Exhibit 1.1
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
2,000,000 SHARES
OF
COMMON STOCK
UNDERWRITING AGREEMENT
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc.
▇▇▇▇▇▇▇▇▇ Securities, Inc.
Neidiger, Tucker, Bruner, Inc.
as Representatives of the
Several Underwriters
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the several Underwriters named in Schedule I hereto, who
are acting severally and not jointly (the "Underwriters"), two million shares of
Common Stock of the Company (the "Initial Securities"). As used herein, the term
Company includes ▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. and its wholly-owned subsidiary, Global
2000 Communications, Inc. Simultaneous with the closing with respect to the
purchase of the Initial Securities by the Underwriters, the Company will acquire
each of AlbanyNet, Inc., Borg Internet Services, Inc., Caravela Software, Inc.
and Ulsternet, Inc. (the "Acquisitions"), the consideration for which will be a
combination of cash and shares of the Company's Common Stock as described in the
Registration Statement (as defined below).
The Company hereby confirms the agreement made by it with respect to the
purchase of the Initial Securities by the Underwriters, which Initial Securities
are more fully described in the Registration Statement. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
Company, Inc., ▇▇▇▇▇▇▇▇▇ Securities, Inc. and Neidiger, Tucker, Bruner, Inc.
will act as the representatives of the several Underwriters and are referred to
herein as the " Representatives."
You have advised the Company that the Underwriters desire to act on a firm
commitment basis to publicly offer and sell the Initial Securities for the
Company and that you are authorized to execute this Agreement. The Company
confirms the agreement made by it with respect to the
relationship with the Underwriters as follows:
1. FILING OF REGISTRATION STATEMENT WITH S.E.C AND DEFINITIONS. A Registration
Statement and Prospectus on Form SB-2 (File No. 33-73067) with respect to the
Securities (as defined below) has been carefully and accurately prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the published rules and regulations (the "Rules and
Regulations") thereunder and has been filed with the Securities and Exchange
Commission (the "Commission") and such other states that the Representatives
deem necessary in their discretion to so file to permit a public offering and
trading thereunder. Such registration statement, including the prospectus, Part
II, and all financial schedules and exhibits thereto and all other documents
filed as a part thereof or incorporated therein, as amended at the time when it
shall become effective, is herein referred to as the "Registration Statement,"
and the prospectus included as part of the Registration Statement on file with
the Commission that discloses all the information that was omitted from the
prospectus on the effective date pursuant to Rule 430A of the Rules and
Regulations with any changes contained in any prospectus filed with the
Commission by the Company with the Representatives' consent after the effective
date of the Registration Statement, is herein referred to as the "Prospectus."
The prospectus included as part of the Registration Statement of the Company and
in any amendments thereto prior to the effective date of the Registration
Statement is referred to herein as a "Preliminary Prospectus."
2. DISCOUNT, DELIVERY, AND SALE OF THE SECURITIES.
(a) Subject to the terms and conditions of this Agreement, and on the basis
of the representations, warranties, and agreements herein contained, the Company
agrees to sell to, and the Underwriters agree to buy from the Company at a
purchase price of $___ per share before any underwriting expense allowances, an
aggregate of 2,000,000 shares of Common Stock on a firm commitment basis in the
amounts set forth in Schedule I which is a part of this Underwriting Agreement.
It is understood that the Underwriters propose to offer the Securities to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement becomes effective.
The Underwriters may enter into one or more agreements as the Underwriters in
their sole discretion deem advisable with one or more broker-dealers who shall
act as dealers in connection with the offering.
(b) In addition, subject to the terms and conditions of this Agreement and
on the basis of the representations, warranties and agreements herein contained,
the Company grants an option to the Underwriters to purchase up to an additional
300,000 shares of Common Stock ("Option Securities") at the same terms as the
Underwriters shall pay for the Initial Securities being sold by the Company
pursuant to the provisions of SECTION 2(a) hereof. The Initial Securities and
Option Securities are sometimes hereinafter collectively referred to as the
"Securities." This option may be exercised from time to time, for the purpose of
covering overallotments, within forty-five (45) days after (i) the effective
date of the Registration Statement if the Company has elected not to rely on
Rule 430A under the Rules and Regulations or (ii) the date of this
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Agreement if the Company has elected to rely upon Rule 430A under the Rules and
Regulations, upon written notice by the Representatives setting forth the number
of Option Securities as to which the Representatives are exercising the option
and the time and date at which such certificates are to be delivered. Such time
and date shall be determined by the Representatives but shall not be earlier
than four (4) nor later than ten (10) full business days after the date of the
exercise of said option (the "Option Closing Date(s)"). Nothing herein shall
obligate the Underwriters to make any overallotment.
(c) Delivery of the Initial Securities against payment of the purchase
price therefor by certified or official bank check or checks or wire transfer in
next-day funds, payable to the order of the Company shall take place at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc. at New York City, within three (3)
business days after the Initial Securities are first traded (or such other place
as may be designated by the Representatives) at 11:00 A.M., New York time or
such time and date as you and the Company may agree upon in writing, such time
and date of payment and delivery for the Initial Securities being herein called
the "Initial Closing Date." In addition, in the event that any or all of the
Option Securities are purchased by the Underwriters, payment for the purchase
price for, and delivery of the certificates for such Option Securities shall be
made at the above mentioned office or at such other place as shall be agreed
upon by the Representatives and the Company.
The Company will make the certificates for the shares of Common Stock to be
purchased by the Representatives hereunder available to the Representatives for
inspection and packaging at least two (2) full business days prior to the
Initial Closing Date or the relevant Option Closing Date, as the case may be.
The certificates shall be in such names and denominations as the Representatives
may request to the Company in writing at least two (2) full business days prior
to any Closing Date.
(d) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Initial Closing Date and each Option Closing Date,
if any, and during such longer period as the Prospectus may be required to be
delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus will contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and will conform to the requirements of the Act and the Rules and
Regulations; and, at and through such dates, 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 in which they were made, not misleading; PROVIDED, HOWEVER,
that this representation and warranty does not apply to statements made or
statements omitted in reliance upon and in conformity with written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in the Preliminary Prospectus, Registration
Statement or the Prospectus or any amendment thereof or supplement thereto.
(e) The information set forth under "Underwriting" in any Preliminary
Prospectus and Prospectus relating to the Securities (insofar as such
information relates to the Underwriters) constitutes the only information
furnished by the Underwriters to the Company for inclusion therein, and you
represent and warrant to the Company that the statements made therein are
correct.
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(f) On the Initial Closing Date, the Company shall issue and sell to the
Representatives warrants (the "Representatives' Warrants") at a purchase price
of $.001 per Representatives' Warrant, which shall entitle the holders thereof
to purchase an aggregate of 200,000 shares of Common Stock. The Representatives'
Warrants and the shares of common stock issuable upon the exercise of the
Representatives' Warrants are sometimes hereinafter referred to as the
"Representatives' Securities." The Representatives' Warrants shall be
exercisable for a period of four (4) years commencing one (1) year from the
effective date of the Registration Statement at a price equaling one hundred
fifty percent (150%) of the initial public offering price of the Securities. The
form of Representatives' Warrant Certificate shall be substantially in the form
filed as an Exhibit to the Registration Statement. Payment for the
Representatives' Warrants shall be made on the Initial Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company represents and warrants to you as follows:
(i) The Company has prepared and filed with the Commission a
Registration Statement, and an amendment or amendments thereto, on Form SB-2
(No. 33 - ), including any related Preliminary Prospectus for the registration
of the Securities and the Representatives' Securities under the Act, which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the Rules and
Regulations. The Company will promptly file a further amendment to said
Registration Statement in the form heretofore delivered to the Representatives
and will not file any other amendment thereto to which the Representatives shall
have objected verbally or in writing after having been furnished with a copy
thereof.
(ii) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Prospectus or the
Registration Statement and no proceeding for an order suspending the
effectiveness of the Registration Statement or any of the Company's securities
has been instituted or is pending or threatened. Each such Prospectus,
Registration Statement and/or any supplement thereto has conformed in all
material respects with the requirements of the Act and the Rules and Regulations
and on its date did not include any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein not
misleading, in light of the circumstances under which they were made and (i) the
Prospectus and/or any supplement thereto will contain all statements which are
required to be stated therein by the Act and Rules and Regulations, and (ii) the
Prospectus and/or any supplement thereto will not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, in light of
the circumstances under which they were made; provided, however, that no
representations, warranties or agreements are made hereunder as to information
contained in or omitted from the Prospectus in reliance upon, and in conformity
with, the written information furnished to the Company by you as set forth in
Section 2(e) above. The Company has filed all reports, forms or other documents
required to be filed under the Act and the Exchange Act and the respective Rules
and Regulations thereunder, and all such reports, forms or other documents when
so filed or as subsequently amended, complied in all material respects with the
Act and the Exchange Act
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and the respective Rules and Regulations thereunder.
(iii) The Company and each of the entities referred to above that will
be acquired by the Company upon consummation of the Acquisitions ("Acquisition
Companies") has been duly organized and is validly existing as a corporation in
good standing under the laws of each jurisdiction of its incorporation. Each of
the Company and the Acquisition Companies 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
require such qualification or licensing. Except as set forth in the Prospectus,
the Company and each of the Acquisition Companies do not own, directly or
indirectly, an interest in any corporation, partnership, trust, joint venture or
other business entity. The Company and each of the Acquisition Companies have
all requisite power and authority (corporate and other), and have obtained any
and all 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), necessary and material to the owning or leasing its properties
and conducting its business as described in the Prospectus; each of the Company
and the Acquisition Companies is and has been doing business in compliance with
all such authorizations, approvals, orders, licenses, certificates, franchises
and permits and with all federal, state, local and foreign laws, rules and
regulations to which it is subject; and each of the Company and the Acquisition
Companies 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 and
adversely affect the condition, financial or otherwise, or the earnings,
prospects, stockholders' equity, value, operations, properties, business or
results of operations of the Company and the Acquisition Companies as a whole.
The disclosure in the Registration Statement concerning the effects of federal,
state, local and foreign laws, rules and regulations on the Company's and the
Acquisition Companies' business as currently conducted and as contemplated is
correct in all material respects and does not omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
(iv) The Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities and the Representatives'
Securities and to enter into this Agreement, the Representatives' Warrant
Agreement (the "Representatives' Warrant Agreement"), and to consummate the
transactions provided for in such agreements; each such agreement has been duly
and properly authorized, executed and delivered by the Company. This Agreement
and the Representatives' Warrant Agreement constitute valid and binding
agreements of the Company, enforceable in accordance with their respective terms
(except as the enforceability thereof may be limited by bankruptcy or other
similar laws affecting the rights of creditors generally or by general equitable
principles and except as the enforcement of indemnification provisions may be
limited by federal or state securities laws).
