Underwriter.
(z) Except: (i) for payments in the aggregate amount of $25,000
which have been made by the Company to the Underwriter prior to the date hereof
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 Underwriter's 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 Pacific Stock Exchange, 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
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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
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
required to be disclosed therein that have not been thus disclosed.
(dd) Any certificate signed by the President, any Vice President or
the Secretary of the Company, and delivered to the Underwriter or its counsel
(to the "Underwriter's Counsel") shall be deemed a representation and warranty
by the Company to the Underwriter as to the matters covered thereby.
(ee) The minute books of the Company have been made available to
the Underwriter and the Underwriter's 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.
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(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, 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.
2. Purchase by the Underwriters; Delivery and Payment.
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(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 the Underwriter, and the
Underwriter agrees to purchase from the Company, at a price of $_________ per
share, that number of Firm Securities set forth in Schedule I opposite the name
of the Underwriter.
(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
Underwriter to purchase all or any part of an additional 210,000 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
Underwriter to the Company setting forth the number of Option Securities as to
which the Underwriter is 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 the
Underwriter and subject to the terms and conditions herein set forth, the
Underwriter shall become obligated to purchase from the Company that number of
Option Securities then being purchased. Any such time and date of delivery (an
"Option Closing Date") shall be determined by the Underwriter, 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 Underwriter and the Company. The Underwriter
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 Underwriter, ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, or at such other place as shall be
agreed upon by the Underwriter and the Company. Such delivery and payment shall
be made at 10:00 a.m. (New York City time) on February __, 2000 or at such other
time and date as shall be agreed upon by the Underwriter 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 Underwriter, payment of the purchase price for, and delivery of
certificates for, such Option Securities shall be made at the above mentioned
office of the Underwriter or at such other place as shall be agreed upon by the
Underwriter and the Company on each Option Closing Date as specified in the
notice from the Underwriter to the Company. Delivery of the certificates for the
Firm Securities and Option Securities, if any, shall be made to the Underwriter
against payment by or on behalf of the Underwriter 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 Underwriter under the terms of this Agreement
upon such date of payment including the underwriting discount, net
non-accountable
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expenses and additional amounts owed under Section 5 of this Agreement and such
other amounts as the Company and Underwriter 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 Underwriter 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
Underwriter at such office or such other place as the Underwriter 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
Underwriter, or to bona fide officers of the Underwriter, Warrants to purchase
an aggregate of 140,000 shares of Common Stock at a purchase price of $.001 per
warrant. The Warrants shall be exercisable for a period of five years commencing
one year from the date hereof at a price equal to 120% of the initial public
offering 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
Underwriter 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 Underwriter deems advisable,
the Underwriter 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 Underwriter 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 Underwriter in its sole discretion deems advisable. The Underwriter may
enter into one or more agreements as the Underwriter, in its 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 the Underwriter 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 Underwriter and
Underwriter's 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
Underwriter 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 Underwriter and confirm the notice in writing, (i)
when the Registration Statement, as amended, becomes effective and, if the
provisions of Rule 430A
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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 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 Underwriter) 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 Underwriter, 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 Underwriter 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 Underwriter 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
Underwriter's 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
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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 Underwriter's Counsel, and the
Company will furnish to, or at the direction of, the Underwriter copies of such
amendment or supplement as soon as available and in such quantities as the
Underwriter 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 the Rules and Regulations, and to the Underwriter, 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 Underwriter:
(1) 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;
(2) 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;
(3) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders;
(4) 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;
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(5) 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
(6) 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 Company and its subsidiaries are required to be
consolidated under GAAP, 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 Underwriter or on the
Underwriter's order, without charge, at such place as the Underwriter 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 Underwriter 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
Underwriter, 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 the
Underwriter 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 Underwriter.
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(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 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 Underwriter 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 the Pacific Stock Exchange
and for a period of five years from the date hereof, use its best efforts to
maintain the Nasdaq SmallCap Market and the Pacific Stock Exchange 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 ________ shares of Common
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Stock issuable upon exercise of stock options granted pursuant to the Company's
_____ 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 _________ 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.