(v) Except as disclosed in the Prospectus, each of the Company and the
Acquisition Companies is not in violation of its certificate of incorporation or
bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material bond,
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debenture, note or other evidence of indebtedness or in any material contract,
indenture, mortgage, loan agreement, lease, joint venture, partnership or other
agreement or instrument to which the Company or the Acquisition Companies is a
party or by which it may be bound or is not in material violation of any law,
order, rule, regulation, writ, injunction or decree of any governmental
instrumentality or court, domestic or foreign; and the execution and delivery of
this Agreement, the Representatives' Warrant Agreement, and the consummation of
the transactions contemplated herein and therein and in the Prospectus and
compliance with the terms of each such agreement will not conflict with, or
result in a material breach of any of the terms, conditions or provisions of, or
constitute a material default under, or result in the imposition of any material
lien, charge or encumbrance upon any of the property or assets of the Company or
the Acquisition Companies pursuant to, any material bond, debenture, note or
other evidence of indebtedness or any material contract, indenture, mortgage,
loan agreement, lease, joint venture, partnership or other agreement or
instrument to which the Company or the Acquisition Companies is a party nor will
such action result in the material violation by the Company or any of the
Acquisition Companies of any of the provisions of its respective certificate of
incorporation or bylaws or any law, order, rule, regulation, writ, injunction,
decree of any government, governmental instrumentality or court, domestic or
foreign, except where such violation will not have a material adverse effect on
the financial condition of the Company and the Acquisition Companies taken as a
whole.
(vi) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus under "Capitalization" and
"Description of Securities" and will have the adjusted capitalization set forth
therein on the Initial Closing Date and the Option Closing Date, if any, based
upon the assumptions set forth therein, and the Company is not a party to or
bound by any instrument, agreement or other arrangement providing for it to
issue any capital stock, rights, warrants, options or other securities, except
for this Agreement and the Representatives' Warrant Agreement and as described
in the Prospectus. The Securities and the Representatives' Securities and all
other securities issued or issuable by the Company on or prior to the Initial
Closing Date and each Option Closing Date, if any, conform or, when issued and
paid for, will conform, in all respects to the descriptions thereof 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 holder of any security of the Company or any similar
contractual right granted by the Company. The Securities to be sold by the
Company hereunder and pursuant to the Representatives' 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 descriptions thereof contained in the
Prospectus; the holders thereof will not be subject to any liability solely as
such holders; all corporate action required to be taken for the authorization,
issue and sale of the Securities and Representatives' Securities has been duly
and validly taken; and the certificates representing the securities, when
delivered by the Company, will be in due and proper form. Upon the issuance and
delivery pursuant to the terms hereof and the Representatives' Warrant Agreement
of the securities to be sold by the Company hereunder and
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thereunder to the Representatives' or the Underwriters, as the case may be, the
Representatives or the Underwriters, as the case may be, will acquire good and
marketable title to such securities, free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind whatsoever asserted against the Company, any of the Acquisition
Companies, or any affiliate (within the meaning of the Rules and Regulations) of
the Company.
(vii) The outstanding shares of capital stock of each of the
Acquisition Companies have been duly authorized and validly issued, and are
fully paid and non-assessable. As of the Initial Closing Date, after giving
effect to the Acquisitions, all of the outstanding shares of capital stock of
each of the Acquisition Companies will be owned by the Company free and clear of
all liens, encumbrances, equities, and claims; and except as described in the
Registration Statement, no options, warrants or other rights to purchase,
agreements, or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in the
Acquisition Companies will be outstanding.
(viii) Each of the Company and the Acquisition Companies has good and
marketable title to all properties and assets described in the Prospectus as
owned by it, free and clear of all liens, charges, encumbrances or restrictions,
except such as are described or referred to in the Prospectus or which are not
materially significant or important in relation to its business or which have
been incurred in the ordinary course of business; except as described in the
Prospectus, all of the leases and subleases under which each of the Company and
the Acquisition Companies holds properties or assets as lessee or sublessee as
described in the Prospectus are in full force and effect, and the Company and
each of the Acquisition Companies is not in material default in respect of any
of the terms or provisions of any of such leases or subleases, and no claim has
been asserted by anyone adverse to the Company's or any of the Acquisition
Companies' rights as lessor, sublessor, lessee or sublessee under any of the
leases or subleases mentioned above or affecting or questioning the Company's or
any of the Acquisition Companies' right to the continued possession of the
leased or subleased premises or assets under any such lease or sublease; and the
Company and each of the Acquisition Companies owns or leases all such properties
as are necessary to its operations as now conducted and as contemplated to be
conducted, except as otherwise stated in the Prospectus.
(ix) The financial statements of the Company and the separate
financial statements of each of the Acquisition Companies, in each case together
with the related notes thereto, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus fairly present the financial position,
income, changes in stockholders' equity and the results of operations of the
Company and each of the Acquisition Companies, respectively, at the respective
dates and for the respective periods to which they apply and the pro forma
financial information included in the Registration Statement and Prospectus
presents fairly, on a basis consistent with that of the audited financial
statements therein, what the Company's and the Acquisition Companies' (taken as
a whole) pro forma capitalization and balance sheet data 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.
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There has been no material adverse change or development involving a
prospective change in the condition, financial or otherwise, or in the earnings,
prospects, stockholders' equity, value, operations, properties, business or
results of operations of the Company, whether or not arising in the ordinary
course of business, since the date of the financial statements included in the
Registration Statement and the Prospectus; and the outstanding debt, the
property, both tangible and intangible, and the business of the Company and the
Acquisition Companies conforms in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus. The
financial information set forth in the Prospectus under the headings "Selected
Historical Financial Data for our Internet Service Providers," "Capitalization,"
"Selected Pro Forma Financial Data," and "Management's Discussion and Analysis
of Financial Condition and Results of Operation" fairly presents, on the basis
stated in the Prospectus, the information set forth therein and such financial
information has been derived from or compiled on a basis consistent with that of
the audited financial statements included in the Prospectus.
(x) Subsequent to the respective dates as of which information is
given in the Prospectus as it may be amended or supplemented, and except as
described in the Prospectus, each of the Company and the Acquisition Companies
has not, directly or indirectly, incurred any liabilities or obligations, direct
or contingent, not in the ordinary course of business or entered into any
transactions not in the ordinary course of business, which are material to the
business of the Company and the Acquisition Companies as a whole and there has
not been any change in the capital stock of, or any incurrence of long term
debts by the Company or any of the Acquisition Companies or any issuance of
options, warrants or rights to purchase the capital stock of the Company or any
of the Acquisition Companies or declaration or payment of any dividend on the
capital stock of the Company or any of the Acquisition Companies or material
adverse change in the condition (financial or otherwise), net worth or results
of operations of the Company and the Acquisition Companies as a whole and each
of the Company and the Acquisition Companies has not become a party to, any
material litigation whether or not in the ordinary course of business.
(xi) To the knowledge of the Company, there is no pending or
threatened, action, suit, inquiry, arbitration, investigation or proceeding to
which the Company or any of the Acquisition Companies is a party before or by
any court or governmental agency or body, which might result in any material
adverse change in the condition (financial or other), business or prospects of
the Company and the Acquisition Companies as a whole or might materially and
adversely affect the properties or assets of the Company and the Acquisition
Companies as a whole nor are there any actions, suits or proceedings against the
Company or any of the Acquisition Companies related to environmental matters or
related to discrimination on the basis of age, sex, religion or race which might
be expected to materially and adversely affect the conduct of the business,
property, operations, financial condition or earnings of the Company and the
Acquisition Companies as a whole; and no labor disturbance by the employees of
the Company or the Acquisition Companies individually exists or is, to the
knowledge of the Company, imminent which might be expected to materially and
adversely affect the conduct of the business, property, operations, financial
condition or earnings of the Company and the Acquisition Companies as a whole.
(xii) Except as may be disclosed in the Prospectus, each of the
Company and the Acquisition Companies has properly prepared and filed all
necessary federal, state, local and foreign income and
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franchise tax returns, has paid all taxes shown as due thereon, has established
adequate reserves for such taxes which are not yet due and payable, and does not
have any tax deficiency or claims outstanding, proposed or assessed against it.
(xiii) Each of the Company and the Acquisition Companies has
sufficient licenses, permits, right to use trade or service marks and other
governmental authorizations currently required for the conduct of its business
as now being conducted and as contemplated to be conducted and each of the
Company and the Acquisition Companies is in all material respects complying
therewith. Except as set forth in the Prospectus, the expiration of any such
licenses, permits, or other governmental authorizations would not materially
affect the Company's and Acquisition Companies' operations. To its knowledge,
none of the activities or businesses of the Company or any of the Acquisition
Companies is in material violation of, or cause the Company or any of the
Acquisition Companies to materially violate any law, rule, regulations, or order
of the United States, any state, county or locality, or of any agency or body of
the United States or of any state, county or locality.
(xiv) Each of the Company and the Acquisition Companies has not at any
time (i) made any contributions to any candidate for political office in
violation of law, or failed to disclose fully any such contribution, or (ii)
made any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi public duties,
other than payments required or allowed by applicable law.
(xv) Except as set forth in the Prospectus the Company knows of no
outstanding claims, payments, issuances, understandings, whether oral or written
for services either in the nature of a finder's fee, brokerage fee or otherwise
with respect to this financing for which the Company or the Underwriters may be
responsible, or which may affect the Underwriters' compensation as determined by
the National Association of Securities Dealers, Inc. ("NASD") except as
otherwise disclosed in the Prospectus or known by the Representatives.
(xvi) The Company and each of the Acquisition Companies maintains
insurance policies, including, but not limited to, general liability, property,
personal and product liability insurance, and surety bonds which insure the
Company, the Acquisition Companies, and each of its employees against such
losses and risks generally insured against by comparable businesses. Each of the
Company and the Acquisition Companies (i) has not failed to give notice or
present any insurance claim with respect to any insurable matter under the
appropriate insurance policy or surety bond in a due and timely manner, (ii)
does not have any disputes or claims against any underwriter of such insurance
policies or surety bonds, nor has failed to pay any premiums due and payable
thereunder, or (iii) has not failed to comply with all conditions contained in
such insurance policies and surety bonds. There are no facts or circumstances
under any such insurance policy or surety bond which would relieve any insurer
of its obligation to satisfy in full any valid claim of the Company or any of
the Acquisition Companies.
(xvii) The Representatives' Warrants herein described are duly and
validly authorized and upon delivery to the Representatives in accordance
herewith will be duly issued and legal, valid and binding obligations of the
Company, except as the enforceability thereof may be limited by bankruptcy or
other similar laws affecting the rights of creditors generally or by equitable
principles, and except as the
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enforcement of indemnification provisions may be limited by federal or state
securities laws. The Common Stock issuable upon exercise of any of the
Representatives' Warrants have been duly authorized, and when issued upon
payment of the exercise price therefor, will be validly issued, fully paid and
nonassessable.
(xviii) Except as set forth in the Prospectus, no default exists in
the due performance and observance of any term, covenant or condition of any
material license, contract, indenture, mortgage, installment sale agreement,
lease, deed of trust, voting trust agreement, stockholders agreement, note, loan
or credit agreement, purchase order, or any other agreement or instrument
evidencing an obligation for borrowed money, or any other material agreement or
instrument to which the Company is a party or by which the Company and each of
the Acquisition Companies may be bound or to which the property or assets
(tangible or intangible) of the Company and each of the Acquisition Companies is
subject or affected.
(xix) Each of the Company and the Acquisition Companies has generally
enjoyed a satisfactory employer-employee relationship with its employees and, to
the best of its knowledge, is in substantial compliance in all material respects
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 or
any of the Acquisition Companies by the U.S. Department of Labor, or any other
governmental agency responsible for the enforcement of such federal, state,
local, or foreign laws and regulations. There is no unfair labor practice charge
or complaint against the Company or any of the Acquisition Companies pending
before the National Labor Relations Board or any strike, picketing, boycott,
dispute, slowdown or stoppage pending or threatened against or to its knowledge
involving the Company or any of the Acquisition Companies, or any predecessor
entity, and none has ever occurred. No representation question is pending
respecting the employees of the Company and the Acquisition Companies, and no
collective bargaining agreement or modification thereof is currently being
negotiated by the Company or any of the Acquisition Companies. No grievance or
arbitration proceeding is pending or to its knowledge threatened under any
expired or existing collective bargaining agreements of the Company or any of
the Acquisition Companies. No labor dispute with the employees of the Company or
any of its Acquisition Companies is pending, or, to its knowledge is imminent;
and the Company is not aware of any pending or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors which
may result in any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the Company and the
Acquisition Companies.
(xx) Except as may be set forth in the Registration Statement, each of
the Company and the Acquisition Companies do 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 and each of the Acquisition Companies do not maintain or contribute,
now or at any time previously, to a defined benefit plan, as defined in Section
3(35) of ERISA.
10
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 (the "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 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 and each of the Acquisition Companies has
never completely or partially withdrawn from a "multiemployer plan."
(xxi) None of the Company or the Acquisition Companies, or any of
their employees, directors, stockholders, or affiliates (within the meaning of
the Rules and Regulations) 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, the Representatives' Securities or otherwise.
(xxii) None of the patents, patent applications, trademarks, service
marks, trade names, copyrights, and licenses and rights to the foregoing
presently owned or held by the Company or any of the Acquisition Companies, are
in dispute or, to the best knowledge of the Company's management are in any
conflict with the right of any other person or entity. The Company and each of
the Acquisition Companies (i) except as disclosed in the Prospectus owns or has
the right to use free and clear of all liens, charges, claims, encumbrances,
pledges, security interests, defects or other restrictions or equities of any
kind whatsoever, all patents, trademarks, service marks, trade names and
copyrights, technology and licenses and rights with respect to the foregoing,
used in the conduct of its business as now conducted or proposed to be conducted
without infringing upon or otherwise acting adversely to the right or claimed
right of any person, corporation or other entity under or with respect to any of
the foregoing, and except as set forth in the Prospectus or otherwise disclosed
to the Representatives in writing, to the best knowledge of the Company's
management is (ii) not obligated or under any liability whatsoever to make any
material payments 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.
There is no suit, proceeding, inquiry, arbitration, investigation,
litigation or governmental or other proceeding, domestic or foreign, pending or,
to the best of the Company's knowledge, threatened (or circumstances that may
give rise to the same) against the Company or the Acquisition Companies which
challenges the rights of the Company or any of the Acquisition Companies with
respect to any trademarks, trade names, service marks, service names,
copyrights, patents, patent applications or licenses or rights to the foregoing
used in the conduct of its business.
(xxiii) Except as disclosed in the Prospectus, the Company and each of
the Acquisition Companies
11
owns and has adequate right to use to the best knowledge of the Company's
management all trade secrets, know-how (including all other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
inventions, designs, processes, works of authorship, computer programs and
technical data and information (collectively herein "intellectual property")
required for or incident to the development, manufacture, operation and sale of
all products and services sold or proposed to be sold by the Company and the
Acquisition Companies, free and clear of and without violating any right, lien
or claim of others, including without limitation, former employers of its
employees. The Company is not aware of any such development of similar or
identical trade secrets or technical information by others. The Company and each
of the Acquisition Companies has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal property stated
in the Prospectus, to be owned or leased by it free and clear of all liens,
charges, claims, encumbrances, pledges, security interests, defects, or other
restrictions or equities of any kind whatsoever, other than those referred to in
the Prospectus and liens for taxes not yet due and payable.
(xxiv) KPMG LLP whose reports are filed with the Commission as a part
of the Registration Statement, are independent certified public accountants as
required by the Act and the Rules and Regulations.
(xxv) The Company has caused to be duly executed agreements ("Lock-up
Agreements") pursuant to which each of the Company's officers and directors and
holders of more than 5% of the outstanding Common Stock and holders of any
Common Stock options and their underlying shares and holders of any preferred
stock convertible into Common Stock and any person or entity deemed to be an
affiliate of the Company pursuant to the Rules and Regulations has agreed to not
to, directly or indirectly, sell, assign, transfer, or otherwise 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) for a period of not less than fourteen (14) months following such
effective date. The Company has caused to be duly executed agreements pursuant
to which the stockholders in Global 2000 Communications, Inc., AlbanyNet, Inc.,
Borg Internet Services, Inc., Caravela Software, Inc. and Ulsternet, Inc.
("Acquisition Lock-up Agreements") have agreed not to, directly or indirectly,
sell, assign, transfer, or otherwise dispose of more than 50% of the shares of
Common Stock received by them in the acquisitions by the Company (either
pursuant to Rule 144 of the Rules and Regulations or otherwise) for a period of
two years following the closing date of such acquisitions. The Company will
cause the Transfer Agent, as defined below, to ▇▇▇▇ an appropriate legend on the
face of stock certificates representing all of such securities and to place
"stop transfer" orders on the Company's stock ledgers.
The Company has not taken and will not take action to release any
stockholder(s) from the lock-up period (as described above) in the
Acquisition Lock-Up Agreements or to modify, amend or waive any provision of
the Acquisition Lock-Up Agreements.
(xxvi) The Registered Securities have been approved for listing on the
Nasdaq Small Cap Market and the Boston Stock Exchange.
(xxvii) Except as set forth in the Prospectus or disclosed in writing
to each of the Representatives (which
12
writing specifically refers to this SECTION), no officer or director of the
Company, holder of 5% or more of securities 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 any of the Acquisition
Companies, or (B) purchases from or sells or furnishes to the Company or the
Acquisition Companies any goods or services, or (ii) a beneficiary interest in
any contract or agreement to which the Company and the Acquisition Companies is
a party or by which it may be bound or affected. Except as set forth in the
Prospectus under "Certain Transactions" or disclosed in writing to the
Representatives (which writing specifically refers to this SECTION) there are no
existing agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company, and any officer, director, principal stockholder of the Company, or any
partner, affiliate or associate of any of the foregoing persons or entities.
(xxviii) Any certificate signed by any officer of the Company, and
delivered to the Underwriters or to the Underwriters' counsel (as defined
herein) shall be deemed a representation and warranty by the Company to the
Representatives as to the matters covered thereby.
(xxix) Each of the minute books of the Company and the Acquisition
companies has been made available to the Underwriters and contains 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.
(xxx) Except and only to the extent described in the Prospectus or
disclosed in writing to the Representatives (which writing specifically refers
to this SECTION), no holders of any securities of the Company or of any options,
warrants or other convertible or exchangeable securities of the Company have the
right to include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or to require
the Company to file a registration statement under the Act and no person or
entity holds any anti-dilution rights with respect to any securities of the
Company. Except as disclosed in the Prospectus, all rights so described or
disclosed have been waived or have not been triggered with respect to the
transactions contemplated by this Agreement and the Representatives' Warrant
Agreement (including the warrants issuable thereunder).
(xxxi) The Company has not entered into any employment agreements with
its executive officers, except as disclosed in the Prospectus.
(xxxii) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required for the issuance of the Securities and the Representatives'
Securities pursuant to the Prospectus and the Registration Statement, the
issuance of the Representatives' Warrants, the performance of this Agreement,
the Representatives' Warrant Agreement, and the transactions contemplated hereby
and thereby, including without limitation, any waiver of any preemptive, first
refusal or other rights that any entity or person may have for the issue and/or
sale of any of the Securities and the Representatives' Securities, except such
as have been or may be obtained under the Act,
13
otherwise or may be required under state securities or blue sky laws in
connection with the Representatives' purchase and distribution of the Securities
and the Representatives' Securities and the Representatives' Warrants to be sold
by the Company hereunder or may be required by the Rules of the National
Association of Securities Dealer, Inc. ("NASD").
(xxxiii) All executed agreements, contracts or other documents or
copies of executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company or any of the Acquisition
Companies is a party or by which it may be bound or to which its assets,
properties or businesses may be subject have been duly and validly authorized,
executed and delivered by the Company and the Acquisition Companies, as the case
may be, constitute the legal, valid and binding agreements of the Company and
the Acquisition Companies, enforceable against the Company and the Acquisition
Companies 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 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.
(xxxiv) Within the past five (5) years, none of the Company's nor the
Acquisition Companies' independent public accountants has brought to the
attention of the Company's management any "material weakness" as defined in the
Statement of Auditing Standard No. 60 in any of the Company's internal controls.
(xxxv) The Company and each of the Acquisition Companies (i) has paid
all federal, state, local and foreign taxes for which it is liable and which are
required to have been paid, including, but not limited to, withholding taxes and
amounts payable under Chapters 21 through 24 of the Internal Revenue Code of
1986, as amended (the "Code"), and has furnished all information returns it is
required to furnish pursuant to the Code, (ii) has established adequate reserves
for such taxes which are not due and payable, and (iii) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(xxxvi) No transfer tax, stamp duty or other similar tax is payable by
or on behalf of the Underwriters in connection with (i) the issuance by the
Company of the Securities, (ii) the purchase by the Underwriters of the
Securities from the Company and the purchase by the Representatives of the
Representatives' Warrants from the Company, (iii) the consummation by the
Company of any of its obligations under this Agreement or the Representatives'
Warrant Agreement, or (iv) resales of the Initial Securities or the Option
Securities in connection with the distribution contemplated hereby.