(s) Until the completion of the distribution of the Underwritten
Securities, if any, the Company shall not without the prior written consent of
the Underwriter and Underwriter's 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 which
have been approved by Underwriter's Counsel.
(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 the Underwriter 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 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 Underwriter 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 Underwriter.
(w) For a period of 18 months subsequent to the Closing Date, the
Company will retain the Underwriter in an investment banking advisory capacity
and the Company will pay the Representative as consideration for such advisory
services a fee of $4,000 per month.
(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 less than
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45 days prior to the beginning of such fiscal year, a reasonably detailed budget
covering such fiscal year approved by the Board of Directors. 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 Underwriter's Counsel, except as provided
in clause (iv) below) incident to the performance of the obligations of the
Company under this Agreement and the Warrant Agreement, including, without
limitation, (i) the fees and expenses of accountants and counsel for the
Company; (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, (including mailing and handling charges)
filing, delivery and mailing (including the payment of postage with respect
thereto) of the Registration Statement, 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 Selected Dealer Agreements, 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 Underwriter and such
dealers as the Underwriter 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 Underwriter, (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
Underwriter), up to six copies of bound volumes, prospectus memorabilia and
expenses relating to "tomb-stone" advertisements which expenses shall not exceed
$15,000; (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. The Underwriter has received
$25,000 on account thereof.
(b) If this Agreement is terminated by the Underwriter in
accordance with the provisions of Section 10(a) or Section 12, the Company shall
reimburse and indemnify the Underwriter for all of its actual out-of-pocket
expenses, including the fees and disbursements of Underwriter's 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 $150,000, and provided, further, that if the
Agreement is terminated in accordance to Section 10(a)(v) due to the outbreak of
hostilities
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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 Underwriter for an amount equal to 50% of the
Representative's actual out-of-pocket expenses subject to the maximum
reimbursement of $150,000.
(c) The Company further agrees that, in addition to the expenses
payable pursuant to Section 5(a), it will pay to the Underwriter on the Closing
Date by certified or bank cashier's check or, at the Underwriter'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
Firm Securities. 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 Underwriter, on each Option Closing Date, by certified or
bank cashier's check or, at the Underwriter'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 Underwriter's Obligations. The obligations of the
Underwriter 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 Underwriter, 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 Underwriter's 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.
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(b) The Underwriter shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Underwriter's opinion, is material, or omits to state a
fact which, in the Underwriter'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 Underwriter's opinion, is material, or omits to state a fact
which, in the Underwriter's opinion, is material and is required to be stated
therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. 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
Underwriter, be threatened.
(c) On or prior to the Closing Date, the Underwriter shall have
received from Underwriter's 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 Underwriter's Counsel
shall have received such papers and information as they request to enable them
to pass upon such matters.
(d) At Closing Date, the Underwriter shall have received the
opinion of The ▇▇▇▇ Law Group, PLLC, counsel to the Company, dated the Closing
Date, addressed to the Underwriter and in form and substance satisfactory to
Underwriter's Counsel, to the effect that:
(1) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Washington; (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;
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(2) the Company does not have any subsidiaries and does not
own any interest in any corporation, partnership, joint venture, trust
or other business entity;
(3) 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 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 Underwriter 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 Underwriter, will acquire good and marketable title to the
Underwritten Securities and the Warrants, 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 Underwriter 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
Underwriter, (C) the purchase from the Company of the Warrants by the
Underwriter, (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;
(4) the Registration Statement is effective under the
Securities Act, and, if applicable, filing of all pricing information
has been timely made in the
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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;
(5) 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;
(6) 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;
(7) 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
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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 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;
(8) 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);
(9) to the best of such counsel's knowledge, 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;
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(10) to the best of such counsel's knowledge, 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 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;
(11) 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;
(12) the Underwritten Securities and Warrant Shares have been
accepted for quotation, subject to official notice of issuance, on the
Nasdaq SmallCap Market and the Pacific Stock Exchange (for which
purpose counsel may rely on the opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇, P.C.;
(13) 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;
(14) 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;
(15) 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
(16) 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.