(xxxvii) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including, without
limitation, those pertaining to environmental or similar matters), domestic or
foreign, pending or, to the best knowledge of the Company, threatened against
(or circumstances that may give rise to the same), or involving the properties
or business of, the Company or any of the Acquisition Companies which (i)
questions the validity of the capital stock of the Company, this Agreement or
the Representatives' Warrant Agreement or of any
14
action taken or to be taken by the Company pursuant to or in connection with
this Agreement or the Representatives' Warrant Agreement, (ii) is required to be
disclosed in the Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are accurately
summarized in all material respects), or (iii) might materially and adversely
affect the condition, financial or otherwise, or the earnings, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company and the Acquisition Companies as a whole.
(xxxviii) Subsequent to the respective dates as of which information
is set forth in the Registration Statement and the Prospectus, and except as may
otherwise be indicated or contemplated herein or therein, the Company and each
of the Acquisition Companies has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money, (ii) entered
into any transaction other than in the ordinary course of business, or (iii)
declared or paid any dividend or made any other distribution on or in respect of
any class of its capital stock; and, subsequent to such dates, and except as may
be otherwise disclosed in the Prospectus, there has not been any change in the
capital stock, debt (long or short term) or liabilities or any material change
in the condition, financial or otherwise, or the earnings, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company and the Acquisition Companies.
(xxxix) Neither the Company nor any of its respective directors,
officers, stockholders, employees, agents or any other person acting on behalf
of the Company has, directly or indirectly, given or agreed to give any money,
gift or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or any official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or instrumentality of
any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any 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 and adverse effect on the
condition, financial or otherwise, or the earnings, business affairs, prospects,
stockholders' equity, value, operations, properties, business or results of
operations of the Company, or (iii) if not continued in the future, might
materially and adversely affect the condition, financial or otherwise, or the
earnings, business affairs, prospects, stockholders' equity, value, operations,
properties, business or results of operations of the Company. The Company's
internal accounting controls are sufficient to cause the Company to comply with
the Foreign Corrupt Practices Act of 1977, as amended.
(xl) Neither the Company nor any of the Acquisition Companies is
required to register as an "investment company" within the meaning of such term
under the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder.
(xli) The Company and each of the Acquisition Companies maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in
15
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xlii) The Company has provided the Representatives true and correct
copies of the material agreements entered into in connection with the
Acquisitions (the "Acquisition Agreements"); the Company expects that the
Acquisitions will close on or about the Initial Closing Date in accordance with
the terms of the Acquisition Agreements.
(xliii) The Company has filed a Form 8-A with the Commission providing
for the registration under the Exchange Act of the Securities and such Form 8-A
has been declared effective by the Commission.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with you that:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective
date, file any amendment to or supplement to the Registration Statement or
supplement to the Prospectus or file any document under the Act or Exchange Act
before the termination of the offering of Securities to the public by the
Underwriters of which you shall not previously have been advised and furnished
with a copy or to which you or your counsel shall have objected or which is not
in material compliance with the Act, the Exchange Act and the Rules and
Regulations or applicable state law.
(b) As soon as the Company is advised thereof, the Company will advise you,
and confirm the advice in writing, of the receipt of any comments of the
Commission or any state securities department, when the Registration Statement
becomes effective if the provisions of Rule 430A promulgated under the Act will
be relied upon, when the Prospectus has been filed in accordance with said Rule
430A, of the effectiveness of any post-effective amendment to the Registration
Statement or Prospectus, or the filing of any supplement to the Prospectus or
any amended Prospectus, of any request made by the Commission or any state
securities department for amendment of the Prospectus or for supplementing of
the Prospectus or for additional information with respect thereto, of the
issuance of any stop order suspending the effectiveness of the Prospectus or any
order preventing or suspending the use of any Prospectus or any order suspending
trading in the Common Stock of the Company, or of the suspension of the
qualification of the Securities or the Representatives Securities for offering
in any jurisdiction, or of the institution of any proceedings for any such
purposes, and will use its best efforts to prevent the issuance of any such
order and, if issued, to obtain as soon as possible the lifting or dismissal
thereof.
(c) The Company has caused to be delivered to you copies of such
Prospectus, and the Company has consented and hereby consents to the use of such
copies for the purposes permitted by law. The Company authorizes you and the
dealers to use the Prospectus and such copies of the Prospectus in connection
with the sale of the Securities and the Representatives' Securities for such
period as
16
in the opinion of your counsel and our counsel the use thereof is required to
comply with the applicable provisions of the Act and the Rules and Regulations.
The Company will prepare and file with the states, promptly upon your request,
any such amendments or supplements to the Prospectus, and take any other action,
as, in the opinion of your counsel, may be necessary or advisable in connection
with the initial sale of the Securities, the Option Securities and the
Securities and will use its best efforts to cause the same to become effective
as promptly as possible.
(d) The Company shall file the Prospectus (in form and substance
satisfactory to the Representatives) or transmit the Prospectus by a means
reasonably calculated to result in filing with the Commission pursuant to rule
424(b)(1) or pursuant to Rule 424(b)(3) not later than the Commission's close of
business on the earlier of (i) the second business day following the execution
and delivery of this Agreement, and (ii) the fifth business day after the
effective date of the Registration Statement.
(e) In case of the happening, at any time within such period as a
Prospectus is required under the Act to be delivered in connection with the
initial sale of the Securities and the Representatives' Securities of any event
of which the Company has knowledge and which materially affects the Company or
the Acquisition Companies, or the securities thereof, and which should be set
forth in an amendment of or a supplement to the Prospectus in order to make the
statements therein not then misleading, in light of the circumstances existing
at the time the Prospectus is required under the Act to be delivered, or in case
it shall be necessary to amend or supplement the Prospectus to comply with the
Act, the Rules and Regulations or any other law, the Company will forthwith
prepare and furnish to you copies of such amended Prospectus or of such
supplement to be attached to the Prospectus, each such amended Prospectus or
supplement to be satisfactory to you and your counsel, in such quantities as you
may reasonably request, in order that the Prospectus, as so amended or
supplemented, will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances under which
they are made. The preparation and furnishing of any such amendment or
supplement to the Prospectus or supplement to be attached to the Prospectus
shall be without expense to you.
(f) The Company will to the best of its ability comply with the Act, the
Exchange Act and applicable state securities laws so as to permit the initial
offer and sales of the Securities and the Representatives Securities under the
Act, the Rules and Regulations, and applicable state securities laws.
(g) The Company will cooperate to qualify the Initial Securities and the
Option Securities and the Representatives' Securities for initial sale under the
securities laws of such jurisdictions as you may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution contemplated hereby and will make such applications
and furnish such information as may be required for that purpose, provided the
Company shall not be required to qualify as a foreign corporation or a dealer in
securities. The Company will, from time to time, prepare and file such
statements and reports as are or may be required to continue such qualification
in effect for so long as the Representatives may reasonably request.
17
(h) So long as any of the Initial Securities, the Option Securities or the
Representatives' Securities remain outstanding in the hands of the public, the
Company, at its expense, will annually furnish to its stockholders a report of
its operations to include financial statements audited by independent public
accountants, and will furnish to the Representatives as soon as practicable
after the end of each fiscal year, a balance sheet of the Company as at the end
of such fiscal year, together with statements of operations, stockholders'
equity, and changes in cash flow of the Company for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report thereon
of independent public accountants.
(i) The Company will deliver to you at or before the Initial Closing Date
three signed copies of the signature pages to the Registration Statement and
three copies of the registration statement including all financial statements
and exhibits filed therewith, whether or not incorporated by reference. The
Company will deliver to you, from time to time until the effective date of the
Prospectus, as many copies of the Prospectus as you may reasonably request. The
Company will deliver to you on the effective date of the Prospectus and
thereafter for so long as a Prospectus is required to be delivered under the Act
and the Rules and Regulations as many copies of the Prospectus, in final form,
or as thereafter amended or supplemented, as you may from time to time
reasonably request.
(j) The Company will apply the net proceeds from the sale of the Securities
substantially in the manner set forth under "Use of Proceeds" in the Prospectus.
No portion of the proceeds shall be used, directly or indirectly, to acquire any
securities issued by the Company, without the prior written consent of the
Representatives.
(k) As soon as it is practicable, but in any event not later than the first
(1st) day of the fifteenth (15th) full calendar month following the effective
date of the Registration Statement, the Company will make available to its
security holders and the Representatives an earnings statement (which need not
be audited) covering a period of at least twelve (12) consecutive months
beginning after the effective date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act and Rule 158(a) of the
Rules and Regulations.
(l) Non-Accountable Expense Allowance and other Costs and Expenses.
The Company shall pay to the Representatives at each closing date,
and to be deducted from the purchase price for the Securities an amount equal
to three percent (3%) of the gross proceeds received by the Company from the
sale of the Securities at such closing date less, in the case of the Initial
Closing Date, the sum of $50,000 previously paid by the Company to ▇▇▇▇▇▇▇▇▇
Securities, Inc. If the sale of the Securities by the Representatives is not
consummated for any reason not attributable to the Representatives, including
if this Agreement is terminated by the Underwriters in accordance with the
provisions of SECTION 5 or SECTION 9(a), or if (i) the Company unilaterally
withdraws the Registration Statement or does not proceed with the public
offering for reasons other than the affirmative wrongdoing of the
Representatives, or (ii) the representations in SECTION 3 hereof are not
correct or the covenants cannot be complied with, or (iii) there has been a
materially adverse change in the condition, prospects or obligations of the
Company or a materially adverse change in stock market conditions from
current conditions, all as determined by the Representatives, then the
Company shall reimburse the Representatives for its out of
18
pocket expenses including without limitation, its legal fees and disbursements
all on a non-accountable basis.
COSTS AND EXPENSES. Subject to the provisions above, the Company will pay
all costs and expenses incident to the performance of this Agreement and the
Representatives' Warrant Agreement by the Company including, but not limited to,
the fees and expenses of counsel to the Company and of the Company's
accountants; the costs and expenses incident to the preparation, printing,
filing and distribution under the Act of the Registration Statement and
Prospectus (including the fee of the Commission, any securities exchange and the
NASD in connection with the filing required by the NASD relating to the offering
of the Securities contemplated hereby); all expenses, including fees of counsel,
which shall be due and payable on the Initial Closing Date or the relevant
Option Closing Date, as the case may be, in connection with the qualification of
the Securities under the state securities or blue sky laws; the cost of
furnishing to you copies of the Prospectus, this Agreement, the cost of printing
the certificates representing the Securities and of preparing and photocopying
the this Agreement and related Underwriting documents, the cost of three
Representatives' bound volumes, any advertising costs and expenses, including
but not limited to the Company's expenses on "road show" information meetings
and presentations, prospectus memorabilia, issue and transfer taxes, if any and
the fees and expenses of a transfer and warrant agent and registrar for the
Securities. The Company will also pay all costs and expenses incident to the
furnishing of any amended Prospectus of or any supplement to be attached to the
Prospectus.
(m) During a date five years after the date hereof, the Company will make
available to its stockholders, as soon as practicable, and deliver to the
Representatives:
(1) as soon as they are available, copies of all reports (financial or
other) mailed to stockholders;
(2) Unaudited quarterly reports of earnings as certified by the
Company's principal financial and accounting officer; concurrently with
furnishing annual reports to its stockholders, a balance sheet of the
Company as at the end of the preceding fiscal year, together with
statements of operations, stockholders' equity and cash flows of the
Company for such fiscal year, accompanied by a copy of the report thereon
of the Company's independent certified public accountants;
(3) 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;
(4) every press release and every material news item or article of
interest to the financial community in respect of the Company or its
affairs which was prepared and released by or on behalf of the Company; and
(5) any additional information of a public nature concerning the
Company (and any future subsidiaries) or its businesses which the
Representatives may request.
During such five-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
19
Company and its subsidiaries are consolidated, and will be accompanied by
similar financial statements for any significant subsidiary which is not so
consolidated.
(n) 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.
(o) The Company will furnish to the Representatives or on the
Representatives' order, without charge, at such place as the Representatives may
designate, copies of each Preliminary Prospectus, the 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 Representatives may request.
(p) Neither the Company nor any of its officers, directors, stockholders or
any of its affiliates will take, directly or indirectly, any action designed to,
or which might in the future reasonably be expected to cause or result in
stabilization or manipulation of the price of any of the Company's securities.
(q) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act,
and the Rules and Regulations, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements under the
Act, the Exchange Act, and the Rules and Regulations.
(r) The Company shall cause the Securities to be listed on the Nasdaq Small
Cap Market, the Boston Stock Exchange, or another exchange for a period of five
(5) years from the date hereof, and use its best efforts to maintain the listing
of the Securities to the extent they are outstanding.
(s) As soon as practicable, (i) before the effective date of the
Registration Statement, file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities and (ii) but in no event
more than 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/or ▇▇▇▇▇'▇ OTC Manual and to continue such
inclusion for a period of not less than five years if the Securities are not
listed on an exchange. The Company also agrees to take such steps as may be
necessary to comply with the requirements of any state to be in compliance with
the after market provisions of Section 18 of the Securities Act of 1933, as
amended, and as further amended by the National Securities Markets Improvement
Act of 1996.
(t) Until the completion of the distribution of the Securities, the Company
shall not without the prior written consent of the Underwriters and their
counsel which consent shall not be unreasonably withheld or delayed, 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.
(u) During the five (5) year period from the date hereof, the Company will
not take any action or actions which may prevent or disqualify the Company's use
of Form SB-2 (or other appropriate
20
form) for the registration under the Act of the Representatives' Securities.
(v) On or before the effective date of the Registration Statement, the
Company shall provide the Representatives with originally executed copies of
duly executed, legally binding and enforceable Lock-up Agreements, which are in
form and substance satisfactory to the Representatives. On or before the Closing
Date, the Company shall deliver instructions to its transfer agent authorizing
such transfer agent to place appropriate legends on the certificates
representing the securities of the Company subject to the Lock-up Agreements and
Acquisition Lock-up Agreements and to place appropriate stop transfer orders on
the Company's ledgers.
(w) The Company agrees that for a period of fourteen (14) months
following the effective date of the Registration Statement, it, the
Acquisition Companies and any future subsidiaries will not, without the prior
written consent of the Representatives (i) issue, sell, contract or offer to
sell, grant an option for the purchase or sale of, assign, transfer, pledge,
hypothecate, distribute or otherwise dispose of, directly or indirectly, any
shares of capital stock or any option, right or warrant with respect to any
shares of capital stock, provided that the Company may, without the consent
of the Representatives, issue securities (i) upon the exercise of any
outstanding stock options or warrants granted and issued on or prior to the
date hereof, (ii) upon the exercise of stock options that may be granted
pursuant to the Company's 1999 stock incentive plan and the Company's 1999
non-employee director stock incentive plan so long as such stock options were
issued at a price equal to or greater than the fair market value at the time
of grant, and (iii) in connection with an acquisition or acquisitions so long
as the exercise price is equal to or greater than the fair market value per
share of Common Stock on the date of grant or sale.
(x) The Company agrees not take any action to release any stockholder(s)
from the lock-up period (as described above) in the Acquisition Lock-up
Agreements.
(y) The Company shall furnish to the Representatives as early as
practicable prior to each of the date hereof, the Initial Closing Date and each
Option Closing Date, if any, but no later than two (2) full business days prior
thereto, a copy of the latest available unaudited interim financial statements
of the Company (which in no event shall be as of a date more than thirty (30)
days prior to the date hereof, the Initial Closing Date or the relevant Option
Closing Date, as the case may be) which have been read by the Company's
independent public accountants, as stated in their letters to be furnished
pursuant to SECTION 5(b)(iv) hereof.
(z) For a period of three (3) years from the Initial Closing Date, the
Company shall at the request of the Representatives, furnish or cause to be
furnished to the Representatives and at the Company's sole expense, (i) daily
consolidated transfer sheets relating to the Common Stock and (ii) a list of
holders of all of the Company's securities.
(aa) For a period of three (3) years from the Initial Closing Date, the
Company shall, at the Company's sole expense, (i) promptly provide the
Representatives, upon any and all requests of the Representatives, with a "blue
sky trading survey" for secondary sales of the Company's securities, prepared by
counsel to the Company, and (ii) take all necessary and appropriate actions to
further qualify the Company's securities in all jurisdictions of the United
States in order to permit secondary sales of such securities pursuant to the
"blue sky" laws of those jurisdictions, provided that such jurisdictions do not
require the Company to qualify as a foreign corporation.
21
(bb) For the duration of the Acquisition lock-up period (as described
above), the Company shall not restate, amend or alter any term of any written
employment, consulting or similar agreement entered into between the Company and
any officer, director or key employee as of the effective date of the
Registration Statement in a manner which is more favorable to such officer,
director or key employee, without the prior written consent of the
Representatives.
(cc) The Company (i) will use its reasonable best efforts to close the
Acquisitions in accordance with the terms of the Acquisition Agreements and (ii)
will promptly notify the Representatives of the occurrence of any event which
may result in the non-consummation of or material change in the terms of any of
the Acquisitions on the Initial Closing Date.
(dd) The Company shall not invest or otherwise use the proceeds received by
the company from its sale of Securities in such a manner as would require the
Company or any of the Acquisition Companies to register as an investment company
under the Investment Act of 1940.
(ee) The Company will use its best efforts to maintain the effectiveness of
the Registration Statement for a period of five (5) years after the date hereof.
5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligation of the
Underwriters to offer and sell the Securities is subject to the accuracy (as of
the date hereof, and as of the closing dates) of and compliance with the
representations and warranties of the Company to the performance by it of its
agreement and obligations hereunder, the accuracy on and as of the closing dates
of the statements of officers of the Company made pursuant to the provisions
hereof, the performance by the Company on and as of the closing dates of its
covenants and obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective as and when
cleared by the Commission, and you shall have received notice thereof, on or
prior to any closing date no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that or
similar purpose shall have been instituted or shall be pending, or, to your
knowledge or to the knowledge of the Company, shall be contemplated by the
Commission; any request on the part of the Commission for additional information
shall have been complied with to the reasonable satisfaction of counsel to the
Underwriters; and qualification, under the securities laws of such states as you
may designate, of the issue and sale of the Securities upon the terms and
conditions herein set forth or contemplated and containing no provision
unacceptable to you shall have been secured, and no stop order shall be in
effect denying or suspending effectiveness of such qualification nor shall any
stop order proceedings with respect thereto be instituted or pending or
threatened under such law. 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 the Initial Closing Date the Company shall
have provided evidence satisfactory to the Representatives 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.
22
The Representatives shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representatives' opinion, is material, or omits to state a
fact which, in the Representatives' opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances in which they were made not misleading, or that the Prospectus, or
any supplement thereto, contains an untrue statement of fact which, in the
Representatives' opinion, is material, or omits to state a fact which, in the
Representatives' opinion, is material and is required to be stated therein or is
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
(b) On any closing date and, with respect to the letter referred to in
subparagraph (iv), as of the date hereof, you shall have received:
(i) the opinion, together with such number of signed or facsimile
copies of such opinion as you may reasonably request, addressed to you by ▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLP, counsel for the Company, in form and substance reasonably
satisfactory to the Underwriters and ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, counsel
to the Underwriters, dated each such closing date, to the effect that:
(A) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction, (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; the Company is and has been doing business in
compliance with all such authorizations, approvals, orders, licenses,
certificates, franchises and permits and all federal, state and local laws,
rules and regulations; and, the Company has not received any notice of
proceedings relating to the revocation or modification of any such
authorization, approval, order, license, 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. The disclosures in the
Registration Statement concerning the effects of federal, state and local
laws, rules and regulations on the Company's business as currently
conducted and as contemplated are correct in all material respects and do
not omit to state a fact required to be stated therein or necessary to make
the statements contained therein not misleading in light of the
circumstances in which they were made;
(B) upon consummation of the Acquisitions pursuant to the
Acquisition Agreements, the outstanding shares of capital stock of each of
the Acquisition Companies will be owned of record by the Company; and to
such counsel's knowledge, upon consummation of the Acquisitions, the
outstanding shares of capital stock of each of the Acquisition Companies
will be owned free and clear of all liens, encumbrances and equities and
claims, and no options, warrants or other rights
23
to purchase, agreements or other obligations to issue or other rights to
convert any obligations into any shares of capital stock or of membership
interests in the Acquisition Companies will be outstanding except as
described in the Prospectus.
(C) each of the Acquisition Agreements has been duly authorized,
executed and delivered by the Company. Assuming due authorization,
execution and delivery by the other parties thereto, each Acquisition
Agreement constitutes a valid and binding obligation of the Company, except
to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and by general
principles of equity regardless of whether enforceability is considered in
a proceeding in equity or law.