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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 Underwriter's Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of responsible officers of the Company and certificates
or other written statements of officers of departments of various jurisdictions
having custody of documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or certificates
shall be delivered to Underwriter's 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 ▇▇▇▇▇▇▇ Coie, patent and trademark counsel to the Company, dated the
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriter's Counsel, to the effect that:
(1) 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;
(2) the descriptions in the Registration Statement with
respect to the status of such patents, trademarks and patent or trademark
applications are accurate;
(3) 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
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and has not received any notice of conflict with the asserted rights of others
in respect thereof; and
(4) the statements in the Prospectus relating to patents and
intellectual property (as specifically identified by such counsel), are true and
correct.
At each Option Closing Date, if any, the Representative shall have
received the favorable opinion of ▇▇▇▇▇▇▇ Coie, 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, Underwriter's 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 Underwriter 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
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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:
(1) 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;
(2) 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;
(3) 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
(4) 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 Underwriter 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 Underwriter and
Underwriter's Counsel, from Ernst & Young LLP:
(1) 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;
(2) 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;
(3) 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 September 30, 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, 1999 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, 1999 other than as set
forth in or contemplated by the Registration Statement, or, if there
was any such decrease, setting forth the amount of such decrease;
(4) 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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(5) 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;
(6) 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
(7) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriter may reasonable
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(j) 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(j) 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 Underwriter
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
Underwriter 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 and Pacific Stock Exchange, 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 or the Pacific Stock Exchange at any time after the
date hereof.
(r) Prior to the Closing Date, the Underwriter 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 Underwriter.
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 Underwriter's obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Underwriter may terminate this
Agreement or, if the Underwriter 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 the
Underwriter (for purposes of this Section 7, "Underwriter" shall include the
officers, directors, partners and employees of the Underwriter), 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 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
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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 Underwriter's 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) The Underwriter agrees 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 Underwriter 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 Underwriter's 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, 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
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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 or delayed.
(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 Underwriter, 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 Underwriter 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 Underwriter, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions, 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), the Underwriter
shall not be required to contribute any amount in excess of the underwriting
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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
the Underwriter, the Company, any controlling person of the Underwriter or the
Company, and shall survive termination of this Agreement or the issuance and
delivery of the Underwritten Securities and Warrants to the Underwriter.
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 Underwriter
of electronic communications (facsimile or e-mail) to securities dealers
releasing such shares for offering or the release by the Underwriter 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
Underwriter by notice to the Company 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:
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(1) 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;
(2) 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;
(3) trading in the Common Stock shall have been suspended by
the Commission, the NASD or Pacific Stock Exchange 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;
(4) a moratorium on banking activities shall have been
declared by New York or United States authorities; or
(5) 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 the reasonable judgment of the Underwriter, 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 Underwriter 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 Underwriter, by reason of any failure on the
part of the Company to perform any undertaking or satisfy any condition of this
Agreement by it to be performed or satisfied (including, without limitation,
pursuant to Section 6, Section 10(a) or Section 12), the Company shall promptly
reimburse and indemnify the Underwriter for all of its out-of-pocket expenses,
including the fees and disbursements of Underwriter's 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
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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. [Intentionally Omitted]
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 Underwriter may
at its option, by notice from the Underwriter to the Company, terminate the
Underwriter's obligation to purchase Option Securities from the Company on such
date) without any liability on the part of any non-defaulting party other than
pursuant to Section 5, Section 7 and Section 10 hereof. No action taken pursuant
to this Section 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 when delivered in person, by facsimile or recognized courier.
Notices to the Underwriter shall be directed to it at ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇., with a copy to ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP, Two Stamford Plaza, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Esq. and Ruskin, Moscou, ▇▇▇▇▇ & Faltischek, P.C., ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, 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
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Agreement may not be amended except in a writing, signed by the Representative
and the Company.
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.
▇▇▇▇▇▇ ▇▇▇▇▇▇ & CO., LLC
By:
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: A Member
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SCHEDULE I
Number of Firm
Securities to
Name of Underwriter be Purchased
------------------- ------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co., LLC 1,400,000
=========