(D) except as described in the Prospectus, the Company does not
own an interest in any other corporation, partnership, joint venture, trust
or other business entity;
(E) the Company has full legal right, power and authority to
authorize, issue, deliver and sell the Securities and the Representatives'
Securities. The Company has the full corporate power and authority to enter
into this Agreement, the Representatives' Warrant Agreement and to
consummate the transactions provided for herein and therein and each such
agreement has been duly and validly authorized, executed and delivered by
the Company. Each of this Agreement and the Representatives' Warrant
Agreement, assuming due authorization, execution and delivery by each other
party thereto, constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency or similar laws governing the rights of
creditors and to general equitable principles, and provided that no opinion
need be given as to the enforceability of any indemnification or
contribution provisions. Except as disclosed in the Prospectus, the Company
is not in violation of its respective certificate of incorporation or
bylaws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material
bond, debenture, note or other evidence of indebtedness or in any material
contract, indenture, mortgage, loan agreement, lease, joint venture,
partnership or other agreement or instrument to which the Company is a
party or may be bound or is not in material violation of any law, order,
rule, regulation, writ, injunction or decree of any governmental
instrumentality or court, domestic or foreign. None of the Company's
execution or delivery of this Agreement, or the Representatives' Warrant
Agreement, its performance hereunder or thereunder, its consummation of the
transactions contemplated herein or therein, or the conduct of its business
as described in the Registration Statement, the Prospectus, and any
amendments or supplements thereto, conflicts with or will conflict with or
results or will result in any material breach or violation of any of the
terms or provisions of, or constitutes or will constitute a material
default under, or result in the creation or imposition of any material
lien, charge, claim, encumbrance, pledge, security interest, defect or
other restriction of any kind whatsoever upon, any property or assets
(tangible or intangible) of the Company pursuant to the terms of (A) the
certificate of incorporation or bylaws of the Company, (B) to the knowledge
of such counsel, any material license, contract, indenture, mortgage, deed
of trust, voting trust agreement, stockholders' agreement, note, loan or
credit agreement or any other agreement or instrument to which the Company
is a party or by which it is or may be bound, or (C) to the knowledge of
such counsel,
24
any statute, judgment, decree, order, rule or regulation applicable to the
Company, whether domestic or foreign.
(F) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any amendment or
supplement thereto, under "Capitalization" and "Description of Securities,"
and the Company is not a party to or bound by any instrument, agreement or
other arrangement providing for it to issue, sell, transfer, purchase or
redeem any capital stock, rights, warrants, options or other securities,
except for this Agreement and the Representatives' Warrant Agreement and as
described in the Prospectus. The Securities, Representatives' Securities
and all other securities issued or issuable by the Company conform in all
material respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly issued and
are fully paid and non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability
by reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the
Company or any similar rights granted by the Company. The Securities to be
sold by the Company hereunder and under the Representatives' Warrant
Agreement are not and will not be subject to any preemptive or other
similar rights of any stockholder, have been duly authorized and, when
issued, paid for and delivered in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable and conform to the
description thereof contained in the Prospectus; the holders thereof will
not be subject to any liability solely as such holders; all corporate
action required to be taken for the authorization, issue and sale of the
Securities has been duly and validly taken; and the certificates
representing the Securities are in due and proper form. The
Representatives' Warrants constitute valid and binding obligations of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby. Upon the
issuance and delivery pursuant to this Agreement of the Securities and the
Representatives' Securities to be sold by the Company, the Underwriters and
the Representatives, respectively, will acquire good and marketable title
to the Securities and the Representatives' Securities free and clear of any
pledge, lien, charge, claim, encumbrance, pledge, security interest, or
other restriction or equity of any kind whatsoever. No transfer tax is
payable by or on behalf of the Underwriters in connection with (A) the
issuance by the Company of the Securities, (B) the purchase by the
Underwriters of the Firm Securities and the Option Securities from the
Company, and the purchase by the Representatives of the Representatives'
Warrants or the Representatives' Securities from the Company, (C) the
consummation by the Company of any of its obligations under this Agreement
or the Representatives' Warrant Agreement, or (D) resales of the Firm
Securities and the Option Securities in connection with the distribution
contemplated hereby.
(G) When issued in accordance with the terms of this Agreement
and the Acquisitions Agreements, respectively, the shares of Common Stock
to be issued in connection with the Acquisitions will be duly authorized,
validly issued, fully paid and non-assessable when issued and paid for as
contemplated by this Agreement or the Acquisition Agreements, as the case
may be; and no holder of outstanding securities has any statutory
preemptive rights under Delaware General Corporation Law, the certificate
of incorporation or bylaws of the Company, or to the knowledge of such
counsel, any contractual right to subscribe for any of the Securities or
the shares of
25
Common Stock to be issued in connection with the Acquisitions.
(H) the Registration Statement is effective under the Act, and,
if applicable, filing of all pricing information has been timely made in
the appropriate form under Rule 430A, and no stop order suspending the use
of the Preliminary Prospectus, the Registration Statement or Prospectus or
any part of any thereof or suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or, to the best of such counsel's knowledge,
threatened or contemplated under the Act;
(I) each of the Preliminary Prospectus, the Registration
Statement, and the Prospectus and any amendments or supplements thereto
(other than the financial statements and other financial and statistical
data included therein, as to which no opinion need be rendered) comply as
to form in all material respects with the requirements of the Act and the
Rules and Regulations;
(J) to the best of such counsel's knowledge, (A) there are no
agreements, contracts or other documents required by the 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 (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in part, by
reference therein) 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 or each of the
Acquisition Companies 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 and fairly represent the information
required to be shown by Form SB-2; (C) there is not pending or threatened
against the Company or any of the Acquisition Companies 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 any of the Acquisition
Companies or this Agreement or the Representatives' Warrant Agreement, or
of any action taken or to be taken by the Company or any of the Acquisition
Companies 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 is not described as required; and (E) 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 a decision which may result in a material adverse
change in the condition, financial or otherwise, or the earnings, position,
prospects, stockholders' equity, value, operation, properties, business or
results of operations of the Company and the Acquisition Companies as a
whole, which could adversely affect the present or prospective ability of
the Company to perform its obligations under this Agreement or the
Representatives' Warrant
26
Agreement or which in any manner draws into question the validity or
enforceability of this Agreement or the Representatives' Warrant Agreement;
(K) the properties and business of the Company and the
Acquisition Companies conform in all material respects to the description
thereof contained in the Registration Statement and the Prospectus;
(L) the Company and each of the Acquisition Companies are not in
breach of, or in default under, any term or provision of any license,
contract, collective bargaining agreement, indenture, mortgage, installment
sale agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, partnership agreement, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company or the
Acquisition Companies are a party or by which the Company or the
Acquisition Companies may be bound or to which the properties or assets
(tangible or intangible) of the Company or the Acquisition Companies are
subject or affected; and each of the Company and the Acquisition Companies
is not in violation of any term or provision of its articles of
incorporation or bylaws or in violation of any franchise, license, permit,
judgment, decree, order, statute, rule or regulation;
(M) the statements in the Prospectus under "RISK FACTORS,"
"PROSPECTUS SUMMARY," "BUSINESS," "MANAGEMENT," "PRINCIPAL STOCKHOLDERS,"
"CERTAIN TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES
ELIGIBLE FOR FUTURE SALE" 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;
(N) the Securities have been accepted for quotation on Nasdaq
SmallCap Market and the Boston Stock Exchange;
(O) the persons listed under the caption "PRINCIPAL STOCKHOLDERS"
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;
(P) none of the Company, nor any of its officers, stockholders,
employees or agents, nor any other person acting on behalf of the Company
has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent
of a customer or supplier, or official or employee of any governmental
agency or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other
person who is or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed
transaction) which (A) might subject the Company to any damage or penalty
in any civil, criminal or governmental litigation or proceeding, (B) if not
given in the past, might have had an adverse effect on the assets, business
or operations of the Company, as reflected in any of the financial
statements contained in the Registration Statement, or (C) if not continued
in the future, might adversely affect the assets, business, operations or
27
prospects of the Company;
(Q) 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;
(R) except as described in the Prospectus, there are no claims,
payments, issuances, arrangements or understandings for services in the
nature of a finder's or origination fee with respect to the sale of the
Securities hereunder or financial consulting arrangements or any other
arrangements, agreements, understandings, payments or issuances that may
affect the Underwriters' compensation, as determined by the NASD;
(S) assuming due execution by the parties thereto other than the
Company, the lock-up agreements described in SECTION __ are legal, valid
and binding obligations of the parties thereto, enforceable against the
party and any subsequent holder of the securities subject thereto in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or contribution may be limited
by applicable law);
(T) except as described in the Prospectus, the Company and the
Acquisition Companies do not (A) maintain, sponsor or contribute to any
ERISA Plans, (B) maintain or contribute, now or at any time previously, to
a defined benefit plan, as defined in Section 3(35) of ERISA, and (C) has
ever completely or partially withdrawn from a "multiemployer plan";
(U) none of the Company or any of its affiliates shall be subject
to the requirements of or shall be deemed an "Investment Company," pursuant
to and as defined under the Investment Company Act;
(V) to the best knowledge of such counsel and except as described
in the Prospectus, the Company and each of the Acquisition Companies owns
or possesses, free and clear of all liens or encumbrances and rights
thereto or therein by third parties, the requisite licenses or other rights
to use all trademarks, service marks, copyrights, service names, trade
names, patents, patent applications and licenses necessary to conduct its
business (including, without limitation, any such licenses or rights
described in the Prospectus as being owned or possessed by the Company and
the Acquisition Companies), and there is no claim or action by any person
pertaining to, or proceeding, pending or threatened, which challenges the
exclusive rights of the Company and the Acquisition Companies with respect
to any trademarks, service marks, copyrights, service names, trade names,
patents, patent applications and licenses used in the conduct of the
Company's business (including, without limitation, any such licenses or
rights described in the Prospectus as being owned or possessed by the
Company and the Acquisition Companies); and the Company's and Acquisition
Companies' current products, services and processes do not and will not
infringe on the patents currently held by third parties;
(W) to the best of our knowledge, after due inquiry, except as
described in the Prospectus, the
28
Company and each of the Acquisition Companies are not under any obligation
to pay royalties or fees to any third party, with respect to any technology
or intellectual properties developed, employed, licensed or used by the
Company;
(X) No consent, approval, order or authorization from any
regulatory board, agency or instrumentality having jurisdiction over the
Company, or its properties (other than registration under the Act or
qualification under state or foreign securities law or approval by the
NASD) is required for the valid authorization, issuance, sale and delivery
of the Securities pursuant to the Prospectus and the Registration Statement
or the Representatives' Securities, the performance of this Agreement and
the Representatives' Warrant Agreement, and the transactions contemplated
hereby and thereby.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, the Underwriters, Undewriters' Counsel and the independent certified
public accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not certified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the Initial Closing Date and on any later date on which Option
Securities are to be purchased, the Registration Statement and any amendment or
supplement, when such documents became effective or were filed with the
Commission (other than the financial statements including the notes thereto and
supporting schedules and other financial and statistical information derived
therefrom, as to which such counsel need express no comment) 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,
or at the Initial Closing Date or any later date on which the Option Securities
are to be purchased, as the case may be, the Prospectus and any amendment or
supplement thereto (other than the financial statements including the notes
thereto and other financial and statistical information derived therefrom, as to
which such counsel need express no comment) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Such opinion shall also cover such other matters incident to the
transactions contemplated hereby and the offering Prospectus as you or counsel
to the Representatives shall reasonably request. In rendering such opinion, to
the extent deemed reasonable by them, such counsel may rely upon certificates of
any officer of the Company or public officials as to matters of fact of which
the maker of such certificate has knowledge, provided that copies of any such
certificates shall be delivered to Underwriters' counsel; (b) as to matters
involving the application of laws other than the United States and jurisdictions
in which they are admitted, to the extent such counsel deems proper and to the
extent specified in such opinion, if at all, upon an opinion or opinions (in
form and substance satisfactory to Underwriters' counsel) of other counsel
acceptable to Underwriters' counsel, familiar with applicable laws.
The opinion of such counsel for the Company shall state that the
opinion of any
29
such other counsel is in form satisfactory to such counsel and that the
Underwriters and they are justified in relying thereon. Such opinion shall not
state that it is to be governed or qualified by, or that it is including without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991)
or any comparable state accord. Such opinion shall state that it may be relied
upon by ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, counsel to the Underwriters.
(ii) Prior to the Closing Date and each Option Closing Date, if any,
(i) there shall have been no material adverse change or development involving a
prospective adverse change in the condition, financial or otherwise, or the
earnings, stockholders' equity, value, operations, properties, business or
results of operations of the Company or the Acquisition Companies, whether or
not in the ordinary course of business, from the latest dates as of which such
matters are set forth in the Registration Statement and the Prospectus; (ii)
there shall have been no transaction, not in the ordinary course of business,
entered into by the Company or the Acquisition Companies from the latest date as
of which the financial condition of the Company is set forth in the Registration
Statement and the Prospectus; (iii) each of the Company and the Acquisition
Companies shall not be in default under any provision of any instrument relating
to any outstanding indebtedness; (iv) each of the Company and the Acquisition
Companies shall not have issued any securities (other than the Securities) or
declared or paid any dividend or made any distribution in respect of its capital
stock of any class and there shall not have been any change in the capital
stock, debt (long or short term) or liabilities or obligations of the Company or
the Acquisition Companies (contingent or otherwise) from the latest dates as of
which such matters are set forth in the Registration Statement and the
Prospectus; (v) no material amount of the assets of the Company or the
Acquisition Companies shall have been pledged or mortgaged, except as set forth
in the Registration Statement and the Prospectus; (vi) no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental or
other proceeding, domestic or foreign, shall be pending or threatened (or
circumstances giving rise to same) against the Company or the Acquisition
Companies 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 and adversely
affect the condition, financial or otherwise, or the earnings, stockholders'
equity, value, operations, properties, business or results of operations of the
Company and the Acquisition Companies taken as a whole, except as set forth in
the Registration Statement and Prospectus; and (vii) no stop order shall have
been issued under the Act with respect to the Registration Statement and no
proceedings therefor shall have been initiated, threatened or contemplated by
the Commission.
(iii) a certificate of the Company signed by the principal executive
officer and by the chief financial officer of the Company to the effect that
each of such persons has carefully examined the Registration Statement, the
Prospectus and this Agreement, and that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the
Closing Date or the Option Closing Date, as the case may be,
and the Company has complied with all agreements and covenants
and satisfied all conditions contained in this Agreement on
its part to be performed or satisfied at or prior to such
Closing Date or Option Closing Date, as the case may be;
30
(ii) No stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are
pending or, to the best of each of such person's knowledge,
are contemplated or threatened under the Act;
(iii) The Registration Statement and the Prospectus and, if any,
each amendment and each supplement thereto contain all
statements and information required to be included therein,
and none of the Registration Statement, the Prospectus 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 in which
they were made, not misleading and neither the Preliminary
Prospectus nor any supplement thereto included any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which
they were made, not misleading; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (A)
each of the Company and the Acquisition Companies has not
incurred any material liabilities or obligations, direct or
contingent; (B) each of the Company and the Acquisition
Companies has not paid or declared any dividends or other
distributions on its capital stock; (C) each of the Company
and the Acquisition Companies has not entered into any
transactions not in the ordinary course of business; (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 short-term borrowings in the ordinary course of
business) of the Company or the Acquisition Companies (E) each
of the Company and the Acquisition Companies has not sustained
any material 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 Acquisition Companies or any affiliate (within the
meaning of the Rules and Regulations) 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 SECTION
5(b(iii) are to such documents as amended and supplemented at the date of such
certificate.
(v) a letter, addressed to the Underwriters and in form and substance
satisfactory to the Underwriters in all respects (including the nonmaterial
nature of the changes or decreases, if any, referred to in clause (C) below),
from KPMG LLP dated as of the effective date of the Registration Statement:
(A) confirming that they are independent public accountants with
respect to the Company and its
31
consolidated subsidiaries (which includes the Acquisition Companies), if
any, within the meaning of the Act and the applicable published Rules and
Regulations.
(B) stating that, in their opinion, the financial statements,
related notes and schedules of the Company and its consolidated
subsidiaries (which includes the Acquisition Companies), if any, included
in the Registration Statement examined by them comply as to form in all
material respects with the applicable accounting requirements of the Act
and the published Rules and Regulations thereunder and that the
Underwriters may rely upon the opinion of KPMG LLP with respect to such
financial statements, related notes and schedules included in the
Registration Statement.
(C) stating that, on the basis of a limited review which included
a reading of the latest available unaudited interim financial statements of
the Company and its consolidated subsidiaries (which includes the
Acquisition Companies), a reading of the latest available minutes of the
stockholders and board of directors and the various committees of the board
of directors of the Company and its consolidated subsidiaries (which
includes the Acquisition Companies), 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 unaudited financial
statements and supporting schedules of the Company and its subsidiaries
(which includes the Acquisition Companies) included in the Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and Regulations
or are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that
of the audited financial statements of the Company and its consolidated
subsidiaries (which includes the Acquisition Companies) included in the
Registration Statement, or (B) at a specified date not more than five (5)
days prior to the effective date of the Registration Statement, there has
been any change in the capital stock or long-term debt of the Company and
its consolidated subsidiaries (which includes the Acquisition Companies),
or any decrease in the stockholders' equity or net current assets or net
assets of the Company and its consolidated subsidiaries (which includes the
Acquisition Companies) as compared with amounts shown in the December 31,
1998 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 December 31, 1998 to a specified
date not more than five (5) days prior to the effective date of the
Registration Statement, there was any decrease in net revenues, net
earnings or increase in net earnings per common share of any of the Company
or the consolidated subsidiaries (which includes the Acquisition
Companies), in each case as compared with the corresponding period
beginning December 31, 1997, other than as set forth in or contemplated by
the Registration Statement, or, if there was any such decrease, setting
forth the amount of such decrease;
(D) setting forth, at a date not later than five (5) days prior
to the date of the Registration Statement, the amount of liabilities of the
Company and the subsidiaries taken as a whole (including a break-down of
commercial paper and notes payable to banks);
32
(E) 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 and the consolidated
subsidiaries (which includes the Acquisition Companies) 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 the
consolidated subsidiaries 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;
(F) statements as to such other matters incident to the
transaction contemplated hereby as the Representatives may request;
At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from KPMG 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 the statements made in the letter furnished pursuant to SUBSECTION
(b(iv)) of this SECTION, except that the specified date referred to shall be a
date not more than five (5) days prior to the Closing Date or the Option Closing
Date, as the case may be, and, if the Company has elected to rely on Rule 430A
of the Rules and Regulations, to the further effect that KPMG LLP has carried
out procedures as specified in clause (E) of SUBSECTION (b(iv)) of this SECTION
with respect to certain amounts, percentages and financial information as
specified by the Representatives 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 (b(iv)).
(c) On or prior to the Closing Date, the Representatives shall have
received from Underwriters' counsel such opinion or opinions with respect to the
organization of the Company, the validity of the Securities, the Registration
Statement, the Prospectus and such other related matters as the Representatives
may request and Underwriters' counsel shall have received such papers and
information as they may request in order to enable them to pass upon such
matters.
(d) On or prior to each of the Closing Date and each Option Closing Date,
if any, Underwriters' counsel shall have been furnished with such documents,
certificates and opinions as they may reasonably require for the purpose of
enabling them to review or pass upon the matters referred to in SECTION 5(c)
hereof, or in order to evidence the accuracy, completeness or satisfaction of
any of the representations, warranties or conditions of the Company herein
contained.
(e) On each Closing Date, there shall have been duly tendered to the
Representatives the appropriate number of Securities.
(f) No order suspending the sale of the Securities in any jurisdiction
designated by the Representatives shall have been issued on the Closing Date and
no proceedings for that purpose shall have been instituted or shall be
contemplated.
(g) On or before the effective date, the Company shall have executed and
delivered to the
33
Underwriters the Representatives' Warrant Agreement substantially in the form
filed as an Exhibit to the Registration Statement in final form and substance
satisfactory to the Representatives. On or before the Initial Closing Date, the
Company shall have executed and delivered to the Representatives' Warrants in
such denominations and to such designees as shall have been provided to the
Company.
(h) On or before the Initial Closing Date, the Securities shall have been
duly approved for listing on Nasdaq Small Cap Market and The Boston Stock
Exchange.
(i) By the Closing Date, the Representatives will have received clearance
from the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(j) At least two (2) full business days prior to the date hereof, the
Closing Date and each Option Closing Date, if any, the Company shall have
delivered to the Representatives the unaudited interim financial statements
required to be so delivered pursuant to Section ___ of this Agreement.
If any condition to the Representatives' obligations hereunder to be
fulfilled prior to or at the Initial Closing Date or the relevant Option Closing
Date, as the case may be, is not so fulfilled, the Representatives may terminate
this Agreement or, if the Representatives so elects, it may waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS. The obligation of the Company to
sell and deliver the Securities is subject to the following:
(a) The provisions regarding the effective date, as described in SECTION 9.
(b) At the Initial Closing Date, no stop order suspending the effectiveness
of the Prospectus shall have been issued under the Act or any proceedings
therefor initiated or threatened by the Commission or by any state securities
department.
(c) Tender of payment by the Representatives in accord with SECTION 2
hereof.
7. INDEMNIFICATION. The Company agrees to indemnify and hold harmless each of
the Underwriters (for purposes of this SECTION 7, "Underwriters" shall include
the officers, directors, partners, employees, agents and counsel of the
Underwriters, and each person, if any, who controls the Underwriters
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
expenses or liabilities, joint or several (and actions, proceedings,
investigations, inquiries and suits in respect thereof), whatsoever (including
but not limited to any and all costs and expenses whatsoever reasonably incurred
in investigating, preparing or defending against such action, proceeding,
investigation, inquiry or suit commenced or threatened, or any claim
whatsoever), as such are incurred, to which the Underwriters or such controlling
person may become subject under the Act, the Exchange Act or any other statute
or at common law or otherwise or under the laws of foreign countries, arising
out of or based upon (A) any untrue statement or alleged untrue
34
statement of a material fact contained (i) in the Registration Statement, any
Preliminary Prospectus, 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 referred to as "applications") executed by the Company or based
upon written information furnished by the Company filed, delivered or used in
any jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the NASD, Nasdaq or any securities exchange; (B) the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading (in the case of the Prospectus, in
light of the circumstances in which they were made); or (C) any breach of any
representation, warranty, covenant or agreement of the Company contained herein
or in any certificate by or on behalf of the Company or any of its officers
delivered pursuant hereto, unless, in the case of clause (A) or (B) above, such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company with respect to any Underwriter by or on
behalf of such Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or any Prospectus, or any amendment thereof or supplement
thereto, or in any application, as the case may be. The indemnity agreement in
this SECTION 7(a) shall be in addition to any liability which the Company may
have at common law or otherwise.
(b) Each of the Underwriters agree, severally but not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of the Act, to the same extent as the
foregoing indemnity from the Company to the Underwriters but only with respect
to statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment thereof or supplement
thereto or in any application made in reliance upon, and in strict conformity
with, written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment thereof or
supplement thereto or in any such application, provided that such written
information or omissions only pertain to disclosures in the Preliminary
Prospectus, the Registration Statement or the Prospectus directly relating to
the transactions effected by the Underwriters in connection with the offering
contemplated hereby. The Company acknowledges that the statements with respect
to the public offering of the Securities set forth under the heading
"Underwriting" have been furnished by the Underwriters expressly for use therein
and constitute the only information furnished in writing by or on behalf of the
Underwriters for inclusion in any Preliminary Prospectus, the Registration
Statement or the Prospectus. The indemnity agreement in this SECTION 7(b) shall
be in addition to any liability which the Underwriters may have at common law or
otherwise.
(c) Promptly after receipt by an indemnified party under this SECTION
7 of notice of the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against one or more indemnifying
parties under this SECTION 7, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but
35
the failure to so notify an indemnifying party shall not relieve it from any
liability which it may have under this SECTION 7 (except to the extent that it
has been prejudiced in any material respect by such failure) or from any
liability which it may have otherwise). In case any such action, investigation,
inquiry, suit or proceeding is brought against any indemnified party, and it
notifies an indemnifying party or parties of the commencement thereof, the
indemnifying party or parties will be entitled to participate therein, and to
the extent it or they 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, an indemnified party shall
have the right to employ its own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of such counsel shall have been authorized in writing
by the indemnifying parties in connection with the defense of such action at the
expense of the indemnifying party, (ii) the indemnifying parties shall not have
employed counsel reasonably satisfactory to such indemnified party to have
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to one or all of the
indemnifying parties (in which event the indemnifying parties shall not have the
right to direct the defense of such action, investigation, inquiry, suit or
proceeding on behalf of the indemnified party or parties), in any of which
events such fees and expenses of one additional counsel shall be borne by the
indemnifying parties. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action, investigation, inquiry, suit or proceeding or separate but
similar or related actions, investigations, inquiries, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances. An indemnifying party will not, without the prior written consent
of the indemnified parties, settle, compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party. 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 may not be unreasonably withheld.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes a claim for indemnification
pursuant to this SECTION 7, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of this SECTION 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the amount
paid as a result of such losses, claims, damages, expenses or liabilities
36
(or actions, investigations, inquiries, suits or proceedings in respect thereof)
(A) in such proportion as is appropriate to reflect the relative benefits
received by each of the contributing parties, on the one hand, and the party to
be indemnified, on the other hand, from the offering of the Securities or (B) if
the allocation provided by clause (A) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (A) above but also the relative fault of each of the
contributing parties, on the one hand, and the party to be indemnified, on the
other hand, in connection with the statements or omissions that resulted in such
losses, claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where the Company is a contributing party
and the Underwriters are the indemnified party, the relative benefits received
by the Company, on the one hand, and the Underwriters, on the other, shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities (before deducting expenses) bear to the total underwriting
discounts received by the Underwriters hereunder, in each case as set forth in
the table on the cover page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages,
expenses or liabilities (or actions, investigations, inquiries, suits or
proceedings in respect thereof) referred to in the first (1st) sentence of 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, investigation, inquiry suit or proceeding.
Notwithstanding the provisions of this SECTION 7(d), the Underwriters shall not
be required to contribute any amount in excess of the underwriting discount
applicable to the Securities purchased by the Underwriters hereunder. No person
guilty of fraudulent misrepresentation (within the meaning of Section 12(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this SECTION 7(d), each
person, if any, who controls the Company or the Underwriters within the meaning
of the Act, each officer of the Company who has signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company or the Underwriters, as the case may be, 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, inquiry,
investigation or proceeding, against such party in respect to which a claim for
contribution may be made against another party or parties under this SECTION
7(d), notify such party or parties from whom contribution may be sought, but the
omission to so 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.
Notwithstanding anything in this SECTION 7 to the contrary, no party will be
liable for contribution with respect to the settlement of any action or claim
effected without its written consent. 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. EFFECTIVE DATE. This Agreement shall become effective at 10:00 a.m. New York
time on the next full business day following the effective date of the
Registration Statement, or at such other time
37
after the effective date of the Registration Statement as you in your discretion
shall first commence the public offering of any of the Securities covered
thereby, provided, however, that at all times the provisions of SECTIONS 7, 8,
and 10 shall be effective.
9. TERMINATION.
(a) Subject to SECTION 9(b) hereof, the Underwriters shall have the
right to terminate this Agreement: (i) if any domestic or international event
or act or occurrence has materially adversely disrupted, or in the
Underwriters' opinion will in the immediate future materially adversely
disrupt, the financial markets; or (ii) if any material adverse change in the
financial markets shall have occurred; or (iii) if trading generally shall
have been suspended or materially limited on or by, as the case may be, any
of the New York Stock Exchange, the American Stock Exchange, the NASD, the
Boston Stock Exchange, the Commission or any governmental authority having
jurisdiction over such matters; or (iv) if trading of any of the securities
of the Company shall have been suspended, or if any of the securities of the
Company shall have been delisted, on any exchange or in any over-the-counter
market; or (v) if the United States shall have become involved in a war or
major hostilities, or if there shall have been an escalation in an existing
war or major hostilities, or a national emergency shall have been declared in
the United States; or (vi) if a banking moratorium shall have been declared
by any state or federal authority; or (vii) if the Company shall have
sustained a material or substantial loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which, whether
or not such loss shall have been insured, will, in the Underwriter's opinion,
make it inadvisable to proceed with the delivery of the Securities; or (ix)
if there shall have occurred any outbreak or escalation of hostilities or any
calamity or crisis or there shall have been such a material adverse change in
the conditions or prospects of the Company, or if there shall have been such
a material adverse change in the general market, political or economic
conditions, in the United States or elsewhere, as in the Underwriters'
judgment would make it inadvisable to proceed with the offering, sale and/or
delivery of the Securities; or (x) if ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇ shall no longer serve
the Company in his present capacity.
(b) If this Agreement is terminated by the Underwriters in
accordance with the provisions of SECTION 5 or SECTION 9(a) hereof the
Company shall promptly reimburse and indemnify the Underwriters for all its
actual out-of-pocket expenses, including the fees and disbursements of
Underwriters' Counsel, less amounts previously paid. In addition, the Company
shall remain liable for all "blue sky" counsel fees and expenses and "blue
sky" filing fees. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to SECTIONS 5 and 9(a) 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 be affected by such election
or termination or failure to carry out the terms of this Agreement or any
part hereof.
10. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company (or its officers) and the Underwriters set forth in or
made pursuant to this Agreement including certificates of officers of the
Company submitted pursuant hereto, will remain in full force and effect,
regardless of any
38
investigation made by or on behalf of the Underwriters, the Company, or any of
their officers or directors and will survive termination of this Agreement or
the delivery of and payment for the Securities.
11. 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 Underwriters may, at the
Representatives' option, by notice from the Representatives to the Company,
terminate the Underwriters' obligation to purchase Option Securities from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to SECTION 7 and SECTION 8 hereof. No action taken
pursuant to this SECTION 11 shall relieve the Company from liability, if any, in
respect of such default.
12. NOTICES. All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to you, will be mailed, delivered
or telephoned and confirmed to you at, ▇▇▇▇▇▇▇▇▇ Securities, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attn: Investment Banking Department and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Company, Inc., ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, ▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇; and
to the Company to ▇▇▇▇ ▇. ▇▇▇▇▇, President, ▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. ▇▇▇▇ ▇▇▇▇▇
▇▇,▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
13. PARTIES IN INTEREST. This Agreement is made solely for the benefit of the
Underwriters and the Company, and their respective controlling persons,
directors and officers, and their respective successors, assigns, executors and
administrators. No other person shall acquire or have any right under or by
virtue of this Agreement.
14. HEADINGS. The Section headings in this Agreement have been inserted as a
matter of convenience of reference and are not a part of this Agreement.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, without giving effect to
conflict of law principles.
16. COUNTERPARTS. THIS Agreement may be executed in any number of counterparts,
each of which together shall constitute one and the same instrument.
39
If the foregoing correctly sets forth the understanding between the Company and
you, as Underwriters of the several Underwriters, please so indicate in the
space provided below for such purpose, whereupon this letter and your acceptance
shall constitute a binding agreement between us.
Very truly yours,
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc,
By:
--------------------------------------
(Authorized Officer)
▇▇▇▇ ▇. ▇▇▇▇▇, President
Accepted as of the date first above written:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc.
▇▇▇▇▇▇▇▇▇ Securities, Inc.
Neidiger, Tucker, Bruner, Inc.
Acting on behalf of themselves and the
Representatives of the several Underwriters
Named in Schedule I hereof
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc.
By:
-------------------------------------------
(Authorized Officer)
40
EXHIBIT A
SCHEDULE I
UNDERWRITERS
Shares of
Underwriter Common Stock
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Company, Inc.
▇▇▇▇▇▇▇▇▇ Securities, Inc.
Neidiger, Tucker, Bruner, Inc.
TOTAL 2,000,000